Construction & Remodeling Newsletter – May 2014

Construction Disruption Claims

By Attorney Patrick Noaker

Masonry PhotoYou are a masonry subcontractor and, due to early problems on the project, your crew is forced to perform its masonry work in a different sequence than originally planned.  Different portions of the project are available at different times than was reasonably anticipated, requiring your crew to move itself and its scaffolding back and forth on the job site.  Even though the scope of work remained the same, the resequencing of the work wreaked havoc on your crew’s productivity, resulting in significantly higher costs.

This is an example of disruption.  Disruption, in the world of construction projects, means a reduction in productivity of labor and equipment caused by an unforeseen condition or event. Disruption most commonly occurs when there are changes in the sequence or location of the work, differing site conditions, inadequate or defective specifications, unusually severe weather, strikes, unavailability of materials or interferences from other contractors.

Recovery for disruption may be based upon specific contract provisions or implied contractual provisions.   Specific contract provisions that contemplate disruption may be the changes, differing site conditions or suspension of work provisions of the construction contract or subcontract.  Most government contracts contain provisions that can be the basis for recovery for disruption, as do some model construction contracts.  If there are no specific contract provisions applying to disruption, implied contract provisions may be used.  For example, every contract contains an implied duty to not interfere with the contractual performance of another and an implied duty to not commit any act that will hinder or delay performance of the terms of a contract.

In either case, it is important to notify the general contractor or owner of the project, when you encounter disruption.  At times, this will result in a change order being issued, providing for payment of the increased labor and equipment costs.  Other times, the general or owner will take the position that there has been no change in the scope of work and no change in the number of days to complete the work, so no change order.  If this occurs, keep accurate and thorough records because you will most likely be required to bring a disruption claim at the end of the project.

The biggest challenge to a disruption claim is proving that reduced productivity was due to disruption and not some other cause.  This requires that you prove that your assumptions surrounding the productivity of your crew were reasonable.  Was your bid based upon overly ambitious productivity rates?  Did you fail to take into account project terrain, geology or common weather patterns when calculating your bid?  Was your crew’s reduced productivity caused by a lack of effective supervision, lack of technical skill, turn-over or poor morale.  As there are many possible sources of reduced labor and equipment efficiency, simply presenting evidence of increased in labor and equipment costs over the bid amount is not normally sufficient to prove disruption damages.

Instead, disruption damages should be calculated using other accepted calculation methods.  One of these methods is the “measured mile approach.”  The measured mile approach compares a contractor’s activities during the disrupted period of performance with the contractor’s identical or substantially similar activities during a period of unaffected performance.  Sometimes, productivity rates from the same project can be used, other times, rates from a similar project can be used.  One of the keys to success with this approach is comparing apples to apples.  Similar crew, similar task, during similar times in a project.   Another calculation method is to use industry productivity rates as a benchmark labor rate.  These industry rates can also be used to support the accuracy of your unaffected labor rate.

Being knowledgeable about disruption claims and the associated costs will help you recognize when you experience disruption on a project.  Early identification may allow for early communication with the general contractor or owner, and possibly resolving the disruption before it has a major impact on your project costs.  Even if the disruption is not resolved, you will know to keep thorough and accurate records so that you can bring a disruption claim at the end of the project, should that be required.

About the Writer:

Patrick Noaker is an attorney with the Noaker Law Firm LLC who aggressively represents construction contractors in the courtroom, mediation and arbitration.  Patrick has presented cases to judges, juries, arbitrators and mediators across the U.S. for the past 23 years.  Patrick can be reached at his office: 333 Washington Avenue N. # 329, Minneapolis, Minnesota 55401, (612) 839-1080, patrick@noakerlaw.com.

 

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