{"id":898024,"date":"2020-09-30T13:07:59","date_gmt":"2020-09-30T19:07:59","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=898024"},"modified":"2020-09-30T13:08:02","modified_gmt":"2020-09-30T19:08:02","slug":"delay-vs-disruption-damages","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/delay-vs-disruption-damages\/","title":{"rendered":"No Longer in the Dark: A Primer on the Distinction between Delay and Disruption Damages in a Construction Dispute"},"content":{"rendered":"\n

Matthew DeVries | Best Practices Construction Law<\/a><\/p>\n\n\n\n

If you are left in the dark about something, you don\u2019t have the information you should have to make an informed decision. \u00a0Delay claims<\/a> on a construction can be confusing, especially when you think about the delay to the work being performed and the disruption to other activities. \u00a0A few years ago, I found a case that shed some light on the\u00a0delay v.\u00a0disruption\u00a0<\/em>distinction.<\/p>\n\n\n\n

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In\u00a0County of Galveston\u00a0v.\u00a0<\/em>Triple B Services, LLP<\/strong>, decided on May 26, 2016, the Court of Appeals of Texas reviewed a contractor\u2019s claim for damages on a road expansion project. \u00a0While the legal issue focused on the County\u2019s right rely on the defense of sovereign immunity, the Contractor\u2019s (and it expert\u2019s) characterization of the damages was critical to the outcome of the case. \u00a0Since the applicable statute waives a county\u2019s sovereign immunity for breach-of-contract damages that are \u201ca direct result of owner-caused delays,\u201d the Court had to decide whether disruption damages\u2014as opposed to delay damages\u2014were recoverable.<\/p>\n\n\n\n

The Contract.<\/strong>  The County entered into an agreement with the Contractor to expand a three-mile stretch of road. Under the contract, the County was responsible for moving gas, water, and fiber-optic utilities.  According to the Contractor\u2019s expert, the contract established a \u201cbaseline schedule \u2026 created by the County\u2019s engineer,\u201d which showed a starting date with unhindered access along the area of the road where the utilities were located. The contract allowed for \u201cdelay damages\u201d if the Contractor\u2019s request for those damages \u201cis determined to be compensable.\u201d<\/p>\n\n\n\n

Owner-Related Delays.  <\/strong>Although the Contractor\u2019s plans for the construction project anticipated that the County would move the utilities by a particular date, those utilities were moved almost one year later.  Nevertheless, the Contractor completed its work within the contract time.  According to the Contractor, it incurred additional costs to hand-form manholes, set and reset barricades, extended field office overhead, as well as additional labor, equipment, street cleaning, flagging, and traffic control\u2014all of which resulted from the County\u2019s delays in moving the utilities.<\/p>\n\n\n\n

Sovereign Immunity Argument.<\/strong>\u00a0\u00a0The County argued that\u00a0Section 262.007 of the Local Government Code\u00a0waives a county\u2019s sovereign immunity for construction contracts involving claims for delay damages. \u00a0Here, the County relied heavily on the testimony of the Contractor\u2019s expert witness who testified about the Contractor\u2019s damages resulting from the County\u2019s delays. Since the County did not timely move the utilities as anticipated in the original construction plan, that schedule of work was \u201cdisrupted.\u201d \u00a0By seeking disruption damages, the County argued, the Contractor sought damages that were excluded from recovery under the statute.<\/p>\n\n\n\n

So, are these delay damages or disruption damages?<\/h2>\n\n\n\n

On appeal, the Contractor agreed that its \u201cdisruption damages\u201d do not meet the definition of \u201cdelay damages\u201d as traditionally understood in the construction law arena. However, it argued that the statutory waiver of sovereign immunity for damages that are \u201ca direct result of owner-caused delays or acceleration\u201d includes more than \u201cdelay damages\u201d as defined under construction law: \u201cDisruption and lost productivity costs are \u2026 recoverable damages under the clear meaning of the words of the statute.\u201d<\/p>\n\n\n\n

The Court turned to the\u00a0construction law bible written by Phillip Bruner and Patrick O\u2019Connor\u00a0to address the inquiry, noting that delay damages have a technical definition distinct from disruption damages:<\/p>\n\n\n\n

 Delay damages refer to damages \u201carising out of delayed completion, suspension, acceleration or disrupted performance\u201d; these damages compensate the contracting party that is injured when a project takes longer than the construction contract specified. . . .<\/p>

Disruption damages, on the other hand, are for a project that may be timely completed but nevertheless includes disruption to the contractor and compensates it for \u201ca reduction in the expected productivity of labor and equipment\u2014a loss of efficiency measured in reduced production of units of work within a given period of time.\u201d . . . Disruption damages can also be caused by an \u201cevent [that] both disrupts and delays a critical path activity\u2026.\u201d A project that finishes on time but at greater expense because of disruptive events or scheduling errors presents a claim for disruption damages.<\/p><\/blockquote>\n\n\n\n

The Court\u2019s Decision.<\/strong>  Based upon a plain reading of the statute, the Court concluded that Section 262.007 allows a claim for disruption damages against a county \u201cif the disruption damages directly result from the county\u2019s delay in performance of its contractual obligations\u2026.\u201d Significantly, the statute did not distinguish between \u201cdelay damages\u201d and \u201cdisruption damages\u201d that are directly caused by the breaching party\u2019s delay.<\/p>\n\n\n\n

Lesson Learned.<\/strong>   According to the expert in this case, the Contractor incurred significant increased costs to finish the work on time. The Court\u2019s opinion provides an excellent roadmap of the type of expert proof required to establish the damages sought by the Contractor, including the following:<\/p>\n\n\n\n