Supply chain delay claims: A day late and a $1,000 short.

• Author: Glazier, Saul

Byline: Bridgetower Media Newswires

By Saul Glazier

Axley Attorneys

COVID-19 has created many challenges for owners and contractors. Initially, the biggest fear was that a COVID-19 outbreak might shut down a construction site.[1] Next, material prices skyrocketed. Currently, one of the largest concerns is the unreliable supply chain. This article discusses supply chain delay claims and steps owners, contractors, and material suppliers can do to help mitigate the effects of supply chain troubles.

Ounce of Prevention

Steel deliveries have been a major supply chain issue. However, the supply chain has impacted numerous items including windows, cabinets, and appliances. Home builders have been requiring new home buyers to order dishwashers before any ground has been broken on a new home site, because of the long delays in the supply chain. To the extent possible, owners should work with their designers, engineers, and contractors to identify items that may be subject to supply chain problems as early as possible and order difficult to obtain materials. Steel subcontractors should also order steel as early as possible, and consider ordering steel with multiple orders, when it is not possible to order all the steel at once because not all shop drawings have been approved. Early orders may also alleviate some risk in material price escalation costs.

Liquidated Damages

Both section 15.1.7 of the AIA A201 section 6.6 of ConsensusDocs 200 waive consequential damages against contractors. If these provisions are not struck or modified, contractors generally are not liable for consequential damages to owners for late completion if supply chain issues delay a project. Owners, however, typically protect themselves by imposing liquidated damages for delays which extend the substantial completion date. In Wisconsin, liquidated damages are generally permissible so long as they are not a penalty, and a reasonable approximation of the type of losses that might occur because of late completion.[2] It is important for owners to go through the exercise of documenting the basis for the amount of liquidated damages prior to entering into a construction contract, so there is a documented justification for the amount if a contractor subsequently argues that the amount is unreasonable or a penalty.

Contractors should consider requiring a limit on the amount of consequential damages to avoid a catastrophic loss in the event of late completion. Most construction...