Partners Nathan Dee and Jean-Pierre van Lent and Associate Julie van Westendorp Secure Appellate Victory: First Department Reinstates Contractor’s Extended Site Overhead Claim for Third Party Project Management Costs

The Firm is pleased to report a significant appellate win for its client, a general contractor. In a recent decision, the Appellate Division, First Department granted the client’s motion to reargue, reversing a portion of its prior decision of May 29, 2025. The new order, dated December 2, 2025, reinstates the client’s claim for Extended Site Overhead (ESO) damages in the amount of nearly $2.2 million for project management services provided by a third-party construction management firm. The Court remanded for further proceedings on this specific category of damages, while upholding the dismissal of separate claims for extended field office (EFO) costs and weather-related delays.

The First Department held that although bid‑based methodologies cannot be used to recover delay damages, costs for third-party project management services stood on different footing because they were not bid‑based. Rather, they were documented, post‑bid ESO costs that were unforeseeable when the client submitted its bid to the City. The Court also found that factual questions remain as to whether City‑caused delays required external project management services and whether any contractual waiver applies. These issues must be resolved at trial.

Why This Matters for Construction Delay Litigation

This decision clarifies a critical distinction in New York public works delay claims between impermissible bid‑based damage theories and recoverable, actual post-bid overhead costs:

• It confirms that contractors cannot calculate delay damages by comparing actual costs to pre‑bid estimates.
• Equally important, it recognizes that discrete, documented post-bid ESO costs are not automatically barred just because other parts of an ESO claim were bid-based. This is particularly true for costs tied to third-party management services necessitated by owner-directed changes after bid. When properly supported by project records, such costs can present triable issues that defeat summary judgment.
• The Court’s focus on whether owner‑caused delays necessitated outside construction management, and whether any waiver stems from documentation provisions, shifts the inquiry to fact‑intensive questions appropriate for trial. This framing will influence how parties document causation, apportionment, and compliance with contract conditions, such as verified statement of claim submissions required in public contracts.

Practical Takeaways for Public Owners and Contractors

For contractors, this decision highlights the importance of isolating non‑bid‑based, third‑party ESO costs and substantiating them with robust, contemporaneous records linking the services to owner‑caused delays. For public owners, it signals that while bid‑based claims are prohibited, a jury may still hear cases involving documented, unforeseeable post‑bid ESO costs where causation is genuinely disputed. Both sides should expect closer judicial scrutiny of whether project management costs were a foreseeable component of the original bid or a direct result of owner‑directed changes and delays.

The Firm’s Role

The Firm’s team consisted of partners C. Nathan Dee and Jean-Pierre van Lent and associate Julie van Westendorp. The team briefed the reargument motion and successfully demonstrated that the third-party project management subcategory of ESO damages was not calculated using bid estimates and was supported by post-award invoices and records. The First Department agreed that these costs should proceed to trial for a determination on causation and any alleged waiver.

About Cullen and Dykman

Cullen and Dykman (www.cullenllp.com) has been providing legal services to institutional clients since 1850. The firm represents a wide range of clients, including banks and other financial institutions, energy, telecommunications and water companies, construction companies, insurers, educational institutions, religious organizations, and not-for-profits. With over 190 attorneys in seven offices located throughout the Northeast and Mid Atlantic regions, Cullen and Dykman is strategically positioned to meet the changing needs and demands of our clients.