If you completed a construction project last fall, you are probably reading this in mid-winter, warmed by the anticipation of a great new course in the spring. If your project was delayed and/or incomplete, you are probably still, warmed – or hot – by what mom called “stewing in your own juices” at the challenges you face next year.
Construction delays are common, if not notorious. I’ve found golf course contractors have good records, but have seen more delays since the recent recession.
Not all construction agreements are reasonable. Generic “boilerplate” agreements are maddeningly vague on delays. They recognize delays and give contractors the ability to request money and time additions. The owner must give approval, which “shall not be unreasonably withheld.” Translation: “This agreement is only as good as the people signing it.” You can expect negotiations all through construction.
Most do have tools for owners to deal with delays. They set a firm completion date, and state time is of the essence. They often require schedule monitoring (always a good idea) and allow owners to demand accelerated construction when the contractor falls significantly behind. And, when the contractor runs late, they have multi-level options to recoup damages.
The first remedy is liquidated damages, a daily penalty for every day completion is beyond the then current substantial completion date. This is the owner’s main – and sometimes only – compensation for delays. Damages are usually set at $300 to $1,000 per day. Some owners demand higher limits, but they can be self-defeating – bidders pad the bid to cover possible damages, and if they are high, the bid rises substantially. In many cases, the owner over pays in advance for delays that don’t happen. Many golf construction agreements halt the daily penalty in the construction off season to avoid building up high penalties that would raise bids or discourage bids altogether.
The owner’s problem with liquidated damages is that missing prime grassing dates can delay reopening by a year, with substantial revenue loss. Owners feel entitled to some compensation when they lose more time than originally anticipated, but can’t get contractual relief from the contractor beyond the liquidated damages.
The next contractual remedy for severe delays is formal mediation or arbitration with a specialized construction dispute mediator/arbitrator. These are serious and rare, and have huge financial implications. In arbitration, one side wins. In mediation, which is usually preferred, a mediator can find parties at different levels of fault, and set payments, if any, somewhere between the owner and contractor positions, which seems fair in most construction disputes.
The highest compensation requires the owner to declare default or breach of the contract. However, the legal threshold to truthfully use this clause is high. And, at this point, the project becomes extremely ugly. Lawsuits and counter suits are standard, stop the project, and never help grass grow.
If your contractor has supplied a bond against default, it provides potential remedy of bringing in another contractor to finish. This is usually unsatisfying, as construction restarts only after lengthy investigations.
The best and least costly solution to construction disputes is for both sides to keep cool heads and handle disputes by private negotiation, rather than go to arbitration, mediation, bond calls or lawsuit. Occasionally, when working with a club full of lawyers, this turns out to be a minority opinion.
Most construction agreements place the burden of proof for damage on the contractor. To gain financial and time relief under most agreements, they must prove their contract performance was delayed, the delay was excusable, and for substantial time, and that they truly did incur additional expenses. In addition, the claim must be made immediately, and not at the project’s end, to be valid.
These negotiations often require the architect to referee. We are paid by the owner, and tend to defend their interests. However, we are also obligated to be impartial in making any construction ruling.
The best way to deal with delays is to use the old Chicago voting technique, which is to say “early and often.” Start with adequate funding and a schedule that allows for some delay. Select a responsible and adequately funded contractor, begin on time, and then hold regular construction meetings to talk, including schedule and progress monitoring. All help keep small schedule problems small and under control.