Dealing with Mid-Course Adjustments in Project
Planning
and Scheduling and Resultant Claims[1]
I. Introduction
The well recognized phrase, “
We all have anecdotal stories about
cases that we have handled involving these issues. Consider this, your contractor client comes
to you and says, “I’m building a ride and show area at a major Florida
amusement park, and the Swiss-made ride, which I have a subcontractor erecting,
has been delayed, and not only is the ride not arriving in the sequence in which
we have it scheduled, but what we are receiving is out of spec and has to be
returned. My dilemma is that the owner
is ordering me to revise the schedule and build the theme restaurant and show
area
first, which was scheduled to go last,
which will require me to not only change the entire sequence of my work, but,
ultimately, erect the ride over the restaurant, which will be much more
difficult and time consuming, not to mention more expensive, and it will have
to be done at night when the restaurant is closed or create an unacceptable
danger to the restaurant’s patrons. The
owner must have the restaurant open for the Christmas/Hanukkah holiday season,
and also tells me that he has spent millions of dollars on advertising that the
ride will open in the spring and therefore cannot grant any time
extensions. He has rejected my schedule
showing that the ride will not be completed till mid-summer. What do I do?” While this may sound like a hypothetical
question that you might find on a construction certification exam, it is not
far from reality. Or how about this
example: the owner of a condominium comes to you and says, “I have to comply
with the Interstate Land Sales Act,[2]
and must have the condo completed in 24 months or be forced to return deposits
which, in this market, my purchasers would like nothing better. I have just learned from the contractor that
the structural engineer has created serious errors in under-designing the
penthouse slabs, and that there are numerous errors, omissions, conflicts and
discrepancies with respect to the plans for the elevator cores and roof
steel. The contractor tells me that it
called these areas to the attention of the structural engineer nine months ago
at the pre-construction constructability review, but that nothing had been done
by the structural engineer until these items became critical. The project will now be delayed unless I
accelerate the contractor, which he is willing to do for several million
dollars. I advised the structural
engineer, who has notified his errors and omissions carrier, but I am told that
nothing can be done by the carrier in any short period of time and that I will
be forced to pay the contractor for acceleration,
or
force the contractor to accelerate without pay, to get the building completed. What do I do?” These are not uncommon scenarios. In fact, in a hot construction market, they
are quite common. There are no easy
answers. But this paper will explore
both the legal and scheduling issues that arise from these types of scenarios,
provide practitioner’s tips and suggested methodologies to resolve the
inevitable claims that will result.
II. Using
the Schedule as an Effective Management Tool
The complexity of construction cannot be overstated. Beyond the massive coordination effort that occurs prior to even receiving the building permit, the process of building is a daunting task, requiring the efforts and coordination of countless parts and people working under the pressure of time. In analyzing a delay claim one court began:
We note parenthetically and at the outset that, except in the middle of a battlefield, nowhere must men coordinate the movement of other men and all materials in the midst of such chaos and with such limited certainty of present facts and future occurrences as in a huge construction project…[3]
Undoubtedly, the planning and use of a project schedule is one (and probably the first) key for effective management and successful performance. To this end, the schedule is important for detecting delays and making “mid-course adjustments” to avoid them. The necessity for thoughtful and effective scheduling practices, however, is not limited to executing the work, but is required to succeed in advancing or defending a delay claim.
Effectively addressing and asserting your client’s position in the resolution of a delay and disruption claim dispute necessarily requires an understanding of scheduling. Contractors and practitioners must understand that the construction schedule is more than just a graphical representation of the contractor’s plan and intention to perform the contract scope of work. As a management tool, the schedule is used to plan and coordinate the work, monitor and control progress, evaluate and document changes, and is often used to prove or defend claims. The schedule is also a “road map” outlining the flow and sequence of work and, therefore, must be accurate enough to foresee and resolve problems but flexible enough to allow for unavoidable changes. It should allow the owner, design team, and contractor to “see the forest and not just the trees.”
A Critical Path Method (CPM) schedule is a management technique used to plan and control a project.[4] A CPM schedule combines all relevant information into a single work plan, defines the sequence and duration of operations, and depicts the interrelationships of the work activities required to complete the project. The critical path is defined as the longest sequence of interrelated activities in the network which establishes the minimum length of time for completing the project. A CPM schedule also enables one to determine the amount of time activities can be delayed without impacting the overall project completion. The amount of time a specific activity may slip before impacting project completion is identified as “float.”
Typically, the contractor is the principal developer of the CPM schedule and, thus, should maintain control of the schedule. A schedule that is utilized and updated regularly will be more accurate and more likely to represent the contractor’s intentions during the project. Scheduling information provided to subcontractors should reflect the needs and goals of the project. Soliciting input from subcontractors will increase the accuracy of the schedule and provide an accountability tool to control the project. Because the owner will hold the contractor accountable for maintaining on-time performance during execution of the project, the contractor should manage the sequencing and/or schedule logic. If the schedule becomes too complicated, it may become a progressive as-built, documenting the work as it is built, instead of a planning and forecasting tool, too simple, and the schedule becomes ineffective and unrepresentative.
In addition to its use as a valuable management tool, a schedule that is accurately maintained during construction provides a sound basis upon which to measure and apportion delays. The basic technique used in evaluating delay claims with a CPM schedule is to compare planned progress with actual performance at various points during the project. Thus, the key to documenting and resolving delay claims begins with the quality of the schedule and its updates. To understand the scheduling process you also need to familiarize yourself with the correct terms. For example, understanding the “baseline schedule” may be key to quantifying delay, while “milestones” in the contract do not necessarily measure delay-related impact. Here are some key concepts for the effective use of schedules as a management tool:
A. Baseline Schedule
The baseline schedule is a document which illustrates the contractor’s original work plan to perform the scope of work in accordance with the contract documents. The baseline schedule provides a snapshot of the project at the time of contract bid/award from which progress and the affect of changes are measured. Because the baseline schedule is prepared early, it is not contaminated with project history, actual events, or changes in the plan. The baseline schedule should be logical, reasonable, and supportable without apparent flaws. The overall flow or sequence of the work should reflect the manner in which the project is planned to progress. The baseline schedule should be prepared, submitted, and approved in accordance with the contract documents. A time-scaled graphic of a simple baseline schedule is shown below in Figure 1. Logic relationships and critical activities are shown on the graphic.
Figure 1 – Baseline Schedule
The same baseline schedule is shown in Figure 2 printed in a bar chart layout, as typically used on a construction site. The bar chart layout shown is from a standard industry scheduling software package, Primavera Systems.
Figure 2 – Baseline Schedule (Bar Chart
Layout)
1. Contract Requirements (Compliance with Scheduling Provisions)
In many instances, the level of detail required within the schedule is dictated by the specifications. When general specifications do not require a detailed schedule, the contractor should prepare a schedule based upon the needs of the schedule’s end user. The level of detail should be enough for the “big picture” to be accurate. It is not uncommon to add detail as the project develops, particularly with interior work. This is especially true if the time required to develop the initial schedule is unreasonably short or certain project details are not fully developed, a common event in today’s fast-paced market.
“Milestones” in the contract define the start or completion of important events, groups of activities, or areas by specific dates. Too many milestones affect the means and methods of performing the work and restrict the contractor’s ability to schedule the project. Flexibility is thereby sacrificed. Milestones should only be used as necessary to represent important events, completion of specific activities for coordination of other trades, a basis for the start of successive work, or completion of specific areas of work. The baseline schedule shown above in Figure 1 includes milestones for notice to proceed, building water-tight, and project complete.
Some specifications require schedules to be “cost loaded” and/or “resource loaded.” Cost loading is the process of breaking down the cost of the contract work and assigning dollars to each scheduled work activity. The underlying assumption is that the costs are expended as the duration of the activity is completed. The cost loading will be more accurate if material costs are factored out from labor costs and included in procurement/delivery activities.
Resource loading is the process of assigning labor and equipment resources to individual activities. While a helpful tool in planning and scheduling, it may be difficult to get accurate information on resources from subcontractors. In addition, in some instances, not all of the subcontracts are bought out when the schedule is prepared and therefore, not all of the resource information is available at the time the schedule is first developed. Knowing these terms and how they fit into the overall picture can assist in understanding and quantifying delay, and thus, in resolving delay claims.
2. Approval (Owner’s Refusal to Accept)
The schedule is the contractor’s plan and intention to perform the contract work and reflects its means and methods. The owner generally maintains a contractual right to review and approve the contractor’s schedule, but not to dictate means and methods. Review of contract requirements, such as milestones, phases or completion dates and owner activities, such as approvals or deliveries; level of detail; and sequencing, are all appropriate. Overzealous review of detail regarding activity durations, logic restrictions, and level of detail can be considered interference by the owner and may, in and of itself, be cause for a claim.[5] Likewise, an owner’s refusal to approve or accept changes to the schedule could be considered interference or otherwise grounds to assess liability for delay or acceleration claims.
Timeliness of submittal and approval of the schedule is also important. When the submission of the initial schedule is “very late,” both the contractor and the owner are prejudiced by actual events and a clean submittal and approval becomes difficult because of conditions learned subsequent to the bid. When this condition occurs, owners typically spend considerably longer review time, reject the schedule, or approve it with reservations; all of which tend to reduce the usefulness and effectiveness of this important management tool. If the schedule is not approved before it begins to be impacted by project events, approval becomes complicated. The schedule review may become a “chess match” between the parties with each taking a defensive position. Approval of the baseline schedule may be used as a tool to assess a delay claim. A timely review and approval, even with conditions or reservations, will benefit all parties in the long term.
There are unique challenges for approval of schedules on multiple prime projects due to the fact that more than one contractor contracts directly with the owner for specific elements of work on the same project. Buy-in of the schedule by all of the prime contractors is often difficult to achieve. The development of a detailed schedule coordinating the work of the multiple primes from the contract milestones or pre-bid schedule is, in many cases, delegated to one of the prime contractors, usually the general contractor, who doesn’t have privity or control over the other primes. Therefore, as a practice tip, if an owner is using a Construction Manager, the Construction Manager should be made contractually responsible for coordinating with the multiple primes to develop the overall project schedule.
B. Schedule Updates
The schedule is dynamic and needs to be updated regularly, usually monthly, to accurately reflect the progress of the project. The update process is used to document the progress of the work, make necessary logic revisions, incorporate changes, and to record actual dates that activities were started and/or were completed. At all times, the contractor should maintain a copy of the baseline and each successive periodic update for record keeping purposes.
1. Progress
In order to accurately update the schedule, the status of all work activities in process or completed needs to be determined. This is done by assessing the remaining duration or percentage of completion of these activities and recording the information in the schedule update. The update forecast will properly reflect the remaining work and the current path of activities to achieve project completion.
Cost loading adds an extra level of complexity and negotiation to the schedule update process. Disputes may arise over the percentage completion based on duration or costs. Progress on activities should be measured based on the remaining duration of work, and not on remaining cost to complete.
2. Logic Revisions
The logic and sequence of events needs to be reviewed with each update. The progress of the work and other events may require logic revisions. Logic needs to be reviewed and adjusted to reflect changes in the planned sequence of work, additional work, and delays. As work is completed, retained logic may drive relationships between activities that are inaccurate. These logic relationships need to be corrected in the updates to maintain accurate logic through the remaining work.
3. Fragnets
Fragnets
are essential scheduling tools for making midcourse adjustments in project
planning and scheduling. The term “fragnet” is a common expression in the
scheduling industry and is an acronym for “fragmented network.” Fragnets
are strings of activities and logic that are added into a schedule to forecast
the possible impact and coordination required to introduce a new scope, delay,
or new means and methods of construction. A fragnet is a useful tool
during an update that documents a schedule impact caused by change orders, or
possibly material substitutions. For example, material substitutions may
affect the procurement time or procurement process, especially if custom
fabrication is introduced, such as millwork. A properly developed fragnet
can help both parties determine the schedule adjustments needed to incorporate
changes. An example of a fragnet to
incorporate changes in roof steel is shown in Figure 3 below. The fragnet was added to the first update of
the previously referenced baseline schedule.
Figure 3 - Fragnet
A
fragnet can be used to support a claim for delay and impact to a schedule by
showing new or revised activities added to a CPM which identify and assess the
time impact associated with a delay-causing event by projecting the time
relationship of the event to past, current and future-projected delays. A series of fragnets isolating discrete delay-causing
events and their time impact in relation to the overall CPM schedule can be a
powerful tool in supporting a delay and impact claim.
4. Actual (As-built) dates
Schedule software programs include the capability to record actual start and completion dates as schedule activities progress. Theses are referred to as “actual” or “as-built” dates. If the baseline schedule was properly updated during construction, the actual start and completion dates for the various activities are recorded contemporaneously.
In many instances the as-built information within the CPM schedule can provide a reasonably good record of actual events. However, the schedule does not track intermittent starts and stops in the progress of an activity, so it is still advisable to verify the actual dates against the project record. A detailed as-built schedule can be developed from the basic project records, such as daily inspection reports, diaries and logs, progress reports, photographs, and delivery tickets. Efforts should be made to accurately record all as-built information. As-built data is essential for a proper delay analysis, if a dispute later arises. A typical example of an as-built schedule is shown below in Figure 4.