On April 7, 1994, the State’s Office of General Services
(“OGS”) entered into a contract (Exhibit 1, Project No. M1130-C, and
Exhibit 2, Project Specifications) with claimant by which claimant was to
provide the general construction work in connection with the construction of a
new Health Care Unit at Sullivan Correctional Facility in Fallsburg, New York.
Claimant was one of four prime contractors for the project, pursuant to the
Wicks Law, set forth in State Finance Law § 135. The other three
contractors were General Mechanical Systems, Inc. (HVAC), Perreca Electric Co.,
Inc. (hereinafter “Perreca”) (electrical work), and Peter Annis,
Inc. (hereinafter “Annis”) (plumbing). The original contract amount
was $3,554,899.00, although this amount was subsequently adjusted through change
orders. The contract provided that work was to be completed by April 7, 1995.
The Health Care Unit was designed to be constructed as a concrete block
building and, since it was within a maximum security facility, was also designed
to have interior concrete block walls. Claimant, as the general contractor, was
responsible for the construction of both the interior and exterior walls. The
contract provided that claimant had to provide openings in the walls to allow
the other contractors to install their work, and then required the claimant to
close those openings after such work was completed.
As noted above, the contract was dated April 7, 1994, and provided that the
work would be completed within one year. In late August 1994, however, the
plumbing contractor (Annis) filed for bankruptcy and abandoned the project,
bringing work to a stand-still. It took approximately three months for OGS,
through its performance bond, to find a replacement contractor for the plumbing
During this time, James Mayers, the engineer-in-charge (“EIC”) for
the State on this project, informed claimant that work would continue on this
job even without a plumbing contractor. In essence, claimant was instructed to
construct the masonry walls and to leave openings in the walls
where plumbing work would be required. After a plumbing contractor was hired
and had completed its work, Woolard would then be required to finish off those
Due to delays incurred, including that of the extensive delay caused by the
abandonment of the project by Annis, the construction project was not completed
within the one year period called for in the contract. In fact, claimant did
not complete its work on this project, and was terminated by OGS in November,
In this claim, claimant contends that the delay in completing the project was
attributable to the State and as a result seeks damages for the
“inefficiency costs” incurred which required claimant to perform its
work in an out-of-sequence and less efficient manner, as well as additional
“stretch-out costs” incurred by claimant based upon the fact that
claimant was required to work on this project for approximately nine months
after the original anticipated completion date.
Phillip Woolard, the former president of claimant, testified on its behalf. He
confirmed that claimant had been awarded the contract for the general
construction work in connection with the Health Care Unit to be constructed at
Sullivan Correctional Facility. Mr. Woolard explained that since this project
involved the construction of a health care unit, or hospital, it required, in
essence, double the plumbing work that would be required in other projects of
similar scope. Additionally, since this unit was to be constructed to serve a
correctional facility, the interior walls had to be of masonry construction, and
rebars were also required.
Mr. Woolard testified that after the plumbing contractor defaulted on this
project, and once claimant was required to continue with its masonry work, there
was no way to avoid substantial increased costs for this work.
Mr. Woolard testified that first of all, it had been claimant’s intention
to simultaneously construct both the interior and exterior concrete block walls,
and that they intended to work from the center of the building out and therefore
bring the outside walls up once a floor was finished. By this process, claimant
would be able to move the scaffolding up as the work proceeded, and each floor
Secondly, Mr. Woolard testified that it was intended that claimant would
coordinate its masonry work with the plumbing contractor so that the walls,
including any openings for pipes or other plumbing work, would be completed in a
Mr. Woolard testified that after claimant was instructed to proceed without a
plumbing contractor on site, claimant then had to re-sequence its work and had
to leave openings for all of the plumbing stubs and penetrations. As a result,
the interior walls could not be completed in a single stage, and claimant then
had to return and “tooth-in”
remaining masonry after the plumbing work had been completed. Such work also
required that the scaffolding had to be torn down after the initial stage and
then reassembled once the plumbing contractor had completed its work. Mr.
Woolard testified that in essence, claimant had to continually build up its
scaffolding, tear it down, and then reassemble that scaffolding once the
plumbing work was completed, and that this process was continually repeated
throughout the construction process.
Additionally, Mr. Woolard testified that the completion of the project required
that materials for the masonry work, which were required to complete the
interior walls once the plumbing was done, could not be trucked in and
mechanically loaded as originally planned, but had to be hand-carried in by
construction workers, since at that time there was only one access point to the
Mr. Woolard also testified that due to the delay in obtaining a replacement
plumbing contractor, claimant was required to erect the interior block masonry
walls during winter months, which created complications in both the mixing and
protection of the mortar used in the masonry construction, due to cold weather.
The cold weather also resulted in increased costs to the claimant, since it was
required to provide temporary heat for the enclosed building during the
John W. Hillman, the project manager for claimant on this project, also
testified. He testified that as a result of the default by the plumbing
contractor, the entire construction schedule had been thrown off and was
“no use to anybody”. He testified that as originally expected,
claimant did not plan on any costs for winterization of the project, which was
now required due to the delay caused by the plumbing contractor’s default.
He also testified that during his extensive and repeated discussions with Mr.
Mayers, the EIC on this project, he was assured that claimant would be able to
make a request for additional compensation, once the project was completed, as a
result of the re-sequencing of the work and the additional costs involved.
Mr. Hillman also acknowledged that although there were certain delays in this
project which were the responsibility of claimant, these delays did not affect
the completion date of the contract, and that such delays are
“expected”, and that adjustments can be made by the contractor
during the course of the project so that the completion date is not affected.
Francis DeMayo, the owner of The Ferndale Group, also testified on behalf of
the claimant. He testified that his company was the subcontractor of claimant
which performed the masonry work on this project, the primary issue in this
claim. Mr. DeMayo testified that although claimant and Ferndale were two
separate corporate entities, his salary was paid by Woolard and that even though
there was no formal written agreement between claimant and Ferndale,
Ferndale’s workers provided the labor for the masonry work on this
Paul J. Kaiser, claimant’s economic expert, testified as to his
evaluation of the damages suffered by claimant resulting from the delay in
completing the project. Mr. Kaiser assumed the entire delay was due to the
default by the plumbing contractor, and attributed responsibility for this delay
to the State.
Mr. Kaiser’s calculations consisted of two separate elements. The first
element involved the use of the “earned value method” to calculate
the additional labor costs incurred by claimant, attributable to inefficiencies
in the work caused by the absence of the plumbing contractor. The second
element was characterized by Mr. Kaiser as “stretch-out costs”,
representing the additional costs incurred by claimant as it was required to be
on the job for nine months longer than originally contemplated. Mr. Kaiser
further testified that the “strecth-out” costs were comprised of two
components, consisting of “site overhead” and “home-office
With regard to the inefficiency claim, and as set forth in his expert report
(Exhibit 3), Mr. Kaiser utilized a “composite labor rate” of
$42.04 per hour, which he arrived at by combining labor expenses with
percentages for small tools allowance, overhead, and profit. He relied upon the
certified payroll records of The Ferndale Group (Exhibit 71), the subcontractor
for the masonry work on this project, in determining these labor expenses.
Based on his analysis, Mr. Kaiser concluded, in his report, that $502,057.50 was
due to the claimant resulting from the inefficiencies in the masonry work caused
by the abandonment of the project by the plumbing contractor.
At trial, however, Mr. Kaiser testified that an adjustment to this figure was
required, since he learned shortly before trial that the masonry workers from
The Ferndale Group had also performed some non-masonry work. He therefore
adjusted his “earned value” method and arrived at a new amount for
inefficiency costs of $422,836.50 (Exhibit 72).
With regard to “stretch-out costs”, Mr. Kaiser calculated an amount
per month to be allocated to site overhead. He then multiplied this amount by
the additional nine months, for a total of $138,420.00 which he allocated to
additional site overhead costs (Exhibit 3, Tab 3, pages 4-5).
With regard to additional home-office overhead, Mr. Kaiser relied upon the
testimony of Phillip Woolard, Yvonne Clark, and Francis DeMayo. Mr. Woolard
testified that he spent approximately two of the additional nine months on this
project. Ms. Clark, a secretary with claimant, testified that she was spending
approximately two-thirds to three-quarters of her time on this project, and Mr.
DeMayo testified that he was spending approximately 40% to 50% of his time on
this project. Based on this testimony, it was necessary for Mr. Kaiser to
recalculate the amount due for “Home Office Overhead”, which he had
originally determined to be $213,622.00 (Exhibit 3, Tab 3, p. 5). Since the
testimony established that Mr. Woolard, Ms. Clark, and Mr. DeMayo had not
devoted full-time work to this project, and since it is apparent that the salary
for Mr. Hillman, the Project Manager, had already been accounted for in the
computations of “Site Overhead”, Mr. Kaiser determined that the
proper amount due had to be adjusted (downward) to $114,762.00.
Accordingly, based upon the testimony and the calculations provided by
Mr. Kaiser, claimant seeks damages for additional labor costs calculated
under the “earned value” analysis ($422,836.50) and
“stretch-out costs” (site overhead [$138,420.00], home office
overhead [$114,762.00], and 5% profit [$12,659.00]) for a total of $688,677.50,
as calculated by the Court.
James E. Mayers, the State’s EIC on this project, testified on behalf of
the State. In addition to his testimony, transcripts of his deposition
testimony were also received into evidence at trial (Exhibits 62-A, 62-B and
. Mr. Mayers testified that he was the
EIC of this project from July, 1994 through the spring of 1996, and as such was
present and actively involved during the time of the plumbing contractor’s
Mr. Mayers testified that he was present on the job on a daily basis, and that
he met daily with representatives of the prime contractors to discuss progress,
problems, and the like. Claimant introduced into evidence numerous internal
memos from Mr. Mayers (Exhibits 12 - 16) in which he acknowledged the dire
situation on the job site created by the abandonment of the job by Annis, the
During one of his daily meetings, on November 15, 1994, Mr. Mayers advised the
contractors that they would be “invited to Albany” to discuss time
and financial adjustments to the various contracts resulting from the adverse
impact caused by the plumber’s default (Exhibit 16).
William E. Held, a Regional Supervisor for the State, also testified at trial.
Mr. Held testified that he was Mr. Mayers’ supervisor and that he made
weekly visits to the job site to monitor progress. He testified as to the
reasons justifying the decision to proceed with construction work on the project
without a plumber after the Annis default. Mr. Held explained that the State
did not have any idea when a plumber would eventually come onto the job, and
that in order to protect the work that had already been done from the elements
(such as the foundation and interior work), the decision was made to proceed
with the exterior work to ensure that the building would be enclosed before
winter, which would then allow workers to proceed with the interior work during
winter months. In addition to his testimony, a transcript of his deposition
testimony was also received into evidence (Exhibit 63).
Additionally, although he did not testify at trial, a transcript of the
deposition testimony of David Seiffert, head of the OGS Construction Division,
was also received into evidence (Exhibit 64). Through the deposition
testimony of the various State witnesses, as well as documentary evidence
received into evidence (Exhibits E-N), it was established that claimant, during
the course of the project, also had problems of its own, unrelated to the
default of the plumbing contractor, which the State contends contributed to the
delay in completing the project on a timely basis. Specifically, there were
problems and delays related to the construction of an access road, problems and
delays in the delivery of steel, and specifically a problem with the
installation of certain anchor bolts that had to be corrected (Exhibit 9).
As previously mentioned, Mr. Mayers had advised the contractors that they would
be provided the opportunity to request time and financial adjustments to the
contract due to the delay in retaining a plumbing contractor for this project.
It was brought out during trial by claimant that one of the prime contractors,
Perreca Electric, Co., received such an adjustment, in which the State
acknowledged responsibility for a significant portion of the delay in completing
the project (Exhibit 55). Mr. David Seiffert testified in his deposition
(Exhibit 64), that any request for an adjustment by a contractor had to be
evaluated on its own merits, and that responsibility for the delay and possible
financial adjustment could potentially be different, or even nonexistent, for
each contractor. In other words, there could be different reasons behind the
delay, some of which would not necessarily be the responsibility of the State,
and that a delay might affect one contractor while not impacting the others.
Richard D. Weller, a certified public accountant, performed an audit of this
project and testified as the State’s economic expert. His
“Independent Auditor’s Report” was received into evidence as
Exhibit A, and his payroll registers in support of the report were received into
evidence as Exhibit B.
Mr. Weller testified that he audited the daily reports of job activity and
attempted to reconcile the hours worked by the laborers to the type of work
performed. Mr. Weller testified that not all of the work performed by the
laborers related to masonry, but that these workers also had other duties, such
as erecting and disassembling scaffolding and clean up work.
Mr. Weller also made adjustments to the “composite labor rate”
arrived at by claimant’s expert, Mr. Kaiser. The most significant
adjustment to this rate was the fact that Mr. Weller did not include the
“small tools allowance” (8%) which had been utilized by Mr. Kaiser,
as Mr. Weller determined that this item was properly included in the 10%
“general allowance” rather than as a separate itemized category.
Based on the adjustments made by Mr. Weller in his Auditor’s Report, he
concluded that the cost of labor inefficiencies claimed by claimant came to
In his report, Mr. Weller also substantially reduced the claim for additional
site overhead expenses submitted by claimant, as he deducted the amount claimed
for extended supervision (the salaries of the project manager and
superintendent). Additionally, Mr. Weller disallowed any claim for home-office
overhead, since there was no documentation to establish the salaries of Mr.
Woolard, Mr. DeMayo, and Ms. Clark, as well as the amounts claimed for
additional accounting, clerk, and estimator. In sum, Mr. Weller made no
allowance for these supervisory expenses due to the lack of accounting or
As a result, Mr. Weller, in his Auditor’s Report, allowed the sum of
$6,732.00 for additional site overhead expenses, and made no allowance for
Finally, based on testimony elicited during the trial, Mr. Weller made some
mathematical calculations and prepared an alternative “actual total
cost” estimate for the total costs of the masonry work, including overhead
and profit. These calculations were based upon testimony which set forth the
total number of hours, attributable to masonry labor, expended on the project by
claimant, during both “unimpacted” and “impacted”
periods. These computations are set forth in his handwritten notes (Exhibit V),
in which he determined that the increased costs for masonry can be viewed as
The contract which is the subject of this claim contained a “NO DAMAGE
FOR DELAY” clause, set forth as § 17.9 of the contract (Exhibit 1).
This exculpatory language states that the defendant is not liable for damages
resulting from any delays or disruptions in the performance of the contract.
It is well settled, however, that such “NO DAMAGE FOR DELAY”
clauses have four judicially recognized exceptions which, if established, will
nevertheless permit damages to be awarded. As was stated by the Court of
Appeals in Corinno Civetta Constr. Corp. v City of New York, 67 NY2d 297,
Generally, even with such a clause, damages may be recovered for: (1) delays
caused by the contractee’s bad faith or its willful, malicious, or grossly
negligent conduct, (2) uncontemplated delays, (3) delays so unreasonable that
they constitute an intentional abandonment of the contract by the contractee,
and (4) delays resulting from the contractee’s breach of a fundamental
obligation of the contract.
In this particular matter, claimant relies upon the “uncontemplated
delay” exception, referring to the delay and disruption of work caused by
the abandonment of the project by Annis, the plumbing contractor.
Based upon the testimony and documentary evidence (Exhibits 12 - 16), it is
readily apparent to this Court that the delay caused by the default of the
plumbing contractor was not only significant, but was not contemplated by the
parties. Furthermore, as testified to by Mr. Hillman, as a result of the
default the construction was thrown completely off schedule and out of sequence.
While the Court does not fault the State for its decision to proceed with
construction in the absence of a plumbing contractor, the State nevertheless
must be held accountable for the additional costs and inefficiencies incurred by
the other prime contractors in proceeding in this fashion. Claimant, in
particular, was most adversely affected by this decision to proceed, as it was
required to construct the walls, leave openings for plumbing, pipes and
fixtures, and then was required to revisit each section once the plumbing work
was eventually completed to “tooth-in” and finish off the
construction. It is readily apparent and obvious to this Court that requiring
claimant to “hopscotch” and perform what can best be described as
repetitive work (i.e., finishing newly constructed walls once the plumbing work
was completed, which required the reassembly and disassembly of scaffolding),
was much more inefficient and time consuming than if all such work had been
completed in a single stage. The Court therefore agrees with the contention of
claimant that this was a highly inefficient process which resulted in
significant additional labor costs, and required substantially more time to
complete the project than originally contemplated.
Additionally, although it is not necessarily controlling in this matter, the
Court finds highly persuasive the fact that the State did make a financial
adjustment with one of the other prime contractors for additional costs caused
by the delay in completing this project. In making this adjustment, the State
acknowledged that it was responsible for approximately 11 months of the total
delay in the performance of Perreca’s electrical work.
Notwithstanding this finding, however, the Court finds that claimant was also
responsible for a portion of the delay in completing this project.
Specifically, there was an admitted delay caused by problems with the delivery
of steel, as well as problems with the installation of defective anchor bolts
which then had to be replaced. Although claimant’s representatives
contend that these delays were typical and could be made up during the course of
the project, this Court finds that such delays were significant and
substantially contributed to the additional costs incurred and requested by
As a result, this Court finds and determines that claimant must bear 35% of the
burden of the total delay (and the additional costs claimed) and that the State
is therefore responsible for 65% of the additional costs attributed to the
Although a claimant is not required to prove its claim with mathematical
certainty, it does have the burden of proving the extent of damages suffered
(Berley Indus. v City of New York, 45 NY2d 683). Even if they are
uncertain or difficult to ascertain, a claimant is still entitled to recover
damages (J.R. Loftus, Inc. v White, 85 NY2d 874). Nevertheless, a
claimant may not rely upon a theory of damages involving estimates where more
precise records of damages are available (Clark-Fitzpatrick, Inc. v State of
New York, 258 AD2d 431).
I. Labor Inefficiencies
As set forth previously, claimant’s economic expert, Mr. Kaiser, relied
upon the “earned value” concept of determining the additional labor
costs incurred by claimant as a result of the inefficiencies in completing the
contract. In doing so, however, he relied primarily upon testimony from
principals of the claimant due to a lack of documentation and supporting
records. The Court finds that the recordkeeping of claimant was woefully
inadequate in this matter, requiring Mr. Kaiser to base his calculations on
many assumptions rather than facts. The fact that Mr. Kaiser had to revise
many of his calculations, at trial, to account for facts of which he was unaware
when he prepared his report, casts serious doubt as to the credibility of his
The Court further finds that Mr. Weller’s auditor’s report (Exhibit
A), although based upon certified payroll records, is also based upon numerous
assumptions and estimates, due to the lack of supporting documentation.
Accordingly, even though it is set forth in a very simplistic manner, the Court
finds that the most accurate determination of costs due to labor inefficiencies
is found in the calculations prepared by Mr. Weller at trial (Exhibit V). These
calculations can best be considered as a “total cost approach”,
which has been accepted as a method of calculating damages (Fehlhaber Corp.
& Horn Constr. Co. v State of New York, 69 AD2d 362; Port Chester
Elec. Co. v State of New York, 101 AD2d 825). The Court therefore finds,
based upon these calculations, that claimant incurred increased costs resulting
from labor inefficiencies in the amount of $258,211.00. These damages must be
adjusted based upon the percentage of the delay attributable to the State, as
previously determined herein.
II. Stretch-out Costs
Additionally, and as discussed herein, claimant also seeks damages for site
overhead and home office overhead caused by the fact that the delay in
completing the project required claimant to be “on the job” longer
than contemplated under the contract. Although Mr. Weller, defendant’s
expert, only found minimal additional costs (based upon a lack of
documentation), the Court finds that the testimony from claimant’s
representatives adequately established that site overhead expenses, for the
additional nine months for which claimant was on the job, totaled $138,420.00.
Although payroll records were not available, the Court also finds that claimant,
through the testimony of its representatives, has established additional office
overhead expenses of $114,762.00. The total for these “stretch-out
costs”, therefore, is $253,182.00, which amount must also be adjusted
based upon the percentage of fault attributable to the State.
Since these amounts represent the additional costs to claimant attributable to
the delay in completing the contract, claimant is further entitled to a 5%
profit on the entire amount, determined to be $25,570.00.
In sum, the Court finds the following damages: