CLAIMS AND DISPUTES

Preparation and Response

Construction Claims and Disputes

• Construction Delay Claims• Labor Productivity Claims• Design and Construction Defect Claims• Force Majeure Claims• Acceleration Claims• Suspension and Termination Claims• Differing Site Conditions Claims• Change Claims

Construction Delay Claims

• Common points of contention– Impact to the critical path, quantification– Root-cause of the delay and entitlement– Additional compensation

Labor Productivity Claims

• Some of the most contentious claims in the construction industry

• Typically measured as labor hours per quantity of material installed

• Loss is experienced when a contractor, or a particular crew, is not accomplishing the anticipated or planned production rates

Primary challenges –

• Identifying the root cause of labor productivity issues

• Quantifying associated labor productivity losses

• Corroborating the cause-and-effect relationship

• Establishing entitlement to damages

Productivity Analysis

• Measured Mile Analysis• Earned Value Analysis• Work Sampling• Comparable Work Study• General and Specialty Industry Studies (Mechanical

Contractors Association of America [MCAA], Construction Industry Institute [CII], Business Roundtable, etc.)

• Total Cost Method• Modified Total Cost Method• Time and Motion Studies

Defects Claims

• The owner chooses materials or hardware or provides owner-furnished material, which is not sufficient for the purpose intended.

• The architect/engineer specifies the incorrect material, or fails to specify the materials to be used.

• The contractor’s quality control and workmanship is poor or the contractor didn’t follow the proper construction/installation guidelines.

• The contractor/subcontractor uses substandard materials in an effort to reduce costs.

• The material supplier’s product is insufficient or defective.

Force Majeure Claims

• Essentially free both parties to a construction contract from liability or obligation for failure to perform in the event of extraordinary circumstances– Acts of God– Severe weather– Labor strikes– Natural disasters– Governmental actions/changes in law.

Acceleration Claims

• Typically encountered on construction projects when the contractor makes efforts to recover the project schedule after the project has suffered delays due to causes it believes are beyond its control– Working overtime– Implementing a new shift– Providing additional labor– Adding other resources (i.e., equipment)– Re-sequencing work activities

Suspension and Termination Claims

• Suspension occurs on a construction project when an owner instructs a contractor to temporarily stop work on all or a portion of the project.

• Termination occurs when an owner instructs a contractor to permanently stop the performance of work and leave the site.

Suspension Claims

• Often require a schedule delay analysis to evaluate the impact to the project’s critical path

• Elements of Cost– Standby or idle time – Demobilization/remobilization – Other actual costs incurred due to the

suspension

Termination Claims

• Termination for convenience• Termination for cause

Termination for convenience

• The reasonable cost of work performed prior to termination, including profit

• Anticipated profits on uncompleted work • Justifiable and reasonable termination costs

including project wind-down costs • Other costs as may be mutually agreed

Termination for cause

• Failure to pay labor, subcontractors, vendors, or material suppliers

• Failure to meet the project schedule or diligently perform the work

• Defective or deficient performance • Failure to follow applicable laws or regulations • Failure to consistently follow safety

requirements

Termination for cause – Owners view

• Extended project duration and overhead costs (e.g., replacing one contractor with another almost invariably results in overall project delays)

• Loss of use • Loss of profits or deferred production • Liquidated damages or actual damages for delay • Cost to complete the project if the final project costs

exceed the value of the terminated contract less amounts paid to the terminated contractor

Termination for cause – Contractor

• Costs to bid the project • Mobilization and demobilization costs • Anticipated profit on the project • Costs for work performed but not paid • Home office overhead costs • Winding-down costs • Damages for loss of good will/loss of future business due

to potential negative publicity following termination • Betterment issues – changes or upgrades included in the

owner’s cost-to-complete damage model that are above and beyond the contractor’s original scope of work

Differing Site Conditions Claims

• Commonly known as changed conditions or concealed conditions– Occur when conditions at a construction site

differ materially from those that existed at the time of contracting or as represented in the contract documents

Change Claims

• Unclear bid documents • Owner directed changes • Late, incomplete, or defective drawings; specifications, and other

contract documents • Preferential changes by the owner • Misinterpreted contract requirements by the parties • Differing site conditions • New or revised codes/standards • Rework • Impacts/changes to the construction means and methods • Scope additions • Acceleration and/or schedule changes • Constructive changes

Critical Path Analysis

• Windows Analysis or Contemporaneous Period Analysis

• Time Impact Analysis (TIA)• Collapsed As-Built• Impacted As-Planned• As-Planned vs. As-Built

Windows Analysis or Contemporaneous Period Analysis

• Retrospective schedule impact analysis technique that generally utilizes contemporaneous schedule updates, in conjunction with as-built facts related to a delay or change, to quantify impacts to the as-built critical path associated with the change or delay

Method

• Typically begins with the baseline construction schedule, and then proceeds chronologically from update to update, tracking progress along the critical and near critical paths

• For each analysis period, the prior update becomes the baseline for the analysis of delays or accelerations

• Compares start dates, finish dates, and durations of the activities and identifies changes to schedule logic between analysis periods

• Depends on reliable baseline schedule information, contemporaneous schedule updates, and as-built schedule information

Time Impact Analysis (TIA)

• Similar to the impacted as-planned analysis, which forecasts or predicts a delay’s effect on a project’s completion date

Method

• Involves the insertion or addition of activities indicating delays or changes into an updated schedule representing progress up to the point when a delay event occurred to determine the impact of those delay activities

Collapsed As-Built

• Retrospective technique that begins with the as-built schedule and then subtracts activities representing delays or changes to demonstrate the effect on the completion date of a project but for the delay or change

• Applied in cases where reliable as-built schedule information exists, but baseline schedule and/or contemporaneous schedule updates either do not exist or are flawed to the extent that they are not reliable to support a delay analysis

Method

• Involves identifying project delays or changes

• Subtracting activities representing these delays or changes from the as-built construction schedule

• The result demonstrates when a project would have been completed but for the delays or changes

Impacted As-Planned

• A technique which forecasts or predicts a delay’s effect on a project’s completion date

• Generally restricted to the quantification of delays for contemporaneous requests for time extensions

Method

• Involves the identification and insertion or addition of activities representing delays or changes into the baseline schedule to determine the impact of those delay activities

As-Planned vs. As-Built

• A retrospective method which involves comparing the baseline, or as-planned, construction schedule against the as-built schedule or a schedule that reflects progress through a particular point in time

• Typically utilized when reliable baseline and as-built schedule information exists, but the contemporaneous schedule updates either do not exist or are flawed to the extent that they are not reliable to support a delay analysis

Method

• Vary from a simple graphical comparison to a more sophisticated implementation which considers the start and finish dates and relative sequences of the various schedule activities– Simple variation is similar to a comparison of

a monthly update to the baseline schedule– Complex variation compares logic changes

and duration adjustments