Many owners assume that if a project finishes on time, there is no claim to worry about. Impact damages prove otherwise. These claims can surface late in the project, or even after closeout, on jobs that never slipped a day, and they often come as a surprise to owners who were watching the schedule rather than productivity. Understanding what impact damages are, why the courts allow their recovery, and what the owner's team can do during construction to limit exposure is one of the most effective ways to avoid a costly dispute. This is the first article in a multi-part series intended to help public and private owners better understand and manage the construction claims process on their projects.

Impact damages are generally understood as additional costs a contractor incurs when events disrupt its planned means and methods. Design errors or omissions, untimely responses to required submittals or requests for information (RFIs), and delayed or disrupted site access are common causes. These disruptions lead to lost productivity.

Impact damages differ from direct costs resulting from owner-issued change orders such as added labor, material, and subcontractor costs. Instead, impact damages represent the ripple effect of disruptive events. They frequently arise downstream of the causal event(s) and may not immediately be recognized. In essence, impact damages occur when the contractor’s work becomes less efficient or more costly due to an owner-caused condition.

This article introduces the concept of impact damages, outlines the historical and legal foundation supporting the recovery of cumulative impact damages in the United States, and closes with practical steps owners can take to reduce their exposure.

Claims for impact damages are not new in construction. The underlying principle, that a party harmed by another's failure to perform is entitled to the true cost of that failure, dates back decades. In Groves v. John Wunder Co.¹, decided by the Minnesota Supreme Court in 1939, a landowner leased property to a contractor to remove sand and gravel, on the condition that the contractor leave the site at a uniform grade. When the contractor failed to regrade, the court awarded the landowner the full cost to complete the work rather than the far smaller decline in the land's value. Completion dates played no role; the court looked only at what the failure to perform actually cost. That same focus on actual cost, independent of schedule, underlies modern impact damage claims.

The impact damages case most frequently cited today is Pittman Construction Co.² decided by the General Services Administration Board of Contract Appeals (the Board) in 1981 and later affirmed by the U.S. Claims Court in 1983.³ Pittman was the prime contractor on a federal building project in New Orleans. Pittman sought recovery of uncompensated impact damages on behalf of its plumbing and electrical subcontractors. These damages stemmed from more than 200 government-issued changes and contract modifications.

The Board acknowledged that the cumulative impact of multiple changes – large and small – can create a significant ripple effect. The Board famously described the situation as “death by a thousand cuts.” The Board agreed that multiple minor changes can collectively cause productivity loss on unchanged work, resulting in damages that may exceed the sum of the individual changes.

While Pittman clearly established that cumulative impact damages are recoverable, it also articulated the burden of proof required of the claimants. Claimants must provide adequate contemporaneous documentation of events and demonstrate clear causation and impact of each disruptive event. In other words, a claimant cannot simply argue that the issuance of 200 RFIs proves the design was incomplete at contract execution and therefore entitles it to recover all asserted damages.

Contractors do not need to prove critical path delay to recover impact damages. For owners, this means an on-time project is not immune from an impact claim. Impact damages are therefore distinct and separable from delay or time-related damages arising from change orders, differing site conditions, or suspensions of work. However, contractors must demonstrate that their productivity was adversely affected and costs increased due to actions or inactions by the owner or its representatives.⁴

Owners, design professionals, and construction managers must remain vigilant throughout the construction process for events that may impact productivity and cost, such as:

• Work pushed from fall into the winter due to late submittal or RFI responses.

• Work delayed into a higher labor rate period due to owner related actions or omissions.

• Unanticipated overtime or second-shift work implemented after directives to “recover lost time.”

The owner’s field staff must thoroughly document these situations. Project site meeting minutes should record discussions of both the causes and potential effects of each. When these situations arise, owners should carefully evaluate responsibility. If the causal event stems from the owner or its team, prompt negotiation is advisable to resolve the matter efficiently and at the lowest reasonable cost. Owners should also insist that contractors provide timely written notice of claimed impacts as the contract requires, so that issues are raised while the facts are still fresh and can be addressed.

______________________________________________________________________________

The next article will address what a claimant must prove to recover impact damages, the contractual challenges that often arise in pursuing such claims, and the defenses owners can raise against them.

1. Groves v. John Wunder Co., 205 Minn. 163, 286 N.W. 235 (1939).
2. GSBCA No. 4897, 81-1 BCA ¶ 14,837. (1981).
3. Pittman Construction Co. v. United States, 2 Cl. Ct. 211 (1983).
4. Richard J. Long, Rod C. Carter, and Harold E. Buddemeyer, Jr., Proving Cause and Effect Linkage, Long International, Littleton, Colorado.