Practitioner's Guide

Welcome to Project Controls Practitioner's Guide to Key Topics

You are now at the location for what will soon be THE most extensive Project Controls guide on key topics and concepts to be found anywhere on the web. This guide will be under constant update and revision and hence we can never say it is complete. To help us produce this quality service, we request practitioners to contribute with feedback, suggestions and content revision.

Prepared by "PCO Subject Expert" Nader Samir; Project Manager and CRCICA Registered Expert, Egypt

Index

A) Typical claims against Employers:

  • 1. Scope changes,
  • 2. Constructive change orders,
  • 3. Errors and omissions,
  • 4. Contract acceleration and expediting,
  • 5. Work suspension and stoppages,
  • 6. Site access,
  • 7. Lack of Productivity,
  • 8. Strikes and acts of God, and
  • 9. Actions by Employers.

B) Typical claims against the contractors:

  • 1. Out-of-specification materials,
  • 2. Defective work,
  • 3. Property damages,
  • 4. Contractors' late completion, and
  • 5. Low-ball bidders.

C) Dealing with Claims :

C.1) Critical path method and Schedules

  • 1. Schedule Components
  • 2. Contractual Obligations
  • 3. Typical Schedule Check List
  • 4. Legal Implications

C.2) Record management

  • 1. Records for substantiating a claim
  • 2. Daily and Weekly Reports
  • 3. Change Orders Records

A) TYPICAL CLAIMS AGAINST OWNERS

  • 1. Scope changes,
  • 2. Constructive change orders,
  • 3. Errors and omissions,
  • 4. Contract acceleration and expediting,
  • 5. Work suspension and stoppages,
  • 6. Site access,
  • 7. Lack of Productivity, and
  • 8. Strikes and acts of God.
  • 9. Actions by Employers.

Scope Changes :

Scope changes are usually initiated by a change order, letter of intent, or a field directive. They may direct changes, work deletions or additions to the original scope of the contract. Change orders are just part of everyday business in construction environments. To think that a project or a construction contract can be executed without them is an erroneous belief. An effectively organized effort to eliminate cost and time impact as a result of processing work outside the original scope of the contract should be high on the list of priorities of every management team since change orders are the usual reason for cost and time overruns. This is especially true for contractors wanting to realize their planned profits.

Scope changes are often narrowly defined, and estimates of the associated cost and schedule impact are usually lacking accuracy; Contractor, Engineer and Employer may agree on the fact that something should be done, but they may not be so agreeable on its full description and associated cost implications.

When Employers or their authorized representatives give directions that interfere with the normal contract development without acknowledging cost and schedule implications, it is usually called a "constructive change". Additionally, constructive changes are sometimes found after the fact, when reviewing schedules, records, letters and minutes of meetings; this does not negate the contractor's right to recover additional expenses. Contractors are advised to train their teams to recognize constructive changes since this can make the difference between a profit and a loss situation.

Errors and Omissions :

A potential for claims arises when the contractor questions plans and specifications given by contractual terms, and the Employers or their representatives fail to recognize it as a valid change order. Constructive change orders may be generated by absence of agreement on this issue. Even if the contractor is forced to proceed as directed by the Employer and contractual obligations, recovery of additional costs may be pursued at a later occasion. Contractors are advised to document these cases as closely as possible for future identification of additional costs.

Contract acceleration and expediting :

Contractors are frequently directed to accelerate performance of the contract or a portion of it within the original or adjusted completion date. This direction constitutes a change in the contractual obligations, and the contractors have the right to pursue compensation for it. Furthermore, contractors may expend extra effort in response to a directed increase in work without an increase in time. This constitutes a constructive acceleration which should be carefully analyzed, documented and decided upon. Validation of this kind of claims is, of course, difficult and requires the contractors to prove their case.

Work Suspension and Stoppage :

When contractors are notified to suspend work due to reasons out of their control, they have the right to be compensated for the time and cost involved in the suspension or part of the suspension even if the contract document calls for "work-around" directives.Contractors are compelled to keep detailed data related to cases like these to be able to recover related expenses.

Site Access :

When the contractors' scheduled activities have the need for a right of way and/or a location to proceed and the Employer fails to provide them on time, the contractors should pursue a compensation for the time and cost of the resources scheduled and not being able to perform productively.

Lack of Productivity :

When the contractual obligation forces the contractor to joint-occupancy, interference by other Employers' contractors' actions or lack of progress in the area may hamper performance and a justifiable claim for compensation over productivity levels may arise.Productivity or the lack of it is not an easy subject to be justified. Regardless of how controversial these issues may become, contractor6 are urged to substantiate their facts while they are actually happening.

Strikes and Acts of God :

Time delays due to facts beyond a contractor’s Control such a6 Strikes, boycotts, unusual weather, earthquakes, fires, and floods are excusable delays and the contractor should be entitled to a time extension.

Actions by Employers:

The following is a checklist for usual Employers’ actions impacting contractual performance may become handy when managing projects:

  • 1. Improper assumption of direction of field operations,
  • 2. Failure to grant access to the construction site,
  • 3. Procedures approval delays,
  • 4. Arbitrary or unreasonable actions,
  • 5. Failure to expedite/disclose 'information needed to perform,
  • 6. Failure to comply with contractual payment schedule,
  • 7. Excessive number of change Orders, and
  • 8. Poor communications.

B) TYPICAL CLAIMS AGAINST CONTRACTORS

  • 1. Out-of-specification materials,
  • 2. Defective work,
  • 3. Property damages,
  • 4. Contractors' late completion, and
  • 5. Low-ball bidders.

Out of Specification Materials:

Discrepancies may result due to differing interpretations about contractual material specifications. Contract specification omissions/clarity are frequent with the undesirable result that decisions have to be waited for or directions given on-the-run at the job site with the consequent confusion, delays and usual increase in scope work. The main problem comes while supplying materials where it is known that there are numerous competitive manufacturers which may substitute for one another. The contract's language is usually followed but when the issue is material specifications, complications may arise since every Employer wants to save money by competitively bidding prices from different manufacturers while still getting maximum functional efficiency.

Defective Work :

Contractors are responsible for the quality of their work as specified in contractual terms. This is not always easy to establish, since by definition, defective work is difficult to spot and decide upon. Defective work may be blamed on the designer due to lack of adequate specifications or on the Employer for disturbing the original design or on the contractor for lacking the Skills needed for the job. It is not difficult to see why many claims are generated over this issue.

Property damage :

Claims may result from several sources, including:

  • 1. Damaging Employer's installations when performing the contract,
  • 2. Damaging neighbor's installations when performing work,
  • 3. Violating rights of property Employers adjacent to the construction limits, and
  • 4. Violating government area regulations.

Contractor's Late Completion :

Contracts usually call for a completion date on the assumption that the Employer is in need of the facility by that date. A contractor finishing late may bring inconvenience to the Employer and/or financial. Some contracts include clauses where penalties are considered against the contractor in the event of completion delays, but regardless of the contract having or not having that clause, the Employer may claim damages due to late completion.

Low-ball Bidders :

Contractors sometimes come up with extremely low bids which may force them to be excessively cost conscious in their efforts to recover from their tight situation. Their low bids are due to a number of circumstances, such as:

  • 1. Failure to understand the scope of the job,
  • 2. Misunderstood technical requirements,
  • 3. Bid mistakes, and
  • 4. Desire to improve the competitive edge.

C) DEALING WITH CLAIMS :

C.1) Critical Path Method & Schedules

  • 1. Schedule Components
  • 2. Contractual Obligations
  • 3. Typical Schedule Check List
  • 4. Legal Implications

Schedule Components :

Properly designed schedules include:

  • 1. Total scope of the job,
  • 2. Organized sequence of activities needed to perform the job,
  • 3. Duration for all activities involved, and
  • 4. Resources needed to accomplish each activity.

The Critical Path method depict what has to be done, when it has to be done, how it has to be done, who has to do it, and where.

Contractual obligations :

Contractual obligations usually include:

  • 1. Approval of an original Schedule,
  • 2. Procedures to update the Schedule periodically,
  • 3. Procedures to revise the Schedule, and
  • 4. Procedure to utilize the Schedule as a tool for claim settlements.

Typical Schedule Check List :

The following checklist provides a valuable tool for planning and scheduling administration:

  • 1. Establish and maintain a progress measurement system.
  • 2. Gain construction schedule approval as soon as possible.
  • 3. Establish and maintain planning and scheduling routines.
  • 4. Agree upon planning/scheduling indexes and their meaning.
  • 5. Establish schedule revisions approval with minimum turnover time.
  • 6. Establish change order/approved schedule interface System.
  • 7. Create a scheduling revisions filing system.
  • 8. Insist on detailed backup for proposed changes.
  • 9. Promptly notify / process/ document schedule variances.

Legal Implications :

If properly included in the contract, some general legal implications of an approved schedule may be summarized as follows:

  • 1. Both parties are bound to follow the schedule specifications.
  • 2. Labor levels and crew sizes established in the schedule have to be followed unless Changes are duly authorized.
  • 3. Equipment utilization incorporated in the schedule is binding, failure to follow it constitutes a breach of the contract.
  • 4. Materials as specified in the schedule are equally binding.
  • 5. Contractors are liable for productivity lower than that allocated by the schedule.
  • 6. Inspections and approvals from the owner should be performed according to the schedule.
  • 7. Any deviation from the schedule should be settled as per contractual procedures involving schedule revisions.

C.2) Record Management:

  • 1. Records for substantiating a claim
  • 2. Daily and Weekly Reports
  • 3. Change Orders Records

Records for substantiating a claim :

Good, accurate records are the best assistance anybody can get when negotiating changes and disputes. This is particularly important for the contractors since they usually have the burden to prove the impact for any issue under dispute had on their performance. The records usually needed to substantiate a Claim are:

  • 1. Progress schedules,
  • 2. Daily and weekly reports,
  • 3. Change order log,
  • 4. Correspondence from and to the contractor,
  • 5. Photographs,
  • 6. Job diary,
  • 7. Plan and Schedules revisions, and
  • 8. Minutes of daily and weekly meetings.

Daily and Weekly Reports :

Performance is usually documented through periodic reviews and revisions of the project approved schedule. Reports showing scheduled vs. actual performance determine the project status at any time so anybody can visualize the work completed to date, the rate at which the work was performed, and the costs incurred. Daily and weekly reports should include:

  • 1. Issue date, weather conditions,
  • 2. Staffing levels,
  • 3. Equipment used and idled,
  • 4. Materials utilized and future requirements,
  • 5. Subcontractors’ performance,
  • 6. Change orders work, and
  • 7. Safety.

Change Orders Records :

Since change orders are one of the major causes of claims, it is important to maintain good records of them including:

  • 1. Initiations,
  • 2. Cost and time estimates,
  • 3. Approvals,
  • 4. Current status,
  • 5. Requests for project completion revision,
  • 6. Daily progress, and
  • 7. Interface with current approved schedule.

Furthermore, keeping the correspondence well organized by subjects will provide the means of understanding what happened, should an after-the-fact claim arise. It also helps in relating new problems to old ones.