By Michael C. Loulakis and Lauren P. McLaughlin
There are times when a contractor believes its right to a time extension is so obvious that it does not need to support its claim with a typical scheduling analysis. This can occur when the contractor thinks that the owner is on the same page as to why the project was delayed.
This month’s case, Appeal of Wright Brothers, The Building Company, Eagle LLC, provides an interesting lesson about this topic, explaining how a contractor that was delayed on a project by more than three years thought it had an understanding with the federal government that it was entitled to a time extension and additional money, only to lose the case entirely.
The disputes arose on a $3.8 million construction project for the repair and renovation of a building at Minot Air Force Base in North Dakota. The project was to be completed in 365 days, but it ended up being 1,021 days late. The U.S. Air Force issued contract modifications for 986 days and had also paid Wright Brothers for some delay-related costs. However, because the project was completed late for reasons the Air Force attributed to Wright Brothers, the Air Force charged 35 days of liquidated damages. The Air Force also denied Wright Brothers’ entitlement to approximately $450,000 in delay-related costs.
Wright Brothers filed a request for equitable adjustment that was denied in large part by the Air Force’s contracting officer in its final decision. Wright Brothers appealed that final decision to the Armed Services Board of Contract Appeals. The parties agreed that the appeal would be heard based on the submissions of briefs and declarations from witnesses and without a hearing.
Wright Brothers’ appeal was primarily related to the costs it had incurred because of the Air Force delay (due to the contract modifications). Wright Brothers submitted essentially the same claim submission it had provided to the Air Force over the course of the project, and it was largely based on the report of its claims expert. Wright Brothers argued that the “existence of delay to the overall Project and the Government’s acceptance of the vast majority of the delay is not disputed.”
Wright Brothers attributed government delays to the failure of the Air Force to: (a) allow it site access; (b) timely respond to requests for instruction and requests for information; and (c) approve contract submittals. Wright Brothers argued that “the Government accepted responsibility for 97% of the additional time the job required (which) is ample proof alone that (Wright Brothers) is not responsible for the increased costs associated with that delay,” according to the appeal.
Additionally, Wright Brothers asserted that the Air Force “acknowledged and accepted” these delays as its responsibility when it issued contract modifications. The 97% figure was derived from 986 days of modifications versus the 1,021 days of delay, but other than that, Wright Brothers did not explain how the Air Force acknowledged and accepted responsibility for 97% of the delay. The expert for Wright Brothers did not perform a critical path method analysis, stating that it was not required because “in this case, the amount of excusable and/or compensable delay was determined through the Government granting time extensions due to its actions,” according to the appeal.
The Air Force stated that it did not accept any responsibility for Wright Brothers’ cost overruns and that the contract modifications only “identified government delays for no more than 246 days out of 1,021 days, which (was) less than a quarter of the total days of delay identified by” Wright Brothers. For these interruptions, the Air Force had already paid Wright Brothers. In terms of the changes that did not relate to the delays by the government, the Air Force stated that: “The mere grant of a contract extension does not establish that the government was responsible for the delay.”
The Air Force also argued that Wright Brothers was obligated to demonstrate that any alleged claim for a compensable time extension had to be based on a showing that the Air Force was at fault and delayed the critical path. The Air Force cited prior case precedent to support this position; Wright Brothers did not provide a rebuttal.
The ASBCA started its assessment by looking at the applicable case law on delays claims. It cited longstanding precedent holding that a contractor seeking to prove the government’s liability for a delay had to establish a “causal link between the government’s wrongful acts and the delay in the contractor’s performance, and the alleged harm to the contractor for the delay.” The ruling in relation to precedent continues: “To establish that causal link, the contractor must show that the government’s actions affected activities on the critical path of the contractor’s performance of the contract.”
Furthermore, the ASBCA stated that “broad generalities and inferences” that the government must have caused some delay and damage because the contract took longer to complete than anticipated were not sufficient.
In applying that precedent to this case, the ASBCA concluded that Wright Brothers had not met its burden of proof. Although Wright Brothers provided a litany of alleged delays and disruptions, its request for additional money was based on the combined effects of the numerous delays due to the Air Force’s actions that changed the project from a one-year to a four-year project through no fault of Wright Brothers. In doing so, however, Wright Brothers “provided no context to support a finding that the alleged delays and disruption ran through the project’s critical path, and, as such, (Wright Brothers) has failed to meet its burden of proof.”
The ASBCA was influenced by the fact that Wright Brothers had already been paid for some delay damages. In the board’s view, this was all the more reason Wright Brothers was required to “establish an impact to the project’s critical path,” as it had to demonstrate that it had not already been paid for costs it was claiming. “As an adjudicative body, it simply is not our role to piece together a contractor’s allegations of delay and disruption to determine their impact upon the contractor’s performance.”
The ASBCA rejected the opinion by Wright Brothers’ expert that a CPM analysis was not required because the Air Force had granted time extensions due to its actions. The ASBCA concluded that Wright Brothers not only had to establish that the Air Force’s actions affected activities on the critical path but also that “delays of the parties were not otherwise concurrent or intertwined.”
Wright Brothers also raised other theories in support of its position, including that the conversion of the project from one year to four was a cardinal change. While the ASBCA recognized that this theory could be used, it stated that this required a “fact-intensive inquiry into the events that led to the excess work and their effect on the parties.”
Wright Brothers did not accomplish this and only provided generalities about the project growing in duration. “Again, it is not the responsibility of the Board to provide, in the first instance, (Wright Brothers’) factual and legal analysis. … ‘We won’t do (Wright Brothers’) work for it.’”
It is easy to feel sorry for Wright Brothers. There was extraordinary growth in contract duration and there was little, if anything, in the appeal that pointed the finger at Wright Brothers for having contributed to the delays. However, given the substantial precedent in federal contracting that a CPM analysis is needed to prove a delay claim, Wright Brothers certainly took a calculated risk that it could win an ASBCA appeal without having that analysis.
Stated differently, it might have seemed logical for Wright Brothers to rely upon the fact that the Air Force had provided time extensions. But it did not appear that Wright Brothers provided any legal precedent that these time extensions were a way to avoid the requirement for a CPM analysis.
The decision gave a clue as to why a CPM analysis is needed. The ASBCA noted that Wright Brothers failed to explain whether there were any concurrent delays. The reason this is important is because if there is a concurrent delay, the contractor is entitled to a time extension but not to any delay damages. Consequently, the mere fact that an owner extends the contract completion date does not automatically mean the contractor also gets additional money. Because this appeal was essentially all about Wright Brothers wanting additional money for the delays, it had to do more than just prove there was a time extension.
Finally, we provided a few quotes where the ASBCA admonished Wright Brothers for not doing its job in supporting its claim. The “we aren’t going to do your job for you” statement is an important takeaway from this case. It is not unusual for contractors to provide scant details about change orders during contract performance and later in adversary proceedings. Those who are evaluating these change orders may have the patience to sort out the details, while others may simply conclude that the contractor did not do its job and reject the claim.
If you take a shortcut with your evidence, be prepared for the consequences.
Michael C. Loulakis ([email protected]) is the president and CEO of Capital Project Strategies LLC in Reston, Virginia. Lauren P. McLaughlin ([email protected]) is a partner of Smith, Currie & Hancock LLP in Tysons, Virginia.
This article first appeared in the July/August 2023 print issue of Civil Engineering as “Contractor Faces Legal Hurdle When Proving Its Delay Claim.”