Understanding Suspension-of-Work Clauses: Insights from a Recent Agency Decision

Construction contracts, much like other contracts, are designed to delineate the rights and obligations of the parties involved. These contracts often contain detailed provisions that dictate these rights and obligations, frequently incorporating terms from other documents or agreements, especially in public project contracts. These contracts are typically intricate, accounting for numerous potential scenarios that could arise during construction, including ordinary events and extraordinary situations.

A recent decision by the Armed Services Board of Contract Appeals in Granite Construction Company highlights the complexities and potential issues that can arise with such detailed contracts involving government projects (Granite Construction Company, ASBCA No. 62281, November 1, 2023).
 

Background

In the Granite case, the contractor entered into a contract with the United States Army Corps of Engineers to construct new outlet structures and cutoff walls at two dams in Houston as part of a federal flood control project. The contract included a suspension-of-work clause incorporated by reference and a provision detailing how time extensions and compensation for delay costs would be handled in the event of unusually severe weather.

In August 2017, after work had commenced, Hurricane Harvey caused substantial rain and flooding at the project site, leading to the release of water from the dams by the government. Consequently, the government issued a suspension of work, instructing the contractor to stop work on the project. This suspension lasted for approximately 49 days.

The contractor subsequently filed a request for equitable adjustment related to the costs incurred due to the suspension. Although the parties executed a modification for 30 days of the suspension, they did not resolve the issue of compensation for the remaining 19 days. The government contended that the 19 days were anticipated adverse weather days, as identified in the contract, leading to a dispute.

Decision

The Board granted the contractor partial summary judgment, holding that adverse weather delays specified in contract section 1.4 could not be subtracted from a suspension period issued under the suspension-of-work clause. The Board clarified that section 1.4 only defines "unusually severe weather" for determining if a default is excused under the default clause, with no connection to the suspension-of-work clause.

The Board stated that the remaining issue was whether the 49-day suspension period was "reasonable" under the suspension-of-work clause. According to the clause, a contractor is entitled to an equitable adjustment only if the government suspends work for an unreasonable period, thereby delaying the project.

To prove entitlement, the contractor had to establish:

1. There was an unreasonable delay extending the contract completion time.
2. The unreasonable delay was caused by the government's actions or inactions.
3. The delay resulted in injury to the contractor.
4. There was no concurrent delay attributable to the contractor.

However, the Board concluded that the contractor was not entitled to compensation for the full 49-day suspension. The contractor did not prove that the government suspended the contract for an unreasonable amount of time, noting that the contractor could perform other work during the suspension period. The contractor’s reports indicated that critical activities could not be performed during the 49-day period, and the delay was proximately caused by the flood, not the government.

Commentary

The Granite decision underscores two critical points:

1. Thorough Contract Review: Contracts should be meticulously reviewed and understood before signing.
2. Meticulous Clause Interpretation: When a contract clause is triggered, it must be carefully reviewed to properly interpret and apply the clause to avoid further issues.

Failure to adhere to these practices can lead to significant financial consequences, as demonstrated in the Granite case.

If you would like more information regarding this topic please contact Andrew E. Zeyer at azeyer@wbgllp.com or call (914) 607-6485