Completing a construction project within its original completion date is the goal of every good subcontractor. However, planning for the possibility that completion may be delayed is the mark of a successful subcontractor. Your construction contract is where you can minimize the risk of schedule changes and delays.
As a subcontractor, most of your contracts will include a schedule or, at a minimum, a commencement and completion date that coincide with the start and finish dates in the prime contract. The schedule usually shows a critical path and is attached as an exhibit to the contract. The schedule and finish date obligate you to complete your work by a certain time.
Time is of the essence
Many subcontracts will also include a “time is of the essence” provision along with the project completion date. The words “time is of the essence” have significant legal meaning. Without these words, time can be interpreted by the courts in many different ways. With a “time is of the essence” provision, however, the completion date has to be followed specifically without exception. Even if a delay is not your fault, you could be sued for breach of contract if you don’t complete the work on or before the stated date.
To avoid this situation, you can counter the “time is of the essence” provision by indicating that you “shall not be held liable or penalized for any delays or liquidated damages unless such are solely and directly attributable to your company’s actions.” This provision indicates that if it’s your fault, you will own it. But if it’s not your fault you can’t be and shouldn’t be blamed for that delay. Most reasonable general contractors will accept this modification.
If, however, you are unable to counter the “time is of the essence” provision with your own provision or eliminate it altogether, try at least to have the contract broaden the time requirements to complete assigned tasks, excepting those circumstances outside of your control.
Compensation for schedule changes
Most subcontracts state, in no uncertain terms, that the subcontract price will not be adjusted due to changes in the project’s schedule and the pace of the work. Yet it is common during the course of a job for the GC to change the timing on subcontracted work and to ask that work be accelerated to make up for delays, even for those circumstances outside your control. You will therefore want some assurance that you can submit a change order when the work schedule changes. Look to add the following language to your contract:
“Any suspension, acceleration, delay, or change in the sequence of work shall be accompanied by additional compensation equal to subcontractor’s actual labor and material costs plus agreed on overhead.”
While this may be a hard provision on which to obtain agreement, you may want to advise the GC that the only other way to reduce your risk is to account for potential schedule changes in a new, higher cost for the work.
Time is money in your business. When a job goes for a longer period of time then what you bid, you may want to make a claim for an extension. Here are two important things to remember when filing for an extension:
- Provide timely notice. Most contracts will designate a specific time period by which you need to provide a written notice of extension. It could be 72 hours, three days, or seven days from your first knowledge that an extension is needed. So as soon as you know—even if you can’t provide all the details—submit your written notice immediately to meet the extension deadline.
- Determine if you will limit your request to just time, or both time and money. Because it is difficult to have the GC agree to additional compensation for schedule changes, consider adding the following to your final contract: “If any event beyond the subcontractor’s reasonable control delays the work, then subcontractor shall be entitled to a time extension and the parties agree to arrive at reasonable compensation for the schedule change.” Pushing the issue to a future negotiation can often move you beyond a potential impasse in getting the contract signed.
Timing is everything when it comes to construction contracts. Understanding time-related provisions in your subcontracts and taking your own precautionary actions can reduce your overall risk.