thefundamentalsofconstructioncontractspresentationpeabody12!11!08 3

UnderstandingTheIssues

PresentedbyMagA.Risk,P.E.Principalp

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The Fundamentals of Construction Contracts, Peabody, MA 12/11/08 2

Typesofdelayyp y

The Fundamentals of Construction Contracts, Peabody, MA 12/11/084

1. Critical orNonCritical2. Excusable orNonExcusableC N C 3. Concurrent orNonConcurrent4 Compensable orNon4. Compensable orNon

Compensablep


TypesofDelayTypesofDelay

NonCriticalDelays: Impactaportionoftheworkwithavailablefloat Impactaportionoftheworkwithavailablefloattimeallowingtheprojecttobecompletedontime

CriticalDelays: Impactaportionoftheworkexceedingfloattimeavailableanddelayingtheproject


CriticalDelaysCriticalDelays

ExcusableDelayAdelaybeyondthecontrol orfaultofacontractorAdelaybeyondthecontrol orfaultofacontractororowner(e.g.ForceMajeurecausesincludingweather fire flood&actofGod)weather,fire,flood&actofGod)

N E bl D l NonExcusableDelayThecontractorsfault


Excusable DelayExcusable Delay

NonCompensable:Contractorentitled toatimeextension butnot toContractorentitled toatimeextension butnot todelaydamages

Delaydueto: h d lWeatherdelayStrikesActsofGod


Non Excusable DelayNonExcusable Delay

NonCompensable:Thecontractorsfault Contractorisnotentitled toThecontractor sfault.Contractorisnotentitled toatimeextension andowner mayassessliquidateddamages oractualdamages(ifcontractdoesdamages oractualdamages(ifcontractdoesincludeprovisionforliquidateddamages)

Delaycausedbyeventswithinthecontrolofthecontractorandcouldhavepotentiallybeenavoidedcontractorandcouldhavepotentiallybeenavoidedhadthecontractorexercisedcare


Excusable/Compensable/ pProofofDelay

ContractormustproofthatdelayscausedbytheContractormustproofthatdelayscausedbytheownerextend theprojectcompletionbeyond thedateattributabletoitsowndelaydateattributabletoitsowndelayDelaymustbeonthecriticalpath

l b h blDelaycannotbeconcurrentwithExcusable/Noncompensabledelay


FormalRequestsFormalRequests

Requestsforatimeextensionand/oraddedcompensationmustbemadeformally:compensationmustbemadeformally:ComplywithContractNoticeRequirementsP id ti d t tiProvidesupportingdocumentation:

AF d i i ld fi h AFragnet depictingtotaldaysofimpacttothecriticalpathAd t il d tb kdAdetailedcostbreakdown


ExampleofaExampleofaFormalRequestFormalRequest


December 1, 2006 Mr. Owner 1000 Any Road New York, NY 01000 Subject: Request for Time Extension- Change Order 001 Reference: Contract Agreement Dear Mr. Owner, In accordance with our contract requirements listed in Section 5.3 Changes in the Work of A121 and Article 7 of A121

and as a follow-up to our meeting on 6/29/06, we hereby, request a time extension to the contract milestone completion date from March 7, 2007 to July 9, 2007, one hundred (100) days time extension. Please execute Change Order 001, copy attached, to modify the terms of Section 7.1.4 of A121 and to extend the contract completion in accordance with the attached progress schedule. Change Order 001 shall also reflect the net increase in the present lump sum agreement for general conditions at a monthly rate of $100 000 00 attributable toincrease in the present lump sum agreement for general conditions at a monthly rate of $100,000.00 attributable to the Construction Managers general conditions through May 7, 2007 (the forecasted completion date for all buildings, but H) and $50,000.00 per month from May 8, 2007 through July 9, 2007 (the forecasted completion date for building H). The completion date of July 9, 2007 incorporates all progress through 6/30/06 and reflects the ongoing delay due to the issuance of completed design documents for the various buildings. Our current project schedule, copy of which is attached for the Architects review and your approval reflects the following completion dates:

Milestone Completion Date Turnover of Pad for Building F October 19, 2006 Turnover of Buildings G, D, A, B, J & K May 7, 2007 Turnover of Building H July 9, 2007 The current completion date of July 9, 2007, for building H incorporates the current design delivery dates received from the Architect on 6/29/06 reflecting the following:from the Architect on 6/29/06 reflecting the following:

Building Design Review Committee Approval

Shell to Consultants

Early Steel, Concrete &

Brick

Foundation Permit

Drawings

100% CD

H 7/24 8/4 8/25 8/28 9/29 Due to the lack of detailed completed drawings, we are unable to incorporate sufficient detail for the steel p g , psequencing and erection for building H into the attached progress schedule. Once the completed drawings become available, we shall incorporate such detail and notify you of any additional requirements and/or impacts to the completion dates. We shall also have the ability to notify you of any additional requirements to perform work in winter conditions due to the slippage directly attributable to the delay in the delivery of completed design documents. The c rrent design for b ilding H is still in concept al form We reser e o r right to additional req ests for timeThe current design for building H is still in conceptual form. We reserve our right to additional requests for time extensions based on the actual design, delivery dates, detailing of the sequencing and erection of steel activities for building H, as may be applicable.


ManagingRiskManagingRisk

Theprocessofmeasuring,orassessing risk anddevelopingstrategies tomanageit developingstrategies tomanageit.

TypesofRisk1 Contractual1. Contractual2. Construction


ContractualRiskContractualRisk


ContractualRiskContractualRisk

1. NoDamageForDelay

Contractor'ssoleremedyfordelay,lossofproductivity impactdamagesorotherproductivity,impactdamagesorothersimilarclaimsshallbeanextensionoftimei hi ht l t th k I tinwhichtocompletethework.InnoeventshallContractorbeentitledtoadditionalcompensationordamages fordelay."


NoDamageForDelayNoDamageForDelay

Th h ll t b li bl i Theownershallnot beliableinmonetarydamages forthecostofy gdelayswhicharisefromactsor

i i f hi hth i omissionsforwhichtheowner isresponsiblep


ContractualRisk

2. LimitedDelayDamages2. LimitedDelayDamages

TheContractorssoleremedyforanydelayinthecommencement,prosecution,orcompletionoftheWork,orforhindrancetotheperformanceoftheWork,lossofproductivity orothersimilarclaims shallbeanincreaseinproductivity,orothersimilarclaims,shallbeanincreaseintheContractTime unlesscausedbyactsconstitutingintentionalinterferencebytheOwner.TheContractorshall

fbeentitledtoanincreaseintheGeneralConditions iftheContractorsGeneralConditionshaveactuallybeenincreased asaresultofadelaytothecriticalpathoftheincreased asaresultofadelaytothecriticalpathoftheProjectSchedule causedbytheimproperactsoromissionsoftheOwner.


Reduce/EliminateContractualRiskReduce/EliminateContractualRisk

D l D3. DelayDamages

"IntheeventthatContractor's IntheeventthatContractor sperformanceisdelayedorhindered,throughnofaultofitsown Contractorthroughnofaultofitsown,Contractorshallbeentitledan extensionoftimecorrespondingtothenumberofdaysitsco espo d g to t e u be o days tsperformancewasdelayed,andshallbeentitledtoadditionalcosts relatedtosuchdelayorhindrance."


SubcontractorsRecoveryofDelayDamagesfromGeneralContractorfromGeneralContractor

4 ConditionalRecovery4. ConditionalRecovery

"Subcontractoragreesthatitshallnotbeentitledtonor Subcontractoragreesthatitshallnotbeentitledtonorclaimanycostreimbursementordamagesforanydelay,obstruction,hindranceorinterferencetotheWork,, ,excepttotheextentthatGeneralContractorisentitled tocorrespondingcostreimbursement,compensationord f h O d h C D damagesfromtheOwner undertheContractDocumentsandthenonlytotheextent oramount,ifany,whichGeneralContractoronbehalfofSubcontractoractuallyGeneralContractoronbehalfofSubcontractoractuallyreceivesfromtheOwner onaccountofsuchdelay,obstruction,hindranceorinterference.",


ConditionalRecoveryConditionalRecovery

Subcontractorsrecoveryofdelaydamagesisy y gcontingent uponthecontractorprevailing initsclaimfordelaydamagesagainsttheownerclaimfordelaydamagesagainsttheowner


AIAGeneralConditionsoftheContractforConstruction

Delays&ExtensionsofTime8.3.1IftheContractorisdelayedatanytimeinthecommencementorprogressof

theworkbyanactorneglectoftheOwnerorArchitect,orofanemployeeofeither,orofaseparatecontractoremployedbytheOwner,orbychangesorderedeither,orofaseparatecontractoremployedbytheOwner,orbychangesorderedintheWork,orbylabordisputes,fire,unusualdelayindeliveries,unavoidablecasualtiesorothercausesbeyondtheContractorscontrol,orbydelayauthorizedbytheOwnerpendingmediationandarbitration,orbyothercauseswhichthe

h d f d l h h h ll b d dArchitectdeterminesmayjustifydelay,thentheContractTimeshallbeextendedbyChangeOrderforsuchreasonabletimeastheArchitectmaydetermine.

8.3.2ClaimsrelatedtotimeshallbemadeinaccordancewiththeapplicableprovisionsofParagraph4.3

8.3.3Thisparagraph8.3doesnotprecluderecoveryofdamagesfordelaybyeitherpartyunderotherprovisionsoftheContractDocumentsby e t e pa ty u de ot e p o s o s o t e Co t act ocu e ts


OwnersRemedytoRecoverDamagesforDelay

5. LiquidatedDamages

Anagreeduponamountperdayfor Anagreeduponamountperdayfordelaysencounteredontheprojectwhich

db th t t arecausedbythecontractor


OwnersRemedytoRecoverDamagesforDelay

6. ConsequentialDamages

7 ReverseLiquidatedDamages7. ReverseLiquidatedDamages Ratherthanprohibitdelaydamages,thepartiesmay

th tth li bilit t th t t h llagreethattheownersliabilitytothecontractorshallbelimitedtoanagreeduponamountperdayfordelaysencounteredwhicharecausedbytheownerdelaysencounteredwhicharecausedbytheowner.


RiskAllocationRiskAllocation

Generally acontractormayrecoverdamagesGenerally,acontractormayrecoverdamagesarisingfromdelay&disruptionifitcanprove:

1. Thecontractorsworkwasdelayed ordisrupted2. Thecontractorsuffered damagesasaresult3. Theownerand/oritsagentsareresponsible forthe3 g p

actsoromissionswhichcausedthedelayordisruption

4. Thelanguageofthecontractallows thecontractortorecoverdamagesfordelayordisruption


RiskAllocation

PartiestoaconstructioncontractmayelecttoPartiestoaconstructioncontractmayelecttoprohibitorlimitcompensabledelayclaims:

Contractualclausesgoverningtherights&liabilitiesforprojectdelaysallocate riskforprojectdelaysallocate risk

ReviewtheprovisionsofyourcontractpriortoReviewtheprovisionsofyourcontractpriortoexecutiontounderstandhowthesubstantialrisksassociatedwithprojectdelayshavebeenrisksassociatedwithprojectdelayshavebeenallocated


ChangesintheWorkChangesintheWork


ChangeOrdersChangeOrders

Awrittenorder issuedafter acontracthasbeenawardedthatincreases ordecreases thescopeofworkandmodifies thecontractdollaramountforaproject.


AChangeOrdercouldbeIssuedbyanOwnerasaResultof:

Unforeseenor nanticipatedfieldconditions1. Unforeseenorunanticipatedfieldconditions2. Correctionofdesigndiscrepancies,orerrorsor

omissionsinthecontractdocuments3. Ownerrequestedchangestoenhancetheg

presentdesign4. Changesinthecompletiondate4. Changesinthecompletiondate5. Changesinbuildingcodeinterpretations6 Ch i il bilit f i ti 6. Changesinavailabilityofexistingornew

materialandproducts


ChangeCategoriesChangeCategories

1. DirectedChanges Areacknowledgedchangesbytheownertoa Areacknowledgedchangesbytheownertoa

contractedscopeofwork

Examples h d f d f k Architectmodifiescontractedscopeofwork Ownerwishestomakebettermentsand/or

b tit ti f d tsubstitutionsofproducts



2. ConstructiveChanges Arenot readilyacknowledgedbytheownertoa Arenot readilyacknowledgedbytheownertoa

contractedscopeofwork

Examples f k f l Performingworkoutofnormalsequence Actualjobconditionsaredifferentthanthey

d tti fbidappearedattimeofbid Requestingtimeextensions



3. CardinalChange Takeaprojectbeyond theoriginalscopeofwork Takeaprojectbeyond theoriginalscopeofwork

thatwascontracted EntitlementisnotassertedbyContract Entitlementisnotassertedby Contract

adjustmentprocedures

Examples Ifyouwerecontractedtobuildagarageandthe

ownerdecidestoaddahousetotheproject


ClaimsAndDisputesp


CausesofConstructionClaimsCausesofConstructionClaims

1. ProjectDelay

Delaysinconstructionprojectsareexpensivebecause:

thereisusuallyaconstructionloaninvolvedwhichchargesinterestg

managementstaffdedicatedtotheprojectwhosecostsaretimedependentandp

ongoinginflationinwageandmaterialprices



2. Acceleration tomeetContractMilestoneDates: ContractDateshavenotbeenextended ContractDateshavenotbeenextended ContractorsobligationresultsinConstructive

AccelerationAcceleration

9 Remedies: Progresstheschedulebi weeklyormonthly Progresstheschedulebiweeklyormonthly Determinepercentcomplete relativetoBaseline Id tif d l d ibilit Identifydelaysandresponsibility DevelopRecovery plans



3. LackofCoordinationbyOwnerorCM TypeofContractdictatesresponsibilities(Multi TypeofContractdictatesresponsibilities(Multi

PrimeContractingvs.Single) LackofManagement considertheenormous LackofManagement:considertheenormous

effortrequiredtocoordinatetheactivitiesof1500tradesmenonaprojectduringpeakperiodstradesmenonaprojectduringpeakperiods

ExcessiveManagement:considertheinefficienciesassociatedwithmicromanagementinefficienciesassociatedwithmicromanagement



4. ChangesintheWork ChangesinWorkSequence ChangesinWorkSequence ToomanyChangeOrders (turnedouttobe

Design/Build)Design/Build)

9 Remedies: Analyzeimpact:insertproposedchangeorder

intoprogressschedule



5. WorkRestrictions&LimitationsofOperationsOperations Accessrestrictionstocontractorswork W kh t i ti Workhoursrestrictions Noiserestrictions

9 Remedies: Includeallrestrictionsandlimitationof

operationsinthecontract.


SupportingConstructionClaimsSupportingConstructionClaims

TimelyNoticesComplywithNoticerequirementsinthecontractComplywithNoticerequirementsinthecontractReserveyourrights

SupportingDocumentation:pp gCostImpactScheduleImpact(Fragnets)ScheduleImpact(Fragnets)


TypesofContractorDelayDamagesTypesofContractorDelayDamages

1 DirectCosts1. DirectCosts2. IndirectorConsequentialDamages


DirectCosts

a) Mobilization/Demobilizationcostsb) Costsofstandbytime/idleequipmentc) Extendedgeneralconditions&fieldofficeg

overheadd) Extendedhomeofficeoverheadduringdelay) g y

periode) Increasedlabor&materialcostse) Increasedlabor&materialcostsf) Lossofproductivityduetodelaysandhavingto

altermethodsofperformancealtermethodsofperformance


ReserveYourRightsReserveYourRights

SubmitformalNoticeofDelaytimely Sometimesyouareunabletoascertainimpact Sometimesyouareunabletoascertainimpactearlyon:AcknowledgeimpactcannotbedeterminedatthistimeReserveyourrightstofuturerequests


LanguagetoLanguagetoReserveYourRightstoFutureRequests WeherebyreserveourrightstosubmitrequestsWeherebyreserveourrightstosubmitrequestsforadditionalunforeseenconditions.Additionalrequestsshallinclude butnotbelimitedto timerequestsshallinclude,butnotbelimitedto,timeextensions and/oraddedcosts tocompensateustoperformadditionaloutofscope work toperformadditionaloutofscope work.


DevelopingStrategiesDevelopingStrategiest M Ri ktoManageRisk


FactorsContributingtogConstructionRisk

IncompleteDesign Ambiguousplans Ambiguousplans CoordinationoftheWorkbyOwnerorCM Interferences/Unanticipatedconditions ChangesintheSequenceoftheWorkChangesintheSequenceoftheWork ExcessiveChangeOrders LackofProgressbyOtherTrades


ProjectRiskPlanningProjectRiskPlanning

Projectplanning isamust

CommonPitfalls

ThechallengesonemightencounterinanThechallengesonemightencounterinanorganizationthatfeelsaprojectplanningmethodologyisnotneededmethodologyisnotneeded.


ProjectPlanningProjectPlanning

IspartoftheProjectManager'sarmourythatmustbeinplacetoensurethateffectivemustbeinplacetoensurethateffectivecontroloftimeandbudgetovertime ismanagedwithintheprojectenvironment managedwithintheprojectenvironment. TodothisaWorkBreakdownStructure (WBS)mustbeidentifiedandactivitiesassociatedwitheachelementofit.


ManagingRiskManagingRisk

DevelopChangeManagementSystem ManageDelay ManageDelayDevelopBaselineProgressschedulebiweeklyAnalyzedelay,changesDevelopRecoveryPlansDevelopFragnetsDevelopFragnetsRequesttimeextensions&addedcompensation


AnalyzeScheduleImpactAnalyzeScheduleImpact

ImpactduetoChanges: InsertaproposedChangeOrder intotheprogress InsertaproposedChangeOrder intotheprogressscheduletoanalyzeimpacttoprojectcompletionmilestonedatesmilestonedatesAnalyzeimpactduetochangesinWorkSequenceD l F t t tTi E t i DevelopFragnet tosupportTimeExtensionRequests Id tif Additi lR &C t i dt IdentifyAdditionalResources &Cost requiredtoperformadditionalwork


ChangeManagementSystemChangeManagementSystem

DevelopaChangeManagementSystem toexpeditetheissuanceofFormalChangeexpeditetheissuanceofFormalChangeOrders:P id ti l N tiProvidetimelyNotice IdentifyScope ofchange Identifylabor&materialcostsProvidesupportingDocumentationDesiredresults:PerformextraworkafterissuanceofFormalChangeOrdertoexpeditePaymentg p y


thefundamentalsofconstructioncontractspresentationpeabody12!11!08 3

Documents

i t tihttp

floodactofgodn e bl

contract requirements

excusable ornonexcusablec

work of a121

contract agreement dear

time extension change

road new york