Construction Blog

The American Bar Association recently held their Forum on Construction Law 2025 Annual Meeting in Austin, TX where Shareholder John C. Guin, Senior Counsel Chadd Reynolds, and Associate Carol A. Conroy attended and gained valuable insights into the complexities of risk management, contract enforcement, and claims evaluations in construction law. Below are three of their key takeaways from the meeting:

1. Risks and Benefits of the Construction-Management At-Risk project delivery method: Using a Construction Management At-Risk delivery method to construct a project has certain benefits and risks unique to its structure. An owner using CMAR will hire a construction manager during the design process. This method allows for the designer to receive input from the construction manager and even subcontractors and suppliers while the design process evolves. The construction manager also obtains estimates from subcontractors and suppliers while the design progresses. Once the design reaches a certain completion percentage, the construction manager and owner will execute a guaranteed maximum price contract and begin construction. However, determining when to sign the contract before the design process is one-hundred percent complete, can be difficult to assess. Signing the contract too soon can result in additional costs if unforeseen circumstances arise that are different from the construction manager’s assumptions at the time of signing. Therefore, it is important for the owner and construction manager to openly communicate their assumptions and explicitly define in the contract what is reasonably inferable from the incomplete design so when disputes arise, the parties know what is and is not covered under the contract.

2. Payment and Performance Bond Claims and the Surety’s Duty to Investigate – When an oblige makes a claim against a surety under a payment or performance bond, the surety has a duty to investigate the claim and determine which of the options available to it under the bond to exercise. Although courts will provide sureties with a “reasonable” amount of time to investigate, courts will often not look kindly upon sureties who prolong investigations (thus putting time-sensitive projects in danger) or who investigate in bad-faith with an eye towards preparing for litigation rather than reaching a reasonable resolution of the claim. See U.S. Fidelity and Guar. Co. v. Braspetro Oil Servs. Co., 369 F.3d 34 (2d Cir. 2004) (upholding a substantial award against sureties who “conducted little more than a token investigation of their options under the [b]onds, instead electing to prepare for the litigation that was obviously imminent”).

3. Delay vs. Disruption: When calculating lost productivity for delay on a construction project, the methodology for calculating the delay matters and can one of the most important decisions for the litigation team. When choosing a methodology, it is important to recognize the distinction between delay damages—which relate to delayed completion, suspension, acceleration and disrupted performance of the project—and disruption damages—which relate to project that is completed on time but experienced disruption or scheduling errors that led to greater expense. Disruption claims are distinguishable from delay claims as they focus on labor efficiency and resources as opposed to just timing of the project. Although delay and disruption can coexist, they may also be incurred separately.

   While most states will enforce a “no-damage-for-delay” clause, certain exceptions have been developed through recent case law which can affect a party’s ability to recover delay costs. These exceptions include, but are not limited to: (1) delays that are the result of bad faith, active interference, fraud or misrepresentation (and in some jurisdictions, gross negligence) on the part of the party claiming the delay; (2) delays that were not reasonably foreseeable or contemplated by the parties at the time of contract negotiation (e.g., indefinite suspension of work due to unforeseen underground condition that is discovered during the project); (3) delays lasting so long that they constitute as abandonment of the project by the benefiting party (which can be expressed or inferred by party’s conduct and other circumstances); and (4) delays due to a fundamental breach of contract by the benefiting party (i.e., a failure to perform a condition precedent or frustrating the performance of another party). It is important to know and understand which exceptions to no-damage-for-delay apply, as well as how the exception(s) applies under the law that governs your contract.