United States: Recent Changes In New York City's Standard Construction Contract

The most widely discussed change in the City's standard construction contract is the elimination of an express "no damage for delay" clause.

With its new Standard Construction Contract, issued in December 2013, the City of New York (the "City") has implemented numerous significant changes as compared with its 2008 standard contract. This Alert briefly summarizes some of the new provisions.

Some Delays Are "Compensable"

The most widely discussed change in the City's standard construction contract is the elimination of an express "no damage for delay" clause. At least ostensibly, the new contract represents a more flexible approach to delay damages by enabling the contractor to recover for delays in factual settings not previously amenable to delay claims. The scenarios in which recovery for delay damages may now be available are listed in Article 11.4 of the new contract, entitled "Compensable Delays."

Among others, these scenarios include such familiar circumstances as (i) extended delays by the City in reviewing or issuing change orders, or in reviewing and approving shop drawings, or delays resulting from the "cumulative impact of multiple change orders," if such delays have a "verifiable impact on Project costs"; (ii) extended site unavailability that "significantly affects the scheduled completion of the Contract"; and (iii) differing site conditions not "reasonably ascertainable on a pre-bid inspection of the Site or review of the bid documents or other publicly available sources" and "not ordinarily encountered" in the geographical area of the site or the type of work being performed.

One of the more significant changes embodied in the new Article 11 is the possibility of recovering for delays resulting from "[t]he failure of the City to take reasonable measures to coordinate and progress the work ...." "Coordination" issues, under prior practice, were precluded by the no damage for delay clause. However, this apparent flexibility regarding "coordination" issues may be tempered by subsequent court decisions defining more precisely or narrowly what the City's coordination responsibilities are—particularly since, under the new Article 11, the City's coordination responsibilities are explicitly limited by the contractor's own responsibility to coordinate its subcontractors and to progress the subcontractors' work.1

The new provisions concerning delays may be said to reflect a greater flexibility than previously existed. However, this is not to say, and it should not be assumed, that delay claims have necessarily become "easy" or even significantly easier to pursue. Many of the strictly enforced notice provisions that have barred delay claims in the past are still in place; and where a contractor is undergoing a delay that is or may be "compensable," care should be taken to comply with all pertinent contract requirements. The designated notices and statements of claim are required not only to preserve a claim for additional costs due to delay but also to qualify for an extension of time under the contract.

Thus, the new standard contract, similar to the prior one, requires written notice to the Engineer of any condition that "is causing or may cause a delay." This notice must be provided within a brief time period (seven days after the commencement of the condition) and must state "the existence, nature and effect of such condition upon the approved progress schedule and the Work," and "why and in what respects, if any, the condition is causing or may cause a delay." (Article 11.1)

Further, after a delay is first encountered and damages are first incurred, updated verified written statements specifying the damages and extensive additional detailed information (as listed in Articles 11.1.2 and 11.6), along with "documentary evidence of such damages," must be submitted every 30 days. The initial verified statement containing this information and the "documentary evidence of such damages" must be submitted within 45 days from the time the damages are first incurred.

If the contractor is successful on its delay claim, the costs that may recoverable could include the following: direct labor costs; necessary materials as reflected by time and materials records; reasonable equipment rental values; and insurance and bond costs. Extended field office costs, extended site overhead and extended home office overhead also may be recoverable.

After final completion, the Commissioner of the relevant agency determines whether a delay claim is compensable and, if so, the amount that shall be paid, although an earlier determination may be made on the threshold question of whether a delay is compensable. Challenges to the Commissioner's determinations are not made to the Contract Dispute Resolution Board under the City's mandatory dispute resolution procedure (contract Article 27 and Procurement Policy Board Rules § 4-09). Whether the contractual changes regarding delay claims will in fact permit compensation for delays on a greater scale than previously would seem to depend in large part upon determinations made at the Commissioner's level.

Overhead for Extra Work

Compensation for extra work by the contractor shall now include a factor for overhead at the increased rate of 12 percent (up from 10 percent). (Article 26.2.11)

Prevailing Wages / Referrals to Prosecutors

Under Article 37.4.3 of the new contract, "[a] determination by the Comptroller that a Contractor and/or its Subcontractor willfully violated" the prevailing wage law under Labor Law § 220 "will be forwarded to the City's five District Attorneys for review." Given this mention of possible criminal responsibility, and since any such review could adversely impact a contractor's status as a "responsible" bidder, this is possibly a questionable provision for a general or prime contractor that at worst is only "vicariously liable" for a subcontractor's willful violation—as distinct from being actively or "willfully" involved in the subcontractor's violation. Other penalties and consequences for prevailing wage violations, also impacting "responsibility" and the ability to bid public projects, are listed in Article 37.4.

Prevailing wages must be paid by check or direct deposit; and in cases of contracts exceeding $1 million, or subcontracts exceeding $750,000, the checks must be issued by a payroll service or through an in-house payment system approved by the agency. Cash payment of prevailing wages is not recognized. (Article 37.6.7)

Although not a new requirement, Article 37.6.2 of the contract requires the maintenance of daily sign-in / sign-out sheets both for contractors' and subcontractors' employees. Consideration should be given to strictly maintaining such sign-in (and sign-out) records in case of any subsequent prevailing wage issue, e.g., as evidence of who actually worked at the site and during what general time periods and hours. Electronic or biometric sign-in systems may be acceptable, but they have to be approved by the City's Chief Procurement Officer (the "CCPO").

The new contract also requires "site laminated identification badges" with photographs of workers and listing the worker's "trade" (among other identifying information) as a "condition of employment on the site." (Article 37.6.4) Again, close adherence to this provision should be considered (e.g., to assist in determining who was and was not employed at the site in connection with prevailing wage claims, among other possible issues).

Subcontractors

As a material obligation of the new contract form, contractors are required to list their subcontractors in the "web-based Subcontracting Reporting System through the City's Payee Information Portal (PIP), available at: www.nyc.gov/pip." Specified information about the subcontractor and its work, and the payments to it, must be entered. Failure to comply may be deemed a "default" of the contract, resulting in liquidated damages. (Article 17.3)

The subcontract document must include the prevailing wage rates and supplemental benefits to be paid to the subcontractor's employees under Labor Law § 220.

The City's new standard construction contract contains many other new or changed provisions. All contractors and vendors who perform City projects or contracts may want to become familiar with the new contract form.

If you have any questions about this Alert or would like more information, please contact Allen J. Ross, Charles Fastenberg, any of the attorneys in our Construction Group or the attorney in the firm with whom you are regularly in contact.

Note

1 See Article 12 of the new standard contract for further provisions concerning the contractor's coordination responsibilities.

This article is for general information and does not include full legal analysis of the matters presented. It should not be construed or relied upon as legal advice or legal opinion on any specific facts or circumstances. The description of the results of any specific case or transaction contained herein does not mean or suggest that similar results can or could be obtained in any other matter. Each legal matter should be considered to be unique and subject to varying results. The invitation to contact the authors or attorneys in our firm is not a solicitation to provide professional services and should not be construed as a statement as to any availability to perform legal services in any jurisdiction in which such attorney is not permitted to practice.

Duane Morris LLP, a full-service law firm with more than 700 attorneys in 24 offices in the United States and internationally, offers innovative solutions to the legal and business challenges presented by today's evolving global markets. Duane Morris LLP, a full-service law firm with more than 700 attorneys in 24 offices in the United States and internationally, offers innovative solutions to the legal and business challenges presented by today's evolving global markets. The Duane Morris Institute provides training workshops for HR professionals, in-house counsel, benefits administrators and senior managers.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions