Contract Time and Claims Construction Engineering 380

Contract Time and Claims Time is not usually part of consideration (like money), and delayed performance is common in construction Hard for owner to press termination and breach claims for delays Also hard to get relief from delay unless clear and specific damages can be shown or unless there are express contractual terms (must not be unconscionable)

Contract Time and Claims Commencement usually denoted by a Notice to Proceed order from owner (a letter along with necessary permits) There can also be contractor notification clause in the contract stipulating that the contractor send written notice that work has begun

Contract Time and Claims Constructive acceleration claim is generated by owner’s refusal to grant a time extension for changes in scope or condition Contractor must then spend more money to stay on original schedule, justifying the claim for recovery Can also have a request for early completion, handled like a standard (contract) change order Sometimes contractors can be prevented from early finish because of hardship on owner

Contract Time and Claims Project Schedule is often required under contract terms and can have legal standing in the case of a litigated claim Advent of CPM schedules, which establish relationships in activities, have made claims more complex but also probably made relief more realistic

Contract Time and Claims Start with activities and durations on WBS Determine relationships between activities Longest path through network is critical Key is to understand the relationships Must be able to re-run schedule as certain activity durations change. If activity is on critical path, delay is automatic, if it is not critical, then must examine if activity falls within float or creates a new critical path

Irwin/McGraw-Hill ©The McGraw-Hill Companies, 2000 WBS/Work Packages to Network Circuit board Design cost account Production cost account Test cost account Software cost account Lowest element OrganizatioUnitsOrganizatioUnits Design WP D-1-1 Specifications WP D-1-2 Documentation Production WP P-10-1 Proto 1 WP P-10-2 Final Proto 2 Test systems WP T-13-1 Test Software WP S-22-1 Software preliminary WP S-22-1 Software final version B Proto 1 5 D Final proto 2 4 A Specifications and documentation 2 C Preliminary software 3 F Final software 2 K Test 3 A D-1-1 D-1-2 B P-10-1 D P-10-2 F S-22-2 K T-13-1 C S-22-1

Irwin/McGraw-Hill ©The McGraw-Hill Companies, 2000 Activity-on-Node Network Fundamentals KOLL BUSINESS CENTER County Engineers Design Department EF

Irwin/McGraw-Hill ©The McGraw-Hill Companies, 2000 Activity-on-Node Network Forward Pass EF KOLL BUSINESS CENTER County Engineers Design Department

Irwin/McGraw-Hill ©The McGraw-Hill Companies, 2000 Activity-on-Node Network Backward Pass LS KOLL BUSINESS CENTER County Engineers Design Department

Irwin/McGraw-Hill ©The McGraw-Hill Companies, 2000 Activity-on-Node Network with Slack LS EF KOLL BUSINESS CENTER County Engineers Design Department

Irwin/McGraw-Hill ©The McGraw-Hill Companies, 2000 Example of Laddering Using Finish-to-Start Relationship Trench 1/3 Lay pipe 1/3 Refill 1/3 AON network

Irwin/McGraw-Hill ©The McGraw-Hill Companies, 2000 Figure 4-16 Finish-to-Start Relationship XY Lag 2

Irwin/McGraw-Hill ©The McGraw-Hill Companies, 2000 Figure 4-17 Start-to-Start Relationship Activity M Activity N Activity P Activity Q Lag 5 A B

Irwin/McGraw-Hill ©The McGraw-Hill Companies, 2000 Figure 4-18 Use of Lags to Reduce Detail Trench 1 mile Lay pipe 1 mile Lag 3 Refill 1 mile Lag 3

Irwin/McGraw-Hill ©The McGraw-Hill Companies, 2000 Figure 4-19 Finish-to-Finish Relationship Lag 4 Prototype Testing

Irwin/McGraw-Hill ©The McGraw-Hill Companies, 2000 Figure 4-22 Network Using Lags Legend Lag 5 Lag 10 Lag 5 Lag 10

Irwin/McGraw-Hill ©The McGraw-Hill Companies, 2000 Figure 4-23 Hammock Activity Example Legend

Network Plans Activity- unit of work requiring time Merge activity- dependent on prior activity Burst activity- dependent on post activity Parallel activities- can occur simultaneous Path- sequence of connected, dependent activities Event- zero duration activity (start, end)

Network Plans Node marks activity (Activity-On-Node) Every activity has a node Arrow marks relationships 3 relationships must be known –predecessor activities –successor activities –parallel activities

Network Plans When relationships and activities are known, add durations Make forward pass for ES and EF days –add activity times starting from zero –always choose longest EF number Make backward pass for LS and LF days –set EF to LF or use contractual completion –subtract durations starting with end node –always choose smallest LS number

Network Plans Calculate slack (float) times –LS-ES –LF-EF –nodes with positive number can have delayed start without impacting overall project end –nodes with zero are on the critical path –negative slack means a prior node has delay –on average, 10% of activities are critical

Network Plans Check for logic loops and number errors Create ES Gantt chart (easier to read) Add calendar dates w/ weekends & holidays Use ladder activities when starts are dependent but finishes aren’t Note lag activities (conc. cures, shipping) Start-to-start lags are like laddering

Contract Time and Claims Causation can be by: –contractor (owner can file claim or liquidated damages allowed), –Owner (contractor can file claim for delay or acceleration) –No-cause (accidental fire)- no claims –Mutual cause- no claims

Contract Time and Claims Risk allocation and sharing applies to time similarly to money (as in earlier lecture) Force majeure clauses list specific events for which the contractor will be granted an extension Liquidated damages, no-damage-for-delay clauses, and excusable/inexcusable delay were covered in previous lecture

Contract Time and Claims Claims (Chapter 27) are largely two-phase process –Is the claim legitimate under the contract and conditions (what are the facts) –If yes- how much should the damaged party receive (determination of award) –The determination of award is largely a measurement problem, as outlined in the book

Contract Time and Claims Eichleay formula allows contractors to add standard overhead costs to actual costs incurred. Overhead is calculated on a pro- rated daily basis- if your light and heat bill is $100 per day, and you had to stop work for 5 days, you would be entitled to the $500 (oversimplified case)

Contract Time and Claims Certainty principle precludes speculative claim (I would be a starting pitcher for the Yankees if I hadn’t hurt my back) Certainty principle makes documentation and record keeping critically important in providing support for a claim Consequential damages must be foreseeable at the time of the contract

Contract Time and Claims Both parties have a duty to mitigate- cannot exploit, cannot recover damages that you could have avoided- moving capital equipment onto the job Collateral source rule tries to keep costs and benefits in line Non-economic losses, punitive damages generally not awarded in construction, but issue of contorts is developing