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American Subcontractors Association News

Contract Changes

ASAToday 2015-04-23
Contract Changes and Claims: Conduit Clauses and Pass-Through Delay Claims
To the extent that a delay is caused by owner action or omission, prime contractors and subcontractors are usually entitled to adjustment. However, subcontract forms used by many prime contractors often include provisions which limit a subcontractor's entitlement to relief for delay to only that which can be recovered by the prime contractor on the subcontractor's behalf. This kind of pass-through-only subcontract provision can be very limiting to a subcontractor's entitlement to relief. For example:
• If the prime contractor or one of its other subcontractors caused or contributed to the problems causing delay, the prime contractor may not be entitled to compensation or even an extension of time. In such a case, the effect of such a clause can be worse than a no damage for delay clause because it may also deprive the subcontractor of an extension of time.
• Entitlement to relief at the prime contract level is usually dependent upon showing that the delay actually impacted the project's critical path activities, thereby actually causing a delay in overall project completion. However, the timing or duration of a particular subcontractor's work may not be tied into activities on the critical path. Very significant delays can impede a subcontractor's performance. They may not, however, actually impact the overall project critical path. Since such delays would not entitle relief at the prime contract level, the pass-through-only subcontract clause would bar relief to the affected subcontractor as well.
• Any prime contract limitation on the nature or extent of relief for delay, or its procedure for claiming entitlement, will also bind the subcontractor.
When faced with such a clause, a subcontractor should be careful in structuring and characterizing its claim of entitlement. This is especially true when the prime contractor's actions or omissions are a suspected cause of delay. ASA's Contract Changes and Claims is a series of articles providing tips for the management of changes and changed conditions and how to realize full adjustment to the contract price or contract time.