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The Common Issues You See In Construction Claims

January 27, 2013

Heart in HandsThere are several common issues we end up debating and that are often at the heart of a claim. These issues are:

Proper Interpretation of the Contract

Now, if the issue’s small, ultimately the interpretation issue can often be overcome, but if it’s associated with thousands, or worse, millions and millions of dollars in potential added costs, then the proper interpretation of the contract becomes a common bone of contention.

Delays

Delays are an issue in 99 percent of the claims I get involved with. It appears that it’s hard for the project team to answer questions related to delays, to come up with a way of measuring the delays that everybody can agree to, and that everybody can use as a basis for resolution of their differences.

Inefficiency

Efficiency has become more and more common of an issue. When I first started evaluating claims in 1985, inefficiencies were a rare component of a contractor’s claim. Now, it seems like virtually every claim I pick up has inefficiency as a significant component. If delays are hard to measure, inefficiencies are harder to measure.

I was in a mediation last week, and the mediator said if delays are hard to resolve or measure, then inefficiencies are the square of that in terms of difficulty. I’m not sure I quite agree with the square part, but I would say that inefficiencies are typically more difficult to evaluate than delays.

Acceleration

Tying those two things together, delay and inefficiency, is the issue

Weather and Construction: The Contract

November 04, 2012

In the following post, John Crane continues our series on Weather and Construction.

The Contract

In this Ideas & Insights, I will hopefully demonstrate that by providing the proper information and guidance in the contract documents, many common issues concerning weather can be eliminated.  Two examples of standard contract language are shown below to illustrate the questions that sometimes exist in a contract.

The 2007 edition of the AIA-A201 standard agreement states:

4.3.7.2  If adverse weather conditions are the basis for a Claim for additional time, such Claim shall be documented by data substantiating that weather conditions were abnormal for the period of time, could not have been reasonably anticipated and had an adverse effect on the scheduled construction.

And, the recently issued ConsensusDOCS states:

6.3.1  If the Contractor is delayed at any time in the commencement or progress of the Work by any cause beyond the control of the Contractor, the Contractor shall be entitled to an equitable extension of the Contract Time.  Examples of the causes beyond the control of the Contractor include…adverse weather conditions not reasonably anticipated; encountering Hazardous Materials…

These clauses leave us with the question of what is considered to be “abnormal” or could have been “reasonably anticipated.”

How Do We Determine What Is “Normal?”

Whether I am an owner wishing to eliminate such questions or a contractor wanting to determine the number of “reasonably anticipated” weather days I need to plan for, there are references, such as data available from the National Oceanic and Atmospheric Administration (NOAA), that provide historical data that can

Weather And Construction: What You Need To Know

October 07, 2012

Dealing with rain on construction projects.

The following article starts our series focused on the questions and scenarios that stakeholders need to consider when dealing with weather in construction contract documents and project schedules.

Wrestling in the Mud or Dancing in the Rain: Planning for Mother Nature

At one time or another in our construction careers, many of us have worked on projects where some “troublemaker” just did whatever they wanted to do, regardless of the effect that their actions had on our work.  In some of those instances, it seemed that no matter how well we documented the issues, at the end of the day, we had a hard time coming up with an exact method to calculate how much of a problem the “troublemaker” caused.  Mother Nature often acts as just such a troublemaker and is quite capable of creating chaos on a construction project.  She can induce havoc on the project schedule and often is the catalyst for significant disputes between owners and contractors.

Since I started work as a construction management consultant many years ago, there have been few projects that have crossed my desk that didn’t, to some extent, attempt to explain and measure the role Mother Nature played in a project finishing late.  Troubled projects often finish with a bucket full of puzzling “delays” or “impacts.”  The challenge of sorting out such complex delay claims

Differing Site Conditions: To Be or Not to Be

February 27, 2012

Encountering unanticipated subsurface conditions while driving piles or excavating is a common occurrence in construction.  If a contractor encounters a differing site condition, the path to recovery of added costs is through the contract.  As a contractor, what information should be included in your differing site condition request to demonstrate entitlement to additional contract time and compensation for the differing site condition?  Conversely, as an owner, how should the request be evaluated to determine whether the contractor actually encountered a differing site condition?  While all projects are unique, there are some conditions that have to be met to prove entitlement to compensation and time extension for a differing site condition.  However, before identifying those conditions we must first identify what, in fact, constitutes a differing site condition.

The Two Types of Differing Site Conditions

Generally, there are two types of differing site conditions. The first type (Type 1) is usually defined as instances when the contractor encounters subsurface or latent physical conditions that differ materially from those indicated in the contract.

An example of a Type 1 differing site condition may be when a contractor is driving piles and does not reach refusal at the elevations identified in the plans and specifications.

The second type (Type 2) of a differing site condition is usually defined as instances when the contractor encounters unknown physical conditions of an unusual nature that differ materially from those ordinarily encountered and generally recognized as inherent in the work at the project’s location.

An example of a Type 2 differing site

ENR Discusses The Float Debate

December 16, 2011

enr float coverThe cover story of this week’s Engineering News Record features Bill Manginelli, Ted Trauner, and Brian Furniss. The article, “Why Sharing the Float is No Utopia, But Should Be,” gives a good overview on how owners, contractors, and consultants in the construction industry view the issue of float ownership. It serves as a good follow up to the article that was posted in last month’s Ideas & Insights.

The issue hits mailboxes on December 19th. But Ideas & Insights readers can see the entire article at this link.

Who Owns the Float?

November 16, 2011

The concept of float is important to the understanding of CPM scheduling on construction projects.

Theodore J. Trauner, Jr., PE, William A. Manginelli, and Brian Furniss recently collaborated on an article entitled, “Why Owners and Contractors Should Share the Float.”

The detailed article touches on many topics including float’s definition, the different types of float, “float ownership” contract provisions, and addresses the question of “who should own the float.” If you are interested in the topic of planning and scheduling or would like to learn more about float, this article is worth reading.

The American College of Construction Lawyers and Thomson Reuters have graciously permitted us to share this article with our readers. You can access the article at this link (Why Owners and Contractors Should Share the Float Article Reprint).

The article is reprinted with permission from the Journal of the American College of Construction Lawyers, Volume 5, Number 2, Summer 2001, copyright 2011 Thomson Reuters. Further reproduction of without permission of the publisher is prohibited. For addition information about this publication, please visit west.thomson.com.

 

Update on How Different State DOTs Approach the Compensation of Home Office Overhead

August 30, 2011

In 2003, the National Cooperative Highway Research Program published the results of a synthesis study we conducted entitled, “Compensation for Contractors’ Home Office Overhead.” The complete synthesis study can be downloaded at this link. The study summarized State DOT’s practices regarding compensation for home office overhead.

In the synthesis study, each state’s practices were grouped as the Avoidance, Compliance, or Proactive Model. Of the twenty-six states that responded to our questionnaire:

  • Five states reported that they never paid for home office overhead (Avoidance Model)
  • Thirteen of the states paid for home office overhead based primarily on court and board precedent (Compliance Model).
  • Eight of the states responded that they address payment of home office overhead in their standard specifications (Proactive Model)

In the Synthesis Study’s concluding remarks, we stated:

“Over the next few years, it might also be worthwhile to structure a study of the Florida, Ohio, and California approaches to evaluate whether any have succeeded in achieving the objectives for owners and contractors as discussed in this synthesis.”

Recently, AASHTO’s Subcommittee on Construction, Contract Administration Section, followed up with these states to get a sense of the effectiveness of their procedures, whether there were any updates to them, and where these procedures could be found. Here is a brief summary of each state’s responses as outlined in AASHTO’s document.

Ohio Department of Transportation (ODOT)

AASHTO’s follow-up states that ODOT “developed a procedure that may be applied simply without an audit, and without debating and negotiating allowable overhead cost on each contract.” They

Requesting Time Extensions: To Wait or Not to Wait?

July 11, 2011

Contractors struggle with the eternal question: “When is the right time to request a time extension from the owner?” Even when the owner is clearly responsible for critically delaying the project, they may be reluctant to submit a time extension request right away.

The window for submitting a time extension request can vary from during or directly after the owner critically delays the project to after the project is complete.  Contractors often put off submitting a time extension request.  The reasons may include believing they can’t develop a convincing and properly documented request or delaying the submission to “maintain a good working relationship” with the owner.

The Consequences

Not requesting a time extension in a timely manner may have unintended contractual, financial, and delay-mitigation consequences.  Potentially, these are:

  • Contractual: Most contracts contain notice requirements that are imbedded within specific contract provisions, like the time extension provision, that require the contractor to submit a request for additional contract time within a specific time frame. By not submitting within the required time frame, the contractor may waive its right to recover additional compensation related to that delay.  By waiting until the end of the project and choosing not to submit a time extension request in accordance with the contract, the contractor may inadvertently waive its right to recover extra contract time and delay damages.
  • Financial: If the contractor can demonstrate that the owner delayed the project and caused it to incur delay damages (extended field office overhead, unabsorbed home office

The Current Climate of Weather Delays

June 01, 2011

As children, a snow day was a dream come true. But for contractors, severe weather can be a nightmare. That’s because it’s hard to properly account for the risk of weather and still remain competitive, especially in the current economic climate.  The delays and costs can be severe, which is only compounded by liquidated damages if the contractor can’t prove entitlement to a time extension.

Each region of the country has a distinctly different climate that produces unique challenges for the local construction industry. While weather is unpredictable, knowing how to define and deal with weather-related issues will help contractors and owners avoid an avalanche of disputes.

The following article will cover typical requirements for establishing entitlement to a time extension due to weather, emphasizing the importance of understanding your contract’s weather-related time extension provisions.

Proving entitlement to a time extension for weather requires one to establish two things:  entitlement and impact.

Entitlement

Establishing entitlement to a time extension for weather involves convincing the owner that he or she has an obligation to increase the time provided in the contract to complete the project work.  It should come as no surprise that the contract is important to this discussion.  It is common for time to be “of the essence” in a construction contract.  It is also common for “contract time” or the contract completion date to be terms defined by the contract.  In addition, given the contract’s role in defining the sharing of risk, especially the considerable risk associated with weather, it is common for

Powerful Tools for Successful Project Management

May 23, 2011

Introduction

Whether you are an entrepreneur, leader in a large corporation, or fall somewhere in between, proper use of project management tools can help you successfully deliver large tasks or projects on time and within budget. Unlike other management trends, project management is founded on a proven record in the segments of the working world where it has long been used with success, like the construction industry.   With a little training and practice you can apply their proven methods to your work, too.

What is Project Management?

Project management is both a process and a set of tools and techniques concerned with defining the project’s goal, planning all the work to reach the goal, leading the project and support teams, monitoring progress, and seeing to it that the project is completed in a satisfactory way.  The key term in this definition is the word “project.”  A project is a specific product, event, or outcome; it is not an ongoing process.  For example, the operation of the HR department is not a project; it’s an ongoing process.  Implementation of a new health insurance program, however, is not ongoing.  It is a particular event or outcome – a project.  Many of the things we do every day are best viewed as projects; from the mundane – preparing dinner – to the complex – developing a new drug and getting it approved by the FDA.  The advantage of seeing an objective in this light is that it allows you to immediately recognize the need for the

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