By: Kenney & Sams, P.C.
Experienced contractors and construction attorneys know that practically time always is of the essence on a construction project, regardless of what the contract says. This is particularly true on today’s complex construction projects where almost every line item or specified scope of work is governed by an ever evolving Critical Path Schedule (“CPS”). A typical CPS dictates the start date of key work, its duration, and when it must be finished to maintain the ultimate completion date. However, a CPS also typically includes certain non-critical work items that have an element of “float” or “slack” that can be utilized before the completion of those items impacts the overall critical path or completion date. Given that time and associated delay claims can lead to some of the largest issues on a construction project, an interesting question arises concerning “float” or “slack” in the schedule; namely, who owns it?
As a general matter, float can be defined as an amount of time that a project activity can be delayed without affecting the project completion date. If a project activity is said to have zero float, any delay to that activity will result in a corresponding delay to the project completion date (this is a critical path activity) unless recovery measures are taken. If a project activity has positive float, that activity can be delayed until the float reaches zero, without delaying the project completion date. Thus, float can be a valuable asset to the extent it can be used to absorb or offset a delay in a zero float activity and can serve to recover the CPS completion date.
Understanding that float is a valuable asset, the question becomes, which party to the construction project is entitled to control or use the float? As will be discussed further below, the answer to this question can, and should, be answered by looking to the language of the contract between the Owner and Contractor. In the absence of controlling contract language, however, there generally are three competing arguments concerning who owns the float. The three arguments are: 1) the Contractor owns the float; 2) the Owner owns the float; and 3) the project owns the float. The merits of each argument are discussed in turn below.
The Contractor Owns the Float
The most common argument, and perhaps the general rule, is that the Contractor owns the float. The logical basis for this argument is that the Contractor typically creates the CPS, determines the sequence of construction activities, and thereby creates the float. If the Contractor created the float through its own scheduling/sequencing, and can directly impact the float based on the performance of its work, the Contractor should own the float. Furthermore, it is often assumed that the Contractor is the party with the most risk relative to any delays and is therefore in the best position to responsibly utilize the float. In essence, if the Contractor created float through its scheduling/sequencing activities, the Contractor should be permitted to utilize that float to offset any delays experienced in zero float activities.
A Board of Contract Appeals recognized a contractor’s interest consistent with this argument. The Court stated,
[Float] allows the manager latitude in the scheduling of non-critical activities that originate or terminate at that event, and to effect trade-offs of resources to shorten or control his project. Joseph E. Bennett Co., 72-1 BCA ¶9364(GSBCA 1972) at 43, 467 n. 7.
“The general rule there is that a contractor cannot recover delay damages where he and the owner are jointly responsible for the delay. In other words, any contractor-caused delay will bar his claim. However, the courts have refused to apply this rule where the contractor caused delays occurred on items which did not lie on the critical path. The necessary implication is that the contractor had the right to delay those items to the extent of their “float:’ and thus that the float was his”
The Owner Owns the Float
While the general view is that the Contractor owns the float, there is an argument that the Owner should own/control the float. This argument is based on the assumption that the Owner has paid for the Contractor’s services, the CPS, and any resulting float as part of the cost of the project. Since it theoretically has paid for the project sequencing and management, the Owner argues that it should be entitled to control float generated as a byproduct of those efforts to reduce the Owner’s costs and control the progress of the project. Similar to the Contractor, an Owner can incur significant additional costs if its project is delayed and thus the Owner has an interest in making sure any float is used to its benefit.
Even further, proponents of this argument take the position that by allowing the Contractor to use float, the Owner is granting the Contractor an extension of time when the Contractor has not actually been delayed or otherwise entitled to such an extension. Of course, this argument ignores the fact that using float does not actually extend the Contractor’s time for completion of the project. Regardless, there is an argument that the Owner should be entitled to the most efficient performance of the work possible by controlling the Contractor’s use of float.
The Project Owns the Float
The third argument for ownership of the float is that neither party should exclusively control the float. Under this theory, the project should be the beneficiary of the float and it should be used on a first-come, first-serve basis by whoever needs the float. If the Contractor needs to use the float to recover the schedule due to a delay in a critical activity, the Contractor can use the float. If the Owner needs to use the float to ensure the efficient completion of a non-critical work item to obtain a financial benefit to the project, the Owner can use the float.
However, the key to this argument is that the parties use the float in good faith, for the benefit of the project. For instance, the Contractor should not claim a time related change order for an item when float time exists to compensate for the time that otherwise would be needed. Such allocations of float do not advance the interests of the project and therefore are not legitimate under this view of float allocation.
Conclusion
Given that there is not a significant amount of case law on the three arguments discussed above, and respective jurisdictions may treat the issue differently, the best way to address ownership of float is through specific language in the contract between the Contractor and Owner. Obviously, you can minimize the risk of dispute by drafting in a provision that specifically provides that one or the other party specifically owns the float. Alternatively, some common clauses addressing the issue of float are so called “joint ownership” and “non-sequestering” clauses.
A generalized example of such clauses is as follows:
Float, slack time, or contingency within the schedule (i.e., the difference in time between the project’s early completion date and the required contract completion date), and total float within the overall schedule, is not for the exclusive use of either the Owner or the Contractor, but is jointly owned by both and is a resource available to and shared by both parties as needed to meet contract milestones and the contract completion date.
The Contractor shall not sequester shared float through such strategies as extending activity duration estimates to consume available float, using preferential logic, or using extensive crew/resource sequencing, etc. Since float time within the schedule is jointly owned, no time extensions will be granted nor delay damages paid until a delay occurs which extends the work beyond the contract completion date. Since float time within the construction schedule is jointly owned, it is acknowledged that Owner caused delays on the Project may be offset by Owner caused timesaving (i.e., critical path submittals returned in less time than allowed by the contract, approval of substitution requests and credit changes which result in a savings of time to the Contractor, etc.). In such an event, the Contractor shall not be entitled to receive a time extension or delay damages until all Owner caused timesaving are exceeded and the contract completion date is also exceeded.
Obviously the clauses provided above are complementary by indicating that float can be used by either party to meet contractual milestones or completion dates (joint ownership clause), but neither party may consume all of the available float by extending activity durations or employing resource loading/sequencing strategies (non-sequestration clause). It also is key to note that such clauses typically do not allow for extensions of time, delay claims, or the assertion of liquidated damages until a delay occurs that extends the work beyond the contract completion date. Thus, this type of language follows the “project owns the float” argument where the goal is to complete the project on time without additional costs.
To the extent a client has specific questions about the issue of float, they should follow-up with counsel to review this issue.