Sometimes “Time is Money” …but not always!

The old adage that “Time is Money” has never been truer than as it relates to the development and construction of revenue producing properties.  Between the Owner’s debt service expense on loans of tens of millions of dollars, lost revenue, and contractor’s time related costs, the cost per day can be tens of thousands of dollars.  Little wonder that when things don’t work out as planned and the process is delayed resulting in millions of dollars of delay damages, the parties commonly end up embroiled in expensive litigation over very complex issues with attorneys and experts attempting to sort out what caused the delay, how much are the damages, and who is responsible.  

The concept that a concurrent delay may not be compensable under the contract turns out to be an important aspect of many delay analyses.  Basically, if the Owner delays the project concurrent with a delay caused by the contractor, neither the contractor nor the Owner can get reimbursement for their delay damages from the other.  The concept is that the project would have been delayed had it not been for the delay of the other party, so you can’t get the other party to pay for your own delay.

This concurrency concept frequently becomes a major battle ground in delay disputes where whichever party that is being accused of delay, will look for concurrent delay caused by the other party in order to render the delay as “non-compensable”.  

What may appear to be a concurrent delay may actually be a pacing delay, that is, a pacing of work or pacing of a process by a management decision to change the rate of progress due to other events.  For example, if the Owner makes a change in design that affects the floor slab design causing delay to the floor slab construction, the contractor may decide to pace, or delay the delivery of structural steel that sits on the slab on grade in order to avoid having steel stacked up all over the site with no place to put it until the slab is completed.  The contractor’s delay to the shipping of the steel was a management decision to pace the steel fabrication and not a concurrent delay. By simply analyzing the as-built schedule, one may miss-construe that the steel delivery was a concurrent delay since the contractor couldn’t erect steel until it was delivered anyway – so the foundation change and steel delivery would be wrongly identified as concurrent delays, and therefore, the delay caused by the slab design change would not compensable to the contractor.

Pacing can and often does occur in decision processes as well as work flow and procurement.  In the real time of project management, many decisions must be made and issues resolved every day. People tend to make those decisions and deal with those issues based on their perception of priority.  If the contractor informs the Owner that the steel has been delayed 3 weeks due to an issue at the fabrication shop, and the Owner decides to take another 3 weeks to decide on the integral concrete stain color going into the slab concrete since the steel is delayed anyway – that is a pacing delay, not a concurrent delay.  The Owner could take more time on making the decision because of the steel delay.  The contractor can’t successfully claim that the delivery of the steel didn’t hold up the job because the Owner hadn’t made a selection on concrete color anyway.  

The delay analysis process usually takes place in hind-site by experts who weren’t on the project, based on a “static” analysis of available project documentation.  However, the actual construction process is a dynamic process where management decisions are made based on information available to the project participants at a particular moment in time and based on what they believe will happen next.  Good project documentation is extremely critical in the delay analysis process.  More often than not, simply relying on the project schedule analysis without digging into the story behind the activities and an analysis of the reasons certian decisions were being made can lead to the wrong conclusions in delay analysis.

For this reason, it is extremely critical for the project participants to document their actions and be especially cognizant of how a pacing delay can be miss-construed as a concurrent delay having a substantial effect on who may be able to ultimately collect on delay damages. Project participants should think about documentation from the perspective that some expert or attorney may someday re-create the reality of the project based on the written documentation left by the project team.  Whichever project participant best documents the project goes a long way in controlling that future re-created reality.   Project documentation tends to, at best, capture what happened but often doesn’t reflect why it happened.  The “why” can often drive the ultimate outcome of disputes over time and money. An understanding of the nuances of delay analysis, concurrency, and pacing concepts helps the parties understand what is important to document along the way.