The rise of COVID-19 is having an unprecedented impact on economies and industries around the world. While the ramifications of a global pandemic are still unknown, organizations are responding quickly to prioritize the safety of their employees to ensure business continuity.
The Engineering & Construction industry is no exception, with companies still attempting to understand and mitigate the potential impacts to ongoing and future projects.
Join the AACE Metro New York Section on April 21st, 2020 for a free webinar to discuss the impact of COVID-19 on private infrastructure investments and the implementation of project and program risk mitigation methodologies. Adroit’s Amin Terouhid, Ph.D. will be a panelist and will share his views on the recommended measures to mitigate and quantify COVID19’s delay impacts. Here is more information about the event:
Online Webinar Tuesday, April 21, 2020 12:00pm – 1:00pm
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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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.
Construction Claims and Their Types
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.
