By Steven Stuart and James Bidgood of Smith, Currie & Hancock, LLP 

A good project schedule may be critical to managing a project. When the project’s progress is impacted, the schedule can be revised to show the changes and their effect on the project. Contemporaneous schedule updates are not only good practice; they may also be mandated by the project’s contract. Often, the contractor is obligated to provide schedule updates at regular intervals during a project. If a schedule is not appropriately revised, its usefulness may be diminished, and the contractor faces not only risks associated with project completion but also challenges in advancing and defending against delay claims. Contractors need to anticipate that a court or board may express a preference for contemporaneously updated schedules over after-the-fact as-built schedules when assessing delay claims. The decision of the Armed Services Board of Contract Appeals, Hedgecock Elec., Inc., ASBCA No. 56307, 12-2 BCA ¶ 35,086, illustrates this point.

The Project’s Delays

The Navy issued a solicitation for the construction and repair of airfield taxiways and edge lights at the Naval Air Station in Jacksonville, Florida. The solicitation contemplated a performance period of 380 days, and required work to be performed Monday through Friday, 0600 to 1800. The $4,197,000 fixed-price contract awarded to Hedgecock Electric (“HECI”) also set liquidated damages at $1,700 per day.

The contract provided that the airfield would remain open during construction and required HECI to “cause the least possible interference” with operations. The contract also specified when and how certain work would be performed and required HECI to identify on the schedule each factor that constituted a potential interruption to operations. Prior to the start of the work, HECI submitted a critical path method schedule for the contracting officer’s acceptance. The contract specified that the schedule be updated to reflect progress and status of construction “at monthly intervals or when the schedule has been revised.”

HECI encountered delays to its work. The storage area assigned by the Navy to HECI was within 400 feet of a combat aircraft loading area (“CALA”), and when the CALA was “hot” – when ammunition was loaded onto aircraft – HECI could not access its materials. Further, HECI’s employees were required to take more than one training course to obtain badges to access the project, which had not been contemplated by HECI. HECI also encountered potential contamination areas that required a revised digging permit and additional HAZMAT training. The Navy also failed to make certain portions of the project available to HECI, and another contractor on site delayed HECI. The contracting officer and HECI agreed to discuss and negotiate time extensions at the end of the contract.

Two days before the contract completion date, the contracting officer issued a letter expressing scheduling concerns and inviting HECI to provide its plan for contract completion. The next day, the contracting officer retained 33% of HECI’s invoice amount due to HECI’s alleged delays and failure to submit a solution to complete the contract. HECI responded and alleged various government-caused delays, which the contracting officer largely dismissed.

The Navy took beneficial occupancy 77 days past the contract completion date. When HECI and the contracting officer met to discuss the project delays, the contracting officer acknowledged that 16 of the 77 days were government caused and assessed 61 days of liquidated damages. HECI then submitted a formal claim requesting a compensable performance period extension of 77 days. The contracting officer granted a 4 day extension and otherwise denied HECI’s claim. HECI appealed that decision to the Armed Services Board of Contract Appeals (“the board”).

HECI’s Schedules Found Inadequate

As a threshold matter, the government argued that a portion of HECI’s claims were foreclosed by the bilateral modifications that HECI signed during the project. The bilateral modifications expressly stated that the contractor’s acceptance constituted an accord and satisfaction for such claims. Despite this language, the board sided with HECI and found that it was both parties’ intention to address time extensions at the end of the contract.

The board noted that the contract required monthly schedule updates, but HECI only issued 8 updates during the project. The board concluded that those schedules were not adequate to support the delay claims. While HECI’s scheduling firm had prepared a Time Impact Analysis to support HECI’s delay claim, the board concluded that the Time Impact Analysis was inadequate, as it was not founded on accurate contemporaneous schedules. In addition, the board determined that HECI had failed to submit fragnets tied logically to predecessor and successor activities in the existing schedules.

HECI’s superintendent testified that “the schedule is really nice for looking at” but not useful for the actual work performed as the airfield manager dictated when and where work could be performed. Accordingly, the board had “little confidence” that the submitted schedules accurately reflected progress “for any specific date or period of time.” Only HECI’s as-built schedule was “of some value” to the board for the purpose of analyzing HECI’s delay claims.

As to the proof of the delay claims, the board stated that HECI bore the burden of proof in  its government-caused delay claim, while the government carried the burden of proof in assessing liquidated damages. The board found that the government easily satisfied its burden based on the actual completion date. Thereafter, HECI needed to establish a defense to the liquidated damages assessment and prove government-caused delay. As the board “would normally first look to the project schedules” to assess delay, HECI’s failure to submit required schedule updates eroded HECI’s position. Even though the government failed to address time impacts during performance – deferring all discussion until end of contract – the board still found itself without adequate proof of the delays to HECI’s performance. Without the benefit of accurate schedules, the board relied on the daily reports to assess each of HECI’s alleged delays. Ultimately, the board found that HECI was entitled to 43 days of compensable delay and assessed 34 days of liquidated damages.

Hedgecock Decision Takeaways

Schedules are important. In a perfect world, a contractor would perform work in tandem with the baseline schedule, and subsequent updates would be provided as that work is impacted. However, construction does not take place in a perfect world. This does not negate the need for accurate updated schedules on a project and detailed documentation related to potential delays. Instead, the need for accurate schedules and related documentation is essential for success due to the very nature of construction.

Accurate schedules and related documentation are also often required by contract, and courts and boards do not look favorably upon a contractor’s delay claim where the contractor failed to comply with such a contract requirement. For example, in Lovering-Johnson, Inc., ASBCA No. 53902, 05-2 BCA ¶ 33,126, the contractor “failed to comply withits contractual responsibilities to timely provide performance schedules,” and the board stated:

The government had a contractual right to base any time extension on [network analysis system (“NAS”)] submissions. Progress payments were also to be based on updated schedules. Appellant’s failure to provide schedules deprived both parties of a valuable contract administration tool that was designed, inter alia, to contemporaneously identify and provide notice of the impact of the claim events on completion of the construction phases. The contemporaneous absence of the required scheduling materials rendered the NAS tool useless during much of the period involved in this dispute and subject to after-the-fact manipulation and rationalization. It also frustrated analysis and resolution of appellant’s REA.

On that basis, the board denied the contractor’s claim for compensable delays and acceleration.

Owners, whose contracts demand timely resolution of delay claims, should timely resolve any delay claim. The owner who protests that a contractor’s after-the-fact delay claim is not in keeping with the contract requirements may see that defense fail, when the evidence establishes that the owner agreed to defer schedule claims to the end of the job. Contractors face the same risk vis-à-vis their subcontractors if they fail to timely address schedule-related claims.

A contractor can avoid, or substantially minimize, uncertainty in its schedule-related claim, with proper documentation of delays and accurate schedule updates. Without such support, a contractor, as in the Hedgecockdecision, may be largely frustrated in its efforts to recover compensation for delay and/or to be relieved of liquidated damages. Entirely relying on after-the-fact as-built schedules to prove a delay claim is not only challenging, it may be risky given the courts’ and boards’ clear preference for accurate contemporaneous schedules. If contemporaneous schedules are flawed or do not exist, an accurate and realistic after-the-fact schedule can be useful in (and indeed the only resource for) analyzing or presenting a delay claim. The Hedgecock decision reminds us that project schedules should be updated routinely, especially if required by contract; that schedule updates should reflect all changes; and that schedule updates should be approved and shared with all interested parties throughout the life of the project to manage expectations and convey realities.

Steven Stuart is an associate at Smith, Currie & Hancock LLP.   James Bidgdood is a Partner at Smith, Currie & Hancock LLP.   This article originally appeared in the Spring 2014 edition of Common Sense Contract Law