November 27, 2024 Managing Risk with the Four Major Types of Construction Delays

Understanding types of construction delays and who is liable for each is critical to managing risk and keeping projects on track.

By Adrien Pickard

Delays are an inherent risk in construction projects, and when the critical path on the project is delayed, determining the cause and assigning responsibility is crucial for both the contractor and the property owner. The type of delay, its cause, and the applicable contract provisions will shape the parties’ respective rights and remedies. For that reason, it is vitally important that you review your contract to ensure it includes a clear set of contractual provisions that plainly allocates the risk of delay before embarking on a project.

While the specific terms of a construction contract can vary, there are generally four major types of delay that can impact the timely completion of a project: inexcusable delay, excusable delay, compensable delay, and concurrent delay. Understanding these categories is key to resolving disputes and managing risks effectively.

Inexcusable Delay: Contractor’s Fault and Potential Liability

Inexcusable delays are those caused by factors within the contractor’s control or within the contractor’s contractual responsibility. This type of delay can occur when the contractor fails to adhere to the project schedule, perhaps due to poor planning, lack of resources, or inefficiency. Under these circumstances, the contractor will be at fault, and the owner is entitled to compensation for its actual damages.

Some contracts provide for liquidated damages – predetermined amounts specified in the contract that represent a reasonable estimate of the damages the owner will in the event of an inexcusable delay. Liquidated damages clauses serve to protect the owner from the financial impacts of late completion and offer clarity on potential relief.

Excusable Delay: Unforeseeable Events Beyond the Contractor’s Control

Excusable delays, on the other hand, are delays that are caused by unforeseeable events or circumstances that are beyond the contractor’s control and not due to their fault or its negligence. Events like war, labor strikes, pandemics, extreme weather, etc., are good examples. Construction contracts regularly include excusable delay clauses that are designed to address such events, including to excuse a party from performance due to unforeseeable circumstances.

When an excusable delay occurs, the contractor is typically entitled to an extension of time to complete the project but is generally not entitled to any monetary compensation. The extension of time allows the contractor to finish the work, and the owner is not required to pay the contractor for the additional time required. However, the contractor must demonstrate that the delay was unforeseeably beyond its control, that the contractor was without fault or negligence, and that it took reasonable steps to mitigate the impact of the event.

Compensable Delay: Delays Resulting from Owner Interference or Scope Changes

A compensable delay occurs when the delay is caused by factors within the owner’s control, such as changes to the scope of work, design modifications, delays in providing necessary approvals, or some other act by the owner that interferes with the contractor’s ability to complete the work on time. For example, owner changes to the scope of the project that cause delay to the contractor could result in a claim for compensable delay.

In the event of a compensable delay, the contractor is entitled to an extension of time and monetary relief to compensate the contractor for the costs incurred due to the delay. These costs may include labor, equipment, and material expenses incurred as a result of the changes or delays caused by the owner.

Concurrent Delay: Shared Responsibility and Limited Relief

Concurrent delay is a more complex situation in which multiple causes contribute to the delay, not exclusively within the control of either the owner or the contractor. For example, a project may be delayed by an owner change while at the same time the contractor was delayed in procuring materials for the project. If the multiple delays both result in a delay to the critical path, they will be “concurrent,” and neither party will be entitled to monetary relief. Under these circumstances, the sole remedy for both parties is an extension of time. The compensable rights and obligations of both parties are offset against the other, and the delay is treated as an “excusable delay” beyond the control of either party.

The modern trend permits apportionment of responsibility for concurrent delay where the causes of the delay can be clearly isolated and segregated and their duration can be proven. In those cases, fault for the delay can be allocated between the responsible parties.

Conclusion

Understanding your rights and obligations if your project is delayed is a critical part of risk management. Clear contract provisions that define these delay categories can help prevent disputes, ensuring that both parties are equipped to effectively manage delays.

About the Author:
Adrien Pickard is a partner at Barclay Damon in Washington, D.C. He represents clients in the construction, real estate, and government contracts industries in complex commercial litigation before state and federal courts across the country.

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