Better Roads

August 2014

Better Roads Digital Magazine

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22 August 2014 Better Roads InCourt by Brian Morrow, P.E., Esq. Attorney Brian Morrow is a partner in Newmeyer & Dillion LLP and a licensed civil engineer specializing in construction law, including road and heavy construction. T ime is a critical resource in construction, as in "time is money." In construction contracts, contractors must budget their resources, in- cluding labor, materials, equipment, supervi- sion and overhead expenses, so they can realize an antici- pated profit by the projected completion date. Delays impact a contractor's costs and profit. Throughout the years, courts have developed methods to analyze de- lays, such as the Eichleay formula. In a recent case, JMR Construction Corp. v. U.S. (U. S. Court of Federal Claims, July 14, 2014), a federal court addressed delay damages, including issues relating to the Eichleay formula. On June 26, 2007, JMR contracted with the U.S. Army Corps of Engineers (COE or Government) for the con- struction of an aircraft maintenance facility at Nellis Air Force Base. The contract projected a planned completion by Oct. 6, 2008. However, final completion was not obtained un- til Sept. 4, 2009. Delays to the project occurred through January 2009. From Jan. 1 to Jan. 16, 2009, JMR per- formed substantial work on-site. On Jan. 14, the COE took possession, or "beneficial occupancy," of the facility. From that point, JMR's work slowed and it installed temporary lighting in "Room 109." On Feb. 2, JMR installed a temporary power converter. On Feb. 3, JMR removed its office trailer from the work site. After Feb. 3, JMR performed six days of fieldwork to complete two tasks: installation of a permanent power converter and permanent lighting in Room 109. Between Jan. 16 and Sept. 4, 2009, JMR conducted off-site work. On Sept. 4, the COE acknowledged JMR's contract transmittals. JMR submitted several requests for equitable adjust- ment (REAs) to the COE, including a revised REA on Feb. 2, 2010. On March 25, 2010, the COE's contracting of- ficer denied the revised REA. Subsequently, JMR brought a breach of contract claim, claiming delay damages of $428,261.44. The government moved for summary judgment regarding JMR's field overhead damages from Feb. 4 to Sept. 4, 2009, and JMR's home office overhead damages. Field overhead costs, i.e. jobsite overhead, are admin- istrative field costs that increase throughout time, such as field worker salaries, work trailer costs and temporary site utilities fees. Home office overhead costs are the general administrative costs of running a business, such as ac- counting and payroll services, general insurance, salaries, work trailer costs, taxes and depreciation. Home office overhead involves costs for the benefit of the whole busi- ness and may not be charged to a particular contract. The government claimed that after JMR removed its job site trailer on Feb. 3, 2009, JMR performed minimal work, and therefore, "did not occupy the field" sufficiently to re- cover damages for field overhead costs. The court, however, found that JMR's work – six days of fieldwork after Feb. 3 – created a factual dispute that prevented summary judg- ment on this issue. To recover home office overhead, JMR had to satisfy the Eichleay formula, which requires the following: there was a government-caused delay not excused by a concurrent contractor-caused delay; the contractor incurred additional Why Construction Delays Cost Money Contractor makes claim against Army Corps of Engineers for delay damages.

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