Think it through

Feb. 5, 2019

The allocation of risk for work delays is rarely cut and dry

Many construction contracts contain a deadline by which work must be finished and a provision for liquidated damages in the event it is not. Contracts also provide procedures for contractors if they believe they are entitled to a time extension, usually resulting from changes in the work, owner-caused delays or other uncontrollable or unforeseen delays outside of the contractor’s control.

The allocation of risk for uncontrollable or unforeseen events varies from contract to contract. One public entity might specify that third-party utility delays are excusable whereas another might place that risk on the contractor. Even if excusable, however, in nearly all instances uncontrollable and unforeseen delays are non-compensable, meaning that while the contractor might receive a time extension, it is not entitled to compensation for time-related costs such as extended general conditions or site overhead. It is, therefore, important for contractors seeking time extensions to insure they properly categorize and characterize the cause of the delay in their requests; it could make the difference between receiving time and money versus time only. In a recent case decided by the Armed Services Board of Contract Appeals, the contractor’s efforts in this regard may have been a little too creative.

Appeal of Tidewater, Inc., ASBCA No.: 61076 (2018 WL 6131697) involved a design-build contract for a healthcare facility for the U.S. Air Force Medical Services in Louisiana. The RFP described the soils on the project as being composed of alluvial deposits of clay, silt and sand with varying bearing capacity. It also provided that “water table elevation is often high.” The contractor was responsible for a “geotechnical report including . . . design recommendations by a qualified geotechnical engineer.” Finally, the RFP represented that “rainfall averages 46.6 in. annually, with the greatest monthly rainfall occurring in spring.” The contractor’s geotechnical report found similar groundwater conditions and advised that the contractor “determine the actual groundwater levels at the site at the time of construction to assess the impact groundwater may have on construction.”

During concrete pier construction, the contractor discovered that groundwater conditions were much worse than represented by the government and its own geotechnical consultant (i.e., 9 ft below the surface rather than 20 ft). Consequently, the contractor gave written notice to the U.S. Army Corps of Engineers of a Type I Differing Site Condition, a condition that differed materially from what was represented in the contract documents. The Corps disagreed and argued that even the contractor’s own geotechnical engineer had warned that groundwater conditions can vary throughout the year. It blamed the contractor for failing to ascertain actual conditions prior to the work and taking appropriate dewatering measures.

Because of the high groundwater, the contractor altered its methodology for placing concrete in the piers and filed a claim seeking the additional costs and time associated with that methodology. The Corps denied the claim, and the contractor appealed.

In its complaint, the contractor alleged it had experienced the fifth wettest month on record with 10.97 in. of rainfall, which affected the water table on the project and throughout the entire Shreveport and Bossier City region. The contractor argued that the subsurface physical conditions of the soils were significantly saturated and materially different from what it reasonably anticipated when it bid the project and from the information contained in the RFP.

The board rejected the contractor’s claims for two principal reasons. First, the claim was not a Differing Site Conditions claim, but rather one that was based upon unusually severe weather, which is an act of God. The board reasoned that this is the case even when the unusually severe weather alters the site conditions; second, the contractor could not have reasonably relied upon groundwater level representations because they were accompanied by warnings that levels vary during the year and in response to weather conditions.

Though the contractor did not succeed, this is a good example of the level of thought that must go into decisions regarding how to characterize time extension requests.

About The Author: Caudle is a principal in Kraftson Caudle LLC, a law firm in McLean, Va., specializing in heavy-highway and transportation construction. Caudle can be contacted via e-mail at [email protected].

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