Finish Early If You Can

By Joseph P. Dirik, Esq.

The author recommends contractors carefully consider whether or not to notify clients of a planned early completion and when doing so, to submit a realistic early completion schedule.

Joe Dirik is a graduate civil engineer and attorney. He is a member of the construction law practice group at the Dallas office of Jenkens & Gilchrist, PC.

It is often assumed that if a construction project is behind schedule, the contractor must have problems with the project and is likely losing money or, at least, not making as much as intended. A project ahead of schedule, on the other hand, is considered a sign of a successful job. So why not schedule your project for early completion? I think this is a good idea, particularly if the contract contains an early completion bonus. But scheduling early completion may be problematic if the owner interferes or otherwise delays the project.

If early completion is possible, there are many excellent reasons why a contractor may choose this path. A shorter performance time generally reduces indirect costs. Contractors may also be able to avoid periods of inclement weather. Most important, a contractor that focuses on early completion is probably managing the project carefully.

The big problem facing an ambitious completion time involves owner-caused delays or interference. What happens, for example, if the contractor schedules completion three months early and the owner causes three months delay? The answer depends on the terms of the contract, the manner in which the contractor schedules the project and ultimately how a Texas court or arbitrator would chose to rule on the contractor's claim.

I haven't found a Texas case directly on point with this issue, and other state case law is sparse. Federal courts have addressed the issue in some detail and indicate that while recovery is possible, it is difficult. The leading case is Weaver Bailey Contractors Inc. v. United States. In this case, the U.S. Army Corps of Engineers awarded a contract for construction of breakwaters, requiring completion in February of 1985. The contractor scheduled its work to complete ten weeks early, in December of 1984, to avoid inclement weather. As often happens, a defective design prevented the contractor from meeting its early completion schedule. The government refused to pay delay damages because the contractor had not informed the government of the planned early completion. Interestingly, the U.S. Claims Court, now the U.S. Court of Federal Claims, ruled that notification was not required and awarded the contractor more than $400,000 in delay damages. The court established the following criteria under which a contractor may recover for interference with scheduled early completion: the contractor intended to complete the work prior to the contractual deadlines; the contractor's intended schedule was reasonable; and the contractor would have met its intended completion date but for the delay or interference of the government.

The Weaver Bailey decision did not focus on whether the contractor informed the government or that it intended to complete the project before winter. Instead, the court focused on whether the contractor would have completed the project early but for the government's delay. Notwithstanding the court's position, a Texas contractor should carefully consider whether or not to notify its customer of a planned early completion. Consider submitting a realistic early completion schedule to the owner.

By scheduling the project early, a contractor effectively seeks to use project float. Many courts around the country have concluded that float is owned by the project and is available to the parties in the project as long as they act reasonably and can demonstrate early good faith use of the float. Some contracts contain float-sharing clauses that may control the issue. A contractor's ability to effectively schedule early completion may depend on how the contract treats float usage.

Although Texas courts have not dealt directly with this issue, any contractor wishing to complete its project early must have a plan to protect itself against owner-caused delays. In addition, it is not enough for the customer to simply approve an early completion schedule. The planned schedule must be realistic. In order to prevail in a claim, the contractor should be prepared to show that it would have been successful in finishing early but for the customer's interference. Any analysis should consider possible concurrent delay resulting from the contractor's actions or inclement weather beyond the customer's control. As in most schedule-related disputes, the best claim is one that is based on a well-prepared and well-managed schedule.