A Concise Guide to Understanding the EOT Subcontractor Claims Process
Today’s construction industry is often challenged by the complexity, time constraints, and expense of projects which are bound by contractual law. Even a minimal departure from these contractual agreements can result in a significant loss of time and money to all parties involved. Unfortunately, the responsibility for meeting the constraints of time and cost falls squarely upon the shoulders of the general contractor, who is ultimately responsible for meeting the stipulations within the contract.
While most smaller projects, such as those involving the construction of a single residence or a small commercial building, can be completed within the terms set forth in the contract, larger building projects are often riddled with delays because of the sheer number of subcontractors working on their portion of the project. For example, a general contractor may subcontract work out to electricians, plumbers, welders, roofers, and other licensed professionals who are each responsible for the jobs they are contracted to undertake.
Sometimes, through no fault of a subcontractor, their work is delayed. What happens when they are unable to begin or complete their portion of the job timely and within cost due to outside forces preventing them from working on schedule? At this point, that subcontractor will almost certainly want to file what is referred to as an Extension of Time (EOT) construction claims, which needs to follow a very precise format. Following is a concise guide to understanding and filing this type of claim with the general contractor.
Acceptable Reasons for Filing an EOT
Before filing for an Extension of Time, a subcontractor should refer to the guidelines established by FIDIC, the International Federation of Consulting Engineers. This professional body establishes the rules and regulations to abide by which includes, but is not limited to, reasons and procedures for filing EOT claims. As per their guidelines, a subcontractor can’t file for an Extension of Time if they were remiss in carrying out their duties timely and within budget. That’s on them and they cannot expect to recover any losses which were incurred by their own dereliction of duties.
However, consider for a moment the domino effect. Since most jobs on a construction site are dependent on work that went on before their portion of the job commenced, an Extension of Time claim might be agreed if the subcontractor/s before them failed to meet time and cost constraints. In the Building Service Subcontractor Claim, specific allowances are made for those times when delays resulted from such things as:
- Amended directives during a job.
- Missing or incomplete blueprints and specs.
- Previous time schedules not being met which their work is dependent upon.
- The administration of alterations in plans.
- Delays in the provision of utilities and facilities to be supplied by the contractor.
According to contract law, subcontractors have an obligation to compile and provide explanations and documentation of claims. Each claim should be accompanied by contractual references, factual causation, and quantification of the resulting impact along with any and all documented evidence. This evidentiary documentation should include such things as records of disruptions and delays, as well as records of notification and any proposed contractor resolutions.
Statutory and case contract law stipulates which documents are to be used as proof of a requested Extension of Time (EOT) and any costs incurred due to the EOT Construction claim in question. In order to be granted an Extension of Time and be compensated for any financial losses, a direct line of contributory events must be well documented. For this reason, it would behove subcontractors to always be diligent in maintaining complete and accurate records as a job progresses.
A Few Notes on the FIDIC Building Contract
Although this is a standard contract used in the construction industry around the globe, the contract itself does not lay out the groundwork for determining liability when an EOT claim is submitted. Rather, such contracts set out to define the role each party to the contract is to play and then enumerate each party’s responsibilities.
Also, there is a standard procedure to be followed when submitting an EOT claim and at that time, a subcontractor filing the claim should have any pertinent calculations at hand. FIDIC guidelines state that best practices dictate that the subcontractor seeking a compensatory measure should have very specific calculations on monetary losses as well as the amount of time by which they were delayed. It can’t be said enough that the contract as laid out by FIDIC in no way sets out to determine liability but rather works as a set of guidelines to be followed when seeking extra time to complete a job or compensation for losses incurred through no fault of their own.
Specific Details of a Subcontractor’s EOT Claim
In addition to the very basic reasons for filing an EOT claim mentioned above, the prescribed format should also include exact documentation of the following:
- Initial delays resulting in total calendar days.
- Delays resulting from previous Subcontractor duties known as site dependence delays.
- Delays resulting from the untimely issuance of approved drawings and blueprints.
- Delays resulting from pending RFIs (Request for Information).
- Delays resulting from PVAs (Pending Variation Approvals).
Taking all of the above into consideration, it should be stated at this point that when a new date of completion is agreed, it is assumed that the subcontractor filing the EOT claim will not suffer any further delays. It is thus up to the general contractor to ensure that everything is in line and completed prior to a continuance of work by the subcontractor filing the claim.
Actual Prolongation Cost Claim to Be Filed in Addition to EOT Claim
When bidding a job, a general contractor must take into account any delays which should have been foreseeable. These are too numerous to detail at this point but would include such things as an industry-wide shortage of specific building materials, outside influences such as major repairs on city or county utilities which may prove intermittent during a project of this scope, and any other outside factors to be evaluated when setting forth the timeframe under which they are asking to be contracted. The completion date is set by the general contractor and from there, any and all subcontractors estimate dates of completion based on the completion of work they are dependent upon.
This is where litigation often enters into the claims process. If the subcontractor feels that the general contractor did not make a fair determination of the claim for compensation as per stipulations in their subcontractor contract, the claim can (and often does) end up in claims court. Sometimes being held up on one job prevents a subcontractor from moving on to the next job they have contracted, causing losses they are unable to prevent.
Basic Outline of a Subcontractor Contractual Agreement
At this point, it should be evident just how important a subcontractor’s contract is. While the basic format may vary from contractor to contractor or even between cities, counties, states, and countries, the basic elements must be intact. Every subcontractor contract should include such things as:
- Parties agreeing to the contract, i.e. general contractor, subcontractor, client, etc.
- General conditions.
- Specific conditions.
- The scope of work to be completed.
- Time constraints/duration of the project with a completion
All documents are to be signed and dated by all parties agreeing to the terms and conditions. Any revisions and amendments must likewise be agreed by all parties to the contract, signed and dated.
Who Pays the Cost of Delays?
You may be asking who is actually responsible for paying the cost of delays. There are times when the general contractor is liable for delays if it can be shown that the party responsible for delays was the general contractor. Sometimes it is one of many subcontractors on a job and other times several subcontractors fell short of their contractual agreement.
Think of this as a domino effect. One subcontractor sustains losses and files for an EOT along with compensation for losses incurred. As a result of this subcontractor’s delay, other subcontractors experience similar delays in time and costs, which continues down the line. It can be a complex chain of events only determinable in a court of law. For this reason, it is again reiterated just how important it is for the contractor and any subcontractors to keep accurate documentation as the job progresses. Ultimate, liability may depend on being able to pinpoint the exact point in time when the delays began.
The Bottom Line
In the end, subcontractors are advised never to proceed with a job if they feel they will not be in compliance with their contract. Whether it is through their own fault or the fault of the general contractor or another subcontractor upon which their own work is dependent, an EOT should be filed immediately. Each contractor and subcontractor is legally responsible for being compliant with their contract. To proceed without being granted an extension could cost you a considerable amount of profit. If you feel you will be unable to meet time and cost constraints, file the appropriate requests for amendments before being held liable for costly delays.