UnderstandingTheIssues

Presentedby

MagA.Risk,P.E.

Principal
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presentationfromthe
followingwebsite:
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The Fundamentals of Construction Contracts, Peabody, MA 12/11/08

The Fundamentals of Construction Contracts, Peabody, MA 12/11/08

Typesofdelay
yp
y

The Fundamentals of Construction Contracts, Peabody, MA 12/11/08

1. Critical orNonCritical
2. Excusable orNonExcusable
3. Concurrent
C
orNonConcurrent
N C

4 Compensable orNon
4.
orNon

Compensable
p

The Fundamentals of Construction Contracts, Peabody, MA 12/11/08

TypesofDelay
NonCriticalDelays:
Impactaportionoftheworkwithavailablefloat

timeallowingtheprojecttobecompletedontime

CriticalDelays:
Impactaportionoftheworkexceedingfloattime

availableanddelayingtheproject

The Fundamentals of Construction Contracts, Peabody, MA 12/11/08

CriticalDelays
ExcusableDelay
Adelaybeyondthecontrol orfaultofacontractor

orowner(e.g.ForceMajeurecausesincluding
weather fire flood&actofGod)
weather,fire,flood&actofGod)

NonExcusableDelay
N E
bl D l
Thecontractorsfault

The Fundamentals of Construction Contracts, Peabody, MA 12/11/08

Excusable Delay
NonCompensable:
Contractorentitled toatimeextension butnot to

delaydamages
Delaydueto:

Weatherdelay

h d l
Strikes
ActsofGod

The Fundamentals of Construction Contracts, Peabody, MA 12/11/08

Non Excusable Delay

NonExcusable
NonCompensable:
Thecontractor
Thecontractorsfault
sfault.Contractorisnotentitled
Contractorisnotentitled to

atimeextension andowner mayassessliquidated

damages oractualdamages(ifcontractdoes
includeprovisionforliquidateddamages)
Delaycausedbyeventswithinthecontrolofthe

contractorandcouldhavepotentiallybeenavoided
hadthecontractorexercisedcare

The Fundamentals of Construction Contracts, Peabody, MA 12/11/08

Excusable/Compensable
/
p
ProofofDelay
Contractormustproofthatdelayscausedbythe

ownerextend theprojectcompletionbeyond the

dateattributabletoitsowndelay
Delaymustbeonthecriticalpath
DelaycannotbeconcurrentwithExcusable/Non
l
b
h
bl

compensabledelay

10

The Fundamentals of Construction Contracts, Peabody, MA 12/11/08

FormalRequests
Requestsforatimeextensionand/oradded

compensationmustbemadeformally:
ComplywithContractNoticeRequirements
Providesupportingdocumentation:
P id
ti d
t ti

AFragnet
AF
d i i
depictingtotaldaysofimpacttothe
ld fi
h
criticalpath
Adetailedcostbreakdown
Ad t il d tb kd

11

The Fundamentals of Construction Contracts, Peabody, MA 12/11/08

Exampleofa
FormalRequest

12

The Fundamentals of Construction Contracts, Peabody, MA 12/11/08

December 1, 2006
Mr. Owner
1000 Any Road
New York, NY 01000
Subject:

Request for Time Extension- Change Order 001

Reference:

Contract Agreement

Dear Mr. Owner,

In accordance with our contract requirements listed in
Section 5.3 Changes in the Work of A121 and
Article 7 of A121
and as a follow-up to our meeting on 6/29/06, we hereby, request a time extension to the contract milestone
completion date from March 7, 2007 to July 9, 2007, one hundred (100) days time extension.
Please execute Change Order 001, copy attached, to modify the terms of Section 7.1.4 of A121 and to extend the
contract completion in accordance with the attached progress schedule. Change Order 001 shall also reflect the net
increase in the present lump sum agreement for general conditions at a monthly rate of $100,000.00
$100 000 00 attributable to
the Construction Managers general conditions through May 7, 2007 (the forecasted completion date for all
buildings, but H) and $50,000.00 per month from May 8, 2007 through July 9, 2007 (the forecasted completion date
for building H).
The completion date of July 9, 2007 incorporates all progress through 6/30/06 and reflects the ongoing delay due to
the issuance of completed design documents for the various buildings. Our current project schedule, copy of which
is attached for the Architects review and your approval reflects the following completion dates:
Milestone
Turnover of Pad for Building F
Turnover of Buildings G, D, A, B, J & K
Turnover of Building H

Completion Date
October 19, 2006
May 7, 2007
July 9, 2007

The current completion date of July 9, 2007, for building H incorporates the current design delivery dates received
from the Architect on 6/29/06 reflecting the following:
Building

Design Review
Committee
Approval
7/24

Shell to
Consultants
8/4

Early Steel,
Concrete &
Brick
8/25

Foundation
Permit
Drawings
8/28

100% CD

9/29

p
drawings,
g , we are unable to incorporate
p
sufficient detail for the steel
Due to the lack of detailed completed
sequencing and erection for building H into the attached progress schedule.
Once the completed drawings become available, we shall incorporate such detail and notify you of any additional
requirements and/or impacts to the completion dates. We shall also have the ability to notify you of any additional
requirements to perform work in winter conditions due to the slippage directly attributable to the delay in the
delivery of completed design documents.
The current
c rrent design for building
b ilding H is still in conceptual
concept al form.
form We reserve
reser e our
o r right to additional req
requests
ests for time
extensions based on the actual design, delivery dates, detailing of the sequencing and erection of steel activities for
building H, as may be applicable.

13

The Fundamentals of Construction

Contracts, Peabody, MA 12/11/08

14

The Fundamentals of Construction Contracts, Peabody, MA 12/11/08

ManagingRisk
Theprocessofmeasuring,orassessing risk and
developingstrategies tomanageit.
tomanageit

TypesofRisk
11. Contractual
2. Construction

15

The Fundamentals of Construction Contracts, Peabody, MA 12/11/08

ContractualRisk

16

The Fundamentals of Construction Contracts, Peabody, MA 12/11/08

ContractualRisk
1. NoDamageForDelay
Contractor'ssoleremedyfordelay,lossof

productivity,impactdamagesorother
productivity
impactdamagesorother
similarclaimsshallbeanextensionoftime
i hi ht
inwhichtocompletethework.Innoevent
l t th
k I
t
shallContractorbeentitledtoadditional
compensationordamages fordelay."

17

The Fundamentals of Construction Contracts, Peabody, MA 12/11/08

NoDamageForDelay

Theownershallnot
Th

h ll t beliablein
b li bl i
monetarydamages
y
g forthecostof
delayswhicharisefromactsor
omissionsforwhichtheowner
i i f hi hth
i
is
responsible
p

18

The Fundamentals of Construction Contracts, Peabody, MA 12/11/08

ContractualRisk
2. LimitedDelayDamages
TheContractorssoleremedyforanydelayinthe
commencement,prosecution,orcompletionoftheWork,
orforhindrancetotheperformanceoftheWork,lossof
productivity orothersimilarclaims shallbeanincreasein
productivity,orothersimilarclaims,shallbeanincreasein
theContractTime unlesscausedbyactsconstituting
intentionalinterferencebytheOwner.TheContractorshall
beentitledtoanincreaseintheGeneralConditions ifthe
f
ContractorsGeneralConditionshaveactuallybeen
increased asaresultofadelaytothecriticalpathofthe
ProjectSchedule causedbytheimproperactsoromissions
oftheOwner.
19

The Fundamentals of Construction Contracts, Peabody, MA 12/11/08

Reduce/EliminateContractualRisk
3. DelayDamages
D l D
"IntheeventthatContractor's
IntheeventthatContractor s

performanceisdelayedorhindered,
throughnofaultofitsown Contractor
throughnofaultofitsown,Contractor
shallbeentitledan extensionoftime
co espo d g to t e u be o days ts
correspondingtothenumberofdaysits
performancewasdelayed,andshallbe
entitledtoadditionalcosts relatedtosuch
delayorhindrance."

20

The Fundamentals of Construction Contracts, Peabody, MA 12/11/08

SubcontractorsRecoveryofDelayDamages
fromGeneralContractor

4 ConditionalRecovery
4.

21

"Subcontractoragreesthatitshallnotbeentitledtonor
Subcontractoragreesthatitshallnotbeentitledtonor
claimanycostreimbursementordamagesforanydelay,
obstruction,hindranceorinterferencetotheWork,
,
,
excepttotheextentthatGeneralContractorisentitled to
correspondingcostreimbursement,compensationor
d
damagesfromtheOwner
f
h O
undertheContractDocuments
d h C
D

andthenonlytotheextent oramount,ifany,which
GeneralContractoronbehalfofSubcontractoractually
receivesfromtheOwner onaccountofsuchdelay,
obstruction,hindranceorinterference."
,
The Fundamentals of Construction Contracts, Peabody, MA 12/11/08

ConditionalRecovery
Subcontractorsrecoveryofdelaydamagesis
y
y
g
contingent uponthecontractorprevailing inits
claimfordelaydamagesagainsttheowner

22

The Fundamentals of Construction Contracts, Peabody, MA 12/11/08

AIAGeneralConditionsoftheContractfor
Construction
Delays&ExtensionsofTime
8.3.1IftheContractorisdelayedatanytimeinthecommencementorprogressof
theworkbyanactorneglectoftheOwnerorArchitect,orofanemployeeof
either,orofaseparatecontractoremployedbytheOwner,orbychangesordered
intheWork,orbylabordisputes,fire,unusualdelayindeliveries,unavoidable
casualtiesorothercausesbeyondtheContractorscontrol,orbydelayauthorized
bytheOwnerpendingmediationandarbitration,orbyothercauseswhichthe
Architectdeterminesmayjustifydelay,thentheContractTimeshallbeextended
h
d
f d l
h
h
h ll b
d d
byChangeOrderforsuchreasonabletimeastheArchitectmaydetermine.

8.3.2Claimsrelatedtotimeshallbemadeinaccordancewiththeapplicable
provisionsofParagraph4.3

8.3.3Thisparagraph8.3doesnotprecluderecoveryofdamagesfordelay
by e t e pa ty u de ot e p o s o s o t e Co t act ocu e ts
byeitherpartyunderotherprovisionsoftheContractDocuments
23

The Fundamentals of Construction Contracts, Peabody, MA 12/11/08

OwnersRemedytoRecoverDamagesfor
Delay

5. LiquidatedDamages
Anagreeduponamountperdayfor

delaysencounteredontheprojectwhich
arecausedbythecontractor

db th
t t

24

The Fundamentals of Construction Contracts, Peabody, MA 12/11/08

OwnersRemedytoRecoverDamagesfor
Delay
6. ConsequentialDamages
7 ReverseLiquidatedDamages
7.

25

Ratherthanprohibitdelaydamages,thepartiesmay
agreethattheownersliabilitytothecontractorshall
th tth
li bilit t th t t h ll
belimitedtoanagreeduponamountperdayfor
delaysencounteredwhicharecausedbytheowner.
delaysencounteredwhicharecausedbytheowner

The Fundamentals of Construction Contracts, Peabody, MA 12/11/08

RiskAllocation
Generally,acontractormayrecoverdamages
Generally
acontractormayrecoverdamages
arisingfromdelay&disruptionifitcanprove:
Thecontractorsworkwasdelayed ordisrupted
Thecontractorsuffered damagesasaresult
Theownerand/oritsagentsareresponsible
g
p
forthe
actsoromissionswhichcausedthedelayor
disruption
4. Thelanguageofthecontractallows thecontractor
torecoverdamagesfordelayordisruption
1.
2.
33.

26

The Fundamentals of Construction Contracts, Peabody, MA 12/11/08

RiskAllocation
Partiestoaconstructioncontractmayelectto
prohibitorlimitcompensabledelayclaims:

Contractualclausesgoverningtherights&liabilities
forprojectdelaysallocate risk

Reviewtheprovisionsofyourcontractpriorto
executiontounderstandhowthesubstantial
risksassociatedwithprojectdelayshavebeen
allocated

27

The Fundamentals of Construction Contracts, Peabody, MA 12/11/08

ChangesintheWork

28

The Fundamentals of Construction Contracts, Peabody, MA 12/11/08

ChangeOrders
Awrittenorder issuedafter acontracthasbeen

awardedthatincreases ordecreases thescopeof

workandmodifies thecontractdollaramountfor
aproject.

29

The Fundamentals of Construction Contracts, Peabody, MA 12/11/08

AChangeOrdercouldbeIssuedbyanOwner
asaResultof:
Unforeseenorunanticipatedfieldconditions
Unforeseenor
nanticipatedfieldconditions
2. Correctionofdesigndiscrepancies,orerrorsor
omissionsinthecontractdocuments
3. Ownerrequestedchangestoenhancethe
g
presentdesign
4. Changesinthecompletiondate
5. Changesinbuildingcodeinterpretations
6 Changesinavailabilityofexistingornew
6.
Ch
i il bilit f i ti

materialandproducts
1.

30

The Fundamentals of Construction Contracts, Peabody, MA 12/11/08

ChangeCategories
1. DirectedChanges

Areacknowledgedchangesbytheownertoa
contractedscopeofwork

Examples

Architectmodifiescontractedscopeofwork
h
df
d
f
k
Ownerwishestomakebettermentsand/or
substitutionsofproducts
b tit ti f d t

31

The Fundamentals of Construction Contracts, Peabody, MA 12/11/08

ChangeCategories
2. ConstructiveChanges

Arenot readilyacknowledgedbytheownertoa
contractedscopeofwork

Examples

Performingworkoutofnormalsequence
f
k
f
l
Actualjobconditionsaredifferentthanthey
appearedattimeofbid
d tti fbid
Requestingtimeextensions
32

The Fundamentals of Construction Contracts, Peabody, MA 12/11/08

ChangeCategories
3. CardinalChange

Takeaprojectbeyond theoriginalscopeofwork
thatwascontracted
Entitlementisnotassertedby
EntitlementisnotassertedbyContract
Contract
adjustmentprocedures
Examples

Ifyouwerecontractedtobuildagarageandthe
ownerdecidestoaddahousetotheproject

33

The Fundamentals of Construction Contracts, Peabody, MA 12/11/08

ClaimsAndDisputes
p

34

The Fundamentals of Construction Contracts, Peabody, MA 12/11/08

CausesofConstructionClaims
1. ProjectDelay
Delaysinconstructionprojectsareexpensive
because:
thereisusuallyaconstructionloaninvolved
whichchargesinterest
g
managementstaffdedicatedtotheproject
whosecostsaretimedependentand
p
ongoinginflationinwageandmaterialprices

35

The Fundamentals of Construction Contracts, Peabody, MA 12/11/08

CausesofConstructionClaims
2. Acceleration tomeetContractMilestoneDates:

Remedies:

36

ContractDateshavenotbeenextended
ContractorsobligationresultsinConstructive
Acceleration
Progresstheschedulebiweeklyormonthly
Progresstheschedulebi
weeklyormonthly
Determinepercentcomplete relativetoBaseline
Id tif d l d
Identifydelaysandresponsibility
ibilit
DevelopRecovery plans
The Fundamentals of Construction Contracts, Peabody, MA 12/11/08

CausesofConstructionClaims
3. LackofCoordinationbyOwnerorCM

TypeofContractdictatesresponsibilities(Multi
PrimeContractingvs.Single)
LackofManagement:considertheenormous
LackofManagement considertheenormous
effortrequiredtocoordinatetheactivitiesof1500
tradesmenonaprojectduringpeakperiods
ExcessiveManagement:considerthe
inefficienciesassociatedwithmicromanagement

37

The Fundamentals of Construction Contracts, Peabody, MA 12/11/08

CausesofConstructionClaims
4. ChangesintheWork

ChangesinWorkSequence
ToomanyChangeOrders (turnedouttobe
Design/Build)

9 Remedies:

38

Analyzeimpact:insertproposedchangeorder
intoprogressschedule

The Fundamentals of Construction Contracts, Peabody, MA 12/11/08

CausesofConstructionClaims
5. WorkRestrictions&Limitationsof
Operations

Accessrestrictionstocontractorswork
Workhoursrestrictions
W kh
t i ti
Noiserestrictions

9 Remedies:

39

Includeallrestrictionsandlimitationof
operationsinthecontract.

The Fundamentals of Construction Contracts, Peabody, MA 12/11/08

SupportingConstructionClaims
TimelyNotices
ComplywithNoticerequirementsinthecontract
Reserveyourrights

SupportingDocumentation:
pp
g
CostImpact
ScheduleImpact(Fragnets)

The Fundamentals of Construction Contracts, Peabody, MA 12/11/08

40

TypesofContractorDelayDamages
11. DirectCosts
2. IndirectorConsequentialDamages

41

The Fundamentals of Construction Contracts, Peabody, MA 12/11/08

DirectCosts
a) Mobilization/Demobilizationcosts
b) Costsofstandbytime/idleequipment
c) Extendedgeneralconditions&fieldoffice
g

overhead
d)) Extendedhomeofficeoverheadduringdelay
g
y
period
e) Increasedlabor&materialcosts
f) Lossofproductivityduetodelaysandhavingto
altermethodsofperformance

42

The Fundamentals of Construction Contracts, Peabody, MA 12/11/08

ReserveYourRights
SubmitformalNoticeofDelaytimely
Sometimesyouareunabletoascertainimpact

earlyon:
Acknowledgeimpactcannotbedeterminedatthis

time
Reserveyourrightstofuturerequests

43

The Fundamentals of Construction Contracts, Peabody, MA 12/11/08

Languageto
ReserveYourRightstoFuture
Requests
Weherebyreserveourrightstosubmitrequests

foradditionalunforeseenconditions.Additional
requestsshallinclude butnotbelimitedto time
requestsshallinclude,butnotbelimitedto,time
extensions and/oraddedcosts tocompensateus
toperformadditionaloutofscope work.
work

The Fundamentals of Construction Contracts, Peabody, MA 12/11/08

44

DevelopingStrategies
t M
toManageRisk
Ri k

45

The Fundamentals of Construction Contracts, Peabody, MA 12/11/08

FactorsContributingto
g
ConstructionRisk
IncompleteDesign
Ambiguousplans
CoordinationoftheWorkbyOwnerorCM
Interferences/Unanticipatedconditions
ChangesintheSequenceoftheWork
ExcessiveChangeOrders
LackofProgressbyOtherTrades

46

The Fundamentals of Construction Contracts, Peabody, MA 12/11/08

ProjectRiskPlanning
Projectplanning isamust

CommonPitfalls
Thechallengesonemightencounterinan
organizationthatfeelsaprojectplanning
methodologyisnotneeded.
methodologyisnotneeded

47

The Fundamentals of Construction Contracts, Peabody, MA 12/11/08

ProjectPlanning
IspartoftheProjectManager'sarmourythat

mustbeinplacetoensurethateffective
controloftimeandbudgetovertime is
managedwithintheprojectenvironment
managedwithintheprojectenvironment.
TodothisaWorkBreakdownStructure (WBS)
mustbeidentifiedandactivitiesassociated
witheachelementofit.

48

The Fundamentals of Construction Contracts, Peabody, MA 12/11/08

ManagingRisk
DevelopChangeManagementSystem
ManageDelay
DevelopBaseline
Progressschedulebiweekly
Analyzedelay,changes
DevelopRecoveryPlans
DevelopFragnets
Requesttimeextensions&addedcompensation

49

The Fundamentals of Construction Contracts, Peabody, MA 12/11/08

AnalyzeScheduleImpact
ImpactduetoChanges:
InsertaproposedChangeOrder intotheprogress

scheduletoanalyzeimpacttoprojectcompletion
milestonedates
AnalyzeimpactduetochangesinWorkSequence
DevelopFragnet
D l F
t tosupportTimeExtension
t
tTi E t i
Requests
IdentifyAdditionalResources
Id tif Additi
lR
&C t requiredto
&Cost
i dt
performadditionalwork
50

The Fundamentals of Construction Contracts, Peabody, MA 12/11/08

ChangeManagementSystem
DevelopaChangeManagementSystem to

expeditetheissuanceofFormalChange
Orders:
ProvidetimelyNotice
P id ti l N ti
IdentifyScope ofchange
Identifylabor&materialcosts
ProvidesupportingDocumentation
Desiredresults:Performextraworkafterissuance

ofFormalChangeOrdertoexpeditePayment
g
p
y
51

The Fundamentals of Construction Contracts, Peabody, MA 12/11/08

52

The Fundamentals of Construction Contracts, Peabody, MA 12/11/08