By: Alexander A. Miuccio Published: September 2014

New York City Eliminates "No-Damage-For-Delay" Clause

In the March 2014, Attorney’s Column, I mentioned that the City of New York revised its standard contract to eliminate the “no-damage-for-delay” provision and allow claims for delay-related costs under certain circumstances.

Background

In September 2008, the City began a five-year pilot program to test the use of new contract language which would allow delay claims on certain public works projects. The City’s goal was to determine whether some contractors decline to bid on City projects because of delay risks, and whether those who do so are factoring such costs into their bids because they cannot predict what will happen if delays do occur. The contracts on pilot projects eliminated the “no-damage-for-delay” clause. Instead, the contract allowed compensation for delays caused by City agencies.

After completing the pilot study, the City found that the bid prices on projects containing the “no-damage-for-delay” clause were higher than comparable projects where claims were allowed for delay-related causes—which should not have come as a surprise to the City. The demonstrated savings to the City was sufficient justification for the City to revise its standard contract language by eliminating the “no-damage-for-delay” clause and allowing delay damages in limited circumstances on all City construction projects starting after December 24, 2013.

Compensable Delays

The revised Article 11 identifies the type of delays that are compensable, including the four exceptions to the enforcement of the no-damage-for-delay claims made by the Court of Appeals in Corino Civetta Constr. Corp. v City of New York, namely: (1) the City’s bad faith, willfulness, or grossly negligent conduct; (2) uncontemplated delays; (3) unreasonable delays that constitute intentional abandonment by the City; and (4) delays resulting from the City’s breach of a fundamental obligation of the contract.

Other delays allowing a contractor to recover damages include: (5) the City’s failure “to coordinate and progress the work”; (6) extended delays in reviewing and approving change orders, in shop drawing reviews and approvals, or delays resulting from the “cumulative impact of multiple change orders”; (7) unavailability of the site for an extended period of time that significantly affects the scheduled completion of the contract; (8) stop work orders exceeding 30 days relative to a substantial portion of the work; and (9) differing site conditions that were not known or reasonably ascertainable on a pre-bid inspection of the site or review of the bid documents or other publicly available sources and are not ordinarily encountered in the geographical area of the site or in the type of work to be performed.

The revised contract language specifically excludes claims for delays caused by third parties, such as contractors, non-City agencies, utilities, labor strikes or disputes, and “any situation which was within the contemplation of the parties at the time of entering into the contract.”

Notice Requirements and Documentation

Article 11 provides for written notice of any delay conditions to the City’s engineer within seven days of the commencement of the condition. This article further provides that a verified statement and supporting documentation of the details of the delay and the amount of compensation claimed is required to be submitted within forty-five days from the time the damages are first incurred. Thereafter, an updated verified statement and supporting documentation must be submitted every thirty days.

The notice and documentation requirements will be strictly enforced. Failure to comply with the notice requirements will constitute a waiver of the delay claim.

Comment

The elimination of the onerous “no-damage-for-delay” clause on New York City public contracts and the inclusion of recovery for delay damages under certain circumstances is a step in the right direction. It is only fair that contractors be allowed to recover damages for City-caused delays. The taxpaying public also benefits because contractors will not be factoring in their bid prices the projected additional costs needed to cover unpaid delays on the project, thereby reducing the overall cost of the project. Under the revised contract, contractors will now have contractual protections that will include compensation for delays that are reasonably considered to be the City’s own responsibility.

The next step is to eliminate the “no-damage-for-delay” clause from all statewide public contracts. Last year, the New York State Senate passed a bill allowing damages for delay which was similar to the language in the City’s revised contract. The Assembly did not follow suit. Given the City’s allowance of delay claims under the revised standard contract, perhaps the Assembly will be more receptive to enacting a “damages for delay” bill on public works projects throughout the State.

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