NECA 2023 has begun in the city of Philadelphia. Before the show floor opened, attendees had the chance to attend a variety of seminars from experts across the industry. One such seminar was called “Dealing with Delay and Impact: From Contract Negotiations to Claims” by J.T. Gallagher.
Gallagher began working in the construction industry at 15 as a plumber’s helper and has stayed in the industry ever since. Currently, he is a Partner at Hendrick Phillips Salzman & Siegel where he represents contractors, subcontractors, specialty trade contractors, design professionals, and owners in relation to various aspects of public and private construction projects, specifically claim issues related to delay, impact, and inefficiency.
The goal of Gallagher’s seminar was to give the NECA attendees a construction lawyer’s perspective about “what is important to succeeding and getting time and money for delays and impacts. What can you do to mitigate those risks and succeed when you get through the claim?” said Gallagher.
In order for contractors and subcontractors to have as much success as possible, Gallagher outlined three keys to success.
1. Negotiate your contracts
- “You’ve got to negotiate. You’ve got to take that opportunity upfront to try and mitigate risks and get to fair and reasonable terms that help you on the project to get money, get time, and operate efficiently and effectively,” Gallagher said.
- If faced with pushback to negotiation, Gallagher said, “Your client should be on board with that. If they’re not going to negotiate contracts, how are they going to treat you when you actually get out there?”
- You should use your proposal to outline your schedule assumptions, limit the time for which you hold your pricing, propose amended contract terms and conditions when the bid documents include a form of contract, and tie your price to your terms.
- Make sure to classify delay. Causes of delay can be "excusable," meaning it is beyond the control of either party, or "compensable," meaning it is due to the fault of one party but not the other. In the case of excusable time, extension is allowed but no adjustment, and in the case of compensable, time extensions and recovery of resulting costs due to delay may be allowable.
- Be wary of a "No Damage for Delay" (NDFD) clause and avoid it if possible or find ways to expressly qualify or limit the application of a NDFD clause.
- Avoid an implied duty to coordinate. Under common law, there is an implied duty to coordinate and the implied duty could potentially run down to a general contractor. Gallagher advises to "clarify what everyone's job is" in order to avoid this pitfall.
2. Communicate and document with a purpose
- It’s important to understand your contractual requirements and satisfy them.
- Communication and documentation should be done with a purpose. “That purpose generally is to accurately document what is happening on a contemporaneous day-to-day basis and do it in a way that puts you in the best possible light,” said Gallagher. “When we’re trying to pursue a claim, we’re relying on your having done your due diligence during the job to accurately document exactly what’s happening so we can show it in the documents.”
- Document delays and impacts and notify the customer.
- Respond to your client's communication and documentation. “Silence is going to be taken as an agreement,” Gallagher said. “That’s the way it’s going to be portrayed and that’s the way it’s going to be taken. If you didn’t respond contemporaneously to say ‘no, you’re wrong, this is the truth,’ then two years from now, what is the other side going to say?” By responding in the moment, you leave documentation to support your case in the event of a claim later on.
- Segregate actual costs. You need to be able to show how a delay impacts you. "If you can't show that it's impacted your bottom line and specifically," Gallagher said, "then we're not going to get the money."
- Make sure to be aware of and fulfill contractual notice requirements.
- Identify and comply with all early notice requirements. Beware of notice-triggering events!
- Create a contract requirements chart. Gallagher recommended that whoever is in charge of making sure you are complying with the contract identifies the important provisions and puts them into a simple chart.
- Avoid inadvertent waiver. Gallagher said that this is a big issue to be wary of. In some cases, a waiver of release will be attached to the final payment. Gallagher says to “make sure that you modify or at least reserve your rights in writing” to avoid inadvertently losing your ground to a claim.
3. Ask for time!
- Gallagher emphasized that contractors should never be afraid to ask for time. “Time is a remedy. If you’re delayed and you need more time, you should ask for it.”
- Track and segregate the labor and equipment hours for impacted work.
- Track and segregate material costs for impacted work. Tie descriptions of work in reports to costs.
- Create cost codes specific to additional costs. Identify and track one-time costs.
- Track general conditions and field overhead costs.
- Present a claim ASAP! Don’t wait until the end to present claims. You have more leverage while the project is ongoing. You also don’t know what is going to happen on the project in the future.
