Common Causes for Project Overruns & Construction Claimswarehouse.pws.gov.nt.ca/pdf/PMC/PMC...
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Common Causes for Project Overruns & Construction Claims Stephen Revay CCP, CFCC, FCSC, FAACE
Transcript of Common Causes for Project Overruns & Construction Claimswarehouse.pws.gov.nt.ca/pdf/PMC/PMC...
Common Causes for Project Overruns &
Construction Claims
Stephen Revay CCP, CFCC, FCSC, FAACE
AGENDA COMMON CAUSES - Overruns
Typical failings Communication / Email Schedules
COMMON CLAIMS Typical claims Resolution
IMPORTANT QUALIFICATION
STEPHEN REVAY IS NOT A LAWYER. THE OPINIONS EXPRESSED DURING THIS PRESENTATION ARE NOT NOR SHOULD THEY BE CONSTRUED AS LEGAL OPINION. THESE OPINIONS ARE SIMPLY BASED ON 37 YEARS OF COMMERCIAL EXPERIENCE. JUDICIAL OUTCOMES WILL VARY DEPENDING ON SPECIFIC FACT SCENARIOS AND THE RELEVANT CONTRACT – ONE CAN NOT APPLY OUTCOMES TO SEEMINGLY SIMILAR FACT SCENARIOS.
AGENDA – Typical Failings
Owners
Design Consultants
Contractors
Warning Signs Owners who:
have unrealistic expectations
fail to properly develop project
cut corners on investigations and design
inappropriately shift risks to contractor
inexperienced personnel
Realistic Schedule
Project Completion Engineering
Overlap
Construction
DELAY
Increased overlap
Failure to move start and end dates notwithstanding initial delays causes unrealistic schedule
Fast Track
Fast Track &
Hard money (LS)
Excellent source of business for claims consultants
Warning Signs
Engineers who:
pass on design responsibilities to Contractors
agrees to unrealistic expectations
have vested interest in disputes
produce ambiguous or conflicting documents
inexperienced personnel
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It is far more important to be carefully monitoring engineering than construction! When problems start to show up in engineering, it actually may be possible to do something about them. If the problems are not seen until construction, it is usually too late
Warning Signs Contractors who don’t satisfy notice provisions
cut corners to offset bid deficiencies
abuse subcontractors
don’t read the contract or assume it will not be enforced
fail to keep adequate project records
don’t document claims properly
fail to develop and update schedules
inexperienced personnel
The Problem:
Insanity is doing the same thing over and over and expecting a different result.
Albert Einstein
Lessons Learnt
Repeated
Owner Issues
Best practices are known but not practiced
Lip Service SCOPE DEFINITION STAGE GATING RISK MANAGEMENT CONSTRUCTABILITY / VALUE
ENGINEERING
CONSULTANT ISSUES
IMPARTIALITY
PROPER MANDATE
ARBITER
DESIGN CONSULTANT
Contractor Issues
Contract Familiarity
ARTICLES TO READ NOTICE PROVISION
CHANGES/EXTRAS
DISPUTES
AUTHORITY
SOIL SITE CONDITIONS
DELAY
PAYMENT
R T F C
Words of Wisdom
“ Education is what you get when you read the fine print …
...experience is what you get when you don’t. ”
SET THE STAGE Satisfy notice provisions; Avoid surprises; Ensure project records are not adverse to the claim position; Understand the position of the other side;
Most importantly keep emotion out of the equation;
Email: Out of Control
EMAIL Poor form of Communication – easily
misunderstood Responses in anger increase animosity Keyboard jock writes sentiments which
would not otherwise be expressed Careless often smoking gun
A. Barbour, Louder Than Words: Nonverbal Communication,
Communication Elements
Project Documentation Shall: Provide information needed to effectively tender,
plan, manage and construct the work. Be an accurate and complete record of on-site
conditions, problems encountered and their effect on project.
Be readily available to cost effectively reconstruct an accurate history of the project should a dispute not be resolved by Final Completion of the Project.
http://emailcharter.org
Presenter
Presentation Notes
What is the purpose of project documentation ? It is to allow proper communication between the parties involved. It starts with the owner and its professionals. The owner and its design team must produce a comprehensive / complete set of tender drawings to allow for contractors to bid on. Contractors, for their part rely on these documents, to respond to the tender call. If successful, the contractor will need to work not only with its own people, subcontractors but also with the owner and professionals. Construction projects is the fruit of extensive teamwork, coordination and communication. Therefore, proper project documentation is necessary in all circumstances.
Monitoring At each and every coordination job site meeting each and every contractor or subcontractor is asked if they are aware of any current or potential situation that is affecting or might affect their time and or cost to complete their work.
Presenter
Presentation Notes
Contractors/subcontractors must be advised that the purpose of this question is to achieve early warning of adverse change and that a failure to provide that warning will have a detrimental impact on the resolution of any unadvised claim. That advice must also indicate that early advice is synonymous with early payment.
Monitoring The response to this question must be minuted for each and every contractor / subcontractor.
Presenter
Presentation Notes
Early advice is welcome and will be received in a non-threatening manner. This obviously has to occur. A positive response to claims advise. Non-adversarial communication.
What is being said - What is happening
Owners say
We want to know early on
when there are problems
Contractors say
Owners become defensive and more
rigid with no give and take -
becomes war zone
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Can Claims be Avoided?
Degree of design completion at
construction start
Number and severity of design changes during execution
The reaction time of the customer to these changes
Construction manager’s ability to coordinate the
various activities
The number and
magnitude of claims
will depend on:
Effective Project Planning:
"Plans are nothing. Planning is everything." Dwight D Eishenhower
State of the Art - POOR
Deliverables not tools
Unrealistic schedules
Options for Improvement
Contract Language
Schedule Audits
Work Face Planning / Look Ahead Sch.
Integrated Project Schedule
TEAM CONCEPT Contractor
Owner
Design Consultant
Construction Manager Integrated Project Schedule
TEAM CONCEPT Contractor
Owner
Design Consultant
Construction Manager
SCHEDULE REVIEW reduction in adversarial and
defensive attitude
fostering early and open communications
development of common objectives
CONTRACTOR RESPONSIBLE
Means
Methods
Sequence of Work
KEEP ACTUALS
Very expensive after the fact
CLAIMS BY CONTRACTORS
Stephen Revay CCP, CFCC, FCSC, FAACE
CLAIM Ingredients – Fixed Price Contracts
Acceleration: Overtime / Congestion
Poor Scope Definition: Extensive Growth / Rework
People : no communication and no
TRUST
BETWEEN PROJECT PARTICIPANTS
AND
WITHIN THE PROJECT TEAM
SUSTAINABLE ALLIANCES J. W. Carss-Gofton
Cost Trust . . . . . . . . . expectation of a fair and equitable exchange of value
Competence Trust . . confidence in a party’s capability to perform a task.
CLAIMS BY CONTRACTORS IMPEDED and/or NO ACCESS TO SITE DELAY IN SUPPLYING DRAWINGS DELAY IN SUPPLYING PRE-PURCHASED
EQUIPMENT/MATERIAL
OWNER’S NON-DISCLOSURE OF RELEVANT INFORMATION
ACTIVE INTERFERENCE ON PART OF OWNER
ACTIVE INTERFERENCE IMPROPER REJECTION OF AN EQUALLY SUITABLE
ALTERNATIVE
INTERFERENCE WITH METHOD OF CONSTRUCTION
INTERFERENCE WITH SEQUENCE OF CONSTRUCTION
UNDULY DEMANDING INSPECTION
(Quality Assurance - Safety)
CLAIMS BY SUBCONTRACTORS
Same issues as Contractor Pass Through after Review Satisfy Notice Provisions Performance of other
Subcontractors
OTHER CAUSES OF CLAIMS
OWNER’S FAILURE TO GRANT TIME EXTENSION
CONSTRUCTIVE ACCELERATION CONTRACTOR IS ENTITLED TO EXTENSION OF TIME
CONTRACTOR REQUESTED EXTENSION IN A TIMELY MANNER
EXTENSION DENIED IN WHOLE OR PART
CONSTRUCTIVE ACCELERATION
• OWNER MUST DIRECT TO COMPLETE WORK WITHIN
UNEXTENDED TIME
• CONTRACTOR MUST PROVIDE NOTICE THAT THEY
CONSIDER ACTION TO BE CONSTRUCTIVE
ACCELERATION
• OWNER MUST BE SILENT or DISAGREE
• CONTRACTOR MUST ACCELERATE
OTHER CAUSES OF CLAIMS
OWNER’S FAILURE TO GRANT TIME EXTENSION SUSPENSION OF WORK TERMINATION OF WORK
TERMINATION
Convenience
Cause
Convenience / Cause
Abide by Contract terms
Categories of Cost Termination / Suspension
Work completed to date ( not invoiced)
Unusual / special demobilization costs
Termination
Profit on uncompleted work ??
Usually excluded
Non Adversarial Communication
Claims are about money not people
Presenter
Presentation Notes
1)Early claims advice has to be seen positively and result in expeditious payment 2)Claims must be viewed as a commercial request for money and not as a slander against ones profession or firm. 3)Claims must be treated in the same manner as a revision on a construction drawing i.e., without emotion. 4)Claims have to be evaluated for merit and value not negotiated in some back room without analysis.
Project Neutral Approach
ADR during construction
In the event parties have a legitimate difference of opinion
Requiring analysis
Options
• Each party engages claims consultant
• Each party diverts project people to perform analysis
• Two parties engage independent to provide objective basis
Proposed Best Alternative
The appointment of an impartial independent claims consultant to offer:
Unbiased advice and decisions
Assist in negotiation
Conduct forensic analysis at half the cost to each
party
Forensic Analysis
• Initiation of Process
• Fact Finding
• Draft Report
• Final Report
Recommended Sources Revay web page: www.revay.com
AACE : www.aacei.org
COAA: www.coaa.ab.ca CII: http://www.construction–institute.org
www.aacei.org/resources/rp/ Recommended Practices (RPs) cover many topic
areas such as estimating, planning and scheduling, claims and dispute resolution and more! Listed below are a few of the topics covered in AACE's RPs:
RP 25R-03 Estimating Lost Labour Productivity
RP 29R-03 Forensic Schedule Analysis RP 45R-08 Scheduling Claims Protection RP 52R-06 Time Impact Analysis
That’s all , thank you and good luck
