Written by: James G. Zack, Jr., CCM, PMP, Principal, James Zack Consulting, LLC.
Introduction
Those involved in the industry should understand that in construction “time is money”. However, all too few owners, designers and construction managers understand that contractors may bank time through use of early completion schedules. If a contractor prepares an early completion schedule they create a time related contingency for themselves. And, a claims conscious contractor is also able to create potential liability for the owner.
Contractor’s Right to Plan Early Completion
Virtually all construction contracts contain a contractual completion date and “time of the essence” clause. Such language is needed to justify contractual late completion damages – liquidated or actual. Typically, contractors have the right to control their own means and methods and their plan their work to support their means and methods. Unless the contract contains a “complete no earlier than” clause contractors therefore are free to plan early completion of the work.
What is an Early Completion Schedule?
There are two forms of early completion schedules. First, is an as-planned early completion schedule that shows an intent to complete work earlier than required. Second, is a schedule update that shows early completion. Not all early completion schedules are claim traps. Some planned early completion schedules are legimate, so the contractor can bid other projects; or free up resources from one project to use on another; or capture an early completion bonus.
When contractors plan early completion, their overhead costs are reduced and a lower, more competitive bid results. Generally, owners and contractors benefit from early project completion. Contractors save money. Owners receive lower bids and obtain earlier use of the project. At other times, contractors bid the full time of performance set forth in the contract and later prepares an early completion schedule to create “schedule contingency”. Other times early completion schedules result when owners do not prepare a prebid schedule in order calculate a realistic time of performance in the contract. However, delayed early completion can give rise to claims.
What Is A Delayed Early Completion Claim?
Should an owner action hinder the contractor’s work and prevent the contractor from achieving their planned early completion, the owner may be liable for the resulting delay damages. This type of claim is based on the theory that the contractor could have completed their work even earlier than they did but for the actions of the owner. Based on this theory a contractor may complete work on time or even early and file and prevail on an early completion delay claim.
How Are Early Completion Schedules Created?
There are numerous ways to construct an early completion schedule. They include shortening activity durations to the minimum; overstating productivity rates; assuming no adverse weather on the job; understating or scheduling owner activities in the most optimistic fashion, such as delivery of owner furnished, contractor installed (OFCI) items very early in the project; scheduling 5 calendar day durations for submittal responses; or allowing minimal time for startup and commissioning.
Does a Contractor Have a Legal Right to Complete Work Early?
The short answer is “yes”. As far back as 1944 a Federal court in U.S. v. Blair ruled that a contractor has an “…undisputed right to finish his construction work in less time…” than required. However, the Court ruled that the owner has no obligation to help the contractor achieve early completion. In 1963, Metropolitan Paving Co. v. U.S. reconfirmed a contractor’s right to complete work early and again acknowledged while the owner has no obligation to assist the contractor in their effort to complete early “…where the government is guilty of ‘deliberate harassment and dilatory tactics’ and a contractor suffers damages as a result of such action, we think the government is liable.” This case established the early completion delay claim.
In 1993 Interstate General Government Contractors v. West established a three part test concerning early completion claims: notice of intent to complete work early; capability to complete work early; and the contractor would have completed early but for, and only but for, the owner’s actions. Following this case owners defended against delayed early completion claims with arguments like “The contractor never told me they planned to complete early” and/or “I had no obligation to help the contractor complete early.” However, in 1994 in Jackson Construction, Inc. v. U.S. the court noted that “The contractor is not required to notify the government of its intent to finish early” thus eliminating the former argument.
Benefits & Risks of Early Completion Schedules
The pros and cons of early completion schedules are summarized below.
Benefits for Contractors
- Creates an opportunity to bid and win other projects
- Reduces costs
- Allows the transfer of resources to other jobs
- Provides for early release of bonds
- Decreases insurance costs
- Results in satisfied owners (in most cases)
Benefits for Owners
- Lowers project cost
- Provides for early use of the project
- Results in earlier revenue from the completed work
Risks for Contractors
- Must meet the shortened performance period
- Owners may issue change orders revising the contract completion date to the early completion date
- Places the risk of early completion on the contractor
- Puts the burden of proving early completion reasonable and achievable on the contractor
- Subcontractors and supplier added after bid may not be able to meet the planned early completion date
- Assumptions in early completion schedule may be erroneous or compromised by unforeseeable project conditions
Risks for Owners
- Early completion may disrupt organizational planning
- Early completion may disrupt planned project financing arrangements
- Lack of operating staff may prevent taking over work completed early
- Lack of budget to take care, custody and control of work completed early
Can Owners Protect Themselves Against Claims Oriented Early Completion Schedules?
Should an owner be unwilling to accept the risk of accepting an as-planned early completion schedule there are several potential defenses they may employ. Most, if not all, of these defenses must be mounted prior to bidding. Some potential defenses follow.
- Prebid Construction Scheduling: Prior to bidding prepare a prebid schedule to calculate a realistic contract completion date to be included in the contract.
- Exclude Early Completion Schedules: Specify that early completion schedules will not be accepted; no claim may be made for delayed early completion; and/or the owner disclaims any obligation to aid in completing work early.
- Interim Milestone Dates: Establish interim milestone dates to influence construction sequencing and the contractor’s planning and scheduling. Reinforce interim milestone dates by imposing liquidated damages for missing these milestones dates.
- Submittal And RFI Response Times: Specify reasonable response times for submittal reviews (say 20 work days) and RFI responses (say 10 work days) to avoid a planned early completion based on unreasonably short response times.
- Specify OFCI Availability Dates: Specify “earliest expected dates” or “schedule windows” (i.e., no earlier than and no later than dates) for availability of OFCI items.
- Include A Joint Ownership Float Clause: Specify that schedule float is “…a jointly owned expiring resource to be used on a first come, first served basis…”
- Include A Limited Form Of “No Damages for Delay” Clause: Specify that “…the contractor is not entitled to a time extension or delay damages until all schedule float is consumed and the scheduled completion date exceeds the adjusted contract completion date…”
- Include A Non-Sequestering Of Float Clause: Include a clause that allows an owner to reject schedule submittals where float has been sequestered in order to provide for early completion.
- Estimate Start Up And Commissioning Time: Utilize the owner’s operation and maintenance staff to prepare an estimate of the reasonable time to start up and commission the project and include this estimate in the Scheduling Specification.
- Owner’s Right To Modify The Contractual Time Of Performance: Include a clause that if the contractor submits a planned early completion schedule that the owner agrees is reasonable and achievable, the owner may issue a no cost change order to reduce the time of performance in the contract to the planned early completion date.
Conclusion
Not all early completion schedules are claims traps for unwary owners – many are realistic contr
actor plans to complete work earlier than required. However, early completion schedules must be reviewed carefully. If they are legitimate, reasonable and achievable plans owners should seriously consider accepting them and adjusting the time of performance to match the early date. If owners refuse to accept achievable early completion schedules (unless they are excluded by contract) they run the risk of contractors employing a Ghost Schedule on the project and later filing a delayed early completion or constructive acceleration claims. Used properly and cooperatively early completion schedules should benefit both owners and contractors.
Written by James G. Zack, Jr.CCM, PMP, Principal, James Zack Consulting, LLC. He can be contacted by email at JamesZackConsulting@outlook.com.