Quantifying Delay Damages On Your Construction Project
By Jesus Schuldes, PSP
and Kate Hull
As COVID-19 advances across the United States, various industries and nearly all aspects of the supply chain continue to be impacted, including the construction industry – and by default, skilled workers, electricians, engineers, and more. COVID-19 will likely have significant effects on construction due to mandatory work stoppages, material delivery limitations, labor shortages and reduced inspector availability, which will ultimately result in delays. A recent survey by the Associated General Contractors of America (AGC) found that 39% of respondents have already experienced halted or delayed work on construction projects. Accordingly, numerous law firms have advised that project teams review each contract separately to understand exactly what clauses may or may not be applicable to halted or delayed work resulting from COVID-19.
Delays on construction projects can lead to a cascade of negative financial repercussions for owners, contractors and subcontractors. Liquidated damages and extended general conditions are the most common damages associated with delay. However, delay damages can also include unabsorbed home office overhead, idle labor and equipment costs, de-mobilization / re-mobilization costs, labor and material cost escalation, productivity loss and many others. As COVID-19 progresses and new mandates are put in place by federal, state and local government entities, it is imperative that owners, contractors and subcontractors properly notify, document, monitor and quantify all delay damages resulting from COVID-19. Below is a listing of typical delay damages that may result from COVID-19 and quantification methods of such.