On March 17, 2017, the City of New York released a revised version of its Standard Construction Contract, which is effective immediately and to be used for all outstanding bids. The primary purpose behind the issuance of the new Contract was to revise provisions related to delay damages, including the definition of compensable and non-compensable delays, recovery of delay costs and the process for submitting claims for such delays.
Historic Use Of No Damage For Delay Clauses In New York City
New York City’s historic use of “no damage for delay” clauses resulted in significant litigation and some of the most often cited cases defining the exceptions to such provisions, including Kalisch-Jarcho v. City of New York, 58 N.Y.2d 377 (1983) and Corinno-Civetta Construction Corp. v. City of New York, 67 N.Y.2d 291 (1986). In Corinno-Civetta, the New York Court of Appeals identified four exceptions to the coverage of the clause, including: (1) the City’s bad faith, willfulness, or grossly negligent conduct; (2) uncontemplated delays; (3) unreasonable delays that constituted intentional abandonment by the City; and (4) delays resulting from the City’s breach of a fundamental obligation of the contract. These four exceptions provided ample opportunities for contractors to seek delay damages in disputes with the City.
In 2008, New York City began a five-year pilot program to evaluate the effect of contract provisions allowing recovery of delay costs on certain public works projects for delays caused by City agencies. The result of the pilot study confirmed that the bid prices for contracts including a “no damage for delay” clause were higher than comparable projects that allowed for recovery of delay costs. Thereafter, the City revised its Standard Construction Contract to allow delay damages in limited circumstances on all City construction projects after December 24, 2013. The new Standard Construction Contract replaces the 2013 version.
Overview Of 2017 Revisions
The 2017 revisions to the City Standard Construction Contract primarily change the provisions of Article 11 regarding compensable and non-compensable delays. The definition of Compensable Delays was revised to require that certain delays attributable to the City be “unreasonable,” rather than simply “extended” as provided in the 2013 Contract. (Section 22.214.171.124). Section 11.4 clarifies the following “compensable” delays:
126.96.36.199 The failure of the City to take reasonable measures to coordinate and progress the Work to the extent required by the Contract, except that the City shall not be responsible for the Contractor’s obligation to coordinate and progress the Work of its Subcontractors.
188.8.131.52 Unreasonable delays attributable to the review of shop drawings, the issuance of change orders, or the cumulative impact of change orders that were not brought about by any act or omissions of the Contractor.
184.108.40.206 The unavailability of the Site caused by acts or omissions of the City.
220.127.116.11 The issuance by the Engineer of a stop work order that was not brought about through any act or omission of the Contractor.
18.104.22.168 Differing site conditions or environmental hazards that were neither known nor reasonably ascertainable on a pre-bid inspection of the Site or review of the bid documents or other publicly available sources, and that are not ordinarily encountered in the Project’s geographical area or neighborhood or in the type of Work to be performed.
22.214.171.124 Delays caused by the City’s bad faith or its willful, malicious, or grossly negligent conduct;
126.96.36.199 Delays not contemplated by the parties;
188.8.131.52 Delays so unreasonable that they constitute an intentional abandonment of the Contract by the City; and
184.108.40.206 Delays resulting from the City’s breach of a fundamental obligation of the Contract.
Section 11.4.2 was also revised to make clear that a contractor was not entitled to present a claim for delays for early completion unless the Contract provided for additional compensation for early completion or the Commissioner had directed that performance be accelerated. The latter situation had been recognized previously in the 2013 version of the Standard Contract. The components of delay damages that are recoverable were also revised in Section 11.7, including a formula for extended home office overhead.
Section 11.5 of the Standard Construction Contract describes “Non-Compensable Delays” for which “the Contractor agrees to make no claim for, and is deemed to have included in its bid prices. .. the extra/additional costs attributable to any delays.” Non-compensable delays include delays caused by third parties, the Contractor’s means and methods of construction, court orders, force majeure events and other foreseeable delays. Section 11.5.2 of the “non-compensable” delay provision was revised to provide that the Contractor would not have a claim for delays that were within the contemplation of the parties at the time of contracting to the extent that they “would be generally recognized by a reasonably prudent contractor as related to the nature of the Work[.]”
Finally, Article 11 was also revised to provide for a different process of addressing claims for delays. Previously, claims for delays were submitted to the agency for determination of the merits and payments for delays through a change order. The Claim Submission requirements are set forth in Article 11.1 and provide that the Contractor must notify the Resident Engineer of the condition causing the delay and submit the damages claimed to the Commissioner:
11.1 After the commencement of any condition which is causing or may cause a delay in completion of the Work, including conditions for which the Contractor may be entitled to an extension of time, the following notifications and submittals are required:
11.1.1 Within fifteen (15) Days after the Contractor becomes aware or reasonably should be aware of each such condition, the Contractor must notify the Resident Engineer or Engineer, as directed by the Commissioner, in writing of the existence, nature and effect of such condition upon the approved progress schedule and the Work, and must state why and in what respects, if any, the condition is causing or may cause a delay. Such notice shall include a description of the construction activities that are or could be affected by the condition and may include any recommendations the Contractor may have to address the delay condition and any activities the Contractor may take to avoid or minimize the delay.
11.1.2 If the Contractor shall claim to be sustaining damages for delay as provided for in this Article 11, within forty-five (45) Days from the time such damages are first incurred for each such condition, the Contractor shall submit to the Commissioner a verified written statement of the details and estimates of the amounts of such damages, including categories of expected damages and projected monthly costs, together with documentary evidence of such damages as the Contractor may have at the time of submission (“statement of delay damages”), as further detailed in Article 11.6. The Contractor may submit the above statement within such additional time as may be granted by the Commissioner in writing upon written request therefor.
However, Section 11.9 further provides that all delay claims are to be filed with the Comptroller and any compensation will be determined by the Comptroller. The revised provisions appear to complicate the process of filing such delay claims and failure to comply may jeopardize recovery.
In summary, the revisions to the New York City Standard Construction Contract alleviate some of the draconian effect of the prior “no damages for delay” clause that inspired repeat litigation, but continue to provide an opportunity for disputes, including whether the City’s delays were “unreasonable” and whether a “reasonably prudent contractor” would have anticipated the delays.