In an ideal world, each party would monitor and record the progress of the works during the project. In the real world, there are ...
- Natural disasters
- Labor strikes
… and other events out of the contractor’s control that can delay a construction project.
Though the real world is complicated, an extension of time claim doesn’t have to be.
Here we will cover why extension of time claims are important and what should be included in the documents to protect all parties from delays.
Flexbase Makes Filing an EOT Claim Simple With Contract Management
Managing paperwork, forms, and legal documents for a construction project can get complex — not to mention managing cash flow as a contractor.
Managing it all gets intricate.
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What Is an Extension of Time in Construction?
An EOT (extension of time) is a request to move the completion date of a project due to causes that could not be foreseen at the time of contract signing.
EOT requests can come from the following reasons:
- Adverse weather conditions
- Client change orders which are new or additional work not included in the original contract
- The owner may delay the work
- Latent conditions that are unknown when the contract is signed that may affect the completion date
- Events beyond either party's control
Delays are a primary risk of construction projects.
Having a system in place to manage EOT claims means your construction company can prepare for the unexpected.
You can better manage particular:
- Pressure points
- And risks of the project
The process for filing an EOT claim is often outlined in the contract between the general contractor and the owner. Subcontractors are subject to the terms of the contract they have with the general contractor.
One reason EOTs are important is that the contractor is required to prevent or mitigate the delay and any resulting loss. This is required even when the fault does not lie with the contractors.
EOTs can also benefit the clients.
If there were no system in place to extend the deadline and a delay occurred that was not the contractor’s fault, the contractor would no longer be required to complete the works by the completion date.
The contractor would only have to complete the works in a “reasonable” time. The client may also lose any right to liquidated damages.
Most often contractors will only receive an extension to the project timeline, and will not be reimbursed for additional costs. But each circumstance is different.
5 Reasons Why Might You Need An Extension of Time
To qualify for an extension of time claim, this must be considered adverse weather.
Normally, construction projects have ways to manage daily weather and still complete a project within the deadline.
Exceptionally adverse weather on the other hand can be one event like a tornado or a forest fire. Or it can be poor weather over time that is historically unusual for that calendar month and location.
Even when exceptionally adverse weather is defined in the initial construction contract and it has been proven to have occurred, you still must prove this was the cause of the delay.
Many contracts require that the contractor use their best methods to mitigate any delay before an EOT can be considered.
#2: Worker Strikes
Strikes happen and this provision may be included in the construction contract. With proper documentation, you may be able to prove that a strike was the cause of the delay.
#3: Client Delays
If a delay is caused by the project owner or principal, this is also often covered by an EOT claim.
An owner may initiate a change that is beyond the control of the contractor. This might cause a delay to the critical path and is subject to an EOT claim.
#4: Supply Delays
A perfect example of this is the COVID-19 pandemic. Shipping delays and supply delays derailed projects all over the world. Delays of this nature would qualify for an EOT claim.
#5: Governmental Delays
There might be a lack of action by an oversight body or governmental agency that puts a project on hold. Government contractors are particularly familiar with this.
How Do You Request Time Extension in a Construction Contract?
To request an EOT in a construction contract, a formal letter is addressed to the contract administrator. In the letter, you detail why these delays need to be added to the schedule.
The contract administrator then submits the letter to the project manager for evaluation. The project manager then approves or rejects this EOT request.
Requesting an EOT: Contract Is Critical
How to request an EOT claim should be detailed in the construction contract. There it will be described how and within what deadline the EOT should be submitted.
If this process is not included in the contract, it's up to the parties involved to come to an agreement themselves. Even though construction delays are common, clients are rarely happy about delays or requests for extensions.
Items to Include in an EOT Request
#1: Evidence of Delay
Be sure to include all supporting evidence you have to justify your claim.
Typically, once the request has been sent, it will be evaluated by the contract administrator and/or the project manager. They will review the evidence to determine if there is sufficient reason to justify a time extension.
During the COVID-19 pandemic, delays from multiple suppliers and industries have been a particular headache. An EOT claim needs to have sufficient evidence that delay was directly caused by the pandemic.
In the case of COVID-19, here are a few things contractors should carefully document:
- Label the onset and duration of the pandemic
- List which personnel were affected by the pandemic, for how long they were absent or quarantined as a result
- Document whether or how such absences caused a delay and the duration of that delay
- List what reasonable efforts were made during the pandemic related absences to continue operations
#2: Consequences of Delay
Delayed submission of important documents often comes with specific consequences detailed in the contract.
For example, the owner will not automatically be entitled to terminate the contract if the contractor fails to complete the project on time. But the contractor will typically be liable for liquidated damages at a daily rate unless they're purposely excluded from the contract.
They may also be liable for general damages for delay according to common law.
#3: Procedural Requirements
It’s critical to follow the proper protocol when filing for an extension of time.
Be sure to send notices on time.
There are generally two notices that need to be sent for any EOT claim:
- The extension of time claim
- Notice of delay
Notice of delay is simple and less formal. It can be delivered as an email, or a letter, detailing the event and how long you expect the delay to last.
If an EOT is not sent within the time outlined in the contract, the contractor may not be able to request further extension claims or damages.
It's particularly important to follow the correct procedures when deducting liquidated damages.
A contractor may wish to rely on an argument for an EOT as a reason to convince an owner to not assess liquidated damages for a contractor-caused delay. An example of this is when the owner is responsible for a non-critical delay after the project’s contract completion date.
A non-critical delay would not delay the project's critical path. So, this EOT claim would probably be denied, and would not be entitled to relief from liquidated damages.
Does the Contractor Get Paid During an EOT?
Generally, if a contractor or subcontractor is not at fault for the delay, they may be able to recover damages to cover the cost.
No matter the cause, delays cost money. Someone has to cover those costs to complete the project.
Compensable delays are those that are unforeseeable. These are delays that are beyond the contractor's control, but for which the contractor is entitled to additional compensation and a time extension.
Compensable delays are often caused by governmental backups.
Non-compensable delays or delays that the contractor is entitled to a time extension, but no additional compensation. This is like a no-fault approach to delays. Both parties accept extra costs resulting from the delay.
Even if you were to claim that you had no control over the event that caused the delay, you may still not be entitled to compensation for this. In this case, both parties assume their own additional costs, the contractor absorbs their delay costs, and the owner absorbs theirs.
This often comes in the form of liquidated damages by granting an extension of time to the contractor.
If the delay is compensable, the contractor can only recover costs directly tied to the delay. This can include things like:
- Overhead costs
- Insurance costs
- Supervision time
- Project management time
- Loss of use, rents, or profits
- Construction loan interest
Something to watch out for is a “no damages for delay” clause.
If there is no “no damages for delay” clause, this means that, ideally, each party could be held responsible for the cost of delays that they are the cause of.
When there is a delay at the beginning of the project, for example, the effect ripples down to the next trade, and the suppliers, and so on.
During large projects, this effect multiplies. Because of the potential magnitude of this effect, each party might want to minimize the risk that they're liable for.
Easily and Effectively Communicate With Your Customers About Extension of Time Claims With Flexbase
Many EOT disputes can be avoided if each party properly monitors and records the progress of the works during the project. But sometimes, EOTs cannot be avoided.
Make it easier to extend the time frame of construction projects with Flexbase.
Our online platform provides the tools and resources you need to help manage construction businesses like yours.
We automate all of your business paperwork and compliance by generating payment apps with:
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Beyond saving you time, Flexbase also brings you peace of mind in knowing everything you need is in one place.
By making it easy to keep your documents in one place, Flexbase is here to make filing an EOT claim faster and more efficient helping you ensure timely filing and proper documentation.