Running a construction business today means you’re probably no stranger to delays. Whether it’s due to supply chain disruptions, labor shortages, or unexpected health regulations, these challenges can wreak havoc on your project timelines—and, ultimately, your bottom line. But when delays happen, a well-drafted construction contract can save you from costly disputes and keep your business moving forward.

This article will break down how you can draft and negotiate construction contracts that protect you and your clients from the unpredictable nature of today’s construction landscape.

Why Delays Are a Bigger Problem Now

Construction delays have become much more common in recent years, especially with global supply chain disruptions and labor shortages. For example:

• Supply Chain Issues: Materials like lumber, steel, and equipment parts can take longer to arrive, often due to factory shutdowns or shipping backlogs. Delaying the right materials can put your project at a standstill.
• Labor Shortages: Many construction firms struggle to find enough skilled workers, which can slow down timelines even if materials are available.
• Health Regulations: The COVID-19 pandemic brought new safety protocols and health regulations that caused significant delays. While some of those have eased, new guidelines can still pop up unexpectedly.

These issues make protecting your business more important than ever by drafting and negotiating contracts that address potential delays.

Key Elements to Include in Your Contracts

You must cover a few critical areas in your construction contracts to protect yourself from delays. This way, you and your client are clear on what happens when something doesn’t go according to plan.

• Clear Timeline Provisions
  • In every construction contract, you should include clear project timelines, but don’t stop at the expected start and end dates. You should also outline specific phases or milestones of the project and what happens if there are interruptions.
  • Helpful Insight: Be realistic with your timelines. It’s tempting to promise quicker completion to win a contract, but giving yourself extra time upfront will save you from scrambling later when delays happen.
• Force Majeure Clauses (Act of God)
  • A force majeure clause allows you to adjust deadlines or even suspend a contract due to unforeseen circumstances—like natural disasters, pandemics, or political unrest. Given the unpredictability of global events, this clause is crucial.
  • Helpful Insight: Ensure your force majeure clause explicitly covers supply chain disruptions, labor shortages, and health regulations. You want to be specific to ensure your bases are covered.

• Material Delays
  • Given the global supply chain issues, consider adding a section specifically addressing material delays. This can detail what happens if certain materials are unavailable and how delivery delays will impact the project timeline.
  • Helpful Insight: Include a procedure for substituting materials when delays occur. If a specific material is delayed, having pre-approved alternatives can prevent the project from coming to a complete halt.

• Labor Availability and Subcontractor Delays
  • Labor shortages can also cause delays, especially when subcontractors are involved. Ensure your contract includes provisions that address labor availability and what happens if a subcontractor fails to deliver on time.
  • Helpful Insight: Include a clause allowing flexibility in labor scheduling, such as weekend work or overtime, to make up for any delays caused by labor shortages.

• Delay Damages and Liquidated Damages
  • This is where things get serious. You’ll want to include language about delay damages—how much the client will owe you if their actions cause delays (like late payments or design changes). You’ll also want to be clear on liquidated damages—how much you might owe the client if the project isn’t finished on time.
  • Helpful Insight: Negotiate delay damage caps to avoid excessive penalties. For example, you might agree to a daily penalty for each day the project runs late, but with a maximum limit on how much you’re liable for.

• Change Order Procedures
  • Changes to the project scope are a common cause of construction delays. Having a clear, detailed change order procedure in your contract allows you to manage client requests for alterations efficiently without letting the project spiral out of control.
  • Helpful Insight: Specify that any changes to the project’s scope must be documented in writing and approved by both parties. Also, include how these changes might impact both the cost and the timeline of the project.

Negotiating the Contract

When you’re negotiating with a client, the key is to be transparent about potential delays and upfront about how your contract provisions protect both parties. Make it clear that including these provisions isn’t just about covering yourself—it’s about ensuring the client knows what to expect if something goes wrong. By preparing for delays, you and your client will be in a better position to adjust to the unexpected without legal disputes.

Working with a CPA or Legal Advisor

Get help from a CPA or legal advisor specializing in construction. They can craft legally protective contracts, assess risks, set penalties, and guide you through negotiations to avoid unexpected delays.

Conclusion: Protecting Your Business in Uncertain Times

Drafting smart contracts can help you manage the unanticipated delays that are often invetible in managing construction projects. From including clear timelines and force majeure clauses to negotiating reasonable delay penalties, you can keep your projects moving even when the unexpected happens. Remember, having the right team of advisors, like a CPA or construction law expert, can give you the confidence to tackle any delay that comes your way.