Transcript Dispute Resolution Methods

Delay Claims from the Owner
and Contractor’s Perspectives
Annual Program of the
Claims Avoidance and Resolution Committee
of the Construction Institute
March 11, 2010 – Los Angeles
Delay Claims from the Owner
and Contractor’s Perspectives
Claims Avoidance and Resolution Committee
Understanding Claims Subcommittee
•
Dennis M. Mac Bride, Chair - SEPTA
•
Craig Lindquist – CCS Group, Inc.
•
Patrick Watz – AECOM
•
John (Jack) Chiaverini – Retired, Perini Corporation
AGENDA
• What is a Delay Claim?
• Contract Language Related to Delay
• Types of Delays
• Types of Damages
• Requirements for a Successful Claim
AGENDA
• Contractor’s Delay Claim Submission
• Owner’s Defense
• Owner’s Damages / Counterclaim
• Contractor’s Defense
• Case Study
What is a Delay Claim?
In simple terms:
 Contractor: A request for compensation
and/or time due to owner-caused delays
 Owner: An assessment of liquidated
damages or a claim for actual damages
due to contractor-caused delays
Contract Language
• “Time is of the essence”
• Contract time of completion
• Contract milestones / Phasing
• Scheduling specifications (CPM or bar
chart)
• Notice provisions
Contract Language
• Time extension requests (time impact
analysis)
• Time extensions / change orders
• Liquidated damages
• “No damage for delay” clause
• Delays by other contractors clause
• Disputes clause
Types of Delays
Examples of Owner-Caused Delays
•
•
•
•
•
•
•
Site access
Differing site conditions
Shop drawing approval
Design errors and omissions
Extra work / change orders
Failure by owner to timely provide materials
Changed conditions, e.g., working hour
restrictions
• Work suspension
Types of Delays
Examples of Contractor-Caused Delays
• Procurement/Submittal problems (material &
equipment)
• Subcontractor delays
• Lack of adequate resources (labor, material,
equipment)
• Poor work sequencing
• Lack of productivity
• Rework
• Financial difficulties
Types of Delays
Third-Party Delays
• Permit acquisition
• Utility relocations
• Adjacent contractors
• Government Actions/Inactions
Types of Delays - Analysis
• Excusable / Non-excusable delays
• Compensable / Non-compensable delays
• Force majeur (Beyond either party’s
control)
• Concurrent delays
Examples of Contractor Delay Damages
Recoverable
• Field office overhead (General conditions)
– Trailers, utilities, on-site supervision, etc.
• Added cost of work, e.g., winter work protection
• Subcontractor pass through
• Labor and material escalation
• Acceleration
– Directed and constructive acceleration
• Idle labor and equipment
• Lost productivity (inefficiencies)
• Insurance and bonding costs
Examples of Contractor Delay Damages
Not Recoverable (Depends on contract language)
• Home office overhead (G & A)
– Delay vs. total suspension of work
• Lost opportunities
– Lost business revenue, loss of bonding
capacity
• Legal and consultant fees
Owner Damages
Liquidated Damages
• Described in contract
• $ per day for each day substantial completion is
beyond the current contract completion date
• Must be a reasonable estimate of damages and not a
penalty
Examples of Owner’s Actual Damages
• Owner costs
– Lost revenue, interest on financing, project
management, inspection, etc.
• Architect/Engineer costs/fees
– Additional shop drawing reviews, rate escalation,
etc.
• Construction Manager costs/fees
Requirements for a Successful Claim
The burden of proof is on the contractor
Requirements for a Successful Claim
Three elements needed:
• Liability (Entitlement)
• Causation
• Damages (Quantification)
Requirements for a Successful Claim
Liability
• Contractual duties and obligations
– Notice provisions
– Site access, accurate plans and specs
– Adequate resources, workmanship
Causation
• “Cause and effect”
• Link between delay and damages
Damages
• Substantiating documentation for extended
costs
• Actual costs or daily rates
Contractor’s Delay Claim Submission
• Why the owner is responsible for delays and
associated costs
• Schedule analysis
• Damages
• Substantiating documentation
• Transparency
Owner’s Defense
Determine Type of Delay:
Excusable
Non-excusable
Owner-caused
Force majeur
Contractor-caused
Compensable
Noncompensable
Non-compensable
Owner’s Defense
Identify Concurrent Delays:
Excusable
Caused by Owner and Contractor
Non-compensable
Owner’s Defense
• Liability Review - Contract terms
• Causation Review - Schedules, daily reports,
shop drawing logs, meeting minutes, etc.
• Damage Review
– Receipts, invoices, cost reports, etc.
– Reasonable estimates
___________________________________________
Owner Costs that Offset Contractor Damages:
• Overhead paid as part of change orders during
the extended period
• Liquidated or actual damages
Owner’s Damages / Counterclaim
• Why the contractor is responsible for
delays and liquidated or actual
damages
• Schedule analysis
• Damage calculations
• Substantiating documentation
Contractor’s Defense
• Contract Terms / Plans & Specs
– Ambiguities, conflicts, errors & omissions
• Change orders, RFI’s, etc. – Effect on
schedule and costs
• Schedule Analysis
– Owner-caused delays
– Concurrent delays
Delay Claim
Case Study
Case Study
This is the story of a construction project that
was planned to be completed in 24 months.
Unfortunately, stuff happened and it was
completed much later.
Because of this, the contractor incurred extra
costs and requested additional compensation
from the owner.
The following describes the process that was
used to resolve this delay claim.
The As-Planned Schedule
(What was supposed to happen)
Case Study: Subway Station Expansion Project
1
A
2
M
3
J
4
J
5
A
6
S
7
O
8
N
9
D
Months
10 11 12 13 14
J
F M A M
Winter
1 Mobilize
2
15
J
16
J
17
A
18
S
19
O
20
N
21
D
22
J
23 24
F M
Winter
As-Planned
Excavate & sheeting
3
Erect structural steel & pour mezzanine
4
Backfill & paving
5
Mechanical equipment
6
Elevators & escalators
Power & lighting
Gates & cashier booths
7
8
Finishes
9
Demobilize 10
The As-Built Schedule
(What actually happened)
Case Study: Subway Station Expansion Project
1
A
2
M
3
J
4
J
5
A
6
S
7
O
8
N
9
D
10 11 12 13 14 15
J
F
M
A
M
J
Original Contract Period
Winter
Access Delay (1 month)
1
Months
16 17
J
A
18
S
19
O
20
N
21
D
22
J
23
F
24
M
25
A
26
M
27
J
28
J
29
A
30
S
31
O
32
N
Extended Period = 8 months
Winter
Delays
Mobilize
As-Built
Differing Site Conditions (2 months)
2
Excavate & sheeting
Re-design Delay (2 months)
3
Erect structural steel & pour mezzanine
4
Backfill & paving
5
Mechanical equipment
6
Gates & cashier booths
Strike (1 month)
7
Elevators & escalators
Power & lighting
Lack of
Progress (1
month longer
than planned)
8
Rework
Finishes
(1 month)
9
Demobilize 10
The As-built Schedule shows that
there were six delays that resulted
in an eight month delay to the
project.
Case Study: Subway Station Expansion Project
1 2
A M
P
3
J
4
J
5
A
6
S
7
O
Months
9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32
D J F M A M J J A S O N D J F M A M J J A S O N
Original Contract Period
Extended Period
Winter
Winter
8
N
A Mobilize
P
A
As-Planned
vs. As-Built
Excavate
P
A
P
Erect structural steel & pour mezzanine
A
Backfill & paving
New Labor Agreement
P
A
Mechanical equipment
P
A
Gates & cashier booths
P
A
P
Elevators &
A
Power & lighting
P
Finishes
A
P = Planned
P
Demobilize A
A = Actual
<--- 8 month delay --->
Because the project finished eight
months late, the contractor submitted
the following claim to the owner:
Case Study: Subway Station Expansion Project
Contractor's Claim
Claim Item
Cause for Added Costs
Field Office Overhead (trailer, supervision,
Total delay of eight months
etc.)
Labor Escalation after May 1st Labor
2
Delays to finish trades
Agreement
1
Months
8
Monthly
Cost
$
8
2
50,000 $
400,000
$
5,000
10,000 $
20,000
3 Idle Equipment
Re-design delay
4 Winter Work
Winter concrete (blankets, heaters, etc.)
$
10,000
5 Constructive Acceleration
No time extension issued / threat of LD's
$
10,000
6 Lost Productivity
Adverse weather, out-of-sequence work,
etc.
$
10,000
7 Home Office Overhead
Total delay of eight months
20,000 $
160,000
8 Consultant Fees
Claim preparation
$
50,000
9 Interest @ 5% on Delayed Payments
Job financing
$
33,250
10 Bond at 1.5%
Eight month delay
$
10,474
TOTAL CLAIM $
708,724
8
$
Damages
Claimed
$
Before analyzing the contractor’s
costs, the owner performed a Delay
Responsibility Analysis as follows:
Case Study: Subway Station Expansion Project
1
A
2
M
3
J
4
J
5
A
6
S
7
O
8
N
9
D
10 11 12 13 14 15
J
F
M
A
M
J
Original Contract Period
Winter
Access Delay (1 month)
1
Months
16 17
J
A
18
S
19
O
20
N
21
D
22
J
23
F
24
M
25
A
26
M
27
J
28
J
29
A
30
S
31
O
32
N
Extended Period = 8 months
Winter
Delays
Mobilize
As-Built
Differing Site Conditions (2 months)
2
Excavate & sheeting
Re-design Delay (2 months)
3
Erect structural steel & pour platforms & mezzanine
4
Backfill & paving
5
Mechanical equipment
6
Gates & cashier booths
Strike (1 month)
Elevators & escalators
Power & lighting
Lack of
Progress (1
month longer
than planned)
7
8
Rework
Finishes
(1 month)
9
Demobilize 10
Delay Responsibility Analysis
Delay Type
Access Delay
Differing Site Conditions
Re-design
Strike
Lack of Progress
Re-work
Responsibility
Owner
Owner
Owner
Neither
Contractor
Contractor
Case Study: Subway Station Expansion Project
1
A
2
M
3
J
4
J
5
A
6
S
7
O
8
N
9
D
10 11 12 13 14 15
J
F
M
A M
J
Original Contract Period
Winter
Months
16 17
J
A
18
S
19
O
20
N
21
D
22
J
23
F
24
M
25
A
26
M
27
J
28
J
29
A
30
S
31
O
32
N
Extended Period = 8 months
Winter
Access Delay
1
Delay
Responsibility
Analysis
Mobilize
Differing Site Conditions
2
Excavate & sheeting
Re-design Delay
3
Erect structural steel & pour platforms & mezzanine
4
Delay
Responsibility
Months
Owner
5
New Labor
Agreement
Backfill & paving
5
Mechanical equipment
6
Gates & cashier booths
Strike
Contractor
2
Elevators & escalators
Neither
1
8
Power & lighting
Lack of
Progress
7
8
Rework
Finishes
9
Demobilize 10
Based on its Delay Responsibility
Analysis, the owner apportioned the
contractor’s claimed costs and
estimated the contractor’s entitlement
to additional compensation as follows:
Case Study: Subway Station Expansion Project
Contractor's Claim
Owner's Estimate of Entitlement
Monthly
Damages
Monthly
Claim Item
Months
Months
Estimate
Reason
Cost
Claimed
Cost
Field Office Overhead (trailer, supervision,
1
8
$ 50,000 $ 400,000
5
$ 50,000 $ 250,000 Owner delay = 5 months
etc.)
Labor Escalation after May 1st Labor
Apportioned owner delay
2
8
$
5,000
5
$
3,125
Agreement
= 5/8
3 Idle Equipment
$ 10,000 $
20,000
$ 10,000 $
20,000 All costs substantiated
4 Winter Work
$
10,000
$
10,000 All costs substantiated
5 Constructive Acceleration
$
10,000
$
6 Lost Productivity
$
10,000
$
-
Causation not shown
$ 20,000 $
160,000
$
-
Delay, not a work
suspension
8 Consultant Fees
$
50,000
$
-
Not part of the Work
9 Interest @ 5% on Delayed Payments
$
33,250
$
-
Not substantiated
10 Bond at 1.5%
$
10,474
$
7 Home Office Overhead
2
8
2
Subtotal $
TOTAL CLAIM $
Liquidated Damages
$
@ $500 per day x 61
TOTAL
708,724
$
ENTITLEMENT
7,500 Some costs substantiated
4,359 Cost substantiated
294,984
(30,500)
264,484
Contractor delay = 2
months
The contractor requested more than $700,000 in
additional compensation due to project delays.
The owner estimated that the contractor was
entitled to approximately $260,000.
They negotiated a settlement somewhere in
between . . .
. . . and everyone lived happily ever after.
THE END
Delay Claims from the Owner
and Contractor’s Perspectives
Questions?
Delay Claims from the Owner
and Contractor’s Perspectives
Additional Information
Construction Delay Claims, Third Edition, Barry B. Bramble &
Michael T. Callahan, 1999
Construction Delays: Documenting Causes, Winning Claims,
Recovering Costs, Theodore J. Trauner, 1990
Construction Scheduling: Preparation, Liability, and Claims, John
M. Wickshire, Thomas J. Driscoll, Stephen B. Hurlbut, 2008
CPM in Construction Management, Seventh Edition, Fredric Plotnick
& James O’Brien, 2009
Proving and Pricing Construction Claims, Robert F. Cushman,
2000
Recommended Practice No. 29R-03, Forensic Schedule Analysis,
AACE International, 2007