By: David E. Sweitzer, Esquire des@muslaw.com
For the first time, a Pennsylvania appellate court has affirmed the use of the Measured Mile method to calculate a contractor’s loss of labor productivity as the result of a public owner’s ordered acceleration of work. In James Corporation v. North Allegheny School District, the Pennsylvania Commonwealth Court affirmed the trial court’s verdict in favor of the general contractor which included $215,000 for acceleration costs.
In accordance with Pennsylvania’s Separations Act, separate prime contracts were entered into for asbestos abatement, site preparation, general construction, HVAC, electrical, roofing and plumbing for the renovation and construction of an elementary school. The School District assumed responsibility for construction management, and specifically, maintenance and supervision of the project schedule. In order to comply with its contractual obligations, the School District contracted with a separate construction manager.
There were multiple owner-caused delays before the general contractor could commence its work. There was a two-week delay associated with the issuance of the notice to proceed. There was a six-week delay because of the owner’s failure to obtain the necessary erosion and sedimentation control plan, and the general contractor was delayed for several weeks because of the plumbing prime contractor’s delays.
The District’s construction manger acknowledged these delays and prepared an updated schedule to account for them. The School District disagreed with this acknowledgement and terminated the construction manager’s contract, opting to hire a new construction manager which then took a very aggressive approach with respect to the schedule going forward. The trial court found that the School District acted in such a manner because of its stated belief that accepting the delays would subject it to a claim by the contractor. Not only did the District refuse to acknowledge the delays it caused, it also required the general contractor to meet the original completion date or be at risk of having its contract terminated.
The contractor met the original schedule but necessarily had to accelerate its work and as a result, it incurred significant losses in the form of labor inefficiencies. The contractor filed suit under the Pennsylvania Procurement Code to recover the acceleration damages. In addition to the acceleration claim the School District refused to pay several undisputed contract invoices and arbitrarily withheld $13,000 from another invoice.
After a three week trial, a verdict was returned in favor of the contractor. The trial court accepted the contractor’s use of the Measured Mile method of calculating loss of productivity damages and awarded $215,000 for the acceleration claim. Additionally, because the trial court agreed that the School District acted in bad faith by wrongfully refusing to pay undisputed invoices, the verdict included the invoice amounts, plus penalty and interest under the Procurement Code, plus attorney fees in the amount of $110,000.
The Measured Mile analysis involves examination of two snapshots of the project. Expert testimony is utilized to compare the contractor’s cost of completing work during times where there is no delay or acceleration (unimpacted period) with the costs of completing work in times of delay or acceleration period (impacted delay). While the Pennsylvania Board of Claims has considered the method in prior disputes, no appellate court has addressed the issue before the James decision. The method has now been ratified as reasonable and appropriate to quantify acceleration claims.
Aside from the Measured Mile being accepted, the James decision is significant because it gives several examples of disputes which can arise on construction projects, especially those which are governed by Pennsylvania’s Separations Act. Commonly, contracts contain no-damages-for-delay provisions. While these are generally enforceable in Pennsylvania, the James decision confirmed once again that an owner cannot use such provisions as a shield when it causes the delay. Additionally, contracts contain provisions regarding notice of claims. These can be perilous to a contractor which seeks additional compensation but a court may find notice provisions are satisfied if the owner has knowledge of the delays and/or acceleration even though formal notice is not given by the contractor.
For further information on this case and the multiple issues presented, call David E. Sweitzer at 412-456-2843.
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