Contract Claims and Disputes on Texas Highway Construction ... · CONTRACT CLAIMS AND DISPUTES ON...
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CONTRACT CLAIMS AND DISPUTES ON TEXAS HIGHWAY CONSTRUCTION PROJECTS A Thesis by MICHAEL PETER LEHMANN Submitted to the Office of Graduate Studies of Texas A&M University in partial fulfillment of requirements for the degree of MASTER OF SCIENCE May 1991 Major Subject: Civil Engineering
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Transcript of Contract Claims and Disputes on Texas Highway Construction ... · CONTRACT CLAIMS AND DISPUTES ON...
CONTRACT CLAIMS AND DISPUTES ON TEXAS HIGHWAY
CONSTRUCTION PROJECTS
A Thesis
by
MICHAEL PETER LEHMANN
Submitted to the Office of Graduate Studies of Texas A&M University
in partial fulfillment of tt,,~ requirements for the degree of
MASTER OF SCIENCE
May 1991
Major Subject: Civil Engineering
CONTRACT CLAIMS AND DISPUTES ON TEXAS HIGHWAY
CONSTRUCTION PROJECTS
A Thesis
by
MICHAEL PETER LEHMANN
Donn E. Hancher (Chair of Committee)
William . Smith (Member)
May 1991
~~ orge StlJkhart (Member)
ABSTRACT
Contract Claims and Disputes on Texas Highway
Construction Projects. (May 1991)
Michael Peter Lehmann, B.S., Texas A&M University
Chair of Advisory Committee: Dr. Donn E. Hancher
iii
This thesis documents the efforts to determine the major causes of the
numerous construction contract claims and disputes against the Texas State
Department of Highways and Public Transportation. Surveys of departmental
personnel and contractors who do construction for the State were used to
locate these problem areas. These surveys, along with a study of 18 claims
against the State, found design errors, delays by the State, and additional work
to be the main sources of claims. These three factors account for 53 percent
of the number of claims, and for 90 percent of the financial impact of claims.
In order to reduce the impact of claims, therefore, the Department should
concentrate its efforts on the reduction of these causes.
iv
ACKNOWLEDGEMENTS
Extra special thanks to the Administration of the Highway Department,
the members of the Advisory Committee, the Lehmanns, and the Hobsons.
Special thanks to all who contributed information: Bob Templeton and
the people at 0-6; Franklin Young and all of the District 20 folks; Edward
Dominguez and the Silsbee crew; Tom Johnson and the Associated General
-Contractors; and finally, all of you who completed the surveys.
Thanks to the great people at Texas Transportation Institute: my office
mates - Shariq, Johnnie, Roy, David, Kevin, Bill, and Beverly (not all at once);
the secretaries - Sheri, Usa, and Jerri; the other contributors - Pat (for
preserving my sanity), Dan (slides), Bryant (computer expertise), Kelly and Amy
(sparkling conversations), Scott (computer games and assistance), and Ron
(what a chef); the professors; and finally, the other Highway Department
students at A&M - Yvonne, Gus, Pat, David, Mark, and Curtis.
Honorable mentions - Fatburger, McDonald's, Mr. Gatti's, and the Dixie
Chicken for feeding my body; CN N Headline News, the Battalion, PGA Golf
(computer version), and Tetris for feeding my mind.
Finally, for tolerating a house, two cats, a dog, two litters of puppies, and
weekend visits for one full year by herself, extra special thanks to my wife,
Tracy. Without her help and support, this thesis would not have been possible.
v
DEDICATION
Dedicated to the memory of Raymond E. Stotzer, whose dedication to
the Highway Department was exceeded only by his determination to improve
it Mr. Stotzer's efforts resulted in the creation of the Highway Department
Graduate Studies program. Without his efforts, this thesis would not have been
possible.
vi
TABLE OF CONTENTS
Page
ABSTRACT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . " iii
ACKNOWLEDGEMENTS .................................. iv
DEDICATION •......................................... v
LIST OF FIGURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. x
LIST OF TABLES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. xi
CHAPTER Page
l. INTRODUCTION AND BACKGROUND ..................... 1
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 1
Background information . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 2
Study objectives ..................................... 5
Study methodology ........... . . . . . . . . . . . . . . . . . . . . . . .. 5
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 6
Contracts in general . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 6
Contracts with SDHPT ...•. . . . . . . . . . . . . . . . . . . . . . . . . .. 7
The construction claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 9
Contractual provisions ...... . . . . . . . . . . . . . . . . . . . . . . . . . .. 10
Why claims have increased ............................. 11
Dispute resolution alternatives . . . . . . . . . . . . . . . . . . . . . . . . . . .. 13
Contract appeals board ................ . . . . . . . . . . . . .. 13
vii
TABLE OF CONTENTS
(Continued)
CHAPTER Page
Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 15
Arbitration . • . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 18
Dispute review board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 22
Mediation ........................................ 26
Mediation-Arbitration ................................ 28
Mini-Trials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 30
II. THE CURRENT DISPUTE RESOLUTION SYSTEM IN TEXAS ..... 32
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 32
Chain-of-command dispute resolution ......... . . . . . . . . . . . .. 37
Resolution at the project level . . . . . . . . . . . . . . . . . . . . . . . . .. 37
Resolution at the resident engineer level .................. 38
Resolution at the district level ...................... . . .. 39
Resolution at the central headquarters level . . . . . . . . . . . . . . .. 40
General observations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 45
Indirect cost of dispute resolution ....................... 46
III. SURVEY OF SDHPT PERSONNEL ........................ 49
General . • • . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 49
viii
TABLE OF CONTENTS
(Continued)
CHAPTER Page
Statistical analysis methodology .......................... 51
Results of the SDHPT survey ............................ 58
Response rates of the SDHPT survey .................... 58
Discussion of results of the SDHPT survey ................ 59
IV. SURVEY OF CONTRACTORS ........................... 79
General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 79
Results of the contractor survey .............. . . . . . . . . . . .. 81
Response rates of the contractor survey ...... . . . . . . . . . . .. 81
Discussion of results of the contractor survey .............. 82
Differences between SDHPT and contractor surveys. . . . . . . . . . .. 97
V. SUMMARY AND CONCLUSIONS ......................... 108
Summary .......................................... 108
Conclusions ........................................ 111
The need for improved contract documents . . . . . . . . . . . . . . . . 111
The need to provide timely decisions during construction ..... . 117
The need to consider financial impact of additional work . . . . . . . 118
The need for consistent interpretation of plans and specifications ..................................... 119
IX
TABLE OF CONTENTS
(Continued)
Page
The need for Pre· Bid Conferences for complex projects ....... 120
The need to provide utility-free construction zones ........... 121
The need for early, third party dispute resolution ............ 121
The need for a quantitative dispute measurement system .... . . 122
Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123
Recommendations for implementation . . . . . . . . . . . . . . . . . . . . 123
Recommendations for additional research ........... . . . . . . 124
REFERENCES .•.......•............................... 125
APPENDIX A. SURVEY FORMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
APPENDIX B. SURVEY RESULTS ........................... 141
APPENDIX C. CATMOD METHODOLOGY, INPUT, AND OUTPUT .... 161
APPENDIX D. SUPPORTING CALCULATIONS (SAS OUTPUT) ....... 187
APPENDIX E. SAMPLE SDHPT CONSTRUCTION FORMS .......... 191
VITA • . • • . • . . . . . . • . . • . . . . . • • . . . . . . . . . . . . . . . . . . . . . . . . . . 198
x
LIST OF FIGURES
FIGURE Page
1. SDHPT Construction Projects and Spending, 1982 to 1988 . . . . . .. 3
2. Claims Against SDHPT, 1977 to 1989 ...................... 3
3. Total Value of Claims Against SDHPT, 1977 to 1989 . . . . . . . . . . .. 4
4. Average Value of Claims Against SDHPT, 1977 to 1989 ......... 4
5. Dispute Review Board Flow Chart ....................... " 24
6. Condensed SDHPT Organization Chart . . . . . . . . . . . . . . . . . . . .. 33
7. Dispute Decision Flow Chart . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 34
8. Resolution of Claims Against SDHPT, 1982 to 1988 ............ 42
9. The Chi-Square Test for Equality of Distributions .............. 52
10. Construction Contract Revisions .......................... 112
11. Reasons for Claims Against SDHPT, 1984 to 1989 ............. 113
xi
LIST OF TABLES
TABLE Page
1. Costs of Litigation .................................... 18
2. Costs of Arbitration for Complex Cases . . . . . . . . . . . . . . . . . . . .. 21
3. Yearly Estimate of SDHPT Indirect Costs for Claims. . . . . . . . . . .. 47
4. Average Ratings of Contractor Practices by SDHPT Survey Respondents .................................. 62
5. Average Ratings of SDHPT Practices by SDHPT Survey Respondents .................................. 63
6. Average Ratings of Contract Documents by SDHPT Survey Respondents .................................. 64
7. Average Ratings of Contract Administration by SDHPT Survey Respondents .................................. 65
8. Average Ratings of All Categories by SDHPT Survey Respondents 66
9. Summary of Average SDHPT Responses to Multiple-Answer Questions .......... . . . . . . . . . . . . . . . . . . . . . . . . .. 68
10. Summary of SDHPT "Yes" Responses to Question 8 ........... 69
11. Average Ratings of Dispute Resolution Alternatives by SDHPT Survey Respondents ............................ 71
12. Average SDHPT Responses to Question 12 . . . . . . . . . . . . . . . . .. 72
13. Summary of SDHPT HYes" Responses to Questions 16, 17,18, and 20 ••..................................... 74
14. Ten Most Common SDHPT Comments to Question 19 . . . . . . . . .. 76
15. Ten Most Common SDHPT Comments to Question 21 . . . . . . . . .. 78
16. Average Ratings of Contractor Practices by Contractor Survey Respondents .................................. 83
xii
LIST OF TABLES
(Continued)
TABLE Page
17. Average Ratings of SDHPT Practices by Contractor Survey Respondents .................................. 85
18. Average Ratings of Contract Documents by Contractor Survey Respondents .................................. 85
19. Average Ratings of Contract Administration by Contractor Survey Respondents .................................. 87
20. Average Ratings of All Categories by Contractor Survey Respondents .................................. 88
21. Average Contractor Responses to Multiple-Answer Questions . . . .. 89
22. Summary of Contractor "Yes" Responses to Dichotomous Questions ............................... 90
23. Five Most Common Contractor Comments to Question 10 ....... 92
24. Summary of Contractor "Yes" Responses to Question 17 ........ 95
25. Seven Most Common Contractor Comments to Question 18 . . . . .. 96
26. Average Ratings of Dispute Resolution Alternatives by Contractor Survey Respondents .... . . . . . . . . . . . . . . . . . . . . .. 98
27. Results of Comparison of Surveys Using Chi-Square ........... 99
28. Average Ratings of Contractor Practices by SDHPT and Contractor Survey Respondents . . . . . . . . . . . . . . . . . . . . . . . 101
29. Average Ratings of SDHPT Practices by SDHPT and Contractor Survey Respondents . . . . . . . . . . . . . . . . . . . . . . . 102
30. Average Ratings of Contract Documents by SDHPT and Contractor Survey Respondents . . . . . . . . . . . . . . . . . . . . . . . 103
xiii
LIST OF TABLES
(Continued)
TABLE Page
31. Average Ratings of Contract Administration by SDHPT and Contractor Survey Respondents . . . . . . . . . . . . . . . . . . . . . . . 104
32. Average Ratings of All Categories by SDHPT and Contractor Survey Respondents . • . . . . . . . . . . . . . . . . . . . . . 105
33. Average Ratings of Dispute Resolution Alternatives by SDHPT and Contractor Survey Respondents . . . . . . . . . . . . . . . . . . . . . . . 107
34. Average Claimed and Paid Values for Claims ................. 114
35. Maximum Likelihood Analysis of Variance Table for Contractor Practices .................................. 164
36. Maximum Likelihood Parameter Estimates for Contractor Practices .•................................ 164
37. Maximum Likelihood Analysis of Variance Table for SDHPT Practices . • • . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165
38. Maximum Likelihood Parameter Estimates for SDHPT Practices .... 165
39. Maximum Likelihood Analysis of Variance Table for Contract Documents .................................. 166
40. Maximum Likelihood Parameter Estimates for Contract Documents .•.•.............................. 166
41. Maximum Likelihood Analysis of Variance Table for Contract Administration .....•.•••.......•.............. 167
42. Maximum Likelihood Parameter Estimates for Contract Administration ••.......•••......•............. 167
43. Maximum Likelihood Analysis of Variance Table for All Categories .. 168
44. Maximum Likelihood Parameter Estimates for All Categories ...•.•..•..•........... . . . . . . . . . . . . . . . . 168
XIV
LIST OF TABLES
(Continued)
TABLE Page
45. Maximum Likelihood Analysis of Variance Table for Dispute Resolution Alternatives ........................ 169
46. Maximum Likelihood Parameter Estimates for Dispute Resolution Alternatives . . . . . . . . . . . . . . . . . . . . . . . . . . . 169
47. Maximum Likelihood Analysis of Variance Table for Contractor Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174
48. Maximum Likelihood Parameter Estimates for Contractor Practices .................................. 174
49. Maximum Likelihood Analysis of Variance Table for SDHPT Practices .................................. 175
50. Maximum Likelihood Parameter Estimates for SDHPT Practices .... 175
51. Maximum Likelihood Analysis of Variance Table for Contract Documents ............................... 176
52. Maximum Likelihood Parameter Estimates for Contract Documents .................................. 176
53. Maximum Likelihood Analysis of Variance Table for Contract Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176
54. Maximum Likelihood Parameter Estimates for Contract Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177
55. Maximum Likelihood Analysis of Variance Table for All Categories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178
56. Maximum Likelihood Parameter Estimates for All Categories . . . . . . 178
57. Maximum Likelihood Analysis of Variance Table for Dispute Resolution Alternatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179
xv
LIST OF TABLES
(Continued)
TABLE Page
58. Maximum Likelihood Parameter Estimates for Dispute Resolution Alternatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179
59. Maximum Likelihood Analysis of Variance Table for All Categories .. 182
60. Maximum Likelihood Parameter Estimates for All Categories . . . . . . 182
1
CHAPTER I
INTRODUCTION AND BACKGROUND
INTRODUCTION
In fiscal year 1990, the Texas State Department of Highways and Public
Transportation (SDHPT) spent $1.713 billion to construct, repair, or rehabilitate
approximately 715 segments of the 77,000 mile state-maintained highway
system UJ. Departmental estimates for fiscal year 1991 show a decline in the
volume of work, with total lettings down to about $1.3 billion (1). And as the
State struggles to maintain the quality of its highways on a tighter budget, the
Department has spent more than $17 million dollars over a 12-year period to
settle disputes with contractors. From 1977 to 1989, contractors filed an
average of 8.85 claims per year, costing the State $1.43 million annually. That
one-tenth of one percent of the State's annual construction budget could be
used to construct 0.72 projects each year. When the indirect costs associated
with dispute resolution are considered, this figure rises to 6.5 projects annually.
Although it is not feasible to think claims can be eliminated altogether,
the Department must seek a means for reducing the number of claims so tax
revenues can be utilized for their intended purpose: constructing and improving
the vast system of highways in Texas.
The style and format followed in this thesis was Transportation Research Board.
2
Background Information
From 1982 to 1988, the competitive bid process was completed 5,008
times, representing a dollar volume of $9.9 billion. Figure 1 shows both the
number of projects and their yearly total values. From 1977 to 1989,
contractors filed 115 claims against the State, with a corresponding dollar value
of $51.4 million. Of these claims to date, the Department has paid
approximately one-third of the claimed value, or $17.1 million to the contractors.
Figure 2 shows the total number of claims during this period, while Figure 3
shows the total claimed value and total paid value for these years. When the
number of claims is considered, the average claim filed and paid values result,
and these data are presented in Figure 4.
From 1977 to 1989, the overall average number of claims per year is
8.85, the average value per claim is $447,498, and the average settlement is
$148,612. Looking at Figure 4, the yearly average claimed value for three of
the past five years plotted is higher than the overall average. Similarly, the
average paid value is above the overall average for two of the past five years.
While the average number of claims per year shows a pattern similar to the
claimed and paid values, the pattern cannot be deemed a trend. Figure 2
shows the number of claims per year to be somewhat erratic. There is
evidence of an upward trend in the value of the claims, even though there is
a lack of a discernable pattern in the number of claims filed per year.
~ G)
"[ D-
2000---------- =--------r!!::?,000
1500
1
1982198319841985198619871988 Year of Project Letting
I ~ Projects _ Total Dollars
$500
3
(i) c: .2
~ ~
..m 8 ~ .....
Figure 1. SDHPT Construction Projects and Spending, 1982 to 1988.
20
15
1979 1981 1 1978 1980 1982 1984
Year Figure 2. Claims Against SDHPT, 1977 to 1989.
~ ----,-_.& .. __ ..
:& $1o.oool1l~1~~~~~~E~11::~l[~~1 ~~~~§~
~ ----t!I'-----ilL... .. .. _. . ..
:::::::E::::::: :: ::: ......... ~:
... _ ........ -- ... n-
$100 mmm .~~ ~~mm~ ... !: ::::::::: .:: if::::::: . ............ .
.,
$10 r ,~ n 79 81
.... I
83 85 Vear
.. .~. ,. i , . i
i: I: ,. ! . ,. I
I! .~~.-:::::~
1
:.' f ::::::::::::
f······_-.. · 87 89
I ~ Filed Value • Paid Value I
Figure 3. Total Value of Claims Against SDHPT, 1977 to 1989.
;:::::::::::::::: t·· ..... ~ .......... _ ... ~ ........................... .. ~.w., .. ., ......... " •• ...,
• .· •• _ .......... _ .... ·_ .•••.••• m.· ••. ••··•· ••••• ·........ ................ .. . f················ r .... ············
$10 I::",::" ::: I::::::::: :::
~ :::::::::::::::: '." , .. r.: 'f:::::===: ,. ..... _ .... _ ...
t" •• --_._-
j. I
I: W~~~11f~ , .. ---1 ... _ ..
r"--I
83 85 87 89 Vear
I ~ FUed Value • Paid Value I Figure 4. Average Value of Claims Against SDHPT, 1977 to 1989.
4
5
STUDY OBJECTIVES
The primary objective of the research effort was to provide insight into
the problem of numerous construction claims against the SDHPT. This goal
could be divided into several subgoals. First, the problem of construction
claims as a whole had to be investigated to determine basic causes. This list
of general causes then was focused to reveal the specific causes of claims
against the SDHPT. Next, the current system used by Texas to settle disputes
and claims was to be evaluated. Once this was accomplished, specific
recommendations to lower the number of claims encountered by the SDH PT
could be made.
STUDY METHODOLOGY
The research effort was divided into four phases. First, a literature
search provided information concerning dispute resolution alternatives and
background information used to design the survey forms. The surveys of
SDHPT personnel and highway contractors determined major problem areas
within the State, and provided information needed to quantify the claims
problem. The responses to the surveys were compiled and statistically
analyzed according to the position of the respondent. For questions common
to both surveys, the contractor responses were compared to SDHPT
responses to determine if the parties shared common opinions. Both survey
6
forms provided ample space for written comments. These comments were also
compiled and investigated. Interviews with SDHPT personnel and contractors
supplemented the findings of the surveys by providing more detailed insight
into the claims problem. Finally, the research focused on the current system
used by the Department for dispute resolution and claim settlement. Several
claims were studied in detail to evaluate the quality of the documentation and
to fully understand the process followed by the State.
DEFINI1"IONS
Qontracts in General
In general terms, a contract is defined as an agreement, enforceable by
law, between two or more competent parties to do or refrain from dOing
something not prohibited by law for a legal consideration (2). Consideration is
defined as the cause, motive, price or impelling influence which influences a
party to enter into a contract (2).
There are two primary divisions in the construction by contract system.
The first is the single contract method, which is used by the Department for its
highway construction prOjects. Under this system, the contracting agency
enters into a single contract with the party responsible for the actual
construction {3}. This party is referred to as the Contractor, defined as the
"individual, firm or corporation or any combination thereof, Party of the Second
Part, with which the contract is made with the State" ~). The contractor then
7
enters into as many subcontracts as he desires, with the following limitations:
He cannot sublet more than 49 percent of the work; aU subcontractors must be
approved by the Engineer; and finally, subletting any portion of the work does
not relieve the contractor from his responsibility to conform to the requirements
of the contract ~). By entering into subcontracts, the contractor gains the
designation of the ·prime" contractor. Depending on the terms of each of the
subcontracts, these second-level contractors may be able to enter into third
level subcontracts, and so forth. Even though multiple contracts exist for the
construction of a single project, this still conforms to the definition of a single
contract system as the State is only a party to contract in one of the contracts.
By way of contrast, the separate contract system has multiple prime
contractors contracting with the owner (3). This system allows the contracting
agency to be more selective in choosing contractors but presents more of a
challenge from a contract-management perspective. Although the use of this
system might be applicable for some highway construction projects, such as
when multiple individual contracts make up a single project, its use by the state
is currently limited.
Contracts with SDHPT
The contract between the Department and contractor is the agreement
between these two parties covering the furnishing of materials and performance
of the work. The work includes the furnishing of all labor, materials, equipment,
and other incidentals necessary or convenient to the successful completion of
8
the project and carrying out of aU the duties and obligations imposed by the
contract ~). The contract includes the plans, standard specifications, special
provisions. special specifications, and contract bonds. Field changes, extra
work orders, and supplemental agreements are considered to be parts of the
contracts as well ~}.
The plans are the drawings approved by the engineer, or true
reproductions thereof, which show the location, character, dimensions, and
details of the work ~}. The standard specifications are the directions,
provisions, and requirements contained in the current standard specification
issue and referred to by the inclusion of items in the plans directly or as
subsidiary items. The special specifications and special provisions may pre
empt all or part of any of the standard specification items and may address the
method and manner for performing the work or the quantities and qualities of
materials to be furnished under the contract. These specials cover work
pertaining to particular projects and are included in the proposals as issued to
bidders 00.
In cases of disagreement between the terms of the contract, calculated
dimensions govern over scaled dimensions. plans govern over standard and
special specifications, and special provisions govern over both standard and
special specifications and plans ~}. Many of these special items adjust the
method for calculating payment to the contractor, and many items dictate
portions of the work not to be paid for directly but to be considered subsidiary
to other items of work. When these terms of contract are applied over the
9
number of projects let in 24 districts and 126 residencies with each office
selecting which special items are to be included in each project, the possible
number of combinations of provisions approaches infinity.
The Construction Claim
The construction claim is an unresolved dispute between the parties to
a construction contract. The dispute always involves questions of entitlement
(the contractual merit of the dispute) and damages (the dollar value of the
dispute) ffi). A valid claim must include both entitlement and damages.
Differing site conditions, defective and deficient contract documents, breach of
contract, acceleration, suspension, termination, directed change, constructive
change, implied warranty, delays, impossibility of performance, weather, strikes,
owner-furnished items, superior knowledge, and maladministration are the
commonly recognized entitlements ~). Once entitlement has been established
and in order to receive relief, the contractor must prove he incurred damages.
In general, the contractor presents his proof of damages in the form of a report
to the State, including documentation of events, photographs, charts,
schedules, correspondence, and calculation of the damages (2). The detailed
process followed by the Department for dispute and claims resolution will be
discussed in detail in Chapter 2.
10
CONTRACTUAL PROVISIONS
Nearly all construction contracts include provisions spelling out the
process to be followed for dispute resolution. Among the provisions set forth
in federal contracts is the clause stating that disputes concerning a question of
fact • ... shall be decided by the Contracting Officer ..... ~). The contractor may
appeal the Contracting Officer's decision to the head of the agency involved,
and his decision is final unless the decision can be shown to be fraudulent,
capricious, arbitrary, or so grossly erroneous as to imply bad faith. These
exceptions provide the last resort for possible relief for the contractor m).
In Texas, ''the Engineer will act as referee in all questions arising under
the terms of the contract between the parties thereto. and his decisions shall
be final and binding "~). This clause is currently the only mention of the
dispute resolution process in the standard specifications. The process of going
to the claims committee. as will be discussed in detail later, is not mentioned
in writing. When the contractor feels the need to carry a dispute further than
the Engineer, he must either inquire as to the process to be followed, rely on
the experiences of others. or know the process by virtue of having gone
through it previously. The standard speCifications do, however, clearly define
the processes to be followed for the assessment of liquidated damages. for
abandonment of the work or default of the contract. and for termination of
contract ~). The standard specifications also dictate the processes of initiating
11
extra work orders, how to handle changes and alterations, and increases and
decreases in the quantity of the work ~).
WHY CLAIMS HAVE INCREASED
A study done for the Federal Highway Administration in 1988, entitled
-Highway Contract Claims Avoiding/Handling" reveals some reasons for the
recent increase in the number of claims. The major findings showed three
major reasons for the rise: the effectiveness of exculpatory language; the use
of liquidated damages; and the influence of external factors.
Exculpatory clauses are attempts by contracting agencies to escape
responsibility for any type of damages the contractor might incur (2). An
example of an exculpatory clauses included in Federal contracts state, "no
claim shall be made or allowed to the contractor for any damages which may
arise out of any delay caused by the United States" (1). Many state
departments of transportation (DOTs) include similar statements in their
contracts to provide a variety of coverage. California, for example, provides
some information related to subsurface conditions at the site but thoroughly
disclaims responsibility for the accuracy of the information. Such site
investigations are used for the design of the project and presented in the plans
for the benefit of the contractor. The contractor, therefore, must investigate the
site himself or anticipate deviations from the shown information. The State is
effectively denying the contractor the benefit of price adjustments based on
12
differing site conditions. Only two states, Colorado and Florida, permit the
contractor to claim for differing site conditions (2).
Another common source of claims is liquidated damages. Contractors
who are assessed liquidated damages can attempt to show they were delayed
by the contracting agency, forcing the completion date past the threshold for
assessing liquidated damages. If the owner-caused delay can be shown to
force the assessment of liquidated damages, the contractor has filed a winning
claim. Commonly, the effects of owner-caused delays are determined by
critical path methods (CPM) analYSis, with the project documentation providing
data for analysis (§). The FHWA studied 18 projects with delay claims, and out
of these projects, 15 contractors were assessed liquidated damages (2).
Although the FHWA study proved inconclusive, it seems logical that contractors
who feel they were delayed by factors beyond their control would attempt to
recover losses.
The external factors studied can be divided into two major categories:
the number of bidders and the rate of inflation. Although the number of bidders
did not show a direct cause-effect relationship with the number of claims, the
climate created by the increased competition among contractors showed some
correlation with the number of claims. In the battle for state construction
projects, contractors may tend to cut their bids to be awarded the projects,
then recover their costs through change orders and claims. Similarly, the
FHWA study did not find a direct relationship between the rate of inflation and
the number of claims, but rather an indirect relationship (2).
13
DISPUTE RESOLUTION ALTERNATIVES
There are many methods now in use by contracting agencies across the
United States for dispute and claims resolution. Some of the most commonly
used resolution methods are contract appeals boards, arbitration, dispute
review boards, mediation, mediation-arbitration, mini-trials, and finally, litigation.
These methods are presented for consideration by the State Department of
Highways and Public Transportation for possible future implementation, and will
be discussed in detail in the following sections.
Contract Appeals Board
Each federal agency that contracts its construction projects has the right
to establish its own contract appeals board. Some agencies might not be able
to justify the existence of a full-time board because of a low volume of
construction, so they refer any contract disputes to other agencies' boards for
resolution (6). These boards usually are composed of three appointed judges,
who must comply with some prequalification standards. Most commonly, these
judges must have a minimum of five years experience in public contract law (a).
Most importantly, the members must be in a position of complete impartiality.
The main function of the board is to reduce the number of construction claims
that go to litigation for resolution (6). The Contract Disputes Act of 1978 limits
the effectiveness of the board, as contractors are allowed to bypass the board
and go directly to the Court of Claims for dispute resolution (Z).
14
Procedures for the hearing of the dispute before the board are similar
to those of the court. The judges can administer oaths, subpoena witnesses,
authorize depositions, and so forth (8). The decisions reached by the judges
can be appealed by either party. Findings of fact can be appealed only if the
decisions reached are not supported by sufficient evidence. Conclusions of law
may be appealed as a matter of law. In either case, the appeal usually will be
to the court of claims and eventually to the U.S. Supreme Court if not settled
at a lower level (2).
While the contract appeals board varies widely across the states that use
it, most have been patterned after the Federal Board of Contract Appeals. In
some states, the board is composed of political appointees, and the members
mayor may not have construction experience (Q). In other states, the board
may be made up of members of the contracting agency m). Whatever the
makeup of the board. its functions are much the same across the states. The
board hears the contractor's claim, as well as the defense of the claim by the
members of the agency initially involved in the dispute.
The procedural rules are informal, and often, legal counsel are not
included in the hearings to promote freer communication. The board judges
the claim based on validity, determines if both parties complied with contract
provisions, then determines if the contractor is entitled to relief. If so, the
members decide upon the amount of damages suffered by the contractor. The
board then proposes a settlement to the contractor. In some states, these
findings may not be binding (8).
15
One advantage of this process is speed. If the decision of the board is
not appealed, the entire process requires considerably less time than litigation.
Another advantage of this system is the usually equitable settlement for both
parties em. Because the findings of the board are generally based on well
developed principles of law, this process is not well-suited for cases where a
precedent may be set. This fact, along with the frequency of appeals, are the
main disadvantages of this process (9).
Litigation
Usually, the contractor's last resort for attaining relief is litigation. As a
result, litigation is the most commonly used method of dispute resolution within
the United States. In Texas, the claim must pass through all possible avenues
for resolution within the Department before resorting to litigation. While litigation
varies from state to state, there are sufficient similarities to allow for a
generalized discussion of the process.
The process of litigation begins when the claimant files a complaint,
either with the civil court or the federal court ~). All the parties involved in
construction might be a party in the suit. This includes the owner, contractor,
subcontractors, suppliers, consulting firms, manufacturers and sureties.
Usually, however, the prime contractor files the suit against the owner and
every other party conceivably associated with the dispute. The owner
commonly finds himself in a unique position of being the only party with privity
16
of contract with the contractor. When the claim involves projects designed by
others, the owner's only recourse is to file suit against the designer (S).
After the complaint is filed, the pretrial activities get into full swing. These
activities include investigation and compilation of documents by all parties in the
suit. This period is known as discovery: The pretrial or prehearing procedure
designed to promote full disclosure of all relevant facts related to a contract
dispute (2). During discovery, each party is able to investigate the other's
documents, witnesses, and facts. The time frame for the pretrial activities often
spans up to two years (W.
After the discovery period is complete, the parties commonly find the
issues have been narrowed and that a settlement is possible. Sometimes, the
parties reach an out-of-court settlement because one party sees weaknesses
in his case and wishes to avoid the extra cost of the trial (S).
Barring an out-ot-court settlement, the case eventually will go to trial, with
either a judge or jury as trier-of-tact ~). Commonly, trials in construction cases
begin with opening statements intended to set the stage for the trial and to
show the positions of the parties. The evidence is usually presented in
chronological order. Witnesses are called from both sides to present evidence,
and they are cross-examined in an attempt to discredit their testimony.
Summary statements are made by both sides, and the direction of the case is
left to the trier-of-fact (S). This entire process is strictly structured, and the
possibility of a legal error nullifying the judgment always exists.
17
There are some advantages uniquely associated with litigation. The
process can be the most time-consuming of all forms of dispute resolution,
especially if litigation is the contractor's last chance at relief. This results in a
huge advantage to the defendant, most commonly the contracting agency.
Public entities are often in no hurry to settle a claim, as interest commonly is
not applied to the settlement amounts (2). Also, the legal fees commanded by
the best claims lawyers create a tremendous drain on the claimant's cash
supply, so he may not have the resources needed to fight a long, drawn-out
claim. Litigation, therefore, is commonly referred to as the "defendant's forum"
m). Another benefit of litigation is the period of discovery. This intimate,
mutual knowledge of the opponent's case can lead to settlement negotiations
and often to settlements before the completion of the trial (.1.Q). Finally, once
the trial has begun, it often proceeds without interruption until completion (.1.Q).
As will be discussed later, some alternate forms of dispute resolution do not
share this benefit.
The primary disadvantage to litigation shares common ground with the
advantages. Because the process can be so time-consuming, both parties can
spend tremendous amounts of money on attorneys' fees. Table 1 provides
some examples of the magnitude of the costs associated with settling claims
through litigation (.11). Another disadvantage of litigation is the lasting
adversarial effects that can result. Often, the feelings of mistrust, loss of
respect, and even hatred can be reflected in future projects. The final
disadvantage of litigation is the importance of documentation. The courts
18
Table 1. Costs of Litigation.
Project Claimed Settled Defendant's Project Size Amount Amount Legal Costs Overrun
(Millions) (Millions) (Millions) (Millions) (%)
$ 59 $50 $ 37 $9 178.0
$ 9.0 $5.0 $ 3.5 $ 5.0 194.4
$32.0 $10 Pending $ 4 (Est) * 112.5
* Includes only estimated legal fees.
tend to place more weight on the written word than oral testimony m).
Arbitration
After litigation, arbitration is the second most commonly used method of
dispute resolution. Ten of the state DOTs surveyed by Netherton in 1983 (1g),
supplemented by a SDHPT survey of seven states in 1990 m), use arbitration
at one point or another along the dispute resolution trail. Arbitration has a long
history, and is founded on three principles: informality, the use of experts
familiar with the businesses involved in the dispute, and the experts' awareness
of the ever-changing business environment {.1Q).
Arbitration may be defined as Ha separate method of dispute resolution
that utilizes laymen experienced with the type of business involved instead of
a court of law to decide disputes" (lQ). The experts chosen to settle the
dispute can render a fair and equitable decision quickly. often without the need
for a large amount of discovery. Arbitration. therefore. is often more
19
economical than litigation (0). Generally, the construction contract details the
method for selecting the arbitrating party. There are three methods for
selecting arbitrators; they may be selected directly by the parties concerned,
by the National Panel of Construction Arbitrators as maintained by the
American Arbitration Association (AAA); or each party may select arbitrators,
who in turn choose neutral arbitrator (3). Under the third method, the two initial
arbitrators may resign and allow the third to settle the dispute, while in other
cases the initial arbitrators join the third to form a panel em. As in other methods of dispute resolution, the terms of the contract
dictate the arbitration process. A typical hearing procedure has both parties
presenting their cases to the arbitrators including witnesses, proofs, and other
evidence. All witnesses must submit to questions or other form of examination.
The parties may be contractually allowed to be represented by counsel, if
desired. The arbitrators then decide to grant any remedy to either party
deemed just and equitable within the scope of the construction contract
between the parties. The award must be in writing and must be signed by a
majority of the arbitrators if the panel is used. Each of the parties then receives
a copy of the award (3). The decision of the arbitrators is usually binding by
contract, and an appeal is allowed only in special cases. Some of these
special cases occur if collusion among the arbitrators is found, if the arbitrators
were acting beyond their limits of authority, and if the procedural requirements
as stipulated in the contract are not followed (3).
20
Arbitration has many advantages over other methods of dispute
resolution. First, arbitration resolves claims faster than litigation. Dispute
settlement through litigation can take years because of the crowded court
dockets. The litigation process can also be prolonged by the availability of
appellate courts (la). Also, because the dispute is resolved through the use
of experts in the field of construction, there is no need to educate the jury or
judge about complex engineering issues. Because the process is informal by
nature, there are no legal technicalities involved. No attorneys are involved,
unless the parties agree beforehand m). This flexibility reduces the cost of
resolution, partially by reducing or eliminating legal fees (1a). This reduction
of cost has a pronounced effect on smaller cases, which often can be settled
in only a few sessions of arbitration.
Arbitrators of construction cases tend to hear the first two days of the
case at no charge. After that time, fees must be paid, with typical arbitrators
commanding $250 to $500 per day. Also, in more complex cases, additional
costs that can be incurred include the costs of the hearing room, transcripts,
expert witnesses, and attorneys (la). The total cost for these hearings range
from $1,200 to $2,000 per day. Additionally, the filing fee for the AAA can be
as high as $20,000 (M). Table 2 shows these costs to be substantial for
complex cases (.11).
One final advantage of arbitration is that the process is confidential.
Awards and findings are not a matter of public record, and third parties are not
allowed to attend the sessions unless both parties agree beforehand. This
21
Table 2. Costs of Arbitration for Complex Cases
Project Size Claimed Settled Defendant's Project (Millions) Amount Amount Legal Costs Overrun
(Millions) (Millions) (Millions) (%)
$ 146 $ 50 $ 4.5 $5 106.5
$23 $ 15 $ 12 $4 169.6
$ 32 $15 Pending $ 6 (Est) * 118.8
* Includes only estimated legal fees.
advantage can be lost if the dispute cannot be settled at this level, and the
record included in the next step of litigation ~).
These advantages stated above are, however, somewhat outweighed by
the disadvantages. One of these disadvantages is the intermittent nature of the
arbitration sessions. Typically, these sessions are scheduled in short durations
with long recesses to allow the arbitrators to tend to their own businesses. A
complex claim can require numerous sessions spanning a long period of time
to present and discuss the issues involved, thereby reducing one of the positive
points. of this process (13). A second major disadvantage is that the limited
discovery process can lead to surprises during the proceedings. The lack of
prior knowledge of the other party's case can reduce the effectiveness of the
prepared defenses ~). The avoidance of formality in procedure can also be
a double·edged sword, as the predictability of evidence disclosure is lost. Also,
the predictability of the outcome is lost, as the arbitrators do not necessarily
adhere to principles of law as established by prior cases involving similar
22
circumstances (.1ID. Finally, many of the state DOTs surveyed by Kangun feel
the arbitration process is biased against them. They claim their best interests
are not represented on the list of potential arbitrators (a).
Dispute Review Board
The dispute review board (ORB) is a dispute resolution technique that
has recently gained popularity among contracting agencies across the United
States. This method provides a timely solution to problems, with the focus on
resolving disputes while the facts and events are still fresh on the minds of the
participants and while personnel are still readily available (1Q). This process
has had tremendous success in Washington state, especially in several
tunneling projects for WSDOT, in resolving disputes before they become
formalized claims (lW. The board is typically composed of three members,
one each selected by the parties to the contract, and the third member
selected by the first two. Both the owner and contractor must approve the
other's initial selection. The findings of the board are not binding to either party
~).
The board usually meets several times a year, typically every two or
three months. usually coinciding with major. critical, and claim-prone phases
of the work. These meetings provide the members of the board an intimate
familiarity with the project, along with its peculiarities. personnel, and problems.
Between the meeting times, the board is kept informed of the project progress
and problems through correspondence, and board members are similarly
23
notified when a dispute arises (1Q). As with arbitration, the procedure for
creating the board is contractually mandated. One significant difference exists
in the fact that the contractors' bid documents including take-offs, calculations,
quotes, notes, computer disks, and the like are required to be set up into an
escrow for future use (1Q). Also, the board members must be contractually
compensated. Typical costs of the ORB are one-tenth of a percent of the cost
of the project, and the amount is split between the owner and contractor.
Because of the cost associated with the ORB, its usefulness may be restricted
to large, complex, dispute-prone projects where the cost of the ORB may be
offset by savings to the owner and contractor alike (9).
When a dispute does arise, the contractor typically requests extra
compensation from the owner, who usually denies the charge. At the meeting
of the ORB. correspondence between the contractor and owner is presented
to the board. Figure 5 shows the process followed by the ORB (11). The
meeting itself is informal, and both sides present their interpretation of the facts
and specifications to the ORB. Both the owner and contractor have the
opportunity to rebut the other's cases. The board analyzes the dispute and
makes a recommendation to both parties within a specified time frame, usually
short in duration. The recommendations of the DAB focus on questions of
entitlement rather than on issues of dollar values. The parties then determine
the dollar amounts of the damages based on the documents escrowed as
described above. and the recommendation of the DAB. If the parties cannot
Initiate Other Action
Appeal to ORB
Order from
Owner
Contractor Written Protest
Organize for Hearing
Written Recommend.
Figure 5. Dispute Review Board Flow Chart.
Accept
Accept
Dispute Resolved
Dispute Resolved
24
25
reach an agreement on the dollar value of the settlement, the board may be
cal/ed in to assist in the determination of the settlement (.16).
As with all other dispute resolution alternatives, there are advantages
and disadvantages associated with the ORB. Because the board meets on an
ongoing basis, the facts remain fresh with all the parties. Personnel are readily
available for testimony. Also associated with the ongoing meeting process, the
disputes are settled as they arise. The cumulative effect associated with many
after-the-fact methods of dispute settlement is not present. Incidental costs
have little time to accumulate. This process can help foster a positive
relationship between the owner and contractor, as they work together to solve
common problems. Finally, the board is intimately familiar with the project and
its associated problems and personalities. This familiarity allows the ORB to
render its decisions based on the total project, not just on evidence presented
by the parties during discovery (9).
Some disadvantages exist for the ORBs, most notably the cost. The
owner typically pays for secretarial costs and materials, while the other costs
are split between the owner and contractor. Finally, if the members selected
by the parties have little or no expertise on the type of construction or area,
problems could arise. This situation could lead to the third member being the
predominant member, or at worst, the only effective member of the board (9).
26
Mediation
Mediation, another form of third-party dispute resolution, is defined as
the act of the thi~d person who "interferes" between the two contending parties
with a view to reconcile them or persuade them to adjust or settle their dispute
(.1Q). Mediation shows characteristics of both arbitration and the dispute review
board. Because mediation is a structured negotiation process using a third
party as a dispute resolution facilitator, it is similar to arbitration. The process
is similar to the dispute review board in the fact that the decisions reached
through the mediator are non-binding to both parties. The mediator is usually
an expert in conflict resolution and usually needs to possess some degree of
technical ability. The entire purpose of the mediator is to help the parties
formulate a solution to their problem, and he does impose a decision upon the
parties. Mediation is often a voluntary process and is written into the contract
as a alternative dispute resolution process. The mediator is generally selected
before the onset of the work, and the process is commonly a administered
through an association, such as the American Arbitration Association (a). The
AAA claims a high rate of settlements in projects where mediation is used to
settle disputes (17).
The process begins when one of the parties requests mediation to
resolve a dispute. Both parties agree on a date and then prepare their cases
to present to the mediator. The first mediation session includes both parties
simultaneously with the mediator, when each party presents its case. The
mediator then meets individually with each party. and the discussion
27
concentrates on that party's weaknesses. The opponents case will not be
discussed. The mediator challenges both parties' cases individually, and hope
to condense the dispute, eliminate non-issues, and seek trade~offs. The
mediator continues to meet individually with both parties, narrowing the
differences between them until he can propose a settlement based on
compromise ca). The advantages that mediation presents are similar to the advantages
of the dispute review board. First, because mediation is not an adversarial
process by nature, the dispute usually can be resolved without damaging the
working relationship between the two parties. The process is less time~
consuming than litigation and is also not restricted by formal procedures. The
outcome is generally confidential, and both parties agree to the settlement.
Finally, the process will dispose of at least some minor issues so later
resolution can concentrate on the most important issues (a).
The disadvantages of mediation are also similar those of the arbitration.
First, there is no discovery period to allow each side to prepare a defense
against the other's charges. Because the settlement of the dispute is based
on compromise, it may be advantageous for each side to inflate its initial claim,
hoping the settlement will be in the vicinity of the initial target amount. Also,
both sides may be unwilling to commit the funds necessary to resolve the
dispute. It is advisable for each party to be represented by an individual with
the authority to commit these funds. If this is not possible, mediation still can
28
be used as a fact-finding process, with the determination of liability as the sale
goal ~.
Mediation-Arbitration
Mediation-arbitration is sometimes used as a substitute for strict
arbitration. This process is a system of selecting a person in advance to
resolve conflicts between the owner and contractor. As the name implies, the
mediator-arbitrator must employ the functions and skills of the mediator and
arbitrator. One of the main characteristics carried over from the arbitration side
is the binding nature of the decisions made by the mediator-arbitrator (1Q).
The mediator-arbitrator is selected before construction starts, and the
provisions for the selection process will be defined in the contract. The
selection of the mediator-arbitrator should be done directly by the parties
involved, not via selection of two individual parties who then select the third
(1Q). This selection process guarantees the neutrality of the mediator-arbitrator.
The mediator-arbitrator should be selected based on his expertise in the area
of construction and also on his conflict resolution ability. Most importantly, the
person selected should be free from conflicts of interest. Finally, the person
selected should be someone in whom all parties have the utmost confidence.
The flexibility of this system allows the selection of multiple persons to serve as
mediator-arbitrators, with areas of individual specialization being represented
by corresponding experts (1Q).
29
The first functions of the mediator-arbitrator in the dispute resolution
process are those of a mediator. He meets with all parties involved in the
dispute to investigate the situation for all facts, then assembles the parties
involved for negotiation sessions. For these sessions, the parties may retain
technical experts to provide independent advice concerning the dispute. -rhe
mediator-arbitrator then engages in mediation sessions with the parties, both
separately and together, and attempt to resolve the issues. The mediator
arbitrator may decide some of the issues cannot be settled through mediation,
and those must be resolved through arbitration. The process then takes the
form of traditional arbitration, with hearings being held, and the mediator
arbitrator making the final decisions (1ID.
While many of the benefits of mediation-arbitration are the same as those
for the individual processes of mediation and arbitration, the criticisms of the
process are unique. Some experts argue the combination of mediation and
arbitration hinders the process of mediation. This may be due in part to the
tendency of individuals to be more open and free with a person who is not
perceived as being the source of the final, binding decision. Other critics argue
that there are some circumstances when the mediator-arbitrator does not
deserve the confidence of the conflicting parties, and the process does not
provide for the means to determine if this confidence is warranted. As with
some other third party resolution methods, the presence of the third party can
lead to the bringing of common, everyday disputes to the mediator-arbitrator
for resolution. This can dramatically slow the decision-making process at the
30
project site (:1.Q). One advantage unique to the mediation-arbitration process
is the time-saving potential of the combination of these two processes m).
Mini-Trials
There are two separate dispute resolution techniques that fall under the
classification of mini-trials. One is a witness trial, during which each attorney
summarizes the evidence to be presented during a full-scale trial to a six
person jury or judge, who renders an advisory verdict. This process allows
both parties to see the effect of their evidence on the outcome of a trial, without
the time and expense required to prosecute a full trial. The advisory verdict
allows each party to evaluate the strengths and weaknesses of its case, which,
in turn. allows more meaningful discussions aimed at resolving the dispute.
Often, mutually acceptable solutions to the dispute arise from these discussions
(1.Q).
The second type of mini-trial is one in which the executives of the
conflicting parties sit on a panel, along with a neutral adviser. The panel hears
the attorneys from both sides present the evidence that would be presented
during the trial. The executives then attempt to resolve the dispute by mutual
agreement. It is this type of mini-trial that shows the most promise for use in
resolving construction disputes (1.Q).
The process of a mini-trial is not really a trial, but a series of hearings
followed by negotiation sessions. The duration of the proceedings depends on
the complexity of the dispute, but most hearings are conducted in a span of a
31
few days. The negotiation sessions may require substantially more time, but
ideally, the entire process requires less than 90 days (1Q).
SpeE;!d of resolution is the first significant advantage of mini-trials.
Usually, the entire process of the mini-trial requires substantially less time than
arbitration and litigation. The relatively short process means a savings in legal
fees compared with arbitration and litigation. Another main advantage of mini
trials is that they allow for resolution of the dispute by individuals representing
the parties without involving any of the people responsible for the dispute.
Most mini-trials are conducted according to a written agreement between the
parties that allows them to determine how the proceedings will be conducted.
This flexibility of procedure is another benefit. The final main advantage of mini
trials is the confidentiality of the process (1Q).
Mini-trials do have some disadvantages, some of which are discussed
below. The mini-trial is well-suited only for cases where compromise is a
possibility. Further, most mini-trials do not include periods for the discovery
process. One major disadvantage of the mini-trial is the lack of enforceability.
Some other disadvantages are the testimony of witnesses not under oath, the
possibility for limited cross-examination, and the lack of formal records. Finally,
it may be difficult for the parties to find executives truly not involved in the
dispute (1Q).
32
CHAPTER II
THE CURRENT DISPUTE RESOLUTION SYSTEM IN TEXAS
GENERAL
Currently, the State Department ot Highways and Public Transportation
(SDHPT) utilizes the chain-ot-command system for dispute resolution. Figure
6 presents a condensed organization chart ot the Department, and Figure 7
shows a flow chart detailing the process ot dispute resolution followed by the
Department. Under this system, the contractor and project personnel attempt
to resolve the dispute under the provisions of the contract, then move up the
ladder of the chain-ot-command until the dispute is resolved. While many
variations in titles exist across the state, SDHPT personnel assigned to
construction projects typically include general construction inspectors, project
engineers, project inspectors, project bookkeepers, and project managers. The
complexity of the project, weather conditions, availability ot personnel, and the
contractor's work schedule affect the actual staffing ot each project on any
given day. Armed with the plans, standard specifications, special
specifications, special provisions, and general notes, collectively referred to as
the contract documents, this project team is the State's first line ot defense
against claims.
COMMISSION
ENG-OIR COMMITTEE
I DIST ENGR I
--~
I PROJ ENGR I --]
I INSP
Figure 6. Condensed SDHPT Organization Chart
.. --........ -.-.-~.-.. ---------.-· r ................ ----- -_ ....... L--.,.-....J
· · · · · · · · · · · . It .----. , --_ ..... _ ...... - .......................... --· . · . · . · . · . · . · . · . · . · . · . · . · . · .
· . · . · . · . · . · . · . · . · . , . · . · .
, -... ----... --.~---. .' ~;-~ · · · · · · · · · ·
: ,
~~---- •• --. L---~
, , ,
f .-_ .... __ ... ____ ........ _____ ............ ..
~-.-.-.-------.--------.--.----.-
Abbreviated Legend
P E - Proj Engr
AE - Aaa Engr
AH - Admin H.ar
LIT - Litigation
DCE - D Conal Engr CP - Contr Proy
DE - Dlat Engr CO - Changa Ordar
D-e - Conat Diy CMO - Commlnlon
CC - ClaIm Comm Minute Ordar
------ Communication Dlaputa Flow Flow
YES
YES
YES
YES
YES
YES
NO
Figure 7. Dispute Decision Flow Chart.
34
35
To generalize the functions of the members of the project team, the
general construction inspector is the authorized representative of the Engineer
assigned to supervise and inspect any or all parts of the work and materials to
be used within~. The inspector may complete daily pay reports based on his
measurements, then submit these reports to the project engineer for approval.
While the general construction inspector is usually the first member of the
project team to encounter a dispute, he has no authority to resolve the dispute
outside the scope of the contract documents. The inspector does, however,
have authority to reject materials or suspend work until the dispute can be
settled by the Engineer. The inspector is not authorized to revoke, alter,
enlarge, or release any requirement of the specifications, nor to approve or
accept any portion of the work, nor to issue instructions contrary to the plans
and specifications. The inspector should not act as a foreman or perform other
duties for the contractor nor interfere with the management of the work ~).
Project management is accomplished by the project engineer, project
manager, or the project inspector. For the purposes of this paper, these
positions will be referred to singularly as the project engineer. This person is
deemed to be in "responsible charge" of the project, and one of his most
important tasks is maintaining the project diary. The project engineer mayor
may not be the designated as the "Engineer" under the specifications,
depending partially on his status as a professional engineer. The Engineer has
the authority to require the testing, observation, and inspection of the work to
ensure compliance with the specifications. The Engineer has the authority to
36
decide all questions as to the quality or acceptability of materials furnished and
work performed; the manner of performance and rate of progress of the work;
the interpretations of the plans and specifications; and the acceptable fulfillment
of the contract on the part of the contractor. The Engineer's decisions are
considered to be final, and he has executive authority to enforce and make
effective such decisions and orders as the contractor fails to carry out
promptly. Also, the Engineer acts as a referee in all questions arising under the
terms of the contract between parties thereto ~). Effectively, the on-site chain
of-command has the general construction inspectors reporting to the project
engineer. The project engineer then reports to the resident engineer in charge
of the project.
The contractor's project team also varies project by project. Usually, the
crews of workers are supervised by a foreman, who in turn reports to the
project superintendent. The superintendent is the representative of the
contractor authorized to receive and fulfill instructions from the Engineer, and
he supervises and directs the construction~. Sometimes, several foremen
report to an operational superintendent. This additional tier of the project
hierarchy may be necessary on larger, more complex projects. The project
superintendent sometimes reports to an area superintendent, or he may report
directly to the central headquarters. Additional personnel on the project site
can provide specific support functions, such as a project engineer, who
performs engineering calculations for the project. Additionally, the contractor
may employ the use of office managers, project bookkeepers. and project
37
surveyors to perform support functions. For the purposes of this paper, the
project superintendent is the person who negotiates with the State's project
team, and higher levels of authority may become involved as the dispute moves
up the ladder of the chain-of-command toward final resolution. Collectively,
these personnel are referred to as the Contractor: The individual, firm, or
corporation, or any combination thereof, Party of the Second Part, with which
the contract is made by the State ~).
CHAIN-OF-COMMAND DISPUTE RESOLUTION
Resolution at the Project Level
Dispute settlement at the project level takes the form of verbal, informal
conversations between the contractor and the SDHPT project team. The
contractor often includes the foreman under whose authority the dispute
started, as well as the project superintendent in these meetings. He may also
include his surveyor, representatives of the subcontractors, or other party
directly involved in the dispute. The project team includes the project engineer,
and the general construction inspector may be included to provide detailed
information. During these negotiations, the contractor presents his reasons for
the dispute, often making the statement that he is losing money because of
some action or inaction by the project team. The contractor may cite some
part or parts of the contract documents that he feels justify the dispute. The
project team often counters these disputes by citing their own selected
38
specifications, or presenting a differing interpretation of the contractor's cited
references. Herein lies the basis for most unsettled disputes: the difference in
interpretation of clauses of the contract documents by the SOH PT and the
contracting industry.
Resolution at the Resident Engineer Level
When the dispute cannot be settled at the project level, the project
engineer reports the situation directly to the resident engineer in charge of the
project. The resident engineer is almost always considered to be the
authorized representative of the Engineer-Director, as defined by the 1982
Standard Specifications. Once again, there exists much variance across the
state, but usually, the resident engineer is the person in charge of design,
construction and maintenance for a particular area, commonly a county. There
are more than 125 Resident Engineer offices in the state, with each office
operating somewhat differently. One common thread, however, is the fact that
the contractors attempt to settle disputes with the resident engineer after
negotiations with project personnel have failed to produce an acceptable
solution. The negotiations at the residency level take on somewhat of a
different form than those at the project level. At the project level, the
conversations are usually concentrated on the interpretation of the contract
documents. At the residency level, however, field changes, supplemental
agreements, and/or time extensions may be proposed to settle the dispute.
The project engineer may draft these instruments, and the resident engineer
39
recommends them for approval. Sample forms for field changes, extra work
orders. and supplemental agreements are included in Appendix E.
Resolution at the District Level
If the dispute still cannot be resolved, the next step in the resolution
process is a meeting with the district construction engineer. The contractor is
represented by the project superintendent, subcontractors. and/or foremen.
The project engineer and resident engineer usually attend the meeting. The
two parties present their sides of the dispute to the district construction
engineer, who attempts to resolve the dispute. The tools he may select from
to propose a resolution to the contractor are the same as those used by the
resident engineer - field change, extra work order. supplemental agreement,
time extensions, or any combination of these. The district construction
engineer may consult with the Construction Division in Austin (0·6) for
assistance with the dispute, or he may simply notify them that a possible claim
is in the making. The district construction engineer also notifies the district
engineer of this situation. Rarely does the district engineer actively participate
in the negotiations or the settlement of the dispute, rather. his office manages
the correspondence between Austin and the contractor.
Currently. there are dollar limitations for change order approval
associated with the levels of authority within the department. Starting at the
bottom of the chain·of-command, the project engineer has no express authority
to approve change orders. In practice, however, the project engineer may
40
resolve small disputes at the project level by overrunning some project bid
items, thereby paying the contractor for the extra work as required by the
changed conditions. The project engineer must exercise caution in using this
practice, however, as the final project quantities and all over-budget items are
cfosely scrutinized. The resident engineer can also rely on this practice for the
resolution of some small disputes, with the same care. The resident engineer
must submit the written field change, extra work order, and/or supplemental
agreement to the district for approval. as he lacks the authority to approve
these changes himself. The district can approve changes to the plans not
exceeding $25.000. The district engineer himself may reserve this authority, or
he might delegate this authority to the district construction engineer. Changes
to the plans exceeding the district authority, but less than $50,000. can be
approved by the head of the construction division at the request of the district
engineer. Changes over $50,000, but less than $200.000, can be approved by
one of the deputy directors of the Department. Above $200,000, all changes
require the approval of the deputy Engineer-Director (1.a). Regardless of the
level of authority needed for approval within the district, the district proposes
the resolution to the contractor.
Resolution at the Central Headguarters Level
If the contractor is not satisfied with the proposal, the dispute will most
likely become a claim. If so, the three methods of settlement available to the
41
contractor are the committee hearing, the administrative hearing. and litigation.
Figure 8 shows the percentage breakdown for the resolution of 60 claims from
1982 to 1988. To start the process, the contractor is required to submit a letter
of intent to file a claim to the district, who then notifies the administration, the
construction division, and most importantly, the claims committee. The
contractor is also required to file a petition to the Engineer-Director. After the
claim is filed, all communications are directed to the secretary of the claims
committee. From this point forward, district personnel provide information only,
and the construction division supplies information and expertise. The district
and the construction division collect documents that defend the state against
the claim (m). This process of document compilation may be difficult as claims
are filed an average of 30 months from project letting.
In conjunction with the filing of the claim, the contractor needs to provide
some form of documentation that supports both his position of entitlement and
the damages he incurred. Usually, multiple-part claims are broken down into
individual components. Each of the components may be further itemized to
simplify calculation of the total claimed amount. Whatever the breakdown of
the claim, each component is subjected to the test for validity: both entitlement
and actual damages must be shown (la). The question of entitlement is
determined by a thorough investigation of the events leading up to the claim,
so project documentation is vital. The determination of damages is based on
the records of extra expenses and costs, so original materials invoices, time
sheets, equipment logs, and the like are equally vital. The complexity and
Committee - 50 83%
Litigation - 3
5%
Administrative Hearing - 7
12%
Total of 95% within SDHPT resolution.
Figure 8. Resolution of Claims Against SDHPT, 1982 to 1988.
42
43
magnitude of the contractor's claim submittal often is proportional to the size
of the claim and varies from several pages of documentation to several
hundred (2).
After the claim is received, the Department fully investigates the validity
of the claim. This investigation starts with a full review and analysis of the
documentation provided by the contractor and district alike. The committee
initiates any correspondence necessary to clarify questions of fact. There are
three initial lines of action from which to choose. The Department may elect to
propose a settlement to the contractor immediately if the claim is deemed to
be valid. The Department may feel a hearing before the claims committee is
warranted, and a meeting is scheduled. Finally, the Department may return the
claim to the contractor along with reasons for doing so. Usually, the claim is
scheduled to be heard before the claims committee (lll).
Once a committee hearing has been scheduled and agreed upon, the
contractor and district representatives are notified. These two parties gather
any remaining documents, arrange for key personnel to attend, and meet in
Austin for the committee hearing. The fomat of the hearing is informal, and the
attendance of attorneys is discouraged as the presence of legal counsel often
restricts the free flow of conversation. Both sides of the dispute make opening
statements to begin the hearing, then the contractor ·presents his arguments
to substantiate the claimed values. The contractor often includes calculations,
documents, testimony, and other proof of damages and entitlement in his
presentation. The district then rebutts the claimed points, referring to plans,
44
specifications, and departmental policies as pOints of reference in their defense.
The committee members may ask questions of the contractor and/or district
necessary to clarify facts and gain a thorough understanding of the dispute.
The district and contractor then offer final comments. and the process
continues to the next part of the claim, if necessary.
After the claim is discussed to the satisfaction of the committee. the
chairman asks the district and contractor representatives to leave the room
while each item is discussed internally. The committee addresses each point
of claim and discusses these pOints until at least two of the three members
agree on the proposed settlement. The parties re-enter the room, then the
committee chairman discusses reasons for agreement and/or disagreement
with the points of claim. He also discusses the methodology used for arriving
at the offered amounts. The chairman explains that the findings of the
committee will be sent to the contractor by mail. If the contractor intends to file
for an administrative hearing, he is required to respond within 20 days. The
contractor and district are allowed to respond to the findings of the claims
committee.
Should the contractor be dissatisfied with the resolution as proposed by
the committee. the first step in the appeals process is to file for an
administrative hearing. The Engineer-Director of the Department selects the
hearing officers. Commonly lone of the officers is a high-ranking departmental
employee, such as a district engineer or division head not associated with the
claim. The other member is usually a neutral party selected from outside the
45
Department, and is commonly an attorney familiar with the construction
industry. The Engineer-Director designates one of the members as presiding
officer. The proceedings before the hearing officers closely follow the
procedure as before the claims committee US}.
Should the contractor still not believe he has received the relief he feels
entitled to, his last recourse is to bring suit against the Department (19). A
detailed discussion of the procedures after the claim has left the control of the
Department is not presented here, as it is beyond the scope of the research.
Also, only three out of the 60 claims filed against the State from 1984 to 1990
have gone entirely through the departmental process and into litigation. The
emphasis should be placed on reducing the number of disputes to prevent
them from becoming claims; the number of claims going to court should be
reduced accordingly.
General Observations
The author attended a hearing of a contractor claim before the claims
committee in August of 1990. While the details of the claim are not revealed
to protect the anonymity of the parties, a brief discussion of the author's
observations of the meeting follows.
First, the committee seemed genuinely interested in resolving the claim
fairly. The members attempted to view the contractor's pOints of view with a
high degree of impartiality. They did not seem to feel pressured to pay the
contractor as little as possible, but rather to do what is right and fair. The
46
chairman stated that the committee is responsible to several parties in resolving
the claim. First, it is responsible to the taxpayers of the state of Texas to
defend their interests. He realizes that contractors who go out of business
reduce the competitiveness of the bid process, thereby lowering the value of
the construction dollar. Second, the committee owes responsibility to the
district, to protect its interests and to keep from undermining its authority.
Third, the committee owes responsibility to the contractor, to attempt to
equitably resolve his claim. Finally. the committee owes responsibility to the
second*lowest bidder. The committee could not justify awarding the low bidder
with enough claim dollars to push the total contract price over that bid price
submitted by the second lowest bidder unless careful consideration is given to
the validity of the claimed changed conditions.
Indirect Cost of Dispute Resolution
As the dispute moves through the departmental chain-of*command, a
great deal of time is spent at each level. Consequently. a great deal of money
is also spent. Table 3 shows the calculation of an estimate of the indirect cost
of handling these disputes by the Department. The estimate of time spent from
the project through district levels is based on results of the SDHPT survey. The
responses to the survey were averaged within each level of the Department.
The total number of hours was calculated by multiplying the survey estimate by
the number of projects, residencies, and districts. The estimate of time spent
within the 0·6 Claims Section was determined by averaging the number of
47
Table 3. Yearly Estimate of Indirect Costs for Claims.
Title Hours Pay Total Week Year on Year Year
Proj. Engr. 3,647 189,644 $32,400 $2,954,070 ~taff 5,291 275,132 $2,000 $24,000 $3,174,600 ~es. Engr. 702 36,504 $3,200 $38,400 $673,920 Staff 1,911 99,372 $2,000 $24,000 $1,146,600 Dist Const Engr. 115 5,980 $3,750 $45,000 $129,375 Staff 118 6,136 $2,000 $24,000 $70,800 Dist Engr. 60 3,120 $4,500 $54,000 $81,000 Staff 247 12,844 $2,000 $24,000 $148,200 D-6 Claims Section 161 8,375 $4,000 $48,000 $193,275 Yearly Total 637,107 Yearly Total $8,571,840
Plus 33% for OH $2,828,707
Grand Total $11,400,547
48
hours dedicated to claim resolution over the past four years. This information
was compiled from the records kept within the claims section. Finally, the
average salaries used to calculate the total indirect cost were estimated using
the departmental pay structure.
As the evidence shows, the indirect cost of dispute settlement is
significant. The $11.4 million represents 2.85 percent of the total SDHPT
annual payroll. When combined with the direct cost of claim settlement, the
total cost of claims and disputes to the Department is $12.83 million annually.
The indirect costs, therefore, represent 88.9 percent of the total cost of claims
and disputes to the Department annually. Three-quarters of a percent of the
fiscal year 1990 construction budget was depleted because of these claims and
disputes. In terms of the average project, this money could be used to
construct an additional 6.5 projects annually.
49
CHAPTER III
SURVEY OF SDHPT PERSONNEL
GENERAL
As previously stated. the primary objective of the research effort was to
provide insight into the problem of construction claims against the SDHPT.
One method for accomplishing this goal was to send surveys to SDHPT
personnel. The sample targeted 300 SDHPT personnel. including all of the
district engineers and district construction engineers (24 each), all of the
resident engineers (126 each). and one project engineer from each resident
engineer's office. The targeted group represents a sample skewed toward the
lower levels of authority because the largest number of disputes are handled
at this level. The results should therefore truly indicate the nature of the
problem. Since the district construction engineers handle the upper level
disputes and claims, input from these personnel is valuable. The district
engineers were included in the sample because they handle correspondence
concerning claims and are required to approve major changes in contract
amounts in the form of field changes and supplemental agreements. A sample
survey form is included in Appendix A.
Questions on the survey form could be broken down into several
groups. First. Questions 1 through 4, and Question 16 provided general
50
information only. Questions 5.1 and 5.2 divided the potential problem areas
within the state into four categories: contractor practices, SDHPT practices,
contract documents, and contract administration. Questions 6 through 7, and
Question 13 determined problems with the chain-of-command process followed
by the state for dispute resolution. Questions 8 ascertained the frequency of
contractors who use disputes as sources of extra profits. Question 9 followed
up the previous question, and determined the percentage of contractors who
do so. Questions 10, 11, 14 and 15 provided information necessary for the
determination of the indirect cost of the dispute resolution process. Question
12 determined the most frequently used tool for dispute resolution. Finally,
Questions 17 through 21 determined SDHPT opinions of a specifiC measure
which can be taken to prevent future claims and provided ample space for
written comments.
After the completion of the design of the survey form, copies were sent
to the administration of the Department for review and comments. The form
was reviewed by members of the administration and of the construction division
for content and clairty of the questions. Several comments and corrections
were used in preparing the final survey form. The final form was sent back to
the construction division for distribution through the SDHPT mail system. Each
survey form was accompanied by a cover letter detailing the targeted group
and instructions for completion. Also, an envelope to be used to return the
survey to the researchers was included. Each survey form was to be returned
separately to protect the anonymity of the respondents.
51
STATISTICAL ANALYSIS METHODOLOGY
The methods for analyzing the results of both the SDHPT and contractor
surveys varied depending upon the format of the question. Questions with
"yes" or "no" type of answers were arranged into tables to allow the use of the
chi-square test for equality of multinomials. Only the "yes" answers for each of
these questions were considered. The observed frequency, Oji' therefore
represents the total number of "yes" responses. Figure 9 shows the general
format used for performing the chi-square tests. The research hypothesis for
the analysis of dichotomous questions was as follows:
Ho : The responses to the questions are distributed the same.
Ha: The distributions differ.
Test Statistic :
Where:
c R,. L 0,
/-1
52
Levels of respondents or responses
1 2 3 4 j . c
1
2
3
Questions i 0'1 Ri
.
. r
q N
Test Statistic:
Where : 0ij represents the response to Question "i" by respondent "j" or response alternative "j."
E, _ R~CI
c
R, - 1: 0, 1-1
r
C, - 1: 0, 1-1
R "etR' 2 2 eJe eglon: X CIIIc - X dt'-(r-1, c-1) (a- 0.05)
Figure 9. The Chi-Square Test for Equality of Distributions
53
A 'ctA' 2 2 eje eglon: X CIl1c - X dI-(r-1, c-1) (a- 0.05)
The chi-square test was also used to test for significant difference
among the levels of respondents for all questions where multiple responses
were possible, except for the categorical questions of contractor practices,
state practices, contract documents, contract administration, and resolution
alternatives, The major assumptions satisfied in order to use this test are:
independent, repeated trials, multiple possible responses, and the probability
of these responses was unchanged over the trials, The survey as a whole
could be considered a stratified sample, with district engineers, district
construction engineers, resident engineers, and project engineers representing
individual levels of responses. The research hypothesis for this type of analysis
was as follows:
Ho : The responses to the questions are distributed the same,
Ha : The distributions differ.
Test Statistic :
54
R 'ctR' 2 2 eJe eglon: X calc - X df-(r-1. C-1) (a.- 0.05)
The surveys included five categorical questions representing contractor
practices, SDHPT practices, contract documents, contract administration, and
alternatives for dispute resolution. Each categorical question included from
three to 12 individual factors. The intent of the survey data analysis was to
determine if significant differences existed between the individual factors, as well
as between the levels of respondents. A procedure was needed which could
determine not only if significant differences existed in the variables, but also
locate the individual sources of the differences.
These tests were performed using the CATMOD (CATegorical data
MODeling) procedure on Statistical Analysis System (SAS). This procedure met
the requirements of the analysis as stated above. CATMOD is designed solely
for the analysis of data that can be represented in a chi-square table, Basically,
CATMOD fits a log-linear model to a function of the response frequencies, and
develops an analysis of variance (ANOVA) table. The significance of the
variables in question can be tested directly using this table, as the degrees of
freedom, chi-square statistics, and probabilities for each variable are reported.
The chi-square statistic generated by the CATMOD procedure is calculated
similarly to the conventional chi-square. The main difference lies in calculation
of the expected cell values. The expected cell value is calculated using the Eij
equation as shown in Figure 9 for the normal chi-square. By way of
55
comparison, CATMOD uses an iterative process to generate a maximum
likelihood estimate of each parameter. This estimate of each parameter
maximizes the value of the joint multinomial likelihood function of the response,
thereby locating of the individual sources of differences WZ). These estimates
show how each parameter varies from the overall mean. For the analysis of
the survey data, a negative value indicates the parameter is more critical than
the overall mean. The CATMOD procedure calculates the chi-square statistic
for all but the last parameter within a category. The estimate for the excluded
parameter can be calculated from knowledge that the sum of the estimates
must equal zero. The chi-square and probability statistics, however, cannot be
readily calculated. A detailed account of the statistical testing procedure, and
sample CATMOD input and output are presented in Appendix C.
The research hypothesis for the CATMOD procedure required a two-step
analysis. The null hypothesis tested for equality of three parameters:
respondent, category, and interaction between the two. The research
hypothesis for this initial test was as follows:
Ho : The responses to the questions are distributed the same.
Ha : The distributions differ.
Test Statistic:
56
Where : Ej = Maximum likelihood parameter estimate.
Reject Region: X2 c::ak - X2 oY-(k-1) (a - 0.05)
Where : k = number of estimated parameters.
If the initial hypothesis could be rejected, the secondary analysis
determines the parameters which differed significantly from the overall mean.
The research hypothesis for this test was as follows:
Ho : The parameters are equal.
H. : The parameters are not equal.
Test Statistic :
Where : Ej = Maximum likelihood parameter estimate.
Reject Region :
Finally, the contractor survey contained two similar questions (Questions
6 and 12) which were tested for equality of binomial distributions. The research
hypothesis for this test was as follows:
Ho : The binomial distributions are the same.
57
H. : The binomial distributions differ.
D:1 -~ z - -;:::============ Test Statistic: caJc I
fi (1-fi) + D: (1-iQ n1 ~
Where:
Reject Region: !Zcalc! > Z (a =0.025)
For all tests which were conducted using SAS, the reject regions were
calculated internally, and the probability for each null hypothesis being true was
generated and printed. These values were compared to the alpha level. If the
calculated probability was less than the alpha level, the hypothesis was
rejected: otherwise, it could not be rejected. In other words, if the calculated
probability value is less than 0.05, the responses to the questions differ
significantly. The results of statistical tests other than those performed using
the CATMOD procedure are presented in Appendix D.
58
RESULTS OF THE SDHPT SURVEY
A total of 276 survey forms were completed and returned, representing
a 92 percent response rate. The responses were as follows: 16 district
engineers, 23 district construction engineers, 120 resident engineers, 112
project engineers, and five general construction inspectors. The results from
the individual groups and the combined results are reported in Appendix B.
Although the general construction inspectors were not part of the intended
sample, their responses were included in the combined results portion of
Appendix B. The responses from the general construction inspectors,
however, were not used in statistical analyses for several reasons. First, only
five responses were received from this group, and this sample is not of
sufficient size to be considered representative of the population. Second, the
intended response group did not include this position. Finally, the lack of
authority for the inspectors to settle disputes precluded them from properly
answering some of the survey questions.
Response Rates of the SDHPT Survw
The first step in statistical analysis of the data was to analyze the
response rates for each individual question. These response rates are shown
in parentheses immediately following each of the questions in Appendix B.
Question 2 was the most difficult to answer, as indicated by the low (67.0%)
response rate. One possible explanation for the low response rate is the higher
59
degree of difficulty in ranking from one to ten. Another possible explanation is
due to the additional time required to answer this question. The second most
difficult question was Question 15, which had a response rate of 95.3 percent.
The probable source of difficulty with this question is the need to estimate the
man-hours spent handling disputes: The state currently has no method of
measuring time spent handling disputes in the form of time-charge codes. All
other questions had response rates of over 97 percent, with the usual response
rate of approximately 99 percent. These response rates indicate only minimal
problems with the questions.
Discussion of Results of the SDHPT Survey
According to the combined survey results, the most common value of
disputes is in the $1,001 to 5,000 range, followed by $5,001 to 10,000 range,
and then $10,001 to 20,000. The smallest range, $0 to 1,000 was ranked
fourth by the respondents. The larger ranges ranked in order of increasing
value, occupying the ranks of five to ten, respectively. There was no solid
agreement among the levels of the respondents as to the most common value
of disputes. The upper levels handle the larger disputes. According to the
survey, the district engineers and district construction engineers encounter
disputes in the $5,001 to $20,000 range. The project engineers and resident
engineers encounter disputes in the $1,001 to $5,000 range. This trend
indicates the smaller disputes are handled at the lowest levels. The project
engineers and resident engineers tend to take the larger disputes to their
60
superiors for assistance or settlement. The difference between the responses
proved to be insignificant statistically.
The combined survey responses revealed either a lack of knowledge
about dollar limitations for dispute resolution, or a poorly designed question in
the survey. Only 34.1 percent of the respondents stated they were aware of
such a dollar limitation. Question 4 was designed to be a follow-up to the
previous question. Again, there was no evidence that the question was
answered as designed, or that the SDHPT personnel were aware of their
limitations, as shown by the 46 answers under the "Don't know limit" selection.
Because the responses to these questions seem unreliable, additional analyses
of the data were not warranted, thus none were performed.
The following paragraphs present the findings of the categorical analyses
for contractor practices, SDHPT practices, contract documents, and contract
administration. Appendix C presents a detailed description of the statistical
calculation process and the interpretation of the results. The average ratings
by each level of respondent are presented for each factor in tabular form. Also,
the overall average rating for the category as a whole is presented, along with
overall averages by level of respondent. For comparison purposes, the lower
the average response, the more critical the rating. Under the individual levels
of respondents, and under the "average" column, the most critical problem
areas are identified using heavy lines.
The analysis of the contractor practices category revealed some
significant differences. First, the four levels of respondents answered
61
differently, as shown in Table 4 (Ratings of Contractor Practices). The district
engineers rated the contractors the most severely, followed by the district
construction engineers, the project engineers, and the resident engineers. The
analysis also revealed that poor planning by the contractors was the most
significant problem. All four levels of respondents shared this opinion.
Inadequate investigation before bidding was also considered to be a significant
problem. The levels of respondents disagreed on the severity of this problem,
however, as the district engineers and district construction engineers rated this
factor more severely than did theresident engineers and project engineers.
Finally, the analysis revealed the use of wrong equipment to be significantly
less of a problem than the other categories.
Under the SDHPT practices category. the respondents again provided
significantly differing opinions. The district engineers rated the Department
most severely, followed by the resident engineers and district construction
engineers. The project engineers provided the most lenient rating. Looking
only at the average rankings by each of these groups, the differences seem
insignificant. The rankings for individual factors, however, differ Sufficiently to
result in a statistically significant difference. For example, the district engineers
selected contract requirements as the top problem area, while the district
construction engineers felt changes in plans and specifications presented the
most difficulty. None of the individual factors can be considered to be
significantly different from the others. The average responses are presented
in Table 5 (Ratings of SDHPT Practices).
Table 4.
Var.
CP1
CP2
CP3
CP4
CP5
CP6
CP7
CP8
CP9
CP10
I
62
Average Ratings of Contractor Practices by SDHPT Survey Respondents
Description Avg. DE DCE RE PE
Inadequate 3.05 2.56 2.74 3.08 3.13 investigation
Bidding below cost 3.12 3.06 3.00 3.17 3.12
Wrong equipment 3.78 3.75 3.87 3.88 3.63
Failure to follow 3.45 3.19 3.61 3.55 3.35 procedure
Unbalanced bidding 3.47 3.31 3.30 3.56 3.45
Poor planning 2.90 2.50 2.87 2.92 2.91
Overoptimism 3.52 3.69 3.30 3.60 3.47
Delay by contractor 3.36 2.44 3.00 3.38 3.54
Delay by 3.16 2.88 3.04 3.29 3.12 subcontractor
Delay by supplier 3.81 3.50 3.78 3.80 3.88
I Overall averages I 3.36 3.09 3.27 3.43 3.38
Rating Scale:
1 Critical Problem
2 Severe Problem
3 Major
Problem
4 Minor
Problem
5 No
Problem
Table 5.
I Var.
SP1
SP2
SP3
SP4
SP5
SP6
63
Average Ratings of SDHPT Practices by SDHPT Survey Respondents
Description Avg. DE DCE RE PE II Changes in plans 3.48 3.63 3.43 3.47 3.46 and specifications
Inadequate bid 3.86 3.75 3.87 3.83 3.91 information issued
Contract 3.45 3.31 3.70 3.45 3.41 requirements
Overly restrictive 4.04 3.75 4.04 4.01 3.13 specifications
Delay by SDHPT 3.72 3.75 3.74 3.70 3.76
Inadequate time for 3.88 3.63 3.70 3.81 4.02 bid preparation
Overall averages 3.76 3.67 3.75 3.73 3.79
Rating Scale:
1 Critical Problem
2 Severe Problem
3 Major
Problem
4 Minor
Problem
5 No
Problem
The analysis of the contract documents category yielded more serious
results than the SDHPt practices category. The levels of respondents differed
significantly. As can be seen in Table 6 (Ratings of Contract Documents), the
district engineers, district construction engineers, and resident engineers
selected ambiguities in the plans and speCifications as the major problem area.
64
Table 6. Average Ratings of Contract Documents by SDHPT Survey Respondents
Var. Description Avg.
CD1 Errors in plans 3.23
CO2 Ambiguities in plans 3.22 and specifications
CD3 Omissions in plans 3.28
Overa" averages 3.26
Rating Scale:
1 Critical Problem
2 Severe Problem
3 Major
Problem
DE DCE
2.94 3.13
2.81 3.09
2.88 3.13
3.07 3.12
4 Minor
Problem
RE PE
3.30 3.20
3.21
3.26
3.26
5 No
Problem
3.29
3.37
3.29
The project engineers selected errors in the plans as the most severe problem.
This difference in opinion led to the significant differences between the levels
of respondents. Because the variation between the individual factors is small,
the factors were not determined to be significantly different.
The analysis of the contract administration category revealed significant
differences between the respondents, but not between the individual factors.
The district engineers provided the most severe rating. The district
construction engineers, resident engineers, and project engineers followed in
order. These four levels of respondents were within one-hundreth of a point
from unanimous agreement ofthe most critical problem area. Table 7 (Ratings
Table 7.
Var.
CA1
CA2
CAS
CA4
CAS
CA6
CA7
CAB
CA9
CA10
CA11
65
Average Ratings of Contract Administration by SDHPT Survey Respondents
Description Avg. DE DCE W!W PE
Lack of coordination 3.44 3.19 3.48 3.53 3.41 between contractors
Personality conflicts 3.70 3.31 3.43 3.80 3.73
Requests for time 3.63 2.81 3.70 3.66 3.74 extensions
Delays in processing 3.72 3.44 3.87 3.74 3.73 SDHPT paperwork
Quantity 3.82 3.56 3.74 3.90 3.80 disagreements
Construction 3.78 3.63 3.65 3.81 3.83 acceptance or rejection
Interpretation of 3.40 2.75 3.26 3.54 3.38 plans and specs
Time charges 3.87 3.31 3.65 3.88 4.03
Extra work 3.72 3.25 3.70 3.70 3.83
Delays in providing 3.59 3.56 3.61 3.62 3.60 clear right-of-way
Materials acceptance 3.93 3.31 3.78 3.97 4.04 or rejection
Overall averages 3.75 3.52 3.62 3.75 3.81
Rating Scale:
1 Critical Problem
2 Severe Problem
3 Major
Problem
4 Minor
Problem
5 No
Problem
66
of Contract Administration) shows the district engineers, district construction
engineers, and project engineers felt that interpretation of the plans and
specifications provided the most difficulty. The resident engineers felt that the
lack of coordination between contractors was the most critical problem.
Overall, the category of SDHPT practices is only a minor problem area.
Finally. the four categories of dispute-related factors were compared to
determine the main source of problems. The analysis revealed significant
differences between the levels of respondents and the categories of factors.
As shown in Table 8 (Ratings of All Categories), the district engineers rated the
four categories the most severely. The district engineers, resident engineers,
Table 8.
CP
SP
CD
CA
Average Ratings of All Categories by SDHPT Survey Respondents
Avg. DE DCE RE PE
Contractor 3.36 3.09 3.27 3.43 3.38 practices
SDHPT practices 3.76 3.67 3.75 3.73 3.79
Contract 3.26 3.07 3.12 3.26 3.29 documents
Contract 3.75 3.52 3.62 3.75 3.81 administration
Rating Scale:
1 2 3 4 5 Critical Severe Major Minor No Problem Problem Problem Problem Problem
67
and project engineers followed in order. All four levels of respondents selected
the contract documents as the most critical problem area. This agreement
between the respondents resulted in the significant differences between the
categories of factors.
Question 6 quantified the problem of contractors bypassing levels of
authority to get disputes resolved. The combined results of the survey
indicated a favorable response, as 62.0 percent answered "rarely" or "almost
never." Only 9.0 percent of the respondents answered unfavorably. As could
be expected. the highest three levels of authority felt they were bypassed at a
lower frequency than did the project engineers. This difference was reflected
in the calculation of the Chi-square statistic, which was significant at the 0.05
level. Nearly one-half of the project engineers (48.2<'1&) felt they were bypassed
·sometimes" or more often. The resident engineers also felt they were
bypassed too often, but the fraction of responses in the "almost always" to
"sometimes" range was only 3O.S percent. This points to a trend where
contractors take disputes to the level of authority where they feel immediate
resolution is possible. The results to this question, as well as other multi
answer questions are summarized in Table 9 on the following page.
Table 9 also summarizes the responses to Questions 7.1 through 7.3.
These questions further investigated the problem of bypassing levels of
authority by subdividing the process into several parts. Question 7.1
determined the extent to which superiors contact the office of origination for
Table 9.
Number
6
7.1
7.2
7.3
68
Summary of Average SDHPT Responses to Multiple-Answer Questions
Question Avg. DE DCE RE ~I Contractors bypass 3.72 4.06 4.04 3.87 3.51 levels of authority?
Superior gets input 1.43 1.31 1.22 1.35 1.58 before deciding?
Contractor returned 2.28 1.44 1.83 1.93 2.83 for decision?
Superior decides, 3.13 3.50 3.74 3.53 2.58 then informs you?
Rating Scale:
1 Almost Always
2 Frequently
3 Sometimes
4 Rarely
5 Almost Never
input before making a decision. Most of the responses were favorable, as 86.3
percent answered Hal most always" or 1requently". Only a small number
responded totally unfavorably, as less than five percent answered "rarely" or
-almost never". Even though the project engineers felt they were consulted less
frequently than did the upper levels of authority, ·this difference was not
Significant.
Question 7.2 determined the frequency that superiors send contractors
back to the office of origination for decisions. Most of the answers were
somewhat favorable, as 56.1 percent responded "almost always" or ''frequently.''
69
Only 16.0 percent answered unfavorably. There was a marked difference in
opinion reflected in the responses to this question. The project engineers
responded Significantly lower than the other three levels of authority, with only
37.5 percent of the responses being in the "almost always" to "frequently"
range. By way of comparison, the upper three levels of respondents averaged
68.8 percent in this same range.
Finally, Question 7.3 attempted to ascertain the frequency that the
decision is made at the upper levels of authority, but the office of origination is
informed of the decision. Several respondents commented about this question,
saying it is two questions in one. For this reason, the responses are not clear
and were not considered for analysis.
Question 8 determined the SDH PT's opinion concerning contractors who
use disputes as sources of extra prOfits. The majority of the SDHPT
respondents answered affirmatively (87.7%). The responses to this question
are summarized in Table 10. Question 9 was a follow-up to the prior question
intended to quantify the number of contractors who look for disputes as
sources of extra profits. Calculation of the mean response based on the
midpOints of each category yielded a 20.1 percent average. All four levels of
Table 10. Summary of SDHPT "Yes" Responses to Question 8 (Percent)
Number Question Avg. DE DCE RE PE
8 Contractors seek extra 88.3 93.8 100.0 89.1 84.7 profits using claims?
70
respondents were significantly in agreement in their responses to these
questions.
Questions 10 and 11 determined the number of disputes encountered
at each of the positions sampled and the perceived percentage of disputes
settled at these levels. Once again, the midpoint of each range was used to
calculate the means. From the combined results, the average number of
disputes encountered per week was 3.9, and of these disputes, 3.3 (85.3%) are
settled. All four levels of authority substantially agreed in their responses to
these two questions. As could be expected, the project engineers and resident
engineers tended to encounter more disputes per week (4.4 and 3.9,
respectively) than the district construction engineers and district engineers (3.4
and 2.5, respectively). The percentage of dispute resolution was the lowest for
the project engineers (79.9%), peaked at the residency level (90.3%), then fell
off slightly for the district construction engineers and district engineers. Again,
these differences are not significant at the 0.05 level.
The analysis of the responses to Question 12 was similar to the analysis
performed for the other categorical questions. This analysis revealed significant
differences between the levels of respondents and between the individual
alternatives. Overall, the field change alone and the combination of the field
change and supplemental agreement were selected as the most commonly
used dispute resolution alternatives. The supplemental agreement alone was
the third most frequently used. These three alternatives were determined to be
used significantly more often than the others. Table 11 (Dispute Resolution
71
Table 11. Average Ratings of Dispute Resolution Alternatives by SDHPT Survey Respondents
Var. Description Avg.
AL1 Extra work order 3.02
AL2 Field change 2.43
AL3 Supplemental 2.67 agreement
AL4 Field change and 2.43 supplemental agreement
AL5 Agreement between 3.05 PE and contractor
AL6 Agreement between 2.98 RE and contractor
AL7 Agreement between 3.93 DCE and contractor
ALa Agreement between 4.28 DE and contractor
AL9 Time extension 3.32
Rating Scale:
1 Almost Always
2 3 Frequently Sometimes
DE
2.81
2.06
2.56
2.50
3.44
3.31
3.94
4.19
2.94
DCE
2.78
2.21
2.21
2.13
3.35
2.96
3.87
4.26
2.96
4 Rarely
RE
3.12
2.47
2.70
2.43
3.29
3.16
4.24
4.46
3.33
5 Almost Never
PE
3.02
2.47
2.76
2.51
2.68
2.77
3.71
4.21
3.28
72
Alternatives) shows the most frequently used dispute resolution alternatives as
selected by all four levels of respondents to be either the field change alone.
or the combination of the field change and supplemental agreement. The
analysis also revealed two alternatives which are used significantly less often
than the others. These are the informal agreements between the upper levels
of authority (district engineers, district construction engineers) and contractor.
Question 13 determined the timeliness of receiving answers to dispute
related questions from the upper levels of authority. Nearly all of the responses
were favorable. as 90.6 percent responded either "almost always" or
"frequently.· Only 1.8 percent responded unfavorably. The respondents were
in significant agreement to this question. Table 12 presents the responses to
this question for comparison purposes.
Questions 14 and 15 quantified the number of hours spent per week
handling disputes. The average respondent spends five hours per normal
week handling disputes, and the average staff spends 10.6 hours per week
Table 12. Average SDHPT Responses to Question 12
Number Question Avg.
13 Receive answers in 1.51 a timely fashion?
Rating Scale:
1 Almost Always
2 Frequently
3 Sometimes
DE DeE
1.38 1.43
4 Rarely
RE
1.54
5 Almost Never
PE
1.52
73
handling disputes. The project engineer and his staff spend 12.5 hours per
week handling disputes. The resident engineer and his staff spend 20.1 hours
per week, followed by the district construction engineer (9.7 hours) and the
district engineer (12.8 hours). It is interesting that the district engineers
estimated their staff to spend more time on disputes (10.3 hours) than do the
district construction engineers. The responses for these two questions were
not determined to be significantly different.
Question 16 revealed the SDHPT's familiarity with its own claims
resolution and prevention policy. Of the personnel sampled, 85.1 percent said
they were familiar with this policy. There was no evidence of significant
differences among the responses to this question. One would expect the
upper levels of authority to be intimately familiar with the departmental policy
on claims resolution. The district construction engineers were in agreement
with this theory. In fact, Table 13 shows the district construction engineers
unanimously responded "yes" to the question. The district engineers, however,
responded less favorably than the district construction engineers and the
resident engineers. Only the project engineers responded at a lower rate than
the district engineers.
Questions 17 and 18 ascertained the opinion of the respondents
concerning a specific method to lower the number of disputes and then help
the state defend itself against the disputes which become claims. This method
is to require contractors to submit formal, written, itemized notices of disputes
to district personnel. Of the personnel sampled, 64.9 percent thought this
74
Table 13. Summary of SDHPT ''Yes" Responses to Questions 16, 17, 18, and 20. (Percent)
Number Question Avg. DE DeE RE PE
16 Familiar with SDHPT 85.5 87.5 100.0 93.3 74.8 claims pOlicy?
17 Can written notice 64.9 SO.O 52.2 65.8 67.0 lower claims?
18 Can written notice 75.7 75.0 60.9 93.3 76.8 defend claims?
20 More claims due to SO.4 56.3 56.5 47.9 48.6 Texas economy?
process would reduce the number of disputes, and 75.7 percent felt this
process would help defend the state against those disputes which became
claims. At the upper levels of authority, the opinions expressed were nearly
equally divided. At the lower levels, however, the responses were more
strongly in favor of this requirement, as approximately two-thirds of the project
engineers and resident engineers answered "yes" to the first question. All of
the respondents significantly agreed that requiring the contractors to submit the
written notice would help defend the state against claims. The resident
engineers were the most supportive of this concept, as 93.3 percent were in
favor of it versus only 6.7 percent against it. The district construction engineers
were the least supportive of this idea, as only SO.9 percent answered "yes."
Several district construction engineers commented that this process would only
create additional paperwork. The possibility of increased paperwork probably
75
led to a less favorable response. These responses are summarized in Table
13 on the previous page.
Question 19 allowed the respondents to make written comments. These
comments were compiled and tabulated according to the position of the person
making the comment. The ten most frequently made comments are shown in
Table 14. The most frequently made comment expressed the need for better
plans and specifications, as over 24 percent of the respondents commented in
this fashion. This reinforces the responses to Question 5.2, contract
documents.
Finally, Question 20 determined if the current Texas economy created
a climate more conducive to claims, while Question 21 allowed written
comments to follow-up the prior question. The responses to the initial question
show a nearly equally divided opinion. Of the 272 responses to this question,
137 "yes" and 135 Rno· responses were recorded. At the individual response
levels. the breakdown of responses closely approximate equal splits.
Consequently, no significant difference was detected among the levels of
authority. The two most frequently made comments to Question 21 were
increasing competition for projects and contractors bidding too low. Both of
these comments directly reflect the poor state of the Texas economy, as many
contractors who did not previously engage in highway construction may have
resorted to this type of project to pay bills. This, in turn, leads to an increase
in the number of bidders. The probability of a claim arising from an otherwise
small change in the plans or delay is thereby increased. In contrast, the third
76
Table 14. Ten Most Common SDHPT Comments to Question 19.
TOT DE Comment
67 2 6 26 33 Better plans and specifications.
25 3 3 16 3 Be fair but firm with contractors.
24 1 2 9 12 Better trained, educated, experienced SDHPT project personnel.
21 1 3 12 5 Timely response to problems.
17 3 0 8 6 Better project documentation.
14 2 1 7 4 Better prequalification standards.
13 1 0 7 5 More authority to RE and PE.
13 1 4 5 3 Better project level communication.
10 0 2 5 3 Allow more time for bid preparation.
10 0 1 2 7 Maintain partnership attitude.
77
most common comment is the increase in out-of-state contractors. While this
increase adds to the effect noted above, it does show the economy in Texas
to be better off than in some other states. This apparent contradiction sheds
some light on the nearly equal division of opinions to the previous question.
Table 15 presents the ten most frequently made comments by SDHPT
respondents to Question 21.
78
Table 15. Ten Most Common SDHPT Comments to Question 21
f~T DE DeE RE p==.Jl Comment
25 0 2 15 8 Increasing competition for projects.
20 1 2 5 12 Contractors bidding too low.
19 2 1 9 7 Increase in out-of-state contractors.
18 0 1 4 13 Contractors using claims as extra profits.
17 1 2 8 6 Introduction of claims consultants & lawyers.
15 3 1 8 3 Claims Committee too free with settlements.
14 2 1 7 4 Increasingly litigious society.
14 1 1 4 8 Poor plans and specification quality.
12 0 0 6 6 Unskilled Contractor supervisors.
8 0 0 5 3 Inexperienced SDHPT personnel.
79
CHAPTER IV
SURVEY OF CONTRACTORS
GENERAL
To determine the major problem areas within the state from the
contractors point-of-view, 200 surveys were sent to contractors who do
highway construction for the Department. A sample survey form is included in
Appendix A. The contractors were randomly selected from the prequalified
contractors list issued by the State, then grouped into two categories according
to size. Members of the Associated General Contractors (AGC) Highway
Specifications Task Force and the Joint AGC/SDHPT Committee were included
in the sample.
Questions on the survey form could be divided into several groups.
First, Questions 1 and 2 provided general information only. Questions 3.1 and
3.2 determined the major problem areas within the state. Questions 4 and 5
determined problems with the chain-of-command process followed by the state
for dispute resolution. Questions 6 through 12 targeted the number of
contractors who use disputes as sources of extra profits, as well as to correct
bidding mistakes. Questions 13 14, 16 and 19 determined the contracting
community's opinion of the current system for dispute resolution used by the
state. Question 15 determined the most frequently encountered dispute value.
80
Finally, Questions 17 and 18 determined how the current Texas economy
affects the number of claims, and allowed free form comments from the
respondents.
The SDHPT and the contractor surveys shared 16 common questions,
with five of the questions being multi-part, categorical questions. The remaining
questions in the contractor survey differ only slightly from those in the SDHPT
survey. First, the general information questions were structured to reflect the
organizational differences between the contractors and the SDHPT. Second,
at the request of the AGe Executive Committee, "Utilities not adjusted" was
added to the SDHPT practices portion of Question 3.1, as was "Over-usage of
'As directed by the Engineer'" under the contract administration portion of
Question 3.2. Next, questions regarding the SDHPT chain-ot-command were
altered to determine the contractors' opinions. The questions dealing with extra
profits were expanded to differentiate between claims for extra profits and
claims to minimize losses resulting from bidding errors.
As with the SDHPT survey, the survey was reviewed by members ot the
Department. The survey was also sent to the Executive Committee of the AGe
for their review and approval. The survey was mailed to the contractors with
the cover letter signed by the president of the AGC, hoping to attract more
attention and promote more response. Each form included an individual return
envelope to maintain anonymity.
81
RESULTS OF THE CONTRACTOR SURVEY
A total of 42 surveys were completed and returned, representing a 21
percent response rate. Nineteen large contractors and 23 small contractors
responded to the survey. Of the respondents, 19 company presidents, 14 vice
presidents, one managing partner, one general manager, one division head,
and one secretary completed the survey form. The results of the contractor
survey are presented in Appendix B.
Response Rates of the Contractor Survey
Once again, the first step in analyzing the responses was to examine the
response rates for each individual question. Similar to the SDHPT survey, the
ranking of the dollar value of disputes presented the contractors with the
greatest challenge. Only 72.1 percent of the respondents answered this
question properly. Question 2 shows a misleading response rate of only 67.1
percent. Since the structure of each company differs and some positions may
not exist in some companies, some contractors did not respond for each of the
positions listed. The next lowest response rate was for Question 1. In their
attempt to remain anonymous, the contractors responded to this question at
only a 90.5 percent rate. All of the remaining questions were answered at rates
at or exceeding 95 percent, indicating no problems for the contractors to
answer.
82
Discussion of Results of the Contractor Survey
Question 2 determined the average dollar limitation for dispute settlement
for each of the positions listed. The combined results reveal a limitation of
$892,125 for company presidents, $462,141 for vice-presidents, $74,414 for
project managers, $39,758 for project supervisors, and $58,579 for project
engineers. The means were calculated using the midpoints of each range
Dsted, except for the highest range. For this range, a value of $1,000,000 was
used. Both sizes of contractors were in agreement with dollar limitations for the
president and vice-president. The small contractors, however, tended to place
more severe limits on the lower levels of authority than the large contractors.
These responses were not significantly different.
The analysis of the categorical question regarding contractor practices
was performed using the CATMOD procedure. Appendix C presents the
statistical methods used in more detail. The analysis showed significant
differences between the sizes of contractors, but not between the individual
factors. The small contractors tended to rate the contractor practices category
harsher than the large contractors. The two sizes of contractors singled out
different factors as the major problem areas. As can be seen in Table 16
(Ratings of Contractor Practices), the large contractors rated delay by material
suppliers the most severely. The small contractors, on the other hand, selected
delay by subcontractors as the main problem area. Both sizes of contractors
agreed that the use of wrong equipment for particular construction
requirements presented the least difficulty with regard to claims and disputes.
83
Table 16. Average Ratings of Contractor Practices by Contractor Survey Respondents
~. Description
CP1 Inadequate investigation
CP2 Bidding below cost
CP3 Wrong equipment
CP4 Failure to follow procedure
CP5 Unbalanced bidding
CP6 Poor planning
CP7 Overoptimism
CP8 Delay by contractor
CP9 Delay by subcontractor
CP10 Delay by supplier
Overall averages
Rating Scale:
1 Critical Problem
2 Severe Problem
3 Major
Problem
Avg. Large smaWI
3.68
3.48
4.31
3.88
4.14
3.62
3.59
3.81
3.17
3.40
3.71
4 Minor
Problem
3.79 3.55
3.63 3.45
4.47 4.17
4.11 3.70
4.26 4.04
3.68 3.57
3.56 3.61
3.84 3.78
3.26 3.09
3.21
3.90
5 No
Problem
3.57
3.65
84
The second portion of Question 3.1 had the contractors rate SDHPT
practices. The sizes of contractors answered significantly different, as the large
contractors provided the most severe rating. The analysis also revealed a
significant difference between the individual factors. The contractors agreed
that the lack of prior utility adjustments to be the major problem area. Of all the
categorical questions from both surveys, this factor was rated as the most
critical. The contractors also determined two factors within the SDHPT
practices category, overly restrictive specifications and inadequate time for bid
preparation, to be insignificant problem areas. Table 17 (Ratings of SDHPT
Practices) presents these data on the following page.
The analysis for the contract documents once again revealed a
difference between the sizes of contractors. As can be seen in Table 18
(Ratings of Contract Documents), the contractors agreed that ambiguities in the
plans and specifications present the most difficulty. The severity of the ratings
for the individual factors, however, are vastly different. Apparently, since the
large contractors deal with larger projects and therefore more complex contract
documents, the potential for plan errors is increased. Also, these problems
might take more time to correct if a redesign is necessary. The large
contractors reflected the severity of the problem with the contract documents
in their rating of this category. The difference between the factors was
determined to be insignificant, as the individual ratings show all the factors to
be major problems areas.
85
Table 17. Average Ratings of SDHPT Practices by Contractor Survey Respondents
Var. Description Avg. Large Small
SP1 Changes in plans and 3.29 3.16 3.39 specifications
SP2 Inadequate bid 3.12 3.05 3.17 information issued
SP3 Contract requirements 2.83 2.89 2.78
SP4 Overly restrictive 3.60 3.37 3.78 specifications
SP5 Delay by SOHPT 2.98 2.42 3.45
SP6 Inadequate time for bid 3.64 3.84 3.48 preparation
SP7 Utilities not adjusted 2.37 2.16 2.55
3.12 2.99 .... v.
Table 18. Average Ratings of Contract Documents by Contractor Survey Respondents
Var. Description
CD1 Errors in plans
CO2 Ambiguities in plans and specifications
CD3 Omissions in plans
Overall averages
Rating Scale:
1 Criticaf Problem
2 Severe Problem
3 Major
Problem
Avg. Large Small
2.88
2.57
2.71
2.72
4 Minor
Problem
2.53 3.17
2.26 2.83
2.37 3.00
2.39 ~
5 No
Problem
86
The second portion of Question 3.2 dealt with contract administration.
The contractors again differed significantly in their ratings of this category,
asthe large contractors provided the most critical rating. The difference
between the factors was nearly significant. As shown in Table 19 (Ratings of
Contract Administration). the two sizes of contractors agreed that the
Department tends to abuse the "as directed by the Engineer" clause. The
second most critical factor was determined to be delays in providing a clear
right-of-way. This consistency between this categorical analysis and that
performed for the SDHPT practices category reinforced the contractors'
opinions that the Department needs to afford the contractors the benefit of a
construction zone free of utility adjustments.
As with the SDHPT surveys, the four categories were compared using
the CATMOD procedure. This analysis revealed a significant difference
between the sizes of contractors. The large contractors rated the four
categories of factors more severely than did their smaller counterparts. More
importantly J however. was the solid agreement that the major problem area with
regard to claims and disputes lies within the contract documents. This
category was determined to be significantly different from the others, rating as
a severe problem. The SDHPT practices and contract administration categories
were rated as major problems. The contractors rated the contractor practices
category as a minor problem. The results of this analysis are presented in
Table 20 (Ratings of All Categories).
87
Table 19. Average Ratings of Contract Administration by Contractor Survey Respondents
Var. Description
CA1 Lack of coordination between contractors
CA2 Personality conflicts
CA3 Requests for time extensions
CA4 Delays in processing SDHPT paperwork
CAS Quantity disagreements
CA6 Construction acceptance or rejection
CA7 Interpretation of plans and specifications
CAS Time charges
CA9 Extra work
CA10 Delays in providing clear right-of-way
CA11 Materials acceptance or rejection
CA12 Over-usage of "As directed by the Engineer"
I I Overall averages
Rating Scale:
1 Critical Problem
2 Severe Problem
3 Major
Problem
I
Avg. Large Small
3.64
3.43
3.44
3.33
3.62
3.68
3.05
3.50
3.48
2.86
3.52
2.45
3.33
4 Minor
Problem
3.89 3.43
3.32 3.52
3.21 3.64
3.47 3.22
3.58 3.65
3.39 3.91
2.74 3.30
3.32 3.65
3.32 3.61
2.47 3.17
3.53 3.52
2.37 2.52
3.22
5 No
Problem
3.43
88
Table 20. Average Ratings of All Categories by Contractor Survey Respondents
Description
CP Contractor practices
SP SOH PT practices
CD Contract documents
CA Contract ad
Rating Scale:
1 Critical Problem
2 Severe Problem
3 Major
Problem
Avg. Large
3.71
3.12
2.72
3.33
4 Minor
Problem
3.90
2.99 3.24
2.39 3.00
3.22
5 No
Problem
3.43
Question 4 determined the need to bypass levels of authority to receive
answers in a timely fashion. The SDHPT rated poorly, as only 13.1 percent
answered favorably and 33.3 percent answered unfavorably. Over one·half of
the respondents (53.6%) answered "sometimes." Upon investigating the survey
form as presented in Appendix B, one might observe the responses to this
question as being fractional. One of the survey forms was returned with both
"sometimes" and Rrarely" circled. To account for the indecisiveness of the
respondent, both of the answers were given equal representation. Once again,
the small and large contractors were in significant agreement to this question.
The responses to this question are summarized in Table 21 on the following
page.
89
Table 21. Average Contractor Responses to Multiple-Answer Questions
Number Question Average
4 Necessary to bypass 2.75 levels of authority?
5 Receive answers in a 3.14 timely fashion?
Rating Scale:
1 Almost Always
2 Frequently
3 Sometimes
Large
4 Rarely
2.71
3.42
Small
2.78
2.91
5 Almost Never
The SDHPT fared somewhat better in Question 5 than in the previous
question. A total of 31.0 percent thought the Department answered questions
in a timely fashion when disputes could not be resolved at the project level.
Although the difference between the sizes of contractors was insignificant,
Table 21 shows the large contractors rated the Department's timeliness in
answering questions more critically than did the small contractors. Once again,
the relative complexity of projects constructed by the two sizes of contractors
leads to this difference, as the larger projects may require more time to
respond to questions.
When asked if some contractors look for disputes as potential sources
of extra profits in Question 6, 76.2 percent of the contractors answered "yes."
90
Table 22 shows the large contractors to be the most critical in this self-
appraisal. Continuing the self-rating in the following question, the respondents
estimated the fraction of contractors who use disputes as extra profits to be
12.6 percent. Somewhat contradictory to the responses to the previous
question, the small contractors estimated the percentage to be nearly twice as
high as the large contractors (16.9% and 8.5%, respectively). The differences
between the responses were not significant for either question.
The next three questions addressed the impact of contractors who file
many claims against the state. Question 8 determined if these contractors hurt
the image of the contracting community as a whole. Of the combined
responses, 78.6 percent agreed that the composite image is damaged bythese
claims-oriented contractors. The small contractors were again more critical
Table 22. Summary of Contractor "Yes" Responses to Dichotomous Questions (percent)
I Number I Question I Average Large Small
6 Contractors seek extra 76.2 84.2 69.6 profits using claims?
8 Do contractors who file 78.6 68.4 87.0 many claims hurt image?
9 Do contractors who file 54.8 52.6 56.5 many claims hurt competitive bidding?
11 Contractors seek to recover 56.1 47.4 60.9 losses using claims?
91
than the large contractors in this rating. The responses were more equally
divided when asked if these contractors damage the process of competitive
bidding, as only 54.8 percent answered "yes." Table 22 also summarizes the
responses to questions 8 and 9. Finally, Question 1Q allowed the contractors
to describe how the claims-oriented members of their community damage the
process of competitive bidding. The five most frequently made comments are
presented on the following page in Table 23.
Questions 11 and 12 presented the contractors with additional
opportunities to rate themselves. The first question determined the number of
contractors who bid on projects below their "normal" bid with the predetermined
intention to file claims to recover their losses. This process would allow a
dishonest contractor to be awarded projects at the expense of the honest
contractor. Table 22 shows the small contractors felt this practice to be more
predominant than did the large contractors. Question 12 then provided a
quantitative measure of the fraction of contractors using this practice. Using
the class midpoints, 10.2 percent of the contractors doing highway construction
use this devious tactic. The small contractors were again more critical than the
large contractors concerning this practice. Neither difference was determined
to be significant, however.
The difference between the responses to Questions 6 and 11 was tested
for significance using a binomial comparison test. These two questions satisfy
the three requirements for using this test: independent, repeated trials,
dichotomous responses, and the probability of responding "yes" was
92
Table 23. Five Most Common Contractor Comments to Question 10.
TOTAL LARGE SMALL Comment
7 1 6 Contractors turn in low bids with preconceived idea to file claims to recover losses.
4 2 2 Contractors who file claims get work at the exclusion of other traditional contractors.
4 1 3 Claims oriented contractors cause SDHPT to treat all contractors alike.
4 2 2 Contractors bidding to claim are not bidding same work as others.
2 2 0 Contractors who claim often are subject to more scrutiny from SDHPT than others.
93
unchanged over the trials. Using the combined responses to the survey, the
value of Z calculated equals 1.977. This is greater than the Z tabulated value
of 1.96 for a two-tailed test at a confidence level of 0.05. The results of this test
indicate that there is a significant difference between the responses to these
questions, as the proportion of ''yes" responses to Question 6 was significantly
higher than the proportion of "yes" responses to Question 11. The contractors
believed that there are more contractors who seek disputes as extra profits
than to recover losses.
The combined responses to the follow-up questions (Questions 7 and
12) were tested for difference using the chi-square test for equality of
multinomials. Only the first four possible answers were compared, as the last
six contained zero frequencies. The resulting chi-square was 0.672. The chi
square value for a 4x2 table and a confidence level of 0.05 is 7.815. The
difference between the responses to these questions is therefore insignificant.
Question 13 determined the number of disputes encountered per
average week. All of the respondents felt from one to ten disputes per week
could be expected, with an average of 3.1 disputes per week. Both sizes of
contractors responded similarly. When these disputes are presented to the
state for resolution, the contractors felt that only 32.8 percent were at least
partially paid by the state (Question 14). When the state does agree to pay the
contractor for at least part of the dispute, the contractors estimated the fraction
of the disputed value actually paid to be one-half (Question 16). The large
contractors felt the state paid out on 37.1 percent of the disputes, while their
94
smaller counterparts estimated this percentage to be 29.1 percent. Once
again, the difference between these responses was not significant.
When asked to rank the approximate dollar value of disputes from one
to ten, the contractors ranked the smallest disputes first. The most common
dispute value according to the contractors was in the $1,001 to $5,000 range,
followed by the smallest range listed ($0 to $1,000). The dispute values then
decreased in popularity in ascending order, with the largest disputes being the
least common. Since the small contractors tend to construct small projects,
the most common disputes encountered would intuitively be the smallest. The
surveys confirmed this theory, as the small contractors ranked the $0 to $1,000
range first, with the remaining dispute values ranked in order of increasing
value. The large contractors selected the $1,001 to $5,000 range first, followed
by the $5,001 to $10,000 range. The first and fourth ranges tied in third place.
The remaining dispute values ranked in order of increasing value. The
differences reported in the small and large contractors responses were not
significant.
Question 16 asked the contractors to estimate the percentage of the
value of disputes the State pays for disputes. The combined results estimated
this fraction to be one-half. The small contractors estimated this percentage
to be over one-half (57.6%), while the large contractors estimated this
percentage to be lower than the overall average (46.1%). This difference could
be due to the trend for small contractors to encounter smaller disputes. Also,
95
the State may decline to contest these disputes with the same tenacity of the
larger disputes. Once more, the difference was not significant.
The contractors were asked if the current State economy affected the
number of claims against the Department. Twenty-six contractors (61.9%)
answered affirmatively. The small and large contractors' responses were both
close to this overall mean. The responses to this question are summarized
below in Table 24. The next question allowed the contractors to suggest other
reasons for the increase in the number of claims filed against the state. These
responses summarized in Table 25 on the following page. Two of these
comments confirm the impact of the State economy on the claims problem.
First, the increased competition for projects shows a direct reflection of the
current economy: there are not enough non-highway projects within the State
to keep the contractors busy. The lack of other projects leads contractors to
the Highway Department looking for work. This process is also reflected in the
second most common comment, as the increased competition for work drives
the prices down in order to be awarded the work. The contractors therefore
must neglect the normal contingency markup. Any changes in the scope of
Table 24. Summary of Contractor ''Yes'' Responses to Question 17 (percent)
Number Question Average Large Small
17 More claims due to Texas 63.4 61.1 65.2 economy?
96
Table 25. Seven Most Common Contractor Comments to Question 18
TOTAL LARGE SMALL Comment
8 6 2 More errors, ommissions, and ambiguities in plans and specifications.
6 3 3 Projects being bid so low, there is no room for error. Contractors likely to claim.
4 3 1 Lack of knowledgable and experienced SDHPT project personnel.
2 2 0 Projects becoming more complex.
2 2 0 Unreasonably strict inspectors.
2 2 0 Contractors feel they can file claims without reprisal from the SDHPT.
2 1 1 More competition for projects.
97
work without proper compensation is a potential claim.
Finally, the contractors rated the frequency of dispute resolution
alternatives. The CATMOD analysis revealed significant differences between
the sizes of contractors and the individual alternatives. The contractors felt that
the field change was the most commonly used dispute resolution alternative.
This alternative was determined to be used significantly more often than the
others. The analysis also revealed two alternatives, the informal agreements
with the district engineer and the district construction engineer, are used
significantly less often than the others. The average responses to this question
are presented on the following page in Table 26 (Dispute Resolution
Alternatives).
DIFFERENCES BETWEEN SDHPT AND CONTRACTOR SURVEYS
The SDHPT and contractor surveys shared several questions. The
analyses of the differences were accomplished using the same testing
procedures as for the individual surveys.
The *yes" or "no" type of questions were grouped into tables to allow the
use of the chi-square test for equality of multinomials. This test revealed no
significant differences. When asked if contractors look for disputes as extra
profitS, the SDHPT respondents rated the contractors more critically than did
the contractors themselves. The difference was not significant, however. This
agreement between the Department and the contractors for the variable EX 1
98
Table 26. Average Ratings of Dispute Resolution Alternatives by Contractor Survey Respondents
Var. Description
AL1 Extra work order
AL2 Field change
AL3 Supplemental agreement
AL4 Field change and supplemental agreement
AL5 Agreement between PE and contractor
AL6 Agreement between RE and contractor
AL7 Agreement between DeE and contractor
ALB Agreement between DE and contractor
AL9 Time extensions
Rating Scale:
1 Almost Always
2 Frequently
3 Sometimes
Avg.
2.76
2.46
2.68
2.68
3.29
3.15
4.10
4.32
2.88
4 Rarely
Large Small
2.89
2.68
2.74
2.84
3.16
2.79
4.05
4.11
2.84
5 Almost Never
2.64
2.27
2.62
2.52
3.41
3.45
4.14
4.50
2.91
99
shows there are indeed contractors who look for disputes as extra profits. The
contractors deemed the current Texas economy to be more of a factor
affecting claims than did the State. This difference was not significant at the
0.05 level of confidence. however.
A total of four multiple-answer questions fit the requirements for
comparison using the chi-square test for equality of multinomials. The results
of these tests are presented below in Table 27. The variable EX2 represents
thefollow up to the contractors looking for extra profits through disputes. There
was a significant agreement between the two surveys regarding this question.
The variable WEEK represents the number of weekly disputes encountered at
the project site. Again. the State and contractors were in substantial agreement
to this question. For the variable BY1. however, the contractors and State did
not agree. This variable represents the need to bypass levels of authority to
get disputes resolved. The contractors believed this practice is necessary more
frequently than did the departmental respondents. As can be seen in Table 27.
Table 27. Results of Comparison of Surveys Using Chi-Square
Variable Degrees of Chi-Square Probability > Freedom Value Chi-Square
EX2 9 9.826 0.365
WEEK 5 2.183 0.823
BY1 4 48.135 0.000
TIMELY 4 98.519 0.000
100
this disagreement is highly significant, with a chi-square value of 48.1. For the
variable TIMELY, the State and contractors did not agree. This question
addresses the timeliness of SDHPT responses to questions regarding disputes.
Because time to a contractor represents money. their definition of timeliness
may differ from that of the SDHPT. It is no surprise, therefore, that the
contractors rated the timeliness of SDHPT decisions more poorly than did the
departmental respondents.
The categorical questions were analyzed for differences using the
CATMOD procedure as before. Under the contractor practices category,
significant differences were located between the survey respondents. It is not
surprising that the SDHPT respondents rated the contractors the most severely.
It is also not surprising that the different survey respondents selected different
factors as the major sources of claims and disputes. As shown in Table 28
(Ratings of Contractor Practices). the SDHPT respondents selected poor
planning by the contractor as the main problem area. The contractors, on the
other hand, selected delay by subcontractor.
The SDHPT practices category was similarly compared. The SDHPT
respondents rated this category Significantly less severely than did the
contractors. These two groups a/so selected different factors as the major
problem areas. The SDHPT survey indicated overly restrictive specifications as
the main source of problems: the contractors indicated the main problem area
to be contract requirements. Table 29 (Ratings of SDHPT Practices) shows the
average responses to this category. Note that the "utilities not adjusted" factor
101
Table 28. Average Ratings of Contractor Practices by SDHPT and Contractor Survey Respondents
Var. Description
CP1 Inadequate investigation
CP2 Bidding below cost
CP3 Wrong equipment
CP4 Failure to follow procedure
CPS Unbalanced bidding
CPS Poor planning
CP7 Overoptimism
CP8 Delay by contractor
CP9 Delay by subcontractor
CP10 Delay by supplier
Overall averages
Rating Scale:
1 Critical Problem
2 Severe Problem
3 Major
Problem
SDHPT
3.05
3.12
3.78
3.45
3.47
2.90
3.52
3.36
3.16
3.81
3.36
4 Minor
Problem
CONTR
3.68
3.48
4.31
3.88
4.14
3.62
3.59
3.81
3.17
3.40
3.71
5 No
Problem
102
Table 29. Average Ratings of SOHPT Practices by SOHPT and Contractor Survey Respondents
Var. Description
SP1 Changes in plans and specifications
SP2 Inadequate bid information issued
SP3 Contract requirements
SP4 Overly restrictive specifications
SP5 Delay by SDHPT
SP6 Inadequate time for bid preparation
Overall averages
Rating Scale:
1 Critical Problem
2 Severe Problem
3 Major
Problem
SDHPT
3.48
3.86
3.45
3.04
3.72
3.88
3.76
4 Minor
Problem
CONTR
3.29
3.12
2.83
3.60
2.98
3.64
3.25
5 No
Problem
has been excluded from the analysis in order to keep factors consistent.
Although the contractors and departmental employees agreed that the
contract documents are the major problem area, the magnitude of the rating
of this category differed significantly. As can be seen in Table 30 (Ratings of
Contract Documents), the contractors rated this category approximately one·
half point lower than the SDHPT respondents. Both survey groups determined
103
Table 30. Average Ratings of Contract Documents by SDHPT and Contractor Survey Respondents
Var. Description SDHPT CONTR
CD1 Errors in plans 3.23 2.88
CO2 Ambiguities in plans and 3.22 2.57 specifications
CD3 Omissions in plans 3.28 2.71
3.26 2.72
Rating Scale:
1 2 3 4 5 Critical Severe Major Minor No Problem Problem Problem Problem Problem
the problem of ambiguities in the plans and specifications to be the most
critical. The contractors rated this factor nearly three-fourths of a point lower
than did the SDHPT respondents, however.
Under the contract administration category, the contractors again
provided the most critical rating. The results of this comparison are presented
in Table 31 (Ratings of Contract Administration) on the following page. The
difference between the survey groups proved to be significant. "rhe difference
between the individual factors was also significant. Each of the survey groups
selected different factors as being the most critical. The SDHPT survey
indicated the interpretation of the plans and specifications to be the most critical
problem area, while the contractors selected delays in providing a clear right-of-
104
Table 31. Average Ratings of Contract Administration by SDHPT and Contractor Survey Respondents
Var. Description
CA1 Lack of coordination between contractors
CA2 Personality conflicts
CA3 Requests for time extensions
CA4 Delays in processing SDHPT paperwork
CA5 Quantity disagreements
CA6 Construction acceptance or rejection
CA7 Interpretation of plans and specifications
CAB Time charges
CA9 Extra work
CA10 Delays in providing clear right·of-way
CA11 Materials acceptance or rejection
Overall averages
Rating Scale:
1 Critical Problem
2 Severe Problem
3 Major
Problem
SDHPT
3.44
3.70
3.63
3.72
3.82
3.78
3.40
3.87
3.72
3.59
3.93
3.75
4 Minor
Problem
CONTR
3.64
3.43
3.44
3.33
3.62
3.68
3.05
3.50
3.48
2.82
3.52
3.41
5 No
Problem
105
way. As with the SDHPT practices category, the additional factor included in
the contractor survey was not considered in this analysis.
The four categorical questions from both surveys were compared to
determine if the responses differed significantly. The responses differed
significantly, as the contractors provided the most critical rating for three of the
four categories. The contractor practices category was the lone exception to
this statement, as the SDHPT respondents provided a more critical rating than
did the contractors. Table 32 (Ratings of All Categories) shows the agreement
between the contractors and SDHPT respondents that the contract documents
provide the most critical problems with regard to claims and disputes.
Finally, the SDHPT and contractor responses to the dispute resolution
alternatives category were compared to locate any differences. The survey
Table 32. Average Ratings of All Categories by SDHPT and Contractor Survey Respondents
~ Description
CP Contractor practices
SP SDHPT practices
CD Contract documents
CA Contract administration
Rating Scale:
1 Critical Problem
2 Severe Problem
3 Major
Problem
I SDHPT
3.36
3.76
3.26
3.75
4 Minor
Problem
CONTR
3.71
3.25
2.72
3.41
5 No
Problem
106
groups differed significantly, as did the individual alternatives. The contractors
and SDHPT respondents did agree that the field change is the most common
dispute resolution alternative. The respondents also agreed that the informal
agreement between the district engineer and the contractor was used most
seldom. Table 33 (Dispute Resolution Alternatives) presents the ratings of the
alternatives on the following page.
107
Table 33. Average Ratings of Dispute Resolution Alternatives by SDHPT and Contractor Survey Respondents
Var. Description
AL1 Extra work order
AL2 Field change
AL3 Supplemental agreement
AL4 Field change and supplemental agreement
AL5 Agreement between PE and contractor
AL6 Agreement between RE and contractor
AL7 Agreement between DCE and contractor
ALB Agreement between DE and contractor
AL9 Time extension
Rating Scale:
1 Almost Always
2 Frequently
3 Sometimes
SDHPT
3.02
2.43
2.67
2.43
3.05
2.98
3.93
4.28
3.23
4 Rarely
CONTR
2.76
2.46
2.68
2.68
3.29
3.15
4.10
4.32
2.88
5 Almost Never
108
CHAPTER V
SUMMARY AND CONCLUSIONS
SUMMARY
In order to gain insight into the Department's current claims problem, the
research effort followed a three-stage plan. First, a literature search provided
information on the claims problem as a whole. The surveys of SDHPT
personnel and highway contractors focused the remaining research on the
problem in Texas. Finally, interviews with SDHPT personnel and highway
contractors supplemented the findings of the surveys.
The Department cannot realistically expect to eliminate claims
completely. Claims are, unfortunately, an unwanted by-product of the
competitive bid process (21). The Department can expect to reduce both the
number of claims and the monetary loss due to these claims by committing to
an overall improvement in the quality of the contract documents. This
improvement must be comprehensive in nature, including the reduction of plan
errors, ambiguities, and omissions. The Department must strive to provide
timely answers to field questions to reduce the potential for delay claims. The
State must consider the financial impact of extra work on the contractor. Also,
the interpretation of the contract documents must become more uniform across
the State to afford the contractor the benefit of predictability. The State must
109
make every effort to provide the contractor a construction zone free of utilities
needing adjustment. There are several options available to complement the
current system for dispute resolution. Of these, the dispute review board
seems to hold the most promise for future implementation. Along with the pre
construction conferences, the State should consider the implementation of pre
bid conferences to clarify design conflicts before the contractors submit bids.
Finally. the State must implement some sort of disputes monitoring system to
provide an accurate measurement of the number of disputes and the reasons
therefore. This system would provide the State a quantitative measure of future
improvements.
Since contracting is not one-sided, the actions required to make
improvements to the system should not be one-sided. Contractors can take
several steps to reduce the number of claims and the financial impact of these
claims. First, contractors should take the time to investigate each project
thoroughly before bidding. If any errors are located, the prospective bidder
should notify the Department and ask for clarification, rather than interpreting
the intent of the plans himself. The estimating team should then exercise more
care in preparing the bid. The contractor should adequately plan and schedule
the work. Contractors should schedule each project with the intent to pursue
the rapid completion of all of the work. Too many projects are started in a
hurry, only to have completion of the project delayed by the contractor himself.
Contractors should also exercise caution in selecting subcontractors and
materials suppliers. as delays by these entities are major sources of problems.
110
The practice of using the "bid low and file claims to recover losses" approach
to acquire projects must be eliminated.
Once construction begins, the contractor should keep the State's project
inspection team informed of upcoming activities. Only through this
communication can the Department ensure adequate project staffing. Also, the
contractor should inform the project team of any problems encountered, and
require proper compensation for all work performed. In the past, contractors
were willing to perform some work without pay in order to maintain good
working relationships with the Department. In some cases. the Department has
grown accustomed to this practice, thereby failing to realize the need for
payment even for minor changes.
When a dispute arises. contractors should follow established SDHPT
procedures in seeking resolution, paying particular attention to the chain-of
command system. Contractors who bypass steps in the ladder of dispute
resolution destroy the integrity of the system itself. This process has a
compounding effect, as an inspector or engineer who is often bypassed to
have a decision reversed will soon cease to to make any decision at all.
Finally, when it is necessary to file a claim, the amount claimed should reflect
actual damages only. The questionable practice of inflating the claim with hope
that the settlement covers actual damages further complicates the problem.
111
CONCLUSIONS
Since the research was done for the State Department of Highways and
Public Transportation, by researchers employed by the Department, the
following conclusions concentrate on actions which can be taken by the
Department in order to mitigate the claims problem.
The Need for Improved Contract Documents
The research produced several major findings. First, there is
overwhelming evidence of the need for improved contract documents. The
respondents to both the contractor and SDHPT surveys were in agreement with
this weakness, as both surveys indicated the category of contract documents
to be significantly more of a problem than the other categories. Apparently,
there is much room for improvement, as indicated by Figure 10. This graphic
indicates the proportion of plans needing some type of revision to be
approximately 40 percent. The percentage is not exact, as the number of plans
produced in each district is not constant.
Also, a study of 18 claims filed against the Department from 1984 to
1989 confirms the problem of bad plans, as design problems were cited as
reasons for claims in one-third of the projects. As shown in Figure 11, design
errors represent 22 percent of the reasons for the claims. The total number of
reasons shown equals 32, as many of the projects cited more than one reason
for the claim. This study revealed two other major categories of reasons for
"
1-1-1······ .... · .... ········ .. ··········· .. ·••• .. ····•·········· .................................................................................................................................... ..
rn c: f March 1989 to March 1990 0 'en .s; Q)
50 a: '0 e ... c 0 0 Q) C)
S c Q)
~ Q) n.
District
Figure 1 O. Construction Contract Revisions ..... ..... I\)
113
Delays by SDHPT - 7
Other - 6
19%
22%
Design Errors - 7 22%
Additional Work - 6 19%
Barricades - 2 6%
Materials - 2 6%
Const. Methods - 2 6%
Total of 18 claims
Figure 11. Reasons for Claims Against SDHPT, 1984 to 1989.
114
claims: delays and extra work. These two factors account for 22 and 19
percent of the cited reasons, respectively. Of these three major contributors
to the claims problem, the delays and design categories are by far the most
costly. Table 34 below presents the average claimed and paid values for the
categories. It is important to note that the average values are presented for
relative comparison of these factors only. Because multiple reasons were cited
for several projects, it is entirely possible that the claimed and paid values for
any particular project can be represented in more than one of the averages.
Despite this fact, the average paid value shows the significance of design
problems, delays, and additional work, as these three reasons account for 89
percent of direct settlement costs.
Table 34. Average Claimed and Paid Values for Claims
Reason Cited Average Average Percent Claimed Paid Value Value Value Paid
Inadequate design $4,978,323 $1,811,469 37.16
Delays by SDHPT $4,288,546 $1,565,431 32.11
Additional work $1,676,024 $970,181 19.90
Materials $983,391 $343,186 7.04
Const. methods $167,366 $1,500 0.03
Barricades $34,210 $27,266 0.56
Other $515,140 $155,661 3.19
115
The problem of bad contract documents can be divided into three
categories: errors, omissions, and ambiguities. While the concept of plan
errors is a simple one, a plan error can take one of several forms. First, a
mathematical or drafting error can result in the misrepresentation of material
quantities. If the item is not paid according to plan quantity, the error can be
corrected in the field by paying for the in-place quantity. This practice can lead
to extreme over or under payment, however, if unit price for the item in
question is unbalanced. Underpayment resulting from this practice can lead
to a claim. If the item is paid according to plan quantity, a field change and
supplemental agreement may be necessary. Next, an error in the design of the
project can result. Depending on the complexity of the error, this problem can
be solved using the field change and supplemental agreement. The real
danger here is the timeliness of the correction. The contractor can file and win
a delay claim if the redesign is not handled in a timely fashion. Some
omissions in the plans can be relatively simple to correct, while others are more
serious and require more effort to correct. Cases when the plans are drawn
correctly but the pay quantity is not reported can be corrected using the
combination of the field change and the supplemental agreement. When an
entire portion of the detailed design is omitted, however, a complete redesign
may be warranted. This process can require considerable time and effort from
the design team, and can result in major delay to the project schedule. Once
again, the potential for the contractor to file a successful delay claim is present.
116
Ambiguities represent a large source of the problems with the contract
documents. Any ambiguity in the contract documents is a potential claim.
When a bidder encounters such a conflict in the plans, the bidder may attempt
to interpret the intent of the plans. In order to protect himself against a
erroneous Interpretation. he must mark up his bid to provide for contingencies.
In today's economical climate, where the competition for most construction
projects is stiff, the contractor who marks up his bid to allow for contingencies
cannot expect to be the lowest bidder. The ambiguity may be discovered after
construction begins. In this case, the project personnel must attempt to
interpret the intent of the plans. If the decision is not timely by the contractor's
definition, a delay claim is in the making.
From the State's point-of-view, the resolution of disputes resulting from
plan errors is compounded by the lack of certainty if the contractor had
knowledge of the problem prior to bidding. It is possible that contractors
discover these problems before bidding and attempt to take advantage of the
situation, often by unbalancing their bids. The State can be in the position of
paying the contractor more than he deserves if the unit price and in-place
quantities are paid in full. While the standard speCifications include provisions
to handle major increases or decreases in the quantity of the work through
price adjustments, the contractor can still profit Immensely from prior
knowledge of errors.
Also contributing to the problem of plan errors is the confusion which
can be created through the use of speCial items, special specifications, and
117
general notes. Subsidiary pay items can also lead to contractor confusion
when bidding, especially such an item had previously been a direct pay item.
The effect of this problem is compounded when the lack of work forces a local
contractor to cross over into a new district or residency. In doing so, he can
encounter an entirely different method of conducting business from that which
he has grown accustomed to. This compounding effect can be even more
dramatic if competition for work forces contractors from out of state to enter
the Texas highway construction market.
The Need to Provide Timely Decisions During Construction
Table 35 shows the second most costly reason for claims against the
Department to be State-caused delays. Any delay caused by subcontractors,
materials suppliers, owner, or contractor can create a significant impact on the
construction schedule. One source of delay by the State arises from the time
required to process paperwork such as field changes, extra work orders, and
supplemental agreements. The respondents to the contractor survey ranked
this factor fourth within the contract administration category. Another source
of State-caused delay comes from the time required to make decisions. The
contractors responding to the survey indicated the decisions reached by the
State are "sometimes" to "rarely" timely. The Department should strive to afford
the contractor the quickest, most accurate decision possible. If this is not
possible due to the complexity of the decision, the time charges against the
project should be suspended, and be resumed following receipt of the decision.
118
Any failure to complete the project according to schedule would therefore be
caused by delays by parties other than the Department. This strategy would
reduce the financial impact of the delay if the contractor is assessed liquidated
damages. The contractor thereby could not file a successful and justifiable
claim for the return of liquidated damages.
The Need to Consider Financial Impact of Additional Work
Often during construction, the need for additional work arises. In the
past, contractors have been willing to work with the State by performing the
work for little or no compensation. Their losses could be justified by the
favorable working relationship developed through this courtesy. Often when
the State pays for additional work, the total compensation is calculated by
multiplying the unit price for a similar item by the quantity of work. Problems
arise when the bid price was developed assuming conditions consistent with
the work as shown in the plans, but the additional work does not meet these
conditions. For example, the bid for asphaltic concrete pavement was based
on the use of a spreading and finishing machine travelling straight down the
roadway, and the additional work involves hand-work for intersections or
driveways not shown on the plans. The bid price does not include the costs
of additional manpower, nor does it consider the effect of the slower production
rates involved in the hand-work. Additionally, the contractor incurs cost on a
da.ily basis which are not considered. These costs include overhead, bonds,
insurance, and the impact of delay on the project schedule. In situations such
119
as this, the Department must be sensitive to the impact of the additional work
on the contractor as a whole, and should initiate a field change, supplemental
agreement, or extra work order for compensation.
The Need for Consistent Interpretation of Plans and Specifications
The interpretation of plans and specifications is inconsistent among
districts, residencies. and project personnel. There are three separate factors
contributing to this inconsistency. Discussion of the ''ten percent" engineers
and inspectors, the natural variation among engineers and inspectors, and
clauses contained within the specifications follow.
While the Department has recognized the need to eliminate the so-called
"ten percent" engineers and inspectors, contractors claim a few of these
personnel remain in claim-sensitive positions. By definition, the "ten-percent"
engineer or inspector is one whose reputation with contractors leads to the
raising of the bid by a predetermined percentage to account for this person
being assigned to a project.
The natural variation between engineers and inspectors plays more of
a role in the inconsistencies than does the "ten-percent" employee. It seems
logical that decisions made by different personnel based on identical facts will
not be identical. This type of inconsistency cannot be eliminated without
stripping the freedom of free thinking from the decision-makers. It may be
reduced, however, by continuing to provide training for some of the lesser
experienced project personnel.
120
The specifications also provide the means for some inconsistencies.
Phrases like "as directed by the Engineer", "in the opinion of the Engineer", and
"unless approved by the Engineer" are necessary to provide the freedom for
project personnel to make decisions to fit field conditions. In the words of one
contractor, " ... in the hands of some individuals, this can be very deadly
ammunition." Project personnel must strive to make well-analyzed, common
sense decisions when faced with this situation.
The Need for Pre-Bid Conferences for Complex Projects
Several SDHPT survey respondents indicated the use of pre-bid
conferences could help reduce the confusion created by design ambiguities or
conflicting special provisions. Currently, when a contractor is interested in
bidding a job, he must visit the office of the engineer in charge of the project
to view the plans. If the contractor is still interested, he may "ride the job" with
the resident engineer. The purpose of this informal meeting is to clarify
questions concerning the job. The resident engineer must be careful to answer
similar questions of different contractors similarly. Major problems could arise
should the resident engineer fail to do so, or if he should be unavailable to
answer questions. The possibility of the successful bidder being the only
contractor privy to some information exists. A pre-bid conference with all
interested parties in attendance could avoid some of these problems. The
major drawback to this process would be getting contractors to openly discuss
plans for prosecuting the work in front of their competitors. This problem might
121
be avoided if the sole intent of the conference is to clarify questions concerning
the contract documents.
The Need to Provide Utility-Free Construction Zones
Contractors encountering utilities which have not been adjusted prior to
the onset of construction is a major source of claims. As detailed in Chapter
4, "utilities not adjusted" was included in the contractor surveys under the
SDHPT practices category. -rhe analysis of the factors under this category did
not include this factor to retain consistency between the contractor and SDHPT
surveys. By looking at the data as presented in Appendix B, however, it is
evident that this factor would have been determined to be a significant problem
area. Because the contractors rated this factor more critically than the "delay
by SDHPT" factor which was determined to be significantly different from the
rest, it seems logical that -utilities not adjusted" would also have been
significant. The Department seems to be in agreement with the contractors, as
a total of 25 respondents made similar comments.
The Need for Early. Third Party Dispute Resolution
Several alternatives to the current method used by the Department for
dispute resolution were investigated. Of these alternatives, the dispute review
board seems to hold the most promise for future implementation. The states
using the dispute review board have rated this process as a complete success.
As of November 1990, over $4.1 billion in construction has been completed
122
using the dispute review board as the means for disposing of disputes. Not
one of these projects have had disputes go to litigation as the means for
settlement (11). The cost of the ORB limits the economical use of this process
to farge, complex, dispute-prone projects.
The Need for a Quantitative Dispute Measurement System
The Department currently has no method for counting the number of
disputes encountered annually. An effective measurement system would need
to include time-charge codes for time spent managing disputes. This would
allow personnel from all levels to accurately account for time spent handling
disputes. Also, time-charge codes are needed to account for time spent
collecting documentation needed to defend the State against claims. Finally,
the measurement system would require the modification of field construction
forms including field changes, supplemental agreements, extra work orders,
and time extensions. These forms currently provide space for written
descripitions of the problem encountered. The modification would simplify the
process of data compilation, and allow the data to be entered into a database
for analysis purposes. The compilation of this data would provide an accurate
measurement of the number of disputes and the reasons for the problems.
This information would then provide the means for determining if improvements
are being made over time. One additional benefit of this addition to the
construction forms is that the process of approving these change orders could
123
be accelerated. Personnel approving the changes would be reminded by the
form itself that a timely decision is imperative in order to avoid claims.
The significance of the indirect cost of dispute settlement as previously
calculated reinforces the need for a measurement system, as the direct cost of
claims settlement accounts for only one-tenth of the total cost. The total would
be higher still if the cost of all of the field changes, supplemental agreements,
and extra work orders that were initiated as a result of disputes could be
determined. The measurement system is needed to determine the magnitude
of the claims problem accurately. Only through the use of a quantitative
measurement system can the impact of future efforts be determined.
RECOMMENDATIONS
The research effort a total of nine areas for improvement which may
warrant further investigation of possible future implementation by the
Department. Also, four areas needing additional research are presented.
These recommendations are listed below.
Recommendations for Implementation
1. Improve quality of plans and specifications.
2. Provide timely answers to field problems.
3. Attempt to provide consistent interpretation of plans and specifications.
4. Consider financial impact of additional work on contractor.
124
5. rmplement pre-bid conferences.
6. Provide construction zones free of utility adjustments.
7. Implement early, third party dispute resolution process.
B. Modify standard SDHPT construction forms and add time-charge code
for dispute and claim settlement.
9. Continue SDHPT training program.
Recommendations for Additional Research
1. Re-evaluate the current competitive-bid process. Investigate the potential
for design-build contract system for complex projects.
2. Investigate the potential for contractor-determined contract time, using
a combination of low-bid and shortest contract duration as basis for
contract award. If State-determined contract time is necessary,
investigate the potential for contractor·determined sequence of work and
traffic control plan.
3. Investigate the potential for implementing total quality management for
Mure project development.
125
REFERENCES
1. Spanning the State. State Department of Highways and Public Transportation, 1990.
2. Highway Contract Claims Avoiding / Handling. U.S. Department of Transportation, August 1988.
3. H. Hauf. Building Contracts for Design and Construction. John Wiley & Sons, New York, 1976.
4. Standard Specifications for Construction of Highways, Streets and Bridges. Texas State Department of Highways and Public Transportation, September 1982.
5. J. Butler, H. Casner, and N. Lovejoy. Techniques for Understanding, Controlling and Minimizing Construction Claims. State Department of Highways and Public Transportation, not published.
6. R. Rubin, S. Guy, A. Maevis, and V. Fairweather. Construction Claims Analysis, Presentation, Defense. Van Nostrand Reinhold Company, New York, 1983.
7. J. Cibinic, Jr. and R. Nash, Jr .. Administration of Government Contracts, George Washington UniverSity. 1981.
8. G. Smith and D. Hancher. An investigation of Calims and Disputes Settlement by Arbitration for Highway Construction. Report No. FHWA/INfJHRP-86/8, Purdue University, September 1986.
9. L. Kangun. Dispute Resolution Forums. Texas State Department of Highways and Public Transportation, not published.
10. M. Callahan, B. Bramble and P. Lurie. Arbitration of Construction Disputes. John Wiley & Sons, New York, 1990.
11. J. Rozelle. Personal Interview. October, 1990.
12. Transportation Research Board. Construction Contract Claims: Causes and Methods of Settlement. Report No. NCHRP Synthesis 105, November 1983.
13. J. Allen. Arbitration Vs. Litigation: The Pros and Cons. Kellogg Corporation News, June 1990, pp. 4-6.
126
14. H. Hohns. Preventing and Solving Construction Contract Disputes. Van Nostrand Reinhold Company, New York. 1979.
15. E. Shanley. A Better Way. Civil Engineering. American Society of Civil Engineers, Vol. 59, No. 12, December 1989, pp. 58-SO.
1S. J. Coffee. Dispute Review Boards in Washington State. The Arbitration Journal, Vol. 43, No.4, December 1988, pp. 58-61.
17. R. lathlaen. Alternative Dispute Resolution. Constructor, December 1988. pg. 77.
18. B. Lay. Personal Interviews, June 1990 - November 1990.
19. Contested Case Procedure. Texas State Department of Highways and Public Transpotration, adopted from Texas Civil Statutes article 6252-13a, ammended June 1988.
20. SAS/STAT Guide for Personal Computers. Version 6 Edition. SAS Institute Inc., Cary North Carolina, 1987.
21. J. Nicholson. Rethinking the Competitive Bid. Civil Engineering. American Society of Civil Engineers, Vol. 61, No.1, January 1991, pp. 66-68.
127
APPENDIX A
SURVEY FORMS
TEXAS STATE DEPARTMENT OF IDGHWAYS AND PUBLIC TRANSPORTATION
CONIRACI CLAIMS AND DISPUTES SURVEY
1) What is your position with the Highway Department?
District Engineer
District Construction Engineer
Resident Engineer
Project Engineer/Manager
2) Please rank the approximate dollar value of disputes, with 1 being most common and
10 being least common.
SO to 1,000
$ 10,001 to 20,000
S 100,001 to 200,000
S 1,000,001 and up.
S 1,001 to 5,000 $ 5,001 to 10,000
$ 20,001 to 50,000 $ 50,001 to 100,000
$ 200,001 to 500,000 _ S 500,001 to 1,000,000
3) Is there a cenain dollar value limitation associated with your position to settle
disputes? _ Yes _ No
4) If the answer to Question (3) was 'Yes' please indicate the present dollar value
limitation placed on your ability to settle disputes.
$ 0 to 1,000 S 1,001 to 5,000 $ 5,001 to 10,000
S 10,001 to 20,000 $ 20,001 to 50,000 S 50,001 to 100,000
$ 100,001 to 200,000
$ 1,000,001 and up.
$ 200,001 to 500,000 _ $ 500,001 to 1,000,000
Don't know limit.
128
5.1) Using the following scale, please rate the severity of each of the factors as they relate
to disputes by placing an 'X' in the appropriate column.
1 2 3 4 Critical Severe Major Minor Problem Problem Problem Problem
Contractor practices 1 2
Inadequate investigation before bidding.
Bidding below cost.
Use of wrong equipment.
Failure to follow authorized procedures.
Unbalanced bidding.
Poor planning.
Overoptimism.
Delay by contractor.
Delay by subcontractor.
Delay by materials supplier.
Other. (Please specify below)
SDHPT Practices 1 2
Changes in plans and specifications.
Inadequate bid information issued.
Contract requirements (DBE, EEO, Wage rales, etc).
Overly restrictive specifications.
Delays caused by SDHPT.
Inadequate time allowed for bid preparation.
Other. (Please specify below)
5 No
Problem
3 4
3 4
5
I
C
5
129
5.2) Using the following scale, please rate the severity of each of the factors as they relate
to disputes by placing an 'X' in the appropriate column.
1 2 3 4 Critical Severe Major Minor Problem Problem Problem Problem
Contract Documents 1 2
Errors in plans.
Ambiguities in plans and specifications.
Ommissions in plans.
Other. (Please specify below)
Contract Administration 1 2
Lack of coordination between contractors.
Personality conflicts.
Requests for time extensions.
Delays in processing SDHPT paperwork.
Quantity disagreements.
Construction acceptance or rejection.
Interpretation of plans and specifications.
Time charges.
Extra work.
Delays in providing clear right of way.
Materials acceptance or rejection.
Other. (Please specify below)
5 No
Problem
3 4
3 4
5
5
t=L
'30
6) How often do contractors bypass your level of authority and approach your superiors
with disputes?
1 2 3 4 5 Almost Frequently Sometimes Rarely Almost ~ys tJever
7) If a contractor does bypass your level of authority for disputes;
7.1) How often does your superior contact you for input before making the
decision?
1 Almost Always
2 Frequently
3 Sometimes
4 Rarely
5 Almost Never
7.2) How often does your superior send the contractor back to you for a decision?
1 Almost Always
2 Frequently
3 Sometimes
4 Rarely
5 Almost tJever
7.3) How often does your superior make the decision, but informs you of the
result?
1 Almost Always
2 Frequently
3 Sometimes
4 Rarely
5 Almost Never
8) Do you feel that there are some contractors who look for disputes as opportunities
to make extra profits on projects? _ Yes _ No
9) If the answer to Question (8) was 'Yes', what percentage of contractors do you
estimate do so?
1-10% _ 11-20%
51-60% 61~70%
21-30% _ 3140% _ 41-50%
71·80% _ 81·90% _ 91~100%
132
13) If a dispute cannot be settled at your level, how often do you receive answers from
your superiors in a timely fashion?
123 Almost Frequently Sometimes Always
4 Rarely
5 Almost Never
14) Please indicate the number of hours you spend handling disputes during the normal
forty hour week.
1 to 5
21 to 25
6 to 10
26 to 30
11 to 15
31 to 3S
16 to 20
36 to 40
IS) Please estimate the number of man-hours your staff spends handling disputes during
the normal forty hour week. (Please include only your directly supervised staff. Do
not include yourself in this estimate.)
1 to 5 6 to 10
21 to 25
41 to 45
61 to 65
26 to 30
46 to 50
66 to 70
80 + (Please show estimate).
11 to 15
31 to 35
51 to 55
71 to 75
16 to 20
36 to 40
56 to 60
76 to 80
16) Are you familiar with the SDHPT claims resolution and prevention policy?
Yes _ No
17) Do you feel that requiring contractors to submit formal, written, itemized notices of
disputes to District personnel can help lower the number of disputes?
_ Yes _ No
133
18) Do you feel that requiring contractors to submit formal, written. itemized notices of
disputes to the District can help defend the State against disputes which become
claims?
_ Yes _ No
19) What additional measures can the State take to reduce the number of disputes which
become claims?
20) Do you feel Contractors are filing more claims than before due to the current
condition of the State ecomomy ?
Yes No
21) If the answer to Question (20) was 'No', please list other causes for Contractors to
file more claims than before.
TIiANK YOU FOR YOUR TIME AND EFFORT.
TEXAS STATE DEPARTMENT OF HIGHWAYS AND PUBLIC TRANSPORTATION
CONTRACTORS CLAIMS AND DISPUTES SURVEY
134
Note: This survey should be completed only by personnel with authority to settle claims with the Texas State Department of Highways and Public Transportation.
1) What is your position in the company?
2) Using the following scale, please indicate the limitations for dispute approval for
each of the positions listed by writing the appropriate letter in the blank column.
A - S 0 to 1,000 B - $ 1,001 to 5,000
E· $ 20,001 to 50,000
c· $ 5,001 to 10,000
F - $ 50,001 to 100,000 D - $ 10,001 to 20,000
G - S 100,001 to 200,000
J. $ 1,000,001 and up.
H - $ 200,001 to 500,000 I - $ 500,001 to 1,000,000
Position Title Umiation Code
President
Vice-President
Project Manager
Project Supervisor
Project Engineer
Other. (Please specify below)
135
3.1) Using the following scale, please rate the severity of each of the factors as they relate
to disputes by placing an 'X' in the appropriate column.
1 2 3 4 5 Critical Severe Major Minor No Problem Problem Problem Problem Problem
Contractor practices 1 2 3 4 5 T. ..:I, lAte' . . hefnre hinning
Biddinll be10w cost.
,r!:e nf wrnna . Failure to fonow au·1. • ~d DTOcedures. ,T .. t. ." ..:I I.' ..:I..:I!
Poor .1
O\i .
Delav hv Contractor.
Delav bv lctor. I
Delav bv •• SUDDlier. II
Oth!!r. (P'!!a~!! snecifv helow)
SDHPT Practices 1 2 3 4 5
136
3.2) Using the following scale, please rate the severity of each of the factors as they relate
to disputes by placing an 'X' in the appropriate column.
1 2 3 4 5 Critical Severe Major Minor No Problem Problem Problem Problem Problem
Contract Documents 1 2 3 4 S Prrnn: in nhtnc: A •• . ~ •• in nlam; and sneclc
Om .... : .... innc: in n'~nc:
Other. (Please :L. below)
Contract Administration 1 2 3 4 S
TJidc of ..... 1.. .... , ....... (" , .... +"' ....
on ~litv ~onflicts
'R for time
Delavs in inuSDHE'I ,- .1.
Ouantitv diS21rrt'!t'!m",ntc;
n or reiection. T. inn nf ohmc; and ,r.
Time .L
Extra work.
Dela~ in orovidinp clear rilZht of way.
Materialc: a, Ice or rei"'rtinn
Over-usal'1:e of "At; directed bv the Enl'1:int'!er"
Other. (Please sneclfv helow)
137
4) How often do you feel it is ~ecessary to bypass a level of authority within the
Highway Depanment to receive answers to construction problems in a timely
fashion?
1 Almost Always
2 Frequently
3 Sometimes
4 Rarely
5 Almost Never
5) If a dispute cannot be settled at the project level. how often do you receive answers
from the Highway Department in a timely fashion?
1 2 3 4 5 Almost Frequently Sometimes Rarely Almost Always Never
6) Do you feel that there are some Contractors who look for disputes as opportUnities
to make extra profits on projects?
Yes No
7) If the answer to Question (7) was 'Yes', what percentage of Contractors do you
estimate do so?
1-10%
51-60%
11-20%
61-70%
21·30%
71·80%
_31-40%
_81-90%
_41-50%
_ 91·1()()%
8) Do you feel that the Contractors who file numerous claims against the State hurt the
image of Contractors as a whole?
_ Yes _ No
138
9) Do you feel these Contractors hurt the process of competitive bidding?
_ Yes No
10) If the answer to Question (9) was 'Yes', please briefly describe how this practice
hurts bidding.
11) Do you feel there are Contractors who intentionally bid low to be awarded a project,
then file claims to recover their losses?
_ Yes _ No
12) If the answer to Question (11) was 'Yes', what percentage of Contractors do you
estimate do so?
1·10% _11·20%
_ 51·60% _ 61·70%
21·30% _ 3140% _ 41·50%
71-80% _ 81·90% _ 91·100%
13) Please indicate the number of disputes your firm encounters per average week.
It05 6tol0 lito 15 16 to 20
_ 21 to 25 _ 26 to 30 _ 31 to 35 _ 36 to 40
139
14) What percentage of disputes do you estimate result in the State paying the
Contractor at least part of the dispute value?
1·10% _ 11·20%
51·60% _ 61·70%
21-30% _ 31-40% _ 41·50%
71-80% _ 81-90% _ 91·100%
IS} Please rank the approximate dollar value of disputes that you encounter, with a rank
of 1 being most common and 10 being least common.
$ 0 to 1,000
$ 10,001 to 20,000
$ 100,001 to 200,000
S 1,000,001 and up.
$ 1,001 to 5,000
$ 20,001 to 50,000
S 5,001 to 10,000
$ 50,001 to 100,000
$ 200,001 to 500,000 _ S 500,001 to 1,000,000
16) When the State agrees to pay the Contractor as a result of a dispute, what
percentage of the value of the disputes do you estimate the State pays?
1·10% _ 11-20%
51-60% _ 61·70%
21-30% _ 31-40% _ 41·50%
71·80% _ 81-90% _ 91·100%
17) Do you feel some Contractors are filing more claims than before due to the current
condition of the State ecomomy ? _ Yes _ No
140
18) If the answer to Question (17) was 'No', please list other causes for Contractors to
file more claims tban before.
19) Using the following scale, please rate the most common alternatives in resolving
disputes by placing an 'X' in the appropriate column.
1 2 3 4 5 Almost Frequently Sometimes Rarely Almost Always Never
Alternatives Involved in Resolving Disputes 1 2 3 4 5
Extra Work Order.
Fil"lr1 ("h:.lnofl!
(' ·_-'--... ·nat A
Fip.lr1 C'h:.lnl7p. :.Inri -,
~ntal A tt
Verbal Agreement between Inspector and Contractor.
Verbal Agreement between Resident Engineer and Contractor.
Verbal Agreement between District Construction Engineer and Contractor.
Verbal Agreement between District Engineer and Contractor.
Time ~.
Othl"1" (Pll"::lc:e c:nl".dfv helow)
11IANK YOU FOR YOUR TIME AND EFFORT.
APPENDIX B
SURVEY RESULTS
TEXAS STATE DEPARTMENT OF WGHWAYS AND PUBLIC TRANSPORTATION
CONTBACf CLAIMS AND DISPUTES SURVEy
COMBINED RESULTS (Numbers in parentheses indicate response rate) [Numbers in brackets indicate calculated values]
1) What is your position with the Higbway Department? (100%)
~ District Engineer
..2l. District Construction Engineer
m Resident Engineer
ll.2... Project Engineer/Manager
....s... General Construction Inspector
141
2) Please rank the approximate dollar value of disputes, with 1 being most common and
10 being least common. (67.0%)
_4_ S 0 to 1,000 ....l- S 1,001 to 5,000 --1.. S 5,001 to 10,000
--L $ 10,001 to 20,000 -L S 20,001 to 50,000 -L $ 50,001 to 100,000
....:L S 100,001 to 200,000 -B- S 200,001 to 500,000 -L S 500,001 to 1,000,000
-1!L S 1,000,001 and up.
3) Is tbere a cenain dollar value limitation associated witb your position to settle
disputes? (96.''1»
-2!. Yes (34.1%)..llJ. No (62.''1» ..L No Answer (3.3%)
4) If the answer to Question (3) was 'Yes' please indicate the present dollar value
limitation placed on your ability to settle disputes.
-2L S 0 to 1,000 -B- S 1,001 to 5,000 -L $ 5,001 to 10,000
-1!L S 10,001 to 20,000 ...ll- S 20,001 to 50,000 -L S 50,001 to 100,000
....L S 100,001 to 200,000 .JL S 200,001 to 500,000 -L S 500,001 to 1,000,000
--'L $ 1,000,001 and up. ~ Don't know limit. ...l1l.. No Answer
142
5.1) Using the following scale, please rate the severity of each of the factors as they relate
to disputes by placing an 'X' in the appropriate column.
1 2 3 4 S Critical Severe Major Minor No Problem Problem Problem Problem Problem
(99.4%)
Contractor practices NA 1 2 3 4 S Inadequate investigation before bidding. 0 23 40 121 8S 7
Bidding below cost. 3 21 S2 87 89 24
Use of wrong equipment. 0 3 16 63 152 42
Failure to follow authorized procedures. 3 10 24 82 137 20
Unbalanced bidding. 2 12 31 79 112 40
Poor planning. 0 23 S3 132 6S 3
Overoptimism. 3 7 26 78 131 31
Delay by contractor. 1 8 38 96 110 23
Delay by subcontractor. 3 14 56 86 96 21
Delay by materials supplier. 1 4 14 51 163 43
Other. (Please specify below)
(99.4%)
SDHPT Practices NA 1 2 3 4 5
Changes in plans and specifications. 1 11 20 86 138 20
Inadequate bid information issued. 3 9 12 48 132 72
Contract requirements (DBE,EEO,Wages) 1 16 28 83 110 38
Overly restrictive specifications. 2 3 11 38 133 89
Delays caused by SDHPT. 1 9 21 54 140 51
Inadequate time allowed for bid prep. 2 11 20 43 110 90
Other. (Please specify below)
143
5.2) Using the following scale, please rate the severity of each of the factors as they relate
to disputes by placing an 'X' in the appropriate column.
1 2 3 4 5 Critical Severe Major Minor No Problem Problem Problem Problem Problem
(99.5%)
Contract Documents NA 1 2 3 4 5
Errors in plans. 1 13 47 82 126 7
Ambiguities in plans and specifications. 2 17 44 82 117 14
Ommissions in plans. 1 12 37 100 112 14
Other. (Please specify below)
(98.4%)
Contract Administration NA 1 2 3 4 5
Lack of coordination between contractors. 4 8 26 85 131 22
Personality conflicts. 4 4 20 60 144 44
Requests for time extensions. 5 3 20 68 145 35
Delays in processing SDHPT paperwork. 3 3 20 65 135 50
Quantity disagreements. 5 3 10 45 170 43
Construction acceptance or rejection. 6 3 15 51 148 53
Interpretation of plans and specifications. 5 10 32 77 126 26
Time charges. 3 4 17 47 135 70
Extra work. 4 4 15 74 124 55
Delays in providing clear right of way. 7 26 2S 40 94 84
Materials acceptance or rejection. 3 1 11 37 168 56
Other. (Please specify below)
144
6) How often do contractors bypass your level of authority and approach your superiors
with disputes? (99.3%)
7)
Almost Frequently Sometimes Rarely Almost Always Never
4 21 78 107 64 (1.4'11) (7.6%) (28.3'11) (38.8'11) (23.2%)
If a contractor does bypass your level of authority for disputes;
7.1) How often does your superior contact you for input before making the
decision? (98.2%)
Almost Frequently Sometimes Rarely Almost Always Never 200 38 20 5 8
(72.5%) (13.8%) (7.2%) (1.8%) (2.9%)
72) How often does your superior send the contractor back to you for a decision?
(98.2%)
Almost Always
89 (32.2%)
Frequently
" (23.9%)
Sometimes
72 (26.1%)
Rarely
27 (9.8%)
Almost Never
17 (6.2%)
7.3) How often does your superior make the decision. but informs you of the
result? (97.5%)
Almost Always
45 (16.3%)
Frequently
41 (14.9%)
Sometimes
61 (22.5%)
Rarely
53 (19.2%)
Almost Never
68 (24.6%)
8) Do you feel that there are some contractors who look for disputes as opportunities
to make extra profits on projects? (99.3%)
~ Yes (81.7%)..lL No (11.6%) ..L No Answer (0.7%)
9) If the answer to Question (8) was 'Yes" what percentage of contractors do you
estimate do so? (100% 242/242) [20.1%]
..J.n2.. 1-10% --ll. 11-20% ...32... 21-30% ..lL 31-40% ...lL 41-50%
~ 51-60% --.1.. 61-70% --L 71-80% ...L 81-90% _4_ 91-1()()%
145
10) Please indicate the number of disputes you handle per average week. (97.8%)
[3.9 Disputes!Week]
..lZi. 1 to 5
-1.. 21 to 25
-2L 6 to 10
--L 26 to 30
...ll- 11 to 15
.JL.. 31 to 35
-L 16 to 20
.JL.. 36 to 40
11) What percentage of disputes are you able to resolve in order to avoid claims?
(97.1~) [85.3% Resolution]
-1L 1-10% -L 11-20% -L 21-30% -L 31-40% JL 41-50%
-L 51--60% _4_ 61-70% -L 71-80% M- 81-90% ..182... 91-100%
12) Using the following scale, please rate the most common alternatives in resolving
disputes by placing an 'X' in the appropriate column.
1 2 3 Almost Frequently Sometimes Always
(97.9%)
Alternatives Involved in Resolving Disputes NA
Extra Work Order. 4
Field Change. 3
Supplemental Agreement. 6
Field Change and Supplemental Agreement. 6
Informal Agreement between Inspector and 5 Contractor.
Informal Agreement between Resident 5 Engineer and Contractor.
Informal Agreement between District 9 Construction Engineer and Contractor.
Informal Agreement between District Engineer 11 and Contractor.
Time Extensions. 4
Other. (Please specify below)
4 Rarely
1 2
17 66
36 110
21 90
39 106
28 53
21 66
2 11
3 6
7 38
3
114
99
111
89
99
106
67
23
135
5 Almost Never
4
32
22
38
26
44
38
76
69
57
5
43
6
10
10
47
40
111
164
35
146
13) If a dispute cannot be settled at your level, how often do you receive answers from
your superiors in a timely fasbion? (99.3%)
Almost Frequently Sometimes Always
160 90 19 (58.0%) (32.6%) (6.9%)
Rarely
4 (1.4%)
Almost Never
1 (0.4%)
14) Please indicate the number of hours you spend handling disputes during the normal
forty hour week. (97.5%) [5.0 Hours/Week]
--1Z2.. 1 to 5 ...n... 6 to 10 -1L 11 to 15 -L 16 to 20
---L 21 to 2S -L 26 to 30 ..-JL 31 to 35 -L 36t04O
15) Please estimate tbe number of man-hours your staff spends bandling disputes during
the normal forty hour week. (Please include only your directly supervised staff. Do
not include yourself in this estimate.) (95.3%) [10.6 Hours/Week]
-122.. 1 to 5 -SL 6 to 10 ~ 11 to 15 -1L 16 to 20
-lil 21 to 2S ...lL 26 to 30 --L 31 to 35 --L 36 to 40
--.Jl 41 to 45 -L 46 to 50 -L 51 to 55 -L 56 to 60
---L 61 to 65 -L 66 to 70 ..-JL 71 to 7S ..-JL 76 to 80
~ 80 + (Please show estimate). 90, 120 hrs.
16) Are you familiar with the SDHPT claims resolution and prevention policy? (99.6%)
...m.. Yes (85.1%) ~ No (14.5%) -L No Answer (0.4%)
17) Do you feel that requiring contractors to submit formal, written, itemized notices of
disputes to District personnel can help lower the number of disputes? (100%)
l.7.L Yes (64.9%) .1L No (35.1%) -2- No Answer (0.0%)
147
18) Do you feel that requiring contractors to submit fonnal, written, itemized notices of
disputes to the District can help defend the State against disputes which become
claims? (100%)
..lO2.. Yes (75.7%) ..JiL No (24.3%) -L No Answer (0.0%)
19) What additional measures can the State take to reduce the number of disputes which
become claims?
20) Do you feel Contractors are filing more claims than before due to the current
condition of the State ecomomy ? (98.6%)
...lJ1. Yes (49.6%) ..ui. No (48.9%) -L No Answer (1.4%)
21) If the answer to Question (20) was 'No', please list other causes for Contractors to
file more claims than before.
THANK YOU FOR YOUR TIME AND EFFORT.
150
SURVEY COMMENTS TO QUESTION 21
TOT DE DeE RE PE Comment
25 0 2 15 8 Increasing competition for projects.
20 1 2 5 12 Contractors bidding too low.
19 2 1 9 7 Increase In out-of-state contractors.
18 0 1 4 13 Contractors using claims as extra profits.
17 1 2 8 6 Introduction of claims consultants/lawyers.
15 3 1 8 3 Claims Committee too free with settlements.
14 2 1 7 4 Increasingly litigious society.
14 1 1 4 8 Poor plans and specification quality.
12 0 0 6 6 Unskilled Contractor supervisors.
8 0 0 5 3 Inexperienced SDHPT personnel.
5 1 2 2 0 DBE subcontractors.
5 0 1 3 1 Process of disputes too easy.
4 0 1 1 2 Escalating Insurance costs.
4 0 1 1 2 Lack of experienced. skilled workers.
4 0 0 4 0 SDHPT too lenient with contractors.
4 0 0 2 2 Contractors better organized.
3 0 1 1 1 Plans prepared by consultants.
3 0 0 1 2 Projects now are more complex In nature.
2 1 0 0 1 Traffic control plan disputes.
2 0 1 1 0 Contractors spread too thin on projects.
2 0 1 0 1 Extra work.
2 0 0 1 1 New contractors with no experience.
2 0 0 0 2 Utility adjustment delays.
2 0 0 1 1 Contractor not knowing what to expect.
151
SURVEY COMMENTS TO QUESTION 21 (CONTINUED)
TOT DE DeE Comment
2 1 0 0 1 Poor planning by contractors.
1 0 1 0 0 More projects - more claims.
1 0 1 0 0 Requiring work outside scope of contract
1 0 0 1 0 Negotiated settlements of disputes.
1 0 0 1 0 Not enough time to perform contract.
1 0 0 1 0 Field change process takes too long.
1 0 0 1 0 Additional responsibilities placed on contractors.
1 0 0 1 0 Problems with national economy.
1 0 0 1 0 Increasing number of subcontractor defaults.
1 0 0 0 1 Increase in unbalanced bidding.
1 0 0 0 1 Poor communications.
1 1 0 0 0 Time charges returned to contractor.
1 0 0 0 1 Poor quality of field surveys used for plans.
TEXAS STATE DEPARTMENT OF HIGHWAYS AND PUBLIC TRANSPORTATION
CONTRACTORS CLAIMS AND DISPUTES SURVEY
COMBINED RESULTS
152
Note: This survey should be completed only by personnel with authority to settle claims with the Texas State Department or Highways and Public Transportation.
Large Contractors --1.!- (45.2%) Small Contractors ~ (54.8%)
1) What is your position in the company? (90.5%)
Presidents • 19 (45.2%) Managing Partner • 1 (2.4%) Division Head • 1 (2.4%)
Vice Presidents • 14 (33.3%) General Manager • 1 (2.4%) Secretary • 1 (2.4%)
2) Using the following scale, please indicate the limitations for dispute approval for
each of the positions listed by writing the appropriate letter in the blank column.
A· $ ° to 1,000
D· $ 10,001 to 20,000
G - $ 100,001 to 200,000
J - $ 1,000.001 and up.
Position N
Title A
President 2
Vice-President 10
Project Manager 13
Project Supervisor 11
Project Engineer 23
Other.
A B
0 0
2 1
6 1
15 9
11 4
B· $ 1,001 to 5,000
E· $ 20,001 to 50,000
H· $ 200,001 to 500,000
(67.1%)
Limitation Code
c· $ 5,001 to 10,000
F· $ 50,001 to 100,000
I - $ 500,001 to 1,000,000
DoUar
C D E F:G:t H 1 J Limitation
0 0 1 o 0 10 28 $892,125
0 3 4 4 2 0 8 8 $462,141
7 3 8 1 0 2 0 1 $74,414
3 2 0 0 1 0 0 1 $39,758
1 1 0 1 0 0 0 1 $58,579
153
3.1) Using the following scale, please rate the severity of each of the factors as they relate
to disputes by placing an 'X' in the appropriate column.
1 2 3 4 Critical Severe Major Minor Problem Problem Problem Problem
(99.3%)
Contractor practices NA 1 2
Inadequate investigation before bidding. 1 1 0
Bidding below cost. 0 5 4
Use of wrong equipment. 0 0 0
Failure to follow authorized procedures. 0 1 3
Unbalanced bidding. 0 0 4
Poor planning. 0 2 5
Overoptimism. 1 0 4
Delay by Contractor. 0 1 1
Delay by subcontractor. 1 4 4
Delay by materials supplier. 0 2 5
Other. (Please specify below)
(99.3%)
SDHPT Practices NA 1 2
Changes in plans and specifications. 0 3 2
Inadequate bid information issued. 0 2 9
Contract requirements. 1 8 8
Overly restrictive specifications. 0 1 4
Delays caused by SDHPT. 0 3 12
Inadequate time allowed for bid preparation. 0 3 5
Utilities not adjusted. 1 14 11
Other. (Please specify below)
3
14
9
5
7
1
8
15
13
16
13
3
19
13
9
9
10
6
6
5 No
Problem
4
23
14
19
20
22
19
16
17
15
18
4
16
18
15
2S
12
18
7
5
3
10
18
11
15
8
6
10
2
4
S
2
0
1
3
3
10
3
154
3.2) Using the following scale. please rate the severity of each of the factors as they relate
to disputes by placing an 'X' in the appropriate column.
1 2 3 4 Critical Severe Major Minor Problem Problem Problem Problem
(100.0%)
Contract Documents NA 1 2 3
Errors in plans. 0 8 7 11
Ambiguities in plans and specs. 0 7 12 15
Ommissions in plans. 0 10 6 12
Other. (Please specify below)
(99.6%)
Contract Administration r;; 1 2
Lack of coordination between Contractors. 0 3 5
Personality conflicts. 0 0 5
Requests for time extensions. 1 2 4
Delays in processing SDHPT paperwork. 0 2 5
Quantity disagreements. 0 2 4
Construction acceptance or rejection. 1 1 2
Interpretation of plans and specifications. 0 2 7
Time charges. 0 1 8
Extra work. 0 1 5
Delays in providing clear right of way. 0 10 7
Materials acceptance or rejection. 0 1 3
Over-usage of" As directed by the Engineer". 0 13 8
Other. (Please specify below)
3
5
19
15
16
5
9
21
7
14
10
14
11
5 No
Problem
4 5
14 2
8 0
14 0
4
20
13
14
15
28
26
11
21
17
9
21
9
S
9
5
6
4
3
3
1
5
5
6
3
1
155
4) How often do you feel it is necessary to bypass a level of authority within the
Highway Department to receive answers to construction problems in a timely
fashion? (100.0%)
Almost Always
3 (7.1%)
Frequently
11 (26.2%)
Sometimes
22.5 (53.6%)
Rarely
4.5 (10.7%)
Almost Never
1 (2.4%)
S) H a dispute cannot be settled at the project level. how often do you receive answers
from the Highway Department in a timely fashion? (100.0%)
Almost Always
2 (4.8%)
Frequently
11 (26.2%)
Sometimes
12 (28.6%)
Rarely
13 (31.0%)
Almost Never
4 (9.5%)
6) Do you feel that there are some Contractors who look for disputes as opportunities
to make extra profits on projects? (100.0%)
-.lL Yes (76.2%) ...llL No (23.8%) ~ No Answer (0.0%)
7) If the answer to Question (7) was 'Y est. what percentage of Contractors do you
estimate do so? (103.1% 33/32) [12.6% Responses]
-Z.L 1-10% -L. 11-20%
-L 51-60% -L 61-70%
--L 21-30% -2.. 3140%
.....L 71-80% --.0... 81-90%
~41-50%
--.0... 91·100%
8) Do you feel that the Contractors who file numerous claims against the State hurt the
image of Contractors as a whole? (100.0%)
...3l. Yes (78.6%) -2.. No (1l.4%) ~ No Answer (0.0%)
156
9) Do you feel these Contractors hurt the process of competitive bidding? (100.0%)
....2l- Yes (54.8%) --12- No (45.2%) -L No Answer (0.0%)
10) If the answer to Question (9) was ·Yes·. please briefly describe how this practice
hurts bidding.
11) Do you feel there are Contractors who intentionally bid low to be awarded a project,
then file claims to recover their losses? (97.6%)
....2l- Yes (54.8%) ...l.a- No (4%.9%) -L No Answer (%.4%)
12) If the answer to Question (ll) was 'Yes', what percentage of Contractors do you
estimate do so? (100.0% 23/23) [10.2% Responses]
JL 1·10% ~ 11·20%
-L 51-60% --2.. 61·70%
~ 21·30% ---2- 31-40%
--2.. 71·80% ~ 81·90%
---1l 41·50%
---1l 91·100%
13) Please indicate the number of disputes your firm encounters per average week.
(95.2%) [3.1 Disputes/Week ]
~ It05
-L 21 to 25
-i 6to 10
--2.. 26 to 30
--2.. 11 to 15 --2.. 16 to 20
--2.. 31 to 35 --2.. 36 to 40
157
14) What percentage of disputes do you estimate result in the State paying the
Contractor at least part of the dispute value? (97.6%) [32.8% Responses]
...lL 1·10% --1.. 11·20% ~ 21·30% ....l. 31-40% -2. 41·50%
--L 51-60% ---0.. 61·70% ---0.. 71·80% --.6... 81·90% --L 91-100%
15) Please rank the approximate dollar value of disputes that you encounter. with a rank
of 1 being most common and 10 being least common. (72.1%)
--Z.. $ 0 to 1,000
_4_ $ 10,001 to 20,000
--1.. $ 100,001 to 200,000
--1.Q.. $ 1.000,001 and up.
-1- $ 1,001 to 5,000 ....l. S 5.001 to 10,000
..l- S 20.001 to 50,000 ---6.. $ 50,001 to 100,000
....8- $ 200,001 to 500,000 J. $ 500,001 to 1.000,000
16) When the State agrees to pay the Contractor as a result of a dispute, what
percentage of the value of the disputes do you estimate the State pays? (95.2%)
[50.0% Responses]
---L 1·10% ~ 11·20% -..6.. 21·30% -'- 31-40% -12.. 41·50%
--L 51-60% --1.. 61-70% _4 71·80% -1.. 81·90% ....l. 91-100%
17) Do you feel some Contractors are filing more claims than before due to the current
condition of the State ecomomy ? (97.6%)
--'6- Yes (61.9%) ~ No (35.7%) -L No Answer (2.4%)
158
18) If the answer to Question (17) was 'No', please list other causes for Contractors to
file more claims than before.
19) Using the following scale, please rate the most common alternatives in resolving
disputes by placing an 'X' in the appropriate column.
1 2 3 4 5 Almost Always
Frequently Sometimes
(97.1%)
Alternatives Involved in Resolving Disputes NA
Extra Work Order. 1
Field Change. 1
Supplemental Agreement. 2
Field Change and Supplemental Agreement. 2
Verbal Agreement between Inspector and 1 Contractor.
Verbal Agreement between Resident 1 Engineer and Contractor.
Verbal Agreement between District 1 Construction Engineer and Contractor.
Verbal Agreement between District 1 Engineer and Contractor.
Time Extensions. 1
Other. (Please specify below)
Rarely
1 2
6 12
6 18
4 15
5 13
5 7
2 13
1 1
1 2
3 10
THANK YOU FOR YOUR TIME AND EFFORT.
3
12
12
13
14
12
11
6
3
19
Almost Never
4
8
2
6
6
5
7
18
12
4
5
3
3
2
2
12
8
15
23
5
159
SURVEY COMMENTS TO QUESTION 10
TOTAL LARGE SMALL Comment
7 1 6 Contractors tum in low bids with preconceived idea to file claims to recover losses.
4 2 2 Contractors who fDe claims get work at the exclusion of other traditional contractors.
4 1 3 Claims oriented contractors cause SDHPT to treat all contractors alike.
4 2 2 Contractors bidding to claim are not bidding same work as others.
2 2 0 Contractors who claim often are subject to more scrutiny from SDHPT than others.
1 1 0 Contractors bidding to claim may be temporarily successful, but not consistently competitive.
1 1 0 Too many claims will result in more restrictive SDHPT specifications.
1 1 0 SDHPT use of stiff pre-quallficatlon standards to limit bidders affects all contractors equally.
1 1 0 Contractors who fDe many claims get good at the process, until SDHPT catches on.
1 1 0 Creates adversarial attitude 0 •
1 0 1 Lack of State laws regulating competetlve bidding hurts process.
1 0 1 SDHPT seems to accept 'Claims Contractors' without prejudice.
1 0 1 Claims cause costs to overrun.
1 0 1 Public feels money Is being wasted on claims.
160
SURVEY COMMENTS TO QUESTION 18
TOTAL LARGE SMALL Comment
8 6 2 More errors. om missions. and ambiguities in plans and specifications.
6 3 3 Projects being bid so low. there is no room for error. Contractors likely to claim.
4 3 1 Lack of knowledgable and experienced SoHPT project personnel.
2 2 0 Projects becoming more complex.
2 2 0 Unreasonably strict inspectors.
2 2 0 Contractors feel they can file claims without reprisal from the SOH PT.
2 1 1 More competition for projects.
1 1 0 Any hinderance by owner Is potential claim.
1 1 0 Poor quality plans done by consultants. getting design questions answered for these projects.
1 1 0 Increased usage of special speCifications.
1 1 0 Changed conditions.
1 1 0 More delays arising from uncompleted utility adjustments.
1 1 0 Project TCP ambiguous, engineer changes TCP.
1 1 0 Increase In out-of-state contractors.
1 1 0 SoHPT feels contractors getting rich.
1 1 0 Nature of hard dollar contracting.
1 1 0 Increase In use of claims consultants.
1 1 0 Inadequate time allowed for bid preparation.
1 0 1 Contractors feeling slighted will pursue claims.
1 0 1 Poor project level communications.
1 0 1 Late decisions by SOH PT.
1 0 1 Belligerent field engineer attitude.
1S1
APPENDIX C
CATMOD METHODOLOGY, INPUT, AND OUTPUT
METHODOLOGY FOR SDHPT SURVEYS
The analysis for Questions 5.1 and 5.2 performed at the category level
using the CATMOD prodcedure. Significant differences were located within all
four subgroups. Under the contractor practices section, significant differences
were found between both the levels of authority responding to the survey and
between the individual factors. No significant difference existed for the
interaction between these two variables. Table 35 shows these statistics.
The large chi-square calculated for the position variable indicated a
considerable difference in the levels of respondents. The large chi-square for
the variable CP also showed a significant difference among the individual
factors. Three of these factors proved to be significantly different from the
others. These factors are represented by the variables CP1, CP3, and CPS.
As shown in Table 36 the estimates for variables CP1 and CPS are both
negative, while the estimate for CP3 is positive. This difference in sign indicates
these three factors are significant in opposing ways: Inadequate investigation
before bidding and poor planning by the contractor are both significant
problems, while the use of wrong equipment on construction projects is
significantly not a problem. Table 36 also shows the relative ranking of each
162
of the factors, as determined by the parameter estimates.
The second part of Question 5.1 had the departmental respondents rate
SDHPT practices. As with contractor practices, the levels of respondents
answered differently. Table 37 shows the calculated values, and Table 38
presents the parameter estimates and ranking of the factors. There was no
significant difference between the factors within the SDHPT practices, nor was
the interaction between the respondents and factors significant.
The first portion of Question 5.2 concerned contract documents.
Significant differences were discovered between the levels of respondents, but
not among the factors. Again, the interaction between the respondents and
factors was insignificant. The results of these calculations are presented in
Table 39 and Table 40 presents the parameter estimates and the ranking of the
factors.
The second portion of Question 5.2 dealt with contract administration.
Once again, a significant difference within the levels of respondents was
discovered. The interaction between the respondents and the factors was
insignificant. These statistics are presented in Table 41. Table 42 shows the
relative ranking of the contract administration factors. Looking at the individual
factors, interpretation of plans and specs stands out as being Significant. Since
there is no significant difference among the factors as a whole, however, this
difference cannot be deemed significant.
The four categories of factors were compared to each other using the
CATMOD analysis procedure. The combined analysis revealed a significant
163
difference between the levels of SDHPT respondents. More importantly,
however, the categories of factors were significantly different. The interaction
between these two variables was insignificant. Table 43 presents these
statistics, while Table 44 shows parameter estimates and category ran kings.
The SDHPT survey indicates the most significant problems with regard
to claims and disputes arise from the contract documents. As shown by the
parameter estimate for this factor, the contract documents were rated nearly
one full pOint lower than the overall mean for the combined data set. This
difference is highly Significant, as indicated by the large chi-square. The
estimate for the contractor practices is slightly lower than the overall average,
but is not significant when compared to the other categories. The SDHPT
practices category and contract administration categories displayed large chi
squares (518.32 and 1414.21, respectively) and are therefore significantly
different from the overall mean.
Question 12 discovered significant differences between both the levels
of respondents and the alternatives, but not within the interaction between
these two. Table 45 presents these statistics. Three alternatives are used
significantly more often than the others. These are the field change,
supplemental agreement, and the combination of the two. The informal
agreements between the district construction engineer and contractor, and
district engineer and the contractor are the least frequently used. These two
alternatives are used significantly less than the others. These statistics are
presented in Table 46, along with the relative ranking of the alternatives.
164
Table 35. Maximum Ukellhood Analysis of Variance Table for Contractor Practices (SDHPT Survey).
Source Degrees of Chi-Square Probability > Freedom Chi-Square
POSITION 3 3603.34 0.0000
CP 9 41.54 0.0000
POS*CP 27 9.27 0.9994
Table 36. Maximum Ukellhood Parameter Estimates for Contractor Practices (SDHPT Survey).
Parm Chi-Sq Prob> VAR Description Est Chi-Sq Rank
CP1 Inadequate investigation -0.127 6.40 0.000 2
CP2 Bidding below cost -0.054 1.30 0.255 5
CP3 Wrong equipment 0.150 11.94 0.000 9
CP4 Failure to follow 0.049 1.13 0.288 7 procedure
CP5 Unbalanced bidding 0.044 0.92 0.337 6
CP6 Poor planning -0.154 9.26 0.002 1
CP7 Overoptimism 0.076 2.86 0.091 8
CPS Delay by contractor -0.063 1.59 0.207 3
CPS Delay by sub-contractor -0.057 1.39 0.234 4
CP10 Delay by supplier 0.136 NA NA 10
165
Table 37. Maximum Likelihood Analysis of Variance Table for SDHPT Practices (SDHPT Survey).
Source Degrees of Chi-Square Probability > Freedom Chi-Square
POSITION 3 2370.86 0.0000
SP 5 6.99 0.2213
POS*SP 15 1.88 1.0000
Table 38. Maximum Likelihood Parameter Estimates for SDHPT Practices (SDHPT Survey).
Parm Chi-Sq Prob> VAR Description Est Chi-Sq Rank
SP1 Changes in plans and -0.060 1.98 0.160 2 specs
SP2 Inadequate bid 0.033 0.66 0.418 5 information issued
SP3 Contract requirements -0.069 2.61 0.107 1
SP4 Overly restrictive specs 0.070 2.93 0.087 6
SP5 Delay by SDHPT 0.007 0.03 0.874 3
SP6 Inadequate time for bid 0.019 NA NA 4 preparation
166
Table 39. Maximum Ukelihood Analysis of Variance Table for Contract Documents (SDHPT Survey).
Source Degrees of Chi-Square Probability > Freedom Chi-Square
POSITION 3 1033.18 0.0000
CD 5 0.08 0.9593
POS*CD 15 0.55 0.9972
Table 40. Maximum Ukelihood Parameter Estimates for Contract Documents (SDHPT Survey).
Parm Chi-Sq Prob> VAR Description Est Chi-Sq Rank
CD1 Errors in plans 0.005 0.01 0.000 2
CO2 Ambiguities in plans and -0.012 0.08 0.255 1 specs
CD3 Omissions in plans 0.007 NA NA 3
167
Table 41. Maximum Ukelihood Analysis of Variance Table for Contract Administration (SDHPT Survey).
Source Degrees of Chi-Square Probability > Freedom Chi-Square
POSITION 3 4392.82 0.0000
CA 10 10.09 0.4328
POS*CA 30 5.81 1.0000
Table 42. Maximum Ukellhood Parameter Estimates for Contract Administration (SDHPT Survey).
Parm Chi-Sq Prob > VAR Description Est Chi-Sq Rank
CA1 Lack of coordination -0.054 1.38 0.241 2 between contractors
CA2 Personality conflicts -0.006 0.02 0.895
CA3 Requests for time -0.038 0.64 0.422 3 extensions
CA4 Delays in processing 0.029 0.44 0.508 7 SDHPT paperwork
CAS Quantity disagreements 0.045 1.04 0.309 10
CA6 Construction acceptance 0.039 0.79 0.375 9 or rejection
CA7 Interpretation of plans -0.108 5.09 0.024 1 and specs
CAS Time charges 0.033 0.55 0.457 8
CA9 Extra work 0.007 0.03 0.870 6
CA10 Delays in providing clear 0.003 0.00 0.945 5 right-of-way
CA11 Materials acceptance or 0.050 NA NA 11 rejection
168
Table 43. Maximum Ukellhood Analysis of Variance Table for All Categories (SDHPT Survey).
Source Degrees of Chi-Square Probability > Freedom Chi-Square
POSITION 3 8465.66 0.0000
VARIABLE 4 2089.59 0.0000
POS*VAR 9 3.97 0.9133
Table 44. Maximum Likelihood Parameter Estimates for All Categories (SDHPT Survey).
Parm Chi-Sq Prob> VAR Description Est Chi-Sq Rank
CP Contractor practices -0.036 NA NA 2
SP SDHPT practices 0.358 518.32 0.000 3
CD Contract documents -0.878 1357.06 0.000 1
CA Contract administration 0.558 1414.21 0.000 4
169
Table 45. Maximum Likelihood Analysis of Variance Table for Dispute Resolution Alternatives (SDHPT survey).
Source Degrees of Chi-Square Probability > Freedom Chi-Square
POSITION 3 2935.10 0.0000
ALTERNATIVE 8 144.97 0.0000
POS*AL 24 16.44 0.8716
Table 46. Maximum Likelihood Parameter Estimates for Dispute Resolution Alternatives (SDHPT survey).
Parm Chi-Sq Prob> VAR Description Est Chi-Sq Rank
AL1 Extra work order -0.030 0.37 0.542 4
AL2 Field change -0.272 24.26 0.000 1
AL3 Supplemental agreement -0.168 10.33 0.001 3
AL4 Field change and -0.235 19.44 0.000 2 supplemental agreement
AL5 Agreement between 0.050 1.21 0.272 7 PE & contractor
AL6 Agreement between 0.008 0.03 0.868 5 RE & contractor
AL7 Agreement between 0.266 38.66 0.000 8 DCE & contractor
ALB Agreement between 0.349 71.28 0.000 9 DE & contractor
AL9 Time extension 0.032 NA NA 6
170
APPENDIX C
CATMOD METHODOLOGY, INPUT, AND OUTPUT
METHODOLOGY FOR CONTRACTOR SURVEYS
The CATMOD procedure was used to analyze the categorical questions
for the contractor surveys. The analysis for the contractor practices category
located a significant difference between the size of the contractors. The small
contractors tended to rate the contractor practices category harsher than the
large contractors. The factors and the interaction between the size of the
contractors and the factors differed, but not significantly at the 0.05 level. Table
47 shows the calculated statistics on the following page. Also, Table 48 shows
the relative ranking of the factors, as well as the calculated statistics for each
of the parameters.
Within the SDHPT practices category, significant differences were also
discovered between the sizes of contractors, as the large contractors rated the
Department more severely than their smaller counterparts. While the
differences between the SDHPT practices as a group were not significant at the
0.05 level, the contractors singled out contract requirements as a major source
of problems. Once again, there was no significance to the interaction between
the size of the contractors and the factors. Table 49 shows the calculated
statistics, and Table 50 shows the parameter estimates and the rankings of the
171
factors.
When asked to rate the contract documents as sources of disputes, the
results from the contractors were similar to the SOHPT practices category. The
sizes of respondents were significantly different, but no differences among the
factors or the interaction term were discovered. These calculations are
presented in Tables 51 and 52.
The analysis of the contract administration category produced much the
same result: significant differences between the contractors with no difference
between the factors or the interaction term. The results of these calculations
are presented in Table 53. Also, the results of the analysis between the factors
are presented in Table 54.
Finally, the responses to each of the groups of factors were compared
to each of the other groups of factors. The same method of analysis used for
the comparison of the four categories for the SOH PT survey was used to locate
the differences within the contractor survey. The difference between the sizes
of contractors was not significant at the 0.05 level. The differences between the
categories and the interaction terms, however, were significant. The difference
in the interaction term indicates the small contractors tended to rate the four
categories alike. Similarly, the large contractors tended to answer the
questions alike. In other words, prior knowledge of. the size of the contractor
allowed some degree of predictability of how a respondent rated the
categories. The large contractors tended to rate the contract documents,
contract administration, and SOHPT practices more severely than did the small
172
contractors. The reverse is true for the contractor practices category, where
the small contractors were the most critical. These differences in the
responses led to the significant differences in the interaction term. The ANOVA
table is presented in Table 55.
Table 56 shows the rankings and the parameter estimates for the
categories. As with the SDHPT survey, the contractors identified the contract
documents as the main source of the Department's claims problems. The
contractors rated the contract documents nearly one full point below the overall
average for all four categories. This difference was significant at the 0.05 level.
The SDHPT practices category was only Slightly below the overall average, and
is not Significant. The contractor practices and contract administration
categories, however, are Significant in the opposite direction.
Finally, the contractors were asked to rate the most common factors
used to resolve disputes with the State. Significant differences were located
between the sizes of contractors and the alternatives. The interaction between
the size of contractors and the alternatives was insignificant. Table 57 presents
these calculated statistics.
Table 58 presents the relative rankings and their corresponding
parameter estimates. The contractors felt the most commonly used tool for
dispute resolution to be the field change. This tool is used significantly more
often than the others. The supplemental agreement, the combination of the
field change and supplemental agreement, the extra work order, and the time
extension completed the list of legitimate dispute resolution alternatives. The
173
informal agreement with the resident engineer and project engineer followed.
Finally, the informal agreements with the district construction engineer, and
district engineer are the least commonly used alternative for dispute resolution.
The last two alternatives are used significantly less than the others.
174
Table 47. Maximum Likelihood Analysis of Variance Table for Contractor Practices (Contractor survey).
Source Degrees of Chi-Square Probability > Freedom Chi-Square
SIZE 1 8.76 0.0031
CP 9 13.54 0.1395
SIZE*CP 9 1.77 0.9946
Table 48. Maximum Likelihood Parameter Estimates for Contractor Practices (Contractor survey).
Parm Chi-Sq Prob > VAR Description Est Chi-Sq Rank
CP1 Inadequate investigation -0.023 0.09 0.764 5
CP2 Bidding below cost -0.051 0.42 0.516 3
CP3 Wrong equipment 0.164 5.25 0.022 10
CP4 Failure to follow 0.060 0.64 0.242 8 procedure
CPS Unbalanced bidding 0.124 2.90 0.089 9
CP6 Poor planning -0.012 0.03 0.873 6
CP7 Overoptimism -0.051 0.42 0.517 4
CP8 Delay by contractor 0.038 0.26 0.612 7
CPS Delay by sub-contractor -0.167 4.07 0.044 1
CP10 Delay by supplier -0.082 NA NA 2
175
Table 49. Maximum Likelihood Analysis of Variance Table for SDHPT Practices (Contractor survey).
Source Degrees of Chi-Square Probability > Freedom Chi-Square
SIZE 1 16.20 0.0001
SP 6 18.63 0.0048
SIZE*SP 6 3.01 0.8076
Table 50. Maximum Likelihood Parameter Estimates for SDHPT Practices (Contractor survey).
Parm Chi-Sq Prob> VAR Description Est Chi-Sq Rank
SP1 Changes in plans and 0.075 0.88 0.349 5 specs
SP2 Inadequate bid 0.025 0.09 0.761 4 information issued
SP3 Contract requirements -0.100 1.24 0.266 2
SP4 Overly restrictive specs 0.162 4.37 0.037 6
SP5 Delay by SDHPT -0.071 0.68 0.410 3
SP6 Inadequate time for bid 0.186 5.91 0.015 7 preparation
SP7 Utilities not adjusted -0.277 NA NA 1
176
Table 51. Maximum Likelihood Analysis of Variance Table for Contract Documents (Contractor survey).
Source Degrees of Chi-Square Probability > Freedom Chi-Square
SIZE 1 14.45 0.0001
CD 2 0.70 0.7093
SIZE*CD 2 0.00 0.9986
Table 52. Maximum likelihood Parameter Estimates for Contract Documents (Contractor survey).
Parm Chi-Sq Prob> VAR Description Est Chi-Sq Rank
CD1 Errors in plans 0.058 0.56 0.453 3
CO2 Ambiguities in plans and -0.055 0.49 0.486 1 specs
CD3 Omissions in plans -0.003 NA NA 2
Table 53. Maximum Likelihood Analysis of Variance Table for Contract Administration (Contractor survey).
Source Degrees of Chi-Square Probability > Freedom Chi-Square
SIZE 1 27.52 0.0000
CA 11 18.37 0.0733
SIZE*CA 11 4.47 0.9542
177
Table 54. Maximum Ukellhood Parameter Estimates for Contract Administration (Contractor survey).
Parm Chi-Sq Prob> VAR Description Est Chi-Sq Rank
CA1 Lack of coordination 0.108 1.93 0.165 12 between contractors
CA2 Personality conflicts 0.040 0.25 0.617 6
CA3 Requests for time 0.011 0.05 0.825 4 extensions
CA4 Delays in processing 0.018 0.05 0.821 5 SDHPT paperwork
CAS Quantity disagreements 0.097 1.52 0.218 11
CA6 Construction acceptance 0.077 0.93 0.335 10 or rejection
CA7 Interpretation of plans -0.088 1.04 0.308 3 and specs
CAB Time charges 0.059 0.53 0.465 8
CA9 Extra work 0.053 0.43 0.513 7
CA10 Delays in providing clear -0.158 3.17 0.075 2 right-of-way
CA11 Materials acceptance or 0.071 0.80 0.370 9 rejection
CA12 Over-usage of has -0.288 NA NA 1 directed by Engineer"
178
Table 55. Maximum Ukelihood Analysis of Variance Table for All Categories (Contractor survey).
Source Degrees of Chi-Square Probability > Freedom Chi-Square
SIZE 1 2.72 0.0990
VAR 3 861.58 0.0000
SIZE*VAR 3 33.20 0.0000
Table 56. Maximum UkeUhood Parameter Estimates for All Categories (Contractor survey).
Parm Chi-Sq Prob> VAR Description Est Chi·Sq Rank
CP Contractor practices 0.541 434.13 0.000 3
SP SDHPT Practices -0.119 NA NA 2
CD Contract documents -0.983 516.36 0.000 1
CA Contract administration 0.551 451.41 0.000 4
179
Table 57. Maximum Likelihood Analysis of Variance Table for Dispute Resolution Alternatives (Contractor survey).
Source Degrees of Chi-Square Probability > Freedom Chi-Square
SIZE 1 5.57 0.0183
AL 8 44.24 0.0000
SIZE*AL 8 4.03 0.8548
Table 58. Maximum Likelihood Parameter Estimates for Dispute Resolution Alternatives (Contractor survey).
Parm Chi-Sq Prob> VAR Description Est Chi-Sq Rank
AL1 Extra work order -0.107 1.48 0.224 4
AL2 Field change -0.219 5.59 0.018 1
AL3 Supplemental agreement -0.162 3.21 : 0.073 2
AL4 Field change and -0.162 3.20 0.074 3 Supplemental agreement
AL5 Agreement between 0.065 0.62 0.431 7 PE & contractor
AL6 Agreement between 0.009 0.01 0.913 6 RE & contractor
AL7 Agreement between 0.286 14.71 0.000 8 DCE & contractor
ALB Agreement between 0.335 20.90 0.000 9 DE & contractor
AL9 Time extension -0.045 NA NA 5
180
APPENDIX C
CATMOD METHODOLOGY, INPUT, AND OUTPUT
METHODOLOGY FOR COMPARISON OF SDHPT TO CONTRACTOR
SURVEYS
Finally, the four categorical questions (contractor practices, SDHPT
practices, contract documents, and contract administration) were combined
and compared to the survey respondents (SDHPT and contractor surveys).
The combined data set was analyzed using the CATMOD procedure as before.
ignoring the effects of SDHPT position and contractor size. The analysis
revealed significant differences between the respondents, categories, and the
interaction between the two. The calculated values are presented in Table 59.
The large chi-square for the SURVEY variable indicates the difference
between the respondents. In general, the contractors tended to rate the
factors related to disputes and claims more critically than the SDHPT
respondents. The large interaction chi-square indicates a relationship between
the respondents and the ranking of the categories. As could be expected, the
contractors were critical of the Department, rating the SDHPT practices,
contract documents, and contract administration categories more severely than
the SDHPT respondents. Also according to expectation, the SDHPT
respondents rated the contractor practices more severely than did the
181
contractors. This two-way finger pointing resulted in the large interaction term.
Finally. the large chi-square value for the parameter VAR indicates a significant
difference among the categories of factors. Consistent with the individual
analyses, the contract documents were Singled out as the main problem area
by the combination of the SDHPT and contractor surveys. This variation from
the mean response was highly significant. The rankings and the parameter
estimates are presented in Table 60. The SDHPT practices category was
ranked second, but is probably not significantly different from the mean. Also
similar to the individual analyses, the contractor practices and contract
administration categories were significantly different from the mean. The
positive values of the parameter estimates indicate these categories less of
problem areas than the contract documents.
182
Table 59. Maximum Ukellhood Analysis of Variance Table for All Categories (Combined survey).
Degrees of Chi-Square Probability > Source Freedom Chi-Square
SURVEY 1 9877.79 0.0000
VAR 3 874.98 0.0000
SURVEY*VAR 3 38.53 0.0000
Table 60. Maximum Likelihood Parameter Estimates for All Categories (Combined survey).
Parm Chi-Sq Prob> VAR Description Est Chi-Sq Rank
CP Contractor practices 0.535 430.75 0.000 3
SP SDHPT Practices -0.111 NA NA 2
CD Contract documents -0.974 526.47 0.000 1
CA Contract administration 0.550 459.36 0.000 4
APPENDIX C
CATMOD METHODOLOGY, INPUT, AND OUTPUT
SAMPLE CATMOD OUTPUT
Response: POS*SP Weight Variable: RES Data Set: SOHPTl
SAS 18:35 SU'lday. NOYeIItIer 18, 1990
SOHPT Survey
CA TM(!) PROCEDURE
Response Levels (R)= 24 Populations (S). 1 Total Frequency eN): 6079 Observations (Obs). 1621
MAXIMUM LIKELIHOOD ANALYSIS OF VARIANCE TABLE
Source OF Chi-Square Prob
POS SP pos*SP
3 5
15
LIKELIHOOD RATIO 0
2370.86 6.99 1.88
0.0000 0.2213 1.0000
ANALYSIS OF MAXIMUM LIKELIHOOD ESTIMATES
Standard Chi-Effect Parameter Estimate Error Square Prob
_RESPONSE_ 1 -1.1028 0.0422 681.66 0.0000 2 -0.7101 0.0363 382.54 0.0000 3 0.9318 0.0232 1618.23 0,0000 4 -0.0598 0.0425 1.98 0.1589 5 0.0334 0.0412 0.66 0.4180 6 -0.0691 0.0428 2.61 0.1065 7 0.0699 0.0408 2.93 0.0868 8 0.00659 0.0415 0.03 0.8738 9 0.0579 0.0948 0.37 0.5415
10 -0.00139 0.0932 0.00 0.9881 11 -0.0229 0.0978 0.06 0.8145 12 -0.0380 0.0931 0.17 0:6833 13 0.0254 0.0933 0.07 0.7856 14 -0.0258 0.0836 0.10 0.7576 15 0.000217 0.0801 0.00 0.9978 16 0.0567 0.0820 0.48 0.4891 17 0.00761 0.0789 0.01 0.9232 18 -0.00730 0.0810 0.01 0.9282 19 -0.00651 0.0528 0.02 0.9020 20 -0.00131 0.0511 0.00 0.9796 21 -0.00199 0.0532 0.00 0.9702 22 0.00894 0.0505 0.03 0.8595 23 -0.00n6 0.0516 0.02 0.8804
NOTE: _RESPONSE_ • POS SP POS*SP
184
Response: POS*CP weight Variable: RES Data Set: COMBINED
SAS 19:07 St.nday. Novenber 18. 1990
Contractor Survey
CATMOD PROCEDURE
Response Levels (R)= 20 Populations (S)= 1 Total Frequency eN). 1546 Observations (Obs): 417
MAXIMUM LIKELIHOOD ANALYSIS OF VARIANCE TABLE
Source Df Chi·Square Prob - ...... -_ .. __ ._---_._---.. _---.----------- ..... -_. POS 1 8.76 0.0031 CP 9 13.54 0.1395 POS*CP 9 1.n 0.9946
LIKELIHOOD RATIO 0
ANALYSIS OF MAXIMUM LIKELIHOOD ESTIMATES
Standard Chi· Effect Parameter Estimate Error Square Prob ----.----.--.---.--------.... -----~----.- .. ---------------------_RESPONSE - 1 0.0759 0.0256 8.76 0.0031
2 ·0.0232 0.0775 0.09 0.7643 3 ·0.0510 0.0784 0.42 0.5160 4 0.1636 0.0714 5.25 0.0219 5 0.0598 0.0747 0.64 0.4234 6 0.1236 0.0726 2.90 0.0888 7 -0.0123 o.om 0.03 0.8733 8 -0.0510 0.0787 0.42 0.5165 9 0.0383 0.0755 0.26 0.6121
10 -0.1666 0.0826 4.07 0.0437 11 -0.0358 0.0775 0.21 0.6435 12 -0.0210 0.0784 0.07 0.7887 13 -0.0150 0.0714 0.04 0.8333 14 -0.0329 0.0747 0.19 0.6595 15 -0.00679 0.0726 0.01 0.9255 16 0.00324 o.om 0.00 0.9665 17 0.0541 0.0787 0.47 0.4917 18 0.0119 0.0755 0.02 0.8752 19 -0.0297 0.0826 0.13 0.7194
NOTE: _RESPONSE_ .. POS CP POS*CP
185
SAS 18:35 Sunday, November 18, 1990
Comparison of SDHPT to Contractors
CATMOO PROCEDURE
Response: SURVEY*CD Weight Variable: RES Data Set: COMB2
Response Levels (R)= Populations (S)= Total Frequency (N)= Observations (Obs).
7 1
2938 923
Effect
MAXIMUM LIKELIHOOD ANALYSIS OF VARIANCE TABLE
Source
SURVEY CD SURVEY*CD
DF Chi-Square
1 2 2
1280.67 0.63 0.49
Prob
0.0000 0.7294 0.7816
LIKELIHOOD RATIO 0
ANALYSIS OF MAXIMUM LIKELIHOOD ESTIMATES
Standard Chi-Parameter Estimate Error Square Prob
1 -3.9030 2 0.0522 3 -0.0531 4 0.0533 5 -0.0439
0.6744 0.0755 0.0776 0.0805 0.0824
33.50 0.0000 0.48 0.4894 0.47 0.4932 0.44 0.5075 0.28 0.5943
NOTE: _RESPONSE_ • SURVEY CD SURVEY*CD
186
APPENDIX D
SUPPORTING CALCULATIONS (SAS OUTPUT)
SAS 18:10 Monday, November 19, 1990 8
TABLE OF SURVEY BY VAR FOR COMPARISON OF SOHPT TO CONTRACTORS DICHOTOMOUS QUESTIONS
SURVEY VAR
Frequencyl Percent I Row Pct Col Pct !EConomy :Extra' : Total ••••••••• + •••••••• + •••••••• +
Contr I 26 I 32 I 58 I 5.95 I 7.32 I 13.27 I 44.83 I 55.17 I I 15.95 I ".68 I
••••••••• + •••••••• + •••••••• +
SOHPT I 137 I 242 I 379 I 31.35 I 55.38 I 86.73 I 36.15 I 63.85 I I 84.05 I 88.32 I
••••••••• + •••••••• + •••••••• + Total 163 274 437
37.30 62.70 100.00
STATISTICS FOR TABLE OF SURVEY BY VAl
Statistic DF
Chi-Square 1 Likelihood Ratio Chi·Square 1 Continuity Adj. Chi'Square 1 Mantel·Kaenszel Chi·Square 1 Fisher's Exact Test (Left)
(Right) (Z·TaH)
Phi Coeff i ci ent Contingency Coefficient Cramer's V
Sample Size = 437
Value
1.620 1.590 1.271 1.617
0.061 0.061 0.061
Prob
0.203 0.207 0.260 O.Z04 0.921 0.130 0.243
187
SAS 18:28 Saturday, Novenber 17, 1990 3
--.--------- .•• -•• ---------- •• -- ••. VAR-BY3 •••. --- ••• ---.----.--.-.- ••• ------.
TABLE Of RES BY POS FOR SDHPT SURVEY MULTIPLE'ANSWER QUESTION
RES POS
Frequency' Percent I Row Pct I Col Pct, DEI DCEI REI PEl -_._. __ ._+_ •••••• -+--_ •• _-.+-_ ••• _--+ •• -.-.-.+
1 ' 8 I 15 I 53 ' 13 I I 3.05 I 5.73 I 20.23 I 4.96 I I 8.99 I 16.85 I 59.55 I 14.61 I I 61.54 I 65.22 I 46.09 11.71 I
-_._ •• _-.+_ ••••• _.+-_ •••••• +._----._+.- ••••• _+
2 I 2 I 2 I 31 I 28 I I 0.76 I 0.76 I 11.83 I 10.69 I I 3.17 I 3.17 I 49.21 I 44.44 I I 15.38 I 8.70 I 26.96 I 25.23 I
••••••••• + •••••••• + •••••••• + •••••••• + •••••••• +
3 I 2 I 3 I 21 1 43 I I 0.76 I 1.15 I 8.02 I 16.41 I I 2.90 I 4.35 I 30.43 I 62.32 I I 15.38 I 13.04 I 18.26 38.74 I
-_ ••••••• + •••••••• + •••••••• + ••••••• _+ •••••••• + 4 I 0 I 1 I 6 I 18 I I 0.00 I 0.38 I 2.29 I 6.87 I
I 0.00 I 4.00 I 24.00 I 72.00 I I 0.00 I 4.35 I 5.22 I 16.22 I
••• _ ••••• + •••••••• + •••••••• + •••••••• + •••• __ •• +
51 '1 21 41 91 I 0.38 I 0.76 I 1.53 I 3.44 I I 6.25 I 12.50 I 25.00 I 56.25 I I 7.69 I 8.70 I 3.48, 8.",
.-•• _ •••• +- ••••••• + •••••••• + •••••••• + •••••••• +
Total
89 33.97
63 24.05
69 26.34
25 9.54
16 6.11
Total 13 4.96
23 115 111 262 8.78 43.89 42.37 100.00
STATISTICS FOR TABLE OF RES BY POS
Statistic DF
Ch i . Squa re 12 Likelihood Ratio Chi'Square 12 Mantel'Haenszel Chi'Square 1 Phi Coefficient Contingency coefficient Cramer's V
Sample Size s 262
Value
56.935 61.828 28.746 0.466 0.423 0.269
Prob
0.000 0.000 0.000
WARNING: 35% of the cells have expected counts less than 5. Chi'Square may not be a valid test.
188
SAS 18:10 Monday, November 19, 1990 6
TABLE OF VAR BY POS FOR SDHPT SURVEY DICHOTOMOUS QUESTIONS
VAR POS
Frequency I Percent I Row Pc:t I Col Pc:t IDCE IDE IPE IRE I ---_.-... + ..... _--+-----_ .. +--------+-_ ... _--+ Defend I 14 I 12 I 86 I 92 I
I 1.43 I 1.22 I 8.78 I 9.39 I I 6.86 I 5.88 42.16 I 45.10 I I 16.47 I 20.69 I 21.94 I 20.67 I
_._------+-----_._+--------.---_. __ .+_ ... -... + Ec:onomy I 13 I 9 I 54 I 56 I I 1.33 I 0.92 J 5.51 I 5.71 I
I 9.85 I 6.82 I 40.91 I 42.42 I I 15.29 I 15.52 I 13.78 I 12.58 I ---_ ..... +_ ....... +.- ...... + ..... _--+_._ ..... +
Extra1 ' 23 ' 15 I 94 I 106 I I 2.35 I 1.53 I 9.59 I 10.82 I I 9.66 I 6.30 I 39.50 I 44.54 I I 27.06 I 25.86 I 23.98 I 23.82, -_ ....... + ...... _.+_ ....... + •••••••• + ........ +
Lower I 12 I 8 I 75 I 79 I I 1.22 I 0.82 I 7.65 I 8.06 I I 6.90 I 4.60 I 43.10 I 45.40 I , 14.12, 13.79 I 19.13 I 17.75, ......... + .... _-_.+ ........ + ........•........ +
PoLicy I 23 I 14 I 83 I 112 I I 2.35 I 1.43 I 8.47 I 11.43 I I 9.91 I 6.03 I 35.78 J 48.28 I , 27.06 I 24.14 I 21.17 I 25.17 I
••••••••• + ••••••• _+ ••••••• - ••••••••• + ••••••• _+
Total 85 58 392 445 8.67 5.92 40.00 45.41
STATISTICS FOR TABLE OF VAR BY POS
Statistic: OF Value
Total
204 20.82
132 13.47
238 24.29
174 17.76
232 23.67
980 100.00
Prob .. ----------------_.-----_.--_ .. ----------------------Chi-Square 12 Likelihood Ratio Chi'Square 12 Hantel'Haenszel Chi'Square 1 Phi Coefficient Contingency Coefficient Cramer's V
Sample Size = 980
5.510 5.636 0.011 0.075 0.075 0.043
0.939 0.933 0.916
189
SAS 18:28 Saturday, November 17, 1990 17
------------------------------.---- VAR=BY1 ------ •• ---.----------- •• -.--------
TABLE OF PaS BY RES FOR CONTRACTOR SURVEYS MULTIPLE·ANSWER QUESTION
PaS RES
Frequency I Percent I Row Pct I Col Pct I 11 21 31 41 Total _._------+._ ...•. _+---_.---+._ •.. ---+--_._---+ Large I 1 I 7 I 7 I 1 I 16
I 3.12 I 21.87 I 21.87 I 3.12 I 50.00 I 6.25 I 43.75 I 43.75 I 6.25 I I 33.33 I 63.64 I 46.67 I 33.33 I _ .. _-----+. __ ._-_.+. __ ._ ..• +.- ..•... +._ .. _-_.+
Small I 2 I 4 I 8 I 2 I 16 I 6.25 I 12.50 I 25.00 I 6.25 I 50.00 I 12.50 I 25.00 I 50.00 I 12.50 I I 66.67 I 36.36 I 53.33 I 66.67 I ------_ .. +--...... +._ .. _ ... +-_ ...... +_._-_ .. _+
Total 3 11 15 3 32 9.38 34.38 46.88 9.38 100.00
STATISTICS FOR TABLE OF PaS BY RES
Statistic OF
Chi'Square 3 likelihood Ratio Chi-Square 3 Mantel'Haenszel Chi'Square 1 Phi Coefficient Contingency Coefficient Cramer's V
Sample Size = 32
Value
1.552 1.575 0.195 0.220 0.215 0.220
Prob
0.670 0.665 0.659
WARNING: 50X of the cells have expected counts less than S. Chi-Square may not be a valid test.
190
APPENDIX E
SAMPLE SDHPT CONSTRUCTION FORMS State Department of Highways and Public Transportation FORM 112A (ROSCOE 9-B9)
APPROVAL OF CHANGE IN PLANS
191
F.C. Req. Ho. _ Accomp. by Sketches or F.C. Plan-Sheets Numbered Hwy. No. ___ _ County. Federal Proj. No. Control
~TO~T~HE~E~NG~I~NE~E~R~-D~I~R~ECnT~OR~:~ ------------Approval of the following changes in plans and/or specifications is requested. limits: SU. to Sta. _______ _ Description:
ThiS field change is requested for the following reasons:
Supported by Supplemental Agreement No. __ _ and by Extra Work Order No. __ __ Contractor:
,Contract' ,Contract I Item No. Description Unit Quantity Price Amount Quantity Price Amount
Additional Days
Time Extension No.
RESPECTFULLY REQUESTED ey:
(S) Resident Engineer Date
(S) District Construction Engineer Date
Tota 1-------.:.$ _____ _ Tota 1------,:.$ _____ _
Net Underrun$ ""------- Net Overrun~$ _____ _
APPROVED BY:
(5) District Engineer Date
INSTRUCTIONS: This form to be used for changes approved by the District Engineer.
192
~tate Department of Highways and Public Transportation fORM 1128 (ROSCOE 9-89)
APPROVAL OF CHANGE IN PLANS
F.t. Req. No. Accornp. by Sketches or F.C. Plan-Sheets Numbered Hwy. No. ___ _ ""","""",,",""""""""""""'J"',-'I':"-'" -"'I"II:"I-",,=~County. Federal Proj. No. ContrOl ______ _ TO THE ENGINEER-DIRECTOR:
Approval of the following changes in plans and/or specifications is requested. Limits: Sta. to Sta. _______ _ Description:
This field change ;s requested for the following reasons:
Supported by Supplemental Agreement No. __ _ and by Extra Work Order No. __ _ Contractor:
Item No. Description
Additional Days __
Time Extension No.
RESPECTFULLY REQUESTED BY:
(5) Resident Engineer
(S) District Construction Engr
(S) District Engineer
I NSTRUCTI ONS: To be used for changes approved by the Construction Division or the Administration
Unit
Date
Date
Date
IContractl !Contractl Quantity Price Amount Quantity Price I Amount
I
I I I
Tota 1-------:.=.$ _____ _ Toto.l------.;:.S _____ _
Net Underrun::.S _____ _ Net Overrun . .;:.$ _____ _
RECOMMENDED FOR APPROVAL BY:
Chief Engineer. H1ghway Design Date
Chief Eng •• Safety & Main. Operations Date
Bridge Engineer Date
APPROVED ____ --=:::-r:==~=;::_:_~ __ - _-,,:'=_ Construct1on Engineer Date
APPROVEO._---;::-:-:-~~-",=~_::_..__,.,.--.-.--__ ......-.:~_ Deputy Dir Design & Construction Date
~tate Uepartment of Highways and Public Transportation Construction FORM 317A (ROSCOE 9-89)
193
EXTRA WORK ORDER NO.
County ______ Project ________ Control, _____ ......:Highway ____ _
Date Statlon'-__________ to Stat;on'-________ _
To,_.....,,~~~~_=--------------__ ----- • contractor on the above project.
This will be your authority to proceed with the following force account work. The Engineer will have an inspector in charge of work at all t1mes, and dally reports are to be rendered, signed by both parties.
Work consists of
and General Specification Items 4.4, 9.3, I II
Equipment IAgreed Ratell
I II I 11
I II I II
I II I II I II I II I II I II . II
Estimated Cost to be.-Z,.$ ____ _
Sealed Copy on file __
Days added __ Time Extension No.
by (5)
agree to do the above work at the rates named.
Contractor's Representative Date
9.4, 9.5, and 9.6 are to govern. I I
Labor IAgreed Ratel
I I I I I I I I I I I I I I I I I I I I I I
by (S) Resident Engineer Date
Approved by: (S)
District Engineer Date
194
State Department of Highways and Pub11c Transportation Construction FORM 3178 (ROSCOE 9-89)
EXlRA WORK ORDER NO.
County ______ ,Project ________ Control ______ H,ighway ____ _
Date Station ____________ to Station~ _______ _
TO'_~'L'.:":":_:_:=_:;_:_::7"""--------------------' contractor on the above project.
This will be your authority to proceed with the following force account work. The Engineer will have an inspector in charge of work at all times, and daily reports are to be rendered. Signed by both parties.
Work consists of
and General Specification Items 4.4, 9.3, 9.4, 9.5, and 9.6 are to govern. I" I I
Equipment IAgreed Rate I I labor IAgreed Rate I I II I I I II I I I II I I I II I 1 I II I I I II I I I II I I I II I ~ I II : I I II I I I II I I
Estilllated Cost to be'-'S"'--___ _ by (S) Resident Engineer Date
Sealed Copy on File __
Days added __ Time Extension No.
1 agree to do the above work at the rates named.
by (S) Contractor's Representative Date
Approved by: (5)
District Engineer Date
Engr •• Canst. & Cont. Adm. Date
Deputy Dir., Field Oper. Date
SAMPLE
(SUPPLEMENTAL AGREEMENT FOR DISPUTE RESOLUTION ON AN ONGOING PROJECT)
SUPPLEMENTAL AGREEMENT NO. _
PROJECT: CONTROL: HIGHWAY: COUNTY :
WHEREAS, on the _ day of ,19_ a contract was entered into by and between the State of Texas represented by the Engineer-Director and , Contractor for construction of certain improvements on that portion of SH _ in County, Texas and designated as Project , and;
WHEREAS, the Contractor has expressed in writing his disagreement with the contract working days charged based upon delays because of conflicts with water lines, sewer lines, power lines and railroad tracks; and further the contractor has paid the power company approximately $3,800 for relocating a power line a second time while reserving all rights of claim, and; (DISCUSSION OF PROBLEM)
WHEREAS, to bring these differences to a mutually satisfactory agreement the parties hereto have met and discussed these problems in depth and; (JUSTIFICATION AND ACTION)
THEREFORE, have agreed that the Contractor is hereby granted 123 additional working days and that this is a fair, reasonable and equitable resolution of the above problems that occurred prior to February 28, 1988 and that it is further agreed that there will be no further claims by the Contractor for delays or otherwise, as may result from these actions.
195
SAMPLE
(SUPPLEMENTAL AGREEMENT FOR DISPUTE RESOLUTION ON COMPLETED PROJECTS)
SUPPLEMENTAL AGREEMENT NO.
PROJECT: CONTROL: HIGHWAY: COUNTY :
WHEREAS, on the _ day of ,19_ a contract was entered into by and between the State of Texas represented by the Engineer-Director and , Contractor for certain improvements on that portion of SH __ in County, Texas and designated as Project , and;
WHEREAS, during the course of the subject project, the Contractor requested additional compensation in the amount of $28,656.00, such amount allegedly incurred by the Contractor for unpaid borrow tickets, and; (DISCUSSION OF PROBLEM)
WHEREAS, after careful review of the Contractor's request, the project pay records, and the nature of the project, it has been determined appropriate that a portion of the claim in the amount of $14,375.02 be paid, such amount representing compensation to cover said unpaid tickets, and; (JUSTIFICATION AND ACTION)
THEREFORE, have agreed between the parties hereto that a lump sum payment to the Contractor in the amount of Fourteen Thousand Three Hundred Seventy-Five Dollars and Two cents ($14,375.02) in consideration of the above-mentioned items of the claim is fair and reasonable, and constitutes full and final payment for said unpaid tickets, and; (RESOLUTION)
IT IS THEREFORE AGREED, that the Contractor hereby waives any claim for additional compensation due to any and all other expenses or loss of compensation incurred in the performance of this contract to date. (DISCLAIMER)
196
Project IUghway County
STA'!'S OEPA.RTMEm' OF HIGH' •• I>.YS AND PUBLIC TRANSPORTATION
CONTRACTOR
Resident Engineer Date
Executed for the State Engineer Director and approved for the State Highway and Public Transpor-
{Firm}
By:
tation Commission under Minute SURETY APP~ Order 82513 and Administrative Order 32-87, for the purpose and efffect of activating and/or carrying (Firm) out the orders. established policies or ~~rk programs heretofore approved By: and auth~rized by the State Highway 3nd Public Transportation Commission.-
District £nglneer Date
Date
197
MICHAEL PETER LEHMANN 5055 Oriole Beaumont, Texas 77707
198
VITA
Engineer I, Texas State Department of Highways and Public Transportation
EDUCATION
B.S., Civil Engineering, Texas A&M University. December 1984
EXPERIENCE
Engineering Assistant, Texas State Department of Highways and Public Transportation, Hardin County Resident Office, District 20, February 1986 to December 1989.
Engineering Assistant, SDHPT, District 20 Design Office, Beaumont, May 1985 to February 1986.
Engineering Aide, SDHPT, Orange County Resident Office, District 20, May 1984 to August 1984.
Student Laborer, Texas Transportation Institute, Riverside Campus, October 1983 to January 1984 and October 1984 to December 1984.
MEMBERSHIPS AND HONORS
Chi Epsilon American Society of Civil Engineers American Society of Civil Engineers. President, Texas A&M Student Chapter,
1984 ASCE Student Chapter "42" Tournament Co-Champion, Spring 1990
FIELDS OF EXPERIENCE
Mr. Lehmann been a full-time employee of the Highway Department from May 1984 to the present. Experience during this time frame included geometric deSign, schematic deSign, pavement deSign, structure layout, construction management, materials testing, and surveying. He was selected to represent the Highway Department at Texas A&M as a graduate student. This program provided the foundation for the research effort.
