Importance of Documentation

Adequate documentation is crucial for both project owners and contractors.

Documentation is very important in a construction project because it provides a “memory” of the project.  It is the only contemporaneous record of what was actually happening at any given time during the course of the project. Documentation is the framework on which a claim is built; without it, there is no contemporaneous evidence to prove a claim and, thus, little chance of a fair outcome.

Documentation is the foundation on which all proposals, disputes, or claims are built.  Without documentation, there is essentially no contemporaneous evidence and, therefore, it is difficult to present a persuasive case.  Documentation is critical to resolving disputes.

A contractor asserting a claim has the burden of proving, by a preponderance of the evidence, entitlement to the relief it seeks. Clear, objective documentation will almost always be necessary for success. Similarly, a project owner opposing a contractor’s claim will need documentation to rebut the contractor’s assertions and swing the evidentiary balance in the owner’s favor.

In considering the role of recordkeeping in the claims process, it is instructive to examine court and administrative board decisions which were based on the adequacy of the documentation.

DELAYS CLAIMS

When a contractor seeks an extension of time due to excusable delay, there is no substitute for a daily job log maintained by a person in authority at the job site. In the Appeal of Lucerne Construction Corp., VABCA No. 1494 (October 28, 1982); CCM January 1983, p. 5, the contractor sought a 43-day time extension in order to avoid assessment of liquidated damages for late completion. The contractor claimed that unusually severe weather had hindered its progress. The contractor was unable to produce daily job logs, however, and submitted public weather data collected 75 miles from the job site. The Veterans Administration Board of Contract Appeals ruled that without contemporaneous daily job logs, the contractor could not establish the nature of the weather conditions it encountered at the site or the effect of those conditions on the work itself. The claim for a time extension was denied.

EXTRA COST

If a contractor seeks a price increase due to owner-caused delay, daily job records become even more essential. In one case, the contractor claimed that rail traffic had interrupted its work on a subway project for periods of up to 4 1/2 hours per day. Yet the contractor was unable to document these delays with its daily job logs. The Corps of Engineers Board of Contract Appeals denied the claim, saying, “It is not credible that a contractor would endure a daily loss of productive time of this magnitude without appropriate notations being made in contemporaneous job records.” Appeal of Norair Engineering Corp., ENG BCA No. 3981 (September 5, 1980); CCMDecember 1980, p. 5.

The documentation requirements become even more demanding if both the owner and the contractor have contributed to the delay of construction. In these situations, the contractor must segregate and document each individual delay occurrence and then separately track the job costs attributable to each delay. Otherwise, the contractor will be denied any recovery despite its ability to show the existence of owner-caused delay. Pittman Construction Co.,lnc. v. United States, 2 Cl.Ct. 211 (1983); CCM August 1983, p. 4.

CLAIMING DIFFERING SITE CONDITIONS / PRE-BID INVESTIGATION

A “differing site condition” (also known as a “changed condition”) as a “DSC,” is an unknown and hidden, concealed, or latent physical condition encountered at a site that differs materially from the reasonably anticipated conditions.

Encountering an unexpected site condition is one of the more common risks on a construction project for a deep foundation contractor. A “differing site condition,” or as it is sometimes called a “changed condition,” is generally understood to be a physical condition discovered while performing work that was not visible or otherwise expected at the time of bidding. Often, the condition could not have been discovered by a reasonable site investigation. However to prevail it is important to demonstrate by evidence most likely photos or videos that the project was visited before preparing the bid. Without visiting the project most likely the DSC claim will be denied.

With differing site condition claims, the biggest problem for contractors is the failure to document the pre-bid conditions in the field. Once a “differing” condition is encountered, the contractor leaves the condition undisturbed and notifies the owner. An investigation ensues. Documentation of the current condition is usually not much of an issue. But in order to show that this condition differed materially from what the contractor reasonably anticipated, documentation of the observable pre-bid conditions may be crucial.

An example is found in the Appeal of Granite Construction Co., IBCA No. 1500-8-81 (February 12, 1982); CCMApril 1982, p. 5. The contract required the contractor to replace all fences within the right-of-way on an aqueducts project. The contractor alleged that when it had conducted its pre-bid site inspection, the centerline stakes had been removed, misleading it with regard to the location of the right-of-way. The contractor claimed that the presence of certain fences constituted a differing site condition. The Interior Board of Contract Appeals denied the claim because the contractor was unable to offer any photographs or other documentary evidence proving that the centerline stakes had been missing.

CHANGED WORK

Nowhere is documentation more important than in support of claims for a price increase due to changed or additional work. Once again, the contractor has the burden of proving its increased costs with specificity, even when the existence of changed work is acknowledged by the owner. Failure to maintain precise, itemized records may result in denial of a claim for a price increase. This is particularly true if the contract expressly imposed documentation requirements on the contractor.

It should also be noted that the failure to segregate and document the cost of extra work may prevent a contractor from asserting a mechanic’s lien for that work. This deprives a contractor on a private project of its most meaningful form of security in the event of nonpayment. Foster v. Waverly Hall United Development Corp., 285 S.E.2d 35 (Ga.App. 1981); CCM April 1982, p. 8.

While contractors have an obligation to prove their increased costs with specificity, this need not be done with “absolute certainty” or “mathematical exactitude.” Therefore, contractors are sometimes allowed to extrapolate their total cost of changed work from partial cost records. In one recent case, the contractor maintained detailed labor cost records for the first one-third of the extra work and then inexplicably discontinued the practice. The work was repetitive in nature, however, so the contractor was allowed to extrapolate its total costs from those records. Appeal of Harrison Western!FrankiDenys,ENG BCANo. 5577 (May 30, 1990); CCM September 1990, p.4. The contractor in this case was fortunate. Not all work is off without good labor cost records for the initial portion of the extra work, any recovery would have been doubtful.

TOTAL COST PRICING

Contractors are sometimes allowed to use the so-called “total cost method” for pricing changed or delayed work. This approach compares the cost of the work as bid with the actual cost of performance and charges the increase to the project owner. It is permitted in situations where (1) the nature of the claim makes it difficult to price with a reasonable degree of accuracy; (2) the contractor’s bid price was realistic; (3) the contractor’s actual costs were reasonable; and (4) the contractor was not responsible for any of the increased costs.

The use of the total cost method reduces the contractor’s burden of linking specific costs to specific causes, but it in no way negates the need for accurate record keeping. Without good job cost records, it is impossible to judge the reasonableness of the contractor’s actual costs or to compare those costs with the original bid. If the cost records are inadequate or inconsistent, the contractor will not be allowed to use the total cost method for pricing its claim. Appeal ofJ. D. Abrams, Inc., ENG BCA No. 4332 (November 28, 1988); CCMMarch 1989, p. 4.

FORWARD PRICING

Project owners sometimes ask contractors to “forward price” change order work. That is, establish a mutually agreed lump sum price increase for performing the changed work. The advantage for contractors is that they are relieved of the need to maintain detailed, segregated cost records. The disadvantage is that a misjudgment may prove costly. If unanticipated factors such as delay and disruption drive costs up, the contractor will still be limited to the agreed fixed price increase. Appeal of Saudi Tarmac Co., Ltd., ENG BCA No. 4841 (August 4, 1989); CCMNovember 1989, p. 4. In such cases, the contractor may wish it had gone to the trouble of tracking and documenting its actual costs.

It should be stressed that contractors cannot be forced to forward price change order work. A contractor’s refusal to submit a nonbinding change order estimate or cost proposal may be a breach of contract. Palmer & Sicard, Inc. v. United States, 6 CI.Ct. 232 (1984); CCM January 1985, p. 3. But a contractor cannot be forced to sign off on a forward priced change order. Appeal of Centex Construction Co., Inc., ASBCA No. 26830 (April 29, 1983); CCM July 1983, p. 5.

COST PLUS WORK

Finally, there should be brief mention of construction work performed on a cost-plus basis. Due to the nature of this payment arrangement, contractors are held to a high standard with regard to the detail and accuracy of their cost records. If invoices are not adequately itemized and documented, the owner may not be required to pay. Jalasko Associates, Inc.v. Newberry Energy Corp., 663 P.2d 946 (Alaska 1983); CCM September 1983, p. 3. The contractor is allowed to rely on subcontractor requisitions, however, simply adding the agreed mark-up for overhead and profit. Duncan Development, Inc. v. Haney, 634 S.W.2d 811 (Texas 1982); CCM September 1982, p.