1	CONSTRUCTION INDUSTRY COALITION COUNCIL Reducing Risk in Construction Program Management June 1, 2004 Scott A. Beisler, PMP Navigant Consulting, Inc.
2	Reasons for Increased Number of Claims Claims result from many issues. Complexity of Today’s Projects Poorly Defined Scope/Incomplete Contract Documents (The perfect plans have yet to be drawn.) Design Changes/Additional Work Cash Flow (Owner and/or Contractor) Allocation of risk (Has there ever been an ideal contract without risk to either party?) New technologies/processes/proprietary equipment Multiple parties – more coordination and competing interests Scheduling issues (Has a project ever been built exactly as-planned?)
3	Types of Claims Claims vary depending on the issue. Delay/Extended Overhead “Time is Money!” Acceleration Where there is delay, there is often acceleration. Disruption/Productivity Losses Counterclaims from Owner Liquidated Damages (LDs)
4	Categories of Delays Not all delays provide entitlement. Excusable/Compensable Delays beyond the Contractor’s control Contractor entitled to a time extension and delay damages (O/H). Excusable/Non-compensable Delays for which neither party at fault Contractor entitled to time extension (i.e., LDs waived), but NOT delay damages.
5	Categories of Delays (cont.) Non-Excusable/Non-Compensable Caused by Contractor, e.g. Slow progress Insufficient/Inadequate manpower Defective work Subcontractor/vendor delays
6	Contractual Issues The contract establishes whether a claim can be pursued. Owner subject to Adjustment of Completion Date - Issue extensions if justified. Contractor subject to Responsibility for Completion - Get Back on Schedule!!! Conflict between these competing clauses often leads to claims. What date are we trying to meet? Who has delayed the project? Time extension - Owner grants relief to Contractor. Schedule recovery directive - Contractor recovers delay at its own expense. Acceleration directive - Owner compensates Contractor to recover delays. What if delays and responsibility are intertwined? Who pays for what? That’s why a good schedule is needed.
7	Contractual Issues (cont.) Ownership of Float Other Owner responsibilities: Duty to cooperate with contractor (provide information, approve submittals, respond to RFIs, inspections, etc.) Contractor has burden of proof.
8	Pre-Planning All of the following may have an influence on the potential for claims. Prioritization of Owner’s Goals Cost Schedule Owner Involvement Partnering program Selection of Architect, Engineer and Contractor Acceptance/Allocation of Risk Type of Contract
9	Pre-Planning (cont.) Establish intermediate schedule milestones to ensure overall completion date. Payment milestone with or without LDs. May increase potential for additional delay claims. Cash Flow Contingency for extra work/cost overruns The best way to defend a delay claim is to plan ahead and prevent them.
10	Pre-Planning
11	Cost and Schedule Optimization
12	Owner vs. Contractor Risk
13	As-Planned Schedule/Updates Delay claims often rise or fall on the quality of the schedules. Uncertainty and risk are part of any schedule. Recognize that schedule is dynamic. Include a detailed schedule specification in the contract. Requirement for CPM/software. Schedule reports/quantity curves. Level of detail. Manpower/quantity/cost loaded. Monthly narrative with progress achieved, delays incurred, outstanding issues, critical path analysis, etc. Define procedure for obtaining a time extension.
14	As-Planned Schedule/Updates (cont.) Require activities/logic that typically may affect the schedule, e.g.; Submittal cycles. Deliveries. Proper sequencing/construction logic. Area availability dates (e.g., renovation projects). Crew/equipment restraints.
15	As-Planned Schedule/Updates (cont.) Establish the construction schedule baseline early in the construction period. Review the schedule with the contractor and resolve potential errors. Share knowledge. Understand your commitments and plan accordingly. Use the schedule as a management tool, not a weapon. (Build, not battle.) Use float prudently. Revise schedule if necessary. Activity level should define responsibility.
16	As-Planned Schedule/Updates (cont.) Monthly schedule review sessions. Insist on quality updates –actual progress and realistic to-go plan. Don’t let the schedule become a burden. Bigger not always better. Review delays, current critical path, need for extensions or recovery plans. Require critical path reports to show driving activities. Require plots showing critical path(s) only. Beware of downstream resequencing of activities. Is the job really on schedule??? Or that far ahead/behind? Issue Minutes of Meeting.
17	As-Planned Schedule/Updates (cont.) Define weather days in contract (including dry-out days). Recovery Schedules Require if contractor behind due to its delays. Review for credibility. Make it more than just a scheduling exercise. Monitor progress and subsequent delays. Discuss schedule regularly at all levels of management. Obtain buy-in from key parties. Make people schedule conscious. A schedule is only as good as its input and cannot work if not followed.
18	As-Planned Logic Requirements
19	Time Extension Requests Time extension requests should be considered and acted upon. Arbitrary rejection is dangerous. Review and respond to all time extension requests. Require a critical path analysis that proves the [potential] impact of the event. Require a fragnet/subnet to be included in the overall project CPM. Check other paths, particularly prior critical path. Consider possible ways to mitigate the event. Is it really a delay? If request submitted after delay is over, require proof that event actually affected critical path.
20	Time Extension Requests (cont.) Require documentation that proves causation, responsibility and duration for the requested time extension. Properly define and document the time extension with a change order. Attempt to resolve time extensions during the project. Remember – if a time extension is improperly denied, the contractor may be entitled to acceleration costs for attempts to recover [Owner] delay(s). A properly executed time extension may prevent a larger delay claim later.
21	Incorporation of Fragnet
22	Acceleration Claim Required Linkage Between Event and Extra Cost
23	Claims Prevention during Project Develop your defense as part of your daily job. Avoid “He said, She said” arguments after the issues become gray. Maintain an accurate project record. The facts are your best defense. Respond timely to RFIs and contractor requests. Resolve direct cost change orders during project. Maintain proper documentation on potential delay issues raised by the contractor. Respond timely to contractor letters to establish your position. Sophisticated contractors now often have a “claims” engineer on site or use its scheduler to develop claims files during the project. Maintain daily reports at similar level as contractor.
24	Claims Prevention during Project (cont.) Require Notice on potential claims. Respond appropriately. Require regular cost/schedule reporting. Question accuracy of data and deviations from the plan. Progress curves – Track key commodities. Manpower data – Track manpower requirements. Productivity reports. Daily/monthly reports. Schedule updates. Obtain legal counsel as needed.
25	Progress Curves
26	Manpower Curve
27	Post Project Claims The project is not really over until the claims are resolved. Should a delay claim develop that wasn’t resolved during the project, be prepared to defend it. “We’ll resolve this at the end of the job” attitude. Maintain the project documents. Continue to research claims and supplement issue files. Involve the proper personnel from the project. Owner personnel active during the project. Architect/Engineer/CM as appropriate. Assist with the delay analysis as needed and possible.
28	Post-Project Claims Review the claims vigorously; require the Contractor to meet its burden of proof. Pursue counterclaims if appropriate.
29	Delay Analysis Techniques CPM analysis and detailed fact-finding required. Courts and Boards have endorsed the use of CPM. Different approaches may yield different answers. Circumstances often dictate what approach to use, such as: The contractor did not prepare a schedule or used limited schedules. Schedules used for progress payments only; schedule accuracy unreliable. Contract defines the method to be used. Issues and type of claims put forth by the contractor.
30	Delay Analysis Techniques Methods Fragnet Approach Time Impact Analysis Collapsed As-Built Schedule (“But For”) As-Planned v. As-Built Analysis As-Built Critical Path Regardless of approach used, the underlying (claimed) causes for the delay should be thoroughly reviewed along with the contractual basis for making the claim. Reasonable check - does the claim make sense? Resolve it!
31	Resolution Methods The available methods vary in difficulty, time, expense and risk. The longer the dispute is unsettled, the more contentious it becomes.
32	Construction Dispute Resolution Methods