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THE JOURNAL OF AACE INTERNATIONAL THE AUTHORITY FOR TOTAL COST MANAGEMENT
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COST
INCREASING
PRACTICES IN
March/April 2012
ENGINEERING
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PROJECT CONTROLS
IMPACT ON A SUCCESSFUL PROJECT
CONSTRUCTION CHANGE ORDER MANAGEMENT CAUSE AND EFFECT:
HOW SCHEDULE ACCELERATION AFFECTS PRODUCTIVITY BRINGING HOME THE BACON THE ROLE OF
OVERHEAD CALCULATIONS AND THE LAW
CONSTRUCTION COST AUDITING WITHIN PROJECT CONTROLS
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CONTENTS
COST ENGINEERING
TECHNICAL ARTICLES 4 Increasing Project Controls Impact on a Successful Project
David A. Lucas
12 Practices in Construction Change Order Management

Joseph J. Egan, PE; Joseph E. Seder, CCE; and Dayna L. Anderson
19 Cause and Effect: How Schedule Acceleration Affects Productivity

Matthew Christopher Baker, CCT
26 Bringing Home the Bacon Overhead Calculations and the Law

Dr. Kathleen M.J. Harmon and Kathleen O. Barnes
34 The Role of Construction Cost Auditing Within Project Controls

Jake Ortego, PE and Antonio Fratangelo, CCC
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TECHNICAL ARTICLE
INCREASING PROJECT CONTROLS

IMPACT ON A SUCCESSFUL PROJECT
David A. Lucas
Abstract: Project controls, in many organizations, is viewed as the quantitative and analytical arm of project management. Many advances in project controls technologies over the past couple of decades have made producing performance metrics, schedule analysis, and earned value reporting more automated and efficient. The question is who is using the information and is it increasing the likelihood that the projects will be successful? Project controls organizations should not be blinded by producing common reports or performance metrics, but should place a higher emphasis on ensuring that the information they provide is useful to those making decisions that will ultimately determine the success of the project. This article examines how project controls organizations can increase their impact on the success of their projects by evaluating their customers, identifying key project decisions, and aligning the information they provide with the success criteria of the project. This article was first presented at the 2011 AACE International Annual Meeting as manuscript CSC.606. Key Words: Communication, project controls, project management, and stakeholders
engaged, proactive, and value added project controls organization that is viewed as integral to all project management processes and a significant contributor to the success of the projects it serves.
What Is Project Controls

Project controls is generally identified in most project management organizations as the group of employees responsible for developing and producing reports and analyses in the areas of cost, schedule, earned value, and key performance indicators. These groups are also often tasked with the responsibility to manage the various project controls systems that are used to collect, analyze, and report project management related data, such as scheduling and cost software and integrated information systems. While these roles are broadly accepted as the functional responsibilities of a project controls organization, within most project management frameworks project controls is considered a project management process. The project controls associated processes encompass many areas of project management and are the responsibility of a broad range of project team members.
he expectations for project management in firms around the world are changing rapidly. With significant pressures on firms to reduce expenditures, it is a matter of survival for companies to be as efficient as possible in their investment of capital dollars and highly competent in the management of all types of projects. Project controls plays a significant role in how well firms are able to optimize available resources and effectively execute projects. Over the past decade, significant advances have been made in the scheduling, cost, and earned value management information systems that
most project controls organizations use to produce the reports and metrics used every day in the management of projects. The question is who is using the information and is it actually contributing to the efficient use of capital dollars and successful projects? In this article, readers will examine the ways that project controls should be viewed by project management organizations in order to maximize their impact. The author also discusses various considerations that leaders of project controls organizations should incorporate into their business processes, employee development plans, and management philosophy. The goal is to create an
In the Project Management Institutes, A Guide to the Project Management Body of Knowledge [PMBOK] 4th edition, five project management process groups are discussed: initiating, planning, executing, monitoring and controlling, and closing. The monitoring and controlling process group is defined as, the process of tracking, reviewing, and regulating the progress to meet the performance objectives defined in the project management plan [6]. It is important to note that the monitor and control process group is not a project phase, but is carried out throughout the lifecycle of the project and is very closely integrated with the other four project management process groups. The output of one of the project management processes generally becomes the input to another process or is a deliverable of the overall project [4]. The monitor and control project management process includes many of the functions typically characterized as project controls related tasks, such as: Comparing actual project performance against the project management plan. Accounting for newly identified risks and analyzing, tracking, and monitoring existing risks. Providing information to support status reporting, progress measurement, and forecasting. Providing forecasts to update current cost and current schedule information. And, Monitoring implementation of approved changes as they occur [5].
PDCA control style that reflects the following steps of: Plan establish a plan. Do make measurements of performance. Check compare the measurements against the plan. And, Act take corrective, mitigating, or improvement action as needed [3].
Similar to the monitor and control process group in PMBOK, the project control process cycle is an iterative process that is repeated periodically through the lifecycle of the project. The project control process cycle also includes many tasks generally characterized as project controls functions some of which include: Project scope and execution strategy development. Development of a work breakdown structure. Integrated plans for cost, schedule, and resource management. Establish project baselines for performance measurement. Perform value analysis and engineering. And, Performance assessments to evaluate deviations from plan [3].
all of these functions to ensure that overall project objectives are accomplished. Organizations that recognize the importance of integrated project controls processes and incorporate these processes from initiation through closeout are more likely to be successful in achieving their objectives. The second key concept in this section is to recognize that all project team members must participate in the project controls related processes to obtain the full value added contribution to the project team. This means that project management and project controls organizations must spend time training all project team members in project controls concepts, reports, and how to use the information to help them be successful. Project controls organizations that isolate this type of general training to only project controls personnel will not be as effective as those organizations with knowledgeable project team members who know what information to ask for, what the information means, and how to translate the information to tangible results.
Providing Relevant Information

In order for the metrics and reports produced to monitor project progress to be relevant to the project manager and the project team, they must be aligned with the success criteria for the project. Although this concept seems simple and obvious to most, it is often overlooked by many project controls organizations that produce the same standard reports on every project. There are many drivers to a project that can change the success criteria for the project team and the information that is needed to make effective decisions. Project controls should be engaged with the project team and fully understand the success criteria for each project in order to determine what types of information the project team needs to evaluate its progress toward achieving all of its objectives. It is commonly recognized that most projects are bound by scope, cost, schedule, and quality. But there may also be other considerations that impact the types of metrics and reports that a
In the Association for the Advancement of Cost Engineering Internationals Total Cost Management Framework (TCM), there are five processes in the project implementation step of the strategic asset management process: project planning, project activity implementation, project performance measurement, and project performance assessment. All of these five processes are defined in TCM as the project control process cycle [2]. Project control is defined in TCM as, a process for controlling the investment of resources in an asset. TCM uses a
In both the AACE and PMI frameworks, project controls is a project management process that is carried out from the initiation of the project through project close-out and involves all members of the project team. Project controls processes lead the project team to define the project objectives, develop a plan to achieve those objectives, use the plan to establish a baseline for measuring progress, and then provides the tools for the project team to identify any deviations from the plan. The first key concept that must be recognized, in order for project controls organizations to have the maximum impact on the successful completion of projects, is that project controls processes are integral to all of the project management processes. While individual project team members may be focused solely on engineering, construction, or operations, the project control processes integrate
project team needs for effective decision making. Factors such as environmental or regulatory compliance, contracting philosophy, public perception, or overall business impact may change the type of information needed to manage risk or report progress. In the instance of contracting philosophy, the risk to an owner is different if it were to contract a construction labor contract on a reimbursable basis versus a fixed-price basis. Under a reimbursable basis, the owner may assume productivity, schedule, scope, and labor rate risks. In this case, the project team would need frequent earned value reporting, schedule analysis, craft rates, equipment rates, and overhead rates. On a fixed price basis, the owner would likely pass the productivity, labor rate, equipment, and overhead risks to the contractor. The project team would be more interested in reporting performance information on factors such as schedule adherence and any change orders to the base contract value. If a project is being undertaken to address specific environmental or regulatory requirements, there may critical milestones or specific reporting requirements required in order to obtain funding, meet performance requirements, or achieve compliance. In these instances, the project team may be required to develop and provide project specific reports that include the information necessary to monitor progress against the stated objectives. A common obstacle that some organizations experience when providing project specific reports, based on the success criteria or risk profile of a project, is the standardized software systems organizations use to produce various types of performance status reports. While the software systems may be extremely powerful, they may also be very restrictive in manipulating data or providing user-defined reports. Software systems that do not allow for some flexibility in reporting can hinder the overall impact that project controls can provide to a project management organization. As project management continues to evolve and mature in many organizations the importance of aligning
metrics with success criteria will become increasingly important for project controls organizations to add value to the project teams. As Gary R. Heerkens points out in his book, The Business Savvy Project Manager, the landscape of project management is changing and as it changes the expectations for all those involved in managing projects will change as well [8]. The way that we are now beginning to assess true project performance is evolving beyond cost and schedule. Project controls must expand its role in order to maximize its value to the project team. As Harold Kerzner has stated, If management doesnt see how a project will deliver value, that project will be cancelled even if its meeting time and budget constraints. Kerzner went on to point out that this is a significant shift in the focus of many project management organizations and is going to require a re-evaluation as to how project managers evaluate how well their project is performing [9]. Project controls organizations must continuously monitor how projects are being evaluated and provide relevant data for project management organizations to be successful.
When decisions needs to be made; and, what are the potential outcomes of the decisions.
In many firms, the engagement of the project management organization in decision analysis, project selection, and business case preparation is rapidly evolving and becoming a significant role of the project teams. This early preproject engagement provides project managers a more strategic role in the organization. Dr. Kerzner noted, based on his research of project management over many years, The biggest change in the last several years has been senior management support of project management. Senior management no longer views project management as a career path. It is now viewed as a strategic competence necessary for the survival of the company [9]. As the expectations of project managers evolve, project controls must evolve as well. This can be accomplished by expanding its role from the traditional cost and schedule development and analysis for defined projects. This expanded role would then also include the following. More parametric estimating; Decision tree analysis; Lifecycle cost analysis; Business case preparation; and, Risk modeling.
Key Project Decisions and Events

Corporations and project teams are required to make many critical business decisions on every project that they choose to under take. Decisions range from project selection, technology selection, make/buy decisions, schedule decisions, funding decisions, and alignment with corporate objectives. As Heerkens noted, Projects are critical agents in nearly every companys quest to achieve positive business results [7]. Given the critical nature of the decisions made around each project, one of the greatest value-added contributions that a project controls organization can make is ensuring that the project team has the right information, at the right time, to make the best decision possible. In order for this to happen, project controls must be engaged and understand the following: Who are the decision makers; What information they need to make their decisions;
Organizations that build competencies in the above areas will become highly valued in the decision making process. Once a project has been initiated, there continues to be many decisions and critical events that a project team must manage throughout the planning, execution, and close-out phases of the project. The most important contributions that a project controls organization can make, once a project has been selected and approved, is to provide forward looking analysis that identifies problems early and to actively participate in the development of strategies to keep the project on track.
Figure 1 Partial Project Stakeholder and Communications Mix As Lynda Bourne stated in a recent article on project controls and communication, The only value that a project control tool can offer is to influence future actions and decisions [1]. The key concept is that in order to maximize the impact that project controls has on the project or the firm, project controls has to: be engaged in the critical decisions that are made to select the right project; establish the right success criteria; develop a plan to achieve the success criteria; and, proactively participate in the decisions that need to made during project execution to ensure a successful outcome. identification and analysis process that is a part of the project communications planning process for the overall project. Project controls should be engaged and support the overall effort and then conduct a more specific analysis detailing select stakeholders and what information that they need to effectively carry out their role on the project. As defined by PMI in PMBOK 4th edition, Identify stakeholders is the process of identifying all people or organizations impacted by the project, and documenting relevant information regarding their interests, involvement, and impact on project success. Stakeholders may be individuals or entities that are internal or external to the project team [7]. Once project controls has aided the project manager in the identification of all key stakeholders on the project, it is often valuable to work with the project management team to group the stakeholders in terms of interests, information required, and frequency of the reporting updates. This will be a key input to the overall project communications plan as it relates to project controls deliverables. See figure 1 for a partial excerpt of an overall project stakeholder/communications matrix. As a result of the overall project stakeholder identification process, project controls will identify which key stakeholders require significant interface with project controls in order to effectively carry out their role on the project. Once these individuals or entities are identified, project controls should conduct detailed face-to-face discussions to determine the types of information that is needed to assist them in contributing to the success of the project. Project controls should also use these discussions to present any standardized reports and to explain the value of these reports. This step of developing a communication strategy for all key stakeholders is one of the most important aspects of project controls planning. Bourne pointed out that, The challenge facing schedulers and other controls staff is recognizing that their primary role is communication not controls. Certainly they need to be able to gather and process information effectively but this is wasted effort without equally effective communication [1].
Understanding Your Stakeholders

Another concept that is sometimes overlooked in the world of standardized reporting and uniform project controls processes is stakeholder engagement and communications planning for project controls produced deliverables. Many project managers and project teams go through a stakeholder
Figure 2 Partial Project Controls Reporting Matrix by Stakeholder Communication of project controls information is essential to the success of the project, so it is important that leaders of project controls organizations both understand and emphasize to employees some of the key principles of effective communication. Consider the following key communication principles. Spend time in face-to-face interviews to better understand your audience, their frame of reference, their experience, whats important to them, and how they are going to use the information. Build trust in the relationship with the key stakeholders. It is very important for project controls to be considered an integral part of the team that is helping the project achieve success and not an auditor of the project. Be respectful of your audiences time and develop reports that provide data in a manner that your audience can understand quickly. If the recipient of a report has to struggle to understand the report, the likelihood that it will not be used and that it will not positively impact the project increases. Be engaged and continuously follow-up with stakeholders. Do not blindly issue reports electronically without personal interaction around what is important, what conditions may have changed, and any new information that may be needed. Be timely, consistent, and accurate in all communications. Project team members are relying on project controls information to make critical decisions, engage in commercial or legal discussions, and update project sponsors. It is critical that project team members have confidence in the accuracy of the information they are being provided. controls can provide that will assist them in their individual role. Different roles on the project may have drastically different needs in terms of the information they require from project controls. One example project shows how the level of the information provided to certain stakeholders, while based on the same data set, is different based on the role of the stakeholder, (See figure 2). The number of different reports, formats, and analysis, that a project controls organization may provide on each project is why it is so critical to understand the true needs of the stakeholders and provide information that will be used. On many large complex projects the number of stakeholders and types of reports can become overwhelming if not managed through clear and concise up-front communication, identifying where standardized reports can and cannot be used to satisfy a need, and ensuring a clear understanding of the intent of each report that is provided. It is also important that project controls organizations do not get so
During the face-to-face interviews with each key stakeholder, project controls should gain a firm understanding as to what is important to each of them. This is a crucial step in determining what information project
consumed with processing periodic status reports that publishing the reports becomes the number one goal, and not the analysis and value added contribution to the project. This is where there is great value in establishing some standardized reports and coding structures on projects and then training the workforce to understand how to use the reports as generated. A best practice for project controls leaders is to closely track the number and types of reports that project controls is requested to provide on all projects. If similar requests for customized reports are identified on a wide range of projects, project controls may consider modifying an existing report to include the information or develop a new report that becomes part of the standard suite of reports for each project. Another critical aspect of communication for leaders of project controls organizations to consider is the generational gap, personality styles, and the environment in which much of the project controls related communications takes place. Understanding that these types of soft attributes are not strongly recognized in many technical organizations, the reality is that they do exist and they do have a significant impact as to whether project controls organizations maximize their overall contribution to the success of the project. One company with several high performing young project controls employees recognized that some were intimidated in working with experienced construction managers, and uncomfortable challenging them on performance related metrics. They did not have enough confidence in their technical understanding of construction work and had seen how aggressive the construction managers could be when challenged. Although the project controls employees were very well versed in earned value, thoroughly new to the details of the cost and schedule performance on the project, and had actually identified numerous legitimate concerns that needed to be addressed, their lack of confidence was not allowing them to maximize their impact
on the project. They would instead produce their reports, attend the meetings, and keep their issues to themselves. In these types of instances where team members do not feel comfortable raising legitimate issues or participating in a team meeting, project managers and project controls leaders need to first recognize it and then intervene as quickly as possible. After recognizing the situation above, this company began holding training sessions for all of its project controls personnel on recognizing different personality styles, effective communication, and conflict resolution. Supervisors also started making more routine site visits with younger employees to observe and provide guidance on effective communication skills. Understanding and emphasizing the importance of communication to all different types of stakeholders is now viewed as a necessary skill for project controls personnel.
Reliable metrics should always be accurate and consistent. Worthwhile the effort to produce the metrics should only be a fraction of the value they provide. Balanced in combination the metrics for a project should cover all of the important areas of the project. And, Constructive the metrics should not initiate or invoke off-target behavior that does not support the project objectives [10].
Making an Impact
Once a project controls organization has: supported the project team in preproject activities; understands the project success criteria; identified key project controls related stakeholders; and, developed a detailed communication strategy for project controls deliverables,
it has now established the foundation to provide a value added contribution to the project team. The next step is to develop the metrics and reports that project controls will provide key stakeholders to execute the project. When choosing the metrics for a project, there are several considerations that should be evaluated. According to project management consultant, Max Wideman, performance metrics should be: Focused meaning they are relevant and useful to the project team and its stakeholders.
Another important factor to consider in the development of metrics and reports is how the end user is going to use each report to impact the project. An example of this was on a recent large capital construction project where the site construction manager met every week with his construction coordinators and sub-contractors to review progress and performance. When project controls conducted their face-to-face interview with the site construction manager, he stated he would like to be able to discuss performance sorted both by sub-contractor and responsible coordinator to improve accountability and collaboration. Project controls, using a resource code field in the cost and schedule systems, was able to provide CPI [Cost Performance Index], SPI [Schedule Performance Index], and variance analysis sorted by sub-contractor and responsible coordinator to the site construction manager each week in support of the meetings. The site construction manager used this information to assign personal accountability to both the subcontractor and construction coordinator for the performance of their assigned work. As a result of these changes in reporting, the performance on the project improved and an increased collaboration between the owner and sub-contractor was recognized. On another project, an owner had contracted a large installation contract on a firm fixed-price basis. Although the owner did not have any cost risk on the base scope of the contract, project controls, along with construction, began to identify the number of resources on the project were consistently exceeding
the resource loaded schedule without significant changes in schedule durations. After recognizing this trend, project controls began to monitor labor cost performance and projected the financial condition of the contract. The analysis predicted that the contractor was likely over-running its estimate. So, the owner began to prepare more aggressively for a request for additional compensation. As a result of project controls being engaged in the project, understanding the key events taking place on the project, and proactively providing analysis to project management, the owner was fully prepared when the request for additional compensation was received as to the true drivers of the contractors costs. This allowed for a quick and fair resolution of contractors request so that the overall project objectives were met. There are many more examples that could be written of how a strong project controls organization has positively impacted a project. The consistent theme in all of these examples is that the project controls personnel assigned to the projects were: an integral part of the project team; were effectively communicating with the other team members; understood what was transpiring on the project; proactively identified what decisions needed to be made; and, provided good and accurate information to support the decision making process.
is critical that project controls be viewed as the project management process that integrates the initiation, planning, execution, and close-out processes. Project controls organizations will continue to exist to ensure accountability for the deliverables associated with the project controls process, but all project team members must participate fully in project controls processes in order to achieve the maximum impact on the success of the project. As project controls organizations look forward to the increasing responsibilities and new roles that they may assume, they must keep in mind some basic concepts to ensure they are maximizing their impact on the organization. These basic concepts include: Ensuring that the information provided on every project is relevant to the success criteria of that specific project. Understanding the critical events and decisions being made on the project and providing proactive and forward-looking analysis to support effective decision making. Identifying project controls key stakeholders and communicating in a manner that the stakeholders can successfully execute their role on the project. And, Seeking out opportunities through engagement with project team members and analysis of project performance to proactively contribute to the success of the project.
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Conclusion
roject management is an evolving field and the strategic importance of strong project management processes is being realized by firms now more than ever in the past. As global economic pressures continue to force firms to make better decisions as to how they select and monitor their capital investments, project management and project controls organizations must continue to evolve in their responsibilities and provide the basis for effective decision making. In order to increase the project management competencies in a firm, it
Project controls and project management organizations that increase their competencies in all of these areas will be well positioned to ensure that the right projects are built, the projects are well planned, success criteria are well defined, and the tools are in place for effective project execution.
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REFERENCES
1. Bourne, Lynda, DPM, PMP, Project Controls & Communication, Voices on Project Management, Project Management Institute, Inc., 2009, referenced from:
http://blogs.pmi.org/blog/voices_o n_project_management/2009/07/p roject-controls-communication.html Total Cost Management Framework A Process for Applying the Skills and Knowledge of Cost Engineering, 1st Edition, Chapter 2 The Total Cost Management Process Map, AACE International, Morgantown, WV, pages 19-20, 2006. Total Cost Management Framework A Process for Applying the Skills and Knowledge of Cost Engineering, 1st Edition, Chapter 2 The Total Cost Management Process Map, AACE International, Morgantown, WV, page 27, 2006. A Guide to the Project Management Body of Knowledge (PMBOK Guide), 4th Edition, Chapter 3 Project Management Processes for a Project, Project Management Institute, Inc., pages 40-41. A Guide to the Project Management Body of Knowledge (PMBOK Guide), 4th Edition, Chapter 3 Project Management Processes for a Project, Project Management Institute, Inc., pages 59-64. A Guide to the Project Management Body of Knowledge (PMBOK Guide), 4th Edition, Chapter 3 Project Management Processes for a Project, Project Management Institute, Inc., page 61. A Guide to the Project Management Body of Knowledge (PMBOK Guide), 4th Edition, Chapter 10 Project Management Processes for a Project, Project Management Institute, Inc., page 246. Heerkens, Gary R., The Business Savvy Project Manager, The McGraw-Hill Companies, page 10. Miller, Cyndee, Harold Kerzner: Project Managers Must Understand Business, Voices on Project Management, Project Management Institute, Inc., 2009, referenced from: http://blogs.pmi.org/blog/ voices_on_project_management/ 2009/10/harold-kerzner-projectmanager.html
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10. Wideman, Max, Maxs Project Management Wisdom, Project Metrics, Slide 5 of 10, referenced from: http://www.maxwideman .com/isaacsons/iac1008/sld005. htm.
ABOUT THE AUTHOR

David A. Lucas is with American Electric Power. He can be contacted by sending e-mail to: dalucas@aep.com.
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11
TECHNICAL ARTICLE
PRACTICES IN
CONSTRUCTION CHANGE ORDER MANAGEMENT

Joseph J. Egan, PE; Joseph E. Seder, CCE; and Dayna L. Anderson
Abstract: Changes during most construction projects are inevitable and can lead to cost and schedule overruns. Effectively managing these changes can significantly reduce the risk of disputes and claims that often result in costly litigation. This article examines the various approaches to change management currently used in the industry and summarizes some of these practices. In addition, a case study involving the construction of a power plant impacted by a force majeure event that delayed the shipment of the major equipment for more than six months is discussed. Impacts to the project were tracked on a contemporaneous basis in order to efficiently quantify cost and schedule impacts for change order negotiations with the owner and for insurance recovery purposes. Some of the means and methods used on the project to track the impacts, including out-ofsequence work, winter conditions, stacking of trades, and others, are addressed in this article. The authors first presented this manuscript as CSC.607, at the 2011 AACE International Annual Meeting in Anaheim, CA. Key Words: Claims, change orders, construction, cost, risk, and schedules hanges during most construction projects are inevitable and can lead to cost and schedule overruns. Effectively managing these changes can significantly reduce the risk of claims that often result in costly disputes and litigation. This article examines the various approaches to change management currently used in the industry and summarizes some of these practices. In addition, a case study involving the construction of a power plant is discussed. Construction of the plant was impacted by a force majeure event that delayed the shipment of the major
when the scope of work performed differs from the scope of work outlined in the contract documents. Examples of common changes encountered on construction projects include the following: addition or deletion of scope; changes to the project duration; revisions to material type and specifications; drawing and specification errors and omissions; late or defective owner-furnished material; differing site conditions; equipment procurement and manufacturing issues; force majeure; and contractual non-compliance by the owner.
equipment for more than six months. Impacts to the project were tracked on a contemporaneous basis in order to efficiently quantify cost and schedule impacts for change order negotiations with the owner and for insurance recovery purposes. Some of the means and methods used on the project to track the impacts including out-of-sequence work, winter conditions, stacking of trades, and others, are addressed in this article.
Changes to a construction project can be defined in many ways, including being generally categorized into three broad categories: directed changes; constructive changes; or cardinal changes.
Defining Change
On many construction projects of Directed changes are changes varying size or type, changes often occur. typically issued by the owner or its Changes on a construction project occur representative that are often written as
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formal change orders [2]. As such, the owner recognizes directed changes as changes to the contract documents [10]. Examples of directed changes include the addition or deletion of scope and revisions to material specifications. In contrast, constructive changes are typically defined as acts by the owner or its representative that are not directed changes but which still require the contractor to perform work different from that required by the contract documents [5]. Examples of constructive changes include performance interference by the owner, and untimely responses by the owner to contractor submittals, among others. Cardinal changes are typically changes which require the contractor to perform work that was not contemplated by the parties when they entered into the contract and is fundamentally different from the scope of work outlined in the contract documents [5]. For example, the deletion of a large portion of a contractors scope of work by the owner could constitute a cardinal change. Summary of Change Management Approaches Being Used Within the Construction Industry Effectively managing changes on a project can significantly reduce the risk of cost and schedule overruns, which oftentimes result in disputes and claims. Implementation of change management processes can aid in the effective management of change. Currently, there are no widely accepted industry standards related to change management processes; however, numerous organizations and individuals have recommendations on change management processes. The following publications are just a few examples: Project Change Management by the Construction Industry Institute [4]; AACE Internationals Professional Practice Guide to Contracts and Claims, which includes a number of AACE International Transaction papers with titles such as, Project Trends and Change Control, Change Management for Todays Projects A Process Approach, and Effective
Management of Project Change Orders [11]; Change Management Best Practices for the Engineering and Construction Industry by Oracle [10]; and Proving and Pricing Construction Claims by Robert F. Cushman, Craig M. Jacobsen, and P.J. Trimble [2].
AACE International does not have an existing Recommended Practice for change management processes, perhaps highlighting the difficulty of establishing a widely accepted change management industry standard. One challenge is that there is no one specific change management process that is most beneficial and appropriate for all types of construction projects. Each project has its own unique set of facts and circumstances which may make standardization difficult, examples of which are discussed below. The methods and procedures used for managing changes can vary based upon the type of construction contract. Detailed support of a change and its impact to the project may be more beneficial on a lump sum or fixed price contract compared to a cost-plus contract. Additionally, the standard contract documents used in the construction industry include various methods for managing change. For example, the standard AIA documents and ConsensusDOCS documents each include language related to change, including sections on change orders and interim directed changes. However, the methods and procedures for managing change differ between each [6, 8]. Variances in the size, length, and complexity of a project can also be a factor in how change is managed. For example, a large, multi-year project with multiple contractors, subcontractors, architects, engineers, and other consultants may use a robust change management process that can electronically track changes, notify and coordinate the change among the parties, update the project schedule, and track the cost and schedule impacts going forward through the completion of the project.
At times, large, complex projects may require multiple people fully dedicated to tracking and managing change. This detailed process may require additional resources and is less likely to be fully employed on projects of smaller scale and scope. As demonstrated by these few examples, there may not be one specific change management methodology that is appropriate for all construction projects. However, despite the differences that exist between the scenarios mentioned above, each of the change management methodologies reviewed include certain underlying consistencies and commonalities among the alternative approaches. Summary of Practices to Change Management Processes As explained above, there are numerous approaches to change management currently being used within the construction industry. The following change management process summarizes some of the practices from these various approaches and outlines the steps that can be taken to effectively manage change on a construction project: Address potential changes in the contract documents. Identify the potential change. Create a proposed change order and document the proposed change. Review and evaluate the proposed change order timely. Execute the change order. And, Document the executed change.
Address Potential Change in the Contract Documents Effective management of change begins prior to the commencement of construction on a project. The first step in the change management process is to address change in the contract documents. As mentioned above, standard AIA documents and ConsensusDOCS documents each include language related to change and change management. In addition to this standard language, consider including in the contract well-defined processes to deal with change as explained below.
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Changes Clause
The changes clause in a construction contract allows for changes to the scope of work and allows the contractor an equitable adjustment to the contract price or schedule as a result of a change [2]. This clause defines the process which both parties should under take when a change is recognized. For example, the changes clause typically defines the timeframe for which the contractor should notify the owner of the change, the timeframe for which the contractor should provide a cost and schedule estimate to the owner for the changed work, and in some instances, the timeframe for which the owner should review the contractors estimate and respond to the contractor [2]. The changes clause also typically outlines the means and methods of how the contractor should calculate the cost of the change and any associated schedule impacts. For example, the changes clause might direct the contractor to calculate changes on a lump sum basis, a time and material basis, or on a cost plus fee basis. In addition, the changes clause sometimes identifies the parties who are authorized to make changes to the contract [2]. For example, the ConsensusDOCS outline a change process whereby change orders can be either directed by the owner or requested by the contractor [8]. The AIA documents require that the owner, contractor, and architect approve changes to the contract [6].
the claim [7]. If mediation is unsuccessful, the contract language allows the parties to select the binding dispute procedure (e.g., arbitration, litigation, or some other method) [7]. Similarly, the ConsensusDOCS contract documents outline a dispute mitigation and resolution process whereby project personnel first attempt to resolve the dispute [9]. If these negotiations are unsuccessful, discussions between senior executives from each party take place in a further attempt to resolve the dispute [9]. If these attempts also fail, the parties can go before a project review board, a project neutral, or attend mediation [9]. If the claim remains unresolved, the parties then have the option to either litigate or arbitrate the claim [9]. Clearly defined change management processes, including what to do if the parties cannot reach agreement on a change, are often included in the contract documents in order to prevent disputes and claims and aid in the overall success of a project.
Identify the Potential Change

The second step in the change management process is to identify a potential change and correctly classify the type of change according to the contract documents [10]. Early identification of a potential change helps the parties to ensure that the contract provisions related to the particular type of change is followed and that the contract requirements have been fulfilled.
Dispute Resolution Clause

In addition to the changes clause, the contract documents often also include a dispute resolution clause which defines the steps the parties should undertake if they cannot successfully negotiate a change. For example, the 2007 AIA contract documents outline a dispute resolution process that begins with an initial decision maker (the architect on the project unless the parties appoint another individual) who can request additional information, reject the claim, approve the claim, or suggest a compromise [7]. Following the decision of the initial decision maker, the parties can mediate
Create a Proposed Change Order and Document the Proposed Change

Next, a proposed change order should be created. Each proposed change order should be given a unique identification number and a log should be created in order to track the following: proposed change order number; description of proposed change; date of submittal; date of owner approval/rejection; and other relevant information.
Documentation supporting the proposed change, including project correspondence, project schedules, or other contemporaneous records often accompanies the proposed change order when available. The proposed change order should clearly state the reason for the proposed change, as well as quantify the cost or schedule impacts of the proposed change. For example, in the instance of added work, the proposed change order often includes a price for all added work including direct costs and indirect costs (e.g., labor, material, equipment, contractual markups, and any timerelated costs incurred because of schedule delay as a result of the change) and any requested schedule extension. There are multiple methods for determining the cost and/or schedule impacts resulting from a change to the project. Many times the owner and contractor agree on a method to price the change prior to the performance of the work. Other times, the contractor and owner may not agree on the appropriate method or cost until after the work is completed. Generally speaking, discretely tracking the cost and schedule impacts will lead to a greater likelihood of recovery [2]. In order to discretely capture the costs associated with the proposed change, a unique cost code is often created. This allows the contractor to more accurately price and track the costs of the change order. To help ensure that the actual costs associated with the change are captured accurately, field personnel should be notified of the new cost code. Afterwards, cost reports and time sheets should be reviewed to verify the new cost code is being properly used. In addition, the project schedule can be updated to reflect and discretely track the change ordered work if the change impacts the schedule. Not only is accurate cost and schedule data important when pricing the change order, but it is also important if the change order is not approved and the contractor needs to pursue a claim. By discretely tracking the cost and schedule impacts, the actual historical costs will have been collected and segregated in a manner that is preferred
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by the courts [2]. If all of the costs associated with the change cannot be quantified at the time the proposed change order is created, the contractor can often reserve its rights to submit these costs at a later date [1]. According to AIA Best Practices The Proposed Change Order Process, a construction change directive is issued rather than a proposed change order if the contractor believes, a change is necessary to maintain the project schedule [3]. Often times, because of the criticality of time, the cost of the change, and any associated time extension required as a result of the change, cannot be determined at the time of issuance. Instead, the contractor often requests that the changed work be priced on a time and materials basis. A similar process to the one outlined above should be used to document the change.
impacts can be compared to the impacts quantified in the proposed change order.
Execute the Change Order

Once all parties have reviewed and evaluated the proposed change order, negotiations between the parties typically take place in an attempt to execute the change. If the parties can agree to the terms of the change, a change order is created. The change order should be dated, be assigned a unique number, and include a detailed description of the change including the revision to the contract price and/or duration. Similar to the proposed change order, the change order should also include relevant documentation supporting the change. This could include drawings, correspondence, and other contemporaneous documentation. Typically, the contractor and the owner sign the change order as an acknowledgment by both parties that the original contract documents have been modified. The AIA documents also require the architects approval [6]. If the negotiations between the parties are unsuccessful and an agreement cannot be reached regarding the cost and schedule impacts of the change, the parties typically refer to the dispute resolution clause outlined in the contract documents.
Proper record keeping allows change ordered work to be effectively tracked on an individual basis, as well as on a cumulative basis. It also generally allows for more effective project management. In addition, the change order log is a useful tool should claims arise on a project. It not only tracks both agreed upon and disputed changes to the contract, but it also documents adherence to contractual obligations including, for example, the time it takes for the owner to respond to the change order.
Case Study
The following case study provides an example of a construction project that was impacted by a force majeure event during the construction phase, which resulted in numerous changes to the project. The change management process used on the project and the efforts undertaken to contemporaneously monitor and track the cost and schedule impacts are explained below.
Review and Evaluate the Proposed Change Order Timely

Next, the proposed change order is issued to the architect, subcontractors, or other relevant parties for their review. Suggested changes to the proposed change order should then be reviewed by the contractor and incorporated into the proposed change order if necessary. The revised proposed change order is then issued to the owner per the processes outlined in the contract documents. The owner should perform a detailed review and evaluation of the change documents in order to assess the impact of the change. Many times this evaluation is performed in concert with the architect/engineer for the project. The owner typically evaluates the contractors entitlement to recover additional costs or time by determining whether or not a change has occurred and if a remedy for the change exists in the contract documents. If the owner determines that the contractor is entitled to recover costs and/or time associated with change, the owner often measures the effect of the change by calculating the additional costs and/or time extension required as a result of the change. These calculated
Case Background
The project involved the design and construction of a gas fired combined cycle electric power plant. The owner hired a firm to engineer, procure, and construct the power plant. The project was proceeding along slightly ahead of schedule approximately one third of the way through the construction phase when a force majeure event occurred. Some of the major equipment was procured and manufactured overseas. The equipment was in route via a cargo ship when the ship encountered a typhoon. The equipment broke loose on board and was tossed about in the storm. The equipment was severely damaged or completely destroyed. Much of the equipment had to be rebuilt or repaired. As a result, the equipment was delivered to the project approximately six months late. At the time of the typhoon, the equipment that was in transit was on the critical path for the completion of the project. The contractor immediately notified the owner, the manufacturer of the equipment, and the insurance carriers of the problem.
Document the Executed Change

After the change order is executed, the change should be properly documented. A change order log should be created that tracks the following: change order number; corresponding proposed change order number; description of the change; cost of the change; modified contract amount; time extension associated with the change; parties involved in approving the change; change order submittal date; and, change order approval date by each party.
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Two types of insurance were involved. First, the equipment was insured via cargo insurance that insured the cargo while in transit. Second, the contractors builders risk insurance was also put on notice of the pending impacts to cost and schedule. It was not known which of these parties would ultimately pay for the cost impacts caused by the typhoon, but it was clear that the contractor was still responsible to finish the project.
Impacts Caused by Change

As a result of the anticipated six month delay in receipt of the critical path equipment, the contractor recognized that the as-planned sequence and timing of the installation of the equipment was no longer valid. The contractor explored and analyzed various options on how to proceed, including delaying the project in order to maintain the as-planned construction sequence. However, the contract with the owner contained a liquidated damages clause requiring the contractor to pay damages to the owner if the power plant was not brought on line in time for the high electricity demands of the summer months. As a result, the contractor elected to implement numerous mitigation efforts to minimize the delay of the completion of the project and accelerate the construction after the delayed equipment arrived. All of the involved parties were informed of the options considered and the chosen approach. The delay in equipment arrival caused numerous changes and impacts to the project including the following: Weather ImpactsMuch of the work was planned to be performed in the summer and fall, but because of the delay, a majority of the work was actually performed in the winter months. The project was located in the US midwest and all work was outdoors. As a result of the cold weather, the craft labor was less efficient than they would have been had the work been performed as-planned during warmer months. Out-of-Sequence WorkBecause of the delay, the sequence of the work
had to be changed. Work that could be completed while waiting for the damaged equipment to be reshipped was performed. However, work was performed in a less efficient manner as a result. Stacking of TradesThe original plan was to have only one trade working in an area at a time. For example, boilermakers would first finish their work, then the pipefitters, then the electricians, and so on until the work was completed. However, as a result of the delay, numerous trades were forced to work in the same area simultaneously. This impacted labor productivity and caused inefficient use of cranes and lifts. Additional OvertimeThe original plan included limited use of overtime, but the delay caused overtime to be used extensively after the late equipment arrived. Extended Time Related Costs Certain costs such as equipment rental, project personnel, and site office costs were extended because of the delay caused by the late shipment of the damaged equipment.
Discussion of Change Management Process Used to Track Impacts to the Project

The contractor recognized early on that the changes to the project because of the late arrival of equipment were going to be numerous. The contractor also recognized the importance of effectively managing these changes by measuring and tracking the cost and schedule impacts associated with these changes. However, the existing project cost and schedule management system was not set up to monitor and track the myriad of increased costs. One of the authors of this article was retained to assist in setting up the means and methods to both measure and track the cost and schedule impacts to the project as a result of the late delivery of the critical equipment. The following summarizes the efforts undertaken to measure and track the cost and schedule impacts associated with the changes.
For each of the subcontractors, the schedule prior to the event was used to measure what would have been performed and when it would have been performed but for the force majeure event. Separate cost codes were established specifically for tracking the cost impacts. The actual timing and conditions of when and how the work was performed was compared to the baseline schedule and planned conditions. For example, if certain work was planned to be performed in September with one crew, no overtime, and with no other craft in the area, but was actually performed in January with two crews working overtime in below freezing conditions with two other craft in the area, these different working conditions were noted. Daily observations were made for each of the subcontractors working in the respective week. Next, various recognized construction industry studies that measure the impacts of weather, overtime, stacking of trades and out-of-sequence work were used to measure the labor impact of the changed working conditions. The labor impacts were calculated each week. Other cost impacts were also contemporaneously tracked including equipment rental, field office costs, incremental project personnel costs, and others. In certain instances, change orders for subcontractors were prepared and approved. At the end of each month, a separate invoice summarizing all of the cost impacts was prepared and submitted to the insurance carriers for payment. The invoices included all supporting documentation including pictures of the changed working conditions and the basis for each of the increased costs.
Lessons Learned
For various reasons, the insurance companies declined payment of the invoices for the increased costs. Eventually, the contractor was forced to litigate the matter with the insurance companies.
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The contractor was able to recover all of its increased costs but not until after a successful trial. At trial, the insurance companies tried to argue, using hindsight, that the costs were overstated and inaccurate. However, the jury concluded that the costs, as tracked contemporaneously, were an accurate measure of the impacts to the contractor. The key lesson learned was that when faced with changes to a project, do not wait until after the project is over to try and measure the impacts. Rather, set up cost codes and means and methods to contemporaneously measure and track the cost and schedule impacts. The time and effort spent during the project to measure and track these impacts will assist in recovering what is owed under a changed condition.
significantly reduce the risk of claims that often result in costly disputes and litigation.
9.
REFERENCES
1. Cox, R.K., Managing Change Orders and Claims, Journal of Management in Engineering, Volume January/February, pages 24-29, 1997. Cushman, R.F., C.M. Jacobsen and P.J. Trimble, Proving and Pricing Construction Claims, 2nd Edition, Chapter 8: Change in Scope Claims, John Wiley & Sons, Inc., New York, NY, 1996. Hart, D.H., The Proposed Change Order Process, American Institute of Architects, 2008, retrieved on January 10, 2011, from: http://www.aia.org/aiaucmp/group s/ek_public/documents/pdf/aiap03 7629.pdf SP43-1-Project Change Management, Project Change Management Research Team, Construction Industry Institute, Austin, TX, 1994. AACE International Recommended Practice No. 10S-90: Cost Engineering Terminology, AACE International, Morgantown, WV, revised 2010. AIA Document A201 General Conditions of the Contract for Construction, Article 7.2 Change Orders, American Institute of Architects, Washington, DC, 2007. AIA Document A201 General Conditions of the Contract for Construction, Article 15.2 Initial Decisions, American Institute of Architects, Washington, DC, 2007. ConsensusDOCS 200 Standard Agreement and General Conditions Between Owner and Contractor (Where the Contract Price is a Lump Sum), Article 8 Changes, Consentaneous, LLC, 2007.
2.
3.
Consentaneous 200 Standard Agreement and General Conditions Between Owner and Contractor (Where the Contract Price is a Lump Sum), Article 12 Dispute Mitigation and Resolution, Consentaneous, LLC, 2007. 10. Change Management Best Practices for the Engineering and Construction Industry, Oracle Primavera, 2009, retrievedn December 2010, from: http://www.oracle.com/us/industri es/045720.pdf 11. Zack, James G. (Editor), AACE Internationals Professional Practice Guide to Contracts and Claims, 4th Edition, Chapter 6, Management of Change, AACE International, Morgantown, WV, 2008.
ABOUT THE AUTHORS

Joseph J. Egan, PE, is with Davis & Hosfield Consulting, LLC. He can be contacted by sending e-mail to: jegan@dhllc.com
Conclusion
hange during most construction projects is inevitable and can lead to cost and schedule overruns. The change management process typically includes: address potential change in the contract documents; identify the potential change; create a proposed change order and document the proposed change; review and evaluate the proposed change order timely; execute the change order; and, document the executed change.
4.
5.
6.
7. These are some of the practices being used in the construction industry to effectively manage change. As illustrated by the case example above, contemporaneously measuring and tracking the cost and schedule impacts associated with project changes will assist in the recovery of what is owed under a changed condition. Effective management of changes can
Joseph E. Seder, CCE, is with Davis & Hosfield Consulting, LLC. He can be contacted by sending e-mail to: jseder@dhllc.com
8.
Dayna L. Anderson, is with Davis & Hosfield Consulting, LLC. She can be contacted by sending e-mail to: Danderson@dhllc.com
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TECHNICAL ARTICLE
CAUSE AND EFFECT:

HOW SCHEDULE ACCELERATION AFFECTS PRODUCTIVITY
Abstract: Effective cost and schedule management are critical success factors for all projects. We work in a world where our available time and money is limited. Unfortunately, the majority of projects experience schedule slippage and subsequent cost overruns. This article will elaborate on examples of how a project manager can negatively impact the budget by making changes, during construction, that are not covered in the original estimate. The examples discuss the pros and cons of accelerating a construction schedule and its effect on cost and schedule productivity. The included productivity tables and diagrams illustrate that increasing the hours worked per week has a drastic impact on the actual cost of work performed because of the increased overtime charges. Because of typical productivity in the field, increasing hours worked per week does not significantly improve schedule as it increases cost and, therefore, has a minimal return on its investment. This article was first presented at the 2011 AACE International Annual Meeting in Anaheim, Calif., as presentation CSC.580. Key Words: Budgets, construction, cost, management, overtime, productivity, and schedule
them to the original plans. What went wrong? Why? Where is the team leadership missing the mark in their estimates? What went right? What lessons can be learned from this experience?
The Problem
Properly detailed work estimates are developed and approved prior to the funding approval for engineering and construction. The quantities, work-hours, and dollar amounts are the basis of the estimate. During project execution, managers often make changes to respond to actual or even potential schedule delays. Examples of some high impact changes are a change of work calendar or the addition of workforce. Most project managers do not explore schedule modeling techniques to simulate the effect of increased work-hours on productivity. These decisions are not usually made under the same financial scrutiny as displayed in the original estimate for project funding. Although a project change is usually made with the best of intentions, these decisions are usually detrimental to the budget because they are not properly defined, tracked, and are not accounted for in the original plan and estimate. The actual costs related to these changes
ost companies define a successful project outcome using the same criteria. A successful project outcome would be one that concludes safely, accomplishes all of the objectives within the original scope and budget, and concludes within the time constraints set by the leadership team. Project controls professionals commit weeks and sometimes even months to prepare a detailed estimate of the planned work. It all starts with the front end loading process, which defines the project scope. After the preliminary drawings are sent out with the request for quote, contractors that provide the
most competitive bid proposals for our work scope are selected. A resourceloaded, critical path schedule is developed and maintained. A project management steering committee reviews and approves the estimate for funding. All of the recommended cost and progress reports are created. The project changes and their effect on the budget are recorded as they occur. Actuals and forecasts are created based on various cost and schedule productivity factors. When the project is finally complete and the last service order is closed, project managers look back at the actual milestone completions and compare
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Figure 1 An Example of How Calendar Change Affects the Remaining Schedule typically dissolve into the actual costs related to the original scope. Since the contractor has not been directed to separate the hours on his timesheets or invoices, it is impossible to discern the cost impact of the change. This could have an artificially negative effect on cost productivity. The negative effects of these veiled changes are not usually fully recognized until it is too late to recover from the subsequent cost overruns.
Schedule Crashing
Many project managers react to schedule slippage by increasing the number of days per week and/or hours per day that the contractor is approved to work. This process is referred to as crashing the project [1]. This name does not come from the reputation of the process, but rather the reduction of the expected schedule duration. As you can see from the example in figure 1, the 5d x 10hr calendar seems to be more efficient than the 5d x 8hr calendar at face value. Many schedule driven projects choose to increase the work calendar because of mandatory finish dates. The project team leaders voice their determination to finish on schedule, no matter what the cost.
incentive for workers to pack their bags and relocate to remote project areas. During a plant turnaround, a lot of tasks need to be accomplished in a very short period of time. When a facility is not making product, it is losing revenue. Facility management wants to finish as soon as physically possible. Scheduled overtime with multiple shifts can provide a solution that allows contractors to complete the work scope within the allotted time constraints.
Methods of Schedule Acceleration

When the project falls behind the planned schedule, management typically begins to investigate ways to improve productivity. Accelerating the remaining schedule can give the contractors an opportunity to catch up to the original progress curve. Assuming that the remaining activity durations are realistic, they can only be accelerated using three methods. One method is to increase the number of hours a contractor can work per day and/or week. The second method is to increase the number of contractors on the job. And, The last method is to strategically remove non-critical tasks from the remaining group of activities.
Productivity Studies
One common misconception regarding the increase of a work calendar is the assumption that productivity in the field will not change. Several industry productivity studies have been performed over the last 40 years. They reveal that adding overtime hours to the work calendar makes craft productivity suffer in the long term. A 2005 AACE technical paper, titled Construction Productivity, by J.D. Whiteside, II, PE, analyzed the effects of several different work calendars on craft productivity [4]. The example, (shown in figure 2)[4], displays a sharp decline in craft productivity on all of the work calendars after 60 hours per week. Another relevant factor to consider is the cumulative effect of scheduled overtime of direct labor in construction. A 1980 report from The Business Roundtable on Scheduled Overtime Effect on Construction Projects displays a figure showing the cumulative effect of scheduled overtime on productivity in the field over a 12 week period [3]. The
Advantages of Scheduled Overtime

Implementing scheduled overtime can have limited advantages. The overtime hours can sometimes attract local workers to the project that would potentially work elsewhere if the project were on a straight time work calendar. Workers compare the calendars, job lengths, rates, and per diems of all of the local projects in their area of interest and decide which project is the most lucrative. Remote area projects are often more difficult to staff. This is especially true if the environmental conditions are extreme, such as the weather in Siberia or Iraq. Scheduled overtime, competitive subsistence, higher wages, and other monetary benefits can provide an
These methods and their potential benefits and/or risks will be discussed in further detail within this article.
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Figure 2 Productivity Index vs. Hours per Week average productivity of a 50 hour per week calendar appears to peak at approximately (.93) during the third week, and then drops over 22 percent from week four onward. The 60 hour per week calendar appears to peak at approximately (.89) during the third week and then drops over 27 percent from week four onward. There are several potential reasons for this. the owner is on time and material, or cost plus, it is advantageous for the contractors to increase their resources and take longer to finish. Suddenly, the crews want to work on Saturdays, for example. Aside from absenteeism and tardiness, productivity suffers early in the week because the contractors prefer to have more overtime hours on their paychecks. Lack of adequate field-level management by owners can make the situation even worse. After a long period on scheduled overtime, some workers decide to quit the job near the holiday season because they have made their personal income quota for the year. Whatever the reason for productivity loss, a clear pattern reveals that more available work-hours per week do not necessarily equate to an accelerated schedule completion. productivity. The input is work-hours. It appears that the maximum values of these variables are mutually exclusive to each other. The more overtime hours that you expend per week, the less productive work you have to show for those expended hours.
Cost Impact of Calendar Changes

There are several things for a project management team to consider when proposing an increase of the work calendar during construction. The cost of this increase is significant and should be analyzed in detail to determine if it is feasible. The hypothetical example in (table 1) displays a crew that will complete an 80 duration hour task on a reimbursable contract. The billable straight time and overtime rates are listed, as well as the itemized labor costs for each work calendar. Overtime, in this example, begins after 40 hours. This table displays cost increase percentages as more overtime hours are required. Finally, the estimated schedule compression is based on the reduction of calendar days required to complete the task. The important caveat to remember is that (table 1) does not take work productivity into consideration. These figures could only be achieved if the estimate was accurate, productivity was perfect, and there were no delays.
Fatigue
Longer hours result in fatigued workers. Contractors have to be at work earlier in the morning and stay later in the evening. Absenteeism, consequently, goes up over time. Because the workers are tired and they are physically at the jobsite for longer periods, they are more likely to have an accident. Accidents typically stop work at the entire jobsite. The facility management has to neutralize hazards, tend to the injured, determine why the accident happened, and how to prevent the accident from happening again before work can commence. Sometimes the workers have to attend additional safety training courses before returning to work. These incidents can be very costly and consume valuable time.
The Law of Diminishing Returns

There is a microeconomics concept called the Law of Diminishing Marginal Returns. This rule states that, "we will get less and less extra output when we add additional doses of an input while holding other inputs fixed. In other words, the marginal product of each unit of input will decline as the amount of that input increases, holding all other inputs constant"[2]. The marginal product in this case is craft productivity, and ultimately, cost
Financial Goals
Another factor that affects the productivity curve is the financial goals of the contractor. If the contract with
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Table 1 Work Calendar Effect on Cost/Schedule Excluding Productivity In the real world, estimates are not 100 percent accurate, productivity is virtually never perfect, and delays are going to happen. These risks deserve careful consideration when deciding to make changes to the existing work calendar. measurement of (.75) would mean that one labor dollar would have to be spent to pay for 75-cents of physical progress. The productivity factor of (.87) is applied to the cost and schedule on the 6d x 12h calendar. For the simplicity of this example, schedule and cost performance indices are equal. The item cost totals for this calendar are divided by the (.87) productivity factor. This increases the direct labor cost from $22,080 to $25,379, or about 16 percent. The remaining schedule duration is divided by the (.87) productivity factor. Eight calendar days divided by (.87) equals 9.2 calendar days. The productivity factor of (.75) is applied to the cost and schedule on the 7d x 12h calendar. The item cost totals for this calendar are divided by the (.75) productivity factor. This increases the direct labor cost from $23,000 to $30,667, or about 34 percent. The remaining schedule duration is divided by the (.75) productivity factor. Seven calendar days divided by (.75) equals 9.33 calendar days. In summary, the 6d x 12h calendar costs 38 percent more than the 4d x 10h calendar, but saves only 16 percent of the schedule duration. The 7d x 12h calendar costs 67 percent more than the 4d x 10h calendar, but saves only 15 percent of the remaining schedule duration. It is important to remember that (table 2) calculates a flat productivity rate for an 80 hour task. For construction activities during scheduled overtime with durations of several weeks, there will be a gradual decline in craft productivity similar to what is shown in (figure 3). This further increases costs
Productivity Applied
In (table 2), the average productivity indices from (figure 2) are factored into the 6d x 12h calendar, as well as the 7d x 12h calendar. Productivity measurement, in this case, is defined by the number of budgeted units completed divided into the actual amount of units expended to complete those budgeted units. In other words, for every unit we actually expend in construction, how much of that unit represents physical work accomplished? If that unit is dollars, then a productivity
Table 2 Work Calendar Effect on Cost/Schedule including Productivity
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Figure 3 The Effect of Doubling the Resources in the Schedule and inflates the remaining schedule duration. people that are available at a given time for a construction project. It is important to discuss with the project team what the resource limitations are. This information can be used to create resource limits in the schedule. When activities are scheduled that require more resources than are currently available, reports will show overallocation for those tasks. If multiple crews are working concurrently on the same type of task, such as welding, productivity can depend upon the balance of skills between those workers. Contractors should avoid placing all of their most experienced craftsmen together in one crew. If all of the crews do not possess the same general level of skills and expertise, then the productivity of each crew will suffer as the more competent crew pulls away from their tasks to assist the other crews with re-work. It is important to account for all of the local holidays when setting up the work calendar in the scheduling software. Holidays are constraints because they highly correlate with absenteeism. For example, you should avoid scheduling construction work in the US during the Thanksgiving or Christmas holidays. Even if the contractors are available to work, facility operators and field supervision typically choose to take vacation at this time. Scheduling the holiday breaks in the work calendar will prevent any related schedule slippage. Another resource to consider is equipment. Doubling of work crews could require the doubling of heavy equipment, welding machines, temporary power, transportation, chairs in the lunch tent, safety supplies, et cetera. It may be a fact that two activities cannot commence at the same time because of the limited availability of specialty equipment, such as a 2,500 ton crane or a pneumatic bundle puller. These constraints need to be identified and implemented when scheduling tasks. Before the project team can implement the increase of labor and equipment during construction, they must determine if there is adequate space available. Density analysis is often performed on congested project sites to determine the maximum amount of workers that can safely work in each area. Congestion can be a constraint. Construction activities performed at heights or in confined spaces are limited to how many workers can be in the area. The work of other contractors can create schedule conflicts. For example, a civil crew and a crew of iron workers usually cannot work simultaneously in the same area. This is because of the fact that a concrete foundation has to cure before you can stand iron columns on top of it. The work, itself, has inherent logical constraints that need to be addressed in the schedule by the planners and field managers. Other factors to consider are the availability and logistics of materials, as well as the presence of issued for construction drawings on the jobsite.
Fast Tracking
If qualified resources are readily available, adding resources to a project can possibly accelerate the remaining schedule. Having multiple crews in different crafts can allow some types of activities to commence simultaneously, potentially saving a significant amount of time in construction. This concept is referred to as fast tracking[1]. The schedule comparison in (figure 3) demonstrates that doubling the resources, such as adding a second crew, can drastically improve the overall remaining schedule duration. This method of schedule acceleration, if applied correctly, appears to have greater potential benefit to the schedule because of its lasting efficiency. Productivity does not suffer because there is no need for scheduled overtime in this case.
Resource Limitations
Scheduling software is not a crystal ball, nor a form of artificial intelligence. It performs calculations and is completely dependent upon the quality of the data that is entered into it. For example, a scheduler may be able to schedule 20 activities to happen at the same time, but in reality this plan may be too optimistic to feasibly accomplish. There are several hidden constraints that scheduling software cannot detect. Resources are limited most of the time. There are only so many qualified
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There is nothing you can do to improve productivity if these things are not in place. Good weather is also essential for good productivity. Adding resources during a season of bad weather could be risky if those workers cannot work productively. The standby costs of these additional resources can be significant. There are many issues to consider when determining if fast tracking is the right plan for your remaining work scope. It is vital for a project management team to have open communication of these potential benefits and risks, as well as collective ownership of the decision. An experienced group of project leaders who make their constructive thoughts known can potentially steer the project team away from some detrimental decisions.
Eliminating Scheduled Tasks

Removing scope from the remaining schedule is usually a last resort for a project team. This option is sometimes considered when other methods of schedule acceleration have failed to produce the desired results that project management is looking for and they have to comply with a mandatory finish date. During a plant shutdown, owners have budgeted to accept a revenue loss for the planned time that it takes to make the maintenance repairs or equipment construction at their facility. Starting up only a day later than planned could cost millions of lost revenue! Since this is not acceptable, removing nonessential tasks from the remaining schedule can be a viable alternative. There may be some tasks that can be postponed until after the commission and start up process. Sometimes work packages are pieced into the scope as targets of opportunity, but are not essential to the system operation.
requirement that requires the completion of that task in order to start the facility safely. These extra items should be identified by the project team, including facility operators. If removing these items benefit the schedule completion date, then this change should be agreed upon in writing by the team leadership. For example, items that would not be required to start up the facility could be painting, insulating, signage, fencing, installing light poles, etc. If an agreement is reached to remove that scope from the schedule, then it needs to be removed from the budget using a change management process. Those change orders would then be archived for use in developing the scope for the next turnaround. Most teams keep the work scope and categorize them as post start-up activities because it is more cost effective to use workers while they are mobilized.
Conclusion
The Risk of Omission

The potential risk of eliminating tasks from the work scope is that a vital item required for start-up could be missed. The project manager may think that the completion of a certain task is not necessary to physically start up the facility, but is unaware of a regulatory
f it is necessary to make up lost time in construction, it is possible to buy some time by accelerating the remaining schedule. However, the results of accelerating the planned schedule depend upon many variables. Increasing the work calendar to include scheduled overtime for more than a few weeks at a time has a negative effect on productivity in the field. This is because of fatigue, misalignment of the financial goals between the client and the contractor, and the cost burden of adding premium time to the work calendar. If the budget for the original work scope was estimated on a straight time work calendar, increasing the calendar to include scheduled overtime will cause a cost overrun. Increasing the workforce can be an effective way to significantly accelerate the remaining schedule if qualified resources are available, skills are balanced between crews, planned holidays and breaks are scheduled in the work calendar, equipment is available and in good working condition, there are favorable environmental conditions, and materials, as well as issued for
construction drawings are present on the jobsite. Multiple crews can accomplish groups of tasks simultaneously, potentially saving time. The risk of increasing resources is that they will not accomplish the fast track schedule because of real world constraints, such as limited availability of resources, equipment, materials, drawings, space, the logical constraints of the activities, and the unplanned cessation of work. If conditions are not favorable to complete the work in the field, then adding resources will only create cost escalations with little benefit to the remaining schedule. Eliminating non-essential tasks from the remaining schedule can accelerate the overall remaining schedule duration if the project team and facility operations determine that the project goals can still be achieved. The impact of these changes to the schedule, as well as the budget, should be agreed upon in writing by the project leadership team. If vital tasks are arbitrarily eliminated from the remaining schedule, they will create hidden schedule delays and cost increases. The project controls specialist should model various schedule acceleration scenarios and quantitatively show the output of the results in both cost and schedule. These results should be considered by the project management team prior to changing the work calendar or the number of resources. The decision to accelerate the schedule during construction has a large potential impact. This proposed decision deserves the same level of financial scrutiny as the original estimate. It is important for the project management team to determine the reason why the change is being proposed, as well as to identify the benefits and risks of the change. The project leadership team should determine the priority of the project objectives; finishing on schedule or finishing within budget. If the project is cost-driven, then accelerating the schedule may have little return on its investment.
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REFERENCES
1. Budd, Charles I. and Dr. Charlene S. Budd, A Practical Guide to Earned Value Management, Management Concepts, Vienna, VA, page 133, 2005. Microeconomics, 17th Edition, Samuelson & Nordhaus, page 110, 2001, referenced from: http://en.wikipedia.org/wiki/Dimini shing_returns#cite_note-0 Scheduled Overtime Effect on Construction Projects, The Business Roundtable, Report C-2, A Construction Industry Cost 4.
Effectiveness Task Force Report, 1980. Whiteside, J. , II PE, Construction Productivity, AACE International Transactions, AACE International, Morgantown, WV, 2005.
2.
Coombes, Jim, Real World Construction Scheduling, Chapter 8, Manpower and Productivity, Construction Planning & Management, Inc., Seattle, WA, pages 157-159, 1990.
2.
3.
RECOMMENDED READING 1. Singh, A. Bobby, World-Class Turnaround Management; Business Driven and Reliability Focused, Chapter 10, Resource Planning, Everest Press, Houston, TX, pages 183-195, 2000.
ABOUT THE AUTHOR

Matthew Christopher Baker is with Chevron. He can be contacted by sending e-mail to: mxsk@chevron.com
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25
TECHNICAL ARTICLE
BRINGING HOME THE BACON
OVERHEAD CALCULATIONS AND THE LAW

overhead costs are, by their very nature, not definable with precision, but may be said to include broadly the continuous expenses of the business, irrespective of the outlay on a particular project. This definition came out of the court case titled, Grand Trunk W.R.R. v H.W. Nelson Co. 116 F.2d 823, 839 [6th Cir, 1941]. These overhead activities include management, accounting, sales and marketing, rent, utilities, insurance, and so forth and are time dependent. Usually, the contractors accounting system does not distribute these costs directly to Key Words: Claims, contracts, cost, damages, delay, Eichleay, and overhead specific projects, but are combined in a home office overhead account or pool. here is a continuing debate as or the courts? In what circumstances will Cost accounting standards defines to which formula is the different calculations be allowed? How home office as: appropriate one to use in can you set the stage to recover all your calculating home office overhead costs either via a claim, request The home office overhead overhead costs resulting from owner for additional compensation or change account may be apportioned to caused delays. Overhead is a real cost, order? various projects based on any This article discusses all the but in developing claim damages or number of formulas, such as seeking compensation for extraordinary questions above. It will also outline the being apportioned based on changes, it is the calculation given the strengths and weaknesses of the various project billings, number of methods of calculating overhead, as well least attention. projects, project profits, or total For home office overhead the most as the documentation needed to support labor used by project, etc. famous or infamous is Eichleay, but there your position. are states which do not accept Eichleay, A condition(s) which force the or times when Eichleay is inappropriate. Home Office Overhead contractor into prolonged contract So what then do you do? And what about Home office overhead represents the durations will reduce the cash stream. field overhead costs? How does the costs of the activities of the contractors That will result in under-absorbed or uncontract boards or different state courts home (or corporate) office, necessary to absorbed home office overhead costs. handle overhead? What is the proof you run the business and to support the The additional under-absorbed and need to prevail in negotiation, mediation projects in the field. Home office Abstract: There is a continuing debate as to which formula is the appropriate one to use in calculating home office overhead costs resulting from owner caused delays. Overhead is a real cost, but in developing claim damages or seeking compensation for extraordinary changes, it is the calculation given the least attention. For home office overhead the most famous or infamous is Eichleay, but there are states which do not accept Eichleay, or times when Eichleay is inappropriate. So what then do you do? What do the courts require? How does a contract go about recovering its full costs of a delay with regard to home office and field office overhead? This presentation will also discuss the merits and foibles of several home office overhead formulas, cite relevant case law, and also list those items which may be included in field office overhead costs. This article was first presented at the 2011 AACE International Annual Meeting in Anaheim, Calif., as presentation CDR.542.
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Table 1 Eichley Formula unabsorbed home office overhead costs, accumulated by the contractor, are determined on the basis of decreased sales or revenues on a project. These do not cause a corresponding savings in executive attention to the project. In fact, the opposite happens, executive attention increases. An extended and impacted project continues to get senior executive attention and a corresponding amount of support time. Home office executive personnel spend additional time attempting to resolve problems which arise on a project rather than seeking new work. In addition, certain administrative costs continue to be incurred regardless of the rate of progress of the project. For example, payrolls; accounting, management, equipment usage, project status, etc., as well as reports; cost projections, and other documents are prepared with the same frequency, whether progress is as planned or slower. Likewise, other fixed overhead and physical plant costs, as well as insurance premiums, continue during the extended duration. Once legal liability for the delay has been established, courts generally require a minimum of four criteria to allow a contractor to recover his/her home overhead costs. This is unless recovery is specifically excluded in the contract language. Texas DOT contracts are an example of a specific exclusion in the contract language. Article 4.4A.3, of the Standard Specifications; and Article 4.4A.1c, of Special Provision 004-012, stipulate the department will not compensate the contractor for home office overhead in case of delay claims, unless: The project was delayed by excusable and compensable impacts. The contractor was effectively on standby during the delay. Contractors crews and equipment remained at the project site while the problem was being resolved. And, The contractor was unable to take on other work, on or off the project, during the impact period. Manshul I formula. o Manshul II formula. Contractual Mark-up; Allegheny Sportswear formula; Hudson formula; Emden formula; and, Ernstrom/Essler formula.
EICHLEAY FORMULAS Eichleay Formula

The Eichleay formula, proposed by the Eichleay Corporation, was accepted by the court as a reasonable method to calculate home office overhead. The court case is listed as: (Eichleay Corporation ASBCA No. 5183, 60-2 BCA 2688 (1960), aff'd on recon., 61-1 BCA 2894). It is one of several calculations which have been used in US federal and state courts. The formula is outlined in table 1. There has been considerable debate in the courts and scholarly writings concerning the Eichleay formula. Some authors, as well as some state courts (for example the New York courts), have taken issue with the Eichleay formula as being defective or unrealistic.
Calculations
There are several methodologies in which home office overhead is calculated. The most famous or infamous is the Eichleay formula, as it was outlined in: Eichleay Corporation, ASBCA No. 5183, 60-2 BCA 2688 (1960), aff'd on recon., 61-1 BCA 2894). However, there are also several others. This article will discuss several of the formulas and note their usage in various legal venues. The calculations for home office overhead are as follows: Eichleay formula; o Modified Eichleay (Capital/DCAA) formula.
Modified Eichleay
The basic Eichleay formula was modified in 1980, in the Schindler Haughton case (Schindler Haughton 80-2 BCA 14,671; 1980 GSBCA LEXIS 104). In this case the defendant, the General Services Administration, initially
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Table 2 Modified Eichleay Formula objected to Eichleay, then abandoned its objection to Eichleay, but argued that certain costs included in the fixed overhead figures were unallowable. This calculation was also used in 1984, by Capital Electric Company in the court case: (Capital Electric Co. v United States, 729 F.2nd 743 (Fed. Cir., 1984)). It is the Capital Electric case that is often cited when using the modified Eichleay formula as outlined in table 2. Under the Manshul formula, extended overhead is calculated by estimating the actual cost of the work performed after the scheduled completion date, deducting from the contract price the portion allocable to overhead and profit; allocating a percentage of this cost for overhead, and allowing this as excess overhead resulting from delay, and adding to this figure a profit percentage based on excess overhead. Both figures are to compensate the contractor for its home office overhead during the delay period. At trial, the bid documents were not in evidence, so the judge believed that 15 percent represented the anticipated overhead and profit, the contractor included in its bid. The court then divided this figure into 7.25 percent for overhead and 7.25 percent for profit. By calculating home office overhead in this way, the judge relied on the method of calculating overhead and profit in Fehlhaber. In Fehlhaber, the court allowed the plaintiff an overhead figure supported by the plaintiffs books and records. Manshul takes this calculation a step further (See table 3). He also used the billings for the original/base contract exclusive of change orders. The actual figures used at trial are shown in table 4. Misc.2d 209; 444 N.Y.S.2d 792; 1981 N.Y. Misc. LEXIS 3250) formula is quite different from the Manshul I formula. In Manshul II, (1981) the Dormitory Authority sought to set aside a jury verdict in favor of Manshul. In discussing the home office overhead award, the court noted that the, current state of the law in this area is uncertain and fluid. Through oral and written evidence, Manshul demonstrated the vast amount of work its home office was performing on this troubled project. The court, in determining to ascertain what the jurys thinking was determined that the jury reached the decision that: the defendant was responsible for the delay, Manshul expended a large sum for home office overhead, and, that the Manshul home office was predominately related to the Kingsborough project.
MANSHUL FORMULAS Manshul I

The method used to calculate the extended home office overhead is based on Manshul Construction Corp. v The Dormitory Authority of the State of New York, 436 N.Y.S. 2d 724, 731 {1st Dept. 1981}. The Manshul formula is approved by the courts in New York, and is accepted by New York City. This formula was a further development of a previous calculation in the Fehlhaber court case: (Fehlhaber Corporation and Horn Construction Co., a Joint Venture v State of New York, 65 A.D. 2d 119; 410 N.Y.S. 2d 920; 1978 N.Y. App. Div. LEXIS 13067). In Manshul, the trial court totally dismisses the Eichleay calculation as a, wholly unrealistic figure. The extended overhead is a percentage of the estimated actual cost of the work performed after the scheduled completion date. It is arrived at by deducting from the contract price the portion allocable to overhead and profit.
Manshul II (Kingsborough ) Formula

The Manshul II (Manshul Construction Corp. v Dormitory Authority of the State of New York, 111
The court determined that the jurys result is not unlike a formula. The formula, with the amounts used by the court is shown in table 5. The court further found that the there was no justification for substituting a mathematical formula for the kind of direct evidence available to this jury in determining delay damages.
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Table 3 Manshul I Formula
Contractual Mark-Up
This methodology involves applying the contractual mark up for change order work (generally between 15 percent and 20 percent) to the direct costs of the work expended during the period of delay. However, the percentage mark-up method may not recover significant portions of extended home office overhead particularly when the extended period does not involve a significant amount of work. The contractual mark-up on direct costs may be insufficient to compensate a contractor for the extended project overhead cost incurred.
Hudson Formula
This formula appears in Hudsons Building and Engineering Contracts [1]. This formal was created in the United Kingdom and seeks to recover unabsorbed home office overhead using data form the original bid (tender) the contractor made to the owner. It uses the planned overhead in the bid and applies it to the original contract sum and is then divided by the contract period resulting in a daily overhead rate. The formula presupposes that the percentage used in the bid is the contractors normal or average rate. See table 7. Courts have mistakenly believed that they are using the Hudson formula when in fact they are using the Emden formula.
figures are represented as shown in table 9. There is a slight mathematical error of $10.00 in the courts calculation. The average overhead rate was determined from a retrospective glance back at the overhead rates for a three year period. As anyone who has read a security prospectus knows, past performance does not necessarily indicate how the contractor will perform in the future.
Ernstrom/Essler Formula
This formula was proposed by the authors Ernstrom and Essler in a Construction Lawyer article [4]. This formula does not develop a daily cost, but rather a lump sum figure for the allocable overhead that is to be reimbursed to the contractor, (See table 10).
Allegheny Sportswear Formula

The Allegheny Sportswear formula comes from the manufacturing industry (Allegheny Sportswear Co. ASBCA No. 4163, 58-1 BCA (CCVH) 1684 (1958)) and like Manshul it is cost rather than time based. It also shifts the delay period calculation back into the originally scheduled work period to re-create overhead rates that would have been incurred had the delay not occurred. Essentially it calculates the difference in overhead rates between the originally anticipated period of performance against the actual period of performance. This rate is then multiplied by the contract base costs. The formula is shown in table 6. As noted, this is a manufacturing case, not a construction case.
Emden Formula
The Emden formula [2,3] is a variation on the Hudson formula and there are several cases in which the court believed it was using the Hudson formula, but was actually using the Emden formula. While the Hudson formula uses the bid overhead, the Emden formula substitutes the bid overhead with the actual overhead incurred by the contractor, (See table 8). The Emden formula is also refereed to as the Canadian Formula since it originated in Canada. This methodology was reaffirmed by the trial court judge in the Ellis-Don case. The calculation and
Case Law
The following is a partial listing of cases that discuss home office overhead, organized in alphabetical order. The cases are not only from the US, but also Canada and England as well. 1. Alfred McAlpine Homes North, Ltd. v. Property & Land Contractors, Ltd. 76 BLR 59 (1995); 1995-ORB-179; 995 WL 1082028. Allegheny Sportswear Co. ASBCA No. 4163, 58-1 BCA (CCVH) 1684 (1958) Allen v Gardner 126 Cal. App. 2d 335 (1954)
2.
3.
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Table 4 Manshul I Formula with Figures Used by Court 4. Baxter v Colt Industries, 10 Cal App. 3d 144 (1970). 5. Berley Industries v City of New York, 45 NYS2d 683, 385 N.E. 2d 281 (1978) 6. Beechwood Development Company (Scotland) Ltd v. Stuart Mitchell 7. (2001) CILL 1727 8. R.G. Beer, Eng BCA No. 4885, 85-3 BCA 19,012 (1985) 9. Broward County v Brooks Builders, Inc. 908 So. 2d 536 (2005) 10. Broward County v Russell, Inc. 529 So 2d 983 (1991) 11. Complete General Construction v Ohio Dept. of Transportation 19 Ohio St. 3d 54, 760 N.E. 2d 364 (2002) 12. Capital Electric v. United States, 729 F.2d 743 (Fed. Cir. 1984) 13. Community Heating & Plumbing Co., Inc. 987 F.2d 1575 (Fed. Cir. 1993) 14. C.B.C. Entreprises, Inc. v United States, 978 F.2d 669 (Fed. Cir. 1992) 15. Eichleay Corporation, ASBCA No. 5183, 60-2 BCA 2688 (1960), aff'd on recon., 61-1 BCA 2894 16. Ellis-Don Ltd v Parking Authority of Toronto 28 Build. L. R. 98 (1978). 17. Excavation-Construction, Inc. v United States, ENG BCA 3851 (1984). 18. Fehlhaber Corporation and Horn Construction Co,, a Joint Venture v State of New York, 65 A.D. 2d 119; 410 N.Y.S. 2d 920; 1978 N.Y. App. Div. LEXIS 13067 Fred R. Comb Co. V United States, 103 Ct. Cl 174 (1945) Guy James Construction Co. v The Trinity Industries, Inc. 644 F.2d 255 (5th Cir. 1981) J.F. Finnegan, Ltd. V Sheffield City Council, 43 Build. L.R. 124 (Q.B. 1989) Grand Trunk W.R.R. v H.W. Nelson Co. 116 F.2d 823, 839 [6th Cir, 1941] Interstate General Government Contractors, Inc. v. West, 12 F.3d 1053 (Fed. Cir. 1993) IPS Group, Inc., ASBCA No. 33182, 88-3 BCA 21,142
19. 20.
21.
22. 23.
24.
30
25. Manshul Construction Corp. v. The Dormitory Authority of the State of New York, (Manshul I) 436 N.Y.S. 2d 724, 731 {1st Dept. 1981}). 26. Manshul Construction Corp. v Dormitory Authority of the State of New York, (Manshul II) 111 Misc.2d 209; 444 N.Y.S.2d 792; 1981 N.Y. Misc. LEXIS 3250 27. McCord v United States, 9 Ct Cl. 155, 169 (!873). 28. Nello Construction Company, a Division of Gito, Inc. v Commonwealth of Pennsylvania,
29.
30. 31.
32.
Department of General Services, 2006 PA Bd. Claims LEXIS 1 March 20, 2006 Norwest Holst Construction Ltd v. Co-Operative Wholesale Society Ltd [1997] APP. L.R. 12/02 A.E. Ottaviano Inc. v State of New York, 202 MISC. 532,536 Richerson Construction, Inc. v General Services Administration, GSBCA Nos. 11611, et. al., 93-1 BCA 25,239 Shirley Contracting Corp., ASBCA No. 29848, 85-1 BCA 18,019
33. Shore & Horwitz Construction Co. Ltd. v. Franki of Canada Ltd., S.C.R. 589 (1964). 34. Schindler Haughton 80-2 BCA 14,671; 1980 GSBCA LEXIS 104 35. W.B. Construction v Mountains Community Hospital District (2005) Cal. App unpub. LEXIS 5124 36. Whittal Builders Co. Ltd. V Chester Le Street, 5 (1985) 12 Const.L.J. 356 37. Wickham Contracting, Inc. GSBCA No. 8675, 92-3 BCA 25,040, affd Wickham Contracting Co. v Fischer, 12 F.3d 1574 (Fed. Cir. 1994)
Table 5 Manshul II Formula
Table 6 Allegheny Sportswear Formula
Table 7 Hudson Formula
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38. Zurn Constructioors, Inc. Plaintiff and Respondent, v. Castic Lake Water Agency, Defendant and Appellant. 2003 Cal. App. Unpub. LEXIS 11267 December 2003
Field Office Overhead

Field office overhead costs also make up a significant portion of the costs to be recovered. These costs should be based on actual costs expended and may include: Field supervision; project manager (not included in G&A costs);
assistant project manager; project accountant; on-site office manager; on-site engineer; non-working foremen; non-working shop steward; project scheduler; on-site clerk; on-site receptionist; safety personnel; Vehicles for supervisory personnel; gas; tolls; repairs; Disbursements for supervisory personnel;
per diem; meals; travel; hotel; office supplies; office equipment; bottled water; weather protection; leased space; field office trailer; port-o-sans; temporary heat, light, and water; insurance; storage; safety equipment; cleaning supplies;
Table 8 Emden Formula
Table 9 Emden Formula - Don-Ellis Case
Table 10 Emstrom/Essler Formula
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idle equipment; repairs; and, misc consumables.
While this listing is not exhaustive, it does provide for a general roadmap of the type of costs to be included in calculation of extended field office overhead costs. However, in calculating these field office overhead costs there is a continuing debate on whether or not the mark-ups for change order work being performed during the extended period should be deducted from the overall field and home office overhead costs being requested. The owners position that a contractor receiving both extended overhead costs and mark-up costs on change orders performed during the extended period is double dipping, the contractors argue that the mere 15 percent or 20 percent mark-up on change orders merely reimburses him or her for the ancillary costs of the change order work itself, not any of its indirect field or home office overhead costs.
Those courts that do elucidate calculations, tend to discuss complex overhead claims in an abbreviated fashion. The construction industry strives for accuracy and it is clear that unabsorbed overhead cannot be determined with absolute accuracy. Additionally, it is virtually impossible to calculate actual harm when attempting to determine the cost of home office overhead as it applies to a particular delayed project. The application of well known formulas provides a methodology for the contractors to be compensated for home office overhead costs resulting from delays caused by the owner. No formula is perfect, each has it foibles, yet the goal for each of the formulas is to compensate the contractor for delays not of his or her making.
2.
3.
4.
Bickford-Smith, S and E. Freeth (Editors), Emdens Building Contracts and Practice, 8th Edition, Volume 2, Butterworths, London, page 46, 1980. Lloyd, H., A. Bartlett, and D. Shapiro (Editors), Emdens Construction Law, LexisNexis Butterworths, Butterworths Law, Butterworths Tolley, London, July 31, 2002. Ernstrom, W.J. and K.S. Essler, Beyond the Eichleay Formula: Resurrecting Home Office Overhead Claims, The Construction Lawyer, 3(1) 1+, 1982.
ABOUT THE AUTHORS

Dr. Kathleen M. J. Harmon is with Harmon/York Associates, Inc. She can be contacted by sending e-mail to: kharmon777@aol.com Kathleen O. Barnes is with Watt Tieder Hoffar & Fitzgerald. She can be contacted by sending e-mail to: kbarnes@wthf.com
REFERENCES
1. Wallace, I.N.D., Hudsons Building and Engineering Contracts, 10th Edition, Sweet & Maxwell, Ltd., London, UK, 1970.
Conclusion
he unabsorbed home office overhead is perhaps the most difficult concept in delay damages. While there is no doubt that home office overhead is a legitimate expense of the contractor, the methodology for the calculation of the expense incurred has been widely debated, as well as the circumstances under which the methodology should be applied. Therefore, a contractor calculating home office overhead, and arguing a formulas appropriateness, faces several challenges. While much has been written about the various home office overhead formulas and why they succeed or fail, no one formula addresses all the criticisms of it from various courts and boards of contract decisions. Moreover, delay claims for home office overhead, however, do not receive consistent judicial treatment. Frankly, confusion exists partly because courts fail to enunciate precise justifications for awarding overhead as delay damages.
33
TECHNICAL ARTICLE
THE ROLE OF
CONSTRUCTION COST AUDITING WITHIN PROJECT CONTROLS

Abstract: Even with the most effective project control techniques, there are some project costs that cannot be fully evaluated until the construction project has been completed. For this reason, a construction audit of the final costs should be a standard part of an effective project controls program. This article will discuss the benefits of interim and final construction cost audits to owners, contractors and construction managers. Additionally, this article will provide recommendations that will help make a project more easily auditable at any stage of construction. It will also address some of the similarities and differences between construction auditing and project controls. Examples from actual case studies will be provided to help illustrate the results that audits may produce beyond standard project controls techniques. Finally, the article will show how objective auditing can aid the closeout process and may lower the risk of potential litigation which may be beneficial to not only project owners, but contractors and construction managers as well. This article was first presented at the 2011 AACE International Annual Meeting in Anaheim, Calif., as presentation CSC.667. Key Words: Audits, construction, contractors, costs, owners and project controls onstruction cost auditing can play an important role in the overall project control strategy by providing an objective review of the projects actual and contractually allowable costs. For many people, the term audit signifies a review of a financial process associated with accounting practices. With this premise, a construction audit is often not viewed as a valuable part of a project controls strategy. Audits are often initiated by an organizations executive management who are typically not involved in the daily aspects of daily project controls. The result is that many audits are conducted
without involvement from the project team. The audit process may be further isolated when the auditors do not have actual construction experience, including direct field experience, project controls, or the more specific construction accounting knowledge necessary to conduct a construction audit. This can happen when organizations default to either a financial auditing firm without a specialized construction practice or their own internal audit group who may not have experience with the nuances of everyday construction. These factors have the potential to create negative or adversarial auditing experiences for some project teams.
There is a more positive approach to construction auditing that some owner companies and even some construction firms are embracing. By integrating construction audits within their overall construction program, firms can better review the project costs that are not easily reconciled in the day to day project controls of a construction project. This article will discuss the main components of a construction audit and how they compare to the process of an effective project controls plan. Discussions will focus on how a construction audit can be an integral part of the project controls program and provide case study examples of actual audit findings. Finally, this article will show how objective auditing can aid the closeout process and may lower the risk of potential litigation, therefore providing benefits to not only projects owners, but contractors and construction managers as well.
Components of a Construction Audit

It is important to have a common understanding of construction auditing and its major components before further discussing how it is integrated into a project control system. Construction audits may have any of the following primary components:
34
Table 1 Summary Correlation Between the Responsibilities of Project Controls and Auditing
Process Compliance
contract compliance; process compliance; reconciliation; reasonability; verification (or testing); and, recommendations for improvement. Process compliance primarily verifies if an organization is following its own internal processes. The results of this portion of the audit may reveal how effective or reasonable the internal processes are while also exposing any deficiencies in the process. These processes can include how approval is granted for budgets, contract awards, changes and payment of invoices.
report errors, subcontractor credits not passed to the owner, etc.
Reasonability
This portion of the audit evaluates if costs or estimates are reasonable with respect to industry standards. A reasonability review may evaluate values for fees, insurance, bonds, general conditions, equipment rental and labor burden. This activity may be performed at the beginning of a project to determine if the budgets or contract estimate is complete and accurate. Similar reviews can be performed on change orders.
Contract Compliance
A construction contract is the document that defines the responsibilities between the owner and the CM or contractor. The contract compliance portion of an audit examines if the project is following the terms and agreements spelled out in the contract, such as fees, general conditions, changes, subcontractor bidding, schedule, communications, etc. Additionally, this review can identify risk exposure for future projects.
Reconciliation
The reconciliation audit verifies that the contractors costs are valid and accurately reflect what has been invoiced and paid for on a project at a specific point in time. Often times, reconciling a contractors cost report with the current project cost can help identify major errors in the construction costs including duplicate payments, cost
Verification
Auditors use many of the tracking reports created by the project team to reconcile and review the project costs. An important part of any audit consists
35
of verifying the accuracy of supporting documents. Due to the large volume of data associated with some construction projects, auditors use sampling techniques to verify accuracy, rather than examine every document. Standard on Auditing Standards (SAS No. 39) defines audit sampling as, the application of an audit procedure to less than 100 percent of the items within an account balance or class of transactions for the purpose of evaluating some characteristic of the balance or class [6]. The sampling results are also used to validate the accuracy of the projects changes, cost, and commitment tracking data. How this data reconciles with the final cumulative values of the pay applications is one of the primary focuses of all cost audits.
Construction Audits and Project Controls

There are numerous articles that discuss the importance of construction audits as part of an organizations fiduciary responsibility and fiscal stewardship. One such example is the paper written by W. Doug Creech, titled Sarbanes-Oxley and Cost Engineering. It is these concepts that are often the factors that executives have in mind when contemplating audits. It could be argued that these concepts are also primary drivers behind the cost control portion of project controls. Table 1 summarizes the correlation Creech makes between the responsibilities of cost engineers, often responsible for project controls, and the fiduciary responsibly associated with the auditing requirements. The primary goal of a construction audit is to verify that the allowable contractual costs have been accurately invoiced. Auditing seeks to identify potential risk exposure and increase the accuracy of project costs. These goals also coincided with the fundamentals of project controls. In fact, a number of the construction audit processes for reconciliation of project costs are very similar to the close out activities of project controls. Construction audits and project controls are both concerned with the relationship of project risks and costs. The primary focus of project controls is forecasting costs and mitigating potential risks either before they happen or as they are occurring. In contrast, a construction audit focuses on understanding and evaluating what actual impacts there were to the project. Despite the shared attributes, construction audits and project controls are seldom executed in tandem. Project teams with active project management and controls of any level can easily view an audit as a display of doubt in their teams ability and effectiveness. Many construction firms have accepted that audits are becoming part of their clients requirements. These firms are more likely to accept, or at least more readily cooperate, with a client-driven audit. However, a construction firms internal project team is likely to have the same perception of
doubt if the audit is initiated from within. Construction audits have the ability to serve as an additional project control tool by offering an unbiased and objective assessment of the costs and allowable billings. There are many aspects of construction that makes each project dynamic and unique in its own nature, however, the final allowable billable value is based on contractual terms, change orders and negotiations made during the course of the project. For this reason, construction audits look at the project from a specific point in time rather than a daily basis. Additionally, there are some project costs that are more efficiently reconciled after the project has been completed. For example, reconciling final costs to the contractors billing; balancing back charges; comparing final subcontract costs to total charged; reconciling any credits and refunds; and, reconciling actual insurance and bond rate charges.
Recommendations for Improvements

The construction audit can not only identify errors and reconcile costs, but can identify opportunities for future improvement. Recommendations can help tailor future project control plans to verify and check certain aspects of the construction process in order to aid a project in achieving its cost and schedule goals.
Interim Construction Audits

Audits are typically performed at the end of a construction project as a result of more accurate final costs being available. However, interim audits may also be necessary and valuable for a project. On larger projects with extended schedules, interim audits can be beneficial by identifying potential issues before they create a significant impact to the project. This may reduce the risk of dispute and subsequent litigation at the end of a project. Interim audits can be performed at any point in a project or at certain project milestones. Reasonability and process reviews may be done before the project is awarded to the construction firm. Regardless of the timing, interim audits are more dynamic and interactive than the final audit.
This type of information is typically only available at the end of a project. As a result, the project controls team may not have an opportunity to identify these items if they have moved on to another project and are not involved in reviewing these final costs. As with any significant ideological change in an organization, implementing construction auditing as part of project controls needs to be supported from both the executive and production levels. The auditing process needs to be viewed as a tool to an organization and not a weapon against the project team. Project controls requires specialized skills for cost and schedules. Similarly, performing a construction audit requires a qualified person with a specific skill set who can remain objective during the process. Often an organization may choose to complete a construction audit with an external consultant who obtains these skills and can remain unbiased during the review process.
36
Table 2 Duplicated Invoices Affecting the Total Contract Billings In this scenario, it is important for all parties to understand that the construction auditor can be a member of the project team and is in place to assist with mitigating the exposure to risk and verification of accuracy for all parties involved. A qualified construction auditor should have knowledge of the following: construction accounting; contract law; labor law as it relates to tax and burden; basic understanding of estimating; change management; insurance and surety; project management; sampling/testing techniques; and, scheduling. Although this article is advocating the integration of auditing and control, the two activities should not be performed by the same group. By keeping these functions separate, the auditor can have a level of objectiveness within his or her findings. This level of neutrality can be beneficial in determining how to address potential claims on a project if necessary. By understanding how the actual costs reconcile with the allowable contractual billings, owners and construction firms can sometimes find a mutual understanding of each others position and reduce the risk of litigation. While construction auditing is typically initiated at the owner or client organization, it can also be beneficial if initiated by the construction firm. These companies may want to understand actual and allowable costs as a means to help prepare a more accurate final invoice. Additionally, audits can be used as a demonstration to the client that the invoiced values are valid and correctly calculated. Construction firms can use the audits to help refine their historical benchmarking data, as well as find potential improvements in how costs are managed and tracked. construction auditing engagements. All of these examples represent items that may be more easily found during an audit rather than project controls during the project execution.
Example 1: Billing Errors

Project Size: $24MM Project Type: Electrical Systems Upgrades Location: Illinois
It can also be helpful to have enough technical experience to be able to understand drawings and specifications. This knowledge as a whole can help the auditor understand the correlation of any audit findings and the project controls performed. It is not uncommon to have significant findings in an audit that can be explained or justified in the project controls documentation. While the audit and project controls can mutually benefit each other, the audit should still be executed as a separate function and operate impartially to the project team.
Construction Audit Examples

The following section shows examples of findings from real
On this project, there were several invoices that were submitted multiple times to the construction manager (CM). In many cases, the CM was able to vet out the duplicated invoices from their billing to the owner. However, there were multiple invoices that slipped through the review process at both the CM level and the owner level. The construction audit was able to pinpoint the duplicated invoices as a result of testing and verification of invoice numbers, See table 2. The invoices from the subcontractors were flagged as being repetitive as a result of matching invoice numbers. Further investigation resulted in determining the invoices were submitted and approved on multiple pay applications. The resulting duplicated invoices were in excess of $115K of additional costs. Without the thorough construction audit process, this error would not have been discovered and therefore, the
37
project would have been reported as $115K over the actual costs
Example 2: Scope of Work Credit Reductions

Project Size: $56MM Project Type: Greenfield Hospital Location: Arizona
The subcontracts changes were reviewed and reconciled with the job costs and owner change orders. This project had a significant amount of changes reducing the scope of work after the project had been started. Most of these savings were passed on to the owner in the form of a reduction to the guaranteed maximum price (GMP); however, a few items were not passed on. Table 3 summarizes the credits that should have been passed through to owner. In nearly any type of contract, an adjustment to the scope of work to a subcontractor is a valid basis of adjusting the contract value. The scope reductions in table 3 were found when reconciling all of the subcontractor changes with their payments and back charges to the owners change orders.
Table 3 Subcontractor Credits Resulting from Scope that Were Not Passed to the Owner (SDI). The rate in the GMP, changes, and all invoices was 1.3 percent. However, a review of the actual rates issued by the insurance carrier revealed that they were charged an adjusted rate of less than 0.5 percent. This lower rate was not known until the completion of the project when the insurance carrier made the adjustment. The CM received a credit for this lower value, but the client was still charged the full 1.3 percent over the course of the project. Table 4 shows a summary of the reductions. Note that the soft costs, shown in table 4, are based on a multiplier of the hard costs. SDI is actually a multiplier of the subcontracts only. This example shows confirmation of an assumed percentage can result in an adjustment of material value.
Example 4: Settlement Value

Project Size: $7.5MM Project Type: Senior Living Location: California
Example 3: Actual Multiplier Rates vs. Estimated Multiplier Rates

Project Size: $20MM Project Type: Retail Mall Renovation Location: Texas
A GMP style contract allowed for the use of a subcontractor default insurance
At the conclusion of the project, there was a disagreement between the owner and the construction manager regarding what total final billed amount. The CM believed that they were due $7.8MM, while the owner believed the final value should be $7.4MM. The CM stated that they only wanted paid the correct amount to cover their subcontracts, actual general conditions and contractual fee. A reconciliation and audit of the CMs cost found the value to be approximately $7.6MM. Further investigation found that the CM staff was using incorrect data for their payroll,
Table 4 Adjusted Costs from a Reduction in the SDI
38
Table 5 Example Adjustments to Actual Cost Compared with Allowable Costs for Settlement insurance and bond rates, See table 5. The reduced and validated cost brought each party closer to a mutual understanding of the actual project costs and a settlement was made without the need for legal action. Both parties wished to be fair to each other, however, neither wanted to have to lose money on the project. In this example, it can be seen that the final costs as forecasted by the CM where greater than their true actual costs. This was because of inflated forecasting of their insurance and labor rates on self performed work. As the CM indicated they were interested in getting their actual costs plus fee, the audit was able to show that their starting negotiating position should not be greater than $7.6MM. The only remaining dispute was regarding a contractual cap on the general conditions. With a reduction of the gap between the two parties starting position, this dispute was more easily settled. how change orders are to be calculated within all contracts. Structure the budget and estimating schedule of values (SOV) or work breakdown structure (WBS) to align with the planned tracking structures that will be used during execution. Have a system that ties the subcontract changes to their associated owner change orders. Require that all final lien releases have the actual final total paid to the subcontractor clearly stated. A zero value owed statement does not provide any clarity regarding what actually was paid. Addressing these issues can be beneficial for the construction firms and their clients. As the project progresses, it becomes harder to capture the intent or rationale behind some of supporting cost documents. The list above represents some of the items that often require a greater level of investigation and discussion during an audit. They also represent areas with a more probable change of an audit finding.
Reporting
Verify that any hourly reports for management, administrative or labor have a clearly defined relationship with the primary cost report if these values are not already on it. Verify that the continuation sheets on any application for payment can be explicitly tied to the cost report. And, Verify that all back charges can be traced and balanced for credits and debits.
Conclusion
Change Management
Use a system to be able to clearly track how change orders, contingency transfers or budget adjustments affect any given line item. Very few construction tracking software packages offer this feature, which means it has to typically be done separately. However, having this type of control can help expedite the audit process and potentially help all parties understand how the various line item budgets may have been changed.
Recommended Practices
Aligning construction audits to project controls is primarily a matter of approach and perception. However, there are some efforts that can be made during the project execution to make a project more easily audited including but not limited to the following.
Pre-Construction
Clearly define allowable multipliers, allowable general conditions and
true construction audit can be a valuable part of any construction project by tying together specific aspects of financial accounting and construction accounting. Auditing can be used as an additional control tool when implemented as part of the project controls program. Project controls are receiving more attention as there are increased concerns over accountability and transparency. The integration of auditing into the control process requires the correct understanding of its process and results, as well as using
39
audit resources that are well versed in key aspects of construction. The positive results of auditing can help in claim avoidance and resolution, as well as help the control process for future projects. These benefits can be realized from both the owner/client side, as well as the constructor side. Owners and constructors should consider how they can make auditing a part of their construction program with the intent of having a positive and neutral tool. The results may mutually benefit all parties.
ABOUT THE AUTHORS
Member-Get-A-Member Grand Prize Winner Announced for 2011

Tamara Welten, Projects Cost Controller for Apache Energy Ltd, in Perth, Australia was randomly selected to win a trip to the 2012 AACE Annual Meeting July 8-11 in San Antonio, Texas, including airfare, registration, room at the Marriott Rivercenter Hotel, and $500 to cover expenses. She was entered when she told her colleagues about AACE International membership, and they included her name on the membership application. Each of the quarterly drawing winners won a $250 gift card to Lands End. These winners were: Ibrahim Demirbas, Samuel O. Martins, MRICS, Thomas (Mac) Sumrall, and Christopher W. Carson, PSP. The campaign will continue in 2012 with new quarterly prizes.
Jake Ortego, PE, is with Commercial Cost Control, Inc. He can be contacted by sending e-mail to: jortego@commercialcostcontrol.com
REFERENCES
1. Palmer, W., W. Coombs, and M. Smith, Accounting & Financial Management, 5th Edition, Chapter 11: Internal Auditing, McGraw-Hill, pages 399-402, 1994. Gillbreath, R., Managing Construction Contracts, 2nd Edition, Chapter 16: Short Form Contracts, John Wiley & Sons, Inc., page 256, 1992. Duncan, W., A Guide to the Project Management Body of Knowledge, Chapter 7.4: Cost Control, Project Management Institute, pages 79-80, 1996. Ciccarelli, J., Cost Control Systems: Benefits Provided to Claims Analysis, AACE International Transactions, AACE International, Morgantown, WV, 2003. Patrascu, A., CCE, Implementing a Company-Wide Cost Control System, AACE International Transactions, AACE International, Morgantown, WV, 1977. SAS 39 Audit Sampling, Statement on Auditing Standards, Auditing Standards Board, American Institute of Certified Public Accountants, 1981. Nalewaik, Alexia A., CCE, Construction Audits An Essential Project Controls Function, AACE International Transactions, AACE International, Morgantown, WV, 2006. Creech, W. Dough, CCC, SarbanesOxley and Cost Engineering, Cost Engineering, Volume 48, No. 7, AACE International, Morgantown, WV, July 2006.
Antonio Fratangelo, CCC, is with Commercial Cost Control, Inc. He can be contacted by sending e-mail to: afratangelo@commercialcostcontrol.com
2.
3.
4.
5.
6.
7.
8.
bn
40
PROFESSIONAL SERVICES DIRECTORY
All AACE International Books to be "Print-on-Demand" Products

AACE will be reformatting each of its print products (i.e., the Skills and Knowledge of Cost Engineering; CCC/CCE Certication Study Guide; EVP Study Guide; PSP Study Guide; and the TCM Framework) to be produced by a subsidiary of Amazon.com. Our goal is to have each of these AACE publications available online from Amazon.com in 2012. We will maintain a link from the AACE website to Amazon.com and recommend additional products as well.
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OR GO ONLINE AT www.aacei.org
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ARTICLE REPRINTS AND PERMISSIONS
COST ENGINEERING
Vol. 54, No.2/March/April 2012
Members of AACE International have access to free downloads of selected articles that are published with an AACE International reference number. These articles are available at the online Virtual Library at www.aacei.org. Electronic files of each months technical articles are posted and members can download an Adobe Acrobat (PDF) version of any of the technical articles for free. You can search for articles using the reference numbers listed in the Cost Engineering journal. Non-members can subscribe to the AACE Virtual Library at an annual cost of US $100.00. AACE International no longer offers reprints of individual articles.
Pages 4-11
Increasing Project Controls Impact on a Successful Project

David A. Lucas
This article was first presented at the 2011 AACE International Annual Meeting as manuscript CSC.606.
Article Reference Number - 21971 Pages 12-17
Practices in Construction Change Order Management

Joseph J. Egan, PE; Joseph E. Seder, CCE; and Dayna L. Anderson, ICC
The authors first presented this manuscript as CSC.607, at the 2011 AACE International Annual Meeting in Anaheim, CA.
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Cause and Effect: How Schedule Acceleration Affects Productivity

This article was first presented at the 2011 AACE International Annual Meeting in Anaheim, Calif., as presentation CSC.580.
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Bringing Home the Bacon Overhead Calculations and the Law

This article was first presented at the 2011 AACE International Annual Meeting in Anaheim, Calif., as presentation CDR.542.
The Role of Construction Cost Auditing Within Project Controls

This article was first presented at the 2011 AACE International Annual Meeting in Anaheim, Calif., as presentation CSC.667.
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CALENDAR OF EVENTS
MARCH 2012
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THE JOURNAL OF AACE INTERNATIONAL THE AUTHORITY FOR TOTAL COST MANAGEMENT

OVERHEAD CALCULATIONS AND THE LAW

CONSTRUCTION COST AUDITING WITHIN PROJECT CONTROLS

See the forest and the trees.

12 Practices in Construction Change Order Management

19 Cause and Effect: How Schedule Acceleration Affects Productivity

26 Bringing Home the Bacon Overhead Calculations and the Law

34 The Role of Construction Cost Auditing Within Project Controls

COST ENGINEERING MARCH/APRIL 2012

AACE INTERNATIONAL BOARD OF DIRECTORS

Managing Editor Art Director Advertising Sales

AACE International - The Authority for Total Cost Management

Policy Concerning Published Columns, Features, and Articles

COST ENGINEERING MARCH/APRIL 2012

We invite you to apply on our website

INCREASING PROJECT CONTROLS

What Is Project Controls

COST ENGINEERING MARCH/APRIL 2012

Providing Relevant Information

COST ENGINEERING MARCH/APRIL 2012

Key Project Decisions and Events

COST ENGINEERING MARCH/APRIL 2012

Understanding Your Stakeholders

COST ENGINEERING MARCH/APRIL 2012

COST ENGINEERING MARCH/APRIL 2012

COST ENGINEERING MARCH/APRIL 2012

COST ENGINEERING MARCH/APRIL 2012

ABOUT THE AUTHOR

reviewing your P6 schedule and reviewing your P6 XER file? Everything

COST ENGINEERING MARCH/APRIL 2012

CONSTRUCTION CHANGE ORDER MANAGEMENT

COST ENGINEERING MARCH/APRIL 2012

COST ENGINEERING MARCH/APRIL 2012

Identify the Potential Change

Dispute Resolution Clause

Create a Proposed Change Order and Document the Proposed Change

COST ENGINEERING MARCH/APRIL 2012

Execute the Change Order

Review and Evaluate the Proposed Change Order Timely

Document the Executed Change

COST ENGINEERING MARCH/APRIL 2012

Impacts Caused by Change

Discussion of Change Management Process Used to Track Impacts to the Project

COST ENGINEERING MARCH/APRIL 2012

ABOUT THE AUTHORS

COST ENGINEERING MARCH/APRIL 2012

CAUSE AND EFFECT:

COST ENGINEERING MARCH/APRIL 2012

Methods of Schedule Acceleration

Advantages of Scheduled Overtime

COST ENGINEERING MARCH/APRIL 2012

Cost Impact of Calendar Changes

The Law of Diminishing Returns

COST ENGINEERING MARCH/APRIL 2012

Table 2 Work Calendar Effect on Cost/Schedule including Productivity

COST ENGINEERING MARCH/APRIL 2012

COST ENGINEERING MARCH/APRIL 2012

Eliminating Scheduled Tasks

The Risk of Omission

COST ENGINEERING MARCH/APRIL 2012

ABOUT THE AUTHOR

COST ENGINEERING MARCH/APRIL 2012

BRINGING HOME THE BACON