If you are involved in the construction industry, you are familiar with the challenge of staying on schedule. On every project, construction contractors perform a balancing act between completing their scope of work on time, in a good and workmanlike manner, and without eating away at their anticipated profits. Logistics can be problematic because projects often involve multiple trades. Everyone knows about delay claims. But contractors should keep in mind a related but often overlooked claim: disruption.
In the context of a construction project, disruption means a “reduction in the expected productivity of labor and equipment – a loss of efficiency measured in reduced production of units of work within a given period of time.” County of Galveston v. Triple B Services, LLP, 498 S.W.3d 176, 181–82 (Tex.App.-Hous. (1 Dist.), 2016) citing BRUNER & O’CONNOR, 5 CONSTRUCTION LAW § 15:102. For example, a general contractor altering a subcontractor’s sequence of work resulting in the subcontractor performing its work less efficiently. This forces the contractor to incur increased labor costs because it takes them more time to complete the task than originally contemplated. Such a scenario is not unique, and the sum of such inefficiencies can have a tremendously negative impact on a contractor’s profit margins.
Disruption Distinguished from Delay
Time is the key distinguishing factor between a delay and a disruption. Delay damages arise out of delayed completion of the work and compensate the delayed contractor when a project takes longer than the construction contract specified. Delays are often remedied by awarding more time to complete the scope of work. Disruption is different. Unlike delay damages, a contractor may suffer disruption damages regardless of whether the project was completed on time. The issue is not timeliness of completion, but whether the project finished at greater expense to the contractor due to disruptive events or scheduling errors.
Determining Disruption Damages
Because construction disruption damages may not be as obvious as damages associated with construction, it is a good idea to become familiar with several methods of identifying the effects of disruption:
- Comparative Project Study – Analyze another recently executed project with an equivalent scope of work.
- Measured Mile Study – Compare contractor’s productivity on the project during periods that were impacted by disruption to productivity during periods that were not disrupted.
- Cumulative Impact – Analyze the negative impact on labor productivity in terms of the amount of changed work, expressed in man-hours, and timing related to the overall project schedule. The severity of the disruption impact increases with increased changed work man-hours and/or as changed work emerges later in the project.
Regardless of which method the contractor chooses, precision is paramount. Courts are unlikely to accept a disruption damages model based on fuzzy math. For those reasons, it is imperative to retain a construction scheduling consultant early in the evaluation process.
Disruptions in a construction project can be devastating to a contractor’s bottom line. The source of disruption is varied: design deficiencies, lack of access to the project, problems coordinating with trades, for myriad other reasons. A contractor must closely monitor disruptions. Knowledgeable construction attorneys and scheduling consultants can help a contractor identify and quantify its loss due to disruption.