Free CLE: Understanding Delay and Disruption Claims
A Look at Key Issues and Legal Considerations
In this free CLE course, construction attorneys Jim Sienicki and Ed Hermes of Snell & Wilmer will provide an in-depth overview of key issues in pursuing or defending against claims related to delay and disruption, particularly in light of COVID-19.
The presenters will also discuss how to document position claims and defenses. Join live to ask your questions in a Q&A session after the presentation.
What we’ll cover:
- Impact of COVID-19 on delay and disruption claims
- Contract terms which may apply as a result of the pandemic
- Key considerations when addressing defenses or counterclaims which may be raised by contractors
Meet the presenters:
Jim Sienicki is a partner at the law firm of Snell & Wilmer. Jim’s practice involves construction contract preparation, construction law representation and litigation, procurement law and bid protests, general commercial litigation, creditors’ rights and other litigation, alternative dispute resolution and appellate matters. Jim was the head of the firm’s construction practice group for more than 15 years, and the firm’s construction litigation practice has been recognized as a National Tier 1 practice for the past seven years by U.S. News and World Report/Best Lawyers. Jim has been named to Best Lawyers in America® 2003-2020 in the area of Construction Law and Litigation. The Best Lawyers in America® also named Jim Phoenix Lawyer of the Year, Construction Law, in 2013 and Phoenix Lawyer of the Year, Construction Litigation in 2018.
Ed Hermes is an attorney at the law firm of Snell & Wilmer. Ed’s practice is focused on complex commercial and construction disputes, including disputes related to delay, disruption, improper liens, construction or design defect, change order, and related construction-related disputes. Ed regularly appears on behalf of his clients in state, federal, and tribal courts and administrative tribunals, such as the Arizona Registrar of Contractors. Having previously lived and worked on the Navajo Nation, Ed also advises companies and contractors construction and general compliance issues in Indian Country.
This course is eligible for 1.5 hour CLE credit in Arizona. Attendees will receive a Certificate of Attendance via email. Check your own state Bar requirements for eligibility to receive credit in your state.
Kathryn Barona (00:00:05):
Good afternoon, everyone. I’m Kathryn Barona with Levelset and we are here to see Jim senaki and ed Hermes present this CLE about understanding delay and disruption claims, and I’m going to let them get started right now. So please enjoy the presentation and if you have any questions, please type them in the chat box at the bottom of your screen, and just write them in there. And we are going to save all those questions for the end. And then, um, that’s when Jim and ed will address them. So thank you and enjoy the presentation, Jim.
Jim Sienicki (00:00:45):
Thank you, Catherine. Um, I’ll tell you a little bit about myself. Uh, you got there and asked, did I introduce myself, tell you a little bit about the firm I grew up in Pittsburgh. That’s where my, uh, by accident is from. I then went to the air force Academy. Then I went to, uh, Kansas for law school. Uh, Kansas, unfortunately got kicked out of the NCAA tournament quite early. And so now I’m doing these presentations to bill my time. Uh, that’s a joke obviously, but, uh, anyway, uh, after, uh, I went to KTU, I joined the Burma Snell and Wilmer, and, uh, I’m probably a pretty rare person these days because I, I, uh, went, they pay you for law school. And I came over in 1983 and I’ve been with Zelmer ever since in a lot of people as you know, over 35, 40 years or whatever it is, I think it’s 37 for me.
Jim Sienicki (00:01:42):
Um, you know, change quite frequently these days. And so, um, a little bit about the farm, the farm when I first started with a Phoenix farm, but now we’re all over the Western United States. Uh, we, we practice, I tell people that we, unless you’re getting a divorce, we can help you. Uh, we, we do basically everything except, uh, you know, divorce law and that kind of stuff, but we have a very good construction practice. Uh, our offices are mostly in the West, as I said, uh, uh, Denver, um, Arizona is California, Portland and various other places. Uh, so we basically cover most of the Western United States. Um, that’s enough about myself and the firm. I might turn it over to ed and let him tell you a little bit about yourself and whatever I forgotten about the farm. Go ahead. Thanks Tim. I appreciate it. You did a great job talking about Snell and Wilmer, so I’ll, uh, I’ll give a little bit of background on myself. My name is ed Hermis. I am an associate at a law firm, Snell and Wilmer, uh, born and raised on a hog farm in Illinois before moving to Arizona and going to Arizona state university for undergraduate
Ed Hermes (00:03:00):
And law school. Um, in between that time, I was a school teacher on the Navajo nation, uh, and lived up in window rock for a time before becoming an attorney. Uh, I practiced construction law and Indian law. Um, based on my time living in Indian country, I have a unique experience in health and construction projects here in the West, especially, uh, on Indian reservations as well. It’s a nice little niche, but also do work quite a bit with gyms Nikki on, on construction matters more generally, and appreciate the opportunity today to discuss delayed disruption can claim something that we’ve been, uh, experiencing more of in the last year due to COVID-19 and you know, Jim and I would love to be there, uh, with you guys in person. Um, but this works to being on zoom. So you can, you can see that I’ve had a busy year this past year where some of the artwork from my kids back here, it’s been an interesting year for everyone in the industry. And, uh, we appreciate the opportunity to come and talk to you about it today.
Jim Sienicki (00:04:04):
Okay, let’s get started. Um, the first slide here, uh, that we’re gonna put up here or hopefully get up here is delayed in disruption claims. That’s what we’re here to talk about today. And there’s a difference between delay and disruption claims. And as this court said, this is a pretty painless, uh, uh, case the bill BCI case. Uh, the court described the two as follows and the claim captures the time and cost of not being able to work while a disruption claim captures the cost of working less, efficiently than plan. So let’s take COVID if, if COVID, um, on a job, you know, caused the owner of the job to suspend the, the project, obviously that would, uh, in most cases, depending on the contract would create a delay claim and the, you would be entitled to, uh, additional time, uh, depending on the contract for, um, the period of delay.
Jim Sienicki (00:05:13):
But also if it, you have a COVID situation and you have, you know, to keep, uh, you know, six feet apart and you can’t, you know, if you’re in a high rise and you can only get three people in an elevator at a time, obviously getting the crew up to the 12th floor to 28th floor or whatever is going to take more time. So that is more of a disruption plane because you’re working less efficiently. So, okay, let’s go to the next slide. And so, regardless of whether it’s delay or disruption, you still have to prove three things, liability, causation, and damages. And so if you’re you’re, if you’re the contractor and you’re asserting at the light claim, you have the burden of proof for showing how long were you delayed that the lane was caused by the owner and that the delay caused damage to you. And, um, usually that will be, uh, quite easy to do as far as the delayed caused damages, because if you’re on a job for an extra three months and you have GCs general conditions for three months, obviously you’re going to have additional damages that you weren’t counting on in the first place.
Jim Sienicki (00:06:40):
So we’re talking about delay disruption, and COVID depending on the contract terms. And it’s very important to look at the contract terms on all of these things. And, and don’t just look at the contract terms. A lot of times people just focus on the contract terms, but there’s another piece. And that is what is the prevailing law. And, and, and why that, what I’m saying is there’s, there’s sometimes you’ll have something in a contract that will say, what, what are the payment provisions, but the, the staff, the state that you’re working in may have a prompt pay act, or the state that you’re working in may have an anti indemnity statute. So you can’t just read contracts, although, you know, you, you want to read the contract, but you also want to go the extra mile. And that is that that’s because I, I used to run marathons.
Jim Sienicki (00:07:38):
I will always run the extra mile. You always want to look at what is the law in the Jewish diction, and does that law in the jurisdiction, uh, Trump what’s in the contract and then, um, co contract. Now, th th the terms that have got the most play during COVID is forced to mature delay, clauses, suspension, clauses changes in law. You know, you know, attorneys and contractors and people in this business are creative folks. And, you know, you, you look at your contract, you look at the prevailing law and you see where you can hang your hat and bring a claim or defend against a claim. So contractors may be able to use these clauses or impossibility of performance, obviously effect, you know, there’s, there’s a, you know, shelter in place, kind of thing, where you get, you can’t go to the job site. If it, it, if that’s the case and excuse the light performance due to COVID and may possibly, uh, give you a place to hang your hat in order to get, uh, the increased cost, uh, caused by the delay or, or the disruption. Next slide, please,
Jim Sienicki (00:09:00):
On the other hand, owners are going to look at those clauses force, majeure suspension, delay changes in law clauses and other clauses to attempt to limit its liability. It may say, okay, this is a force majeure. Um, if forced majeure entitles you to a time extension, but you don’t get your GCs. And so, um, that’s, that’s where the, um, you know, the tug of war is going to be in figuring out what, where are you going to hang your hat and what are going to be the defenses that are raised to that? So, uh, creatively owners and contractors and subcontractors are going to be looking at these clauses, uh, et cetera, next slide.
Speaker 4 (00:09:48):
Jim Sienicki (00:09:51):
So for us was during COVID, uh, I got ahead of myself a little bit, but some prime contracts say that a contractor or sub who’s excused by force majeure is entitled to a non-compensable extension of time. So you may be protected from LDS, and you may be able to get a time extension, but you’re going to be eating your GCs if that’s what the force majeure clause says. And because the COVID 19 has been unprecedented, it’s still going on and is still an ongoing issue. You know, you should closely review and update your contract with regard to provisions that are favorable and unfavorable, uh, and looked at those clauses. And now here’s, here’s another kind of tip, and that is okay. Now, if you enter into a contract, can you claim that this is forced, where’s your, that this is an unforeseeable event, probably not, uh, depending on, uh, what the clause says, et cetera.
Jim Sienicki (00:10:57):
So, um, you know, if, if you were on a project last March and this came up, um, you may be able to fit under, uh, a clause that now you can’t fit under, because now we’ve had a year of COVID and everybody knows it’s out there and you can’t kind of say, well, this was unforeseen. In other words, if it’s, if, if it describes it as an unforeseen event, you’re not going to be able to do that, uh, you know, fit, fit your claim into that, uh, into that, uh, box or whatever, or, or that hang your hat on that, uh, element, whether it’s force majeure or changes in the law, that kind of stuff. Okay. Next slide.
Jim Sienicki (00:11:47):
So let’s talk about the Lake claims, uh, the Lake claims, and frankly, for those that are, uh, you know, watching and listening. Now, these are big dollar claims, delay, and disruption claims are big dollar claims. I mean, I’ve handled delay and disruption claims, you know, you know, in $15 million range and I mean, big claims and big dollars, uh, uh, so this, this is something that you want to, uh, get your arms around because there, there, I mean, there could be there be small delayed claims, small disruption claims, but they can get very big. And, and oftentimes, uh, you’re going to need help from both a scheduling person, uh, and probably a good counsel who will hire a good scheduling person, but the four things you want to consider excusable is the delay. Excusable is a delay compensable to different animals. Is it a critical path delay? And are there concurrent delays con okay, so let’s, let’s go to the next slide.
Speaker 4 (00:13:15):
Jim Sienicki (00:13:15):
So excusable, so pursuant to the terms of a contractor at the lady’s excusable, when it is due to an unforeseeable, cause beyond the control and without the fault of the contractor. And that’s what I was saying. Okay. Is a, COVID now an unforeseeable cause. Um, and, and so if it’s excusable, you’re entitled to time now, you got to say, I’m, I’m entitled to a time extension. So you can’t Nick me for LDS and I’m entitled to that additional time. Now, can I get money for my GCs? Okay. That’s compensable. We’ll go to the next slide.
Jim Sienicki (00:14:04):
The next slide says critical for, for something, um, for a delay, you know, just because you’re delayed on a project, doesn’t mean that you’re entitled to a time extension. I got a little bit ahead of myself and the delay must affect the overall project completion. The delay must be critical. And what do you mean by critical? It has to be on the critical path. What does that mean? Uh, I’ve described it to folks in, and when I’m explaining what is a critical path delay, I say, okay, your Thanksgiving, what do you have? You’re going to have 12 people over for Thanksgiving. Dinner. Dinner is going to be at four o’clock. What items are on the critical path to make sure that you’re having dinner at four o’clock and not having your guests hang out till nine o’clock at night before they eat Turkey? Well, what’s on the critical path. I think most of you understand is getting that Turkey in the oven. You can make the potatoes later. You can make the gravy later and you can make, you know, everything else doesn’t take. As long as getting done the Turkey, the Turkey is on the critical path. So if there’s a delay in getting the mashed potatoes going, you can still have dinner by four o’clock. Uh, but if there’s a delay in getting the Turkey in the oven, you’re probably not going to have dinner by four o’clock next slide.
Jim Sienicki (00:15:49):
So what are the fences to, uh, the late claims, uh, notice, did you, did you give the upstream person notice if you’re a subcontractor, did you give the contractor notice and bid? You give notice in time that under the prime contractor, that, um, the prime contractor has to, uh, submit it in accordance with the prime agreement. So you have to give notice and, and folks, you know, I know you guys like lawyers and you like to hire lawyers, I’m being facetious. Um, but why do you hire us to fight over whether you gave the notice that’s required by the contract? I mean, that’s just a waste of your money. If the contract says that you got to give notice within three days or five days or seven days or whatever it is of the event, give the notice. So you don’t have to hire ed and I, and we come up with creative arguments.
Jim Sienicki (00:16:56):
In fact, we have a, an Arizona case that says, if you did give notice, but the owner knew about the issue and wasn’t prejudice by the issue. You can get around the notice issue, but not every state has that kind of issue. And why do you want to spend time for us convincing somebody else that we’ve complied with some Arizona chase instead of that you complied with the contract? Um, another defense is obviously it’s not critical. Um, now concurrent delay means, um, you have been delayed on the critical path by something let’s, let’s, let’s just say that the design was screwed up. That’s a novel problem, huh? Uh, again, facetious there’s there’s design problems in a lot of projects, as you folks know, and if there’s a design problem and the contractor needs the, um, and this is a conventional design bid build project where the owner hired the, um, designer and then the contractor bid on the, uh, design and okay, so that, that happens.
Jim Sienicki (00:18:19):
And, um, you’ll get delayed because the design doesn’t get remedied, uh, regarding an item that’s on the critical path for a month. In other words, you got something on a critical path and you get slowed down for a month, but let’s say you contractor are running behind because of other issues, manpower issues, et cetera, et cetera. And you want to got to that issue for two weeks anyway. Well that two week period where you caused a critical path delay and the owner caused a critical path, delay are concurrent delays and concurrent delays are you’re entitled to time, but not money. Uh, other defenses are lien waivers. You sign lien waivers every month. When you get paid, you have to read those lien waivers because sometimes the lien waivers say, in fact, uh, various statutory lien waivers say you’ve been paid for everything on the project, through a certain date, except for pending modifications or retention.
Jim Sienicki (00:19:32):
Well, if, if you haven’t submitted a change order, so that it’s a pending modification, you’ve given the other side. And the argument that, that has been waived by your lien waiver link, same thing with pay app languages, sometimes pay apps, say I hereby certify and agree, um, that, uh, you know, and that, to the best of my knowledge that I have, uh, been paid this, this pay app covers everything that I am entitled to through the time of this payout, other than, uh, retention. Well, if that’s not the case, um, you know, they’re, they’re gonna use whoever’s on the other side is going to use that language against you and change order language. Sometimes, um, folks, um, will sign a change order and they’ll get the dollars, but they’ll put zero time extension. And then later they’ll say, Oh, I was delayed 10 days because of that, uh, change order. Well, you better get it in the change order, or again, you’re, you’re going to be spending money on attorney’s fees that you not necessarily need to spend because you got to reserve your right in that change order. Um, I agree that, um, this is the right amount, but I reserved my rights to a time extension of 10 days. And then later you figure out whether you really are entitled or not entitled. Next slide.
Speaker 5 (00:21:04):
Jim Sienicki (00:21:06):
We, we, we talked about, uh, delay in disruption planes earlier, but remember, loss of productivity claims important thing to remember is it’s irrelevant. Whether the impacted activities lie on the critical path. And in other words, the fact that the folks have to get in an elevator, just three persons to go up to the 28th floor. And it takes a lot longer to get your crew up there. That’s a loss of productivity claim that, that, that activity doesn’t necessarily have to be on the critical path. Um, and loss of productivity is only concerned with increases in cost incurred to perform a certain item. You, you figure that, um, it’s gonna, it’s gonna cost X dollars. Uh, a good example that I had in, in, in, uh, in a case here was we were going down a street out here, um, in the East Valley, and this was a sword line case and they were going, let’s just, I’m just making up numbers now, but they were the lawn a hundred yards a day and basically lay in the shoreline. But then they got through an area that was right next to where there was basically a, a waste dump that that was causing methane gas. And these folks had to get into like spacesuits. And instead of going a hundred yards a day, they only went 20 yards a day. So it took them five times as long to do that work. Well, that’s a loss of productivity claim. It’s a, it’s a measure of output. Next slide.
Speaker 5 (00:23:02):
Jim Sienicki (00:23:04):
Like I said earlier on liability disruption, loss of productivity, planes, okay. Impacts due to errors and omissions in the design documents impacts causing you to have to perform work out of sequence because the work in front of you, uh, the, the, the, the owner or, or the general contractor didn’t get work done in front of you, that caused you to do work out of sequence that made it, um, less productive. You weren’t as efficient delays that push the project in the periods of adverse weather. And you say, well, Danish, what do you know about adverse weather? Well, you go up to Flagstaff and we get 42 inches of snow up there. It’s snowballed. And, and you have projects that get pushed into adverse weather conditions. You can’t, you can’t, uh, go the same pace that you were when it wasn’t an adverse condition. And then another, uh, uh, issue that sometimes causes a loss of productivity claim is the effect of excessive overtime due to acceleration.
Jim Sienicki (00:24:18):
Uh, and what, what do we mean by that? Well, you all know from whatever your job is, whether you’re you’re a contractor or a lawyer or an owner, whatever you’re doing that after a certain point, whether it’s 40 hours a week, 50 hours a week, 60 hours a week, you’re not, you’re not as efficient in those last 10 hours as you were in a first and, and you lose. And, and they do these studies, these, these organizations do studies that say that once you work X, X amount of hours per week, uh, you you’ll, you lose 10% or 15% or 20% efficiency in your work. In other words, you, you just don’t get it done as fast because you’re mentally fatigued or physically fatigued. Next slide.
Jim Sienicki (00:25:10):
Okay. We talked about LIBO. Now we’re going to talk about causation. Causation means that whatever is the problem, it causes you to be damaged and incur more monetary costs. So causation, the events were unforeseeable at the time of the contract. The events were beyond your control. They were caused by the owner or the design professional in a design bid build don’t don’t, don’t raise that issue on a design build contract. I, I had somebody that was against me in a case, and they were complaining about how the design was screwed up. And I said, well, that’s great. I said, you’re the design builder. You’re responsible for the design that doesn’t work anymore. You’re, you’re back in the past, you know, and you know, so anyway, events, uh, were caused by a situation, uh, for which there’s contractual liability. We talked about earlier, uh, for forced Ms.
Jim Sienicki (00:26:13):
Your or different site conditions. Next slide, please, differing site conditions obviously are where you get into the, you know, a lot of that is, uh, where you hit soil conditions. And, and instead of getting soil that you can move quite rapidly, hit hard rock, or you have, you know, you have to bring in dynamite and all kinds of stuff that makes it a lot slower. So that that’s one, that’s the classic differing site. So we’ve talked about liability causation. Now we’re going to talk about damages. Now, damages are sometimes, um, sometimes are, are the part that people don’t focus on, uh, and they should, as soon as you have an issue, you already be getting with your accounting department. Uh, and if you’re the owner, you, you ought to be, you know, uh, confirming the costs that are being incurred. But if, if you’re the contractor you want to maybe tag these things and have a certain, you know, uh, computer code that these numbers that these damages get assigned to.
Jim Sienicki (00:27:29):
So that later you don’t just have a big bucket of money and say, well, I thought it was going to cost me 25 million. And it costs me 27 million on my damages are 2 million that’s called total cost claim and courts don’t like that. They’ll usually toss them out. Um, so, um, what you want to do is you want to show that when you hit the rock, um, you had, so you had a hundred thousand dollars in your bid for that work. That bid was reasonable for the conditions that you had, and now you hit hard rock and it cost you $600,000. So you have $500,000 in damages to do the same thing. And it’s not necessarily a very purse. You don’t have to be down to the nitty gritty, but you must utilize a methodology that’s recognized by the courts. And in the first thing, depending on what side you’re on, if you’re on the owner side or, or whatever, um, if you’re on the owner side, I always ask for a job cost report because you’ll have somebody that will say I have a loss of productivity, a claim, and this thing I have a $10 million job, and it costs me, uh, $12 million.
Jim Sienicki (00:28:48):
And, um, so I have a $2 million, uh, loss of productivity claim. And then you’ll get their job cost report, which are all the costs that they incurred during the job. And you’ll see that they only spent $10.5 million on the job cost report. Well, that other million and a half bucks just went up in smoke. So, um, you know, you, you, you want to make sure that things get in your job cost report that should get into your job cost report, but you always want to start with the job cost report. And, and depending, no matter what side you’re on, because you want to see if your job cost report either supports your claim or, uh, harpoons your claim. Uh, next slide.
Jim Sienicki (00:29:34):
So again, uh, the, the COVID pandemic and the government restrictions disrupted, as everybody knows supply chains, you know, the, the folks that we’re looking for marble from Italy or Connie in trouble, you know, and in some of these projects, uh, I I’ve had people that were, you know, their, their, their supply chain went from, you know, it usually takes two months from ordering it to getting it to the basically a year and caused the owners to make difficult decisions. So instead of it accepting that an unforeseen disruptive event has necessitated a complete work stoppage, um, which would cause the owner to bear the financial exposure. Sometimes the owners should, I always recommend the owners and the subcontractors and the contractor should all get together and say, look, none of us thought that we were gonna have these issues. Um, do use an old air force expression.
Jim Sienicki (00:30:39):
It’s the runway behind us. We can’t do anything with it. What are we going to do with the runway in front of us? How can we mitigate the damages? How can we solve the problem? And so, um, it’s important that folks get together. And, um, I guess during COVID, you have to have a zoom conference and get the contractor and owner and subs together, and then discuss, okay, here’s the problem. Because if you put a bunch of bright minds together, you can come up with solutions and mitigate the damages, and then you have a smaller amount of damages to fight over at the end, and you can work, you know, a better chance of working those up without litigation or arbitration or some other procedure. Uh, next slide. Okay. So proving disruption damages, uh, the sample methodology is the actual cost method. That’s the one I told you, um, you’ll, you’ll see here at the bottom, it’s called the total cost methods.
Jim Sienicki (00:31:51):
You said, Oh, I thought it was going to cost 20 million and cost 24 million so that my, my damages are $4 million. Well, that’s that, that usually isn’t accepted by the courts. As I said earlier, the measure mile is the example I gave you about doing the sewer line, and then hitting that patch where you hit the methane you’re measured mile. You, you were, you were going, so you’re your first mile, you know, cost you $3 million to put in the sewer line or whatever it is. And then the next mile of the shoreline where you hit the methane cost, you $6 million. Well, if you hit five measured miles in a row, and then you had a six one, uh, that’s a pretty good case because for those five miles, you were, you were clicking at, you know, $3 million a mile or whatever it is. And then all, once you went to 6 million where you hit the methane, well, you’re, you’re under the measured mile, uh, methodology of proving your damages.
Jim Sienicki (00:32:58):
Your damages are the additional $3 million. Similar work comparisons are sometimes used that, you know, if you’re, you’re building the same kind of building on the same kind of soil, uh, and you did it, you’re going to do four buildings. Uh, and the first three went one way it’s similar work or, uh, you know, you, you, you, you built a school building for one school district, and then you build, uh, a school district. I mean, uh, a building very similar for another school district with the same kind of square footage and stuff. You can compare those things. Uh, these specialty industry studies, I, I told you about that. Uh, the mechanical contractors of America have studies, different, um, organizations have studies that, uh, talk about loss of efficiency. Uh, if you work over time, uh, you know, how that affects, um, your, your project and your productivity.
Jim Sienicki (00:34:06):
Um, now your total prospect that I told you that what is the modified total cost metrics? Okay, you, you have a $20 million project. It came in at $22 million, but you recognize that you had a bust in a certain scope of work, and that that bust would have it. You should have been the job at 20 million, 800,000, and then you make a couple other tweaks to your, um, to your project. And you say, well, if everybody would’ve came in, it would have been 21 two. And, and so now your damages are 800,000. That’s a modified total cost method. And that usually you need expert testimony to say, here, here’s what they bid. And when you bid something, you, you, you always want to bid something. It needs to delay. And disruption claim is you, you want to show, I’ve been the project for this much money based on this schedule and have it tied together, because that is how you have to tie it together. Um, and it, it just makes sense when you’re trying to convince an arbitrator or a court or a jury that you’re entitled to additional money you want to start with. Okay, we bid it here. I went through my bid I’ve at this way, the bid was ad pretty. It was based on this schedule, and then the schedule got delayed or disrupted because of, you know, in other words, the project got delayed or disrupted by various things. Okay. Next one, next slide.
Jim Sienicki (00:35:55):
And then were, where are your defenses against the disruption claim? The very same thing I told you about earlier, notice job cost reports, lien, waiver, language saving. I talked about earlier pay app language. You got to watch all those things change, where languages, um, you know, in, in any project where there’s a delay or disruption claim, you ought to be looking at these things. Did you give the right notice? What’s your job cost reports say what lien waivers have been signed, no matter what side you’re on. You want to look at these, these five things. Next slide.
Speaker 5 (00:36:37):
I think there’s going to take you for a while now. Go ahead.
Ed Hermes (00:36:41):
Thanks, Jen. Appreciate it. I’ll be talking about tips for winning delayed disruption claims. And then before I kick it back to Jim to wrap up, but just a quick reminder, um, this is being recorded and this will be up on the Levelset website afterwards. I know there’s, there’s a lot of information here that that’s coming at you. So this will be, you want to watch this again, and there’ll be that opportunity, or you want to share it with somebody who couldn’t make it today. There’ll be that opportunity as well. So, um, additionally just wanted to have a reminder that there is a chat function. I see a little bit of activity in the chat already was some good questions coming in, feel free to continue with those questions. And we’re going to address questions at the end. So with that, I’m going to be talking about tips for winning delayed disruption claims, uh, with the elements that Jim mentioned that bind about how you prove delayed disruption claims and keeping in mind that typically the burden of proof falls on the contractor or subcontractor to approve up, uh, those delay and disruption damages.
Ed Hermes (00:37:49):
What’s the best way to set, set you up, uh, to bring or defend against a claim for delay or disruption damages. And some of this I’m going to be reinforcing things that Jim said that are they’re critical and expanding upon them. We talking about you again, know your contract and subcontract key terms. That includes what your applicable law is in describing those terms. And we’ll dig into that a little bit more planning your project, scheduling it out, thinking through, um, that, uh, the critical path and how are you going to sequence the project to be the most efficient, um, and documenting this. I cannot stress enough documenting the delays, this disruption documenting contemporaneously what’s happening on the job site. Um, as I’m sure many people here have, have experienced when you’re getting towards the end of a job or certainly accurate, uh, memory seemed to fade or change.
Ed Hermes (00:38:54):
And, um, what, what you thought you had an agreement on, or what somebody thought that they said or heard those these can conveniently changed sometimes. So documenting contemporaneously is extremely important when proving up or defending against delayed disruption claims, um, you know, a picture, they say a picture’s worth a thousand words. That is absolutely true when it comes to documenting, uh, delay and disruption claims. I’ll, I’ll, I’ll talk a little bit more about that as well. And then diagnosing the delay and productivity impacts early on, as contemporaneously as possible when those delays are coming, what is the impact of, uh, an RFI request for information? Are there long delays of getting those answered that are affecting the job site that are holding up your trade in affecting the critical path or, or, or making, uh, your costs increase, um, rain delays, weather delays, COVID 19 delays.
Ed Hermes (00:39:55):
How is that impacting you with the governmental regulations, uh, or the owner requirements? You know, if they’re saying, okay, here’s, here’s how we’re going to change things. Might’ve COVID-19 or groups how they have, you know, how does that affect you? Um, documenting those things contemporaneously in the daily reports in the meeting minutes, uh, in email, uh, and with photos are extremely important to making those, those claims. So, uh, as Jim’s Nikki can tell you, it needs to be serves as an arbitrator, but arbitrators and courts and judges, they, they really like to look at contemporaneous communications and evidence that was happening at the time, the arbitrators and judges find that much more reliable, uh, usually than people’s memories, you know, that who were being deposed, you’re testifying, you know, a year after the events happened after you’re in a litigation situation. So having copious notes, uh, in the dailies and contemporaneous photos and emails are, are very important.
Ed Hermes (00:41:11):
Um, you want one of the things that, that sometimes we’d like to do, I read attorneys like to do in, uh, in court sometimes when there’s a huge issue that comes up, whether it be a delay disruption, or other major change that comes up, if it’s not documented, you know, uh, sometimes we’ll, we’ll ask a line of questioning to the witness of, well, you had access to a computer didn’t you, you could have given up provided a notice about that, uh, delay or disruption or other issue that increased your costs. The witness of course has to say yes. Uh, but you didn’t, you didn’t provide that notice. Well, not in writing, you know, that’s not as impactful as if you were to provide, goes copious notes and contemporaneous writings about those impacts that you’re seeing on the job site. Uh, I’ll expand upon that a little bit more.
Ed Hermes (00:42:09):
So some traps to a successful claim is a contractor or subcontractor claim can be doomed by lack of prior, proper planning and execution or by contract or subcontract terms and conditions are not following the subcontract. So knowing those terms and following them, uh, can really put you in the best position possible to make your claims or defending against those claims. As Jim mentioned, w w we attorneys teres can get creative, um, but it’s much less expensive and much better for you if you follow the contract. And if, if the notice is required within, for example, 14 days or seven days of a change happening, it’s much better to provide the robust notice, um, to, to put yourself in the best position to help your attorney to make those claims. Uh, it’s just going to be another hurdle that you have to get over and something that, uh, the opposing side will point out if you don’t provide that, that timely notice.
Ed Hermes (00:43:11):
Uh, not necessarily you might not, not necessarily be all, all, all white on it, if you don’t, but again, you want to avoid putting yourself in that situation. What are the key contracts will provisions, um, definitions of substantial completion of time? When is the, when is it, uh, date of commencement? Um, when is the data of you’re supposed to be substantially complete again, knowing that the case law onto these terms is also in your jurisdiction is also very important. A lot of jurisdictions have their own definitions for what substantial completion means for different purposes, such as for release that retention, uh, knowing what those definitions are. In addition to what your contract says, it’s going to be very helpful in making those claims and following what the contract says, uh, knowing what the schedule is, updating the schedule, as things change on the ground, uh, making those timely schedule changes and amendments, uh, very important, uh, what those claim provisions are for delays. What’s considered an excused delay versus unexcused delay and knowing what those are. So you can, you can shape it and craft your notice accordingly. Uh, and what the contract says regarding confirming delays is very important.
Ed Hermes (00:44:35):
And knowing the contract, uh, cannot be, uh, I can’t stress it enough, how important it is to know what those terms are contemporaneously with, uh, while you’re experiencing those delays. You know, so if you need to getting your counsel involved to help, uh, explain and interpret and give you some advice, asked you those notices a, you know, a bit of pinch of, of, um, you know, uh, preventative medicine is worth a pound of cure when it comes to complying with knowing and compliant with the contract contemporaneously as matters are happening on the ground. So you’re providing that those notices in accordance with your contract, you’re going to provide you going to save you a lot of time, money and headache down the road, potentially. Then, then kind of assuming that you’re compliant with the contract without actually checking that, you know, nowadays, uh, after COVID hits, a lot of people dusted off those contracts, took a look at what these delayed disruption, uh, provisions say and me, uh, and we’d get a little, gotten a lot of those questions, but, you know, we don’t know what the long-term ramifications are gonna be or what restrictions might come down the road.
Ed Hermes (00:45:55):
So it was important to know what those contractual provisions say and how to comply with them, even if it looks like right now, things are looking better and there’s fewer restrictions. It’s still important to know what those provisions say. Um, consider negotiating our full terms and conditions away. You know, some contracts have very draconian, um, terms when it comes to delay and disruption, um, putting much more of the, uh, the costs and risk of delays onto the con contractor or subcontractor, knowing what those terms are when you’re bidding is crucially important. So you can adjust your bid price accordingly, or you can adjust the contract and subcontract so that you you’re going into it with eyes wide open, knowing that you, the owner, for example, is asking you to take on a significant risk of the delay. And because they, the contract States prime contract States that if there’s a delay, they’re not going to provide any, uh, financial release.
Ed Hermes (00:47:01):
And it’s just going to be limited to providing additional days. So knowing what those terms are and negotiating those upfront, uh, is going to be very important. Or if you can’t do adjust your re your bid accordingly. So, you know what those risks are, um, you know, when, when you get into, um, litigation as Jim and I do, you know, arbitrators and courts expect the parties to have known and read and understood and agreed to these contractual terms, uh, and what the terms are that are adjusting the risks on, on each side. So, you know, saying that, well, this, this is unfair, or, you know, I didn’t understand or read this is never really going to be as a great defense. So make sure you understand those terms upfront as early as possible. And if you’re a subcontractor and the subcontractor is incorporating certain terms of the prime contract, make sure you’re getting a copy of that plan contract.
Ed Hermes (00:48:02):
So you can, do you understand what these terms are that you’re going to be, uh, obligated to before you start bidding in contract the contracting on that project? I have here a, uh, provision that’s favorable to a contractor, um, some sample language, uh, that that could be used. That’s favorable to a contractor related to the issues we’ve talked about with, with delays here. This provision says contractor shall be at title, equitable adjustments for the contract price contract time, including, but not limited to any increased costs of labor, supervision, and equipment or materials and reasonable, overhead, and profit. I won’t read the whole thing, but essentially what we’ve provided here are some sample, a contractual term that provides for equitable adjustments for the contractor. If there are delays both in, in time and additional money. And this is a very, um, I would call contractor friendly provision that allows the contractor to seek and obtain equitable, reasonable, fair, uh, adjustments to the contract price. In the event of there are unforeseen delays that are not caused by the contract, and that are caused by some act of God, uh, or other, you know, labor unrest or by the owner. Um, so this is a good, good provision to have in your back pocket. Uh, if you are a contractor or make modifications and subcontractor to provide those equitable,
Speaker 5 (00:49:39):
Ed Hermes (00:49:42):
A schedule obligations. Contractor must provide the owner with a scheduling information as required by the, the contract. Uh, again, it’s important for the contractor to consult with subcontractors and the order to prepare that prepare that schedule so that, you know, everyone is on the same page, uh, and can, and is agreeable to that schedule. And contract is very important. The contractor update the schedule as necessary. There’s always going to be changes that happen on the job site. You’re going to hit those, those unforeseen conditions, whether it be weather or, uh, you know, as, as Jim mentioned, um, you know, some sort of noxious gas things that just aren’t aren’t foreseen is important, provide those updates to the schedule as soon as possible, uh, that you, uh, that, you know, what those impacts are going to be, uh, the schedule and all subsequent changes and additional details should be submitted to the owner properly.
Ed Hermes (00:50:43):
Here’s an example of a provision that is oftentimes seen in contracts as it relates to, uh, delays. Um, you know, you want to check with what your contract or subcontract status, but here’s a very typical, um, provision here. It says the contractor shall give them written notice of all plans within 14 days of the contract with knowledge of the facts, giving, giving rise to the event, which the claim is made thereafter, uh, after this then, uh, essentially, um, within 21 days of giving notice, um, then contractors shall submit a written, written documentation of the complaint, including appropriate supporting documentation. And the owner shall respond within 14 days, uh, as to allowing those increased whether or not to allow those increased time and increased costs. Um, this is fairly typical. And again, it’s, it’s something that can trip up contractors and subcontractors who don’t provide the written notice within a certain amount of time, even if it seems, you know, absolutely obvious at the moment that there are these restrictions, you know, for example, COVID, everybody knows you in March of 2020, you know, uh, our state and federal governments and local governments provided a, uh, executive orders and other emergency decorations related to COVID-19.
Ed Hermes (00:52:11):
You know, even if that seems very clear and apparent, it’s still important to provide those requisites written and robust notices required by the contract or else if that’s not provided within that time, order’s going to say, sorry, you’re out of luck. You didn’t do that now, just because you don’t do that doesn’t mean you’re all that, uh, Jim mentioned a, a case where we have here in Arizona, a new Buffalo constructors, where the contractor did not provide the requisite written notice, or at least allegedly didn’t that was written and with, with appropriate supporting documentation, if you can believe it, there was a hurricane, uh, that hit the Southwest. This was decades ago, and it created a, a terrible situation, um, for a con construction of a freeway down in Southern Arizona. And you had machinery that was, that was sinking in mud. And it was, there was huge delays and increased costs.
Ed Hermes (00:53:19):
The contractor didn’t provide, or allegedly didn’t provide the requisite notice. Um, but the court ultimately said, well, this was something that was obvious. And, uh, didn’t prejudice the state of Arizona by not providing that, that notice. So we’re going to allow the claim, even though you might not have provided the requisite. So again, there there’s, uh, arguments that we as attorneys make, but the best practice is to provide that notice, uh, as required by the contract key considerations for handling delayed disruption claims. Um, again, reviewing that contract language, reviewing the daily reports of trusting, uh, labor and other resource utilization, as well as project conditions that have delayed or impacted the contractor’s performance, uh, reviewing written notices and meeting minutes regarding delays, following up in a timely manner. Um, it’s, it’s really important when you are in a dispute and it was can sometimes be very costly, uh, to have a really solid timeline.
Ed Hermes (00:54:28):
You know, one of the first things that when you’re engaging counsel are going to probably ask you for is provide me, you know, a timeline of the events with the backup for those. So if you can keep that contemporaneously, uh, and have a good, you know, uh, file and a timeline that outlines all of the notices that were done, all those meeting minutes, contemporaneous photos, if it’s, if it’s, uh, you know, uh, if it’s COVID related, you know, what a photo of, of people standing in line trying to get into, I’m going to, I’m going to use gyms, examples, standing in line, trying to get onto the elevator, trying to get up to the 25th floor and having to stand there for, you know, 20 minutes having a photo or a video of that. Nowadays, it’s so easy to, to capture video with your phone or with drones, um, that, that, that videos and photos can be really great evidence to document what those delays and disruptions are, uh, providing that in the meeting minute neurosis.
Ed Hermes (00:55:32):
You know, if the meeting minutes after the fact, we’re talking about a delay, that was a huge delay that, that costs a million dollars, but there’s no mention of it in meeting minutes. No, that’s not going to be helpful with, or in any emails. That’s not going to be helpful at the same token providing responses. You know, if you’re, you’re the owner, especially in your contractor saying, Hey, sending you emails saying, Hey, we’re, we’re being delayed. This is happening on the ground. You know, we’re being delayed by, you know, the owner’s failure to do something or not to do something, or by this act of God. And you disagree with that. And there’s evidence to the contrary, responding to those things and, uh, you know, putting a controverted those things in writing contemporaneously, those contemporaneous emails, uh, and pictures and meeting minutes, or going to be very influential, uh, in fighting that claim.
Ed Hermes (00:56:30):
You know, a lot of times you’re on a project you’re busy, it’s rush, rush, rush, um, you know, and it can be tough to stop, take a minute and document something and cause you’re, you’re off to the next project or you’re off to the next thing, or there’s a feeling of, well, we’ll find that out later, we’ll deal with that at the end of the project. Well, if you’ve lost an opportunity to provide that contemporaneous notice and really paper the file and provide a solid evidence of how you’re being impacted and that could hurt your plan.
Speaker 5 (00:57:07):
Ed Hermes (00:57:09):
We could cover this a little bit, consider your form of evidence to support your delay, delay and disruption claims, um, note and explain any deviations from the work plan and contempt contemporaneous project records, get photos can sell a thousand words. Um, you know, I had, I had a, uh, a case with some, uh, delayed disruption case recently where somebody had subcontractor had put together a, a motto and, um, you know, that mock-up and shop drawings were all approved by everyone. And then, and then that was changed. Uh, and there were significant delays by that change. Well, my subcontractor had fantastic photos and video of that mock up and people standing around and approving that, uh, as the way it was. And we could draw a direct line from that change from the mock up and shop times to that delay. And it really helped make the claim really pop when you can provide that documentary evidence, uh, documenting evidence of the actual costs directly attributable to the impact, uh, should be presented separately, attracting the project as presented. Jim talked a little bit about that, about, uh, those cost codes, uh, as a great way to document
Speaker 5 (00:58:30):
Ed Hermes (00:58:33):
A successful claim begins with good. Record-keeping having a great timeline, can save you a lot of money also in attorney’s fees and having this, this, uh, documented very well in a well thought out, you know, point by point timeline of events of, you know, here’s where the payoff happened. Here’s where the Lena bleed waiver happened. Here’s the change or here’s where we invited this notice, uh, providing that to your counsel upfront can really save a lot of time, money and effort in your counsel having to put together a correspondence and to fight the claim. Uh, Jim mentioned, uh, uh, Costco’s to track our, spend it, that gets it. That’s a great idea.
Speaker 5 (00:59:18):
Ed Hermes (00:59:23):
Uh, cumulative impact. Uh, so this is a bit of what we call death by a thousand plants when there’s so many small changes and that there’s a cumulative impact of those minor change orders that can have a larger impact. I think Jim, this is, I think the slide that I’m passing it off to you, if I’m not mistaken.
Jim Sienicki (00:59:46):
Yes. And you, you did nicely. And I, and we did not drop the Baton, like, you know, the Olympics, you know, so, okay. A couple of things here. Um, one thing that ed touched upon was the, the schedule, the, the baseline schedule is so important. I I’ve handled two relatively big cases in the last year where the people couldn’t agree on what was the baseline schedule, because there’s a, you know, a schedule gets attached to the contract, but for whatever reason, because you don’t get approval from the municipality, this or that, the project doesn’t start for another three months and, and, you know, or there’s big, big scopes of work in, and the schedule that was, instead of things being, uh, discreet. And, you know, this is going to take seven days. This is going to take two weeks. They lumped things into, you know, four months, five months, et cetera.
Jim Sienicki (01:00:48):
Um, that just, you know, is not a good recipe for, um, being in a project like that. Because no matter what side you’re on, you’re going to spend money, just arguing about what was the baseline schedule. And, um, so that’s one thing that the, the other thing is this late change orders that I see people bring in change orders. Well, after the fact that here here’s, I had a, a significant case for a very well-off client that built a very high end house. The house was a year late. So they had a claim for liquidated damages and this kind of stuff for the project began late among other things. But the other side basically came in with this thing. So before I got involved with the client, basically wrote these guys a letter and said, Hey, you know, you’re a year late. And the LDS or listen, you know, you’ll watch, uh, X amount of dollars.
Jim Sienicki (01:01:56):
Well, all once within three days, like, you know, 20 change orders came in that basically equal the amount of the LDS. So let’s say the LDS were million and a half dollars or whatever it was, I can’t remember, but all wants a million and a half dollars worth of change orders, payment. So I’m in front of these arbitrators. And I say to the president of the contracting company, so are you in business to make money? What’s he going to say, no, yes. To make money, you have to get paid. Right, right. To get paid, you have to submit a payout, right. To get paid for a change order work, um, and included in your pay app, you have to have an approved change order. Right. Right. Um, well, let’s take this change order. Um, this was work done in January of so-and-so. Um, you didn’t submit it in January digit, February, no.
Jim Sienicki (01:02:48):
March, no. April. No. So I, you know, then I said, okay, and you signed the lien waiver in January. Right. And your lien waiver said that everything was included up to that date except for this, uh, you know, except for retention and pending modifications. Now this change order wasn’t pending yet. Right. Right. It wasn’t in February, right. March, March. I didn’t even get the April the second time through. And the arbitrators that three of them stopped me and said, Jim, we get the point. I mean, you know, this was made up stuff after the fact to try to counter that the liquidated damages. And so you got submit it. If it was legitimate, you should’ve submitted it a year ago and you shouldn’t be signing laneway, lien, waivers waving it. So that’s, that’s like a war story, but I think it gets across the point, uh, talking about cumulative impacts is, is ed said, this is death by a thousand cuts. And where that comes in is you get multiple, multiple hundreds of change orders on, on a project. And you don’t know whether you’re coming or going because the change orders are coming in. And, and so in addition to the direct cost associated with implementing the change order, if the change order was just by itself, okay, it’s a $50,000 change order.
Speaker 5 (01:04:10):
And they’ll time, uh,
Jim Sienicki (01:04:12):
Perhaps, but if you got a hundred change orders of different,
Speaker 5 (01:04:18):
Uh, magnitudes, um,
Jim Sienicki (01:04:21):
You’re, you’re going to, you got your cruise, you’re trying to schedule your cruise and all these change orders are coming in because the design was all screwed up to start with. And you’re getting all these changes in. You’re trying to keep up with stuff. Well, it’s not just the direct cost. And so the cumulative impact has been, uh, the find is when there are multiple changes on a project and they act in sequence or concurrently, there’s a compounding effect, this death by fives and cuts. And this is the most damaging consequences of a project and the most difficult to understand and manage. I mean, if you know, you’ve got all these change orders coming in and the owner is saying, no, I need this, this done first. And, you know, changing the scale of that net effect of these changes is much greater than the sum of the individual parts.
Jim Sienicki (01:05:13):
In other words, when a project requires multiple change orders, I’m not talking about 10 or 12, I’m talking about, this was like an avalanche of change orders where the project just wasn’t designed correctly in the first place, the contractor, you may have to go back and tear out work that was already in place replant. And we sequence work that had been previously, um, uh, you know, scheduled. And then you have to adjust the allocation of manpower because you were, you, you had your manpower figured, um, that, uh, you know, it would come in at a certain rate and now you’ve got stacking of trades. You got everybody in, in rooms, you know, tripping over each other and saying, no, no, no, I, I gotta get that up in the ceiling first, then, you know, all that kind of stuff with that, I’m sure a lot of you are familiar with, well, that that’s where a cumulative impact claim comes in. And a lot of oftentimes, um, oftentimes it can save the day for a contractor because they’ll, they’ll say, well, you signed this change or this change or this change, or yes, but the cumulative impact of those change orders, I did not, I did not, uh, present previously and knowing and presenting a cumulative impact change order. Now, if you’re on the other side of the equation, uh, next, next slide.
Jim Sienicki (01:06:42):
So as we talked about what are the major causes? So we have this workflow disruption out of sequence where everybody, you know, the electrician wants to get, you know, this end and in the mechanical, once we get this thing in, and everybody’s jockeying for position about how, how to get things in, and work’s being done out of sequence, not the way you planned it as a subcontractor or contractor that self-performing et cetera. There there’s sometimes a lack of materials. Um, so if your materials were in the Suez canal and they got jammed up here lately, uh, all, once all these materials are going to come in, you know, three months late, and then everybody’s going to want something yesterday. So you’re going to have, uh, you know, cumulative impacts perhaps, or the same work, different conditions. As we talked about earlier with, with either, uh, you know, wet seasons, uh, cold seasons, you know, uh, you know, concrete obviously, uh, doesn’t do as well in, you know, a 20 degree temperature as it does in, in 50 degree temperatures.
Jim Sienicki (01:07:59):
And then the base work contract performed in, uh, adverse weather conditions like we talked about. And then as I’ve, I’ve spoken about a couple of times here is that significant overtime. When you have all this change order work coming in, you got not only stacking of the trades, but everybody’s working 50, 60, 70 hours to get the school open on time. You know, because, um, before we did it virtually kids that actually go to school and, and, and, and attend school. So that would always, that would always be school openings are always one where you see at the end, the stacking of the trades the last two months before school opens. I mean, if you do that kind of work, you understand what I’m talking about. Okay. Next slide.
Speaker 5 (01:08:51):
Jim Sienicki (01:08:51):
The common keys to success is obviously you want to, when you sign a change order requests, the number of days of delay analyze whether you should state zero, if, if that change by itself is zero, but you’ve also got another hundred, uh, you may want to say, uh, this change order request, um, I am allocating zero days, but I am right. You’re serving my rights to the cumulative impact of this change order, along with these other a hundred change orders that have come in, and then you obviously got to have evidence. I mean, evidence is the key of all this stuff. So you have to be prepared with evidence to support or oppose that the changes were excessive. You know, I mean, you, you can’t be signing change orders all along, and then you get 20 at the end. Um, and you say, well, that’s a funeral that the impact is pretty much the industry standard is you’re, you’re going to get that kind of, uh, you know, a number of change orders anyway.
Jim Sienicki (01:10:00):
And, and then you gotta be prepared to demonstrate the link between the excessive change orders and the loss of productivity that the, that these folks were, you know, putting up the drywall at the end at a, at a certain rate, but because they were working, uh, seven 70 hours a week, and the electrician was trying to put the, you know, the electrical behind the drywall, et cetera. Um, it caused this thing to take a lot longer, you know, in the cumulative impact. You you’ll oftentimes need to have expert testimony on these issues, and that’s why this is difficult, but an important element. So again, you want to observe and document video, et cetera. You know, if you got, you know, 40 guys in a, in a room and they’re tripping over each other, you want to think of video of that. And all these trades tripled over each other and, and document the ripple effect is these things are executed. Okay, next slide please.
Speaker 5 (01:11:01):
Jim Sienicki (01:11:04):
I can’t tell you enough, uh, that hiring the right help and the right consultant on these projects sometimes makes or breaks the, uh, your, your claim. Um, if, if you have a, a significant, significant claim that you think is going to wind up either in arbitration or litigation or something, and you’re going to hire counsel, you, you want to consult with your counsel first, because if your counsel hires the consultant and the consultant, uh, is never designated as your expert in the case, but works behind the scene as the consultant, and then does work. And it comes back to the attorney and says, man, your client, wasn’t telling me all the straight stuff I found out X, Y, and Z. And I don’t think you have much of a case. Well, it may be that you don’t have much of a case or a baby that you have the wrong consultant, and you may want to change horses, uh, with respect to the consultant.
Jim Sienicki (01:12:13):
Uh, and therefore you, you want your attorney to hire the consultant so that the, uh, opinions that are not helpful to you never get disclosed and never, uh, uh, become part of litigation. And only when you designate the consultant, then you find out you hire a consultant, a consultant’s done a good job and says, yeah, you, you got, you got critical path, the lazier of 188, 188 days, blah, blah, blah. Then you may designate that consultant as your expert witness in the case. So consultants can interpret plans and specifications because they’ve been in this business industry usage. Uh, they’re going to know some things, frankly, that the authorities don’t know. And they’re going to say, Hey, you know, um, uh, according to industry standard or this, this was, this is done all the time, this way, and they’re making a big deal out of something that’s industry standard. Uh, the consultant can give you a reasonable analysis of the client’s performance and prepare, help you prepare demonstrative exhibits for arbitration and trial and explain that. And, and frankly, a lot of times consultants can assist with negotiating an early and advantageous settlement before you have to spend, uh, all kinds of money in attorney’s fees and executive time, uh, going all the way to arbitration or drought, et cetera. Next, next slide please.
Jim Sienicki (01:13:44):
And, uh, uh, consultants retained early can also help preserve important evidence for later uses is, uh, ed was talking about walking the site, taking photographs and video and, and, and, and doing some testing and inspection, you know, whether the concrete is the proper strength or this or that, or the other, uh, repair and we design efforts, uh, the, uh, the, the way the contractor wants to repair or redesign the project. Does that make sense? Uh, you know, could it be done cheaper and still give you the same quality, uh, damage mitigation when you get behind? Does it make more sense for you say, as the contractor to accelerate your work, pay the overtime, but then avoid liquidated damages, or does it make more sense to just get done 30 days later and pay the liquidated damages? Um, you, you, you, you got to sometimes make those hard decisions. Uh, what do you need to re sequence, uh, the schedule and then obviously critical path schedules and scheduling issues, um, you know, in Primavera and all that kind of stuff. You’re gonna need a scheduling expert to help you with that next slide, please.
Jim Sienicki (01:15:09):
And obviously it obviously helps to select the right attorney and, and, and prepare your experts for cross-examination because you’re, you know, a lot of these cases come down to the battle of the experts. One schedule, one scheduling expert says that, uh, the contractor is entitled to 200 days. The, the owner’s scheduling expert says that the contractor is entitled to five days. And so you have this battle of the experts and you, you, uh, if you got the right attorney and they work with the, the right expert, you can look sometimes at prior opinions or depositions or trial testimony of the other expert. And that may contain inconsistent opinions. You know, uh, I I’ve had, uh, deposition transcripts where an expert says something 180 degrees opposite of what they said in another case. And what you say is, so does your opinion depends on who hires you, you know, and that kind of thing.
Jim Sienicki (01:16:12):
And they, they get the idea and the, and then other attorneys who have worked with, or opposed the expert may provide insight to opposing counsel as to preference as to potential weaknesses that can be exploited. In other words, yes. I had a case against that, uh, witness, he let somebody else work up these cases, and he just shows up for his opinions. If you dig deeper, uh, during cross examination, he he’ll wind up going places and he won’t know what the answers are. So, you know, so, so in other words, know the weaknesses of your, of your, uh, opposing experts. Next slide, please. I think that’s it. Yeah. That I do this in honor. This was given to me by, uh, one of my partners that, uh, fought in Iraq and, uh, did a tour over there. And he does construction law with me at the farm. And so I, this obviously is in his picture, but I put this picture in, in honor of him. And it is now is the time for questions,
Ed Hermes (01:17:19):
Jim. We’ve got some really good questions. I’m going to go to read a few of them. I think we’re right on time here. So we’ve got a little bit more than 10 minutes, and I’m going to read a few questions that I think are really great here. And please continue to keep the questions coming. Um, for the first one I’ll read to you, Jim here is says, um, similar to late change orders, if a contractor or subcontractor waits until the end of a project to send back charges and attributing LDS to a subcontractor to counteract open change orders submitted through the project. Is that treated in the same way as late change orders?
Jim Sienicki (01:18:02):
Well, usually the, the subcontractor will have an obligation under its subcontract to comply with the prime contract, which is incorporated usually by reference, which is why, if you’re a subcontractor, you should always ask your prime contractor for a copy of the prime contract. If the prime contractor does not want to give you a copy of the prime contract, but once you do incorporate by reference, you may want to consider whether you want to do business with that prime contractor, the French Snell rule, who started our farm. And he was also a K U grad 1924. And I had the pleasure of working with him. Um, my first, uh, five or six years at the firm before he passed away at 90 song. But Frank Snell used to say the most important thing about a contract is who you contract with, and that’s the case. And I bet you, I got 125 heads nodding. Yes, because if you get a jerk, doesn’t matter, what’s in your contract, you’re going to get hosed. And if you’ve got somebody that you trust and you’ve done work with, you can a lot of times shake hands, but I don’t recommend it. And, and, uh, do it next, next question, please.
Ed Hermes (01:19:14):
Next question is, uh, can meeting minutes take the place of formal notification per the contract language? And I would say Helen, I’ll let Jim get his 2 cents too, but I would say, you know, you’re going to want to look at your contract and subcontract requirements, but typically the notice requirements are, are that are more robust than that than just some meeting minutes that mentioned the fact that there’s a delay, you’ve got a obligation to provide a timely written notice that adequately describes the delayed effects of that delay meeting minutes typically are not going to be. Um, and I don’t recommend just relying on meeting minutes to be a substitute for, for the notice. Now, if that’s all we you’ve got meeting minutes or are better than nothing, but, but don’t put yourself that situation when it could be easily avoidable, when you’ve been, I’ve had a really robust, uh, notice that’s timely under your contract, Jim, would you agree?
Jim Sienicki (01:20:18):
Uh, yeah, I was going to answer that question. Uh, it depends who your client is. Um, I mean, it’s, it’s, it’s something that you can argue about both sides. I think you get the short end of the stick on whether or not that was adequate notice. I do think though, that meeting minutes can be a pending modification and therefore not waived by a lien waiver. I think that’s a stronger argument that even though I signed a lien waiver, this was a pending modification because you knew about it. We told you we were going to bring a claim. It’s it’s, it’s in these, uh, meeting minutes. And so, um, you, you can, I think get around. I would say you got a winner on getting around the lane waiver issue, but you probably got the short end of the stick of whether you complied with the, uh, notice requirements. Okay. Next one,
Ed Hermes (01:21:17):
Next one, here, here, Jim. We are the subcontractor on a project with a no damage for delay clause, but we weren’t allowed to start work until three weeks before the project was supposed to be complete. At what point does a delay become more than just a delay and truly a complete job shutdown?
Jim Sienicki (01:21:39):
Okay. Well, first of all, before answering all these questions, we got to give a disclaimer that we’re not here giving legal advice as to your specific situation, because we don’t, we don’t know all the facts. We don’t, we don’t know what your contract says. We don’t know who the parties are, et cetera, et cetera, but, you know, for purposes of this, uh, seminar, um, I think that, um, you know, that that may be, uh, a issue. If, if you were only, if you were only told three weeks before it was supposed to be done, it would seem that you would have an acceleration claim because you, you, you had a specific period of time. If I’m understanding the question correctly, you had a specific period of time to get the work done. They then told you that, um, although it was going to take you six weeks to do your work, it’s only three weeks before the school.
Jim Sienicki (01:22:44):
And therefore you got to get your work done in three weeks. That’s, what’s called an acceleration claim. If, if w what you should do is ask for a three week extension show that you’re entitled to a three week extension. Um, and then if you, if your had, um, six weeks and they only gave you three weeks and you, you requested an additional three weeks and they did not get it to you, and they told you to get it done in the three weeks, um, you’ve been constructively accelerated, and therefore you would be entitled to like your overtime and all the additional costs of being constructively accelerated. Okay, next question.
Ed Hermes (01:23:34):
Next question is a good one, too. Wouldn’t you agree that COVID was a foreseeable event when we had more than three months of warning, that it was coming and could see how other countries were being shut down by it. Uh, the owner did not pause the contractor to have to send three people up at a time in the elevator by 4% using your example. Why would an owner be responsible for the loss of productivity when it was not the owner’s fault? Good.
Jim Sienicki (01:24:08):
Well, that’s why, that’s why in a, that’s why in a while the foreseeable unforeseeable issue is an issue that will be decided by the trier of fact, either the arbitrator or the jury, or the judge will decide whether it was foreseeable or unforeseeable. Um, that’s, you know, you’re going to have the evidence, you know, that you know, about Chinese bats or wherever you’re going to start with, but, um, you know, that, that’s, that’s a question that’s going to be decided by the trier of fact, um, the, the, the issue for the, um, the question is then, um, what does your force majeure clause say, and how do you fit it into the force majeure clause and, and all these things, uh, you know, are things that you, you should seek legal counsel on and, and, and, and have legal counsel look at, what are the facts? What does the contract say? And what are you entitled to
Ed Hermes (01:25:17):
Great. Um, that is all the questions that we have, and which is great, good work. We’re right. About out of time, um, in any, any last words you want to part with us, Jim, um,
Jim Sienicki (01:25:32):
When you, when you said we’re, we’re done the one, one place you’d never want to be in an airplane, you never want to be out of airspeed, altitude, and ideas all at the same time. So, uh, that’s one of the things you learn when I got my private pilot’s license at the air force Academy, but, um, now I have nothing else to, you know, all these issues are significant issues. Delay in disruption claims are big planes, and you want to get it. If you’ve got a significant one, you ought to get, um, appropriate counsel and counsel out and get an appropriate consultant to look at these issues. Um, these are not, um, these are not things to take lightly, and they usually have significant dollars and time associated with them. Uh, I, I do appreciate everybody. I know it’s hard, uh, because I’ve been on the other side of these webinars hanging in there for a, you know, an hour and a half and listened to, you know, uh, to folks, uh, just, uh, you just see their heads and, and see him talk. And, but, uh, I do appreciate everybody’s time and the questions, and, uh, I thank, uh, Catherine for putting this thing together and twisted my arm and Ed’s arm to attend here today. Thank you.
Kathryn Barona (01:26:50):
Yes. Thank you both. Um, that was an excellent presentation and perfect timing, and we did get some comments, Jim. Um, since we were watching the chat that people really found this very informative and helpful, and they said, you know your stuff,
Jim Sienicki (01:27:08):
And it helps me a tremendously in these things and, and helps our team look good here. So thanks. Thanks to everybody always quit on a high note. Yes, I omitted the comment of Jen knows his stuff. The, I was going to throw in that top of it later after the back, but thank you, Catherine. And thank you so much for the opportunity to partner level set here to do this presentation. We really appreciate the opportunity.
Kathryn Barona (01:27:33):
Yes, it was wonderful working with Snell and Lamar and YouTube. So thank you everyone. Have a great day. Have a great day. Thank you.