ConstructionPro Week, Volume: 3 - Issue: 47 - 11/21/2014

Is a Suspension a Delay? Does It Matter?

By Bruce Jervis

 

A work stoppage is a work stoppage, or so it would seem. Regardless of whether the project owner directs a suspension of work or whether the contractor encounters an unexpected problem that brings work to a halt, the result is the same. But, the contract documents frequently make a distinction, so it does matter.

 

An owner-directed suspension is usually expressly compensable, with the elements of compensation defined in the contract. Delay and disruption of ongoing work may be treated differently. The contract may disclaim owner liability for delay, regardless of cause. Or, the contract may severely limit recovery of delay damages.

 

An example of this distinction is found in a recent Pennsylvania case. The contract documents limited recovery for delay, disclaiming compensation for extended job site overhead and lost profit. The project owner suspended work due to contamination of the soil. The court allowed contractor recovery of extended overhead and lost profit. A suspension was not a delay, and the damage disclaimer did not apply.

 

In this case, the owner expressly directed a suspension of work while it evaluated its options. But, what about a so-called “constructive suspension” of work? How does this differ from a delay? Can the characterization be used to avoid the consequences of a delay damage disclaimer? Or, are we indulging in a purely semantic distinction? I welcome your comments.

 

COMMENTS

Well, Bruce, you have raised an "age old" question. I have these comments:

1. The industry has in practice melded the meanings of "suspension" and "delay," although Eichelay originally applied to suspension of work.

2. In CA, it is illegal for a public works contract to expressly deny delay damages. Private contracts are a different matter of agreement between the parties, but I understand courts may generally seek a more strict definition of what the parties intended as "delay" to be covered by a "no damages for delay clause." Best practice: read the proposed private contract, assess the risk allocations and negotiate.

3. Regardless of clauses about delay and suspension, contracts usually include a clause on "Claims" which allows the Contractor (and the Owner) to make claims against each other for increases in costs, which, if not excluded, could include not only direct but indirect costs such as site and home office overhead. Then the sticky-wicket is what to do with the Contractual Completion Date and liquidated damages. Suspension and delay both go to this sticky-wicket.

4. "Constructive suspension" becomes a difficult argument of "he said" vs. "she said." I think the generic term "suspension" would include both directed and constructive suspension. Easy to prove the former, more difficult to prove the latter. Thus, it behooves the Contractor to provide timely notice to the Owner of any suspension. Best practice: document, document, document during the project.

5. Any question of "delay" (whether termed "delay" or "suspension") goes to the analysis of the critical path of the schedule -- whether called direct suspension, full suspension, partial suspension, constructive suspension -- which leads to the questions of completion date, liquidated damages and extra costs (including "delay damages"). Of course, even suspensions which are not on the critical path can create extra costs for both the Owner and the Contractor -- don't forget that!

Thanks for the oppportunity to share in this discussion, Bruce.

Regards,

Jack Irwin
Posted by: W. John (Jack) Irwin II, PE, CFCC - Friday, November 21, 2014 1:20 PM


 









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