Construction Risk | Carolina Consultants

Five Tips for Better Construction Project Documentation

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Nov 252013

When it comes to claims and disputes, I have often heard the proverbial advice that “you should document everything.” However, in reality this is rarely done and it is often impossible to accomplish. Normally, the folks on a construction project simply don’t have the time to write down everything that’s going on at the site and at every project meeting and then respond to every email and phone call. In fact, I would not advise you to try! Doing so would be frustrating at best and counterproductive at worst. Your management team should be focused on managing the project. This is especially true on a troubled project, where you have to put out one fire after another. Your team’s efforts should be focused on using their time in the office wisely and making sure that the important items are properly documented. So, how are they supposed to know which of the items are the most important to document? This article attempts to answer that question by establishing some rules and by providing an objective framework that can be used when deciding how and what to document.

1. SUPPORT YOUR POSITION

Spend the time to write the letters or emails that support your position and explain why your position is correct. This should be the overall framework from which you are focusing your documentation efforts. Document the issues and events as they occur; take a photo, write an email, or put an extra note in the daily report that explains the event or occurrence from your perspective. Pay particular attention to items that delay or disrupt the critical path work on the project, such as: design errors and omissions, missing information (such as unanswered RFI’s), differing site conditions, changes that disrupt the critical work, critical path delays (inability to start or finish work in the critical areas of the project), loss of productivity (interference or additional mobilizations to complete work in the critical areas) and acceleration (working overtime to make up lost time or compression of work or stacking of trades in a schedule). In general your documentation efforts should be focused on those things occurring on the project that results in a growth of cost and that could not have been anticipated at the time of bid. Make sure there is evidence in the file that supports and explains your position as to why the growth in cost occurred. Connect the dots between the event or issue and the actual growth in cost. You’d be surprised how the resolution of an issue was won or lost based on the existence or absence of a crucial piece of documentation in the file.

2. RESPOND TO EVERY LETTER

When is it necessary to write a letter? When someone writes one to you. It is not necessary to engage in a letter-writing campaign (it is simply not true that the person with the highest stack of letters automatically “wins”). But, for each letter that’s written to you make sure there is a written response in the file. One solid letter for each issue is a good rule of thumb. Get your points documented, keeping in mind tip #1, above.

3. BE PROFESSIONAL

In your written correspondence, always be professional and stick to the facts. Be objective, rational and unemotional. There is no need to tell the owner’s rep that he’s an idiot (even if he is). Many people may be involved in the resolution of the dispute after the project is over and they may never meet you. People are going to form their opinions of you based on what you say and how you say it.

4. GIVE NOTICE

Notice provisions are written into contracts for a reason. Their purpose is to give the other party time to investigate, mitigate expenses, and track costs. Read your contract and make sure you are complying with the notice requirements. To make giving notice easier, we recommend that our clients develop form notices. At a minimum, we suggest having form notices available for each of the following situations: (a) Excusable Delay / Request for Time Extension, (b) Differing Site Condition, (c) Conflicting Specifications, (d) Acceleration (Directed or Constructive), (e) Disruption of Work Force, and (f) A/E Change. Have your lawyer review the notices before using them in the field.

5. RESERVE YOUR RIGHTS

I have been involved in several lawsuits in which the judge upheld signed releases on payment applications and change orders, and barred recovery for delay / disruption damages. Have your lawyer review the release language on any document before you sign it. At a minimum, cross out the offending language, or simply write that you are reserving your right to additional money or time for the impact encountered on the project or as a result of the change.

Knowing how and what to document will keep your team focused on managing the project and put your company in a much better position when it comes to resolving disputes when they arise.

Proving Lost Labor Productivity in Construction Claims

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Sep 032013

Construction claims can be costly for all parties involved. There are the costs of attorney’s and expert witness fees and potentially years of waiting without resolution. There are also more hidden costs to deal with, such as lost management time, impacts on the company’s reputation, and the decreases in team morale as the claim remains unresolved.

It is critical to make sure the damages in a construction claim are calculated and presented correctly to ensure your best chances at negotiating a quick and reasonable settlement. This article deals with the application of some of the most common methods used to prove damages in one of the most common types of claims faced by contractors on construction projects – lost labor productivity claims.

Total Cost Method

With the total cost method, lost labor productivity damages are calculated by comparing the actual costs with the expected or bid costs. The difference between the actual and expected costs is presented as the claimed amount.

It’s also possible to modify the total cost claim by subtracting for bid errors and cost overruns that were not the fault of the other party. This “modified total cost” method is often cited as being more credible than the unmodified version.

Be aware that the total cost method is controversial and sometimes disfavored by courts and boards. To use the total cost method effectively, it should only be used when

It is impractical to measure losses directly
The bid price was reasonable
The actual costs were reasonable (and accurately recorded)
None of the overruns were the responsibility of the party making the claim

Discrete Cost Approach

With the discrete cost approach, labor costs are tracked and attributed to specific events (using cost codes, labor codes, etc.) and then combined into a lost productivity claim. Compared to other approaches for pricing lost labor productivity damages, discrete methods are generally preferable, provided that the requisite project cost data was collected on the project.

When using the discrete approach, care should be taken to segregate damages (unanticipated or increased costs) from the normal project costs. Discrete approaches are highly effective in pricing direct impact costs but less effective in measuring and estimating the indirect costs associated with certain types of claims.

Measured Mile Method

The measured mile method is the preferred approach to pricing lost labor productivity claims. This method contrasts the contractor’s performance during an impacted period with the contractor’s performance during an unimpacted period on the same project. Labor productivity is measured and calculated for both periods (i.e., square feet of drywall per labor hour, linear feet of underground piping per crew day). The main advantage of the measured mile method is that it does not rely on the bid estimate or “as planned” labor productivity. It measures the actual productivity that was achieved on the project and uses that level as the benchmark in the comparison.

With the measured mile method, care must be taken to ensure that the condition under which the measured work is performed is identical except for the impact on the work that is being blamed for the lost productivity. If a reasonable unimpacted period cannot be identified in the same project (i.e., because the project was at least partially impacted in all areas and at all times), then the analyst may look to comparable projects to draw a comparison.

As with the discrete approach, the measure mile method requires robust project productivity data, which may or may not be available. Care should also be taken to account for other factors that could be affecting productivity such as learning curve, ramp up effects, or weather.

Industry Studies

Industry studies, industry benchmarking, and other similar approaches are generally seen as being less effective than the other methods described above. These approaches are sometimes useful for claims in which the comparative labor costs are non-specialized or highly repetitive, or as objective references when estimating lost productivity on a forward-pricing basis.

Choosing the correct method for calculating damages in a construction claim is a challenging but an essential part of the claim process. It involves collecting, categorizing, and analyzing project costs using the proper methodology to prove the accuracy of the costs being claimed. It also requires a superior understanding of the behavior of costs on a construction project so that the correct and relevant costs are identified and documented.

As discussed above, it is important to take into account the effectiveness and acceptability of the method being used to calculate lost labor productivity claim damages. Since each method has its own strengths and weaknesses, and is accepted to a greater or lesser degree, going with the wrong method for a particular claim can mean a less-than-favorable result. At Carolina Consultants, we are often retained by contractors to review their records and help them choose the best method for calculating lost labor productivity damages on a construction project. If you have a delay or productivity claim contact us today and speak with one of our construction claim specialists. Our claim specialists have focused their careers on solving the most complex construction problems and disputes. Let us put our experience to work to help you find successful resolution to your construction claim.

How to Update a Construction Schedule – Part 2

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Aug 182013

In How to Update a Construction Schedule – Part 1, we examined why schedules are updated, what a baseline is, and the why the frequency of schedule updates are determined by project complexity, unexpected events, and contract requirements. In Part 2, we will explore the actual steps in properly updating a construction schedule.

Step by step procedure for updating a construction schedule

Updating a construction project schedule is a systematic, step-by-step process that includes the following steps:

Gathering activity status information
Inputting the activity information
Reviewing and analyzing the schedule status
Modifying and revising the schedule to reflect the current plan
Publishing and implementing the updated schedule

The first step in updating a construction schedule is to gather the activity status information. This involves gathering and estimating the following information about each activity in the project schedule:

Actual Start Date
Completion Status
Remaining Duration
Actual Finish Date

Actual Start Date The Actual Start Date is when meaningful work will began on the activity. Note: this may not be the first day that work was performed on an activity. Typically, it’s the day that work is started with the intention of working continuously until the activity is completed.

Completion Status At the time of the schedule update, some activities will not have started, some will be in progress, and other activities will have been completed. The activities that are in progress at the time of the schedule update should receive the most attention.

Remaining Duration For any in-progress activities, the remaining duration should be estimated based on (a) how much of the planned work is completed and (b) how much longer it will take to complete the activity. This requires a review of the level of productivity being achieved.

Actual Finish Date Like the actual start date, the actual finish date may not be the last day work was performed on a particular activity. The actual finish date is generally defined as the day when the successor activity can begin and continue without being hindered by any remaining minor work of the predecessor activity being reviewed.

Activity status information can be gathered from a variety of sources, such as:

Walking the jobsite and directly observing the work
Conducting update meetings with subcontractors
Reviewing field reports such as the superintendent’s and subcontractor’s daily progress reports
Generating and distributing update worksheets to the various superintendents, project managers and foremen to fill out and provide the required activity status information.

Once the activity status information is gathered, the information is input into the scheduling software, the status/data date is adjusted, and the schedule is recalculated. The recalculated schedule at this step in the process is often referred to as a “half-step” schedule – that is, the baseline schedule updated with the status information with no changes to logic, original durations or any activities added or deleted.

This half-step schedule can be used to review and analyze the project status. During this review and analysis, the project team should address certain key situations and events, such as:

Discrepancies between the new forecast completion and the contractual completion date. If there is a large discrepancy between the forecast and contractual dates, the baseline and updated schedule should be compared and analyzed to determine the cause of the discrepancy.

Shifts in the critical path. If a critical path shift has occurred, the baseline and updated schedule should be compared and analyzed to determine the cause of the shift and, depending on the reason for the shift, whether corrective action is needed.

Significant changes in float. The reason for any significant changes in float for individual activities should be determined and analyzed. Special attention should be paid to near critical activities.

Scope of work changes. If there have been changes to the scope of work, then activities should be added or deleted as needed and appropriate logic ties made to the un-changed work.

Delays or other impacts. Impacts such as weather, lack of manpower, lower-than-expected productivity, design deficiencies, etc. should be taken into account and the schedule adjusted accordingly.

If the construction project has proceeded as planned and none of the above situations have affected the schedule, then the update process is complete and the schedule can be published and implemented. However, as is usually the case, the schedule will need to be modified and revised as a result of changes in the anticipated conditions. These revisions and modifications take the schedule from a half step to a full and complete schedule update.

Generally, revisions made to the updated schedule to reflect current project status can be categorized as follows:

Revisions to logic
Revisions to activity durations
Adding or deleting activities

The updated project schedule should reflect the way in which the project team plans to complete the project. Once the updated schedule is complete, the final step is to publish and implement the schedule – that is, use it to plan and manage the ongoing and upcoming work onsite.

The above steps for how to update a construction schedule are vital to keeping an accurately updated project schedule. An incorrectly updated schedule can result in a tool that is less useful to the project team as it manages the completion of the project. The information above and in Part 1 is meant as a guideline and not a foolproof plan for success. For true expertise from a reliable, experienced source, trust Carolina Consultants to help you get your construction project off the ground, properly planned and completed on time and within budget.

How to Update a Construction Schedule – Part 1

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Jul 262013

Things change rapidly on construction projects: the site changes; the weather changes; personnel and equipment change; the design changes. Impacts and challenges occur that must be overcome. The original plan for the project may quickly become obsolete. As a result, on nearly all construction projects the schedule needs to be updated on a regular basis to ensure that it reflects the team’s current plan for completing the project.

This article provides a step-by-step method for updating and modifying a construction project schedule to reflect the current project status.

Why schedules are updated

Schedules are updated at regular intervals in order to:

Evaluate a project’s status
Predict the completion date
Create a historical record of the project

The most important reason for a schedule is to track and monitor project status. The status of each activity should be evaluated independently in order to serve as the basis of evaluating the project’s overall status.

Almost all construction projects require that the project be substantially completed by a specified date or within a specified duration of calendar days. If a contractor fails to complete the project on time, the contractor may be charged liquidated damages or be liable for actual damages for each day the project is late. Thus, it is very important that the team know the currently-forecasted completion date so that the plan can be adjusted as necessary to mitigate delayed completion.

Historical update information can be used as a basis to plan and schedule future projects. It can also be a useful in a claims situation or if a forensic schedule analysis is needed to analyze and identify liability for project delays.

Establishing a baseline schedule

In order to be meaningful, there has to be an official baseline schedule to compare against in order to determine a project’s status. The baseline schedule is the starting point in preparing a schedule’s update. The current baseline is the contemporaneous schedule in effect since the last time the schedule was updated. The baseline schedule is the schedule that progress and the affect of changes since the last update are measured against and analyzed.

Frequency of updates

The frequency of updates should be determined by:

The project’s complexity
The frequency of unexpected events
As specified by the contract

The more complex a project, the greater need for more frequent updates. Complex projects have more entities working at the same time, thus they require more coordination.

When an unexpected event occurs that will impact the ability to complete the project on time, the schedule should be updated. The updated schedule will become a valuable tool in order to develop strategies to overcome and mitigate the impact of the unexpected event.

At a minimum, the schedule should be updated as specified in the contract documents. For most projects, the schedule is updated monthly to correspond with the contractor’s pay applications. Monthly updates are normally sufficient, however some sophisticated owners require weekly or bi-monthly schedule updates.

Carolina Consultants seeks to educate and inform by way of our blog. We choose such topics because we know them, inside and out. If you have further questions about how to update a project’s schedule, this post will be continued in Part 2, where we outline the step-by-step procedures.. We’re also available via phone and form for your questions or comments!

Demand for Alternative Project Delivery Rising in NC

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Jun 242013

While the more traditional project plan of design-bid-build is still popular in North Carolina, lately there has a sharp increase in the demand for alternate project delivery methods l. These alternative project delivery methods include:

Design-Build
Integrated Project Delivery (IPD)
Public-Private Partnerships (P3)
Construction Manager at Risk (CM-at-Risk)

More and more owners are seeking these alternative methods because they offer greater efficiencies and less risk in the construction process. Even state government agencies have begun using more alternate project delivery methods, especially design-build and CM-at-Risk.

The maturation of new delivery technologies is also increasing demand for alternative project delivery methods. Some such technologies include:

Building Information Modeling (BIM)
Virtual Design and Construction (VDC)
Lean Planning
4-D Scheduling

These technologies work best in collaborative settings, where all parties involved in the construction process have input from the start of the project. Owners who are looking for this type of setup will search for a team that has previous experience with these technologies and team organizations.

From 2009-2011, North Carolina experienced a significant decrease in the amount of design-build projects, as the decline in the economy gave owners a strong incentive to save money by using the more traditional hard-bid design-bid-build project method. But over the last six months we have seen a dramatic resurgence in alternate project delivery proposals and more qualifications-based selections. Price is no longer the deciding factor in many projects in North Carolina and owners are free to choose the most qualified teams for their specific needs.

In the future, we expect to see an increase of all alternative project delivery methods, especially with integrated project delivery (IPD). With IPD, the owner, designers, contractor, and major subs all agree to sign a single contract between all the parties and share the risks and rewards on the project. This has been rare in North Carolina up until recently, when some very sophisticated owners in North Carolina have procured large projects using IPD. Although many of the players are still learning the process “on the fly,” we should expect to see more of IPD, especially as it becomes more familiar to owners and construction firms in Florida.

At Carolina Consultants, we are experienced in IPD methods as well as the other alternative project delivery methods. If you are a contractor we can help you with the new delivery technologies, such as Lean Planning and 4D Scheduling. If you’re an owner, we can help you to choose method that will work best for your project and see it through to the end. Contact us today for a free consultation.

Your Project’s Most Valuable Tool – It’s Schedule

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Apr 232013

Construction Scheduling from a Consultant’s Perspective

At Carolina Consultants, we provide consulting, expert and advisory services in the area of critical path method (CPM) planning and scheduling. Our focus is on providing insight into your project’s most valuable tool – its schedule.

At Carolina Consultants we have seen the value and benefits of a well-developed and properly-maintained project schedule. A project schedule can be an invaluable tool in the management of the most important elements of a construction project.

We have also seen the down side of not properly maintaining a project schedule. Such as having to rely on other project records to prove a claim when the information would have been readily available had the schedule been properly maintained and updated.

The following are some of the major benefits of having a good project schedule:

Managing Construction Risk

The schedule is one of the most important tools for managing risk on a construction project. As things inevitably change on the project, the schedule is the best vehicle for evaluating the impact of changes on other elements of the project. It is also a powerful tool for scenario planning and mitigating the affect of a change. Additionally, the project schedule is by far the best tool for early identification of problems and trends that could jeopardize project success.

Managing and Coordinating the Construction Project

Schedules are often the primary tool used by project managers and superintendents to manage and coordinate the work of the various trade contractors on the project. A well-developed schedule will clearly model and illustrate the team’s plan for executing the project. Additionally, a well-developed and properly-updated schedule can accurately predict the completion date of the project, not only at the beginning but as the project progresses. Project schedules are often used by your subcontractors and suppliers to coordinate their own work and as a production forecasting tool.

Communicating the Construction Plan

The is no better tool for communicating the team’s plan for executing the project than the project schedule. As the plan is adjusted for changes and actual performance, the schedule should be updated and distributed to the various parties – subcontractors, suppliers, vendors, the owner, the architect/engineer, inspectors, etc. It helps keep everyone up to date and on the same page.

As-Built Schedule and Schedule Analysis

A properly-updated and maintained schedule is an invaluable depository of “as-built” information for the project. This information can be used for later review in planning projects in the future, or as an analysis tool for documenting or defending against a claim.

For all of these reasons, it makes sense to invest the time and effort into developing and properly maintaining a project schedule. Whether you need help preparing a baseline project schedule or you would simply like professional feedback on an existing schedule, Carolina Consultants can develop a cost-effective, comprehensive solution to meet your project’s needs. Contact Don W. Carlow, PSP at (407) 603-6165 or don@Carolina-Consultants.com.