By: William E. Underwood Partner, Jones Walker LLP.
When critical path activities are delayed by the owner (or another party), contractors will sometimes “pace,” or slow down, other activities to match the owner-caused delay. After all, why should the contractor hurry up and wait? But paced activities can often appear as concurrent delays on a project’s overall schedule. And all too often, contractors fail to contemporaneously document their efforts to pace work. Not only can this create avoidable disputes with owners and other contractors, but it can also create future roadblocks to the recovery of delay damages. This article examines the interplay between pacing and concurrent delay[1] and what contractors should do to minimize risk and preserve their rights to obtain more than a simple time extension for project delays.
Pacing versus Concurrent Delay
As a basic matter, most contracts allocate responsibility/liability for a schedule delay to the party that caused the delay. For example, if an owner is contractually required to provide equipment for a contractor to install, then the owner likely bears responsibility for any delays caused if the equipment is delivered late. If, however, the contractor was also behind schedule on other activities during this time and the project would have been delayed regardless of the owner’s late deliveries, then the delay is probably concurrent. And the contractor will generally be entitled to only an extension of time, and no other monetary relief.
But what if the owner notifies the contractor that the equipment delivery will be late and the contractor elects to slow down, or pace, its other work so that it will complete these unrelated tasks at or near the new equipment delivery and/or installation date? A cursory review of the project schedule would then appear to show a concurrent delay: both the contractor and owner are now set to complete unrelated activities beyond their originally planned durations, thereby concurrently delaying the project. What should a contractor do to preserve its contractual and legal rights to monetary relief for the owner’s delay?
Read the Contract
An important initial step is to ensure that the contractor actually has the right to pace its work. For example, many contracts contain a standard requirement that the contractor “diligently pursue the work.” So it is important to re-read the contract and note all relevant provisions impacting a decision to pace work. That being said, many courts and boards have determined that contractors do not need to zealously adhere to a disrupted schedule.[2] As a result, many jurisdictions allow contractors to intentionally slow down work in the event of a non-contractor-caused delay. But this is not necessarily always the case, and it is critical to understand the specific state and federal laws, rules, and regulations governing the project. Failure to do so could result in self-inflicted wounds brought on by impermissible pacing.
Document, Document, Document
Another critical step is to document, document, document. True pacing is a conscious, voluntary, and contemporaneous decision to slow down work, but it may not always look that way to a third party (such as an arbitrator, expert, or even another contractor on site) conducting an after-the-fact review of project schedules and correspondence. Therefore, a contractor should be diligent in contemporaneously documenting its election to slow down.
Actual notice is obviously the preferred method — a written communication to the owner plainly identifying the non-contractor-caused delays, the activities to be paced, and the new anticipated completion dates for those activities. And some contractors will even go so far as to submit a formal “pacing plan” that contains schedule updates, a detailed accounting of the paced activities, and any other relevant information. Regardless, it is always important to check the contract to identify all relevant notice requirements — or possibly even specific notice requirements in the event a contractor elects to pace its work — and then adhere to those requirements. In other words, compliance is key.
But even if a contractor fails to provide actual notice, there may be other avenues to escape the label of concurrent delay. Constructive notice is one such avenue. Under a theory of constructive notice, a contractor can claim that although it may not have provided actual notice, the owner nonetheless knew that the contractor was pacing its activities. This is not an ideal method to demonstrate that the contractor was pacing activities, and it will likely lead to claims that the contractor is simply using pacing as an after-the-fact fiction to get delay damages, but it is better than nothing. The contractor will also likely need strong expert analysis to bolster its claims of pacing, but again, it is better than nothing.
Nothing is Without Risk
Pacing is not without risk. There is the practical risk that the owner (or other delaying party) may unexpectedly erase all or part of an anticipated delay, thereby making the contractor’s paced activities theoretically delayed. In that case, there will almost certainly be a dispute regarding the permissibility and impact of the contractor’s election to pace its work. And there is also the very real risk that, in the event of a future dispute, the paced activities will be seen as concurrent delay. Again, this is when notice and contemporaneous documentation become vitally important.
There is also debate within the industry that contractors should not be entitled to full delay damages for paced activities. In theory, pacing can mitigate a contractor’s delay damages. Therefore, if a contractor seeks full compensation for the delays on the project, it could — again, in theory — be overcompensated for the harm it actually incurred. This overcompensation argument can serve as a roadblock to the full recovery of damages. Thus, pacing can be an effective but risky way manage other project delays.
Conclusion
Overall, pacing can be an effective way for contractors to deal with project delays, but it is not without risk. It is important to read the contract, understand the law, and clearly document the issue. These are important steps to preserve the right to future recovery when pacing project work.
[1] Although authorities do not necessarily agree on an exact set of requirements, concurrent delay is generally defined as two or more independent parallel delays to the project’s critical path.
[2] See, e.g., John Driggs Company, Inc., ENG BCA No. 4926, 5061 & 5081, 87‐2 BCA 19,833 (“The occurrence of a significant delay generally will affect related work, as the contractor’s attention turns to overcoming the delay rather than slavishly following its now meaningless schedule.”).
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