There is one undeniable truth in construction, delays are inevitable. When a delay occurs, there is often little agreement on who the responsible party is. However, sometimes it’s obvious that one party is responsible for the delay, in which case we often see that party making a different argument: that its delay was concurrent with another delay caused by the other party. This is a “concurrent delay” argument. Concurrent delays are generally defined as two or more delays occurring at the same time.
Typically, the party that makes the concurrent delay argument often does so to mitigate, or even eliminate, its responsibility for delaying the project. Owners cite concurrent delays by the contractor to avoid issuing time extensions or avoid paying the contractor its extended general condition costs when owed a time extension. Similarly, contractors rely on concurrent delays to avoid responsibility for liquidated damages.
So how can you successfully defend against a concurrent delay argument that could either prevent you from recovery of compensation if you’re a contractor, or prevent you from assessing liquidated damages if you’re an owner?
What Does the Contract Say?
The first thing to consider is, as with all construction disputes, what does the contract say. Contracts sometimes, albeit rarely, define concurrent delays and specify the contractor’s compensation when concurrent delays occur on a project. For instance, Section 1806.2.D, Concurrent Delays, of the Minnesota Department of Transportation Standard Specifications define concurrent delays fairly clearly:
Concurrent delays are independent sources of delay that occur at the same
When a project is delayed, contractors are often exposed to increased costs that were not anticipated at the time of bid. Higher fuel and energy costs are some of these unanticipated increased costs, and they can have a significant impact on whether a contractor is profitable on a project or not. With energy prices soaring and analysts forecasting no relief any time soon, now more than ever, contractors need to be aware of the impact these costs can have and how to recover for those increases when a project is delayed. This article discusses the impact that rising fuel and energy costs may have on a contractor as a result of project delays, what is required to establish entitlement to recover those unanticipated costs, and what documentation is generally required to substantiate a request for higher fuel and energy costs.
The Impact of Project Delays on Fuel and Energy Costs
When a contractor is required to perform on a project longer than it originally anticipated, it may be exposed to increased time-related costs. These costs can include costs associated with operating equipment, providing temporary facilities, running generators, or fueling vehicles during a time period in which increased fuel and energy prices are much higher than was contemplated in the contractor’s bid. This type of delay-related damage is often referred to as “escalation” costs, and these escalation costs can have a significant impact on a
(You may be interested in our previous series on inefficiency, with three separate articles on “Quantifying Inefficiency: Comparing
Comparisons.” While it is not necessary to read these all in order of publication, those other three posts provide some context for some of the terms discussed here. You can find links to those first three blog posts HERE.)
In our previous articles about quantifying inefficiency on construction projects, we focused on measuring inefficiency by comparing productivity ratios. The difference among the previous three methods was the source of
the baseline productivity value used in the calculation. The baseline productivity value used in the previous calculation methods were:
1) the achieved productivity on the same project; 2) the achieved productivity from a different, but similar project; and 3) the planned productivity from the contractor’s bid.
However, often in construction projects, depending on the work being performed, the circumstances in which the work is performed, or the documentation maintained, it may be impractical or even impossible to track productivities such that a measured mile analysis, which compares the work performed over the resources expended, can be performed. So, in these situations, in lieu of using the measured mile analysis, a fourth approach can be utilized.
This fourth approach is a method that combines elements of both an earned value analysis and a measured mile analysis. It utilizes the contractor’s actual revenue earned for a construction project and calculates the contractor’s inefficiency by comparing its revenue in a manner similar to a measured mile approach. Instead of comparing the
A Time Impact Analysis (TIA) is a schedule delay analysis methodology that is used to estimate the project delay that was or will be caused by an event. Generally, the event is modeled as an activity or group of activities, known as a fragmentary network or “fragnet,” which is then inserted into a critical path method schedule to quantify the resulting delay.
Typically, to substantiate a time extension request, public owners specify that a TIA be prepared and submitted by its contractors to quantify the project delay that would result from added or changed work prior to the performance of that work. This type of TIA which is submitted before the added work is performed, is called a Prospective TIA.
While a contractor may attempt to comply with the contract requirement of a TIA to demonstrate its alleged delay, contractors’ TIA submissions often contain errors that make the analysis results ineffective or unreliable. The following are five mistakes that are commonly made in the preparation or submission of a TIA.
Late Submission: When a TIA is a contract requirement, the timing of the submission is critical. Often contracts will specify the time frame in which the contractor must submit a TIA. This is to provide notice and allow the owner the opportunity to evaluate the potential time impact and attempt to mitigate the potential
(This is the third posting in our series on “Quantifying Inefficiency: Comparing Comparisons,” and it is encouraged that they be read in sequence: Part I, Part II.)
In Part I of our blog series on “Quantifying Inefficiency: Comparing Comparisons,” we introduced the fundamentals of inefficiency and detailed the most reliable way of analyzing and quantifying the impact that work performed inefficiently can have on a construction project: the measured mile analysis. However, we also explained that the measured mile analysis requires both an “impacted” and “unimpacted” period on the same project. In cases where that does not exist, the next approach is to compare the actual productivity achieved on the project in question to another, similar project that was performed previously.
In Part II of this blog series, we laid out the approach of comparing the impacted productivity experienced on the current project to that of an unimpacted productivity experienced on a past project. As part of this analysis approach, it is incumbent on the analyst to use actual productivities achieved on a previous project that is as similar as possible to the impacted project to minimize productivity loss that may be attributable to factors not related to the impact or impacts on the current project. In either approach, the quantification of the inefficiency percentage experienced by a contractor is as follows:
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In Part I of our blog series on “Quantifying Inefficiency: Comparing Comparisons,” we introduced the fundamentals of inefficiency and detailed the most reliable way of analyzing and quantifying the impact that work performed inefficiently can have on a construction project: the measured mile analysis. As discussed in Part I, the measured mile analysis compares the productivity in an unimpacted period of performance and an impacted period of performance of the same operation to quantify the contractor’s inefficiency using the simple formula below:
However, when an impacted project has no period of performance that can be classified as unimpacted or nearly unimpacted, then there is no reliable and easily identifiable “unimpacted” period of performance on that project to use as the baseline period of productivity. Thus, the version of the measured mile analysis described above that uses the “impacted” and “unimpacted” periods of performance from the same project cannot be used to accurately quantify the contractor’s inefficiency. This is because the formula in this scenario, by relying on the achieved productivity of the same operation on the same project, in most cases will underestimate the contractor’s lost productivity.
Consider the following example. Project A, originally planned to begin in late summer with site excavation work, has its
As discussed in the introductory post to this series on inefficiency, when a contractor’s operation experiences a reduction in productivity the result is usually the expenditure of more labor and/or equipment hours than it originally estimated. These additional labor and/or equipment hours, in turn, can result in significant losses that will negatively affect a contractor’s profitability. Often, the impacts responsible for contractor’s inefficiency were not within its control and, as such, the contractor may be entitled to recover its additional costs resulting from the inefficient operation.
The contractor’s ability to recover its additional costs resulting from the inefficient operation can be determined by the contract. If the contract is silent, then typically the contractor would have to determine who or what was responsible for the impact that caused its operation to be inefficient. Typically, if the impact was a force majeure event, then the contractor may not be able to recover additional costs from the owner. However, if the contractor can demonstrate that the impact and its expenditure of additional labor and/or equipment costs was caused by the owner or could be attributable to the owner, then the contractor should be able to recover its additional costs.
However, in order to determine the extent to which its operation was inefficient and to calculate the additional costs that it may be entitled to recover, it is crucial
For contractors, profitability is the utmost concern on most, if not all, projects. Whether or not a contractor is profitable, and just how profitable they are, depends on how they perform in comparison to their bid. One of the most significant portions of a contractor’s bid involves the amount of manhours and, if applicable, equipment hours necessary to complete its scope of work for the project.
To estimate the number of manhours and/or equipment hours that are necessary to complete its scope of work, a contractor must first determine the planned rate of production it believes it is able to achieve. This requires the contractor to calculate how many manhours and/or equipment hours that it needs to expend to complete a specific quantity of work. The contractor will then multiply its planned rate of production across the quantity of work in its scope for the particular project, in order to calculate its budgeted manhours and/or equipment hours to complete said scope of work.
For example, a contractor is building a 200’ long, 4’ high CMU retaining wall. Assuming standard 8”x16” block is being used, the contractor knows that they need at least 900 blocks to construct the wall. The project also requires that the wall be built in 3 workdays. Therefore, the contractor knows it must lay at least 300 blocks per day to accomplish the
In our previous Concurrent Delay posts, we defined concurrent delays and described how the identification of concurrent delays depended on the definition of the “critical path.” In this second part of our “How to Identify a Concurrent Delay” series, we will discuss the two different concurrent delay theories.
AACE International’s Recommended Practice No. 29R-03, Forensic Schedule Analysis, identifies these two types of concurrent delay theories as literal concurrency and functional concurrency. The basic difference between the two is the “timing” of the alleged delays. Under the literal concurrency theory, for two delays to be considered concurrent, the alleged delays must delay the project’s critical path and the forecast completion date at “the same time.” Said another way, the two delays must occur simultaneously.
Under the functional concurrency theory, the alleged delays must only delay the project’s critical path within the same analysis time period, which is typically between consecutive schedule updates, and are not required to have actually occurred on the same days.
In terms of quantifying the concurrency of two alleged concurrent delays, a literal concurrency adherent would argue that the project schedule enables the parties to identify the initial critical path work activity on a daily basis, thus enabling the parties to likewise identify the days during the schedule update period when the alleged concurrent delays were literally concurrent. A functional concurrency adherent would argue
In previous posts, we discussed why owners and contractors often argue for the existence of concurrent delay and how concurrent delay is defined. This post will be the first of two posts that will tackle how to identify a concurrent delay. As detailed in the previous post, in order for two delays to be concurrent and for one delay to negate one party’s responsibility against another’s, the delays must be concurrently critical. This means that both delays must be capable of delaying the project’s completion date.
As such, the first piece to the puzzle in identifying concurrent delays is related to how the “critical path” or “criticality” is defined. It is generally uncommon for construction contracts to define the term “critical path,” and this lack of a contractual definition means that we’re left to industry standard definitions to fill the void. Arguably, there are two industry standard definitions of the critical path: (1) the longest path, and (2) all activities with total float values of zero or less. However, there’s a clear trend that the longest path definition is the more readily accepted definition of the critical path, as the total float value-based definition can sometimes produce unreliable results due to the use of multiple work calendars that show or limit when particular work can occur during the year. Because work calendars identify the available
