Construction Claims | Adroit Consultants, LLC

Evaluating Activity Logic Relationships: A New Perspective

Posted on March 25, 2019March 27, 2019 by Adroit

Project schedules are among the key project artifacts that are used as a basis for project control. They are one of the most effective ways that a project team can use to coordinate their activities. Project schedules play a key role in making such coordination and to facilitate achieving a project’s time objectives. However, project schedules can play this role only if they are prepared in a reasonable manner. The reasonableness of project schedules can be evaluated from various perspectives including consistency, clarity, completeness, and feasibility of construction plans.

The following are some of the main considerations that need to be given to developing project schedules to ensure they are reasonable:

The schedule is complete and entails all the activities that are needed to successfully implement the scope of work
Proper logical relationships (including finish-to-start, start-to-start-, start-to-finish, or finish-to-finish relationships along with proper lag and lead values) are used in creating the project network
An appropriate combination and choosing of activity relationships (including mandatory, preferential, and scenario-based relationships) are created to define activity dependencies
The schedule accounts for the technical, physical, and technological constraints of performing the work
The schedule meets proper contractual milestones, identifies all interim and ultimate contractual deliverables, and satisfies time and resource constraints outlined in the contract
The schedule is clear, reasonable, and complete
Different sections of the schedule are consistent in terms of the timeline, work priorities, and work sequence

As noted above, activity dependencies are among the key main considerations in developing well-prepared schedules. A project network not only contains project activities but also defines activity dependencies (also known as activity ties or activity relationships). A variety of activity dependencies exists, and activity relationships are categorized in different ways.

Activity dependencies can be categorized based on the nature of dependencies that exist between project activities. From this perspective, activity dependencies are often categorized into the following two types of dependencies:

Mandatory dependency (also known as hard logic): This relationship represents a dependency that is necessary or inherent in the nature of the work.
Discretionary dependency (also known as soft, preferred, or preferential logic): This type of dependency represents preferential logic that is used to establish a desired sequence of work despite alternative sequences that are acceptable.

It is important to note, however, that mandatory and discretionary relationships are not the only activity relationships that are used in project schedules. To better identify activity dependencies, it is suggested that activity dependencies are further categorized as shown in Figure 1.

Figure 1. Activity relationship types

As this figure shows, mandatary relationships can further be broken down into the following three types:

Imposed relationships: Imposed relationships are those relationships that need to be built into a project schedule to satisfy legal, regulatory or contractual requirements. An example includes a contractually-imposed requirement that mandates using a phased approach (where a portion of work has to be implemented after another portion) in completing certain elements of work.
Physical relationships: This relationship represents a dependency that has to be established between two or more activities due to the nature of the work. An example of dependencies that are inherent in the nature of the work is the need to place a foundation first before erecting a column atop the foundation.
Safety relationships: This relationship represents a dependency that has to be established between two or more activities to ensure safety considerations are accounted for in sequencing project activities. An example of a safety relationship is the need to avoid concurrent logic in scheduling two activities that cannot be undertaken simultaneously because of safety concerns (e.g., a crew that cannot work on the second floor of a building because of the ongoing work on the first floor).

Sometimes, project scheduling professionals use scenario-based relationships to define dependencies between project activities. The current article uses the term scenario-based to characterize these relationships because depending on the implementation strategy chosen to execute a project, scenario-based relationships may or may not be used in defining work sequences. Resource relationships are examples of scenario-based relationships. Resource relationships are often added to the project schedule due to resource management concerns (e.g., resource constraints).

For example, if a contractor needs to implement two non-causally-related activities, each of which requiring a crane, the contractor may decide to add a finish-to-start relationship between the two activities if the contractor has only one crane in its possession. In this example, the two activities are not causally related; however, based on the scenario described, the contractor has established a relationship between these two activities to satisfy its resource constraint. If the contractor had two cranes in its possession, defining a dependency between the two activities was unnecessary because as noted above, the activities are presumably not causally linked. Therefore, it is reasonable to recognize the above-referenced activity relationship as a scenario-based relationship because these relationships may or may not be used depending on the implementation scenario or strategy used.

Not all scenario-based relationships are resource relationships; therefore, in Figure 1, scenario-based relationships are broken down into the two main types of resource relationships and others. An example of other scenario based dependencies includes a dependency that is established between two activities based on an assumed what-if scenario to manage a likely change in the project scope of work. This relationship may or may not be required to be established depending on whether the change occurs or not.

The last category of activity relationships is improper relationships that consist of redundant, incorrect logic, and logic loops. Incorrect logic relationships can further be categorized into errors, missing logic, out-of-sequence, and improper use of lags and leads. These relationships will be described in greater depth in a future article.

Planning and scheduling professionals need to make informed decisions in selecting and using the right relationship type. In general, it is suggested that only mandatory relationships are used in developing project schedules unless the use of discretionary or scenario-based relationships is justified. Similarly, the use of preferential relationships may not be appropriate in demonstrating that a schedule follows a reasonable logic. It is recommended that, instead of resource constraints, planning and scheduling professionals use resource leveling techniques to ensure the schedule is not bounded by too many dependencies that could have otherwise been accounted for.

Assessing activity relationships is critical in preparing or investigating time extension requests or delay assessments because a proper delay analysis has to be based on a reasonable schedule. A delay analysis based on a project schedule that contains questionable activity relationships is defective. Project planning and scheduling, forensic scheduling experts, and claim management professionals need to ensure project schedules are free of improper relationships. Otherwise, the schedule will not be reliable or reasonable and it may not serve its purpose.

Author: Dr. Amin Terouhid, PE, PMP, PSP | Principal Consultant

If you are interested to find out more about the main considerations in developing or evaluating project schedules, please contact us. Adroit’s consultants have demonstrated their expertise in developing, updating, constructability review, and forensic evaluation of project schedules and will be able to assist. You may also be interested to read the following articles:

Schedule constructability review, what does it entail?

Schedule constructability review, what does it entail?

Assessing Concurrent Delays: A Challenging Exercise

Posted on January 28, 2019January 28, 2019 by Adroit

Concurrent delays frequently occur in construction projects, especially in complex construction projects in which various contracting parties implement and are responsible for a variety of activities over the project life cycle. Assessing concurrent delays is among the most challenging forensic delay analysis practices because, contractual, legal, and technical considerations add several layers of complexity to cases of concurrent delays.

A project network not only contains project activities but also defines activity dependencies (also known as activity ties or activity relationships). Two or more delayed activities in a project network may be identified to be concurrent when they, partly or wholly, overlap one another. Therefore, a project network is a key tool to identify what activities partly or wholly overlap and what their dependencies are. Courts, boards of contract appeals, and experts, however, are inconsistent in their approach to defining concurrent delays.

Definitions

Experts rely on different references for the definition of concurrent delays. In the United States, one of the technical references that is commonly-cited in delay claims is AACE International Recommended Practice (RP) 10S-90, entitled Cost Engineering Terminology. RP 10S-90, however, does not offer one single definition of concurrent delays. Two of these definitions are provided below (AACE International, 2017, p. 21);

(1) Two or more delays that take place or overlap during the same period, either of which occurring alone would have affected the ultimate completion date.

(2) Concurrent delays occur when there are two or more independent causes of delay during the same time period. The “same” time period from which concurrency is measured, however, is not always literally within the exact period of time. For delays to be considered concurrent, most courts do not require that the period of concurrent delay precisely match. The period of “concurrency” of the delays can be related by circumstances, even though the circumstances may not have occurred during exactly the same time of period.

Another commonly-cited technical reference is AACE International RP 29R-03, entitled forensic schedule analysis. RP 29R-03 identifies that the following tests must be proven to ensure concurrent delays exist (AACE International, 2011):

Two or more unrelated, independent delays exist. One of these delays can a delay arisen from a force majeure event.
None of the delays identified in Step 1 can be a voluntary delay.
Not all delayed activities identified in Step 1 are the responsibility of only one contracting party.
The project completion date would have been delayed in the absence of any of the delays identified in Step 1.
The delayed work has to be substantial (i.e., not easily correctable).

The meaning of concurrent delay is different in the English Law. The following are two excerpts that help illustrate the meaning of concurrent delay under the English law:

True concurrent delay is the occurrence of two or more delay events at the same time, one an Employer Risk Event, the other a Contractor Risk Event, and the effects of which are felt at the same time… In contrast, a more common usage of the term ‘concurrent delay’ concerns the situation where two or more delay events arise at different times, but the effects of them are felt at the same time. In both cases, concurrent delay does not become an issue unless each of an Employer Risk Event and a Contractor Risk Event lead or will lead to Delay to Completion. Hence, for concurrent delay to exist, each of the Employer Risk Event and the Contractor Risk Event must be an effective cause of Delay to Completion (not merely incidental to the Delay to Completion) (The Society of Construction Law, 2017).
Concurrent delay is used to denote a period of project overrun which is caused by two or more effective causes of delay which are of approximately equal causative potency (Marrin, 2012).

Entitlements

Concurrent delays typically entitle contractors to time extension, but not time-related delay damages. In other words, if a contractor is able to demonstrate the presence of concurrent delays, it may be entitled solely to time extension for the net period of the concurrent delay.

It is important to note that in some cases, two or more delays occur concurrently (overlap one another to some extent), all of which are the responsibility of one single contracting party. In that case, the net effect of the concurrent delays have to be taken into account in assessing delays. For instance, if two overlapping 5 day owner-caused delays exist, entirely overlapping each other, the contractor is only entitled to a single 5-day time extension. As another example, if a contractor is found to be responsible for a 10-day delay, 7 of which are concurrent with another contractor-caused delay, the contractor is ultimately responsible for 10 days of delay, not 17 days.

In a similar way, if both an owner and a contractor concurrently contribute to the occurrence of a critical path delay (i.e., a delay that ultimately results in the delay of the project completion date), none of the contracting parties is typically entitled to collecting delay damages from the other party unless delay responsibilities can be apportioned between the parties.

In the event of a concurrent delay, the time impact of a contractor-caused delay on a project’s longest path may be greater in magnitude than the time impact of an owner-caused delay. Under such circumstances, it is sound to expect that the owner is entitled to collect delay damages for the excess impact. Conversely, the time impact of an owner-caused delay on a project’s longest path may exceed the time impact of a contractor-caused delay. Thus, it is critical to perform forensic schedule analysis and closely examine the cases of concurrency to properly allocate responsibilities for delays and specify proper entitlements.

Although definitions of concurrent delays exist in the literature, any assessment of concurrent delays has to start with performing a liability analysis (i.e., entitlement assessment) based on contractual rights and duties of contracting parties. Performing such liability assessments is necessary because the contract may specify how the cases of concurrency are characterized and how they are supposed to be assessed and/or dealt with.

The lack of clear contractual procedures for concurrent delays increases the likelihood of delay-related disputes. As noted above, courts, boards of contract appeals, and experts are inconsistent in their approach to characterizing and assessing concurrent delays. Therefore, it is important that the parties exercise due diligent in preparing unambiguous contract language that facilitates successful resolution of delay-related matters before they result in a conflict.

Moreover, if a party is in a position to negotiate over the provisions of a contract, it is recommended that it negotiates to reach an agreement, prior to signing the contract, on definitions of and procedures for assessing various types of delays including concurrent delays. Such definitions and procedures combined with the use of sound forensic schedule analysis techniques can play key roles in minimizing and/or successful resolution of delay-related disputes.

References:

AACE International. (2011). Recommended Practice No. 29R-03 Forensic Schedule Analysis. Morgantown, WV, USA: AACE International®.

AACE International. (2017). Recommended Practice No. 10S-90 Cost Engineering Terminology. Morgantown, WV, USA: AACE International®.

Marrin, J. (2012). Concurrent Delay Revisited 2. Presented at the Society of Construction Law Meeting, London, England (December 4, 2012).

The Society of Construction Law. (2017). Delay and Disruption Protocol, 2nd edition (DDP2). Retrieved from https://www.scl.org.uk/sites/default/files/SCL_Delay_Protocol_2nd_Edition.pdf

Author: Dr. Amin Terouhid, PE, PMP, PSP | Principal Consultant

Amin Terouhid is a construction claims expert and a Principal Consultant with Adroit Consultants, LLC. He was a recipient of the 2018 AACE Technical Excellence Award.

Note: If you are interested to find out more about the main considerations in assessing concurrent delays, please contact us. Adroit’s consultants have demonstrated their expertise in performing delay analysis and will be able to assist. You may also be interested to read the following articles:

Adverse effects of schedule deficiencies on claim administration

Mandatory, Discretionary, Scenario-based, and Improper Activity Relationships: Theoretical and Practical Considerations

Posted on January 16, 2019January 16, 2019 by Adroit

Project networks play important roles in carrying out construction activities in a timely manner, and they are among the key means of communication that project teams use to coordinate their efforts throughout the process of construction. Project networks are also among the key project artifacts that are used for preparing or investigating time-related claims and for determining entitlements to time extensions and/or delay damages. Therefore, it is important to have a more in-depth knowledge of activity dependencies and their types.

Activity dependencies are among the key characteristics and building blocks of project schedules. A project network not only contains project activities but also defines activity dependencies (also known as activity ties or activity relationships). A variety of activity dependencies exists, and activity relationships are categorized in different ways.

The four main types of activity dependencies include Finish-to-Start (FS), Start-to-Start (SS), Start-to-Finish (SF), and Finish-to-Finish (FF). The following briefly describes these relationship types:

Finish-to-Start (FS): The successor activity cannot start unless the predecessor activity finishes.
Start-to-Start (SS): The successor activity cannot start unless the predecessor activity starts.
Start-to-Finish (SF): The successor activity cannot finish unless the predecessor activity starts.
Finish-to-Finish (FF): The successor activity cannot finish unless the predecessor activity finishes.

Activity dependencies can also be categorized based on the nature of dependencies that exist between project activities. From this perspective, activity dependencies are often categorized into the following two types of dependencies:

Mandatory dependency (also known as hard logic): This relationship represents a dependency that is necessary or inherent in the nature of the work.
Discretionary dependency (also known as soft, preferred, or preferential logic): This type of dependency represents preferential logic that is used to establish a desired sequence of work despite alternative sequences that are acceptable.

To better identify activity dependencies, it is suggested that activity dependencies are categorized as shown in Figure 1.

Figure 1. Activity relationship types

As this figure shows, mandatary relationships can further be broken down into the following three types:

Imposed relationships: Imposed relationships are those relationships that need to be built into a project schedule to satisfy legal, regulatory or contractual requirements. An example includes a contractually-imposed requirement that mandates using a phased approach (where a portion of work has to be implemented after another portion) in completing certain elements of work.
Physical relationships: This relationship represents a dependency that has to be established between two or more activities due to the nature of the work. An example of dependencies that are inherent in the nature of the work is the need to place a foundation first before erecting a column atop the foundation.
Safety relationships: This relationship represents a dependency that has to be established between two or more activities to ensure safety considerations are accounted for in sequencing project activities. An example of a safety relationship is the need to avoid concurrent logic in scheduling two activities that cannot be undertaken simultaneously because of safety concerns (e.g., a crew that cannot work on the second floor of a building because of the ongoing work on the first floor).

Assessing activity relationships is critical in preparing or investigating time extension requests or delay assessments because a proper delay analysis has to be based on a reasonable schedule. A delay analysis based on a project schedule that contains questionable activity relationships is defective. Project planning and scheduling, forensic scheduling experts, and claim management professionals need to ensure project schedules are free of improper relationships (i.e., redundant, incorrect logic, and logic loops). Otherwise, the schedule will not be reliable or reasonable and it may not serve its purpose.

Author: Dr. Amin Terouhid, PE, PMP, PSP | Principal Consultant

Note:

Adverse effects of schedule deficiencies on claim administration

Schedule constructability review, what does it entail?

The Key Issues with Dangling Activities

Loss of Productivity in Construction – Some Considerations

Posted on December 17, 2018 by Adroit

During construction projects, a contractor’s scope of work may be influenced by a wide range of factors with an adverse effect on the contractor’s labor or equipment productivity. In these cases, it is said that the contractor is facing a loss of productivity in performing its scope of work. The loss of productivity is considered a type of disruption. According to the Society of Construction Law (2017), disruption is “a disturbance, hindrance or interruption to a Contractor’s normal working methods, resulting in lower efficiency. Disruption claims relate to a loss of productivity in the execution of particular activities. Because of the disruption, these work activities are not able to be carried out as efficiently as reasonably planned (or as possible).” (p.44)

Some Considerations

It is important to note that a loss in productivity may or may not result in project delays. For example, if a contractor has not been able to achieve its intended productivity rate due to productivity factors that are in a client’s control, the loss of productivity may result in delays if some activities end up taking more than expected due to decreased levels of labor productivity. However, delays may not be caused in some cases of disruption. An example is the case of acceleration, which has a possible disruptive effect on a contractor’s work. If instructed, a contractor may accelerate its work using a wide range of methods such as by increasing project resources (e.g., labor) that are allocated to activities or by elongating working hours. For instance, an owner-issued acceleration order does not cause delays but instead, the contractor incurs additional costs to accelerate the work. Therefore, an owner instruction for acceleration may give rise to a claim for requesting additional compensation and seeking productivity-related damages if the contractor believes it has not been fairly compensated for the damages incurred as a result of an acceleration.

Assessment Methods

To properly analyze cases of disruption from the contractors’ perspective, the main causes of disruption need to be closely analyzed. In addition, the time periods in which disruptions have occurred and the activities that are influenced should be identified. For this type of analysis, a cause-and-effect analysis will provide proper insight into the underlying causes of disruption. However, further investigation will be required to identify the extent productivity factors have impacted the work or resulted in additional costs. Some of the common methods of disruption analysis that may help in identifying the extent of impacts include the following (Society of Construction Law, 2017):

Measured mile
Earned Value
Program analysis
Work or trade sampling
System dynamic modeling
Estimated vs. incurred labor
Estimated vs. used cost

Keeping detailed project records over the course of a project plays an important role in properly evaluating disruption claims. Some of the documents that need to be recorded include daily job-site reports, detailed performance reports, daily logs containing actual man-hours spent, details of change orders and the basis of calculating proposed time and cost proposals for executing change orders, and correspondences between the contracting parties.

Conclusion

In sum, the main causes of disruption need to closely be analyzed in disruption cases. For this type of analysis, cause-and-effect analyses provide proper insight into the underlying causes of disruptions. Further investigations that make use of loss of productivity assessment methods will identify the extent productivity factors have impacted the work or resulted in additional costs.

Reference:

Society of Construction Law. (2017). Delay and disruption protocol. Society of Construction Law.

Author: Dr. Maryam Mirhadi, PMP, PSP | CEO and Principal Consultant

If your project has been affected by disruptions and if changes have adversely affected labor or equipment productivity on-site, or if you are interested to find out more about productivity in construction projects, please contact us. Adroit’s consultants have demonstrated their expertise in the use of the loss of productivity assessment methods and will be able to assist. You may also be interested to read the following articles:

Cumulative Impact Claims

https://www.adroitprojectconsultants.com/2018/10/29/cumulative-impact-claims/

Adverse effects of shiftwork on labor productivity

https://www.adroitprojectconsultants.com/2018/03/24/adverse-effects-shiftwork-labor-productivity/

MCAA Labor Productivity Factors

https://www.adroitprojectconsultants.com/2018/11/24/mcaa-labor-productivity-factors/

MCAA Labor Productivity Factors

Posted on November 24, 2018November 24, 2018 by Adroit

Changes that are made to a contract scope of work and modifications of work conditions are among the key causes of conflict in construction projects. When a contractor is faced with changed conditions or needs to work under circumstances that force the contractor to work while its productivity is less than what it expected, the contractor is, in fact, working in the state of inefficiency. The loss of productivity results in monetary damages because working inefficiently forces contractors to incur labor or equipment costs more than what they originally expected. One of the references that claim administration professionals use for quantifying the adverse impact of change on labor productivity is the MCAA labor productivity factors.

The phrases inefficiency and loss of productivity can be used interchangeably. Proving and quantifying the adverse impact of change on the labor productivity of a contractor is, in fact, one of the most challenging topics in construction claims. One of the references that is often used to quantify the adverse impact of change on labor productivity percentages of contractors is a reference published by the Mechanical Contractors Association of America (MCAA) within which labor productivity factors are identified.

MCAA focuses on the special needs of the firms that are involved in heating, air conditioning, refrigeration, plumbing, piping, and mechanical service. In 1971, MCAA published a reference entitled Management Methods Manual, in which it identified factors affecting productivity. The latest MCAA publications, including the 2018 edition of MCAA’s guideline, entitled, Change Orders, Productivity, Overtime—A Primer for the Construction Industry, still contains these labor productivity factors [1]. These productivity factors have also been endorsed by other professional associations including the Sheet Metal & Air Conditioning Contractors’ National Association’s (SMACNA).

The MCAA factors are also known as MCAA labor productivity factors. These factors identify the major causes of labor productivity loss experienced by mechanical contractors. As such, they can be used not only to estimate the adverse effects of particular productivity factors on labor productivity levels but also to measure the extent a contractor has incurred damages as a result of estimated losses of labor productivities encountered over the course of a project.

The MCAA labor productivity factors include factors such as the following:

Stacking of trades
Crew size inefficiencies
Site access issues
The ripple effect, and
Overtime and shift work

Some critiques indicate that the MCAA factors are not based on the outcome of empirical studies to determine the percentages of loss of labor productivity arisen from specific productivity factors. However, the MCAA factors have successfully been used in many cases brought to courts or reviewed by boards of contract appeals. An example of these cases is the case of CLARK CONCRETE CONTRACTORS, INC., v. GENERAL SERVICES ADMINISTRATION, in which, the use of the MCAA factors is described as follows:

To assess the impact of unanticipated conditions on productivity …, P&K used a manual published by the Mechanical Contractors Association of America (MCA). This manual was the same one P&K used, with reference to labor rates, in constructing its bid for the project. P&K has used it on other projects to measure similar impacts, and the publication is generally accepted in the mechanical industry for this purpose… We have previously accepted the use of this manual for this purpose as well. Stroh Corp., 96-1 BCA at 141,132; see also Fire Securities Systems, Inc., VABCA 3086, 91-2 BCA 23,743, at 118,902. The manual lists various types of impacts and, for each, a percentage of labor costs which represents loss of labor productivity under each of minor, average, and severe impacts. [2]

It is important to note that MCAA factors can be used both prospectively and retrospectively. In using the MCAA factors prospectively, a contractor may use the MCAA guideline to price a lost productivity element of a change order proposal to quantify the extent that the labor productivity of the contractor may be impacted as a result of a change. In using the MCAA factors retrospectively, a contractor, however, may use the MCAA guideline to retrospectively quantify the impacts of change on the labor productivity as experienced by a contractor. A retrospective quantification of the impacts of change on a contractor’s labor productivity may become necessary because no other method might be available to measure labor productivity of the contractor over the course of the project due to the lack of detailed records of labor hour tracking.

It is important to use the MCAA productivity factors properly. The method is relevant to the work of mechanical contractors but the use of this method for contractors that work in other disciplines may not be appropriate. In addition, if a contractor has maintained proper, detailed records of labor hour tracking over the course of a project, the use of the MCAA labor productivity factors may not be the best choice of the loss of labor productivity assessment method. That is because the presence of detailed records of labor hour tracking over the course of a project may enable a contractor to use a method such as the measured mile method which may be identified to be a more appropriate method depending on the specifics of a case. The measured mile method measures labor productivity levels during a relatively un-impacted reference period with performance on the same or similar work (similar in type, nature, and complexity) during an impacted period. This method then calculates the productivity for both periods of time and identifies the difference between the two as the productivity loss attributed to the impact.

It is important that claims administration professionals assess the circumstances that have given rise to a claim for loss of labor productivity and decide whether the use of the MCAA labor productivity factors is appropriate. Although the MCAA guideline is not based on the outcome of an empirical study to determine the percentages of loss of labor productivity arisen from specific productivity factors, it has successfully been used in many cases brought to courts or reviewed by boards of contract appeals. However, claims administration professionals and experts need to apply the MCAA guideline with careful consideration once the facts surrounding the claim have closely be examined.

References:

[1] Mechanical Contractors Association of America [MCAA] (2018) Change Orders, Productivity, Overtime—A Primer for the Construction Industry, MCAA. Retrieved 24 November 2018, from https://www.mcaa.org/resource/change-orders-productivity-overtime-a-primer-for-the-construction-industry-2/

[2] CLARK CONCRETE CONTRACTORS, INC., v. GENERAL SERVICES ADMINISTRATION. Retrieved from https://www.gsbca.gsa.gov/appeals/w1434015.txt

Author: Dr. Amin Terouhid, P.E., PMP | Principal Consultant

If your project has been affected by change orders and if changes have adversely affected labor or equipment productivity on-site, or if you are interested to find out more about labor productivity factors, please contact us. Adroit’s consultants have demonstrated their expertise in the use of this method and will be able to assist. You may also be interested to read the following articles:

Cumulative Impact Claims

Types of Change in Projects

Cumulative Impact Claims

Posted on October 29, 2018October 29, 2018 by Adroit

Dr. Amin Terouhid, PE, PMP

This article describes the nature and causes of cumulative impact claims and explores the underlying factors that give rise to cumulative impacts in construction projects.

Changes that are made to a contract scope of work and modifications of work conditions are among the key causes of conflict in construction projects. The net cumulative effect of changes is often greater than the sum of the effect of individual changes. This condition may occur when a contractor realizes that the work has been affected by unforeseeable synergistic effects of multiple changes. This condition is typically the case where the collective cost, time, and productivity impacts of the changes have been impossible for the contractor to foresee while considering each of the effects individually. The collective impacts of these types of changes are typically identified as the cumulative impact. The Construction Industry Institute (CII) describes cumulative impact as follows:

When there are multiple changes on a project and they act in sequence or concurrently, there is a compounding effect – this is the most damaging consequence for a project and the most difficult to understand and manage. The net effect of the individual changes is much greater than a sum of the individual parts. [1]

A cumulative impact claim typically arises when the changes to a contractor’s scope of work are so numerous and overlapping that the contractor had no reason to know that it was not fully pricing each of the change orders at the time it negotiated the changes one at the time.

Cumulative impacts have unique characteristics that differentiate them from other types of impacts. In the case of cumulative impacts, multiple changes occur whose cumulative effect is greater than the sum of the effect of individual changes. It is important to note, however, that the multiple changes that have a cumulative impact on a scope of work should typically be labor-related changes. Therefore, in assessing cumulative impacts, the dollar value of the changes that have occurred is not as important as their intensity in terms of the number of labor hours required to execute the changed work. The number of labor hours needed to perform the change is critical in evaluating cumulative impacts because the ultimate objective of a cumulative impact claim is to demonstrate the extent of loss of labor productivity arisen from the synergistic effects of multiple changes. It is typically expected that the more labor-intensive the changes are, the greater their individual and cumulative impacts will turn out to be.

To quantify the damages resulted from the cumulative impact of multiple changes, a variety of methods can be used some of which include actual cost method, estimated cost method, total cost method, modified total cost method, should have spent method, measured mile, and jury verdict [2]. What is important, however, is to be able to demonstrate that the damages have resulted from the causes in reference. The success of a cumulative impact claim depends primarily on the ability to establish the cause and effect relationships between the causes in dispute and the resultant cumulative impact. No definitive standard has been established or accepted by courts or dispute boards to quantify the loss of productivity claims that contain a cumulative impact component; therefore, it is typically challenging to prove that damage calculations accurately represent the damages incurred as the sole result of cumulative impacts.

As part of a cause and effect analysis, a written narrative that describes the chain of events is essential. The narrative should properly establish the relationship between causes and resultant impacts. Preparing such a written description of the events, causes, and their effects is a minimum requirement for parties involved in a claim to demonstrate the cause-and-effect relationships between various events and resultant damages. Adequate supporting documents such as excerpts from the contract, change directives, meeting minutes, relevant correspondence, and filed reports can play an important role in substantiating the arguments and supporting the statements contained in the claim.

One of the methods that are often used to assess causal relationships between causes and effects in complex construction claims is the system dynamics method. Complex cases of claim involve multiple claim components that are typically intertwined and interrelated; and as such, assessing these cases may require advanced methods such as system dynamics. This method is an approach within the system thinking domain which considers complex systems as a holistic set of interrelated components to provide a better understanding of the system. Four important questions that are asked in the process of developing a system dynamics model include what is the issue at hand, what is flowing into and gets accumulated in the system representing the problem, where and how does it accumulate, and what factors cause it to flow.

Cumulative impacts should not typically be measured right after a change or during the course of the project while the impact of changes has not fully been materialized. Instead, cumulative impacts are typically measured towards the end of the project to ensure the full adverse, synergistic effect of multiple changes can properly be identified and qualified. Untimely evaluations may partly represent the adverse cumulative impacts that take shape over time.

References:

[1]. T. Hester, John A. Kuprenas. & T. C. Chang (1991). Construction Changes and Change Orders: Their Magnitude and Impact. CII Source Document 66.

[2]. Jones, R. M. (2001). Lost productivity: Claims for the cumulative impact of multiple change orders. Pub. Cont. LJ, 31, 1.

If your project has been affected by multiple change orders and they have adversely affected labor or equipment productivity on-site, or if you are interested to investigate the adverse effects of cumulative impacts on your project, Adroit will be able to assist in assessing these impacts. For more information, please contact us.

A well-drafted contract changes clause

Posted on September 26, 2018 by Adroit

Author: Amin Terouhid, Ph.D, P.E.

Changes that are made to a contract scope of work and modifications of work conditions are among the key causes of conflict in construction projects. A contract changes clause can play an important role in properly allocating risks among the parties to a contract to ensure each party knowingly assumes risks that it is capable of managing.

The main objective of a contract changes clause is to establish a well-drafted procedure for allowing change to the project scope of work and modifications of work conditions that a contractor is subject to. The following table highlights some of the main considerations that need to be given to drafting a contract changes clause.

ID	Items	Description
1	The right to make changes	A well-drafted contract changes clause needs to recognize proper rights to make changes. These rights are typically, but not always, given only to the owners. If the intent is to specify the individuals who are authorized to direct changes, this requirement must be included and clearly be stated in the contract.
2	The size of changes that can be made	The contract changes clause should clearly identify any limitations on the permissible adjustment to the subcontract price.
3	Notice requirements	Proper means of communication and issuing change directives need to be defined in the contracts. In addition, the contract should clearly specify the notice requirements that need to be satisfied prior to performing any additional work (e.g., performing additional work following an unwritten change directive) as well as any ramifications of failure in giving proper notices in a timely manner.
4	Estimating and pricing considerations	The contract should identify proper mechanisms for estimating and pricing change orders (e.g., defining pre-approved unit rates and force account procedures), and the roles and responsibilities of the contracting parties in defining the scope of change and providing the information needed for pricing change orders.
5	Change order resolution timetable	The contract should provide a procedure to specify the steps that need to be taken for the resolution of cost and time adjustments to the contract due to changes. A change order resolution timetable should also be contained as part of the procedure to define expectations from the time management and construction administration perspectives.
6	Conflict resolution procedures	Conflicts are inevitable especially in large construction projects. The more changes are made to the contract scope or work conditions, the more likely the conflicts are. As such, a well-drafted contract changes clause needs to define proper conflict resolution procedures to facilitate successful management and resolution of claims and conflicts.
7	Unwritten change orders	The contract should clearly state if unwritten change orders are permissible, and if so, under what circumstances.
8	Working under protest	It is important to ensure that a contract changes clause specify if the contractor is contractually required to proceed with a changed work even if the contractor is not in agreement with the directing party about the price of the changed work.
9	Time impacts	A contract changes clause should define the conditions under which time extensions are issued due to changes. It should also specify if the contactor needs to submit its time extension request in a specified format or within a defined time frame.
10	Productivity and cumulative impacts	A contract changes clause should specify if productivity or cumulative impacts are permissible to be accounted for in pricing change orders in the event of a change, and if so, how and/or within what time frames the contract allows the contractor to seek compensation for the adverse effects of changes on the contractors labor and equipment productivity or request for compensation due to unexpected cumulative impacts whose synergistic effects were unknown at the time of evaluating individual changes.
11	Emergency changes	It is expected that a contract changes clause defines if emergency changes are allowable to be made under a serious, unexpected, and often life-threatening or property-damaging emergency requiring immediate action, and if so, what the roles, rights, and obligations of the involved contracting parties are if such a need for change arises.

Since changes to the contract scope or work conditions typically have significant impacts on construction projects, they potentially have time, cost, and productivity implications. Therefore, it is important to take proper steps in minimizing the likelihood and/or impact of conflicts between contracting parties. This article focused on one of these steps and identified some of the key considerations that need to be given to drafting a contract changes clause that exposes the involved parties to smaller risks arisen from changes that take place in construction projects.

If your project has been affected by multiple change orders and they have adversely affected labor or equipment productivity on-site, or if you are interested to investigate the extent of time and cost impacts due to change orders, Adroit will be able to assist in assessing these impacts. To find out more about Adroit’s Construction Claims Consulting services, call 352.327.8029 or contact us using this form.

Adverse effects of schedule deficiencies on claim administration

Posted on May 29, 2018October 31, 2018 by Adroit

Dr. Maryam Mirhadi, PMP, PSP

Project schedules provide a basis for communication, execution, monitoring and controlling, and reporting and offer a platform for measuring project progress and performance. In addition, courts bank on project schedules to assess time extensions or time-related compensation requests. As such, project time schedules are one of the key inputs without which many construction claims cannot properly be prepared or investigated. Construction contractors should give proper attention to preparing detailed and reasonable project schedules throughout the project to ensure the project schedules remain acceptable and reliable over the course of the project, and they reasonably represent the plans as well as the actual progression of work. Some of the main issues with project schedules, especially those that adversely affect claim administration efforts, are discussed in this brief article.

The project schedule needs to be continuously updated at reasonably short time intervals; otherwise, project schedules will not reflect the most current information about the actual progression of work on the project. Inaccurate updated schedules and the lack of updated schedules for some of reporting/updating cycles make claim administration challenging because the updated schedules may not contain all pieces of information that a claim investigation team is looking to find. Examples of these pieces of information include planned start and finish dates, actual start and finish dates to quantify the extent of delays, periods of disruption, and the key dependencies that drive critical path delays within each updating cycle. In particular, delays cannot properly be assessed without having accurate project schedules for all the key reporting/updating cycles especially for the cycles in which delays have negatively impacted the progression of work.

Project schedules should not only represent the plans going forward but also illustrate the actual progression of work. In doing so, if an impact prevents a contractor from being able to achieve certain planned dates, these impacts should properly be reflected in the schedule. For instance, if during a time analysis period, a change has impacted a contractor’s work sequence, the project schedule updated at the updating cycle immediately after the change should properly illustrate the impact of this change on the work. Otherwise, retroactively correcting the project schedules may be challenging due to reasons such as lack of access to accurate contemporaneous data or lack of authorization to make changes after the fact. Project schedules also need to be complete to ensure they include a right set of project activities and work packages, properly reflect the project scope of work, and outline all reasonable steps that need to be taken to complete the project scope of work in its entirety.

Depending on the nature of the work, a proper combination of physical, safety, resource, and preferential relationships can be used in defining activity relationships. It is important, however, to make sure that project schedules are free of logic deficiencies. Example logic deficiencies that may call the credibility of project schedules into question include incorrect logic, missing logic, logic loops, excessive or improper use of time lags/leads, and redundant activity ties. Logic deficiencies make the process of delay analysis challenging because a schedule that suffers from logic deficiencies cannot reasonably be used to assess the expected and actual sequence of work.

Resource loading project schedules allows for resource planning, resource tracking, and resource optimization. It also allows for adjusting the schedule based on resource constraints by performing resource smoothing or resource leveling. In a similar way, cost loading project schedules allows for the development of funding plans, budget consumption plans, and cost flows. Resource plans and budgeted costs are also important for claim investigation purposes because they specify how resources and costs were supposed to be expended over the course of the project and identify if certain changes, delays, or productivity factors have impacted these schemes. As such, resource plans and budgeted costs should be prepared at a reasonably detailed level; otherwise, they cannot provide an insight into the impact of change on the project. Properly documenting the basis of estimates and using proper cost breakdown structures are two other important considerations in budget and cost flow documentation. Whenever, a delaying event occurs or a condition adversely influences the project schedule, the contractor should re-assess the project schedule to ensure the schedule is adequately detailed to measure the adverse effect of the delaying event or the condition with a negative impact on the project schedule.

Many factors play a role in the successful use of project schedules in administering construction claims. However, the quality of project schedules is one of the main role players in facilitating successful management and resolution of construction claims. The accuracy of project schedules, their completeness and reasonableness, and proper use of resource- and cost-loaded schedules are some of the important considerations that need to be given to using project schedules in administering construction claims.

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Cause-and-Effect Analysis in Loss of Productivity Claims

Posted on June 27, 2017August 7, 2018 by Adroit

The construction industry is one of the labor-intensive industries with a significant contribution to the economy. As such, labor productivity plays an important role in successful implementation of construction projects to ensure construction activities can be implemented in an efficient manner.

Productivity or efficiency is a relative measure of output relative to inputs. In construction projects, inputs are typically labor and equipment whose work result in certain outputs, which are typically represented by quantities of installed equipment and material onsite.

In the event of a loss of productivity claim, one of the key pieces of missing information is typically accurate and well-maintained contemporaneous productivity records to show how the contractor managed its labor force over the life of the construction project. Construction contractors also need to be able to provide adequate productivity information to properly demonstrate their original plans to ensure they are able to perform a comparative analysis to measure differential productivity over the course of the project and identify loss of productivity issues when they occur.

A myriad of factors with potential adverse effects on labor productivity have been identified in the literature. Examples include frequent change orders, stacking of trades, lack of proper site access, crew size inefficiency, and excessive overtime. Many loss of labor productivity claims suffer because they do not contain a well-established cause-and-effect analysis to properly show how productivity factors resulted in loss of productivity in a particular case.

As part of a cause and effect analysis, a written narrative that describes the chain of events is essential. The narrative should properly establish the relationship between causes and the resultant impacts. Preparing such written description of the events, causes, and their effects is a minimum requirement for parties involved in a claim to demonstrate the cause-and-effect relationships between various events and resultant damages. Adequate supporting documents such as excerpts from the contract, change directives, meeting minutes, relevant correspondence, and filed reports can play an important role in substantiating the arguments and supporting the statements contained in the claim.

One of the methods that sometimes is used to assess causal relationships between causes and effects in complex construction claims is the system dynamics method. Complex cases of claim involve multiple claim components that are typically intertwined and interrelated; and as such, assessing these cases may require advanced methods such as system dynamics. This method is an approach within the system thinking domain which considers complex systems as a holistic set of interrelated components to provide better understanding of the system.

Four important questions that are asked in the process of developing a system dynamics model include what is the issue at hand, what is flowing into and gets accumulated in the system representing the problem, where and how does it accumulate, and what factors causes it to flow.

In system dynamics, stocks are like storage reservoirs which represent values that accumulate or decay over time. For instance, in a construction project, the project may accumulate the amount of work performed (i.e., cumulative progress) or may incur damages (i.e., cumulative damages incurred). Storage levels are increased or decreased by inflows or outflows respectively causing Units to accumulate or decay. Units can be units of measurement for monetary damages in case of a construction claim. Inflows and outflows are controlled by Rates. Examples of Rate in a construction projects include productivity or defect rates. All these elements are illustrated in a graphical representation, which is considered a insightful tool for understanding and assessing complex problems.

System dynamics has matured over the last few decades, and many software packages such as Stella, Vensim, and iThink have been developed for practitioners operating in this field. A famous case that was settled using the above-referenced approach was a $500 million shipbuilder claim against the US Navy (Cooper, 1981). For more information about system dynamics or to learn more how system dynamics may be used to assess a construction claim, please contact Adroit.

Reference: Cooper, K. G. (1980). Naval ship production: A claim settled and a framework built. Interfaces, 10(6), 20-36.

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Construction Claims and Their Types

Posted on May 4, 2017November 16, 2018 by Adroit

Dr. Maryam Mirhadi, PMP, PSP

A wide range of claims may arise between contract parties in a construction project. In case of a construction claim, one or more parties seek entitlement to time extension or compensation for damages under the terms of a legally binding contract. Construction claims can be categorized in a variety of ways and based on different criteria. This short article identifies the main construction claims and categorizes the main construction claims in a tree-like structure that can be used as a basis for identification and review of such claims.

AACE International® defines claims as “a demand or assertion of rights by one party against another for damages sustained under the terms of a legally binding contract. Damages might include money, time, or other compensation to make the claimant whole” [1]. The PMBOK Guide [2] provides a slightly different definition and states “contested changes and potential constructive changes are those requested changes where the buyer and seller cannot reach an agreement on compensation for the change or cannot agree that a change has occurred. These contested changes are variously called claims, disputes, or appeals”.

As the above definitions suggest, a claim is made when one or more parties demand their contractual rights. These demands are materialized in the form of seeking entitlement to time extension or compensation for damages.

Construction claims can be categorized in a variety of ways and based on different criteria. One may categorize construction claims based solely on responsibilities; whereas, another practitioner may prefer to categorize construction claims based primarily on their cause. The following tree-like structure provides an example structure that can be used to categorize the key types of construction claims.

As the above figure illustrates, construction claims can be categorized into the three main categories of claims against the contractor, claims against the owner, and claims against the other contract parties. Claims against the contractor can further be broken down into delay-related claims, defective construction work, tort claims, termination claims, and other claims. These claims are typically made by owners and they primarily arise when an owner finds out that the contractor has not satisfied certain contract requirements in one way or another. Under such circumstances, the owner claim arises because the owner believes the contractor has failed to perform one or more obligations required under the construction contract.

Claims against the owner are primarily made by contractors. These claims typically arise when contractors identify that some of the assumptions they made during the bidding phase are invalid. These assumptions may have been made about project scope, project specification, site conditions, or about other project requirements such as expected delivery dates of owner-furnished equipment or material. These claims can generally be categorized into delay claims, productivity / disruption claims, acceleration claims, payment claims, scope related claims, termination claims, and other miscellaneous claims.

Claims against the other contract parties can be categorized into the main groups of duty claims, warranty claims, delay claims, disruption claims, and other claims. These claims can be against a design firm that prepares and governs the design process, construction management firm that manages the construction process, or any other major contracting party that is involved in contract disputes.

Since the relationship between contract parties are governed by the terms of the construction contracts, these terms are the basis against which entitlements should be assessed and determined. In assessing construction contracts, not only contract forms and contract documents must be evaluated, contemporaneous evidence and records must also be assessed to ensure entitlements are assigned in a reasonable and equitable manner. A tree-like structure to categorize construction claims, such as the one provided above, is a good starting point to properly identify construction claims and differentiate between the types of construction claims that may arise in a construction project.

References:

[1]. AACE International®. Recommended Practice No. 10S-90 Cost Engineering Terminology. Morgantown, WV: AACE International, 2004

[2]. Project Management Institute. (2013). A guide to the project management body of knowledge (PMBOK guide). Newtown Square, PA: Project Management Institute. ISBN: 9781935589679