A suspension of work typically occurs when an owner directs a contractor to stop working on all or part of a project. Work can also incur a full or partial suspension due to outside forces, such as a labor strike, inability to have access to a site or failure of another contractor or utility to complete work before the contractor can perform its own work under the contract. The result of the suspension may or may not cause a delay to the project and there may or may not be compensable damages associated with the delay.
Time and Cost Impacts
Many construction contract documents, particularly government contracts, include suspension of work clauses set out to specifically define the parameters for a suspension order issued by the owner. One of the primary factors involved is whether a suspension is for a defined period of time or if the duration is unknown. Another primary factor is whether the suspension affects the entire project or just a portion of the work. For example, a strike by laborers on a project may appear to shut down a project. However, the strike might occur during the sitework portion of the project allowing operating engineers unimpeded access for their earthwork equipment, with the project not having to be suspended at all during the strike. As with any delay, the contractor is still tasked with showing what work a suspension actually affected and if the suspension delayed completion of the project or project milestones.
Since construction delays can be expensive, even a hint of a suspension needs to be addressed as early as possible to both mitigate resulting delays, as well as to establish proper notification and documentation necessary to support time-extension requests and all suspension-related costs (damages). However, it is not as straightforward as it may seem. There are a number of nuances that affect the actions necessary by the contractor and exactly what costs are recoverable. For example, depending upon the suspension directive issued by the owner, standby costs may be recoverable in some circumstances, and not others. In some situations, the case for a “cold” suspension may be made; that is, work needs to be completely shut down and the job demobilized.
Another issue is whether to claim costs under the suspension of work clause or one or more different clauses in the contract. The suspension clause in government contracts does not allow profit. If the contractor must stop work due to a differing site condition, it may be possible to claim the related delays as part of a differing site conditions claim rather than claim a constructive suspension. This would allow recovery of profit, but may eliminate the recovery of time-related overhead.
Finally, a suspension of work may not result in a time extension to the contract, such as where the critical path has not been affected or in the case of a critical delay. However, a partial suspension can cause impact damages, such as lost productivity, idle equipment and material escalation costs.
Importance of Contract Procedures and Documentation
Collectively, based upon typical contract documents, legal precedent and the particular laws of each state and local jurisdiction, a contractor needs to follow specific notification protocol, identify all activities affected, document all actions taken, including mitigation actions, and track all costs incurred due to a suspension of work order. This is especially important when the suspension is “constructive,” that is, it is not a result of a verbal or written directive from the owner. Either way, it is in the best interest of the project that the contractor and owner have a mutual understanding of the suspension and how the various potential costs will be treated.
In an upcoming live webinar produced by WPL Publishing Co., Inc. (constructionclaims.com), construction expert Jim Zack dives into the suspension of work issue, including legal trends over recent years and the impact of some recent board and court decisions. The different types of suspensions are reviewed, as well as the various types of damages. In addition, Jim has identified a 12-point test for recovery of suspension damages. This event does more than help the contractor protect its interests in damage recovery, but also advises owners of best practices in addressing contractor concerns and resolving suspension claims at the project site. For more information, click here.