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Case Study: Claim for Extension of

Time and Additional Compensation


Newhealth Hospital Redevelopment
Presented in San Antonio, Texas

Agenda
I.

Project Overview

II.

Problems Encountered by the Contractor

III. How to Demonstrate Entitlement


IV. Workshop Review of the Contractors Optimistic Claim
V. Delay Analysis
VI. Evaluation of Damages
VII. Problems/Solutions re. Disruption Claims

I. PROJECT OVERVIEW

Project Description
Construction of the Newhealth Hospital redevelopment.
Project consisted of interior finishes and fit-ups for the new
four-level addition to the hospital and renovations to the
existing structure.

Project Layout

Contract Dates
On March 1, 2006, the Service and Supply Department of
Newhealth (SSDN) awarded a contract to Supreme
Contracting inc. (Supreme).
This was a design-bid-build (fixed price) contract.
Planned construction was to be executed from April 1, 2006 to
December 30, 2006.

Delay Overview
Apr. 1, 2006

Dec. 30, 2006

Planned

Jun. 15, 2007

Extended
Duration

5.5 months

9 months
Apr. 1, 2006

Jun. 15, 2007

Actual
14.5 months

II. PROBLEMS ENCOUNTERED BY


THE CONTRACTOR

Problems Encountered by the Contractor


Level 3
Unanticipated Interferences in the Ceiling on Level 3
Incorrect Slab Openings for Ductwork Systems

Level 1
Unanticipated Interferences in the Ceiling on Level 1
Excessive Modifications to Patient Service Units (PSU)
Late Drawings of Device Location and Elevation
Excessive Modifications to Door Frame and Layout

Unanticipated
Interferences in the
Ceiling on Level 3
Mechanical and electrical
systems located in the ceilings
of Level 3 had excessive
interference issues.
The contractor discovered that
there was insufficient space to
accommodate the specified
mechanical and electrical
equipment.
Several mechanical and
electrical systems, including the
ventilation, required significant
design modifications.

Unanticipated Interferences
in the Ceiling on Level 3 (contd)
ITEMS TO BE INCLUDED
- Seismic hangers
- Lighting fixtures
- Spacings
- Cable tray
- Controls
- Vav box
- Medical equipment

Installation Impossibility
758 mm of materials into a 650 mm space
Someone did not CAD it, lets see what the
contract says
Whose pre-planning?
Delayed for circumstances beyond the
contractors control

Incorrect Slab
Openings for
Ductwork Systems
Existing openings in the
concrete slabs did not have
the correct dimensions to
accommodate ductwork
systems as designed.
No timely design was
provided by the design
professionals, so the
subcontractor proposed a
solution.

Unanticipated
Interferences in the
Ceiling on Level 1
Mechanical and electrical
systems located in the
ceilings of Level 1 had
excessive interference
issues.
The contractor discovered
that there was insufficient
space to accommodate the
specified mechanical and
electrical equipment.
Several mechanical and
electrical systems,
including the ventilation,
required significant design
modifications.

Excessive Modifications
to Patient Service Units
(PSU)
Owner requested
modifications related to
the medical gas located in
the PSUs
As seen, this request
introduced changes to
many of the rooms located
on Level 1

Distribution of Reasons for CCOs (QTY)


REASONS

QTY

% OF CCOS

Incomplete Design

450

82

User requests

74

13

Others

20

Site conditions

Incomplete Design
82%

Others
4%

User Requests
13%
Site Conditions
1%

III. HOW TO DEMONSTRATE


ENTITLEMENT
Presented by: Phil Walters

Entitlement Issues

Does the contract permit the claim?


Was proper notice provided?
Reasonable efforts to mitigate?
Was there a reservation for cumulative impact?
Were the CCOs agreed to?
Were the delay events on the critical path?
Were there concurrent activities (contractor vs
owner)?
Was there apportionment of liability?
Is there a disruption claim without a delay?
Is the quantification credible?

IV. WORKSHOP REVIEW OF THE


CONTRACTORS OPTIMISTIC CLAIM

V. DELAY ANALYSIS
Presented by: John Owens

Examples of Different
Delay Analysis Methods
As-Planned vs As-Built
Window or Snap Shot Analysis
Impacted As-Planned
Collapsed As-Built
Time Impact Analysis

Level 1 Primary Problems

Level 1 Rough in Above Ceiling

DELAYS TO CONTRACTOR AND ITS


SUBCONTRACTORS ACTIVITIES RESULTING
FROM ABOVE CEILING COORDINATION
PROBLEMS

Level 1 - Partitions

DELAYS TO CONTRACTOR AND ITS


SUBCONTRACTORS ACTIVITIES RESULTING FROM
ABOVE CEILING COORDINATION PROBLEMS

Level 1 Delays

DELAYS TO CONTRACTOR AND ITS


SUBCONTRACTORS ACTIVITIES RESULTING FROM
ABOVE CEILING COORDINATION PROBLEMS

EFFECT OF CEILING COORDINATION


PROBLEMS ON STEEL STUD INSTALLATION

CONTRACTUAL INITIAL
COMPLETION DATE
DEC 1, 2007
CLAIM 1
COMPLETION DATE
JUNE 10, 2008

DELAYS TO CONTRACTOR AND ITS


SUBCONTRACTORS ACTIVITIES RESULTING FROM
ABOVE CEILING COORDINATION PROBLEMS

VI. EVALUATION OF DAMAGES


Presented by: Steve Revay

Contractors Evaluation of Damages


1.

Extended Field Overhead...

2.

Extended Equipment..

160,000

3.

Delayed Release of Holdback.

42,000

4.

Inclement Weather.

45,000

5.

Overtime Premiums .

23,000

6.

Productivity Loss ..

28,000,000

7.

Material Handling ..

150,000

8.

Safety .

75,000

9.

Disputed Extras .

457,000

10. Labour and Material Escalation ..

300,000

11. Loss of Revenue

135,692

SUBTOTAL :

$ 29,512,432

12. Head Office Overhead & Profit (10%) .

SUBTOTAL :
13. Claim Preparation (3.5%) .

TOTAL :

$ 124,740

2,951,243

$ 32,463,675
1,136,228

$ 33,599,903

1. Extended Field Overhead

Superintendent. $ 8,250
Secretary/timekeeper (labour burden incl) 3,000
Telephone (service & long distance) 450
Fax (rental, paper, long distance)
250
Couriers ..
250
Sundry Trucking .
400
Temporary Power ..
400
Temporary Toilets .
450
Office Building & Supplies ...
950

Site Truck & Fuel .


Consumables ...
Tools and Equipment ..
Subsistence ..
Travel Time ...
Bonds .
Insurance ...
Extended Warranty ..

Total Cost per month .

$27,000

Total Cost ($27 000 x 4 months) .


10% Office Overhead

$108,000
10,800

SUBTOTAL :
Profit (5%).
TOTAL :

$ 118,800
5,940
$ 124,740

950
550
2,500
2,000
2,200
2,270
600
1 530

Quantifying Overhead Costs


How much of the delay is truly compensable?
(assume that 4 months delay is acceptable)
THREE OPTIONS :
Option 1: Average O/H during the peak period of work

More common approach

This will yield the highest result

It is appropriate only when no delay occurred during the


mobilization period

Option 2: Average O/H during the life of the project

More common approach

Option 3: Average O/H during last 4 months of the project

Much of the last period is demobilization

A contractor will generally short change himself with this option

Supremes Extended
Field Overhead Costs
Extra Work field O/H

Supreme has received $1.5 million of extra work

Duplication! Typical pricing of extra work contains monies for field O/H

Explanation should be provided if this credit is not provided


(i.e. Extra work required additional resources which are not part of the extended field O/H)

Actual O/H
Estimated costs
Extra work O/H
Optimum claimable O/H cost

Supremes Extended
Field Overhead Costs
Home Office O/H & Profit

In Principle, there is nothing wrong with claiming home office O/H


and profit on its field O/H.

The % should be based in the mark-ups defined in the contract

Duplication! Supreme has claimed for home office O/H and profit
on:
- each individual item
- within the charge out rates used to calculate labour impact
- as a separate component at the end of the claim
- under the guise of lost revenue

Supremes Extended
Field Overhead Costs
Substantiation Should be Requested

Claimed amount for each individual item is rounded off, undoubtedly


upwards!

It is possible that Supreme erred in making its claim and that some of the
amounts are not as high as is suggested.

Time Related Costs

Must ensure that Supreme is only claiming for ongoing time related costs

Supreme should not be claiming for non-recurring costs such as:


- Mobilization
- Permits
- Potentially insurance & bonds

Consumables and Tools

Potential for duplication, if the charge out rates used by Supreme in


claiming impact include an allowance for consumables and small tools.

Supremes Extended
Field Overhead Costs
Extended Warranty Period

Warranty period starts upon substantial completion with the owner


but starts when the equipment is put in to service for the supplier.

Due to delays, the gap between these two periods has extended
considerably

This is a valid item of claim. However:


- How was the amount claimed determined?
- Is there a more appropriate manner of dealing with this cost?

The owner could simply indicate that it will accept a warranty period
based on when the equipment was put into service.

The owner could agree to pay actual costs if any occur.


There is ample room for discussion as to
how this claimed cost might be addressed

2. Extended Equipment
4 months x $ 40,000/month

VALID

$ 160,000

- Justification required

INVALID

This is an extended overhead cost and as such, the above


amount should be substantiated

Supreme should be requested to demonstrate that the crane


was in fact on site for the additional four months claimed.

It is not axiomatic that all overhead items will be extended by


the same duration as the project.

3. Delayed Release of Holdback


Contract Value .
10% Holdback
Therefore, 4 months interest at 4% ..

$ 31,500,000
3,150,000
$ 42,000

VALID
INVALID

Valid claim IF: the contract does not indicate that financing costs are part of
the mark-up for profit and home office overhead

The calculation, is incorrect!

The contractor has suffered additional costs because it was required to finance
the holdback for a longer period of time than would otherwise have occurred,
as the project duration incurred from 9 months to 14.5 months. Thus, it is
entitled compensation. It did not, however, finance the whole holdback for an
additional 5.5 months. Therefore, the calculation should be corrected to reflect
the varying level of holdback during the life of the project.

4. Inclement Weather
Additional Heaters
Temporary Protection .
Additional Labour ..
TOTAL:

VALID

$ 15,000
15,000
15,000
$ 45,000

- Justification required

INVALID

This might be a valid claim subject to the following qualifications:


the amounts need to be substantiated
there has to be a demonstration that the delays being claimed did push the
work into winter
one has to ensure that no duplication exists with the costs claimed for
extended duration and impact.

5. Overtime Premiums
a) Premium Portion of Overtime
Total Cost of Premium O/T Worked.....
Premium Cost Agreed by Owner .
SUBTOTAL:
b) Second Shift Differential
Total Second Shift Premium .....
Amount Agreed by Owner .
SUBTOTAL:
TOTAL PRICE: .....

VALID

INVALID

$ 25,000
(5,000)
$ 20,000

$ 4,000
(1,000)
$ 3,000
$ 23,000

5. Overtime Premium
Arguments:

Supreme contends that it accelerated the work with the knowledge of the
owner who should pay for the cost.

The owner contends that whereas it was aware that an acceleration program
was ongoing, it was not aware that it was to the owners account. It assumed
the contractor was making good its own delays.

Valid Claim?

A review of the records is required before deciding conclusively

Supreme has a problem. It should have acquired a change order, as


apparently occurred for other acceleration efforts. In this case, it is likely that
Supreme's silence will be his undoing.

It is quite surprising how often one sees an acceleration program discussed


in detail at site with neither party seeking to ascertain who is paying for the
program and how inefficiency costs are going to be addressed.

6. Loss of Productivity
Hours Expended (includes subcontractors): ...
Hours Estimated at Bid:
Includes scaffolding

400,000 manhours
120,000 manhours

The following list identifies all the adverse conditions experienced in executing the work. Pursuant to industry
averages and taking a very conservative approach, we have calculated the following efficiency losses.
Adverse Productivity Factors
Manhours
Inclement Weather (5%) .......... 20,000
Shift Work (5%) .. 20,000
Overtime (5%) 20,000
Impact from Changes (10%) 40,000
Owner Interference (10%) 40,000
Congestion (5%) 20,000

Adverse Productivity Factors


Manhours
Overmanning (5%) 20,000
Learning Curve (5%) 20,000
Site Access (5%) 20,000
Dilution of Supervision (5%) 20,000
Stop-and-Go (5%) . 20,000
Errors and Omissions (5%) 20,000

TOTAL LOSS OF EFFICIENCY 280,000 manhours

COST ($100/hr. x 280,000 mhrs) : $ 28,000,000

VALID
INVALID

7. Material Handling
Additional equipment costs arising from
down time and standby time.. $ 150,000

VALID

- Justification required

INVALID

This is an extended field overhead cost and as such, the


above amount should be substantiated

The lack of detail raises a number of questions, such as


potential duplication.

8. Safety
Additional tool box meetings
and indoctrination down time.$ 75,000

VALID

- Justification required

INVALID

Supreme is arguing that because of the extended duration, it


has experienced additional down time.

Can be a valid claim, but is likely in this case a duplication of


amounts claimed for impact.

9. Disputed Extras
Justified extras refused by consultant...$ 457,000

VALID
INVALID

Depending on the contract there may be some potential entitlement problems. One
should ascertain if the contractor has satisfied the requirement to provide the
appropriate Notice of Dispute.

Potential duplication may exist with the impact claim.

If the alleged extra is deemed not to be an extra then the allocated hours and material
are in fact an underbid. If they were in the bid they would obviously not be an extra.

These disputed extras are frequently very telling about the project and the personalities
involved. The reasonableness of the parties becomes quite apparent as one reviews these
extras. Additionally, it is surprising how often one can resolve the claim by dealing with
these extras which are frequently the root source of the friction between the parties.

10. Labour and Material Escalation


120,000 hrs. x $1.25 . $ 150,000
Material Increase 150,000
TOTAL:
$ 300,000

VALID

- Justification required

INVALID

If the project is extended, the contractor can be pushed into a period of


higher wage rates or simply expend more labour in the period of higher
wages. The same of course can apply to material.

In Supremes case, whereas there might be some validity to the claim, the
amount is clearly considerably inflated. A five and half month delay to a 14.5
month project should not cause 40% of the labour to be expended in a
higher wage rate.

11. Loss of Revenue


Background:


The revenue guaranteed towards the support of his home office will be
reduced (if not eliminated) when a contractor encounters compensable
delays

Home office costs are real and unavoidable

Home office costs (in majority of cases at least) include:


- Estimation for projects to be tendered
- Accounting for the job and the corporation
- Purchasing
- Management of the overall direction of the corporation and frequently for
individual projects

Head Office, per se, does not generate revenue

11. Loss of Revenue


Background:


No construction project could function without the head office.

Revenue for a construction organization is earned on the field


Project bids must include an allowance towards the support of Home Office
functions. Usually as a % of estimated project costs.

This allowance will yield the required contribution to allow the head office to function

Therefore:


when project completion is extended without commensurate increase in the overall


revenue, then the "take home" pay generated by that project will fall below the required
(and estimated) level and therefore the home office is left with some of its costs
"unabsorbed".
This unabsorbed portion of the contractor's overhead, in case of a compensable
delay, is a proper valid claim. The Supreme Court of Canada has addressed this
issue in the case of Shore & Horwitz Construction Co. vs. Franki Canada Ltd.
Eichleay Formula - most commonly used by contractors to calculate loss of revenue

11. Loss of Revenue


Home Office & Margin
PROJECTED
REVENUE

REVENUE

LOSS OF
REVENUE

COMPENSABLE DELAY
PLANNED

ACTUAL

TIME

11. Loss of Revenue


Eichleay Formula
Step 1:
Step 2:
Step 3:

Contract Billing
Total Billing X Total Overhead = Overhead Allocatable to the Contract
Allocatable Overhead
= Allocatable Overhead Per Day
Actual Contract Duration
Daily Overhead X Delay Days =

Loss of Revenue

Note:
Eichleay formula has been accepted in Canada several times.
In the USA, it is generally accepted when the delay is akin to a suspension during
the work but is still greeted with some skepticism as a means of calculating
compensable overhead at the end of the job.
The amount of money calculated may have absolutely no relation to the actual
losses of the contractor, who in fact may not even have suffered damages.

11. Loss of Revenue


Per the foregoing formula, Supremes costs for this item are as follows:

Step 1:

31.5 million
500 million

Step 2:

$ 441,500
13 months

Step 3:

X 7 million =

$ 441,500

VALID
=

$ 33,923/month

$ 33,933 X 4 months =

$ 135,692

INVALID

In the case at hand Supreme has several problems with the calculation.

the calculation for loss of revenue duplicates the amount charged for overhead and
profit in the next item

this claim item also duplicates the overhead and profit charged on individual items for
if they are paid Supreme has not suffered unabsorbed overhead

there also exists duplication with the amounts included for overhead and profit in the
extra work.
This claim item is a hard sell and Supreme is better off simply applying the mark-up
allowable in the contract, even if it yields a lower result. Applying the mark-up will cause less
confusion and controversy and will usually be resolved much quicker with the same or a
higher end result - i.e., money.

11. Loss of Revenue (American)


Eichleay Formula:
Step 1:

Contract Billing X Total Overhead = Overhead Allocatable to the Contract


Total Billing

Step 2:

Allocatable Overhead = Allocatable Overhead Per Day


Actual Contract Duration

Step 3:

Daily Overhead X Delay Days =

Unabsorbed Overhead

Modified Eichleay Formula:


Step 1:

Contract Billing
X Total Overhead = Overhead Allocatable to the Contract
Total Billing

Step 2:

Allocatable Overhead
Original Contract Duration

Step 3:

Daily Overhead

Allocatable Overhead Per Day

Delay Days =

Unabsorbed Overhead

11. Loss of Revenue


Originated in Britain
Used in Canada
HUDSON
Overhead calculation based on Bid

EMDEN
Overhead calculation based on historical average over 2 to 3
years

12. Head Office Overhead & Profit


Utilities
Building
Computers
Administration
Management













Financing
Insurance
Bonding
Extended Warranty
Business Development

VALID

- Justification
required

INVALID

$ 29,512,432 x 10% = $ 2,951,243

Duplication. This item duplicates costs that have been included in the other
heads of claim.

Typically, as is suggested in the previous item, this amount will be accepted if


one does not duplicate cost and treats the claim as a disputed extra/changed
work.

The mark-up used in pricing this item should be equivalent to the mark up
allowance in the contract for extra work.

12. Head Office Overhead & Profit

Administration
Purchasing
Engineering
Tendering
Financing

13. Claim Preparation


Based on the costs expended,
claim preparation costs are 3.5% of the total claim:
$ 32,463,675 x 3.5% = $ 1,136,228

VALID
INVALID

- Rationale:

The amount and method of calculation is quite difficult to accept.

Generally speaking, this item will infrequently be paid.

It is usually considered part of doing business.

It should be noted, however, that if the dispute enters the arena of arbitration
or litigation the costs of experts are considered valid compensable costs.

Recap: Evaluation of Damages


1.

Extended Field Overhead...

2.

Extended Equipment..

160,000

3.

Delayed Release of Holdback.

42,000

4.

Inclement Weather.

45,000

5.

Overtime Premiums .

23,000

6.

Productivity Loss ..

28,000,000

7.

Material Handling ..

150,000

8.

Safety .

75,000

9.

Disputed Extras .

457,000

10. Labour and Material Escalation ..

300,000

11. Loss of Revenue

135,692

SUBTOTAL :

$ 29,512,432

12. Head Office Overhead & Profit (10%) .

SUBTOTAL :
13. Claim Preparation (3.5%) .

TOTAL :

$ 124,740

2,951,243

$ 32,463,675
1,136,228

$ 33,599,903

VII - How to Succeed in Disruption


Claims and improve the chances of a
Successful Project
Presented by: Gerard Boyle

to CCA Conference held March 2015

Objectives
Discuss how and why Disruption claims are
failing
Describe a better way to get more or all of
your Rightful Entitlement earlier, and possibly
even avoid performance impediments that
would otherwise continue or worsen

My Experience
GC/CM
At Revay:
Claims Review
Project Planning and Control on major
infrastructure, ICI, tunnelling, heavy civil, road,
airport projects
Negotiated settlement of delay and disruption
claims

Typical Setting and Outcome of


Disruption Claims
Submitted late: before Substantial?
Sub Claim Pass-thru by GC? Not much collaboration in
preparation
Negotiations fail or unsatisfactory (30 cents on the dollar;
arbitrary award; even if agreement payment is delayed)
Dispute Resolution approaches similarly unsatisfactory
If no agreement, Liens, job disruption and delayed finish
Since project probably finishes late, may be indirect claim
as well
Litigation uncertainty & cost compels contractor to absorb
losses
Hope for the best in the end
Potential exposure to owner claims

A Better Result
Recover rightful
entitlement in a timely
fashion
Improved project
performance thru more
efficient and effective
execution improves
bottom line

Identify current problems


How to correct them

1. PROBLEMS WITH THE CURRENT


APPROACHES TO DISRUPTION CLAIMS

Definitions Impact/Disruption
Impact Costs: increased costs of one or several related
construction activities, in excess of those which would have
been but for an incident, action or omission relating to a
separate (discrete) item of work. Often referred to as ripple
effect, because originate in one or more isolated problems
and spread like ripples through the project. Not the direct
(or discrete) cost of making a change.
Sometimes referred to as disruption costs or loss of productivity
costs.

Disruption: Loss of productivity, disturbance, hindrance or


interruption to progress.
Local (Direct) Disruption: direct impact that change works has
on other unchanged work around it. Foreseeable!
Cumulative disruption: disruption between two or more
changes and is exclusive of local disruption Synergistic
effect of changes on unchanged work and on other changes.

Example of Local Disruption or Oneto-One Impact


Increased quantity of
embedded conduit
increases cost of
formwork
Or delay into winter
work conditions
Foreseeable,
quantifiable,

Definitions: Cumulative Impact


When there are multiple
changes and they act in
sequence or concurrently, then
there is a compounding effect
this is the most damaging
consequence for a project and
the most difficult to
understand and manage. The
net effect of the individual
changes greater than sum
of individual parts.

1.1 TIMING IS EVERYTHING! DELAYING


UNTIL THE END IS HIGH RISK!

End-of-project Total-Cost
Disruption Claim
As Built
C.O. with direct
cost only

Changes
priced/
approved
without
disruption
(or timebased) costs

Forecast

Total Cost
Impact Claim

Delay

Contractor delays disruption cost


submission to end of project
The amount(s) set forth in this change order are for full
reimbursement for the direct cost of all labor, material,
and equipment to perform the work described in this
change order. All rights are reserved and not accorded
or satisfied by this change order regarding any additional
time required or costs incurred to perform any and all
other work of the contract (including other change orders)
caused by this change order. For greater clarity, no
amount has been included for delay, disruption, impact,
cumulative impact of changes, productivity, acceleration
or consequential costs, and we reserve the right to claim
for any such costs.

What about Direct Disruption


(or 1-to-1 Impact)?
As Built
C.O. with direct
cost only

Electrical
conduit in
formwork; or
winter work

Forecast

Total Cost
Impact Claim

Delay

Contractor postpones forward pricing


to end of project

Why isnt this forward


priced?!
Can the contractor rely on
reservation of rights to
claim later?
Does owner know real
cost of this change?
Informed decision?

What about Cumulative


Impact of Changes?
As B.

Impact

Total Cost
Impact Claim

Forecast

Delay

Contractor postpones disruption cost


submission to end of project

Numerous changes
over past 5 months
For past 3 months,
productivity below
plan & declining
Base contract
activities delayed,
taking longer.

Lost Productivity has been incurred to


date and was discoverable
There will be future costs
Can the Contract change process be
used to address this?
How does the owner know the
significance of this issue and therefore
really make an informed decision
based and mitigate its own damages?

Can Contractor rely on Reservation


Clause instead of Compliant Notice?
While cumulative impact may not be
foreseeable at early stage, a contractor
should be able to identify productivity
(and time) effects once they start to
appear.
20 years ago Appellant might
justifiably have taken position it
could not foresee any sort of impacts
We consider more plausible [now] that
complete cost of change, including
impact, [could be estimated].

Doyle vs. Carling Failure to Notify on


Cumulative Impact Claim
The grumblings of this contractor, in site
minutes, display no intention to claim until
December, 1983 [completion February, 1984].
Even then, no claim was actually advanced, but
intent was indicated. But no details were given:
an owner would be hard put to know exactly
what it is to meet, and hence what it is to do. The
purpose of the notice is to give the owner an
opportunity of considering his position and
perhaps taking corrective measures, and he is
prejudiced by not being able to do it.

1.2 QUALITY PROBLEM: OVER-RELIANCE


ON, AND IMPROPER USE OF, INDUSTRY
STUDIES & FACTORS

The Good News re. Quantifying


Productivity Claims
Heavy burden of proof with respect to causation, but
less so with the amount. Causation important because
Contractor may be claiming for its own inefficiencies or
a bad estimate.
But if causation is established, even if amount defies
precision, there may be leniency in quantification:
there was uncertainty with respect to the extent of
damage, but none as to the fact of damage; and there
is a clear distinction between the measure of proof
necessary to establish the fact [contractor] sustained
some damage and measure of proof necessary to
enable the jury to fix the amount.

Methods to Calculate Productivity Loss


1. Project-Specific damage calculations supported by
contemporaneous project documentation preferred:
Measured Mile
Earned Value Analysis

2. Industry Studies and Factors: (not project specific)


Cumulative Impact:
Industry Studies
Leonard, CII, IBBS

Factors:
MCAA

Overtime/Over-crowding/Congestion:
US Dept of labour; NECA; CII; Army Corps
Studies re. work density, manpower pl.v. act

Assumptions & Inherent Limitations of


Productivity Loss Calculation Methods
General:
All will have element of subjectivity
Causation must be established for each

Measured Mile: (preferred but )


Unimpacted period? Similar work? Long enough?
Owner-caused? Apportionment possible?
Productivity data available?

Assumptions & Inherent Limitations:


Industry Studies, Factors, Formulas
Not project specific;
viewed with scepticism by the courts.
Studies, factors, formulaic approaches relied
upon by experts must be shown relevant to
project at issue.

Assumptions and Limitations:


MCAA Factors
MCAA Factors:
Arbitrary and subjective
Added or adjusted to obtain pre-determined
result
Addition of multiple factors may be unreliable
Objectivity? Mechanical contractor group
Not based on empirical study

Flawed Practice in using Productivity


Loss Methods
Timely (or any) productivity data not available.
Use of Studies or factors instead of project
specific methods like measured mile
No attempt to apportion responsibility
No attempt to identify causes

Test the End-of-Project Total Cost


Disruption Claim against Claim Pillars
Entitlement to claim for prod. per Contract: ?
Notice: Just grumblings
Critical Path Schedule Analysis: No reference to
schedule at all, or only at the end.
Mitigation: Owner deprived of opportunity?
Apportionment (only owner-caused?): No effort
to determine or apportion cause/ effect.
Quantum fair and reasonable: Total Cost rarely
justified.

2. A SUCCESSFUL APPROACH

Using the Contact to Succeed in


Disruption Claims

Follow the Contract especially change procedures


Dont wait until the end
Changes to include all reasonable costs
Include reservation of rights clause, but also
Forward price direct impact cost and time effects
Quantify Cumulative Impact:

Identify effect and notify!


Quantify historical effect
Cause and effect: matrix, other
Compare to studies (use in support of project specific analysis
such as Measured Mile or Earned Value)
Forward price (with qualifying assumptions): estimate based on
current productivity, added Factors, etc.?
Negotiation, dispute resolution

Connecting Time to Production and


Productivity
Forming Wall 12-Day Activity Duration

Activity Duration(w.d.) =

Daily Production Rate


(s.f./w.d.)

Quantity of Work (s.f.)


Daily Production Rate (s.f./w.d.)

Productivity (s.f./m.h.)

9.75 s.f./m.h.

11,184 s.f.

932 s.f./w.d.

Effort m.h./w.d.

96 m.h./w.d.

932 s.f./w.d.

Measured Mile
Impacted vs. Non-Impacted Period
2,000

250

225

IMPACTED PERIOD

NON-IMPACTED PERIOD

200

1,400

175

Hours per Month

1,600

Lost Productivity

1,200

150

1,000

125

Underbid

Hours per Month

Bid Hours per Unit

Non-Impacted Hours per Unit

Actual Hours per Unit

Sep - 94

Aug - 94

Jul - 94

Jun - 94

May - 94

Apr - 94

Mar - 94

Feb - 94

Jan - 94

Dec - 93

Nov - 93

Oct - 93

Sep - 93

Aug - 93

Jul - 93

Jun - 93

May - 93

25

Apr - 93

200

Mar - 93

50

Feb - 93

400

Jan - 93

75

Dec - 92

600

Nov - 92

100

Oct - 92

800

Hours per Unit

1,800

Cause Effect Matrix


RESULTED IN

RESULTED IN

Productivity Monitoring
To gain experience and
expertise, and support
in your productivity
claims.

Conclusions
Contract compliance requires timely notice of reasonably
discernable effects so owner can mitigate its own damages
Deferring disruption claims until the end of the project is high risk
for the contractor
The project is best served by identifying performance problems
early so as to possibly avoid further delay and disruption
Contract change mechanism usually affords an opportunity to
claim for damages contemporaneously
Distinguish between cumulative and other types of impact in
quantifying claim
Even cumulative impact claims can be resolved contemporaneously
if the parties are willing and reasonable
Track project-specific productivity data to feed MM and EV analysis
3rd party monitoring
Negotiate settlement at the time, or make use of dispute resolution
provisions

References Revay Reports


available at the back of the room

89

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