Sunny With a Chance of Rain

Sunny With a Chance of Rain

Understanding the Federal Government Weather Clauses

By Kay Kendall

You have probably seen the clause in your government contract discussing time extensions for unusually severe weather.  The clause specifies the procedure for determining time extensions for unusually severe weather in accordance with the Default Clause for Fixed-Price Construction.

In order to qualify for a time extension under this clause, the weather experienced at the project site during the contract period must be found to be unusually severe and it must actually cause a delay to the completion of the project.

Schedule of Anticipated Adverse Weather Delays

Many government contracts include a schedule of monthly anticipated adverse weather delay days.  It is important to read the clause carefully.  Normally the monthly anticipated adverse weather delays are based on a five-day work week.  If the Monthly Anticipated Adverse Weather Schedule shows five days of anticipated bad weather for January, and the contractor experienced (10) workdays of delay as a result of bad weather, then the contractor experienced (5) working days of delay more than was anticipated.  This means the weather in January was “Unusually Severe”.  If the (5) days of unusually severe weather impacted the contractor’s contract-completion date, then the contractor is entitled to a non-compensable time extension.  Government contract durations are based on calendar days, not working days.  Therefore, the time extension for the (5) unusually severe weather delays should be converted to calendar days.  This is done by merely dividing the 5 unusually severe weather delay days by five working days per week, then multiplying by seven calendar days per week.

(5) unusually severe days/(5) working days per week = (1) x (7) calendar days per week  = (7) calendar days.

The time extension to the contract should be (7) calendar days in this example.

Be sure to check the contract specifications for any additional criteria that may entitle the contractor to a time extension for unusually severe weather.

Weather Documentation

The contractor is required to record the weather on a daily basis on the Contractor’s Quality Control Reports and discuss if any adverse weather prevented work on critical activities for 50% or more of the contractor’s scheduled workday.

The government will normally send the contractor a letter each month advising that they have performed an analysis of the weather conditions for the month and whether their analysis shows that contract work was affected or delayed by unusually severe weather beyond what was expected for the time period.  If the contractor does not agree with their findings, written notification should be provided with information to support the contractor’s position.  This notification should be provided within seven days of the government’s letter.

If the contractor is performing earthwork and experiences a “mud” day after a day of rain, and both days impact critical path work by 50% or more, then the contractor should note that in the Contractor’s Quality Control Report and include it in their own analysis of anticipated adverse weather delays.

Time extensions issued under the Default clause for weather delays are non-compensable.   

Kay Kendall is currently president of Kendall-Dinielli Consulting, providing consulting services to government and commercial clients.  She has extensive experience in preparing requests for equitable adjustment proposals and claims for government construction contractors.  She has also consulted Contractors with DCAA audits and resolving audit disputes. You can visit Kendall-Dinielli Consulting at

The Punch List is Triune’s proprietary blog for discussing issues and providing insights specific to the commercial construction industry. Copyright 2013 TMV, LLC (Triune).  Any and all rights reserved.


6 Reasons Profit Fade

6 Reasons Profit Fade

6 Reasons for Profit Fade

By Wesley Middleton 

Profit fade.  This is a situation that your bonding agent doesn’t want to see.  Company owners and controllers seldom use this tool, despite the fact that it can be very effective in identifying situations and issues inside your company.  Preparing a fade analysis on a regular basis can help identify trends that may warrant further investigation.

What is a fade analysis? In a very general sense, it is simply a comparison of your original estimated gross margin on a job to your actual progression throughout the construction period to completion. Generally, a fade of 10% or more will result in a call from your bonding agent with questions about why it is happening.  The more variability in your contract over time, the more of a risk you appear to be to your bonding agent, and the less confidence they have in your ability to estimate and manage jobs.

A Note on Fade/Gain Calculations: Avoiding a Common Error

If you have an estimated profit of 2% and your profit drops to 0%, then technically you have a 100% profit fade. The calculation should be a percentage change of a percentage, rather than the difference between 2 percentages. Let’s look at another example: If your 2% gross margin represented $1 million and the job broke even, then you’d want an explanation of the 100% profit fade. The current schedule would only show a 2% fade.

Sources of Contract Fade

When preparing a fade analysis, it is important to break it down by project manager, estimator, category of construction work, or other categories that may exist in your company.  This can further isolate the cause of the contract fade.  Here are six important reasons that you may be experiencing contract fade:

  1. An estimator who is not competent at estimating jobs and is too optimistic in his estimates, or aggressive bidding by an estimator who is struggling to win contracts.
  2. Change orders that are unprofitable or simply have not been approved and recorded in the accounting system.
  3. An under-performing project manager who is not effective in managing the costs and people on the job.
  4. Jobs that are outside the company’s expertise, resulting in a learning curve that causes additional costs or job delays.
  5. The accounting department is not coding job costs to the correct job. Having the project manager and estimator review and approve the final job costs will help in this area.
  6. Cost shifting, otherwise known as fraud. It can be in the accounting department or from the project manager. The project manager could be shifting costs from one job to another to cover up the fraud, or the accounting clerk could be doing the same thing. Either way, the same review process in #5 above would help prevent this from happening.

Seeing the Better Picture

Comparing the total actual costs to the estimated costs simply isn’t enough. Seeing the change in gross margin from year to year adds an additional level of analysis.  A well-planned deception of systematically “shifting” job costs from one contract to another between periods may not be detected by only comparing estimated costs to actual. Preparation of the fade analysis is better supported by a well-prepared WIP or contract schedule.

For a basic contract fade analysis template, click here. (link to:

“Wesley Middleton is the Managing Partner at MiddletonRaines+Zapata, LLP, a leading Houston-based CPA firm offering a full suite of accounting, tax, audit, and consulting services to the small and middle markets.”

The Punch List is Triune’s proprietary blog for discussing issues and providing insights specific to the commercial construction industry. Copyright 2013 TMV, LLC (Triune).  Any and all rights reserved.