Joseph E. Finley, Andrew D. Ness, Kevin O’Brien, Esha Mankodi, Christopher N. Thatch and Elizabeth M. Walsh | Jones Day | May 2016
Whether a period of concurrent delay properly may be “apportioned” between the parties to a construction contract was a key issue recently in a major construction dispute. Jones Day represented the owners of a half-completed, multibillion dollar project, which had suffered a two-year delay to the critical path of work and, consequently, to the project’s completion. The contractor sought a day-for-day extension of the completion date, as well as damages for each day of delay, claiming that the causes of the delay all were owner-assumed risks under the contract.
In contrast, the owners disputed responsibility for the causes of delay asserted by the contractor, and they pointed to other causes of delay for which the contractor was exclusively responsible and which had also delayed project completion by the same two-year period, or more. Notably, the parties’ contract was silent on the impact of concurrent delays, leaving resolution of this issue to the doctrine of concurrent delay under applicable law as interpreted by state and federal courts.
The owners’ scheduling experts used a Critical Path Method (“CPM”) scheduling analysis to evaluate the causes of the project delays. They concluded that the delays were concurrent because either the claimed contractor delays or the claimed owner delays, acting alone, would have resulted in the same two-year extension of the project duration. As a result, the owners contended, based on case law, that the contractor was not entitled to any damages for the two-year delay because the alleged owner delay did not cause the contractor to incur any added costs that it would not have incurred anyway due to its own concurrent delay.
Seizing upon ambiguous “apportionment” language in the case law, however, the contractor argued that delay liability, and hence damages, should be allocated between the parties on a percentage fault basis, akin to the comparative fault analysis utilized in negligence cases. In effect, the contractor sought at least partial recovery for delay damages that resulted from its own concurrent delay.
In the absence of a contractual provision addressing the issue, however, courts generally do not apply a comparative fault analysis in situations involving concurrent delay. Instead, whether applying the “traditional” or more modern “apportionment” theory of concurrent delay liability as interpreted by most courts, the contractor would not be entitled to damages for its claimed delay.
The Traditional Approach to Concurrent Delay
Prior to the advent of CPM scheduling, and more specifically, to the widespread application of CPM principles to delay disputes, there was no reliable means to distinguish between the effects of two different delays acting in the same time frame. It was the concept of the critical path, which distinguishes critical work activities from noncritical ones, that opened the possibility for finding that Delay 1 was on the critical path, and so affected project duration, while Delay 2 was not critical, and so had no effect on project duration.
Older, pre-CPM cases understandably took the general position that courts should not get involved in attempting to distinguish between the effects of different causes of delay during the same period, and concluded that neither party could recover if both parties contributed to the same total delay. E.g.,Newport News Shipbuilding & Dry Dock Co. v. U.S., 79 Ct. Cl. 25 (1934). In many states, this older rule has never been overturned and has carried forward into the CPM era. Even CPM-era decisions are often unclear if there was any attempt to utilize CPM scheduling evidence to sort critical from noncritical path delays.
The strict traditional approach has the benefit of simplicity: If both parties contribute to overall project delay, then neither party can be compensated for associated damages. The court views it as effectively impossible to allocate responsibility, so it does not even attempt it, even though it may lead to a harsh result for an owner or contractor seeking damages for delay.
The Modern Trend on Concurrent Delay
The more modern rule is that a party (or potentially both parties) may recover damages where there are multiple causes of delay to project completion, but only “when clear apportionment of the delay attributable to each party has been established.” George Sollitt Constr. Co. v. United States, 64 Fed. Cl. 229, 238 (2005); see also Flatiron Lane v. Case Atlantic Co., 121 F. Supp. 3d 515, 541 (M.D.N.C. 2015). The party seeking recovery bears the burden of separating its delays from those chargeable to the other party. If this cannot be done, the delays are considered “concurrent or intertwined,” and neither party may recover. Blinderman Constr. Co. v. United States, 695 F.2d 552, 559 (Fed. Cir. 1982).
A primary source of confusion, however, stems from whether the word “apportionment” refers to apportioning each parties’ fault (and hence apportioning the damages claimed) or apportioning time by attributing the causes of different periods of delay to one party or the other, and then assigning responsibility for those delay periods and associated damages accordingly. In the absence of a contractual provision governing the issue, what most courts overwhelmingly do is apportion time—they determine the days of delay for which each party is responsible. They typically do not approach apportionment, for instance, based on a determination of whether a particular jobsite problem is X percent contractor’s fault and Y percent owner’s fault. In many situations, this outcome makes sense: Under a construction contract, one party or the other is usually (but not always) allocated responsibility for each risk; risks frequently are not shared. In the typical situation, then, fault ordinarily cannot be “apportioned,” and damages are apportioned by the allocation of specific periods of time resulting from a specific risk (i.e., each party bears responsibility for the damages for the periods of delay for which it is responsible).
Whether delay periods can, in fact, be allocated often tends to turn on whether the causes of the delay are entirely concurrent or whether a delay period can be segmented into a series of sequential delays, where one party causes one delay in the sequence, and the other party causes a different delay in the sequence. Where the two competing causes both caused thesame delay to the same activities, or both extended the critical path in the same time frame, and either one would have been sufficient to cause the delay, courts find the delays to be truly concurrent and intertwined, and hence not compensable.
As the Federal Circuit has noted, “the contractor generally cannot recover for concurrent delays for the simple reason that no causal link can be shown: A government act that delays part of the contract performance does not delay ‘the general progress of the work’ when the ‘prosecution of the work as a whole’ would have been delayed regardless of the government’s act.” Essex Electro Eng’rs, Inc. v. Danzig, 224 F.3d 1283, 1295 (Fed. Cir. 2000). In the instance where the effects of different delays can be segregated by sequence, “one party and then the other cause different delays seriatim or intermittently,” the courts are able to segregate and allocate the delays to the responsible party. R.P. Wallace, Inc. v. United States, 63 Fed. Cl. 402, 410 (2004). So, for example, if CPM evidence proved that the first 61 days of delay were wholly the contractor’s fault, but the owner caused the next 60 days of delay, apportionment would be possible between the contractor and owner for their respective periods of delay. Id. at 411. Other means of segregation of delays are also possible, such as where one delay affects the critical path and the other does not, or where the delays are not truly independent—the first-in-time delay causes other work to be slowed because it cannot be completed until the first delay has been resolved.
On a more basic level, apportioning delay in a manner akin to comparative fault runs counter to fundamental notions of causation as applied to delay claims in usual construction disputes. A percentage allocation based on some general concept of relative fault would have the effect of awarding delay damages to a contractor (or owner) where the contractor (or owner) is unable to show that but for the owner’s (or contractor’s) delay, the overall delay in completion would not have occurred.
In our recent case, the owners’ CPM scheduling analysis revealed that the causes of the two-year critical path delay were truly concurrent and intertwined. The work would have been delayed to an equal extent due to the contractor-responsible delays regardless of any owner-responsible delays. This was not a case where a series of different delay periods comprised the two-year delay, such that CPM evidence could be used to apportion the different delay periods between the two parties. As a result, under basic principles of causation, the owners could not have been found to have caused the contractor’s delay damages attributable to the two-year time period, when the contractor was independently responsible for at least the same amount of delay.
The concept of concurrent delay and apportionment often generates confusion among owners and contractors—and their lawyers—in construction litigation. This confusion often emanates from the unqualified word “apportionment” and the ambiguity it introduces in terms of exactly what the court is supposed to be apportioning: relative fault for the delay, delay damages, or time. In the absence of contractual language altering the ordinary rules applicable to concurrent delays, most courts in construction disputes do not interpret the term “apportionment” to mean a determination of either party’s percentage of fault for the cause of delay. Rather, responsibility is established by contract, and in most instances it is a binary analysis. Accordingly, courts generally consider “apportionment” in a multiple delay situation to involve the segregation of distinguishable periods of delay caused by one or the other party to the construction contract, followed by a determination of how those respective delay periods contributed to the overall delay to project completion.
In terms of practice tips, one way to prevent claims for delay damages based on nontraditional theories, such as comparative fault, is to address the issue in the construction contract. For example, the contract could expressly limit delay damage entitlement to critical path delays pursuant to proof based on a critical path analysis. Alternatively, if the parties want to allow for an alternative approach to the treatment of concurrent delay, such as specifying some portion of recoverable costs or establishing a percentage split between owner and contractor delay responsibility, that approach also can be specified in the contract.