No Damage for Delay clauses are inherently unfair

No Damage for Delay clauses are inherently unfair. In some states the legislature has outlawed them on public contracts. Are they permissible in public contracts in your state? If so, Triple R Paving Inc. v. Broward County, 2000 WL 1584452 (Fla.App. 4 Dist. 2000), a recent Florida case, may be of interest to you.
Triple R successfully bid on a Broward County contract, which called for widening a portion of a road and bridge. During construction, delays resulted from a horizontal sight distance design flaw, a Florida Power & Light utility relocation and detention pond design elevation problems. Triple R filed suit against Broward County for delay damages, which included lost home office overhead and lost efficiency. The county, in turn, filed a third-party complaint against its designer for indemnification.
Broward County’s contract contained the following No Damages for Delay clause:
NO CLAIM FOR DAMAGES FOR ANY CLAIM OTHER THAN FOR AN EXTENSION OF TIME SHALL BE MADE OR ASSERTED AGAINST THE COUNTY BY REASON OF ANY DELAYS.
After contract award, Triple R submitted a value engineering (VE) proposal to build the bridge in a single span rather than two spans as designed. The VE proposal did not change any element of horizontal geometry.
Repeated delays
During construction, it became apparent that the bridge was too close to the Inverrary driveway, and Triple R sent a letter to the county advising them of the problem. Later, Triple R advised the county that it would move its manpower and equipment off the project until the county provided a solution to the horizontal sight distance problem. The county directed Triple R not to do so.
A second delay was caused by utility relocation, which the county’s consultant stated they wished to coordinate. Triple R was delayed several days waiting for the power company to remove power lines that went over the existing bridge.
The third delay resulted from a design flaw of the detention pond. Apparently, neither the county’s designer nor the county were aware that the elevation of the canal was higher than the pond. Had the construction proceeded as designed, a backward flow would have resulted. The detention pond design delay also led to extended performance costs for Triple R.
After the project was complete, Triple R filed suit seeking damages for inefficiency based on the inability to complete the project in the time originally anticipated. When Triple R presented its case, the county’s designer/consultant moved for directed verdict. The designer/consultant argued that the No Damages for Delay clause of the contract precluded delay damages in as much as Triple R had failed to prove that the construction delays were the result of fraud, bad faith or active interference.
Flaw-sighted
During the trial Triple R’s witnesses stated that the consultant’s representative was aware of sight distance problems as early as 1992, but never mentioned it during the VE process. The jury returned a verdict which awarded damages to Triple R for loss of efficiency in the amount of $112,929.31.
The designer/consultant appealed, claiming the trial court erred in denying its motion for directed verdict as to Triple R’s delay damages claim in the face of the No Damage for Delay clause, absent fraud, bad faith or active interference.
The Florida District Court of Appeals acknowledged that No Damages for Delay clauses are enforceable, except in the case of fraud, bad faith or active interference by the owner.
The court agreed with the designer/consultant with respect to the delays occasioned by the utility relocation and the detention pond elevation design error. However, the court found that the facts surrounding the delay which resulted from the horizontal sight distance design flaw were sufficient to allow a jury to decide the question of fraud, bad faith or active interference. The court found a "knowing delay" and silence when the county’s designer/consultant was assigned the responsibility of verifying compliance with sight distance issue.
Who should have borne the risk of these delays? Do No Damage for Delay clauses give public owners and their designers a license to put out for bid defective plans and specifications? The contractor was damaged because of matters outside its control and within the control of the county and its designer. It seems to me that at the very least the county and its designer got off on a technicality.