Avoid Unscrupulous Claims
In this era of lawsuits by contractors with claims for delays and unabsorbed overhead, many facilities owners insist on getting a detailed schedule for critical path management before permitting any construction work to start. But do they demand enough documentation? Oftentimes, a contractor will spend thousands of dollars preparing a baseline CPM schedule, to plan the project before the first shovel hits the ground. And frequently, the contractor will update the schedule monthly to show actual construction progress. But very few contractors will use the schedule to spot lurking delays.
DISHONESTY. I have spent the past 15 years working as a scheduling and claims analyst. I also have been a contractor, an owner's representative and an architect's representative. Although I have worked with a number of contractors who were above reproach–in terms of fair and honest pricing and requests for additional time–I have worked with many more contractors who had less integrity. This does not imply that all contractors are unscrupulous, but in my experience many are.
On almost every project I have worked on recently, the contractor in question showed only impacts to the project that he or she believed were caused by the owner or architect. No impacts were shown that were caused by the contractor or its subcontractors. In this light, owners need to protect themselves and their projects. Some owners do require their architects to review their contractors' baseline CPM schedules; some even review the monthly updates. But how many architects really understand CPM scheduling?
Most architects that I have worked with have no real understanding that "total float" is merely a numerical value for the amount of time that a project can slip without being completed late. The real focus should be on the "critical path," meaning the sequence of activities that will take the longest amount of time to complete. Contractors and scheduling consultants have developed many tricks to hide float, or make something appear critical when it is not. Activities such as casework or ornamental metals will find their way to the critical path, although rarely will these items delay a project's completion.
On almost every project, a contractor will submit a "request for equitable adjustment," seeking additional money for changed work plus additional time to complete the project and extended overhead as a result of any delays. Too often, the owner or architect will simply use their judgement that a particular issue could not possibly delay a project. Although this gut feeling may in fact be correct, a request for equitable adjustment should be rejected formally, on its merits or lack thereof.
Rejecting it out of hand opens the door for claims and litigation later. If the merits of the denial of a request for equitable adjustment are not put on the record, those merits may not be cited as part of a defense during litigation. Even if you subsequently do the formal review and deny the claim for sound reasons, the same conclusion will have cost thousands of dollars more because your scheduling/claims consultant will have had to sort through boxes and boxes of documentation to uncover the real story.
And what if your gut feeling was wrong? Then you not only will have paid the contractor for extended overhead, but you will have paid your scheduling/claims consultant the same thousands of dollars plus legal fees, and not only yours but in some cases the contractor's. Say the contractor's daily overhead rate is $1,000 and your consultant charges you $500 to review the delay claim. If the consultant determines that you owe for five days of delay, your total obligation is only $5,500. But if you have to pay $30,000 in legal fees plus $20,000 for your consultant, you pay $55,000 for the same five days of delay.
The cliché holds true that an ounce of prevention is worth a pound of cure. Many of my colleagues and I would rather be part of a project from the onset and see a successful completion than not see a project until we must spend countless hours digging through documentation. Owners and architects should begin using CPM scheduling consultants from the time their projects go to bid. With someone on the team that can really evaluate the baseline schedule plus monthly updates and delay claims as they arise, many projects will avoid litigation entirely. This does not mean that you never will have to grant a time extension, but you will have more control over which ones you approve.
RESPONSIBILITY. Ideally, the contractor, owner, architect and CPM consultant should meet monthly to evaluate the likelihood of meeting the contractual end dates and to discuss the progress of each month's work, as well as schedule impacts and potential issues. That way, responsibility for delays or impacts can be attributed readily to the party that caused them. This not only will reduce the costs to the owner and architect for reviewing the schedule for the duration of the project, but will reduce the frustrations of the contractor, who now can focus on building the project instead of fighting for time extensions and increased reimbursements. Owners and architects should write monthly schedule review meetings into contracts, then insist on holding those meetings. That way, there will be a higher probability that the project will be finished on time and within budget, without resulting in costly litigation.
