CHAPTER 1

LEGAL SIGNIFICANCE OF THE

PROJECT SCHEDULE
§un Importance of Time in Construction Contracts
§ 1.02 Role of Scheduling and Project Management Today
§ 1.03 Project Players and Their Objectives
[A] Owner
[8] ArchitectlEngineer
[C] General Contractor
[D] Subcontractor and Supplier
IE] Construction Manager
[F] Scheduling Consultant
§ 1.04 Risks in Scheduling and Project Structure Alternatives
[A] Conventional Construction Procurement
[B] Multiple Prime Contractor Procurement
[C] Construction Manager Procurement
[D] Phased or Fast-Track Construction
[E] Design-Build Technique
§ 1.05 Schedule Analysis as Legal Evidence

3
LEGAL SIGNIFICANCE OF SCHEDULE § 1.02

§ 1.01 IMPORTANCE OF TIME IN CONSTRUCTION CONTRACTS

Contracts for major commercial and construction projects contain a host of

specific terms defining the duties and responsibilities of the parties to the agree-
ment. For successful procurement, each contract must identify and define the fol-
lowing three factors:

I. Scope - What will be provided;

2. Price - How much compensation will be paid for the item or perfor-
mance provided; and
3. Time - When is the performance required.

This book focuses on the legal significance of the time for performance
component in major commercial and construction projects. Generally speaking,
the project schedule represents a point of reference for contracting parties to mea-
sure their performances. The project schedule also represents the baseline the
parties use to rneasure each other's performances and to assess their respective
rights and obligations.

§ 1.02 ROLE OF SCHEDULING AND PROJECT MANAGEMENT

TODAY

In the construction industry computers, advanced technology, inflation, and

complex business relationships have greatly increased the importance of construc-
tion scheduling and project management. Contractors, owners, architects, and con-
struction managers now realize the importance of learning and implementing the
most effective techniques to satisfactorily complete projects and maintain profit-
ability.
To keep pace with these trends, use of proper management techniques is
critical. The use of network scheduling techniques on major projects for planning
and coordinating work became accepted by the late 1970s, and today is an absolute
necessity.
Construction scheduling's importance increased for the following reasons:
Economics. Competition, reduced margins, and volatility in the financial
markets have increased the importance of contractors' and owners' completing
projects within a specified duration.
Scheduling efficiency. Proper use of network planning techniques during
construction provides the management team the knowledge necessary to react to
changing project needs and to maintain the effort level necessary to meet com-
pletion dates.
Technology availability. Increased availability and capacity of personal
computers and decreased computing costs allow parties to avail themselves of
sophisticated schedulingrechniques, thereby increasing project control.

5
§ 1.03 CONSTRUCTION SCHEDULING

Legal application. Recent legal decisions highlight the importance of using

network scheduling techniques to manage project performance,

Claim preparation. The sophistication of claim preparation methods has

made praper project scheduling integral to the assessment of responsibility and
recovery of cost overruns incurred on projects.

Sophisticated methods of scheduling, such as the network technique of criti-

cal path method (CPM), have become widely used and accepted. Scheduling has
become a means of both guiding performance through the contract's life and gaug-
ing the accuracy and appropriateness of performance claims.
When used properly, the project schedule is effective in project management,
analysis, control, and overall performance, not just as a device for telling subcon-
tractors where to move their work forces. The project schedule is also an important
management too] that enables the contractor to use personnel wisely and provide
advance warning of situations threatening the profitability of a project, such as
cost overruns, claims, and other difficulties.
The project schedule is also an analytical device for claim recognition, prep-
aration, and proof. If a claim does arise, the project schedule assists in determining
what went wrong and who is responsible by comparing planned with actual per-
formance. Courts and administrative boards of appeals now consider proper sched-
uling techniques, particularly CPM, as one of the only valid means for proving
liability and damages.

§ 1.03 PROJECT PLAYERS AND THEIR OBJECTIVES

A variety of players must bring their skills and resources together for a
successful procurement that allows each party to achieve its objectives and com-
plete the physical construction of a project. The players on major construction
projects generally include: the owner, the architect/engineer, the general contractor
{who may also be a design builder), subcontractors, suppliers, construction man-
agers, multiple prime contractors, scheduling/claims consultants, and attomeys.
At times, the parties on the project have similar objectives; at other times, they
differ. A brief summary of these objectives is set forth below.

[AJ Owner

Owners do not like surprises or contractor's claims on construction projects.

Owners want quality projects delivered on time and within the bid or negotiated
price. Occasionally, owners put the importance of time above all other constraints
and demand that performance be completed within the original contract comple-
tion date, irrespective of changes, delays, and other factors. Conversely, owners
6
LEGAL SIGNIFiCANCE OF SCHEDULE §1.03[D]

may wish to delay the delivery of a project rather than be subjected to impact or
accelerationc lai ms.

[B] Architect/Engineer

Architects and engineers prefer to complete the design prior to the com-
mencement of construction. Thereafter, architect and engineer prefer that the pro-
ject proceed with minimum effort on their part in responding to design issues,
shop drawings, and inspections relating to construction operations.
Architects and engineers are frequently required to act in a quasi-judicial
capacity when evaluating contract performance, as is often required by contract
documents. It is frequently difficult, however, for the architect/engineer to main-
tain complete independence without partiality when there is a contractual rela-
tionship with the owner. Lastly, the architect/engineer is concerned with satisfying
the owner and avoiding the owner's claims for omissions or reimbursement of
contractor claims.

[C] General Contractor

Today, the goals ofa general contractor are usually similar to that of the
owner. General contractors and owners want to achieve successful construction,
on time and within budget (the identification with owner goals i·s even more pro-
nounced for the design builder). When difficulties are encountered, general con-
tractors prefer to avoid liability to the owner and to subcontractors. Genera]
contractors who perform only the concrete work, or are only brokers on projects,
usually assume less project performance risk after the initial stages of the project.
This occurs because their risk may be related only to project extensions involving
job site overhead and general and administrative expenses. Genera] contractors,
through exhaustion of administrative remedies clauses, no-damage-for-delay
clauses, pay-when-paid clauses, and control over subcontractors payments, have
different - possibly adverse - views from subcontractors for handling the costs
of major delays in project performance and each parties' responsibility for those
costs.

[0] Subcontractor and Supplier

Subcontractors assume the labor productivity risk on major construction pro-

jects because general contractors typically perform a smaller percentage, if any,
of the actual construction work. Thus, the trade contractor assumes greater risk of
lost productivity associated with acceleration, lack of proper scheduling and pro-
ject coordination, and wage escalation. In addition, subcontractors assume the risk
of lost productivity from major delays in the completion of both indi vidual phases
and the overall project.

7
§1.03[El CONSTRUCTION SCHEDULING

Suppliers, on the other hand, are interested in locking in both a schedule and
cost of performance. In some instances suppliers may seek to renegotiate prices
if delays are experienced. In other instances they may refuse to offer firm prices
far in advance of the scheduled delivery.

[El Construction Manager

Construction managers, either under direct contract with trade contractors or

only under contract with the owner and serving as the owner's agent, typically
function in a manner similar to a brokerage genera! contractor. Specifically, the
construction manager may operate on a fee basis and collect funds monthly from
the trade contractors for various services, such as hoisting. The construction man-
ager may also be paid on a rate schedule basis for maintaining a job site staff for
an extended project duration. As a result, the construction manager may be more
interested in satisfying the owner's needs and objectives and less interested in
providing an environment in which trade contractors can achieve the labor pro-
ductivity needed for a successful procurement.

[Fl Scheduling Consultant

The scheduling consultant should strive to develop a trusting relationship

with the different participants to develop a workable plan and project schedule.
Proper scheduling provides the best opportunity for a well-coordinated and well-
sequenced project that is delivered on time and within all participants' budgets.
Because a well-coordinated and well-sequenced project is often difficult to
achieve. the scheduling consultant must work diligently with the project stake-
holders (the general contractor, the subcontractors, the construction manager, or
owner) to ensure the construction process participants are working collectively
toward agreed-on objectives. These objectives usually involve completion of per-
formance in the time allotted and delegated responsibility for maintaining the
schedule utilizing the methodology reflected in the project schedule.

§ 1.04 RISKS IN SCHEDULING AND PROjECT STRUCTURE

ALTERNATIVES

Every construction project faces a multitude of risks that can jeopardize its
success. Therefore, contracting parties must consider their respective risks and
responsibilities in relation to the project schedule. A risk matrix (Figure 1·1)
should be used with any procurement to properly identify the risks assumed by
the various parties. Each party should refer to the matrix and evaluate the level of
risk it is willing to assume. The parties should also determine who will assume
responsibility for other risks.
8
 Risk Who Should Take'? How Managed? r-"
m
Contractor I Architect/
Design. Construction o
;p.
Owner Builde:
....
-'-' . -
Engineer Subcontractor Manaze
- s " .r
"
r-
V>
Outside Influences o
Governmental acts Z
Weather -n
Acts of God n
;p.
Union strife, work rules
Cost escalation
z
n
m
Collapse of major project participants
Resources and Prerequisites to Project o
-n
Adequacy of project funding en
Adequacy of labor force n
Permits. licenses
::r.
m
Site access o
C
Performance-related Elements e-
m
Sufficiency of plans
co Underestimation of costs
Owner-furnished material, equipment
Contractor-furnished material. equipment
Means, methods of construction
Delay in presenting grievances
Delay in addressing grievances
Labor productivity
Late approvals ofsubmittals
Subsurface conditions
Delays
Worker and site safety
Catastrophic failures
Failure of proprietary process essential to project
Plan or design of schedule
Use of excess time, float
Failure to coordinate work
em
Delayed resolution of errors, omissions

FIGURE 1-1. RiSK MATRIX SHOWING RISKS AND RESPONSIBILITIES THAT CAN AFFECT PROJECT PLANS ....o
§ 1,04[A1 CONSTRUCTION SCHEDUUNG

The selection of the project delivery system will have a major influence on
project risk allocation and the duties each party assumes with respect to thesched-
ule. The various procurement structures are discussed below.

[AJ Conventional Construction Procurement

In the majority of construction projects the owner enters into a single con-
tractual relationship with a general contractor, who is responsible for virtually all
aspects of the construction work. The owner also contracts with an archi-
teet/engineer, who is responsible for the design of the project (Figure 1·2).
Under this type of arrangement the owner is responsible for providing to the
contractor a reasonably accurate and complete project design, a site that is gen-
erally in conformance with the representations specified in the contract documents,
and timely access to that site.' The general contractor assumes responsibility for
project scheduling and coordination." Consequently, the general contractor either
prepares the required schedule in-house or retains a scheduling consu ltant. In
scheduling the overall project, the general contractor assumes full responsibility
for coordinating and resolving conflicts in the work schedules of the various sub-
contractors and suppliers.

[B] Multiple Prime Contractor Procurement

Occasionally owners enter into separate contracts with multiple contractors

on a single construction project. This project delivery system is known as multiple
prime contractor procurement (Figure 1·3). This technique is favored when the
owner wishes to proceed prior to receiving a fully developed project design or
when the owner determines it to be cost effective to contract separately with the
various trade contractors,
Under this type of arrangement, the construction project is divided into work
packages that generally fall within the various building trades. The owner assumes
responsibility for project scheduling and construction coordination. Occasionally,
owners may delegate the coordination and scheduling responsibility to a general
trade contractor. This delegation provides the owner with a means to control the
construction progress while attempting to limit responsibility. Alternatively, own-
ers may retain scheduling consultants to prepare an overall project schedule along
with schedules for each of the major trade contractors.

I See. e.g. United States v. Spearin. 248 U.S. 132 ll918): Shintech. Inc. v. Group Constructors.
Inc.. 688 S.W.2d 144 (Tex. App. 1985); Peter Kiewit Sons' Co. v. United States. 151 F. Supp. 726.
138 Ct. Cl. 668 I I 957).
, See Able Elec. CO. Y. Vacanti & Randazzo Constr, Co.. 212 Neb. 619. 324 N.W2d 667 (\982):
S. Leo Harrnonay, Inc, Y. Sinks Mfg. Co .. 597 f. Supp. 1014 (S.D.N.Y. 19841. aff'd, ,62 f.2d 990
(2d Cir. J 985).

10
 § 1.04[B]
LEGAL SIGN1F1CM.JCE OF SCHEDULE

ArchitecV
Owner Engineer

Scheduling Prime
Consultant Contractor

Subcontractor Supplier

Subcontractor Supplier
I
FIGURE 1-2. CONVENTIONAL CONSTRUCTION PROCUREMENT

The multiple prime contractor delivery system raises several issues regarding
legal responsibility for scheduling and coordination of the work. The most im-
portant issue is which party - the owner, scheduling consultant, or general trade
contractor - has the ultimate right to control the schedule. Unless the contract
documents provide otherwise, the owner assumes responsibility for scheduling
and coordination.' Consequently, owners must carefully consider the risks asso-
ciated with the multiple prime contractor arrangement. Under this arrangement,
all parties should endeavor to negotiate contractual terms that clearly and fairly
delegate and allocate scheduling and coordination responsibility.
Some owners on multiple prime contractor projects attempt to shift respon-
sibility for scbeduling and coordination to the individual contractors on the project.

3 Pierce Assocs.. inc" GSBCA No. 4163. 77-2 BCA 12.746 (1977). off·d. 617 F2d 223 (Ct.
CI. 1980): Shea-S&M Ball v. 606 F2d 1245 (D.C. Cir. 1979): Hoffman Y.
United States. 340 F2d 6-+5.166 Ct. CI. 39 (1964): Hall Constr. Co. v. United States. 379 F2d 559.
177 Ct. CI. 870 1.1966).
11
 CONSTRucnoN SCHEDUUNG
§ 1.04[C]

Architectl
Scheduling Owner Engineer
Consultant

,
•
•• •
•
,
,
,• • •
, •
• •
•
•

Prime
contractor
"
Prime
Contractor
No.2
Prime
Contractor
No.3
No.1
FIGURE 1-3. MULTlPLE PRIM'E CONTRACTOR PROCUREMENT

Such a delegation of authority, however, is generally not realistic. All contractors

on the project should be required to participate in the scbedulingand coordination
efforts. At the same time, it is in tbe best interest of all parties to designate a single
entity to be responsible for overall scheduling and coordination. Although the
party accepting responsibility for scheduling and coordination assumes additional
risk, such an arrangement e.ncourages resolution of scheduling and coordination
problems prior to their developing into a crisis,

[Cl Construction Manager Procurement

Owners frequently retain a construction manager to manage the design or
construction of a project. The constrUction manager offers construction or design
expertise to the inexperienced owner. Generally, an owner wi1l enter into separate
contracts with the construction manager and the architect/engineer. Occasionally,
however, the construction manager may also be responsible for designing the
project. The construction manager technique may also be used in conjunction
with a single general contractor (Figure 1·4) or multiple prime contractors
(Figure 1·5).
The contracting parties in a construction manager arrangement should care-
fully consider the level of authority granted to the construction manager in dealing
with project contractors, Some projects give the construction manager complete
12
LEGAL SIGNIFICMKE OF SCHEDULE § 1.04[C]

Architect!
Owner Engineer

/ Prime Scheduling
Construction
Manager Contractor Consultant

Subcontractor Suppiier
I
Subcontractor
I. Supplier
J
FIGURE 1-4. CONSTRUCTION MANAGER PROCUREMENT WITH A
SINGLE GENERAL CONTRACTOR

control over the project contractors with respect to construction costs and sched-
uling. In this situation the construction manager may also be responsible to the
owner and may assume the performance risk of the project contractors. On other
projects, the construction manager acts as the owner's agent and is granted less
control. In the latter arrangement the construction manager has 'limitedsupervisory
responsibility over the project contractors, but may have responsibility for pro-
viding reports to the owner detailing the contractors' performances.
The contract documents for projects using construction managers should
specify who is responsible for scheduling and coordination. When construction
managers contract to complete a project within a guaranteed maximum price, they
usually assume the scheduling and coordination responsibility. However, construc-
tion managers may attempt to delegate this responsibility to general contractors
or general trade contractors. When the construction manager is acting as an agent
of the owner, the risk allocation is not as clear. If the single general contractor
technique is used, scheduling and coordination responsibilities should rest with
the general contractor. If the multiple prime contractor technique is used, parties
should clearly specify who has responsibility for scheduling and coordination.
13
§ 1.04[D] CONSTRUCTION SCHEDULING

Construction Architect!
Owner Engineer
Manager

I
I Scheduling
I Consultant
I
I
I
I
I
I
I
I
I
I
t
Prime
Contractor
No.1

FIGURE 1-5. CONSTRUCTION MANAGER PROCUREMENT WITH

MULTIPLE PRIME CONTRACTORS

Unless the contract provides otherwise, the various prime contractors will have
the right to look to the owner for project scheduling and coordination:

[D] Phased or Fast-Track Construction

The purpose of phased or fast-track construction is to begin construction as

early as possible, Early phases of construction, such as site preparation and foun-
dation work, typically will begin before the final project design is complete, Thus,
project design is completed concurrent with construction work in the early phases
of the project.
When properly utilized, phased construction can result in cost savings to the
owner by minimizing the impact of inflation on construction costs. It also allows
greater use of fixed-price contracts on very large projects, However, the owner
typically assumes a majority of the responsibility and liability for scheduling and
coordination, particularly when multiple prime contractors are involved, As a re-
sult, the owner assumes significant risk in phased construction; the risk is even

4 Pierce Assocs., Inc" GSBCA No, 4163, 77-2 BCA '1[12.746, qlJ"d, 617 F.2d 223 (Ct. CI. 1980),

14
LEGAl SiGNifiCANCE OF SCHEDULE § 1,04[D]

greater on fast-track projects, The owner faces considerable risk in embarking on

a project not fully designed, since later conditions may be unanticipated or dif-
ferent from earlier intentions, Owners on these types of projects should carefully
consider interfacing the schedules of the various phases and with the constraints
imposed on the project by earlier events,
Owners are potentially responsible for damages that can flow from flawed
designs and delays caused by performance problems in earlier phases." In Turner
Construction CO,,6 the contractor,acting as a construction manager on a fast-track
project, recovered delay costs incurred by the contractor and subcontractors in
installing interstitial utilities at a large research facility, The government was re-
sponsible for design defects that required extensive redesign and were not iden-
tified until after construction had already commenced, Although the contractor
was responsible for coordination of the work, the government plans were so flawed
that the major problems encountered could not be anticipated and the govern-
ment/owner bore the full risk of the delays,
One disturbing decision upholding the right of an owner and a contractor to
enter into unfair contracts and then suffer the consequences is Marriott Corp, II,
Dasta Construction Co,? This case involved the construction of a "mega-hotel"
in Orlando, Florida, where the contractor entered into a fast-track prime contract
with a no damages for delay clause,
The court of appeals, upholding the trial court's judgment in favor of the
owner, found that under Florida law, the contractor on this lump-sum, fast-track
construction project was not entitled to recover any damages as a result of unusual
obstructions, difficulties,delays, or deliberate interference in the progress of con-
struction, The court concluded that the contractor was well aware of the possibility
of such delays on a fast-track construction project; the contractor failed to protect
itself against such delays by increasing the amount of its bid; and the contractor
agreed to express language in the contract precluding any increase in the contrac-
tor's compensation for such delays and limiting the contractor to an extension in
the project completion date. The COUI"t recognized the potential application of the
active interference exception to no damage for delay clauses, but noted that the
contractor had failed to give timely notice under the contract.
A well-reasoned dissent noted the lack of prejudice to someone who actively
interferes with project performance:

I dissent from the majority opinion because the majority, , , does not address
the issue of [Marriott's] deliberate interference with Dasta's performance,
which would constitute a legally permissible exception to the enforcement of
the no-damages-for-delay clause against Dasta. Rather, the majority holds that

3 ld.
o Nos, 29.472. 29.591, 29,592, 29.593, 29,830, 29,851, 29,852, 90-2 BCA
22,649 t 1990),
'26 F.3d 1057llith Cir.

15
§ I,G4[EJ CONSTRUCT,ON SCHEDULING

it is unnecessaryto determine whether Marriott actively interfered withDasta's

performance. because, as a preliminary matter, Dasta failed to request an ex-
tension of time, as required by the contract's no-damage-for-delay clause. In
my opinion, the majority's holding that the district court correctly found that
Dasta failed to seek its contractual relief of an extension of time is not deter-
minative of this entire case. The majority's conclusion on this single issue does
not obviate its duty to review the district COUl,'S entry of judgment notwith-
standing the verdict on the issue of the exception, wherein the district court
substituted its version of the facts for the jury's verdict that Marriott deliber-
ately interfered with Dasta's performance under the contract. The real issue of
contention with the majority opinion is that the undersigned would hold that
the exceptionsrecognized by Florida law take Dasta's right to recover damages
outside of the contract and do not require Dasta to make a written request for
extension of time in order to recover damages. Therefore \ Dasta's failure to
comply with the contractual requirements regarding delay does not bar recov-
ery for damages caused by deliberateinterference, \Vhilethe majority contends
that my position would frustrate the bargained-for agreement of the parties, I
maintain rhat the majority's position frustrates Florida law which does not
require a written request for an extension of time in order to recover damages
for deliberate interference.

[E] Design-Build Technique

On design-build projects, the owner provides the contractor with broad per-
formance or program criteria. The contractor, typically a single entity with con-
struction and design capabilities, provides both services (FIgure 1·6). Complete
responsibility, including all scheduling and coordination, lies with the single
design-build contractor, Under this arrangement, owners ordevelopers are able
to contractually shift many risks associated with scheduling and coordination
problems.
Design-build contracts typically impose scheduling requirements on both the
design and the construction phases of the project. 8 Owners on such projects must
guard against the tendency to assume the contractor will perform in accordance
with contract milestones. This faulty assumption often leads owners to ignore the
contractor's plan and schedule for performing the work, re.sulting in drastic con-
sequences when the design-builder has performance problems or overbills the
project based on the percentage of workcompieted." Althongh the owner's sched-
uling involvement may not be as great as on conventional projects, the owner must
review the schedule logic and periodic updates to evaluate performance and de-
termine whether intervention is appropriate,

}; Loulakis & Love, Exploring tile Design-Build Contract, Construction Briefings No, \3 at
10(1986i.
9 lei.

16
lEGAL SI·GNlfICANCE Of SCHEDULE § 1.05

Supptlers

FIGURE 1·6. DESIGN·BUILD

§ 1.05 SCHEDULE ANALYSIS AS LEGAL EVIDENCE

Today CPMschedule analysis is an integral part of a claimant's burden of

proof when asserting a delay claim. In a construction delay claim, the. claimant
bears the burden to show delay and how that delay affected planned performance. 10
Failure to establish both responsibility for and the duration of delays can be fatal
to the successful prosecution of a delay claim.11 In establishing the requisite proof,
courts have typically held that an ordinary bar chart is insufficient to identify the
project critical path, and as a result, is ineffective to show the cause and impact
of the delay. 12 This book will provide guidance as to the use of the CPM technique
in both project planning and claims analysis.

It) witner Y. United States. 16 Ct. -Ct. 260 (199"2) (cla-imant bears the burden of establishing that

government was responsible for the delay and that claimant incurred additional COSlS as a result of
that delay).
II Tectronics v, United Stales. ]0 C1. Ct. 296 (1986) (contractors delay clnirn was denied for
lack of evidence).
I:'. Mega Constr, Co. v. United Slates. 29 Fed. C1. 396 (1993) (conrractors delay claim wasdenied

because the bar chart submitted by the contractor failed to establish The relationship between the
activities delayed by the government and the impact on the overall project completion).

17