City of New York Confirms Willingness to Pay Delay Damages

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City of New York Confirms Willingness to Pay Delay Damages

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Gary L. Rubin

On March 17, 2017, the City of New York issued important revisions to its standard construction contract—including changes to the City’s much-litigated contract provisions on whether contractors will be entitled to recover damages for project delay. The March 2017 revisions enhance liberalized provisions adopted by the City in December 2013, following an experimental pilot program instituted in 2008. As a result of these changes, the City’s longstanding practice of asserting “no damage for delay” defenses as a matter of course has been replaced by a greater willingness to pay delay damages in appropriate cases. However, the types of delay damages payable by the City are contractually limited and remain subject to contractual notice requirements (which are themselves somewhat liberalized).

Article 11 of NYC’s standard construction contract now provides that the contractor “agrees to make claim only for additional costs attributable to delay in the performance of this Contract necessarily extending the time for completion of the Work or resulting from acceleration directed by the Commissioner and required to maintain the progress schedule, occasioned solely by any act or omission to act of the City listed below.” The acts or omissions of the City for which delays are compensable include (among other things) “failure of the City to take reasonable measures to coordinate and progress the Work to the extent required by the Contract”; “unreasonable delays attributable to the review of shop drawings, the issuance of change orders, or the cumulative impact of change orders that were not brought about by any act or omission of the Contractor”; “the unavailability of the Site caused by acts or omissions of the City”; and “differing site conditions or environmental hazards that were neither known nor reasonably ascertainable on a pre-bid inspection of the Site or review of the bid documents or other publicly available sources, and that are not ordinarily encountered in the Project’s geographical area or neighborhood or in the type of Work to be performed.”

Categories of compensable delay damages include:

  • Direct labor
  • Necessary materials
  • Reasonable rental value of necessary plant and equipment
  • Additional insurance and bond costs
  • Extended site overhead
  • Field office rental
  • Salaries of field office staff
  • On-site project managers and superintendents
  • Field office staff vehicles
  • Project-specific storage
  • Field office utilities and telephone
  • Field office consumables
  • Labor escalation costs based on actual costs
  • Material and equipment escalation costs based on applicable industry indices unless documentation of actual increased costs is provided
  • Additional material and equipment storage costs based on actual documented costs
  • Additional costs necessitated by extended manufacturer warranty periods
  • Extended home office overhead calculated based on a formula set forth in Article 11

On the other hand, Article 11 also provides that delay damages will not be compensable when they result from “the acts or omissions of any third parties, including but not limited to other Contractors, public/governmental bodies (other than City Agencies), utilities or private enterprises, who are disclosed in the Contract Documents or are ordinarily encountered or generally recognized as related to the Work,” or from “any situation that was within the contemplation of the parties at the time of entering into the Contract, including any delay indicated or disclosed in the Contract Documents or that would be generally recognized by a reasonably prudent contractor as related to the nature of the Work…”

Within 15 days after the contractor becomes aware or reasonably should be aware of any condition that is causing or may cause of delay in completion of the work, the contractor must furnish written notice of the existence, nature, and effect of such condition upon the approved project schedule and the Work. In addition, within 45 days from the time damages for delay are first incurred, the contractor must submit a verified written statement of the details and estimates of the amounts of such damages, including categories of expected damages and projected monthly costs, together with documentary evidence of such damages as the contractor may have at the time of submission. The standard construction contract no longer requires that such written verified statements be submitted every 30 days thereafter for as long as delay damages are being incurred.

Significantly, the City’s revised standard construction contract no longer provides for contracting agencies to make determinations concerning delay claims or to make payments for such claims through change orders. Instead, delay claims will be submitted directly to the City Comptroller for possible resolution by the Comptroller, in consultation with the contracting agencies and the NYC Law Department, in accordance with standards set forth in the contract.

Following the Depression-like impact of the NYC fiscal crisis in the mid-1970s, the City of New York adopted extreme “no damage for delay” positions that were largely upheld by the New York Court of Appeals in its Kalisch-Jarcho and Corinno Civetta decisions (published in 1983 and 1986, respectively). Now, 30 years later, the pendulum of change has begun to swing in the realm of NYC construction law.