By Tom Owens
The following material is provided for informational purposes only. Before taking any action that could have legal or other important consequences, speak with a qualified professional who can provide guidance that considers your unique circumstances.
Delay claims have always been among the most common type of demand made against parties to a construction project. Design consultants, contractors and clients have all had formal complaints made against them alleging financial damages due to delays in the completion of the project.
At no point in recent memory, however, have architects and engineers experienced so many problems with project delays as they have in the past couple of years. Delays have mounted from a chain reaction of unfortunate and untimely events plaguing projects both at home and abroad.
COVID-19 Stands out as a primary catalyst for many of these mounting project delays. First came stay-at-home orders that forced many in the workforce to miss time on the job. Then, as more and more members of the workforce fell ill or, worse yet, succumbed to the deadly early strains of the virus, shortages in skilled labor, professionals and management multiplied, exasperating the problem.
Then, just as things were beginning to improve thanks to effective vaccines, new, highly contagious variants of the virus appeared. Workforce shortages rose once again. Manufacturing and transportation workers worldwide were not reporting to work. Shipments of parts and materials ground to a halt as ports became overloaded with goods that could not be transported and delivered. Shortages of building supplies, electronic components and other project-critical elements multiplied.
Design professionals and contractors with ongoing projects were caught in the squeeze of this vice of personnel and material shortages. Lead designers had made firm scheduling commitments to their clients and were now unable to meet those deadlines. Project owners complained that these missed deadlines were costing them money as project completion targets and occupancy dates were missed. Complaints were followed by claims.
So, what are design consultants to do? The future of COVID variants remains a great unknown. Labor and material shortages continue to be an alarming problem. Scheduling has become a crapshoot for many in the design-and-build sector.
Coping with This New Reality
So, how do design professionals cope with this new reality of shortages and delays? It is best to openly acknowledge that the current uptick in scheduling problems will likely continue for the foreseeable future — maybe longer. At the earliest stages of project planning, frank conversations regarding realistic timelines and schedules must be had with project owners, building occupants, contractors, subcontractors and subconsultants. Equally important, your concerns regarding potential scheduling problems and delays should be addressed in your contracts with your clients.
When preparing to bid on any new project take an objective and realistic look at labor and material availability. Meet with the project owner and contractor to determine whether material or labor shortages have resulted in delays during recent projects of a similar type. What are reasonable time frames for receiving materials in light of current supply-chain bottlenecks? What are the critical paths most likely to lead to project delays and how can such delays be best avoided?
When specifying materials, have suppliers provide estimates on availability and lead times for delivery. If particular materials are in short supply, what are the reasonable substitutes? What impact would these substitutes have on project schedules and overall project quality?
If the project owner or contractor recommends substitute materials to reduce the chances of project delays make sure it is clear that they requested and/or approved the use of these substitutes.
In your client contract, have your client agree that you are not responsible for any financial or other damages arising out of any delays caused by factors outside of your control. These factors may include pandemics, labor disputes, severe weather, fires, riots, wars, and other natural disasters. Other factors beyond your control that may lead to delays include performance failures by the client, the client’s contractor, government officials and other third parties to the project.
Your contract should also specify that if delays caused by factors outside of your control increase the time and costs you incur on the project you are entitled to a reasonable adjustment in schedule and compensation.
One contract clause every design professional should push for is the “force majeure” clause. Commonly called the “Act of God” clause, the force majeure clause can provide broad protection for design professionals who face potential liability for circumstances beyond their anticipation or control. Such circumstances may include pandemics, wildfires, hurricanes, volcanic eruptions, wars, riots, and other natural or manmade disasters.
Generally, you and your legal counsel will have to actively push to get force majeure language added to your client contract. Neither the AIA’s B101 agreement nor the EJCDC E-500 agreement includes a comprehensive force majeure clause — although both provide limited protection against liabilities for delays caused by factors outside of the architect’s or engineer’s control.
AXA’s XL Contract Guide suggests that design firms consider force majeure contact language such as the following, adapted by you and your legal representatives to fit your unique circumstances:
If an event or circumstance beyond the Consultant’s reasonable control occurs, including without limitation an act of God, fire, flood, hurricane, wind event, storm, weather disturbance, earthquake, pandemic, disease, epidemic, or other viral or bacterial outbreak, government-ordered shutdown, quarantine or shelter-in-place order, an act or omission of a third party, strike, war, riot, terrorism or threat of terrorism, civil unrest, or any other event or circumstance not within the reasonable control of the Consultant, whether similar or dissimilar to any of the foregoing, that cause the Consultant delay or additional expense (“Force Majeure Event”), then the consultant is entitled to an equitable adjustment in the contract price or time for performance. If any Force Majeure Event renders the Consultant’s performance impossible or impracticable, the Consultant has the right to terminate performance under this agreement consistent with any termination requirements that might exist in this Agreement. Upon request by the Client, the Consultant will furnish the Client with periodic reports regarding the impact of the Force Majeure Event on the Consultant’s services.
If a client balks at accepting a force majeure clause in your contract, you might offer to make the clause mutual so that both parties of the contract are projected from liabilities that are due to force majeure events. You might also offer to add a time element to the clause; for instance, requiring that parties must report a force majeure event within 10 business days of the occurrence of the event. The reporting of the event should document the situation that caused the delay or other loss and develop a reasonable approach to completing the project within a doable timeframe.
More on Substitutes
As previously mentioned, you may discover that a tried-and-true material, equipment or product that you routinely specify in your projects is facing lengthy shipping delays due to supply chain problems. Maybe you are aware of a suitable substitution that you can comfortably recommend or specify in advance of the bid date and thereby keep the project on schedule or at least minimize any delay.
In other cases, however, you may not be aware of a ready substitute for a material, equipment or product that is experiencing supply chain delays. In such cases, you should consider asking the contractor or even the client if they have any recommendations.
If you are making or accepting suggestions for substitutes make sure the substitution approval procedure is a formal process well documented in the client contract. Be sure to document, among other things:
- The scope of the substitution
- Reasons for the substitution
- Estimated impact on project costs
- Estimated impact on the project schedule
- The coordination required with other materials, equipment or products.
Note that while a substitute may not suffer the supply chain delays that the originally specified material is facing, you and your client may not achieve all of the estimated time savings you expect. For instance, you’ll need time to review the request for substitutions. The change in specifications may require additional revisions to the design documents to accommodate those substitutions.
Also, if the substitute proves not to be of equal quality or requires greater maintenance or operating costs, the client may seek restitution for the lost time and money. That’s why the client contract is so crucial when setting the guidelines for substitutions.
The client contract should state that upon request of the client, the design professional will evaluate and make recommendations regarding substitutions of materials, products or equipment. It should also state that the design consultant will be compensated for providing such recommendations as well as for any additional design services required to modify the construction documents and coordinate them with the substitutions.
If substitutions are made at the request of the client, the contractor or any other party representing the client, then they should be presented to the design consultant in the form of a Substitution Approval Request Form. Note that you are making the change in specified materials, products or equipment at the request of the client and that you are making no warranty or guarantee as to the quality or suitability of the substitute.
More Delay Busters
Here is some additional advice for avoiding project delays:
- Pick your projects carefully. Are materials reasonably available? Is skilled labor in sufficient supply? Does the client have realistic expectations regarding the time and cost needed to satisfactorily complete the project?
- Continually monitor the project schedule. Address any delays immediately. Ensure that both you and the contractor have the time needed to complete the project and meet the prevailing standard of care.
- Preach project promptness. One of the best preventatives for a delay claim is a project mindset that preaches promptness. For instance, address requests for information (RFIs) and change orders promptly. When an RFI or change order request is submitted by a contractor evaluate it quickly and thoroughly. Give your opinion to the client as to whether the requested change is warranted and whether there is a reasonable basis for a time and/or cost adjustment to the project.
Remember: Time is money for your client, the contractor and you. By being realistic and diligent with your schedules, keeping a watchful eye on material availability and the progress of all project participants (including your subconsultants), and addressing project delays at the first sign of trouble, you can avoid those delays that are avoidable and not be held liable for those delays outside of your control.
Can We Be of Assistance?
We may be able to help you by providing referrals to consultants, and by providing guidance relative to insurance issues, and even to certain preventives, from construction observation through the development and application of sound human resources management policies and procedures. Please call on us for assistance. We’re a member of the Professional Liability Agents Network (PLAN). We’re here to help.