Forensic Schedule Analysis on Risk Adjusted Schedules

John C. Livengood, Esq., AIA Patrick M. Kelly, PE, PSP

Introductions

John C. Livengood, Esq., AIA, CFCC, PSP

Associate Vice President ARCADIS U.S., Inc.

Biography Mr. Livengood is a registered architect with more than 35 years of experience in architectural design, project management, design analysis, and document preparation. He is also an attorney experienced in construction litigation, government contracts, international contracts and arbitration, as well as schedule delay and claims on a variety of large and small projects. He has served as an expert witness and testified on scheduling, damages, and causation issues numerous times. Mr. Livengood has written numerous articles on schedule delay and claims issues.

Introductions

Patrick M. Kelly, PE, PSP

Senior Claims Analyst ARCADIS U.S., Inc.

Biography Mr. Kelly has more than 15 years of construction management, government contracts and consulting experience in the private and public sectors. He has been engaged by both the owner and contractor on Federal, State and Municipal levels and specializes in transportation, government facilities and critical structures assignments. He has provided forensic schedule analysis and litigation support on construction methodology, cost analysis, and delay/disruption issues, and has written several articles on scheduling and delay analysis .

Introduction

Variability of the Critical Path

The Critical Path, the longest continuous chain of activities which establishes the minimum overall project duration for a project is identified through the development of a Critical Path Method schedule. Schedule must have:
Sufficient level of detail that includes full scope of work Logic that accurately describes the planned order of the work Durations that are calculated with respect to the planned level of resources to be applied to that scope of work

This is the Critical Path, and a slippage or delay in completion of any activity along that path will extend final completion correspondingly.

Variability of the Critical Path

The Construction Industry knows that the Critical Path of a project is not static, and will likely not remain on the exact path or give the same predicted completion date determined by the initial CPM calculations. Knowing this, many are turning to Quantitative Risk Analysis (QRA) to try to identify all the likely delays to project completion, and all the likely Critical Paths.
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Definition of QRA
Quantitative Risk Analysis:
Risk analysis is used to estimate a numerical value (usually probabilistic) on risk outcomes wherein risk probabilities of occurrence and impact values are used directly rather than expressing the severity narratively or by ranking as in qualitative methods.

Purpose of QRA
Assessing the potential variability in project duration (in individual activities, various subnetworks, or the overall completion milestone) resulting from identified project risks. Assessing how risks, including threats and opportunities, in the project schedule may influence project economics. Understanding which paths in the schedule have the highest probability of influencing the schedule completion or key milestones. Understanding which risks have the most influence on overall schedule variability.

Definition of Monte Carlo Analysis

Monte Carlo Analysis:
Methods for finding solutions to mathematical and statistical problems by simulation. Used when the analytic solution of the problem is either intractable or time consuming. Relies on a well-developed CPM schedule and probability distributions (often the triangular distribution) for each activity duration, based on normal duration estimating techniques and estimates of likelihood & effects of risks identified by the project management team.
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Definition of Monte Carlo Analysis

Risks are identified by the project management team and tracked in a Risk Register. Register shows risks, likely impacts, responsible party for the risk, and party responsible for mitigating the risk.

Risks listed in register are then associated with specific activities within the schedule, and relate to duration estimates. Risk Register could be used after the fact to determine responsibility and efficacy of actions taken to mitigate risk.
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Definition of Monte Carlo Analysis

The triangular distribution establishes the optimistic, most likely and pessimistic durations, for a specific activity Estimates are based on the analysts understanding of the likelihood and severity of the risks identified for that activity within the risk register.

The establishment of these points of the triangular distribution curve is a matter of judgment for the scheduler and the risk analyst, but these points have a major effect on the Monte Carlo simulation.

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Considerations in QRA Process

Schedule Model Building
Creation of an adequate CPM model for use in QRA Good CPM Practices, including resource/cost loading Meeting Source Validation Protocols in RP 29R-03 Forensic Schedule Analysis Summary vs. Detailed Model Probabilistic and Conditional Branching Establishing risk relationships to schedule Good risk register, communally developed Linking risks to specific activities Combination of linked risks and duration ranges Establishing Correlations Monte Carlo Analysis Specify simulation results Interpreting Accounting for merge bias Results Duration cruciality vs. schedule sensitivity
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Associate Risks to Activities

Recommended Texts for QRA

David Hulett GAO Schedule Guide

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Recommended Texts for QRA

AACE RP 57R-09 AACE RP 64R-11

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QRA in Forensic Schedule Analysis: Central Questions

If the project team was using a risk-adjusted schedule series, showing multiple likely critical paths, then what did the project team think was critical at the time the schedule was created? What implications does the QRA process have for identification of delays and apportionment of responsibility? How should analysts use the information generated in the QRA, with regards to methodology selection and execution?
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Overview of Forensic Schedule Analysis

Forensic Schedule Analysis

Construction schedules (using Critical Path Methodology) are project management tools that, in and of themselves, do not demonstrate root causation, responsibility for delays, or entitlement. Forensic Schedule Analysis:
The study of how actual events interacted in the context of a complex CPM model for the purpose of understanding the significance of a specific deviation or series of deviations from some baseline model and their role in determining the ultimate sequence of tasks within the complex network.

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Two Major Phyla of FSA Methodologies

Observational Methods Examine existing schedules; compare one to another; make minimal changes; perform analysis of events using existing schedules. Modeled Methods Insert/extract activities representing events to/from network; compare calculated results before & after modeling; determine delays & impacts.

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Forensic Schedule Analysis Methodologies

Observational Static Logic Gross Periodic
Contemporaneous As-Is

As-Planned vs. As-Built

As-Planned vs. As-Built

Contemporaneous Period Analysis (Windows) Bifurcated CPA Recreated CPA Impacted As-Planned

Dynamic Logic

Bifurcated Contemporaneous Recreated / Modified

Modeled

Additive Model

Single Base Multiple Base Single Simulation Multiple Simulation

Retrospective TIA

Collapsed As-Built (Single)

Subtractive Model

Collapsed As-Built (Multiple)

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Methodology Selection
Facts of the Case

1st

Contract documents Issues to be claimed Legal jurisdiction Forum for resolution

Technical Considerations

2nd

Quality of source data Complexity of the dispute Timing of analysis Expertise of analyst

Choosing a methodology is a process that must consider and balance a variety of selection factors, based on these priorities.

Commercial Considerations

3rd

Size of the dispute Budget allowed Time allowed

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Methodology Selection
An analysts selection of a methodology is based (at least in part) on the quality of the existing schedules, and how they were used on the project. If the project schedules were used to plan and execute the project, it is advisable to use those schedules in the analysis.
The schedules would have influenced the contemporaneous understanding of criticality.
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Contemporaneous Understanding of Criticality and Variability of the Critical Path in Risk Adjusted Schedules

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Contemporaneous Understanding of Criticality

It is generally accepted that the best position for a forensic schedule analyst to have is one which includes a detailed understanding of what the people on the project at the time it was being built thought was critical.
Important Caveat: This assumes that the contemporaneous understanding of criticality was established through legitimate project scheduling practices. The situation is greatly complicated when the contemporaneous schedule series contains software manipulations that create critical paths to order. Such schedule series are of limited usefulness in post-completion schedule analysis.
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Contemporaneous Understanding of Criticality

Wickwire:
Delays are best evaluated on a chronological and cumulative basis, taking into account the status (and critical path[s]) of the project at the time of the delay in question. With this methodology and protocol, all parties on the project live with the events, actions, and sins of the past.

Bruner & OConnor:

There very well may be more than one critical path on a project, and the critical path may change during the life of a project. While every construction event can eventually become "critical by having its cushion or float time used up, this is not anticipated in the initial scheduling.

QRA is a process that attempts to quantify, using the initial schedule (and possibly updates), what events are most likely to have their cushions of float consumed. The analyst must understand how this process influenced the contemporaneous understanding of criticality.
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Variability of the Critical Path

Example Network (for demonstration):
Duration estimates based on risk assessment are applied to each activity. Monte Carlo analysis is performed (using Palisades @Risk software). 5000 iterations of durations (within the distribution curve) develop the risk outputs.
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CPM Network Calculation Only

Path 1

Task Y Path 2
Non-Critical Activity Critical Activity Float Bar

Path 1 drives the Critical Path in the initial schedule, and Path 2 (through Task Y) shows 12 days of Total Float (roughly 7% of project duration).
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Calculations using Monte Carlo Analysis

Non-Critical Activity Critical Activity Float Bar

Based on duration estimates, clearly there is some likelihood that Path 2 will drive the Critical Path. Software helps quantify that likelihood.
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Range of Likely Project Durations

Cumulative Frequency Probability

Probability distribution of project duration:

50% probability that the project will finish on time (182 days) as shown by CPM alone. 95% probability that the project will finish in 195 days.

Distribution

Projects duration is a range rather than a definite number. How should that be handled in the Firm Fixed Price Contract?

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Potential Criticality of Path 2

Task Y Total Float:
10% probability that Path 2 will drive the Critical Path. 50% probability that Path 2 will have float of 15 days.
Cumulative Frequency Probability

Distribution

Did this influence the contemporaneous understanding of criticality? Did the project management team act on this information?
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Variability of the Critical Path

Non-Risk Adjusted A single, driving critical path, usually with a single causal activity. Possible near-critical paths that may become the critical path in the future. Risk Adjusted Multiple critical paths with different likelihoods of driving the predicted completion date. Quantitatively shows the reality of construction projects.

What did the project management team do with this information?

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What did the project management team do with this information?

Central Question:
If the project team was using a risk-adjusted schedule series, with its identification of the likelihood of various logic paths as possibly driving the longest path through the project rather than the simpler calculation of a single zero-float path through the static network, then what did the project team think was critical at the time?

Whether or not the QRA process was relevant to the project management teams actions is likely to be revealed during document research. If it did (as it should have why else do a QRA?) then the analyst must account for this fact in the delay analysis.
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Risk-Adjusted Schedules: Questions for the Forensic Analyst How was the schedule risk-adjusted? What was the Quality of the Risk Adjustment? Did the Risk Adjusted Schedule Influence the Contemporaneous Understanding of Criticality?

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First Question
How was the schedule risk adjusted?
Summary Schedule QRA
More common. Often performed by the owner during planning, and not used by contractor. Summary schedule doesnt rise to the level of detail necessary to show means and methods. Some argue more useful overall, but likely to result in a time (or cost) contingency rather than influencing thoughts on criticality.

Summary Schedule QRA may still provide insight into the project; however, it is not particularly relevant to FSA methodology selection.
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First Question
How was the schedule risk adjusted?
Detailed Schedule QRA
Often criticized as overly difficult or infeasible. Means and methods are represented by the level of detail. More likely to influence thoughts on criticality.

Assuming Detail Schedule, adjusted through QRA, was then used to plan and implement the project, how well was the QRA performed?
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Second Question
What was the Quality of the Risk Adjustment?
Quality of QRA is its own Source Validation Protocol. RP 64R-11s Minimum Conditions of Satisfaction are relevant.

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Minimum Conditions of Satisfaction

A development of scope of work, execution plan, cost estimate, and schedule that are consistent with each other; A quality schedule: good activities, appropriate level of detail, logic, cost loaded, resource loaded; Agreement on the schedule and/or approval of the schedule; A comprehensive risk register, communally developed, that shows impacts of risks and has a mitigation plan; and An understanding of the systemic risks, if not captured in the risk register, which may impact the projects performance, including schedule completion.
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Second Question
What was the Quality of the Risk Adjustment?
Potential questions to ask:
What was the basis of estimation for the three-point estimates? Did they come from some identifiable source or quantifiable means? Were the line-by-line estimates performed in light of accurate estimates of quantity/resource levels/production rates? What was the basis of choice of a distribution curve, if not a triangular distribution? Were issues related to merge bias taken into account? Were risks properly correlated?
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Third Question
Did the Risk Adjusted Schedule Influence the Contemporaneous Understanding of Criticality?
Again, the answer to this question is in the project documents. If the QRA was performed and ignored, its value to the analyst is diminished. Was QRA used in update schedules? Recovery schedules?

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Additional Bases of Selection of Methodology

Methodology Selection
Facts of the Case

1st

Contract documents Issues to be claimed Legal jurisdiction Forum for resolution

Technical Considerations

2nd

Quality of source data Complexity of the dispute Timing of analysis Expertise of analyst

As a supplement to the first and second level factors for consideration in methodology selection, the analyst must also account for the QRA and the riskadjusted schedules.

Commercial Considerations

3rd

Size of the dispute Budget allowed Time allowed

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Forensic Schedule Analysis Methodologies

Observational Static Logic Gross Periodic
Contemporaneous As-Is

As-Planned vs. As-Built QRA performed but schedules

cant be used. QRA should be

As-Planned vs. As-Built used in identifying the as-built

critical path.

QRA is the most useful to Contemporaneous Period Analysis (Windows)

Bifurcated CPA Recreated CPA Impacted As-Planned

Dynamic Logic

Bifurcated Contemporaneous Recreated / Modified

Windows. Use information to track CPs and show how means & methods were altered to react to QRA. Not useful in performance, but could help justify use of IAP. No effect on this method.

Modeled

Additive Model

Single Base Multiple Base Single Simulation Multiple Simulation

Retrospective TIA

Collapsed As-Built (Single)

Subtractive Model

No effect on these methods, because they do not rely on contemporaneous Collapsed As-Built (Multiple) understanding of criticality.
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Conclusion
Contemporaneous Period Analyses (observational/ dynamic logic) uses the existing schedule series which strongly rely on contemporaneous understanding of criticality.
Existence of a QRA should recommend a CPA (or BCPA) analysis as a method, assuming other requirements are met. Factoring in the QRA is essential.

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Conclusion
The As-Planned vs. As-Built family (observational/static logic) relies in part on contemporaneous understanding of criticality for definition of the as-planned critical path. Regardless of selected methodology, the performance of the QRA will likely have generated important documentation (intentions, means and methods, etc.) that should be nonetheless considered by analysts.
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Forensic Schedule Analysis on Risk Adjusted Schedules

Questions?
John C. Livengood Esq., AIA, CFCC, PSP Construction Claims Services ARCADIS U.S., Inc.
John.Livengood@arcadis-us.com (O) 410-381-1990 x31 (M) 202-669-1360

Patrick M. Kelly, PE, PSP Construction Claims Services ARCADIS U.S., Inc.
Patrick.Kelly@arcadis-us.com (O) 410-381-1990 x12 (M) 757-217-6820

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