Liquidated Damages & Delays

Liquidated damages
 Liquidated damages are damages whose amount the parties
designate during the formation of a contract, for the injured party
to collect as compensation upon a specific breach (e.g., late
performance).
 When damages are not predetermined/assessed in advance, then
the amount recoverable is said to be 'at large' (to be agreed or
determined by a court or tribunal in the event of breach).
Liquidated Damages for Delay
If the work is delayed beyond the actual completion time, the contractor will be
liable to pay an amount equal to 0.1% per day of the contract price.
If the Contractor fails to comply with the Time for Completion in accordance
with Clause mention in Tender Document for the whole of the Works then the
Contractor shall pay to the Employer the relevant sum stated in the Appendix to
Tender as liquidated damages for such default and not as a penalty (which sum shall
be the only monies due from the Contractor for such default) for every day or part
of a day which shall pass between the relevant Time for Completion and the date
stated in a Taking-Over Certificate of the whole of the Works, subject to the
applicable limit stated in the Appendix to Tender. The Employer may, without
prejudice to any other method of recovery, deduct the amount of such damages
from any monies due or to become due to the Contractor. The payment or
deduction of such damages shall not relieve the Contractor from his obligation to
complete the Works, or from any other of his obligations and liabilities under the
Contract.
Delays in Construction
 Avoiding costly delays is one of the most important aspects of
project management in the construction industry. In a best-case
scenario, construction delays reduce your annual revenue figures
and demonstrate to your clients that you’re disorganized or
incapable of delivering. In worst case scenarios, your firm could be
ruined by liquidated damages, a special type of contractual penalty
that you could face if a work delay costs your customer money.
 Avoiding construction delays starts with recognizing their most
common causes and working to mitigate those factors before they
take effect. Planning is crucial, but you’ll also need to depend on
analytics and close oversight to determine when things are falling
behind and make the right decisions to keep your project on track
Reasons for Delays in Construction
 Here are the five most common causes of construction delays
and what you can do about them.
 Poor Weather
 Budget and Resource Shortages
 Overbooked Crews
 Unreliable Subcontractors
 Unexpected Changes
 Poor Weather
 If you’re doing an indoor renovation or refurbishment project, you
probably won’t get away with using the weather as the reason you’re
behind schedule. For outdoor projects, however, poor weather like rain
or snow can leave you way behind schedule, threatening your already-
slim profit margins with each passing day.
 If you’re on an excavation project, there’s nothing like a bit of rain to
turn that freshly dug hole into a mud pit that’s ready to swallow an
excavator or any other machine you drive into it. High winds can often
put a stop to high rise construction or a roofing job, and there’s no end
to the delays that can result from flooding, or worse, a Tornado or
Hurricane.
 You’ll have to build allowances for natural disasters into your contracts
to ensure that you don’t end up paying liquidated damages because of a
storm. Rescheduling activities like concrete pours in accordance with
the weather schedule is also a good idea, and you should always keep
water pumps at a job site so you can dispose of any water that
accumulates and gets in the way.
 Budget and Resource Shortages
 Running out of money is a very bad scenario for a construction
firm that’s in the middle of a project, especially when the client
has already paid and you’re digging into your own pockets to get
the job done.
 It is vital that construction project managers have access to
accurate and complete job costing utilities, as well as real-time
updates on the firm’s financial health in order to ensure that
projects don’t eat up the budget. A well-maintained job costing
software is your firm’s best tool for accurately estimating costs
and ensuring that each job can bring higher profits.
 Banks can also be flexible with providing loans, especially if you’re
an established firm with security to offer. This last resort works
well if you need your hands on some cash to purchase the last
materials for a project, pay workers, and avoid a costly delay.
 Overbooked Crews
 Many construction firms take on too many projects, overbook
their crews, and end up falling behind on one or more jobs as their
exhausted employees drive around from job to job each day trying
to get everything done.
 It’s great to be ambitious about your goals, but everyone has
limits, and you may find that hiring more crews lightens the load
for everyone, avoids delays, and keeps morale higher throughout
your firm.
 Construction project management software can be used to track
the assess the productivity of your crews and determine whether
more labor is required to keep your projects on track, or if your
existing teams can handle the load.
 Unreliable Subcontractors
 Crews that waste time on the job site are a plague in the
construction business. On the one hand, they may lack the tools,
training, experience, or methodology that’s needed to get the job
done efficiently, but on the other, they may spend too much time
chatting or on coffee breaks and lose focus on the importance of
timeliness on the job.
 It’s important to invest in full-time employees – make sure they
know the processes and what’s expected of them, and hold them
accountable for producing results on a daily basis.
 Unexpected Changes
 Unexpected changes are always going to be a part of the construction
business. Sometimes a requirement for the project emerges that was
different from what was expected, and sometimes the customer asks for
something extra and it isn’t possible to say no.
 Managing expectations is the crucial skill when it comes to building
unexpected changes into your schedule. Let the client know about the
change, why it’s needed, and what kind of delay it will cause. If the
client requested the change, let them know that a deadline extension
will be required in order to make it happen, or suggest a bonus for
incorporating the change into the existing work schedule.
 Either way, track changes using a change order form and make sure the
customer signs it as evidence of why the project took longer than
initially planned.
 Conclusion
Although there are many causes of delays in construction projects,
they can all be addressed with similar tools and processes. Always
manage expectations with the client through clear and open
communication about how things are progressing. Ensure that your
working crews are well-trained, focused, and efficient, and use a
construction project management software to keep track of the
important metrics that help you make the right adjustments when
you fall behind schedule.