All disputes – whether negotiated or litigated – are addressed within a legal framework. What are some of the key legal theories relevant to construction delay and cost overrun claims?
Design professional liability for construction delay and extra cost claims can arise based on any of several theories. Some of these can be identified as:
- Unexpected conditions; adequacy of predesign investigation;
- Errors, omissions, and inconsistencies in the plans and specifications;
- Changes to the plans and specifications;
- Deficiencies in providing clarification, interpretation, or shop drawing review;
- Delays in review and acceptance of completed work;
- Communication breakdowns.
Unexpected conditions are one of the more frequently cited reason for delay and extra cost claims. It is possible that a design professional can be found liable for the consequences of design based upon incomplete information. This includes insufficient details about the physical site or applicable regulatory or legal constraints.
A detailed site investigation to determine soil conditions and groundwater characteristics is sometimes omitted to reduce costs. Designers who work on many projects in a given area, become familiar with expected site conditions and may omit a detailed site investigation. Failure to gather fresh objective information on which to base design decisions can become a habit. The design professional is eventually surprised by unexpected site conditions. Departure from specific contractual obligations or departure from the standard of care for predesign site investigation can become the basis for delay and extra cost claim liability.
Lack of or incomplete information about legal or regulatory constraints can also lead to site ownership and easement problems. The design professional needs to avoid taking on responsibilities that might be viewed as legal interpretation as this is outside the scope of an architect’s or engineer’s expertise. This can also have implications as to applicability of professional liability insurance.
Another area of unexpected construction conditions can involve Department of Transportation or other governmental agency constraints. Typically specifications place the burden of ascertaining such constraints on the contractor. When issues arise, they are often issues between project owners and contractors. But design professionals can be drawn into such disputes.
Errors Omissions, and Inconsistencies
It is not uncommon for plans and specifications containing errors – especially inconsistencies – to be the cause of project delays and extra costs. Strategies for minimizing these kinds of problems include following established quality control procedures for the design process and construction administration. These procedures can incorporate checklists and criteria for the review of construction drawings. The review process should verify that dimensions add up properly, drawings are consistent with each other, and that there are no inconsistencies between what is shown in the drawings and what is found in the specifications. A broader scope of review can address questions of build-ability, conformance to codes, and conformance to client's needs.
When such claims arise, design professional defenses can include demonstrating conformance to an appropriate standard of practice, questioning whether an identified error or omission actually caused the delay or extra cost, and challenging the magnitude of the damages claimed. When these kinds of issues arise on large complex projects, the cost of unraveling the specifics can become quite costly and often difficult for courts to understand and evaluate. In some cases the court can appoint a special master to prepare a detailed analysis and recommend a resolution.
Changes in Plans and Specifications
Changes to the plans and specifications initiated either by the owner or other design professionals on a project are a frequent factor in contractor delay and extra cost claims. Changes in themselves need not be a problem nor cause a delay or extra cost claim dispute. However, once a project is far along in its design, inadequately thought out changes can have serious impact and widespread consequences. When consequences are not addressed in complete and thoroughly revised plans and specifications, the problems get discovered during construction. This can lead to makeshift corrective action, delays, and unanticipated costs. Changes during the design ‑ especially the latter stages of the design - must be carefully evaluated for all the possible consequences if this source of delay and extra cost claims is to be controlled.
When is it too late to make changes? Never, as long as the owner is willing to pay for the costs of removing or replacing completed work. It is, however, risky to make design changes at any time after the construction contract with an agreed cost has been entered into. Occasionally the changes can be incorporated into the project at no extra cost. However, even if construction of the "to be changed" portion of the project has not yet begun, the contractor may justifiably claim that certain resources have been committed and that the change cannot be made without additional expense.
Improperly communicated changes can create delay and extra cost liability exposure for the design professional. A phone call without written confirmation can not only lead to misunderstanding, but also problems with demonstrating or proving the specific scope of an authorized change.
Clarifications and Interpretations; Shop Drawing Reviews
The design professional's actual or alleged failure to provide clarification, interpretation, or shop drawing review in a timely manner is another kind of allegation that can arise in delay and extra cost claims. Service contracts may impose a plan and specification interpretation and shop drawing review obligation on the design professional. If the contractor requests a clarification or shop drawing review from the design professional who is not available or slow in responding, the contractor may seek to recover the costs of the delay from the design professional. The design professional needs to provide adequate resources to meet contractual obligations related to construction drawing interpretation and shop drawing review.
Acceptance of Completed Work
Delays in review and acceptance of completed portions of the work are another basis for delay claims. The design professional needs to provide sufficient project resources to perform such on-site duties. The dynamics of construction activity including time and money pressures dictate the need for a disciplined approach including the use of pre-established forms, procedures and criteria.
The design professional's communications directly related to construction can begin with the issuance of plans and specifications and continue until the project is completed and accepted. The design professional needs to be skilled in understanding the purpose of each communication and be able to deliver and accept each communication with clarity. Establishing systematic methods for communications can include use of forms with clear instructions for their use. One of the most costly aspects of addressing delay and extra cost claims is establishing the timing and specific content of communications. Meeting notes and written confirmations are important elements in narrowing the scope of disputes and reducing the cost of resolving such disputes.
A remarkable aspect of construction project delay and extra cost disputes is that they often involve a complex combination of many of these causes. Disciplined organization and documentation of the design professional’s construction related activity is important when it becomes time to sort out why the project was delayed and why expected costs were exceeded.
This article expresses ideas for consideration and should not be taken as recommendations applicable to any specific situation. When making a decision on how to address a specific situation consulting with an experienced attorney is recommended.
No. 8 - Revised 10/18/2016
© 2016 John Wersyn