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PART 2: LOOKING FOR YOUR SUPPORT FOR STA LEGISLATION/S. 5933-A DELAY DAMAGES

By Hank Kita, STA Executive Director

I am asking for your assistance once again in advocating for legislation developed by the STA which will improve the plight of subcontractors where fairness in public contracting is concerned.

Last month on these pages, I asked for your support for legislation that had been approved by the New York State Legislature dealing with a change to the definition of “substantial completion”.  This month, I am coming back to you for your assistance and support in convincing the Governor to sign the STA’s priority legislation for 2019 which deals with the issue of delay damages.

Back in June, the Legislature passed S.5933-A which provides for delay damages to contractors working on state agency and authority public works projects, where there is a delay that is unreasonable and the state’s fault.

S.5933-A is a revised version of a bill that Governor Cuomo vetoed last year (S.6686).  The STA and a coalition of construction associations across the State, are now pressing Governor Cuomo to sign this legislation.  The rationale that the STA is pushing for the approval of this bill includes the following:

  • The construction industry continues to suffer because of the widespread application of unfair “no damages for delay” provisions in state public works contracts.
  • The New York State Office of General Services (OGS) Standard Contract allows for payment of appropriate delay damages and should serve as an example for all other state agencies.
  • The “significant body of case law” that Governor Cuomo referred to in Veto Message #355-2018 last year, actually provides little or no relief to aggrieved contractors.
  • 5933-A addresses the other concerns raised in last year’s veto message.

All public construction contracts for New York State entities should be uniform and equitable in their treatment of delay damages occurrences, where the delay in performance is not the contractor’s fault. S. 5933-A provides for fair and uniform treatment of contractor delay damages claims under these contracts.

The Court of Appeals in Kalisch-Jarcho, Inc. v. City of New York, 58 N.Y.2d 377 (1983) required that, in order to recover delay damages from a public owner, a contractor must prove that the owner acted in bad faith and with deliberate intent. This standard is extremely difficult, if not nearly impossible to prove, thus providing public owners with an unfair advantage and effectively leaving contractors without the ability to collect delay damages on construction projects. Unfortunately, the practical application of the exceptions arising from Civetta Constr. Corp. v. NYC, 67 N.Y.2d 297 (1986) are unworkable and offer no real relief to contractors.

Despite these judicially recognized 33 year-old exceptions to ubiquitous “no damage for delay” clauses, contractors are still not being adequately protected from extensive delays incurred through no fault of their own. Court decisions have in fact drastically limited a contractor’s right to be reimbursed for delay damages for an assortment of simply incredible reasons. As a result, the alleged Civetta exceptions have been almost worthless.

Thankfully, some public owners recognize that this standard is problematic; the Office of General Services (OGS) voluntarily modified its own Standard Contract in 1996 to allow for delay damages in state construction contracts where the delay was not the fault of the contractor. Using language similar to that found in present OGS contracts, S.5933-A would require provisions regarding delay damages in all state entity contracts for public works.

This legislation also addresses Governor Cuomo’s 2018 veto of a more expansive version of the bill (S.6686/A.7945-A). The revised bill addresses technical issues raised in the veto message and clarifies liability for damages where actions or omissions of a state agency or state authority are directly associated with the damages incurred by a covered contractor. This revised legislation a) is limited in application and scope only to state agencies and state authorities; b) removes prior language that you were concerned could establish privity of contract between a subcontractor and a public agency, and other third parties; and c) further limits and narrows the criteria for a delay damages claim against a state agency.

Currently, at least 19 other states limit no-damages-for-delay clauses, or void them entirely. By tracking current OGS contract language, S.5933-A would make unfair and unreasonable “no damages for delay” clauses unenforceable in state agency or state authority contracts where the contractor has suffered a delay that is the fault or responsibility of the project owner. It would require such public contracts to include a clause authorizing contractors to recover damages for delay under such circumstances, which is both fair and equitable.

As was the case with the substantial completion legislation, I ask all STA members to send a letter of support to the Governor’s Office soon.  A copy of such a letter of support is provided here.  Please email your letter of support  to the Governor’s Office to Leigh.Frany@eec.ny.gov.  In addition send a copy to the STA offices by emailing it to Samantha Sweeney at ssweeney@stanyc.com.

With your support, it is my sincere hope that we can convince Governor Cuomo to sign this delay damages legislation!