Why Construction Delays Might Not Get You Paid

But it seems that construction delays meaning that you might not get paid is a quirk of USA construction. It is a Clause popped into private sector contracts and seems to be aimed at saving money for both the Client and the Main Contractor but putting sub-contractors over the barrel! – and that is without any Forensic Delay Analysis (FDA) that actually places the blame on one of the parties! It is interesting to note, though, that some American State Courts are kicking these Clauses out and declaring them invalid!

So let’s have a look at what happens when there are construction delays elsewhere and the standard Forms of Construction Contract – JCT, NEC, FIDIC, etc. – are being used. The original Form of Contract between the Client and the main Contractor will have the Finish Date set. That is usually hand-over date. The Main Contractor, assuming they have carefully come up with a sensible Build Programme, will impose Finish Dates for all the Sub-Contractors they appoint. These latter dates will allow for all subsequent work to start and finish in good time.

If the Client decides that they want changes made to the work originally contracted for this may well take extra time. The Main Contractor will specify this when submitting their revised price, after which it is up to the Client to carry on with the idea or decide it will take too long. Often, with commercial office fit-outs particularly, the Client’s problem of any time extensions could well mean them having to extend their leases on existing premises. The most common figure I’ve come across for this is “£600,000 per month or part thereof” and often the lease extension has to be for a minimum of 3 months! This figure is what is known as “liquidated and Ascertained Damages” (LAD).

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The worst LAD I’ve ever come across was for the hire of an off-shore barge on a long sea-outfall. That was a modest £80,000 per hour or £1.92 million a day!

So, with those kind of sums of money owing to them, is the Client likely to pay out? Doubt it! The final monthly payment request the Main Contractor makes is unlikely to be anything like that value! So who is the “YOU” who might not get paid?

To find that out involves digging deep and finding someone capable of doing a Forensic Delay Analysis (FDA). Planners up to that are a rare breed and do not come cheap! Their services will probably set the Contractor back about £60,000 – and these guys want their money weekly! I know, I used to be one of them! Now, that FDA might show that the construction delay was down to any party to the contract. What the Main Contractor – and I’ve never heard of a Subbie paying out for one – and this is why it may turn out to be a good investment. The delay may have been caused by the Client’s Architects or Consultant being slow in coming up with additional information requested or detailed specs for changes the Client requested. That becomes the Client’s fault and you want your payment!

So that is Why Construction Delays Might Not Get You Paid! The trouble is that the cost of trying to prove the delay is someone else’s fault is such that contractors usually just give up! Subbies particularly, if they are held to blame, usually just shrug and go bust!