MANAGEMENT
By J. Kent Holland, Jr.
Importance of Maintaining Good Cost Records When work is delayed contractors can be held to the requirement to prove “critical path”
W
hen it comes to proving delay claim entitlement, the contractor can be held to the requirement to prove, through a critical path method (CPM) analysis, that the items of work that were delayed were on the critical path. Without a CPM analysis, it is difficult or impossible, to determine what is, or was, the critical path. The court’s holding concerning the use of the jury verdict method in this case is helpful for clarifying when, and how, the method can be used. But even though the jury verdict method was used here to award some damages to the contractor, it must be noted that the contractor got only $155,000 out of its total $1.2 million claim. The jury verdict method is certainly no substitute for maintaining good cost records of each task that the contractor claims is impacted. In this case, a contractor filed a request for equitable adjustment (REA) to the District of Columbia (D.C.) government asserting that the District caused $1.2 million in delay and impact costs, and other damages arising out of a road reconstruction project. It appealed a deemed denial to the D.C. Contract Appeals Board (CAB). The CAB found in favor of the contractor on all its claims based on defective specifications or differing site conditions, but
remanded to D.C. to negotiate the quantum of damages. D.C. then concluded that quantum was equal to “Zero” and the contractor appealed to the CAB, which awarded equitable adjustment in the amount of only $155,000 on the claim because the contractor failed to use a Critical Path Method (CPM) to prove its critical path was impacted and failed to keep good financial records of the damages claims. This decision was affirmed by the D.C. Court of Appeals in Rustler Construction, Inc. v. District of Columbia, 2111 A.3d 187 (2019). Of note are the following holdings:
J. Kent Holland, Jr., is a construction lawyer located in Tysons Corner, Va., with a national practice. He is also president of consulting firm, ConstructionRisk, LLC. Contact him at Kent@ConstructionRisk.com.
The claim for overall delay
1. Contractor was unable to recover under a theory of “overall delay” because it failed to submit appropriate evidence to show the extent of delay to items on the critical path;
2. Contractor was unable to prove the amount of damages because it didn’t break down its costs by task; and
3. Contractor’s failure to demonstrate it was unable to keep detailed records doesn’t necessarily preclude the use of the jury verdict method to award the contractor a portion of its claimed damages.
The contractor wanted to use the number of days by which completion was delayed as a proxy for extra costs incurred. But overall
16 | THE STEEL ERECTORS ASSOCIATION OF AMERICA
delay only occurs when delay by the government/owner affects items that are on the critical path. If the government causes delay to the completion of items outside the critical path, a contractor may not recover based on a theory of overall delay. “The best way to establish the critical path is by presenting CPM schedules.” The court noted, “It is a well-accepted principle that contactors must modify and update the CPM schedules when issues arise during the course of construction.” In this case, although the contract specifically required the contractor to frequently and regularly update the CPM schedules, it only submitted four CPM schedules throughout the course of the contract, and two of those were submitted before construction even began. “The only CPM schedules that [contractor] produced after construction began were insufficient to establish the effect of delay on the critical path.” Although delay damages may sometimes be proven through expert testimony in the absence of up-to-date CPM schedules, the contractor failed to produce such expert testimony.
Calculating damages for additional tasks and out-of-sequence work The Board awarded the contractor damages for 28 days of additional tasks and out-of-sequence work. Due to Contractor’s failure to break down the costs by task, the amount of damages awarded was significantly
