COST

THEJOURNALOFAACE INTERNATIONAL-
THEAUTHORITYFORTOTALCOSTMANAGEMENT

January/February 2016

ENGINEERING
www.aacei.org

THE INNER WORKINGS OF

ORACLE/PRIMAVERA P6
CONTINGENCY DRAWDOWN
FORECASTING,TRACKING,
AND ACTUAL CONTINGENCY
SPEND FORECASTING
CHANGING TREND IN
RISK ALLOCATION
DIFFERING SITE
CONDITIONS
COST ENGINEERING
CONTENTS

TECHNICAL ARTICLES
4 The Inner Workings of Oracle/Primavera P6
Ronald M. Winter, PSP FAACE

23 Contingency Drawdown Forecasting,

Tracking, and Actual Contingency
Spend Forecasting
Robert J. White

31 Changing Trend in Risk Allocation

Differing Site Conditions
Steven A. Collins and James G. Zack, Jr. CFCC FAACE

ALSO FEATURED
2 AACE International Board of Directors 52 Professional Services Directory
2 Cost Engineering Journal Information 52 Index to Advertisers
22 2016-2017 Election Board Candidates 53 Calendar of Events
52 New Recommended Practice

COST ENGINEERING JANUARY/FEBRUARY 2016 1


AACE INTERNATIONAL
BOARD OF DIRECTORS
PRESIDENT
JulieK.Owen,CCPPSP
213.922.7313/president@aacei.org
PRESIDENT-ELECT
JohnC.Livengood,Esq.CCPCFCCPSP
202.669.1360/preselect@aacei.org
PA ST PRESIDENT
MartinDarley,FRICSCCP
713.372.2426/pastpres@aacei.org
VICE PRESIDENT-ADMINISTRATION
JamesJimE.Krebs,PECCPFAACE
734.207.1457/vpadmin@aacei.org
VICE PRESIDENT-FINANCE
JosephW.Wallwork,PECCPCFCCPSP
516.477.7383/vpfinance@aacei.org
VICE PRESIDENT-TECHNICAL BOARD
DanMelamed,CCPEVP
202.586.6239/vptechboard@aacei.org
VICE PRESIDENT-EDUCATION BOARD
JamesG.Zack,Jr.,CFCCPSPFAACE
949.660.8232/vpedboard@aacei.org
VICE PRESIDENT-CERTIFICATION BOARD
CharlesE.Bolyard,Jr.,CFCCPSPFAACE OURVISION-Tobetherecognizedtechnicalauthorityincostandschedulemanagement
703.641.9088/vpcertboard@aacei.org
VP- INTERNATIONAL REGIONS
PhilipsTharakanMulackal,CCPEVP
971.50.631.4830/vpregions@aacei.org
VP- NORTH AMERICAN REGIONS
MariaCristinaBaltazar,PEPSP
410.654.3790/vpregions@aacei.org
DIRECTOR-REGION 1
CindyL.Hands,CCP
403.383.7374/dirregion1@aacei.org
DIRECTOR-REGION 2
CalvinJ.Speight,Jr.,CCP
703.254.9538/dirregion2@aacei.org
DIRECTOR-REGION 3
BryonWilloughby,PECCP
704.895.5350/dirregion3@aacei.org
DIRECTOR-REGION 4
JaquelineT.Doyle,PEPSP
630.613.7170/dirregion4@aacei.org
DIRECTOR-REGION 5
ChristopherP.Caddell,PECCPDRMP
281.997.7260/dirregion5@aacei.org
DIRECTOR-REGION 6
ColmTully,CCPPSP
415.946.0749/dirregion6@aacei.org
DIRECTOR-REGION 7
MohammedRafiuddin,CCPPSP
+966.13.8079303/dirregion7@aacei.org
DIRECTOR-REGION 8
JaiminR.Mehta,CCPPSP
011919586795959/dirregion8@aacei.org
DIRECTOR-REGION 9
GarvanGerardMcCann
+27.11.5188214/dirregion9@aacei.org
DIRECTOR-REGION 10
MarcosEduardoGanut
55.11.999.22463/dirregion10@aacei.org
EXECUTIVE DIRECTOR
CharityA.Golden
304.296.8444/cgolden@aacei.org
2 COST ENGINEERING JANUARY/FEBRUARY2016
CONTENTS
COST ENGINEERING
Established1958
Vol.58,No.1/January/February2016
Managing Editor MarvinGelhausen
mgelhausen@aacei.org
Art Director NoahKinderknecht
nkinderknecht@aacei.org
Advertising Sales JennieAmos
304.296.8444fax-304.291.5728
jamos@aacei.org
HEADQUARTERS
1265SuncrestTowneCentreDr
Morgantown,WV26505-1876
800.858.COSTfax-304.291.5728
AACE International - The Authority for Total Cost Management
forprograms,projects,products,assets,andservices.
OURMISSION-ThemembersofAACE enableorganizationsaroundtheworldtoachieve
thierinvestmentexpectationsbymanagingandcontrollingprojects,programs,andport-
folios;wecreatevaluebyadvancingtechnicalknowledgeandprofessionaldevelopment.
Cost Engineering (ISSN:0274-9696/16)ispublishedbi-monthlybyAACEInternational,Inc,1265SuncrestTowneCentreDr,
Morgantown,WV26505USA.PeriodicalspostagepaidatMorgantown,WV,andatadditionalmailingoffice.POSTMASTER:
Send address changes to AACE International; 1265 Suncrest Towne Centre Dr, Morgantown, WV 26505-1876 USA. Cus-
tomer #7012359 (APC), Publications Mail Agreement No 40624074, Return undeliverable Canadian addresses to PO Box
503, RPO West Beaver Creek, Richmond Hill, ON L4B 4R6. Copyright2016byAACEInternational,Inc.Allrightsreserved.
Thispublicationoranypartthereofmaynotbereproducedinanyformwithoutwrittenpermissionfromthepublisher.
AACEassumesnoresponsibilityforstatementsandopinionsadvancedbythecontributorstoitspublications.Viewsex-
pressedbythemortheeditordonotnecessarilyrepresenttheofficialpositionofCost Engineering,itsstaff,orAACEInter-
national,Inc.Printed in York, PA, USA. Cost Engineering isarefereedjournal.Alltechnicalarticlesaresubjecttoareview
bytheAACEInternationalCostEngineeringJournalReviewCommittee.AbstractsareonlyacceptedinourannualAACE
CallforPapersforourAnnualMeetingandITCMConference.Acceptedabstractsmustbefollowedupwithafullap-
provedmanuscriptthatispresentedandattendeeevaluatedatoneoftheAACEAnnualMeetingsorITCMConferences.
TopratedmanuscriptswillbeconsideredforpublicationintheCEjournal.Anyunsolicitedabstractsreceivedatothertimes
throughoutayearwillreceivee-mailnoticetosubmitinournextCallforPapers.PHOTOCOPY PERMISSION:Authoriza-
tiontophotocopyarticleshereinforinternalorpersonaluse,ortheinternalorpersonaluseofspecificclients,isgranted
byAACEInternational,Inc.,providedthatthebasefeeofUS$4.00ispaiddirectlytoCopyrightClearanceCenter,222Rose-
woodDrive,Danvers,MA01923USA.Telephone:978.750.8400.Forthoseorganizationsthathavebeengrantedaphoto-
copylicensebyCCC,aseparatesystemofpaymenthasbeenarranged.Thefeecodeforusersofthetransactionalreporting
serviceisISSN-0274-9696/02US$4.00.PaymentshouldbesentdirectlytoCCC.Copyingforotherthanpersonalorinternal
referenceusewithouttheexpresspermissionofAACEisprohibited.E-mailrequestsforphotocopypermissiononbulkor-
dersmaybesenttoeditor@aacei.org.ADVERTISING COPY: ContactJennieAmos,1265SuncrestTowneCentreDr.,Mor-
gantown,WV26505-1876.Telephone:304.296.8444.E-mail:jamos@aacei.comforrates.Advertisersandadvertising
agenciesassumeliabilityforallcontent(includingtext,representation,andillustrations)ofadvertisementsprintedandalso
assumeresponsibilityforanyclaimsarisingtherefrommadeagainstthepublisher.Thepublisherreservestherighttoreject
anyadvertisingthatisnotconsideredinkeepingwiththepublicationsmissionandstandards.Thepublisherreservesthe
righttoplacethewordadvertisement withcopywhich,inthepublishersopinion,resembleseditorialmatter.Alladvertis-
ingacceptedforpublicationinCost Engineering islimitedtosubjectsthatdirectlyrelatetothecostmanagementprofes-
sion.Currentratecardavailableonrequest.COST ENGINEERING DEADLINES:SubmissionsforCostEngineeringmustbe
receivedatleast8weeksinadvanceoftheissuedate.Sendto:Editor,1265SuncrestTowneCentreDr,Morgantown,WV
26505-1876USA.Deadlinesdonotapplytotechnicalpapers.
Policy Concerning Published Columns, Features, and Articles
Viewpointsexpressedincolumns,features,andarticlespublishedinCostEngineeringjournalare
solelythoseoftheauthorsanddonotrepresentanofficialpositionofAACEInternational.AACEIn-
ternationalisnotendorsingorsponsoringtheauthorswork.Allcontentispresentedsolelyforin-
formationalpurposes.Columns,features,andarticlesnotdesignatedasTechnicalArticlesarenot
subjecttothepeer-reviewprocess.
 TECHNICAL ARTICLE

The Inner Workings of

Oracle/Primavera P6
Ronald M. Winter, PSP FAACE

tence. The majority of P6 users are un-

Abstract: Oracle Primavera P6 scheduling software is noted for its diverse aware of the underlying calculations for
and extensive set of features and range. The newer date fields and their cal-
new date fields, nor do they under-
culation methods have started intense discussions and caused some misun-
derstanding in the scheduling community. The sheer number of different stand their intended usage. This article
date fields can be a benefit, or a curse, to the scheduler depending on the discusses the underlying calculations
users mastery of how they should be used. for P6 date fields and their potential
Every scheduler should clearly understand the softwares methods of cal- uses.
culation in order to use this powerful tool at its full capacity. This article will It is essential to understand the
define the durations used and describe the P6 date fields, their uses, and the underlying structural format of P6 soft-
underlying calculations. P6 examples will be used to calculate Critical Path ware before delving into its functions.

P
Method (CPM) dates on a schedule that has been progressed with status. This Without such appreciation, errors can
is a little known method of calculation. This article is based on an earlier easily be made in the execution. The
paper, presented in 2009 at an AACE International Annual Meeting, with new
basis of CPM is the accumulation of
and updated information and an entirely new emphasis. This article was first
presented as PS.2063 at the 2015 AACE Annual Meeting In Las Vegas. task durations following rules of logic
in order to calculate planned dates.
Thus, the P6 user must be aware of the
rimavera Inc, (now packages, including Primaveras earlier
basis and limitations behind the way P6
Oracle/Primavera) has a long scheduling software product, Primav-
handles durations and dates.
history of introducing Critical era Project Planner (P3.) This fact may
Path Method (CPM) schedul- explain why many experienced P3
P6 Durations
ing software, beginning in 1983. In users have so much trouble learning to
One of the greatest differences be-
1999, Primavera introduced an entirely properly use P6.
tween P3 and P6 software is how they
new CPM scheduling package designed This confusion is partly a result of
respectively deal with durations. Users
for enterprise-wide project manage- an incorrect assumption that P3 must
of P3 had to decide upon the unit of
ment, the name of which seemed to be an earlier version of the current P6
measure before they created a new
change yearly over the next 16 years. software. Date fields with similar
schedule. The P3 user must express all
This new softwares name has names in both P3 and P6 behave very
durations in units of months, weeks,
gone from Primavera Enterprise to P3e, differently in one than in the other. In
days, or hours. After the schedule was
P3 Engineering and Construction, addition, the plethora of new date
created, the chosen unit of measure
P3e/c, Teamplay, Primavera, P6, Project fields in P6 creates a steep learning
was forever fixed and indivisible. Most
Manager, Enterprise Project Portfolio curve to P6 mastery. A lack of docu-
CPM software works in a similar man-
Manager (EPPM), Professional Project mentation regarding these features
ner.
Manager (PPM), and P6 Professional. adds to the confusion.
Most construction projects are
For simplicity, this article will refer to all Besides a fundamental shift in the
scheduled in days. This unit of measure
of this software simply as P6. way that dates are conceptualized, P6
is normally appropriate for planning,
P6 handles dates fundamentally has more kinds of useable dates than
estimating, and measurement. Appro-
different from most other software practically any other software in exis-

4 COST ENGINEERING JANUARY/FEBRUARY 2016

priate unit granularity is enforced by an
engineering assumption that all work
begins at the beginning of the work day
and all work finishes at the end of the
work day. P3 had no provision for
measuring durations less than the cho-
sen unit of measure. If the schedule is
measured in days, then partial days
were not allowed.
The point to be made here is that
the engineers who designed P3 were
forced to consider significant accuracy.
If a schedule is set to measure dura-
tions in units of days, then every math-
ematical calculation has to return a
whole number of days. As an example,
a six-day activity statused as 30 percent
complete would result in four days re-
maining, not the 4.2 days that the
mathematical calculation would sug-
gest. Engineers would say that if work
is planned using whole days and meas-
ured it in whole days, then it is false ac-
curacy to try to predict anything with
better accuracy than a full days dura-
tion.
Users of P6 face an entirely differ-
ent philosophy about the measure-
ment of duration and time. All dates
are stored in the database as a complex
number that describes dates as the
date, hours, minutes, and even sec-
onds. In other words, all P6 dates are
actually a measure of time.
Users of P6 can approximate the
look of a schedule calculated in days by
Figure 1 Admin and User Preferences for Time Periods
setting their user preference to only
display whole days without hours.
When displaying durations, one can
also have P6 round the current duration
to the nearest whole number. This does
not mean that the dates and durations
are now being measured in whole days;
only that the data is displayed that way.
Because the engineers who de-
signed P6 used a method of storage
that allowed for fractional dates and
fractional days (down to the minute or
even second), they were not con-
strained the way the P3 engineers
were. They were free to have durations
down to the minute and compute early
start and finish dates down to the
minute, regardless of how the end re-
sult was displayed. This ultra accuracy
of date and time storage means that a
P6 user can plan in units of days, enter
only durations in whole units of days,
and still get calculated results that are
expressed in hours, minutes, and sec-
onds.
P6 handles this conversion of input
to storage in the database and back
again into display with an hours per
time period factor. There are four pos-
sible factors:
Hours/Day
Hours/Week
Hours/Month
Hours/Year
COST ENGINEERING JANUARY/FEBRUARY 2016
If the users display is set to display
days, then any numerical entry is mul-
tiplied by the hours/day setting and
that number is stored in the database
in hours for that entry. Alternatively,
one can override the default setting by
entering the number followed by the
measurement acronym. For example,
entering 5w (the w being a recog-
nized short-hand to tell P6 that the
number is a measure of weeks) would
cause P6 to multiply this number by the
hours/week factor and store that num-
ber of hours in the database. If the de-
fault display is still set to days, then P6
would divide the number of hours
stored in the database by the
hours/day factor and display that num-
ber of days in the entry location the P6
user just used.
P6 displays the hours per time pe-
riod settings in either the admin pref-
erence window or the user preference
screen (for pre-Version 7 users), as
shown in Figure 1. Readers should note
that figures 1-3, 6-17, 19-23, 25, and
31-33 are from Oracle Primavera P6,
Versions 7 and 8.
Before Version 7, if the admin pref-
erence option of, Allow users to spec-
ify the number of work hours for each
time period, is selected; then each
user can define their own hours/day
conversion factor. This results in each
user potentially displaying a different
duration, given the same hour number
5
 in the database and a different conver-
sion factor. If the admin preference op-
tion, Allow users to specify the
number of work hours for each time
period is not selected, the hours per
time period settings defined in the
admin preferences are used for the
conversion. These settings for which
conversion option was used are not ex-
ported with the schedule backup.
P6 Version 7 (and later) users have
this admin setting changed to read,
Use assigned calendar to specify the
number of work hours for each time
period. The user preference setting
was removed in Version 7, and was re-
located to the individual activity calen-
dars, as shown in Figure 2. A click on
the calendars time period button
brings up the hours per time period
window. Instead of one user prefer-
ence figure, each activitys calendar
contains the desired conversion factor.
Theoretically, each activity could have
a unique conversion factor if enough
calendars were created.
The pre-Version 7 feature of using
a single conversion factor for all activi-
ties does not work well. This setting is
used for all projects and for all activities
and does not take into account that
various projects may operate different
work schedules and different shift
Figure 2 Assigned Calander for Time Periods
6 COST ENGINEERING JANUARY/FEBRUARY 2016
schedules. In addition, various activi-
ties in the same schedule may work on
dissimilar work schedules.
Changing the conversion factor
whenever desired to meet current
needs does not solve the problem.
Aside from having to keep a list of what
schedules use which factor, there exists
the possibility that some activities in a
schedule might need one setting and
others might need another.
The correct method for assigning
conversion factors is to use the Version
7+ individual activity calendars to set
each activitys day/hours conversion
factor. Another solution is to always Calendar work/non-working hours
enter all durations in the native hours
format, thereby avoiding the conver-
sion altogether. Instead of entering 2 that whole hourly units cannot be the
one would enter, 16h. This way, even
if the displayed duration is incorrect,
the database will contain the correct
figure and the calculated dates will still
be correct.
There are a few issues that must
be considered when using assigned cal-
endars for time periods. The adminis-
trator set conversion is still the default
setting. All new calendars default to 8.0
hours per day, even 24-hour calendars.
Finally, the user must be sure to change
calendars when workdays or working
hours change. This may necessitate the
splitting of activities to reflect acceler-
ation of the work.
Smallest Unit of Measurement
If any duration unit of measure-
ment is acceptable for input and every-
thing is physically able to be stored
down to the nearest second, this begs
the question: What is the basic unit of
measurement in P6? The basic theory
of calculation of a CPM schedule states
that there must be a smallest unit of
measurement.
The Primavera literature says that
the schedule is calculated in hours. The
per day template is calibrated to the
nearest half of an hour, so this means
smallest unit of measurement. The fact
that it is possible to enter dates down
to the single minute seems to indicate
that P6 at least considers time intervals
to the minute.
To verify the smallest unit of meas-
ure (and thus the CPM unit of measure
for P6) one can set P6 to display activity
durations in hours with two decimal
places (the highest accuracy display
available). When one enters 0.01 hours
(which is 0.6 minutes) for Activity 0.01
Act, P6 automatically converts this dis-
play to 0.02 hours (roughly one
minute). P6 will accept entries of 0.02
and 0.03 hours, but not 0.01 and 0.04
hours. Activity 0.04 Act accepts the
0.04 entry and displays 0.03. The com-
puted schedule results are shown in
Figure 3.
This schedule displays a complete
CPM project that is only six minutes in
length (from 08:00 to 08:06.) Activity
0.01 Act starts at 08:00 and ends at
08:01. Activity 0.02 Act starts at
08:01 and ends at 08:03. Activity 0.03
Act starts at 08:03 and ends at 08:04.
Entries of less than a minute get
rounded-up to a whole minute.
Clearly, P6 computes schedules to
a granularity of a minute. P6 handles
this unit of measurement as one
minute is equal to 0.0166667 hours.
The CPM network shown in Figure 3
would hand-calculate, as shown in Fig-
ure 4.
 Figure 3 P6 Unit of Measure
Figure 4 CPM Calculations of a Six-Minute Schedule
P6 Dates
P6 stores dates in what is known
as Julian date format. This is a decimal
number that uses whole numbers to
represent the day and the decimal frac-
tion to represent fractions of a day.
Using the conversion factors of 24
hours in a day and 60 minutes in an
hour:
One day = 1.0 day
One hour = ( 1/24 ) = 0.041666 day
One minute = ( 1/24/60 ) =
0.0006944 day
An example of this format using
the date and time of March 7, 2014
08:00 would find that March 7, 2014,
responds to Julian date 41705 and
Figure 5 P6 Date Calculations of a Six-Minute Schedule
08:00 (8/24) equals 0.3333328. To-
gether, this date and time would be
stored in the P6 database as,
41705.3333328. This format is fully
able to handle any future require-
ments, as the size of the number type
used allows for more than two fol-
lowed by 10304 zeros years.
Repeating Figure 4 in the actual
numbers used by P6 would result in the
network displayed in Figure 5.
Default Time Issue
The format that P6 dates are dis-
played in actually has an effect on the
accuracy of entries. Normally, P6 users
working in whole days tend to hide the
display of the time. It is strongly recom-
mended that every P6 user display the
COST ENGINEERING JANUARY/FEBRUARY 2016
time, as well as the date, when enter-
ing actual dates. This is because of a
problem called, the default time Issue.
When a P6 user enters just the
date for an actual entry, the P6 pro-
gram must supply an appropriate time
to go with that date. The start of the
day, 00:00 (midnight) is quite often
the default. This means that when a P6
user enters an actual finish date, with-
out specifying a time, the date is set to
the start of the day. This is incorrect as
CPM equates this time to the finish
time of the day before. If one wants to
designate an actual finish date, one
must specify a time of 16:00, or what-
ever time is used to indicate the end of
the working day. The result of this entry
has the following undesired effects:
7
 One day activities become zero
duration as the start and finish
time are set to the same date and
time (midnight).
When setting a late finish con-
straint, the time is set to the start
of a day. This in effect causes the
constraint to actually occur one
day earlier than it is intended,
when the constraint time is set to
00:00 (at the start of a day) and
not 17:00 at the end of the day.
Oracle/Primavera provided a fix
for this issue in P6 Version 7 by auto-
matically supplying the normal start
time for starts and the normal finish
times for finishes when not entered by
the user. This software fix only works
under some circumstances and does
not cover the issue of entering sus-
pense dates or constraint dates. In
order to be able to check for accuracy
and consistency, the P6 user should al-
Table 1 Date Fields in P6
8 COST ENGINEERING JANUARY/FEBRUARY 2016
ways display times when entering
dates.
The Date Fields
The first step in understanding P6
dates is to realize the scope and variety
of the pre-established types, or date
fields. Other date fields can be created
by the user but will not be covered
here. The definition of an activity date
field, means that every activity in the
schedule has a slot available for stor-
ing the particular date that applies just
to that activity. Whether or not a date
is actually assigned to that slot or field,
P6 maintains a space for that date for
every activity in the schedule.
One logical way of categorizing the
date fields is by functional hierarchy.
Date fields can be categorized into five
main groups:
Project and WBS Date Fields
Activity Date Fields
Resource Date Fields
Relationship Date Fields
Audit Record Date Fields
There are so many date fields de-
fined in P6 that a resource-loaded
schedule with 1,000 activities would
most likely have at least 50,000 date
fields set aside for use. A list of the pre-
established P6 date fields are shown in
Table 1.
Project and WBS Dates
Even though activity dates are the main
focus of this article, a brief introduction
to project and WBS dates is appropri-
ate since some of them affect the ac-
tivity-level calculations.
Anticipated Start and the Antici-
pated Finish date fields are used
during the project planning stage,
and can be set at the Enterprise
Project Structure (EPS), project, or
 Figure 6 Early/Late Start/Finish Dates
WBS level. These dates are dis-
played at EPS level bars and
columns when the schedule is just
a placeholder and no activities are
assigned. These dates remain as
historical records when activities
are added and the CPM calculates
the start and finish times.
Planned Start date field is the start
date of the project. No early dates
will be calculated before this date.
This date will automatically be
used as the data date until a new
one is manually entered.
Must Finish By date field is a date
constraint placed on the project
completion. Must finish by date
determines the late finish of the
first activity in the backward pass.
P6 documentation offers very little
information about Forecast Start
date. This date represents the start
date of the resource leveling
process on the backward pass. If
resource leveling has not been
used, this date will match the
Planned Start Date.
Finish Date is the latest early finish
date calculated when P6 last
scheduled the project.
Actual Start is the actual start date
of the project, and it is inherited
from the first started activity.
Similarly, Actual Finish date is in-
herited from the last completed
activity in the schedule. This field
will be blank until every activity
has been statused as complete.
Activity Date Fields
P6 activities have the largest share
of the date fields in P6. Many of them
are quite unique to this software. The
documentation supplied by Oracle/Pri-
mavera on these unique fields is lack-
ing in detail and functional
observation.
Early Start/Finish and
Late Start/Finish Dates
The Critical Path Method (CPM) is
a procedure use to calculate projected
dates from activity remaining duration
and precedence logic [3]. It is a curious
fact that all who learn to manually cal-
culate a CPM schedule always use a
schedule without existing status. Un-
fortunately, no available publication ex-
plains how to calculate the CPM when
activities have actual status [2]. P6 ap-
pears to be unique in the transparency
of displaying all internal CPM date cal-
culations. This transparency has caused
some consternation in the world of
scheduling experts who thought that
they understood everything possible
about their craft.
Simply put: every activity in the
schedule is considered when comput-
ing a CPM, even those that have been
statused as complete. Unless overrid-
den by a constraint, all activities with-
out a predecessor are scheduled (with
consideration to their calendars) to
begin on the current data date (early
start) and their remaining durations are
used to compute their early finish. This
rule even applies to completed activi-
ties with a remaining duration of zero.
Original durations have nothing to do
with CPM date calculations.
Immediate successors of the activ-
ities whose early dates were just eval-
uated are considered in like kind with
completed activities all piling-up on
the data date like a stack of milestones.
This process continues until one finally
uncovers an activity with a remaining
duration greater than zero (i.e., an un-
completed activity). From here on, the
calculations proceed as most CPM ex-
perts normally would appreciate. This
process allows one to consider the de-
laying effects of uncompleted work re-
sulting from out-of-sequence progress
under the retained logic CPM calcula-
tion rule.
COST ENGINEERING JANUARY/FEBRUARY 2016
Once the CPM calculation is fin-
ished, P6 returns to the actual dates
and generates a Gantt chart with bars
showing a mixture of actual and calcu-
lated dates using the dates found in the
start and finish columns. The barchart
does not faithfully display the results of
the CPM calculations, especially for
bars before the data date that reflect
the actual, not calculated dates.
The above algorithm can be
proven using P6. The P6 early start,
early finish, late start, and late finish
(early/late start/finish) columns are
presented differently from their coun-
terparts in Microsoft Project or P3.
After the CPM calculations are com-
plete, Microsoft Project blanks out all
calculated date entries for completed
activities. P3 actually deletes the calcu-
lated dates for completed activities
from the database and replaces those
computed dates with the established
actual dates. This substitution has led
scheduling experts to conclude that ac-
tivities with actual dates were not used
in computing the current CPM sched-
ule dates.
Beginning with their Version 5.0
software release, P6 took a third ap-
proach and boldly displayed the calcu-
lated dates, even for completed
activities. It only does this in the re-
tained logic CPM calculation mode. P6
treats the progress override and actual
dates calculation modes the same way
as P3 does.
Figure 6 shows a P6 schedule dis-
playing the actual date columns, as
well as the early start, early finish, late
start, and late finish columns for activ-
ities that are completed.
Notice in the above example that
Activity 0277X-12 actually started on
03APR06, but had an early start of
04DEC06. This early start date corre-
lates to the 04DEC06 data date used for
that calculation. Also note that the late
start of 11MAY07 indicates that this
9
 Figure 7 No Progress Activity - Start/Finish Date

Figure 8 Activity in Progress - Start/Finish Date

Figure 9 No Progress Activity - Planned Start/Finish Date

completed activity has float! After all,
total float is merely the subtraction of
the early start workday from the late
start workday. Given the two calculated
dates, one can compute the float by
subtraction.
If P6 can compute the total float
for completed activities, then why does
it not display this value? The initial P6
Version 5.0 did calculate and display
this float for completed activities, as
well as uncompleted ones. Actually dis-
playing float values for completed ac-
tivities was the last straw for
scheduling experts and evidently
everyone complained. Primavera
quickly issued Version 5, Service Pack
1, to blank out the float column for
completed activities. Just like the moral
of many science fiction movies back in
the 1950s, this was information that,
Man was not meant to know.
The astute reader may ask, If P6
can be used to display the float of com-
pleted activities, then is this float the
activitys as-built float? Unfortu- (Planned Start and Planned Finish.) The
nately, computing the as-built float of
an activity is not that simple [7].
Start/Finish Dates
Start and finish dates work similar
to the way they do in Microsoft Project.
They represent the early dates when
activities have no progress, as dis-
played in Figure 7. If there is no
progress on the activity, then the start
date is equal to the early start and the
finish date is equal to the early finish.
The user can manually input a start
date, but schedule calculations will
generally overwrite the user input.
When the activity is in progress,
start is equal to the actual start and fin-
ish will remain equal to early finish, as
shown in Figure 8. Again, the user can
manually enter a start date and user
input will overwrite actual date.
When the activity is complete,
start and finish dates will be equal to
the actual start and finish dates. In this
case, if a user manually enters a start
or finish date, P6 will keep the changed
dates and actually overwrite the actual
dates without notice!
Planned Start/Finish Dates
Of all the date fields available in
P6, probably the most interesting and
controversial ones are planned dates
(once applied.) Instead, planned finish
majority of P6 users are unaware of the
planned date calculations and how
they are used. This is understandable
as only one reliable partial reference
was found [4].
Planned dates do not always dis-
play planned information. In some in-
stances they are used to display
budgeted and current information as
well.
Planned dates are generated from
the calculated early dates. They match
the early dates exactly as long as the ac-
tivity does not register an actual start,
resource leveling is not used, or the
user does not manually update these
fields. As the schedule is statused and
the resulting CPM calculations cause
the early dates to change, the planned
dates automatically mirror the early
dates change, as shown in Figure 9.
Once the activity reports progress,
planned dates are neither static, like
baseline dates, nor dynamic, like early
and late dates. When the user assigns
an actual start to an activity, the
planned start date is frozen to match
the actual start date (unless manually
changed). The planned finish date will
also then be frozen (assuming no man-
ual intervention.)
Planned finish is not equal to early
finish or even to the actual finish date
is equal to actual start, plus the activ-
itys original duration (using the appro-
priate calendar). The dates inferred by
the baseline bar do not represent
when the activity actually started and
finished. Rather, they represent the
date that the activity actually started
and when it should have finished, not

10 COST ENGINEERING JANUARY/FEBRUARY 2016

when it actually finished.
Manual input into the planned
date fields can change all assumptions.
The early start and planned start fields
are not directly linked. Manually chang-
ing the planned start date will not af-
fect the early start date. Later schedule
CPM calculations will overwrite the
user input with the calculated early
start date. There is no warning to the
user that their input will be overwrit-
ten.
The user can manually input a
planned finish to overwrite the calcu-
lated planned finish. This change will
also automatically change the original
duration of the activity without provid-
ing any warning to the user.
Planned dates are used by many of
the popular features of P6 such as [4]:
If there is no baseline assigned,
then the planned dates are used
for calculating the variances.
Progress spotlight uses the
planned dates. This differs from
what one expects after using other
software with update progress.
Actual dates are changed to
planned dates without any warn-
ing. To overcome this problem,
many schedulers run a global
change to set the planned dates
equal to the start and finish dates
before running the automatic up-
date feature.
When a baseline has not been as-
signed, planned dates are used to
display a project or user primary
baseline bar. Planned dates are
represented as the bars for base-
line schedule when nothing is se-
lected in the assign baselines form.
P6 users who have baseline sched-
ules, but forget to properly assign
them, end up with the current
schedules planned dates for base-
line schedule dates.
Planned dates are also used in the
activity usage profile to show the
budgeted values and as the base-
line values when no baseline has
been set. Once a baseline has
been assigned, then baseline dates
are used.
Planned dates are also used in the
activity usage profile to show the
earned value curves when no
baseline has been assigned. Once
a baseline has been set, then base-
line values are used for displaying
the earned value curves.
The S-curve graphic is generated
from the planned dates.
Planned dates are often acciden-
tally used when sharing layouts created
by other people for other schedules.
This occurs when the layout says to
show baseline bars, but the receiving
P6 user has not designated a baseline
(the assignment does not import.) In
this case, planned dates are automati-
cally used in its place without warning.
Layouts are a formal package of
settings used to define what is dis-
played on the screen. To make commu-
nicating schedule issues easier,
multiple users often share the same
settings, or layout. Thus, when one
user assigns a primary user baseline
and a second user applies this layout
but they have not assigned a user base-
line, then the "planned dates" are used
as a baseline.
The Intended Use of Planned
Dates
Planned dates are primarily in-
tended to be the source of baseline
schedule dates. When a baseline sched-
ule is saved, whatever dates that were
saved in the activity planned dates
fields will be the dates displayed when
the baseline start and baseline finish
dates are displayed or listed. Unlike
with MS Project, baseline dates are not
stored independently in the database.
Apparently, when opening a schedule,
P6 references the schedule designated
as the baseline schedule and displays
the planned dates in the baseline date
field of the schedule.
Planned dates have a highly com-
plex, two-way interaction with other
fields in the schedule and even in other
schedules assigned as baselines. Chang-
ing a planned start date can change the
activitys actual start date. Changing a
planned finish date may result in chang-
ing the activitys remaining duration.
Manual entries into these fields are
therefore strongly discouraged.
COST ENGINEERING JANUARY/FEBRUARY 2016
External Early Start and
Late Finish Dates
Otherwise, independent P6 sched-
ules can be linked by assigning a rela-
tionship from one activity in one
schedule to another activity in the sec-
ond schedule. It is dangerous to export
a single schedule when schedules are
linked to other schedules with such re-
lationships, as these relationships are
then lost in the exported file.
In cases like this, where the inter-
schedule relationships are lost, P6 does
its best to maintain proper timing by in-
ternally constraining the appropriate
early/late dates of the activities missing
their inter-project relationships. These
internal constraints are called, exter-
nal early start and external late fin-
ish constraints This causes the
schedule to mimic the effects of the re-
lationship at the time of the export.
The imposed constraints will not
show up under the tasks constraint
boxes, as these are internally imposed.
The only indication of an imposed con-
straint will be an asterisk printed to the
right of the date in the start or finish
column. These constraint dates will
only be visible if the external dates
columns are displayed.
Most people notice the results of
external constraints when they have
unexplained extreme negative float
values on isolated activities in the
schedule. Others note this when activ-
ities are unresponsive to what-If
analyses or schedule updates; unwill-
ing to display the effects of changes to
the system.
To stop P6 from automatically cre-
ating such external constraints, the op-
tion setting for, Ignore relationships to
and from other projects on the sched-
uling options tab should be checked. P6
will then skip creating external dates
during XER backups. The user can also
directly remove the external con-
straints entirely from the schedule by
showing the external early start and ex-
ternal late finish columns, deleting the
external dates shown, and then recal-
culating the schedules CPM dates.
These constraints are not listed in the
standard constraints boxes on the ac-
tivity tab.
11
 Figure 10 Suspend and Resume - Early Start/Finish Date
Figure 11 Suspend without Resume - Early Start/Finish Date
Suspend and Resume Dates
The suspend and resume functions
in P6 were added in Version 5. Many
software packages suspend an activity
at the end of the working day. A P6 ac-
tivity is suspended on the exact minute
and hour specified (which due to the
default time issue is usually at the be-
ginning of the specified day).
P6 calculates an actual duration
for all activities based on the amount
of non-suspended time. The amount of
time that an activitys progress is sus-
pended is generally deducted from the
total duration. Units and costs are not
spread over the period of suspension.
If the suspend/resume functional-
ity is used, then the early start is set
equal to the resume date. The early fin-
ish is calculated using the resume date
and the remaining duration as shown
in Figure 10.
If the suspend date is entered
without a resume date, then P6 ignores
the suspend date. P6 sets the early
start to the data date shown in Figure
11. In other words, P6 ignores the sus-
pend date unless a resume date is also
entered.
Resource Dates
Resources assigned to an activity
have almost as many dates assigned to
them as do activities. There are several
configuration settings that must be set
for proper functioning of activity re-
sources:
Activity type should be fixed dura-
tion if resourced or otherwise the
resources will change the activitys
12 COST ENGINEERING JANUARY/FEBRUARY 2016
duration.
Activities can be set to resource
driven. In this case, activity dates
are computed using resource cal-
endar.
Resources can be set to driving
activity dates. In this case, the ac-
tivity will not be scheduled to
begin until the resource begins.
Entering an actual date for re-
source can update the activitys
dates. Resource actual dates must
be within the time period of activ-
ity actual dates.
The existence of resource actual
dates will prevent the user from
being able to remove activity ac-
tual starts when attempting to de-
status an activity.
Resource leveled schedules also
strongly affect dates.
P6 can be configured to automati-
cally generate the resource dates; but
even then, there are instances where
the scheduler must manually adjust re-
source dates in order to maintain
proper functioning of the schedule.
The resource date fields include:
Planned Start and Finish Dates
Actual Start and Finish Dates
Start and Finish Dates
Remaining Early Start and Finish
Dates
Remaining Late Start and Finish
Dates
The first three sets of dates oper-
ate summarily to those corresponding
dates for activities. Only the remaining
dates are unique to resources.
Remaining Early
Start/Finish Dates
Although the P6 documentation
does not directly state this, the remain-
ing early and late start/finish dates ap-
pear to be the computed early and late
start/finish dates adjusted for resource
leveling. If resource leveling has not
been run and no manual entry has
been made to this field, then remaining
early start equals the early start date as
shown in Figure 12.
Like the early start date, this date
continues to track the earliest the ac-
tivity can continue if the activity is sta-
tused as active. In P6 Version 7, the
remaining fields were blanked out if an
actual date was registered. In Version
8, they are now displayed just like the
standard early and late start/finish
dates as shown in Figure 13.
The default operation is to over-
write the early start date with the re-
sulting remaining early start date after
the schedule has been resource lev-
eled. There is a resource leveling op-
tion to preserve the scheduled early
dates instead of overwriting them. In
this case, one will be able to observe
the earliest the activity could start or
resume; as well as the date that re-
source leveling picked to start the ac-
tivity as shown in Figure 14.
Once again, the reader is cau-
tioned not to directly enter date infor-
mation into these calculated fields,
even if this is allowed by P6. For in-
stance, the user can manually change
the remaining early finish date and this
Figure 12 Unprogressed Activity - Remaining Start/Finish Date
Figure 13 Activity in Progress - Remaining Start/Finish Date
Figure 14 Resourced-Leveled Resume Dates
would automatically change the re-
maining duration of the activity with-
out warning.
Relationship Dates
When one considers that a rela-
tionship with a lag functions just like an
activity with duration, it is reasonable
to assume that computed early and
late start/finish dates could be com-
puted for relationships. If these dates
can be computed, then one could also
compute the total float of a relation-
ship. This float is not necessarily the
same thing as activity float. In fact, it
would be considered the measurement
of the controlling relationship between
two activities.
P6 places these relationship date
fields under the heading, Multiple
Float Paths. By expanding this head-
ing, one can display the following
columns in the relationship tab:
Relationship Early Start
Relationship Early Finish
Relationship Late Start
Relationship Late Finish
Relationship Total Float
These dates are not saved in the
database. They are re-computed every
time the user opens a new schedule.
Audit Dates
In addition to the four main types
of date field records, every record in
the database contains the three audit
date fields listed above. P6 has storage
set aside to hold a unique date from
every one of the above fields for every
activity in the schedule. A resource-
loaded, 1,000 activity schedule could
easily have 50,000 date fields, set aside
in the database just for that one proj-
ect.
Audit fields were added to practi-
cally every record in the P6 database
beginning with Version 5. Activities, re-
lationships, activity resources, and
even activity steps have audit fields as-
signed to every transaction. Each indi-
vidual record has the following date
information recorded:
Date Created
Date Last Updated
Date Deleted
Table 2 Viewable Audit Dates Fields in P6
COST ENGINEERING JANUARY/FEBRUARY 2016
The P6 User ID of the person per-
forming the above record transactions
is also recorded. Most of this informa-
tion is not viewable by the P6 user. The
audit dates fields that are viewable in-
clude those listed in Table 2.
Figure 15 displays an example of a
P6 schedule with the activity audit
dates shown. The added by, added
date, last modified by, and last modi-
fied date columns are shown.
The blank added date fields are
the result of showing audit information
for finish milestones. This is a P6 bug
that is on the list of potential enhance-
ments.
P6 Calculations
Oracle/Primavera P6 and EPPM soft-
ware have many advanced CPM func-
tions. This article will cover the basis
for these functions, as well as the op-
tions available. It will also break down
13
 Figure 15 Activity Audit Dates
the functions of both the longest path
calculation and the multiple critical
paths function.
CPM Calculations
P6 uses a different CPM calcula-
tion formula than other software prod-
ucts, such as P3. With P3, the formula
for calculating the early finish of an ac-
tivity was: Early Start + Duration 1 =
Early Finish. P6 does not subtract the
1, but later rounds-up finish times to P6. The example shown in Figure16
the first non-working period when dis-
playing the date [6]. This can give the
same end result, with a different
day/hour being displayed. If 16:00 was
the last working hour of the day, P3
would indicate a completion of 16:00,
whereas P6 would indicate 17:00.
With P3, the data date was the be-
ginning of the first available working
time unit and the activity finish was the
end of the time unit. If the data date
was 01AUG08, then the data date was
Figure 16 Eects of Calendars
14 COST ENGINEERING JANUARY/FEBRUARY 2016
the beginning of that day. Similarly, if
an activity finished on the 01AUG08, it
was at the end of that day. Because un-
started daily activities begin in the
morning and always finish at the end
of the day, the CPM calculation rule for
the earliest start of the successor activ-
ity requires one to add 1 to the work
day number of the finish of the prede-
cessor when computing the start of the
successor [1]. This is not the case with
really means that it ends at 08:59:59.
highlights this issue.
When both activities are on the
same calendar, Activity 2 starts the day
after Activity 1 finishes. As shown in
the bottom section of Figure 16, Activ-
ity 1 is on a 9:00 to 17:00 calendar and
Activity 2 is on an 8:00 to 16:00 calen-
dar. In this case, Activity 2 starts the
same day Activity 1 finishes.
Another issue that former P3 users
must deal with is the fundamental dif-
ference in defining the correlation be-
tween time and duration. With P3, a
one-hour duration activity might start
at 08:00 and end at 08:59; that is, ac-
tivities start at the beginning of a pe-
riod (in this case an hour) and end at
the end of the time period.
P6 uses the format employed by
Microsoft Project scheduling soft-
ware. For P6, a one-hour activity might
start at 08:00 and end at 09:00. By say-
ing that the activity ends at 09:00, this
With P6, one does not need to add 1
to time difference calculations, nor is
the addition of 1 necessary to com-
pute the start of successor activities
when dealing with finish-to-start rela-
tionships.
How P6 Calculates the CPM
P6 calculates CPM dates on in-
progress schedules differently than
most people think. There is no complex
formula used to show retained logic
with out-of-sequence activities. The
 Figure 17 Out-of-Sequence Progress Before CPM Calculation
answer is so simple that it is difficult to
convince some people of the correct-
ness. Luckily, P6 itself displays how it is
done.
To use a physical example to ex-
plain the process, imagine the follow-
ing four activities shown in series in
Figure 17. Out-of-sequence status has
been entered, but the CPM has not as
yet been recalculated.
When P6 re-computes the sched-
ule using the retained logic rule, it only
looks at the activity remaining dura-
tions and begins calculating the sched-
ule from the data date (02APR08 in this
example.) For clarity, the hours and
minutes are not shown. Figure 18
shows just how simple this process is.
After the schedule has been recal-
culated, The start and finish columns
are populated from the early start and
early finish columns unless there is an
actual date, which replaces the calcu-
lated date followed by the symbol, A
Figure 18 CPM Calculation
for actual.
P6 then fixes-up the barchart
portion by plotting the start and finish
column dates. Everything to the left of
the data date line is colored blue for ac-
tual. The program colors everything to
the right using green for early dates. If
a gap exists between the two, the area
Figure 19 Displaying CPM Calculation
between the actual date bar and the
new planned work is optionally drawn
in with necking, as shown in Figure 19.
Notice how the early start date for
the third activity in Figure 19 is
08APR08; six days later than the cur-
rent data date. The start date is listed
as 17MAR08; the actual start date.
Schedule Calculation Options
P6 has more schedule calculation
options than most software packages
and most of them will affect the date
calculations. The calculation options,
defined in the general tab shown in Fig-
ure 20, will be discussed.
The first schedule option on the
general tab is whether or not to ignore
relationships to and from other proj-
ects. One can elect to have P6 ignore
relationships that link to activities lo-
cated in different schedules. If this op-
tion is selected, P6 computes the
schedule without regard to any logical
timing in any other dependent sched-
ule. P6 does not provide any indication
of whether the current schedule actu-
ally has any inter-project relationships.
If this option is selected, backups of
this single schedule will also not in-
clude any internal constraints (called,
external constraints.)
The make opened-end activities
critical option overrides standard
CPM calculation rules and artificially
constrains any activity without a suc-
cessor to have their late dates equal
the early ones. The use of this option
is discouraged as this creates addi-
tional critical paths that normally do
not effect project completion.
COST ENGINEERING JANUARY/FEBRUARY 2016
P6 recalculates the duration of ac-
tivities with expected finish dates as
the difference between their actual or
calculated early start dates and the as-
signed expected finish date. Expected
finish constraints can be defined in the
schedule but not considered during the
scheduling process. This CPM option is
checked by default.
There is an option to have P6 au-
tomatically level the activities for re-
source availability each time the
project is scheduled. This can be a
nearly invisible operation, as resource
leveling reports (if produced) are not
automatically displayed. Schedule
analysis should always begin their re-
views by checking to see if this option
is selected. Be sure to also note that if
the option to automatically schedule is
also selected, the schedule will be lev-
eled every time the user moves from
one activity to the next. This can result
in a noticeable time lag and slow down
data entry.
Out-of-sequence progress is not
uncommon in construction schedules.
P6 includes three different options for
handling the computations for this
condition.
If the retained logic option is
selected, P6 does not schedule the
remaining duration of a pro-
gressed activity until all of its pred-
ecessors are complete. In Figure
21, remaining early start of the
out-of-sequence successor (Activ-
ity 2) is generally set to the early
finish of predecessor (Activity 1)
[5].
15
 If the progress override op-
tion is selected, P6 ignores net-
work logic and allows the activity
that has begun out-of-sequence to
progress without waiting for the
predecessor activity to complete.
In this case, remaining early start
equals the data date and the early
finish is calculated by adding the
remaining duration to the remain-
ing early start as shown in Figure
22.
It is important to note that
not only did the out-of-sequence
Activity 2 continue progressing on
the data date, but that Activity 1 is
no longer a critical activity! Even
though P6 displays the relation-
ship between the two activities on
the screen in the barchart and ac-
tivity details, this relationship is
completely ignored during
progress override CPM calcula-
tions and treated as if it had been
deleted. Progress override is ap-
plied to every type of relationship
other than the Finish-to-Finish (FF) Figure 20 Schedule Calculation Options
relationship. In the example the out-of-sequence successor. as shown in Figure 23.
above, Activity 1 now does not This assignment has the potential The late finish of the prede-
have any successor activities. of creating negative float without cessor (Activity 1) is set to the day
Introduced with Version 3.5, date constraints. before the actual start of the out-
P6 has a calculation option called, For actual dates calculations, of-sequence successor (Activity 2).
actual dates. If the actual dates the early start of the out of se- Activity 1 should have been com-
option is selected, then the prede- quence successor (Activity 2) is pleted on 07JUL08 so that Activity
cessors late finish is set to the generally set to the early finish of 2 can start on 08JUL08. This logic
time unit before the actual start of predecessor (Activity 1) or +1 day, is flawed since Activity 2 already

Figure 21 Retained Logic

Figure 22 Progress Override

Figure 23 Actual Dates

16 COST ENGINEERING JANUARY/FEBRUARY 2016

 started; it is evident that Activity 1
finish was not necessary. Although
there are no date constraints im-
posed, the schedule calculates a
negative float for these isolated
activities.
If actual dates option is se-
lected, the start to start lag calcu-
lation option is disabled and actual
start is always used as the begin-
ning of the lag calculation.
In general, using actual dates
option will cause the CPM to be-
have like retained logic if the out-
of-sequence activity has started
but not finished and to behave like
the progress override option if the
out-of-sequence activity has fin-
ished.
The next option is to allow the cal-
culation of total float based on the fin-
ish date of each project in a collection
of schedules or on all opened sched-
ules. P6 is frequently used in a multi-
schedule environment where a group
of semi-independent schedules can be
opened together and run as a single
network.
The, each project option allows
each schedule to calculate their spe-
cific critical path independently even if
they were tied together in a network
of relationships. This method of calcu-
lation fails to identify the single critical
path for a project of multiple sched-
ules, while the other option allows for
a single, common measurement. The
problem with offering two options is
that aside from viewing the scheduling
log (which may not be available,) there
is no indication as to which option was
used for the definition of total float
when later reviewing the results of a
CPM computation.
P6 users have four options when
designating a calendar to calculate the
lag between predecessors and succes-
sors. This one setting is used for all re-
lationships in the schedule. The default
setting used to be the successor activ-
itys calendar until Version 4 of P6,
when the predecessor activitys calen-
dar was used as the default. The lag
can be calculated based on:
Successor Activity Calendar
Predecessor Activity Calendar
24 Hour Calendar
Project Default Calendar (the cal-
endar selected as default for new
activities on the defaults tab of
project details)
Regardless of the relationship lag
setting, P6 uses the successors calen-
dar when determining whether a fin-
ish-to-finish relationship is a part of the
longest path. This undocumented fact
often causes the P6 longest path to be
discontinuous if different calendars are
used.
Longest Path Calculations
P6 software has the ability to cal-
culate the longest logical path through
a schedule network. This list of activi-
ties represents the longest continuous
string of activities that must be com-
pleted in order to complete the proj-
ect. One cannot shorten the length of
a project without shortening the dura-
tion or modifying the logic of activities
on the longest path.
The longest path is a superior
method for identifying the schedules the forward pass and saved this infor-
critical path over using total float as the
indicator. The total float method some-
times misses activities and can become
discontinuous because the activity cal-
endar changes or from start float being
different from finish float.
The longest path calculation starts
out just like the standard CPM calcula-
tion by calculating the early start and
early finish dates of every activity in
the network. This is called performing
the forward pass. It then identifies the
activity with the latest early finish date.
Figure 24 Discontinuous Longest Path Calculation
COST ENGINEERING JANUARY/FEBRUARY 2016
At this point, P6s longest path process
diverges from the standard CPM back-
ward pass procedure.
Instead of calculating the CPM
backward pass, P6 traces a path back-
ward through the logic, following the
controlling logic path. It does this by
identifying which predecessor activity
has zero Free Float. All activities iden-
tified by this procedure are listed as
being on the longest path.
Figure 24 shows a sample longest
path calculation versus a total float crit-
ical path. The milestone in red has a
finish on or before constraint that re-
sults in a -2 total float value. The total
float critical path is shown in red. The
longest path process designates the ac-
tivity, last act as the end of the
longest path and traces the controlling
path backward (designated as a check-
box.) In the example in Figure 24, the
two methods have only one activity in
common, activity Act 1.
Even though P3 software also des-
ignated a longest path, P6 uses a
slightly different technique to identify
the controlling logic. P3 identified the
controlling path logic while calculating
mation. P6s post calculation method
is inferior in that it can sometimes lose
the path because of calendar changes,
as well as following resource leveling.
The longest path method as imple-
mented by P6 has other issues that can
cause it to become discontinuous. Even
though it ignores any constraints that
solely affect the backward pass, for-
ward pass constraints such as start on,
start on or after, finish on, and finish on
or after can halt the backward control-
ling pass identification. Figure 25
17
 Figure 25 Discontinuous Longest Path Calculation
shows an example of a schedule where
the longest path activities are identi-
fied by a checkbox, as well as coloring
the bars red.
The Activity P1N2260 had a start
on or after constraint that caused the
activity to begin later than it would
have using CPM calculations alone.
This caused the longest path to stop its
backward tracing several months short
of the data date.
Multiple Float Path Calculations
The advanced tab of the schedule
options window holds the settings for
the multiple critical path function. The
purpose of using the multiple critical
paths function is to identify and rank
secondary critical paths. It does this by
calculating the float of every relation-
ship in the schedule and then using this
information to iteratively trace and
label all predecessors links.
The concept that relationships can
Figure 26 Relationship Float
Example
18 COST ENGINEERING JANUARY/FEBRUARY 2016
have float different from the predeces-
sors activity float was first formally es-
poused in 2003 [8]. The concept was
later presented in a different format in
2004 as enhanced PDM [9]. Primavera
used the concept of enhanced PDM to
develop multiple critical paths and in-
troduced it in P6 Version 5 in 2005.
A relationship with a lag duration
operates very summarily to an activity
with duration. Early and late start/finish
dates can be computed for each rela-
tionship and the difference between
the two would result in a total float cal-
culation; this time for the relationship
and not for the activity. When an activ-
ity has multiple predecessors, then
each may have different relationship
float that denotes the degree that the
relationship is controlling the start of
the activity. Tracing paths backward
based on the next lowest relationship
float would provide for a listing of the
various controlling paths in diminishing
order of criticality. Each path is labeled
Figure 27 Relationship Lags
Visualized
with an increasing path number, begin-
ning with 1.
Figure 26 shows a relationship
float CPM network example. Each rela-
tionship is marked with an abbreviation
of its relationship type (FS, FF, SS, SF)
followed by a slash and then the lag
value. The FS/0 relationship between
Act 1 and Act 4 is a finish-to-start with
zero lag.
The relationship can be better vi-
sualized if it the lag is replaced with a
corresponding activity. A relationship
with zero lag would be depicted as a
zero-duration milestone with a dia-
mond shape and the non-zero other
lags as an activity rectangle with a
length equal to its duration. Figure 27
shows the transformation with blue-
colored replacements.
The blue activities representing
relationships can now have their CPM
early and late dates calculated and the
Total Float (TF) and Free Float (FF) cal-
culated from this. These values are
Figure 28 Relationship Float
Computed
shown in blue in Figure 28.
The multiple critical paths function
provides two different methods for
tracing the paths backward; total float
method and free float method. The
method using relationship total float
entails finding the latest, lowest rela-
tionship total float and following each
predecessors lowest relationship total
float. The software tags each activity
with a float path number beginning
with 1 and stopping when the activity
does not have a predecessor. The soft-
ware returns to the last activity again Figure 29 Sample Multiple Critical Paths Calculations
starts again with next lowest relation-
ship total float using the next highest
number (2; then 3, etc.).
The method using relationship free
float uses the same method as with re-
lationship total float, except that it uses
the lowest relationship free float. In this
case, the lowest free float equals the
controlling relationship with float path
1 being the same as P6 calculated
longest path. A working example show-
ing both types of multiple critical paths
are shown in Figure 29.
The activity labeled, Last Act is
identified to be the latest, lowest rela- Figure 30 Float Path 1 for Both Example Methods
tionship free float activity and the mile- est relationship total float activity. The fied. Figure 30 identifies the free float
stone labeled, finish-on-or-before is two methods will begin from these method float path 1 in green and the
identified by P6 as being the latest, low- points if no overriding activity is identi- total float method float path 1 in red.

Figure 31 P6 Example of Total Float Multiple Critical Paths

COST ENGINEERING JANUARY/FEBRUARY 2016 19

 Figure 32 P6 Example of Grouping Total Float Multiple Critical Paths
The same example entered into P6
would produce what is shown in Figure
31. Activity, Last Act is highlighted
and the relationship tab shows the
computed relationship total float and
relationship free float for the three
predecessor relationships.
P6 provides a better way to pres-
ent multiple critical paths by grouping
and sorting activities by float path num-
ber. Figure 32 shows this method em-
ployed using the total float method.
The 1 above the first four activities
denotes float path 1 and the 2, 3, and 4
below this list the next most critical
paths in this example.
P6 users used to seeing longest
path designations may be more com-
Figure 33 P6 Example of Grouping Free Float Multiple Critical Paths
20 COST ENGINEERING JANUARY/FEBRUARY 2016
fortable using the relationship free float
setting. Figure 33 shows the same ex-
ample after the multiple critical paths
was computed using the free float set-
ting. Notice how float path 1 also cor-
responds to the P6 longest path.
P6 users have the option of using
relationship total float or relationship
free float when computing multiple
critical paths. The total float setting will
reflect relationship float while the free
float setting will reflect the longest
path.
It is dangerous to leave the, Dis-
play multiple critical paths ending with
activity blank as the software will
them pick the ending activity. Normally
users should designate the substantial
completion activity for the endpoint.
One can also use this entry to investi-
gate the drivers to milestone comple-
tion by inserting the Activity ID of the
milestone.
The ability to specify the number
of float paths to calculate does not
seem very important as this process is
very quick on moderately large sched-
ules and the storage requirement is the
same regardless of what number is
used. Users can just leave this entry
blank to calculate all paths.
Summary
P6 is an incredibly complex and flexible
scheduling software. The flexibility of
P6 can be a benefit, but it is intimidat-
ing to a scheduler expecting other CPM
softwares relative simplicity. Every P6
scheduler should clearly understand
the softwares method of calculation to
use this powerful tool at its full capac-
ity. A brief summary of some of the im-
portant points are listed below:
Each schedule is calculated and up-
dated to the nearest minute. With-
out diligence on the schedulers
part, this can lead to situations
where the successor activity begins
on the same date as the predeces-
sor finishes.
If the durations are entered in time
units other than hours, then they
are automatically converted to
decimal hours using a single, set
conversion factor. Later these du-
rations are re-converted back to
days using the currently existing
conversion factor. For accuracy,
many schedulers enter durations in
hours, even when scheduling in
days.
Schedulers should always show
time, as well as dates when enter-
ing actual dates, even when work-
ing in days. When times are not
shown, earlier versions of P6 de-
fault to entering 00:00 in the time
portion of the date field. Later ver-
sions guess at the correct time for
actual starts and actual finishes,
but not for other date entries.
Early start, early finish, late start,
and late finish dates are based
upon computing the entire sched-
ule starting from the current data
date. This means that completed
activities will show early and late
start/finish dates that are not
equal to their actual start/finish
dates.
Early start and finish dates are not
blanked-out or replaced with ac-
tual dates when actual dates exist
and retained logic is used. This
combinational behavior is reserved
for the P6 start and finish columns.
Early start shows the newest calcu-
lated early start date (using the
current data date) even for activi-
ties with actual dates.
Start and finish dates are early
dates, corrected for actual dates
unless resource leveling has been
used.
Planned dates are used in place of
baseline dates when baselines are
not assigned. This potentially af-
fects earned value and variance
calculations.
During export, the external rela-
tionships might be lost and an in-
ternal date constraint placed in its
stead.
By default, the standard Gantt
chart display shows activity bars
reflecting the start dates, not the
early dates.
It is very dangerous to manually
enter date or duration information
into calculated, interconnected
fields. P6 will generally adjust
other portions of the calculation
input in response to such changes.
Retained logic is the best CPM cal-
culation method for estimating
overall schedule completion.
Progress override allows for auto-
matic activity sequence resched-
uling.
The actual dates calculation option
best if actual dates in the future
are allowed.
Multi-schedule programs can cal-
culate a single critical path using
total float.
Relationship calendars settings can
cause discontinuous longest paths.
Longest path is the best option for
showing remaining work.
The lowest total float is the best
method for showing milestone im-
pacts.
The multiple critical paths feature
identifies and orders the near-crit-
ical paths.
REFERENCES
1. Winter and Evrenosoglu, 2009,
Much Ado about Dates - Under-
standing P6 Date Information,
PS.15 - 2009 AACE International
Transactions, AACE International,
Morgantown, WV.
2. Winter, 2003, How to Befuddle a
College Professor (Without Really
Trying), Cost Engineering Journal
45, 10 (2003): 8-10, AACE Interna-
COST ENGINEERING JANUARY/FEBRUARY 2016
tional, Morgantown, WV.
3. OBrien and Plotnick, 2005, CPM
in Construction Management,
Sixth Edition, McGraw-Hill.
4. Harris, 2008, Project Planning and
Control Using Primavera P6, East-
wood Harris Pty Ltd.
5. Harris, 2008, From Planning Planet
web blog, www.planningplanet.com,
Building Works, Victoria , Australia.
6. Winter, 2004, Determining the
Critical Path, PS.02 - 2004 AACE In-
ternational Transactions, AACE In-
ternational, Morgantown, WV.
7. Avalon, 2014, Calculating the As-
Built Critical Path, PS.1691 - 2014
AACE International Transactions,
AACE International, Morgantown,
WV.
8. Winter, 2014, Computing the
Near-Longest Path, PS.11 - 2014
AACE International Transactions,
AACE International, Morgantown,
WV.
9. Herold, 2004, Enhanced PMD,
Concepts and Benefits, PS.09 -
2014 AACE International Transac-
tions, AACE International, Morgan-
town, WV.
ABOUT THE AUTHOR
Ronald M. Winter,
PSP FAACE, is with
Ron Winter Consult-
ing, LLC. He can be
contacted by send-
ing email to:
ron@ronwinterconsulting.com
FOR OTHER RESOURCES
For additional resources go to:
www.aacei.org/resources/vl/
Do an advanced search by au-
thor name for an abstract listing of
all other technical articles this author
has published with AACE. Or, search
by any total cost management subject
area and retrieve a listing of all avail-
able AACE articles on your area of in-
terest. AACE also oers pre-recorded
webinars, an Online Learning Center
and other educational resources.
Check out all of the available AACE re-
sources.
21
 S&K 6 Available in Digital and Print
The 6th Edition of the
Skills and Knowledge
of Cost Engineering is
now available. This
full color publication
contains updated
graphics and tables,
revisions and adapta-
tions of existing con-
tent, and the inclusion
of 11 chapters of con-
tent not found in pre-
vious editions. This
comprehensive publi-
cation augments information found in the Total Cost
Management Framework and is an excellent resource
for research into cost engineering topics.
This publication is available today as a digital
download or a print-on-demand publication and is also
available for direct purchase through Amazon.com. To
begin the purchase process, visit the AACE Online
Store, https://netforum.avectra.com/eweb/shop-
ping/shopping.aspx?

2016 -2017 ELECTION

BOARD CANDIDATES ANNOUNCED FOR THE

A slate of candidates for the 2016-2017 AACE annual election is being announced to the AACE membership by the
Nominating Committee, chaired by Past President Martin Darley, CCP.

For President-Elect, the candidates are: Charles E. Bolyard Jr., CFCC PSP FAACE and John L. Haynes, PSP.
For VP-Finance, the candidates are: Christopher W. Carson, CEP DRMP PSP FAACE and Cindy L. Hands, CCP.
For VP-North American Regions, the candidate is: Jacqueline T. Doyle, PE PSP.

Regions 1, 2,4,7, and 9 will elect a Director-Region to the AACE Board of Directors.

Region 1, the candidates are: Pranab Kumar Deb, PSP, and Les McMullan, FAACE.
Region 2, the candidates are: Patrick M. Kelly, PE PSP, and Omoniyi (Niyi) Ladipo, CCP EVP.
Region 4, the candidate is: Harrison W. Staley.
Region 7, the candidates are: Husain Ali Al-Omani, CCP CEP DRMP EVP PSP and Maged Sayed El-Hawary, CCP EVP
PSP.
Region 9, the candidates are: Garvan G. McCann and Sean T. Regan, CCP CEP.

Voting will open on February 1, 2016, and will continue through 4 p.m. Eastern US time on March 15, 2016. Eligible
voters will be AACE members with dues paid current as of Dec. 31, 2015. Anyone who renews or joins, in the period from
Jan. 1, 2016 to March 15, 2016, will not be eligible to be added to the voter list, or to vote in the 2016 election.
To learn more about the upcoming election, go to www.aacei.org/aboutUs/structure/elections/

22 COST ENGINEERING JANUARY/FEBRUARY 2016

 TECHNICAL ARTICLE

Contingency Drawdown Forecasting,

Tracking, and Actual Contingency
Spend Forecasting
Robert J. White

Abstract: There are many different methods of calculating contingency as

part of estimate at completion for projects from general rules of thumb to
sophisticated Monte Carlo simulations. However, the fundamental theory of
what happens to that number after it is calculated seems to be a source of
confusion for projects. Project controls must be able to calculate, under-
stand, and articulate contingency drawdown for projects. Analysis of contin-
gency must begin with the fundamental understanding that there are

F
differences between forecasting contingency requirements, tracking contin-
gency drawdowns, and forecasting when the contingency could actually be
spent. Proper forecasting and control of contingency can be a leading indi-
cator of project success in terms of cost, risk, and schedule. This article was

first presented as CSC.1937 at the 2015 AACE Annual Meeting in Las Vegas.

or the purposes of this theo-

retical exploration of contin-
gency management, the
definition of budget contin-
gency is the difference between what
the projects deterministic costs (scope
plus allowances) and the projects initial
funding level. This is not a discussion
around neither cost estimating nor cost
estimating best practices and the chart
above does not explore all the impor-
tant subtleties of estimating such as es-
calation, inflation, owners cost, EPC
premiums or any other standard esti-
mating practices. In Figure 1 above,
identified scope is any component of
the project that has a price and volume
component. For example, x tons of
structural steel at y dollars gives a total
base cost of (x*y). Allowances are used
to account for potential variances in
price or volume, such as price per ton
variances between potential contrac-
tors. Beyond allowances, contingency
is used to account for risks or uncer-
tainties that the project is exposed to.
For example, if the project is procuring
its steel from a gulf coast supplier, it
may be valuable to model some kind of
hurricane risk that could interrupt sup-
ply and cause a cost increase. Contin-
gency is the additional cost (or
schedule) the project predicts it re-
quires beyond base scope plus al-
lowances to finish the project.
Contingency
Calculation at Estimate
A mature projects organization
will likely have a scalable approach to
contingency calculation at estimates
for projects. For small, often repeated
projects such as simple wells in a
known field, contingency calculation
can be as simple as adding 10 percent
to the calculated project cost based on
past performance on wells in that
Figure 1 Simple Illustration of a
Project Budget
field. For large, complex projects
without a rich database of past analog
projects, it may be reasonable to
develop a full cost and schedule risk
analysis incorporating risk range for
each activity, a quantified risk register,
level of effort costs for schedule
duration, and unknown-unknowns.
The controls for the project
contingency should match the level of
detail used in creating the estimate for
contingency. According to AACE,
Methods of quantifications include
(but are not limited to) subjective risk
study team assessments (e.g., rating
each factors impact as high, medium,
or low), manual estimates of the
impact of each factor or group of
factors, or complex simulation or
parametric models [1].
As a project enters execute, a
good cost controller should be

COST ENGINEERING JANUARY/FEBRUARY 2016 23

 constantly updating the project cost
forecasting and phasing. Figure 2
represents a simple forecast
drawdown curve for a project that is
eight months into execute. The
project was funded with a total
contingency at the top horizontal line
(total contingency), and has plans to
consume contingency in a straight line
drawdown every month until project
completion. The actual drawdown for
the project shows that some months
the project has used more or less of
the contingency than planned. This is
a simple effective way of
communicating where the project is
regarding consumption of Figure 2 Typical Contingency Control Draw Down Chart
contingency. Based on this graph, it
appears that the project predicts that
it will need more contingency than it
has used.
Based on the contingency
drawdown curve (shown in Figure 2)
at first glance, many inexperienced
project professionals may believe that
it is a predictor of when the project
will spend contingency. However, by
drawing a simple cost phasing forecast
curve (Figure 3) it becomes clear that
the drawdown curve does not reflect
the pace at which the project can
spend contingency. Because of the
normal S-curve of project cost and
schedule progress, spending at the
beginning and end of the project
tends to be lower than in the middle
of execution. Therefore, it is very Figure 3 Project Spend Forecast Curve
unlikely that the project will spend an
even amount of contingency during
each month of the project. This is an
over dramatization of the fallacy of
linking drawdown curves to forecast
spending.
Even sophisticated rules of thumb
can also lead to poor controls
regarding contingency spending and
forecasting. A clever cost controller on
a mega project might use the heuristic
of assuming proportional contingency
spending based on the cost timing
forecast of the project, as shown in
Figure 4. This method is a much better
guess than a straight line draw down
premise, but it could very easily paint
a totally incorrect picture. An easy
example is a situation where
Figure 4 Spreading Contingency Forecast Based on Base Cost Timing

24 COST ENGINEERING JANUARY/FEBRUARY 2016


Figure 5 How Contingency is Usually Spent
workforce availability is constrained,
such as in offshore or remote
locations where the bed-space is
fixed. In these situations, a risk like
poor performance factor may be
realized over many months at peak
craft level. Assuming this risk was
well-modeled and accounted for in
the contingency calculation, the
project should not be overly
concerned of exceeding the project
budget, and as each month goes by
where the field performance is bad,
the project can assume consumption
of the contingency budget. However,
and this is very important, even
though the contingency is being
drawn down every month, the money
cannot be spent until the back end of
the project manifesting in an
increased duration of peak craft in the
field. The non-intuitive graph (Figure
5) demonstrates this problem.
The only way that a cost
controller can use contingency draw
down and contingency spending
forecasting effectively is by totally
disconnecting the two concepts. The
timing of contingency drawdown does
not reflect when the money can or
will be spent to cover the contingency.
Another important point to note is
that if the project is funded at a P50
value, then there is an equal chance
that the project will not spend its
entire contingency. The project should
be drawing down contingency
whether or not it plans to actually
the contingency is managed well, it
spend the money. If a risk does not
materialize, then the appropriate
contingency should be drawn down.
That fact alone should convince any
project professional that drawing
down contingency does not relate
directly to when the money can or will
be spent.
It is important to note that
although Figure 5 represents how
contingency is usually spent on
projects, this graph creates a unique
problem for cost controllers
attempting to explain how their
phasing matches the schedule. This
problem is exacerbated when a
project is scheduled to end at the end
of a fiscal year, but the contingency
forecast could take significant
spending into future fiscal years. How
can the cost controller be forecasting
to spend money when the schedulers
say the project will be complete? This
is often a problem in comparing
probabilistic cost and a deterministic
schedule. Cost controllers must be
cautious to avoid this apples to
oranges comparison, else they risk
losing credibility. Comparing
probabilistic cost and probabilistic
schedule should allow the cost curve
in Figure 5 and the probabilistic S-
curve for progress to line up.
The Integrated Solution
According to Harold Kerzner,
Effective management of a program
during the operating cycle requires
COST ENGINEERING JANUARY/FEBRUARY 2016
that a well-organized cost and control
system be designed, developed, and
implemented so that immediate
feedback can be obtained [2].
Now that the difference between
forecasting a drawdown of
contingency and the projects ability
to spend the money has been
established, what is the solution that
drives transparency and
accountability? A controlled project
that accurately forecasts needs for
contingency allows a company to
manage a portfolio to maximize
investment opportunities. If a
portfolio has 10 mega projects where
could reasonably execute an 11th
project in the same time frame. To
empower the portfolio manager to
make these kinds of decisions, the
project must communicate when it
can release contingency, and when it
could realistically spend the cash it
has in contingency. The total cost
management system reiterates this
point: The advantage of periodic
drawdowns is that they efficiently
manage the enterprises limited
resources, and project teams are less
likely to spend contingency funds on
work outside of the current approved
baseline project scope [3].
Contingency Draw Down
Forecasting
The following methodology
assumes a mega-project with
adequate resources and motivation to
execute a deep cost and schedule risk
analysis. For this kind of exercise, the
contingency calculation would need
to be made up of continuous and
discrete risks. An example of a
continuous risk is the performance
factor for craft labor. An example of a
discrete risk is an event for the project
that could increase cost, such as
Simultaneous Operations (SIMOPS)
between offshore drilling rigs and
subsea installation vessels; if these
two activities line up at the same
time, then the project may incur
standby costs on one of the vessels.
Optionally, the project may
include contingency for unknown-
25
 unknowns. Inclusion of unknown-
unknowns is a portfolio based
decision. In general, project managers
can probably not be held accountable
for unknown-unknowns since these
very low-probability, very high-impact
risks cannot be funded by the project
even if they do occur. However, if the
portfolio has no way of accounting for
aggregate unknown-unknown risks, it
may be reasonable for each project to
include this calculation so that the
roll-up costs of all projects include
these rare occurrences. The rarity
means that they will not likely occur
on any project alone, but will likely
perform on one of the projects in the
portfolio.
Separating the contingency
calculation into three categories,
continuous risks, discrete risks, and
unknown-unknowns, allows the
project to construct a multi-level
drawdown curve that tells a story for
how the project will proceed.
Continuous risks can be mapped to
activities in the schedule and drawn
down based on the progress of those
components. For example, drawing
down construction performance
factor risks as work is liquidated in the
field; the fewer hours that remain, the
less exposed the project is to poor
performance. Discrete risks should be
mapped to when the risk is likely to
occur in the schedule; in the SIMOPS
example, once the subsea installation
campaign is complete, the project can
draw down that contingency. If the
project is directed by the portfolio to
include unknown-unknown, it may be
best to keep the total value of
unknown-unknowns available to the
project for the entire duration since
there is so little known about this
category, it could be needed at any
time. Using this methodology, the
draw down curve for a project begins
to take shape as shown in Figure 6.
Note the step-wise nature of the
discrete risk contingency. As the
project passes events where the risk
may or may not materialize, it should
draw down contingency accordingly.
26 COST ENGINEERING JANUARY/FEBRUARY 2016
Figure 6 Layered Approach to Drawdown Curves
Clarication on Draw Down
Consume or Return?
Up to this point, this article has
been written from the perspective
that draw down does not distinguish
where the money goes, just that the
uncertainty of whether or not the
project needs the contingency is gone.
A healthy portfolio includes tension
between the portfolio manager and
the project manager around what
contingency draw down actually
means. Project managers look at the
curve in Figure 6 assuming that is
when they will need the money, and
portfolio managers look at that curve
as when the project manager will be
able to return the money. As with
most project questions, the answer is
It depends. If the drawdown
represents a discrete risk that has
materialized, then the project
manager would make the argument
that he or she needs to keep that
portion of the contingency and draw it
down by transferring budget from the
contingency to the account where the
money will actually be spent. If the
discrete risk has passed without
occurring, then the portfolio manager
is reasonable in asking to take that
money from the project budget and
move it to the portfolio, hopefully to
fund other profitable projects.
Forecasting Contingency Spend
This is where controls get
difficult. Mathematical heuristics and
schedule integration do well in
drawing pretty, easy to understand
drawdown curves, but they do very
little in regards to forecasting when
the project can actually spend money
to cover that contingency. A
successful method employed on mega
projects is to categorize the risks in
different areas (such as topsides
construction, wells, subsea
installation) and have a hypothetical
discussion with the project
management as to how the project
would overcome a risk. For example, if
the project has a risk around
performance factor in offshore
installation, would the project
manager consider a flotel to add
beds, or would this risk just result in
schedule extension? Most
contingency spend tends to come at
the end of projects. In fact, it may be
best to have the cost contingency
spend linked to the schedule risk
analysis in a way that the cost
contingency is largely phased after
deterministic project completion
dates, or better yet, at the completion
of activities. This could lead to an
unfortunate behavior of
communicating that the project needs
the entire contingency until the end of
the project. This premise would cause
the portfolio to make poor decisions
regarding the start timing of future
projects as contingency is tied up in a
project that may no longer need it.
This once again emphasizes the need
 Figure 7 Four project Portfolio with Even Contingency Spend
to de-couple the projects ability to
spend contingency from how much
the project needs in contingency at
any given point in time.
Applications to
Schedule Contingency
Fundamentally, schedule
contingency can be treated similar to
cost contingency. Using a risk based
approach; the project team can
consider timing of discrete events to
draw down risk after certain events.
Equally, the project should be able to
draw down continuous schedule risks
based on duration of remaining
activities. The tools for schedule
contingency calculation can be much
more sophisticated than the tools for
cost contingency calculation because
of the inter-connected nature of the
schedule. For example, using
Primavera and Primavera Risk
Analysis, a risk manager can toggle on
or off certain risks to quantify the
actual impact on project completion.
The major limitation to these tools is
that they tend to only analyze critical
path items. Schedule contingency is
driven almost entirely by critical path.
Therefore, on a complex project, there
could be an enormous schedule risk to
an activity with high float. It would be
tempting to draw down schedule
contingency when the risk has passed,
but if the float is greater than the
schedule risk impact, then drawing
down that contingency will give a false
sense of security and could lead to a
surprise when the risk that is actually
driving the contingency requirement
materializes in the future.
There are situations where a risk
could have a significant cost impact,
but no schedule impact. If a project
controller were to get the project
manager focused on the contingency
drawdown graph that shows key
events in the schedule that could
incur risks, it is important to reiterate
that passing those risks may not lead
to a schedule contingency draw down
COST ENGINEERING JANUARY/FEBRUARY 2016
as well. For example, if a project had a
risk of welding quality at a flow line
spool base, poor quality could cause
re-work and increased cost. If subsea
installation is not on critical path, this
re-work may have no impact on the
schedule or on the schedule
contingency requirements. Often
float and schedule contingency
are used interchangeably. They are
not the same term. Float is for
activities that are not on critical path;
schedule contingency is for activities
that are on critical path. While this is
not an article to further define or
discuss scheduling, it is important for
a cost controller to understand the
broad implications of attempting to
phase cost contingency.
Portfolio Example
Figure 7 assumes a portfolio of
four projects ranging from $10million
to $20million starting in 2016, each
project start is staggered by a quarter.
If a portfolio were to use an evenly
27
 Figure 8 Realistic Contingency Spend Forecast - Portfolio View
spread
contingency spend forecast for is 14 percent of the capital spend in manager from project one starting in
projects, the portfolio spend would 2016 that could be invested elsewhere January 2016 on project four starting
look similar to Figure 7. In Figure 7, to make a higher return for the in October 2016, in the first case
each color is a different project with business. For this portfolio of four (Figure 7) this approach seems
the base spend represented by the projects ranging from $10million to reasonable as the overlap is only five
solid bar, and the forecast contingency $20million, that difference in 2016 can months and project one is deep in run
spending as the white bar outlined in be about $6 million. A year of interest down as project four begins.
the same color. This contingency for that $6 million, not being spent in However, the overlap in Figure 8 (the
algorithm assumes contingency 2016, could fund the 2018 realistic case) is more like eight
spending will happen to the exact contingency requirements essentially months. Not many project managers
same proportion as project spend reducing the total cost portfolio. can effectively manage two projects
every month. The fundamental flaws Improved cost engineering of over that length of time, or at very
of this approach were discussed in contingency forecasting is not just an least not as effectively as the
The Trap section earlier in this academic exercise, it is a business assumption in Figure 7. Contract
article. Note the differences between value added imperative. management would also be a concern
Figure 7 and Figure 8 which is the Another key reason to use in the differences of the two cases,
proposed solution for the contingency portfolio planning for projects is the since the realistic case (Figure 8)
spending forecast. ability to cross load resources, extends over a new year. meaning
In Figure 8, the portfolio manager including direct and indirect labor. A construction or support contracts for
has a much more realistic view of how smart portfolio manager should be the project must be written to allow
the cash will actually be spent for the looking for which resources can be for extra time as required.
project. Although the graphs may not shared between projects, and when
look significantly different, for these key project personnel can transition Conclusion
projects, there is 14 percent less from one project to another. For Contingency drawdown curves
funding required in 2016. That is a example, if the portfolio manager communicate how much contingency
significant financial requirement. That were hoping to use the project the project predicts it will need, at any

28 COST ENGINEERING JANUARY/FEBRUARY 2016

given point in time on the project, to can add immense value to a portfolio ABOUT THE AUTHOR
complete the project. It may be and its ability to aggregate risks for
easiest to think of drawdown curves greatest return. The methodology laid
as commitment curves. If the curve is out in this article provides an Robert J. White is
drawn well, based on reasonable opportunity for a cost controller to employed with
premises, the project manager, or make a significant business impact. Shell International
more importantly portfolio Exploration and
leadership, should be able to look at REFERENCES Production. He can
any month and see how much extra 1. AACE Total Cost Management be contacted by
money should remain committed to Framework, 7.6.2.3 Quantify Risk sending email to:
the project for future contingencies. Factor Impacts, accessed on-line Robert.j.white@shell.com
This valuable information must not be January 2015.
confused with cash phasing of 2. Kerzner, Harold, Project
contingency. Knowledge of how much Management: A Systems FOR OTHER RESOURCES
contingency we need to finish a Approach to Planning, To view additional resources on
project does not directly correlate to Scheduling, and Controlling. this subject, go to:
when the project can spend the John Wiley and & Sons, Inc., www.aacei.org/resources/vl/
money. Phasing of probable Published in 2009.
contingency spend requires an 3. AACE Total Cost Management Search by author name for al-
analysis of the project schedule and Framework, 10.3.2.7 Manage isting of articles this author has pub-
an understanding of how risks will be lished with AACE. Or, search by
Contingency and Reserves,
subject for a listing of all available
mitigated. A transparent, risk-based accessed on-line January 2015. AACE articles on your area of interest.
approach to contingency forecasting

HOW PREDICTABLE ARE YOUR MONTHLY COSTS?

MLM Project Services

provides a secure,
cloud-hosted environment.
We deliver a customer-
focused experience with
pricing that includes updates
and technical support in your Is your hosting provider
own dedicated environment. charging you for every
Call us and compare! little thing?

D R McNattty
software professional services hosting
PROJECT SERVICES
ZDE

drmcnattyy.com | ssales@drmcnattyy.com | 877.367.7990

COST ENGINEERING JANUARY/FEBRUARY 2016 29

 TECHNICAL ARTICLE

Changing Trend in Risk Allocation

Differing Site Conditions
Steven A. Collins and James G. Zack, Jr., CFCC FAACE

sometimes included within the scope

Abstract: This article has been prepared by the Navigant Construction of the clause.
Forum authors in order to explore a series of court and Board of Contract
This article goes on to list the six
Appeals decisions concerning coverage of the differing site conditions clause.
While preparing an earlier paper entitled, Trends in Construction Claims and part test for a successful differing site
Disputes [1], the authors noted that there have been a series of decisions is- condition claim and also lists five
sued by courts and Boards of Contract Appeals over time which seem to be additional contractual requirements
increasing contractor risk under the differing site conditions clause. This ar- contractors must comply with in order

T
ticle explores such decisions and highlights the risks for contractors concern- to prevail. The contractors duty to
ing differing site condition claims. The article also draws conclusions and sets continue work is also examined.
forth some practical recommendations for both owners and contractors in A brief discussion of the reverse
dealing with the risks of differing site conditions. This article was first pre- differing site condition claiman
sented at the 2015 AACE Annual Meeting in Las Vegas as CDR.1868. owner claim that may be asserted
against a contractor seeking recovery
he Differing Site Conditions necessarily so! [2] Over the years, the of funds from the contractor when
clause is one of the oldest courts and Boards of Contract Appeals they encounter conditions materially
clauses used in construction have been slowly changing the inter- better than anticipated. The article
contracts, having been cre- pretation of risk allocation under the goes on to explore a number of court
ated by the U.S. Federal government in clause. A series of court and board and Board of Contract Appeal
1926. It is generally accepted that the cases have increased the contractors decisions that appear to be slowly
object of the clause is to transfer the risk concerning differing site condi- eroding the traditional risk allocation
risk of latent site conditions to the tions. commonly accepted under the
owner, thus enticing contractors to re- This article discusses the Differing Site Conditions clause, along
duce their contingency cost at the time definition of a differing site condition with lessons learned from each case.
of bid. The promise of the clause is that and why there is a need for a Differing Finally, the article provides a list of
if the contractor encounters a materi- Site Conditions clause in a practical recommendations for both
ally different condition during the ex- construction contract. The article sets owners and contractors dealing with
ecution of the work, the owner will forth the history and purpose of the the risks of differing site conditions.
compensate the contractor for the re- clause, examines the modern Differing The purpose of the article is to
sulting cost and/or time. For nearly 90 Site Conditions clauses, and provides a summarize these legal decisions and
years this standard clause has been discussion of the terms indications reach a conclusion on whether they
used widely in both public and private and material difference, as well as represent a new trend in the scope of
contracts. Most practitioners in the an overview of the impact of contract coverage concerning differing site
construction industry think they know disclaimers related to differing site condition claims. If so, this trend
what the clause means and how it op- conditions. The article explores what should be of concern to many in the
erates. But, in the words of one of the conditions are generally not covered industry.
mid-20th century deans of construc- by the clause and conditions that are
tion law, Max E. Greenberg, It aint

COST ENGINEERING JANUARY/FEBRUARY 2016 31

 Denition of a
Diering Site Condition
Differing site conditions (also
often referred to as changed
conditions or unknown conditions) are
generally defined as latent (i.e.,
hidden) physical conditions at the
project site which differ from those
conditions identified to the contractor
during the bidding period. Put another
way:
A differing site condition
(also called a changed condition)
is a physical condition other than
the weather, climate, or another
act of God discovered on or
affecting a construction site that
differs in some material respect
from what reasonably was
anticipated. [3]
A differing siteor changed
condition as they are sometimes
calledis a physical condition
encountered in performing the
work that was not visible and not
known to exist at the time of
bidding and that is materially
different from the condition
believed to exist at the time of
bidding. [4]
In the first instance, the difficulty
with encountering a differing site
condition is that it was not anticipated
during bid preparation. As such it was
neither planned for nor budgeted.
Accordingly, there is nothing in the
project plan, the construction
schedule, or the project budget to
deal with this problem other than
typical bid and schedule
contingencies. Second, since most
differing site conditions involve
underground conditions and since
underground work most often occurs
at the outset of a project, encounters
with differing site conditions have a
high potential to delay the entire
project.
The Concept of Contractual Relief
The concept of contractual relief
is frequently employed in construction
32 COST ENGINEERING JANUARY/FEBRUARY 2016
contracts. Generally, contractual relief
involves an assignment of risk to one
of the parties to the contract. Such
contract clauses specifically identify
what risk events are assigned under
the contract; to which party the risk is
assigned; the conditions under which
the other party is entitled to relief;
and what steps the affected party
must take to activate the contractual
relief promised. Thus, if such an event
arises and the affected party complies
with the terms and conditions of the
contract, the party to which the risk is
assigned is obligated to compensate
the other party for the resulting
damagestime and/or cost. The
Differing Site Conditions clause
promises contractual relief in the
event a differing site condition is
encountered and the contractor
complies with the requirements of the
clause.
What Is the Purpose of A
Diering Site Conditions Clause?
Why Do We Need A Diering
Site Conditions Clause In A
Construction Contract?
One author outlined the need for
a Differing Site Conditions clause in
the following manner [5]:
It is a well settled
proposition that the purpose of a
Differing Site Conditions clause is
to shift the risk of unknown
physical conditions to the owner
of the site by allowing a
contractor to seek an equitable
adjustment in the contract price
when the contractor encounters
unanticipated conditions. Ideally,
the corollary benefit to the owner
is that the contractor does not
inflate its bid price to
accommodate for the possibility
of encountering unanticipated
conditions. Thus, a Differing Site
Conditions clause serves to
prevent turning a construction
contract into a gambling
transaction. [6]
The question arises, why do
owners deliberately assign the risk of
latent site conditions to themselves?
Why not just leave the risk with the
contractor? It is because when
contractors are faced with unknown
conditions they are unable to properly
estimate the cost, leaving contractors
with only two possible choices during
the bidding period. First, if they deem
the risk too high, they may walk away
from the project by not submitting a
bid. While this protects the contractor,
it is of little help to the project owner
if good contractors decide not to
bid, leaving the project to less
experienced or less savvy
contractors. Second, if the contractor
decides to accept the risk of latent site
conditions, the only way they can
possibly budget for this risk is to add a
contingency [7] (sometimes a
substantial contingency) to their bid.
Again, while this may protect the
contractor in the event they
encounter a differing site condition
(assuming that the cost impact of the
differing site condition is less than the
amount of the contingency) it does
not help the owner as the initial bid
prices are higher than they would
have been absent the contingency for
differing site conditions.
In order to avoid either situation,
owners frequently incorporate a
Differing Site Conditions clause into
their contract documents, assigning to
themselves the risk of encounters with
unanticipated site conditions. The
theory underlying this assumption of
risk is that if the contract contains a
Differing Site Conditions clause the
bidders will reduce that portion of
their bid contingency centered on the
risk of latent site conditions, thus
reducing their bids. This results in a
lower contract value at the outset of
the project, leaving the owner to pay
only the actual, documented cost of
encounters with latent site conditions
via change order or contract
modification. If no differing site
conditions are encountered, the
owner pays no extra costs.
In discussing this risk assumption
by the project owner, one author
noted the following.
for this risk allocation to
apply in the real world, the law
 must be clear as to the precise
risk that is shifted to the owner.
As stated by one court,
In practice a
contractor may not always
accurately anticipate the
rather esoterical legal
standard by which the
contract representations will
be judged. As a result, what a
contractor might have
thought were reliable and
viable affirmative contract
indications/representations
could, as here, turn out to
be no representations at all.
As a result, the contractor in
such case is left both without
a substantive remedy and
also without having noted
and provided for such a
contingency amount in its
bid. [8]
Thus, unless the esoterical
legal standards become more
explicit, a rational contractor may
still include a contingency for
differing site conditions in its bid
or, alternatively, may include no
contingency on the mistaken
assumption that the owner bears
all risks associated with
unanticipated site conditions. In
either event, the purpose of the
DSC clause would be defeated.
[9]
Therefore, to keep the good
contractors in the chase for a project;
to make the risk allocation clear; to
establish standards for measuring
when the risk allocation clause will
operate; and to reduce bid costs, a
thorough and well crafted Differing
Site Conditions clause is necessary.
History of Diering
Site Condition Clauses
Traditionally, common law placed
all risks of unknown, unanticipated
site conditions on contractors. The
practical result of this traditional risk
assignment follows:
If contractor were required
to assume the full risk of
increased costs of unfavorable
and unforeseeable physical site
conditions, they would have to
choose between (1) undertaking a
costly pre-bid analysis of
subsurface site conditions; or, (2)
including sizable contingencies in
their bids. Either alternative
would prove unnecessarily costly
to the owner and the contractor
in the long run. [10]
The U.S. Department of
Transportation, Federal Highway
Administration, summarized the
history of the Differing Site Conditions
clause in U.S. Federal contracts in the
Geotechnical Engineering Notebook,
Geotechnical Guideline No. 15,
Geotechnical Differing Site
Conditions [11]. This document notes
that in 1926, the Federal Board of
Contracts and Adjustments started
requiring a Differing Site Conditions
clause in all federal construction
contracts. The document notes that
this board initiated the requirement,
to eliminate the contingency factor
for subsurface conditions and to limit
the latent cost incurred by contractors
for pre-bid subsurface explorations.
This document noted that the original
Differing Site Conditions clause
included only conditions that differed
materially from indicated conditions.
However, in 1935, the clause was
modified to include, situations
where the contract is silent regarding
subsurface conditions but the
contractor encounters unforeseen,
unusual conditions which differ
materially from conditions ordinarily
encountered. (Underscoring
provided.)
Another author noted that the
U.S. Federal government began using
a Changed Conditions clause widely in
1927, on all firm fixed price contracts
in order to eliminate bid contingencies
related to subsurface conditions [12].
This author noted that advocates of
COST ENGINEERING JANUARY/FEBRUARY 2016
the Changed Conditions clause argued
the use of the clause would eliminate
the element of gambling from
federal construction contracts.
Without this clause, they claimed, the
contractor would, presumably
include in every bid a contingency
amount based on a worst case
scenario, resulting in increased bid
prices. The author cited a 1942 Court
of Claims case, Ruff v. United States
[13] wherein the court stated that:
the alternative is that the
bidders must, in order to be safe,
set their estimates on the basis of
the worst possible conditions that
might be encountered.
The most recent change to the
U.S. Federal Differing Site Conditions
clause was made in 1963, when the
title of the clause was modified from
Changed Conditions to Differing Site
Conditions. Otherwise, this contract
clause has remained virtually the
same since the 1935 modification.
Modern Diering
Site Conditions Clauses
As noted earlier, the original 1926
Differing Site Conditions clause
included only one type of differing site
condition, conditions materially
different from those indicated. The
1935 version of the clause included a
second type of differing site condition,
[where] the contractor encounters
unforeseen, unusual conditions which
differ materially from conditions
ordinarily encountered. [14] These
two conditions became known
colloquially as Type 1 and Type 2
differing site conditions. More
recently, many Differing Site
Conditions clauses have added a Type
3 differing site condition that included
encounters with hazardous and/or
toxic waste not reported to be or
identified in any site conditions report
provided during the bidding period.
Most modern standard form
contracts in the U.S. contain some
form of a Differing Site Conditions
clause. And, most of these clauses
contain both a Type 1 and a Type 2
33
 differing site condition. Type 1
differing condition claims are more
frequently asserted because most
contracts contain information on or
representations concerning site
conditions. Type 2 differing site
condition claims are certainly possible
but considerably less frequent than
Type 1 claims as Type 2 differing site
conditions are not predicated on a
material difference between pre-bid
information and actual conditions.
Although the Differing Site
Conditions clause was created by the
federal government, it has been
widely adopted in the U.S.
construction industry. For example,
the standard contract documents
issued by the American Institute of
Architects, ConsensusDocs, the
Construction Management
Association of America, the Design
Build Institute of America, and the
Engineers Joint Contract Documents
Committee all resemble each other
closely when describing the conditions
included as follows.
Type 1 Diering Site Conditions
Type 1 differing site conditions
typically refer to situations where the
contractor encounters unanticipated
physical conditions in the field that are
materially (i.e., substantially or
considerably) different than those
identified in the owner provided
documents available during the
bidding period. The description of a
Type 1 differing site condition is fairly
uniform across all of the standard
contract documents as follows:
The Federal Acquisition
Regulation, the American
Institute of Architects and
ConsensusDocs all use the
following language, subsurface
or latent physical conditions at
the site which differ materially
from those indicated in this
contract [15]
The Construction Management
Association of America describes
the Type 1 differing site condition
in the following manner, Any
physical condition uncovered or
revealed at the site differs
34 COST ENGINEERING JANUARY/FEBRUARY 2016
materially from that indicated or
referred to in the contract
documents [16]
The Design Build Institute of
America describes this type of
differing site condition as,
Concealed or latent physical
conditions or subsurface
conditions at the site that (i)
materially differ from the
conditions indicated in the
contract documents [17]
The Engineers Joint Contract
Documents Committee defines a
Type 1 differing site condition as,
any subsurface or physical
condition that is uncovered or
revealed eitherdiffers materially
from that shown or indicated in
the contract documents [18]
Type 2 Diering Site Conditions
Type 2 differing site conditions
are generally described at unknown
physical conditions at the site of an
unusual and unpredictable nature.
The U.S. Federal Highway
Administration describes Type 2
differing site conditions in their
Geotechnical Engineering Notebook
as, situations where the contract is
silent regarding subsurface conditions
but the contractor encounters
unforeseen, unusual conditions which
differ materially from conditions
ordinarily encountered. [19]
(Underscoring provided.)
The contractual language
describing a Type 2 differing site
condition is, again, fairly consistent
across all of the standard contract
documents as follows.
The Federal Acquisition
Regulation describes a Type 2
differing site condition as,
unknown physical conditions at
the site, of an unusual nature,
which differ materially from those
ordinarily encountered and
generally recognized as inhering
in work of the character provided
in the contract. [20]
The American Institute of
Architects documents describe a
Type 2 differing site condition in
nearly identical language, as,
unknown physical conditions of
an unusual nature that differ
materially from those ordinarily
recognized as inherent in
construction activities of the
character provided in the contract
documents. [21]
ConsensusDocs describe a Type 2
differing site condition similarly
as, unusual and unknown
physical conditions materially
different from conditions
ordinarily encountered and
generally recognized as inherent
in work provided for in the
contract documents. [22]
The Construction Management
Association of America document
differ in great degree when it
comes to a Type 2 differing site
condition recognizing only, an
underground facilitynot shown
or indicated in the contract
documents and was not a facility
of which a contractor could
reasonably have been expected to
have been aware and the
underground facility is uncovered
or revealed at or contiguous to
the site [23]
The Design Build Institute of
America documents describe
Type 2 differing site conditions
similar to the Federal Acquisition
Regulation and the American
Institute of Architects document
by stating, are of an unusual
nature differing materially from
the conditions ordinarily
encountered and generally
recognized as inherent in work
[24]
The EJCDC documents describe a
Type 2 differing site condition
similarly, is of an unusual
nature, and differs materially
from conditions ordinarily
encountered and generally
recognized as inherent in work of
the character provided for in the
contract documents. [25]
Type 3 Diering Site Conditions
Type 3 differing site conditions
are relatively new in the construction
industry. Some contract documents
specifically include encounters with
previously unidentified hazardous
waste materials as a type of differing
site condition different than the classic
Type 1 and Type 2 differing site
conditions. As with Type 1 and Type 2
conditions clauses, a contract that
incorporates a Type 3 differing site
condition clause assigns the risk of
encounters with unanticipated
hazardous waste to the owner, unless
the hazardous material is material
brought on site by the contractor or
one of their subcontractors. Since
Type 3 differing site conditions
language is relatively new, it is not
nearly as standardized as the language
of Type 1 and Type 2 language. Some
examples of Type 3 contract clauses
include:
The Los Angeles County
Metropolitan Transportation
Authority describes Type 3
differing conditions as,
Unidentified substances that
design builder believes may be
hazardous materials that are
required to be removed to a Class
I, Class II, or Class III disposal site
in accordance with governmental
rules. Hazardous materials that
are included in the work, as
identified in the contract for
design builder to handle,
mitigate, and remediate, shall not
be construed in any way to be a
Type 3 condition. [26]
Similarly, the Standard
Specifications for Public Works
Construction (the Greenbook)
widely used by public works
entities throughout Southern
California describes a Type 3
differing site condition as,
Materials differing from that
represented in the contract
documents which the contractor
believes may be hazardous waste,
as defined in Section 25117 of the
Health and Safety Code, that is
required to be removed to a Class
I, Class II, or Class III disposal site
in accordance with the provisions
of existing law. [27]
While neither the Federal
Acquisition Regulations nor the
Construction Management
Association of America contract
documents (2004 edition) have been
modified to include a Type 3 differing
site condition, other standard contract
documents have, in one form or
another, including the following:
The American Institute of
Architects documents include a
form of Type 3 conditions as, a
hazardous material or substance
not addressed in the contract
documents and if reasonable
precautions will be inadequate to
prevent foreseeable bodily injury
or death to persons resulting from
a material or substance, including
but not limited to asbestos or
polychlorinated biphenyl [28]
ConsensusDocs deals with the
Type 3 differing conditions as, A
hazardous material is any
substance or material identified
now or in the future as hazardous
under laws, or other substance or
material that may be considered
hazardous or otherwise subject to
statutory or regulatory
requirement governing handling,
disposal, or cleanup. The
contractor shall not be obligated
to commence or continue work
until any hazardous material
discovered at the worksite has
been removed, rendered, or
determined to be harmless by the
owner [29]
The Design Build Institute of
America addresses the issue of a
Type 3 differing conditions very
succinctly, Unless otherwise
expressly provided in the contract
documents to be part of the work,
design builder is not responsible
for any hazardous conditions
encountered at the site. [30]
The EJCDC contract documents
address the Type 3 differing site
condition with the clause, The
contractor shall not be
responsible for any hazardous
environmental condition
uncovered or revealed at the site
which was not shown or indicated
in drawings or specifications or
identified in the contract
COST ENGINEERING JANUARY/FEBRUARY 2016
documents to be within the scope
of the work. [31]
Conditions Typically Covered By
Diering Site Condition Clauses
Modern Differing Site Condition
clauses generally cover unforeseen,
hidden or latent physical conditions at
the work site, not indicated in or
materially different from the
information available at bid. The three
key elements at the outset of a
differing site condition claim are the
following.
UnforeseeabilityThe contractor
must be able to demonstrate that
the condition encountered was
unforeseeable based on all
information available at the time
of bidding. The unforeseeability
test extends to site investigations
also. That is, provided the owner
offered a site investigation prior
to bidding, the contractor making
this sort of claim will also have to
demonstrate that the condition
encountered was unforeseeable
even during the pre-bid site walk.
However, [i]n interpreting site
investigation clauses, the term
site is often interpreted to mean,
essentially, sight, and to not
extend to requiring an
independent subsurface
investigation... [32] Basically, the
condition encountered must not
have been anticipated by the
contractor from a study of the
contract, inspection of the site,
and their general experience. [33]
Physical ConditionThe condition
encountered must be a physical
condition. The condition may be
either a natural condition (i.e.,
change in soil characteristics,
encountering rock, etc.) or a
manmade condition (i.e.,
unidentified utilities, buried
structures, etc.). In any event, the
condition complained of cannot
be an economic, political,
governmental or business
condition (i.e., shortage of
qualified craft labor, inability to
get equipment or materials to the
site, increased material costs or
35
 ordinances that restrict
performance of the work, etc.).
[34]
At the SiteThe condition
complained of must be at the
project site. Typically, the site is
the location where the project is
being constructed. However, if
the owner provides a remote lay
down area or if the owner
designates a borrow pit several
miles from the site then the
Differing Site Conditions clause
will cover differing site conditions
at these remote locations
because the owners actions
incorporated these locations into
the term site for the purposes
of the clause. [35]
Based in U.S. case law [36] ,
assuming the contractor complies
with the terms of the clause, the
conditions shown in Table 1 are
generally covered by the Differing Site
Conditions clause.
What Are Indications?
Indications, for the purposes of
the Differing Site Condition clause,
may be either expressed or implied
indications. [37] Express indications
are more easily demonstrated than
implied indications. Examples of
express indications include:
Rock at specific elevations
Perched water
Specific soil types
Figure 1 Conditions Generally Covered by the Diering Site Conditions Clause
36 COST ENGINEERING JANUARY/FEBRUARY 2016
Utility locations shown on
drawings
Etc.
With respect to express
indications one court commented
that:
There must be reasonably
plain or positive indications in the
bid information or contract
documents that such subsurface
conditions would be otherwise
than actually found. [38]
Concerning express indications,
courts have noted that contractors
should not only be able to compare
express indications with actual
conditions, but also with all
reasonable inferences and
implications that can be drawn from
the information provided. One court
noted that it is not required that
express indications be:
explicit or
specific, but only enough to
impress or lull a reasonable
bidder not to expect the
adverse conditions actually
encountered. [39]
Implied indications are indications
that are uncertain or ambiguous. The
contractor claiming an implied
indication must be able to
demonstrate that the indication was
reasonably inferable from the contract
documents, upon which a reasonable
contractor can be expected to rely.
Basically, the board concluded that an
indication need not be an affirmative
statement or representation, that it
may be proven by inferences or
implications. The board went on to
state the following:
The causes of an erroneous
indication in the contract
whether simple error, negligence
or other are no longer
important. An indication may be
proven, moreover, by inferences
and implications which need not
meet the test for a
misrepresentation or
representation, concepts which
have a long common law history
associated with fraud. [40]
One commentator concluded that
it is sufficient to justify relief if
indications concerning expected
conditions at the project site can be
established from reasonable
inferences and implications that can
be drawn from the contact documents
[41]. Based upon this approach to the
issue of implied indications, boards
and courts may look for design
requirements that cannot be met or
construction methods that cannot be
employed because of the conditions
encountered [42]. Or, lack of detail in
the description of the condition
referenced in the contract documents
may be found to imply a certain
condition exists when, in actuality, the
condition does not exist [43].
What is a Material Dierence?
The term material difference is
a term of the legal art. One cannot
look in Blacks Law Dictionary under
M for material difference and find a
standard definition. The term
material is defined as, Important; conditions with those indicated in the
having influence or effect[44] As
such, to determine if a material
difference has been encountered for
the purposes of the Differing Site
Conditions clause requires a situation
specific analysis. It is entirely
dependent upon the facts of each
such encounter. Each individual claim
of material difference must be
examined from the perspective of
whether the condition encountered
had, or will have, a substantial impact
on the contractors work as well as the
time and cost of the work.
One author noted the following
when discussing what constitutes a
material difference:
Materiality usually turns
upon the unique facts existing on
the particular job. Facts that often
bear on the question of
materiality are: (a) differences in
the quality of substances
encountered; (b) differences in
the quantity of work required as a
result of the condition; (c)
changes in the construction
techniques required in order to
deal with the condition.
Regardless of whether the word
material appears in the differing
site conditions clause, the
difference must be material to
invoke the clause or for denial of
the claim to amount to a breach
of contract. (Murrays Iron Works,
Inc. v. Boyce [2008] 158 CA 4th
1279, 1298). [45]
Based on the above, it appears
that the boards and courts have been
very reluctant to define the term
material difference preferring,
instead, to perform a case by case
analysis. Generally, decisions simply
declare whether or not the claimed
condition is materially different or not
without giving any reason. What is
clear, however, is that a contractor has
an easier job of demonstrating a
material difference if the claim is
based on a Type 1 differing site
condition. In this situation, the
contractor can compare actual
bidding documentsboth expressed
and implied. If the claim is a Type 2
differing site condition, the burden of
proving the material difference is
substantially greater. The contractor
will first have to prove what conditions
they anticipated at the time of bidding
and why this was a reasonable
expectation, as Type 2 claims are
typically filed in the absence of any
owner provided information. Next, the
contractor will have to document the
conditions actually encountered.
Finally, the contractor will have to be
able to articulate and demonstrate the
material difference between the two
conditions.
The Impact of
Contract Disclaimers
As the Differing Site Conditions
clause became more common the
number of differing site condition, or
changed condition, claims grew.
Owners began to take defensive
actions to shield themselves from
differing site condition claims.
Amongst these actions were:
Site investigation clauses
Unit priced contracts declaring
some aspects to the work
incidental to placement of the
work
Contractual disclaimers
Examples of disclaimers follow:
Boring logs and results of other
subsurface investigations and
tests are available for inspection.
Such subsurface information,
whether included in the plans,
specifications, or otherwise made
available to the bidder, was
obtained and is intended solely
COST ENGINEERING JANUARY/FEBRUARY 2016
for the owners design and
estimating purposes. This
information has been made
available only for the convenience
of all bidders. Each bidder is solely
responsible for all assumptions,
deduction, or conclusions which
he/she may make from an
examination of this information.
Some drawings of some of the
existing conditions are available
for examination at [another
location]. These drawings are for
information only and will not be
part of the contract documents.
The quantity, quality,
completeness, accuracy and
availability of these drawings are
not guaranteed. Prospective
bidders shall telephonefor an
appointment to examine
drawings of the existing
conditions.
The owner makes no
representation and denies any
responsibility for the accuracy of
any subsurface data furnished
and expects each bidder to satisfy
itself as to the character, quantity,
and quality of subsurface
materials to be encountered.
The subsurface data furnished to
bidders does not constitute a part
of the contract and is furnished
solely for information. Bidders
must make their own
investigations as to subsurface
conditions and no claim for
additional compensation will be
allowed regardless of the
subsurface conditions actually
encountered.
The obvious purpose of such
disclaimers is to insulate owners from
differing site condition claims. That is,
owners employing such disclaimers
attempt to transfer the risk of both
unknown site conditions as well as the
various representations made in the
contract documents to the contractor.
Most government contracts
contain boilerplate clauses and
special conditions which contain
disclaimer and exculpatory
language intended to relieve the
37
 government of liability under
certain stated circumstances. If
literally applied, they could
frustrate the intended purposes
of the Differing Site Conditions
clause. [46]
The authors do not believe that,
most government contracts contain
boilerplate clauses any longer,
however in our experience there are
still a large number of contracts that
do attempt to disclaim responsibility
for owner furnished information in
one form or another. It has also been
shown that boards and courts often
refuse to enforce such disclaimers
when they are challenged [47].
Boards and courts seem to take
the position that owners cannot give
with one hand (by including a
Differing Site Conditions clause in a
contract and reaping the benefit of
lower bids) while taking away with the
other hand (by trying to disclaim
responsibility for information
provided and undercutting the
contractors right of reliance on the
clause) [48]. Broadly worded, general
disclaimers are unlikely to survive a
U.S. Federal Board of Contract
Appeals or court challenge. An
example U.S. Federal Court ruling on
broad based disclaimers follows:
Even unmistakable contract
language in which the
government seeks to disclaim
responsibility for drill hole data
does not lessen the right of
reliance. The decisions reject, as
in conflict with the changed
conditions clause, a standard
mandatory clause of broad
application, the variety of such
disclaimers of responsibility
that the logs are not guaranteed,
not representations, that the
bidder is urged to draw their own
conclusions. [49]
In another case, centering on a
broadly worded exculpatory clause,
the court commented:
38 COST ENGINEERING JANUARY/FEBRUARY 2016
The effect of an actual
representation is to make the
statements of the government
binding upon it, despite
exculpatory clauses which do not
guarantee the accuracy of a
descriptionHere, although there
is no (express) statement which
can be made binding upon the
government, there was in effect a
description of the site, upon
which plaintiff had a right to rely,
and by which it was misled. Nor
does the exculpatory clause in the
instant case absolve the
government, since broad
exculpatory clausescannot be
given their full literal reach, and,
do not relieve the defendant of
liability for changed conditions as
the broad language thereof
would seem to indicate [citation
omitted] General portions of the
specifications should not lightly
be read to override the Changed
Conditions Clause [Citation
omitted] [50]
Conditions Generally Not
Included Under the Diering
Site Condition Clause
Certain conditions encountered
on a construction site, that many
contractors characterize as changed
conditions have been specifically
excluded from coverage under the
Differing Site Conditions clause by the
boards and courts. Typically, such
excluded events are deemed to not be
physical conditions which is clearly
required by the Differing Site
Conditions clause. Among the
conditions excluded from coverage
are the following:
Weather conditions [51]
Acts of God Fires, floods,
hurricanes, typhoons,
earthquakes, etc. [52]
Economic, governmental or
political conditions [53]
Delays caused by other
contractors [54]
Acts of the government in its
sovereign capacity [55]
Acts of War [56]
Acts of third parties [57]
Labor disputes [58]
Civil unrest [59]
Impact of local ordinances [60]
Conditions Sometimes
Included Under the Diering
Site Conditions Clause
The plain language of the
Differing Site Conditions clause does
not restrict recovery to those
conditions that existed prior to bid
submittal. However, the Armed
Services Board of Contract Appeals
has interpreted the clause to cover
only those conditions which pre-
existed the time of bidding [61].
Other boards and courts have
accepted this limitation likewise.
There are, however, at least three
situations where post award
conditions may, under the proper
circumstances, gain coverage under
the Differing Site Conditions clause.
They are the following:
Government Had a Duty to
Correct or Prevent the Situation:
In situations where the
government had the ability to
prevent the pre-existing
condition from being damaged or
changed to the detriment of the
contractor, and failed to do so,
then under the theory that the
government had a duty not to
hinder performance, Boards and
Courts have allowed recovery
under the clause. [62]
Variations in Estimated
Quantities: Typically,
construction contracts include a
quantity variation clause which
provides for an adjustment to
contract price in the event a
quantity substantially overruns or
underruns the estimated quantity
carried in the bidding documents.
This clause alleviates the need for
a contractor to file a quantity
variation claims under the
Differing Site Conditions clause.
There are, however, some
exceptions to this statement. If
the quantities vary because the
contractor encounters an
 entirely different job [63] or
there is an unforeseen need for
an unusual construction
methodology [64] then the
Differing Site Conditions clause
may be employed in lieu of the
quantity variation clause. If a
board or court determines that
the owners estimate was
negligently performed [65], or if
owner issued change orders
substantially increase the
estimated quantities [66] again,
the Differing Site Conditions
clause may override the quantity
variation clause when it comes to
pricing such variations. Material
variations on owner provided
quantity estimates may become a
Type 1 differing side condition
only if they resulted from a
differing site condition. [67]
In the Absence of a Quantity
Variation Clause: Since the
quantity variation clause is
intended to work in conjunction
with the Differing Site Conditions
clause, the Navigant Construction
Forum believes that if a
contractor encounters a material
change in estimated quantities
and the contract does not include
a quantity variation clause, the
any such claim for additional
costs may be pursued under the
Differing Site Conditions clause.
In such event, if the owner
provided the estimated
quantities in the bidding
documents, then the claim would
be a Type 1 differing site
condition. If the owner did not
provide any estimated quantities
and the contractor was required
to analyze the bidding documents
to ascertain the estimated
quantities, then such a claim
would be a Type 2 differing site
condition.
Roadmap for a Successful
Diering Site Condition Claim
Six Indispensable Elements
The U.S. Court of Claims has
established what it calls the six
indispensable elements for differing
site condition claims which creates a
road map for contractors pursuing
such a claim and is now followed by
other boards and courts [68]. These
elements follow:
The contract document
affirmatively indicated the
subsurface or latent site
conditions upon which the
contractors claim is based.
The contractor must have acted
as a reasonable and prudent
contractor in interpreting the
contract documents.
The contractor must have
reasonably relied upon the
indications of subsurface or latent
site conditions in the contract
documents when preparing their
bid.
The subsurface or latent
conditions actually encountered
differed materially from the
subsurface or latent conditions
indicated in the contract
documents.
The actual conditions
encountered were reasonably
unforeseeable.
The contractors claimed excess
costs were solely attributable to
the materially different
subsurface or latent conditions
encountered.
Five Additional
Contractual Requirements
In addition to the indispensable
elements outlined by the Court of
Claims above, there also are five
additional contractual requirements
which the contractor must follow in
order to successfully pursue a
differing site condition claim. Like the
above requirements, deviation from
any of these contractual contracts
may result in the contractor losing
their claim. These contractual
requirements are the following:
Site InvestigationMost
contracts contain a Site
Investigation clause stating that
the owner expects bidders to visit
the site to observe the various
COST ENGINEERING JANUARY/FEBRUARY 2016
conditions which may impact the
performance of the work [69].
The Site Visit clause is typically
paired with a Site Investigation
and Conditions Affecting the
Work clause which contains an
acknowledgement by the bidders
that they did, indeed, visit the site
and satisfy themselves as to all
site conditions which may affect
the work [70]. Contractors who
do not visit the site prior to
bidding place themselves in
serious jeopardy should they be
awarded the contract.
Additionally, they may learn, to
their dismay, that they cannot
rely upon the Differing Site
Conditions clause to compensate
them for situations they would
have seen had they visited the
site, and therefore unaware of
when preparing their bid simply
because they did not perform a
site visit [71]. That is, the
contractors failure to perform a
site visit may negate the
contractors ability to recover
under the Differing Site
Conditions clause. In looking at
this sort of situation the U.S.
Court of Claims concluded that
the contractor must show, that
the conditions actually
encountered were reasonably
unforeseeable based on all the
information available to the
contractor at the time of bidding.
[72] Information available
includes any and all information
the contractor would have gained
by making a site visit.
Notice to the OwnerMost
Differing Site Conditions clauses
require that, The contractor
shall promptlynotify the
[owner] in writing of [73]
Written notice to the owner of a
differing site condition is required
to give the owner the opportunity
to examine the situation to
determine whether it is, or is not,
a differing site condition. The
written notice also provides the
owner the opportunity to
determine the most cost effective
39
 manner in which to deal with the
condition encountered. The lack
of written notice of a differing
condition deprives the owner of
the opportunity to determine the
nature and extent of the problem.
Thus, from a claims perspective,
the owners position is materially
harmed or substantially
prejudiced. Recognizing this,
boards and courts frequently
deny differing site condition
claims if it can be shown that the
contractor provided no notice to
the owner [74]. Thus, the failure
to provide prompt written notice
may result in the contractor not
prevailing with their differing site
condition claim [75]. However, if
the contractor can demonstrate
that the owner had actual
knowledge of the conditions
encountered in the field, the
contractor may be allowed to
pursue the claim. Nevertheless,
the failure to provide written
notice makes it substantially
more difficult for the contractor
to prove that they are entitled to
recover damages under the
Differing Site Conditions clause.
Stop Work in the Affected Area
The Federal Differing Site
Conditions clause is a self-
actuating stop work order [76]. A
contractor performing work
under a Federal contract, shall
promptly, and before such
conditions are disturbed
provide notice to the owner. The
intent of this requirement is to
preserve the condition so that the
owner can confirm the condition
encountered. Contactors who fail
to preserve the alleged differing
conditions, allowing the owner to
investigate and determine what
was actually encountered, are
almost guaranteed to lose their
claim. They will be unable to
prove what condition they
actually encountered because
they removed the evidence.
Allow the Owner Time to
InvestigateUnder the U.S.
Federal Differing Site Conditions
40 COST ENGINEERING JANUARY/FEBRUARY 2016
clause, the owner, upon receipt
of written notice, shall
promptly investigate the
conditions [77] This requires
the contractor to allow the owner
sufficient time to investigate the
condition. Contractors who file
notice of differing conditions but
continue work are at serious risk
of losing their claim. On the other
hand, should the owner take an
inordinately long period of time
to investigate, they may become
liable for an owner caused delay
for the delayed investigation plus
the damages arising from the
differing site condition.
Mitigate DamagesIt is a
general principle of the law of
contracts that the amount of
damages awarded to a non-
defaulting party will be measured
as though that party had made
reasonable efforts to avoid the
losses resulting from the default.
[78] Simply put, a contractor
who has encountered a differing
site condition is not free to spend
whatever amount of money they
want to spend and expect to
recover what was expended.
Contractors must act reasonably
in overcoming differing
conditions in order to reduce the
owners costs. Failure to mitigate
damages will not result in the
contractor losing their
entitlement to the claim but may
reduce the amount recovered.
Contractors Duty to
Proceed With Work
Most construction contracts
include a clause requiring the
contractor to continue working on
those portions of the project not
impacted by the differing site
condition pending the owners
determination of whether the
condition encountered was a differing
site condition. That is, the contractor
cannot suspend all work to await the
owners decision.
U.S. federal contracts (as many
others) have a specific clause to this
effect:
The contractor shall
proceed diligently with
performance of this contract,
pending final resolution of any
request for relief, claim, appeal,
or action arising under the
contract, and comply with any
decision of the contracting
officer. [79]
The owner, subsequent to their
investigation, may direct the
contractor to proceed with the work
even before reaching a determination
on the differing site condition claim. A
contractor who fails to diligently
pursue the work may face termination
for default. [80]
Reverse Diering
Site Condition Claims
Although rare, it is possible for an
owner to assert a differing site
condition against a contractor,
presumably for encounters with
conditions substantially better than
anticipated in the contract
documents. This is clearly outlined in
the U.S. Federal Differing Site
Conditions clause wherein it states:
The contracting officer shall
promptly investigate the
conditions, and if he finds that
such conditions do materially so
differ and cause an increase or
decrease in the contractors cost
of, or the time required for,
performance of any part of the
work under this contract,
whether or not changed as a
result of such conditions, an
equitable adjustment shall be
made and the contract modified
in writing accordingly. [81]
(Underscoring provided.)
Litigation concerning reverse
differing site condition claims is
extremely rare. One of the few
reported cases is AFGO Engineering
Corporation [82] which arose on a
project where the contractor had to
remove 62 percent less rock than
anticipated in the bidding documents.
In another case involving a
government reverse differing site
condition claim against a contractor
the U.S. Court of Federal Claims
determined that the government
grossly overstated estimated
quantities and denied the
governments claim as a result. [83]
One of the authors has
experience with two reverse differing
site condition claims. In both cases,
while the owners were able to
demonstrate conditions better than
anticipated it was more cost effective
to prosecute the claim in the form of a
deductive change order. The authors
believe that the lack of reportable
cases exists because few owners pay
attention to this type of claim and
those few that are aware of this claim
and encounter such a condition are
more likely to pursue the issue as a
deductive change rather than a formal
claim.
Traditional Understanding of the
Diering Site Conditions Clause
After nearly 90 years most people
in the construction industry think they
understand the Differing Site
Conditions clause and how it operates.
Most believe that the clause transfers
all risk of unforeseeable, latent site
conditions to the owner. Most believe
that they have an absolute right to rely
on information provided with the
bidding documents. Most believe that
owners are obligated to provide all
information at the time of bidding.
And, most believe that when a
subsurface conditions report is silent
concerning water, rock, or other
physical conditions, then this indicates
that condition is not anticipated.
While the authors frequently
encounter these expectations, board
and court decisions are not necessarily
in agreement.
Changing Risk Allocation
Concerning Diering
Site Conditions
The remainder of this research
perspective will examine the outcome
of a number of board and court cases
centering on differing site condition
claims. The authors believe these
decisions indicate that boards and
courts have a much more nuanced
understanding of the Differing Site
Conditions clause than most
construction industry professionals.
The authors have also concluded that
there is a trend toward changing the
understanding of the risk allocation
under this clause.
Contractor Has a Duty
to Review Information
Made Available for Inspection
The Appeal of Bean Stuyvesant
LLC [84] involved a contract where the
contractor was required to dredge soil
from a confined disposal area,
transport the soil via a pipeline and
place the material on a beach in order
to restore a sea turtle habitat in North
Carolina. The contractor encountered
conditions they believed were
materially different than anticipated
and filed a differing site condition
claim. The claim was denied by the
contracting officer and appealed to
the Armed Services Board of Contract
Appeals. The bidding documents
contained the following notice:
Drilling logs of other borings
in the vicinityof the project not
provided in Appendix A are
available upon request. All
requests shall be directed to Ed
Dunlop of the Wilmington District
Office at (910) 251-4492. The
government will not be
responsible for any interpretation
of or conclusion drawn from the
data or information by the
contractor. Bidders are expected
to examine the site of the work
and after examination decide for
themselves the character of
material.
The board decision stated that the
other two bidders requested and
received the information from the
other borings referenced in the
contract and did attend the site visit.
Bean Stuyvesant did neither. The
board ruled against Bean Stuyvesant
stating that:
*Previously known as the Certied Cost Consultant/Certied Cost Engineer
COST ENGINEERING JANUARY/FEBRUARY 2016
Appellant also has not
shown that the conditions were
reasonably unforeseeable based
upon all the information available
at the time of bidding. A
contractor has the duty to review
information that is made available
for inspection [85]. Appellant
has not shown that the
government disclaimed the
accuracy of any of the relevant
drilling data. We believe that the
data included within the contract
and the data made available upon
request were part of the universe
of relevant information made
available to the bidders, which
appellant should have considered
in order to prepare its bid. Having
failed to do so, appellant cannot
prove that it reasonably relied
upon all contract and contract-
related data, as required by the
Differing Site Conditions clause.
[86]
In a similar case, Hunt & Willett,
Inc. v. United States [87] the court
indicated that, the contractor
cannot rest content with the
materials furnished to him or her; he
or she must also refer to other
materials which are available and
about which he or she is told by the
contract documents.
Lesson Learned (Contractors):
When a bidding document
identifies other subsurface
conditions reports and/or soil
borings are available upon
request, request and review all
such information and incorporate
the knowledge gained into your
bid.
Lesson Learned (Owners): Make
certain that the design
professionals and geotechnical
consultants identify, search out
and capture all subsurface
conditions reports and boring logs
previously done on or near the
site and incorporate an
appropriate notice of the
availability of such additional
41
 information in the bidding
documents.
Owner Has No Duty to Disclose
Information Reasonably Available
Through Independent Investigation
North Pacific Erectors, Inc. v. State
of Alaska, Department of
Administration [88] involved a
contract for renovation and asbestos
removal of a state office building. The
contractor, requested additional
payment for the asbestos removal,
claiming there was a differing site
condition that made the project much
more labor-intensive than it had
expected. The claim was denied at
both the project and the agency level.
The contractor appealed to the
Superior Court who upheld the
agencys determination. The
contractor appealed to the State
Supreme Court asserting that its claim
was a valid differing site condition
claim and that the state breached its
duty to disclose information about the
project.
The court decision recorded that
North Pacific and their asbestos
removal subcontractor neither
participated in the pre-bid conference
nor made a site visit. Having said this,
the court noted:
Contractors would not have
been able to see the pan deck
surface at a site visit, however,
because fireproofing was still
covering the pan deck at the site.
Earlier, in one of the
administrative hearings, the states
hearing officer concluded that the
state had an obligation to disclose the
condition North Pacific complained
about and failed to do so. The officer
commented that the Departments
Deputy Commissioner:
determined that the
department did not have a duty
to disclose the site condition,
reasoning that it was possible for
North Pacific to have obtained
the information through site visits
or an independent investigation.
42 COST ENGINEERING JANUARY/FEBRUARY 2016
The court further noted that the
obligation to disclose site information
had earlier been ruled upon in the
following manner.
There are four
requirements for establishing
when the government has failed
in its duty to disclose superior
knowledge. First, the contractor
undertakes to perform without
vital knowledge of a fact that
affects performance costs or
direction. Second, the
government was aware that the
contractor had no knowledge of
and had no reason to obtain such
information. Third, the contract
specification supplied either
misled the contractor or did not
put it on notice to inquire. Fourth,
the government failed to provide
the relevant information. [89]
Turning to the North Pacific case
the court ruled in the following
manner:
Although the department
had more control over the
information here the
department did not have
absolute control over the relevant
information. Rather, North Pacific
could have reasonably acquired
the information without resort to
the department. North Pacific
could have requested photos or
an inspection of an exposed pan
deck, spoken to other contracting
companies that had previously
performed asbestos abatement
for the department in Juneau, or
researched conditions of similar
buildings in the area We
conclude that North Pacific could
have conducted research on its
own and was not dependent on
the department as the only
reasonable avenue for acquiring
information on the surface of the
pan deck. Accordingly, we hold
that the state had no duty to
disclose information regarding
the pan deck surface.
Lesson Learned (Contractors):
When reviewing bidding
documents, do not assume that
the owner is required to provide
all possible information available.
Be prepared to perform and
document some independent
investigation of conditions
potentially impacting the project.
If other information is discovered,
make certain that the bid cost
reflects this independently
discovered information.
Where the Contract is Silent
a Diering Site Condition
Claim Cannot Arise
P. J. Maffei Building Wrecking
Corporation v. The United States [90]
was an appeal from the General
Services Board of Contract Appeals
decision that Maffei was not entitled
to an equitable adjustment for a
shortfall of salvageable steel in a
demolition contract with the
government. The bid documents did
not contain as built drawing of the
structure to be demolished but
required the bidders to deduct the
anticipated salvage value of the steel
from their bid cost. The documents
also noted that a local city agency
had, drawings of the existing
conditions but noted that, These
drawings are for information only and
will not be part of the contract
documents. The quantity, quality,
completeness, accuracy and
availability of these drawings are not
guaranteed.
In Maffei, the court ruled that:
the contract documents
did not indicate the amount of
steel recoverable from the
Pavilion, within the meaning of
the Differing Site Conditions
clausesuccess on a Type I
Differing Site Conditions claim
turns on the contractors ability
to demonstrate that the
conditions indicated in the
contract documents differ
materially from those it
 encounters during performance
[91]. As a threshold matter, then,
this kind of Differing Site
Conditions claim is dependent on
what is indicated in the contract.
[92]
A contractor cannot be
eligible for an equitable
adjustment for change conditions
unless the contract indicated
what those conditions would
supposedly be. [93]
Ragonese v. United States [94], an
older case, is cited by some as
standing for, a contract silent on
subsurface conditions cannot support
a changed conditions claim [95].
Stated more succinctly, one court
ruled that the Differing Site Conditions
clause, cannot be invoked if the
plans and specifications do not show
or indicate anything about the
alleged unforeseen condition, i.e., if
they say nothing one way or the other
about subsurface [conditions][96]
Put even more bluntly, another court
stated where the contract is silent,
a claim cannot arise.[97]
Lesson Learned (Contractors): If
the bidding documents are silent
on an issue (for example,
groundwater) this is no guarantee
that the condition does not exist.
Investigation from other sources
may be well warranted.
Owners Do Not Assume All Risk
of Unforeseen Conditions
Olympus Corp. v. United States
[98] involved a paving contract which
was delayed, at least in part, due to an
oil spill that contaminated the soil. The
court stated that the Differing Site
Conditions clause:
does not shift the risk of
all unanticipated adverse site
conditions from the contractor to
the government. Rather, the
government bears only those risks
that encourage more accurate
bidding.
On this basis, the court concluded
the Differing Site Conditions clause
only applies to those conditions that
exist on the date the parties sign the
contract, and not to site conditions
created after contract award.
Lesson Learned (Contractors): If
site conditions change
subsequent to contract award, do
not rely upon the Differing Site
Conditions clause for an equitable
adjustment to the cost or time of
the contract. Look to other
equitable adjustment clause such
as the delay or the changes
clauses instead.
Contractors Cannot Rely On
Contract Indications Where
Simple Inquiries Might
Reveal Contrary Conditions
Even in situations where the
owner includes all subsurface
information in the bidding documents
and makes no attempt to disclaim
responsibility for the information
provided, contactors cannot rest easy.
In Foster Construction C.A. and
Williams Brothers Company, A Joint
Venture v. The United States [99] the
U.S. Court of Claims ruled that:
The contractor is unable to
rely on contract indications of the
subsurface only where relatively
simple inquiries might have
revealed contrary conditions.
(Underscoring provided.)
For example, in a highway project
where the subsurface investigation
report contains 30 borings to a depth
of 15 meters (and the deepest cut on
the drawings is approximately eight
meters) all of which show no
groundwater, bidders may not be able
to rely on the lack of indication of
groundwater. If the contractor could
have, for example, reviewed and
determined from the local Soil
Conservation Service office that
groundwater records show that at
certain times of the year groundwater
levels rose to within three meters of
the surface, then bidders cannot rely
COST ENGINEERING JANUARY/FEBRUARY 2016
upon the bidding information when
preparing their bids. Similarly, if a pre-
bid site walk would have revealed the
condition, even though it was not
shown in the geotechnical report,
then the contactor cannot rely
exclusively on the bidding
information.
Lesson Learned (Contractors):
Bidders must perform a
reasonable amount of
independent investigation
concerning subsurface conditions
especially where the bidding
information is silent on matters
that, logically, should be present
on or near the site.
When Bidding Information Makes
No Specic Representation
Contractors Cannot Claim
Materially Dierent Conditions
Metcalf Construction Co., Inc. v.
United States [100] involved a Navy
contract to construct military housing
on a base on Oahu, Hawaii. During the
course of construction Metcalf
encountered expansive soils and filed
a differing site condition claim. The
claim was denied. Metcalf took this
claim, along with several others, to the
U.S. Court of Federal Claims. Metcalf
claimed that the Navy failed to
perform a timely investigation
subsequent to the notice of differing
site conditions and unreasonably
rejected the geotechnical reports
submitted by Metcalf in support of
their claim. The Contracting Officers
denial of the claim stated the
following:
As far as the information
provided in our soils report is
concern[ed], the fact that it
differs significantly from the soils
report generated by the
contractor in itself does not
warrant as equitable adjustment
If the contractor decided to
base the cost of the work relying
upon the government provided
data, thats the risk they took and
any consequences resulting
therefrom is their responsibility.
43

The court noted that the
government issued geotechnical
report addressed only, site
preparation, foundation support,
footing, slab and reinforcement
requirements The court took notice
of the fact that the request for
proposal instructed the contractor to
employ their own geotechnical
consultant subsequent to contract
award to perform an independent
investigation for the design of the
project. The court concluded in this
regard that:
In other words, Metcalf
could rely on (the government
issued report) for bidding
purposes, but the Navy advised
all potential contractors they
could not rely on (the
government issued report) in
performing theproject.
Citing Comtrol v. United States
[101] the court concluded that:
Because the contract made
no specific representation as to
the type of soil to be
encountered, it cannot be said
that [the contractor] encountered
conditions materially differing
from those specifically indicated
in the specifications.
While Metcalf I was vacated and
remanded by the U.S. Court of
Appeals for the Federal Circuit in
Metcalf II [102] the Appellate Court
did state the following in regards to
the argument raised in Metcalf I:
The government made clear
that its pre-request soil report
was not to be the last word on
soil conditions for purposes of the
project. A revised request for
proposals stated that the
requirements in the soil
reconnaissance report were for
preliminary information only. The
resulting contract required that
the contractor conduct its own
independent soil investigation
44 COST ENGINEERING JANUARY/FEBRUARY 2016
Even before potential bidders had
submitted proposals in response
to the request, the government
had clarifiedthat the contract
would be amended if the
contractors post award
independent investigation turned
up soil conditions significantly
different than those described in
the governments report.
Similarly, the Civilian Board of
Contract Appeals in Flour
Intercontinental, Inc. v. Department of
State [103] took a similar approach.
The board noted that Section C.2.8 of
the contract stated that:
The contractors
geotechnical engineer shall
review all available geotechnical
information provided in the
contract package and become
familiar with the soil and site
conditions at the project site by
visiting the site. During the site
visit and subsequent phases of
the project, the contractor shall
examine and/or verify the
information provided and obtain
any additional information to
complete the design and
construction of the project. The
contactor remains solely
responsible and liable for design
sufficiency and should not
depend on reports provided by
the [government] as part of the
contract documents.
The board also noted that Section
E.6.2 stated that:
Information Obtained by
Offeror Before submitting a
proposal, each offeror shall, at its
own expense, make or obtain any
additional examinations,
investigations, explorations, tests
and studies, and obtain any
additional information which the
offeror requires.
Based on this contractual
language the board concluded the
following:
the solicitation required
each offeror to use a geotechnical
engineer to assist in the
preparation of its proposal, Fluor
elected not to do so, instead
relying upon the geotechnical
information provided by the
government in its EFS and SUP.
Fluor did not retain geotechnical
engineer until after contract
award.
Finally, the board noted that this
was a design/build contract and
concluded that This contract placed
all of the responsibility for design and
construction (and, as a consequence
all of the risk) on Fluor.
Lesson Learned (Contractors):
When the contract information
makes no specific representations
as to conditions to be
encountered, contractors may
not be successful in claiming that
the condition encountered
differed materially from the
conditions anticipated.
Lesson Learned (Contractors):
When bidders are faced with a
requirement to perform their
own independent, post award
geotechnical investigation, they
may not be able to rely
exclusively on the owner
furnished subsurface
information.
Subsurface Soils of One Type
Will Probably Not Transition
Into Another Type Along a
Straight Line Projection
The Appeal of NDG Constructors
[104] involved a contract for
installation of a water line into an Air
Force base in South Dakota. A portion
of the work involved tunneling under
an interstate highway. The
government issued two subsurface
investigation reports each indicating
that the contractor in the tunneled
section would encounter clay material
which would then transition to shale.
The subsurface reports both
contained the following statements:

the subsurface conditions
at other times and locations at
the site may differ from those
found at our test boring locations
the soils between the boring
locations may differ significantly
from those found at the boring
locations.
During the tunneling operation
NDG encountered much more shale
than clay and filed a differing site
condition claim to recover the
additional time and cost incurred. The
contracting officer denied the claim
and NDG appealed to the Armed
Services Board of Contract Appeals.
During the board hearings, NDGs
geotechnical expert testified that
lacking any other information than the
two soil borings near the tunneled
portion of the work, the only option a
bidder has for estimating and planning
purposes is to draw straight lines for
soil and rock conditions from boring to
boring. The board rejected this
position with the following statement:
It is highly improbable that
subsurface soils of one type
would transition into another
type along a straight line
projection. We do not accept NDG
experts opinion in this regard
because it is intrinsically
unpersuasive.
Citing P. J. Maffei Building
Wrecking Corp. v. United States [105]
and S.T.G. Construction Co. v. United
States [106] and relying on the
disclaimer language contained in the
subsurface investigation reports, the
board concluded:
A contractor cannot be
eligible for an equitable
adjustment for a Type I changed
conditions unless the contract
indicated what those conditions
would supposedly be. Here, the
contract documents did not
indicate where precisely the
contractor would encounter
Carlile Shale. In bidding the
project, BTC did not expect to
transition from Fine Alluvium to
Carlile Shale or, to use its
terminologies, from clay fill
material to shale rock material
at any specific point but only at
some point. And, as BTC
predicted, the soil profile indeed
changed from clay fill material to
shale rock material at some
point.
We conclude that NDG has
failed to prove that the soil profile
encountered was a Type I
differing site condition because
the AETs geotechnical reports
and the boring logs did not
indicate where the transition
from Fine Alluvium to Carlile
Shale would occur, and because
in estimating the work, BTC
recognized that the transition
from clay fill material to shale
rock material would take place at
some point rather than at any
specific point.
Lesson Learned (Contractor):
When faced with a situation such
as the one NDG faced bidders
may be well advised to retain the
services of a local geotechnical
consultant to review the owner
furnished information and
provide advice on how to
interpret the data and prepare
this portion of the bid. If this is
done, it will need to be
documented in the event of a
later differing site condition claim.
Lesson Learned (Owner): To
potentially avoid claims such as
this, owners may want to consider
use of a geotechnical design
summary report or a geotechnical
baseline report where the
geotechnical consultant
interprets soil, rock and water
conditions between borings.
[107]
Subsurface Data Provided in the
Contract May Be a Guide Only
Stuyvesant Dredging Company v.
United States [108] involved an Army
Corps of Engineers contract for
COST ENGINEERING JANUARY/FEBRUARY 2016
maintenance dredging of the Corpus
Christi Entrance Channel in Texas. The
Corps included information in the
bidding documents concerning the
character of the materials to be
dredged and the in-situ densities. The
Corps made available the records of
previous dredging (self-performed by
the Corps in past years) at their district
office.
Stuyvesant had bid on two
previous Corps dredging jobs and had,
in each case, reviewed the information
in the district office related to those
two jobs. Stuyvesant elected not to
visit the site for the Corpus Christi job
nor take material samples or echo
soundings. Instead, Stuyvesant relied
on the fact that the technical
provisions of this contract were,
very similar, almost identical to the
technical provisions of the previous
two projects. They concluded that it
was, not warranted to go to the
expense of or necessary to do any
particular further investigation
Stuyvesant filed notice of
differing site condition and a claim
during the performance of the work
due to the increased density of the
materials encountered which
impacted their productivity and
increased their cost. The Corps denied
the claims and Stuyvesant appealed
this adverse decision to the U.S. Court
of Claims who upheld the Corps
denial. Stuyvesant then appealed to
the U.S. Court of Appeals for the
Federal Circuit.
The appellate court examined the
case and the lower courts ruling and
concluded that the Claims Court
correctly stated:
the six average density
readings were identified to be
guides only did not reach the
level of estimates and [were]
clearly not facts upon which
plaintiff could rely.
The appellate court also noted
that, Government estimates are not
warranties.
45
 Lesson Learned (Contractors):
Contractors must review owner
provided information carefully
when preparing bids. If the
information is included as a
guide then the contractor may
be at risk for relying totally on this
information.
Contractors Cannot Prove
a Diering Site Condition
Based Upon Information
They Never Reviewed
The Stuyvesant Court also dealt
with the issue of Stuyvesant having
not reviewed the Corps information
from previous projects, available in
their district office. The appellate
court upheld the claims court ruling
that:
[P]laintiff cannot prove a
differing site condition based
upon the information in the files
of the Corps because it never
reviewed that information until
the contract was nearly
completed, but more importantly
the Corps records accurately
reflected the character of the
materials encountered by other
dredges.
Citing Vann v. United States [109]
the appellate court noted that where
a contractor has the opportunity to
learn the facts [but fails to do so] he is
unable to provethat he was misled
by the contract.
Lesson Learned (Contractors):
When other available
information is noted in the
bidding documents bidders must
take the time and make the effort
to review this information. Such a
review may prove helpful in
bidding and planning the project.
Further, such a review will help
preserve the contractors right to
file a differing site condition on
the basis of a material difference
between available information
and actual conditions
encountered.
46 COST ENGINEERING JANUARY/FEBRUARY 2016
Each Government Contract
Stands On Its Own
Finally, the Stuyvesant Court
addressed the argument that on their
two previous bids Stuyvesant did
review the material in the Corps
District office, visited the site and
conducted various tests. Stuyvesant
argued that on those two projects the
material encountered was the same
as the material indicated. Stuyvesant
then went on to note that the
technical specifications for the Corpus
Christi Channel project were virtually
identical to the previous two projects,
thus justifying their assumption that
the conditions to be encountered in
the Corpus Christi project, were the
same as those to be found in the
other two channels.
The appellate court summarily
dismissed this argument with the
following statement:
Each government contract
stands by itself Unless the
government advises contractors
that conditions in different
contracts are the same, a
contractor acts at its peril if it
assumes that what it learned on
different contracts applies
equally to a new contract.
Lesson Learned (Contractors):
Bidders cannot assume that
conditions from previous
contracts are the same as the
conditions in the new contract
currently out for bid. [110]
Among all of these adverse
rulings which appear to be narrowing
the coverage of the Differing Site
Conditions clause the Navigant
Construction Forum came across
two court rulings which appear to be
more favorable to contractors.
Notice of Diering Site
Conditions Need Not Follow
Any Specic Format
In a bit of good news for
contractors, Metcalf I did reiterate an
older court decision [111] concerning
the form of notice regarding a
differing site condition and stated:
notice need not follow any
specific format, but must merely
make the contracting office
aware of the differing site
condition. Notice under the
differing site provision of the
contract requires no precise
formula. The obligation to give
notice is discharged when a
contractor makes the
government representatives
aware that he is encountering
either subsurface or latent
physical conditions at the site
differing from those indicated in
the contract.
Lesson Learned (Contractors):
Review the contracts Differing
Site Conditions clause closely.
Contractors are only required to
provide prompt written notice of
differing site condition to the
owner. While not stated it is
probably wise to state what the
materially different condition is
and its location.
It Is Not Necessary That
Indications in the Contract
Be Explicit or Specic
In an older case which is still
frequently cited by more recent cases,
Foster Construction & Williams
Brothers Company v. United States
[112], the court indicated a standard
for determining whether there are
implied conditions in the bidding
documents:
[I]t is not necessary that the
indications in the contract be
explicit or specific; all that is
required is that there be enough
of an indication on the face of the
contract documents for a bidder
reasonably not to expect
subsurface or latent physical
conditions at the site differing
materially from those indicated in
the contract.
 Lesson Learned (Contractors):
Bidders should summarize the
subsurface and latent conditions
they anticipate, based on review
of all documents provided and
referred to, as part of the bidding
process. Once the conditions
anticipated are summarized,
bidders should record how they
relied on these conditions and
how their reliance was translated
into the bid.
Practical Recommendations
for Owners and Contractors
Dealing With the Risks of
Diering Site Conditions
In an article entitled Differing
Site Conditions Who Bears the
Risk? [113] the author crafted a list
of suggestions for how to deal with
differing site condition risks.
For Owners
To avoid liability for unknown or
unforeseen site conditions, it may be
wise to:
Disclose all known conditions
prior to the submission of bids.
If you include a differing site
conditions clause in the contract,
impose strict notice requirements
and consider limiting the
reimbursable costs to only direct
job site costs incurred by the
contractor.
Exculpatory clauses may not avoid
liability when the contract
documents make positive
representations about the site or
subsurface conditions. Avoid such
representations within the
contract documents or otherwise.
If there is a desire to disclaim
geotechnical information
provided to bidders, be sure the
contract clearly states that the
geotechnical reports are not part
of the contract documents.
Prior to letting a project, be
certain that you understand how
the contract allocates the risk of
unknown or differing site
conditions.
For Contractors
Prior to bidding on a project, it
may be wise to:
Carefully review the contract and
understand how it assigns the risk
of differing site conditions.
Search the contract for onerous
exculpatory clauses or contract
language disclaiming the accuracy
of site information reflected in
the bid documents.
Perform a reasonable site
inspection and make a written
and photographic record of your
site investigation. Notice the
physical characteristics of the
surrounding property.
If a differing site condition is
encountered, follow carefully the
contract notice requirements and
wait for instructions from the
owner before disturbing the site
conditions.
Keep careful and separate cost
records of your additional costs
flowing from differing site
conditions.
Understand that the law varies
greatly, from state to state, with
respect to the allocation of site
conditions risk. Before bidding
work in an unfamiliar jurisdiction,
check with your construction
lawyer.
Conclusion
Despite nearly 90 years of
continuous use and the general belief
that everyone in the construction
industry fully understands the
Differing Site Conditions clause and its
scope of coverage, Board and Court
decisions seem to be narrowing the
coverage of the clause, making it more
difficult for contractors to recover
damages pursuant to the clause.
Barring a watershed case concerning
differing site condition claims, the
authors believe this erosive trend is
likely to continue. As noted in an
earlier report, Trends in Construction
Claims and Litigation [114], one of the
unintended consequences of the
vanishing trial is that construction
law is stagnating. Rather than keeping
COST ENGINEERING JANUARY/FEBRUARY 2016
up with industry developments,
construction law has stopped its
evolution. Additionally, the scarcity of
actual trials increases the odds that
decisions such as those cited in this
research perspective will have more
sway over future differing site
condition disputes.
As contractors seem to be much
more at risk as a results of these
decisions and others like them, then
contactors must be more alert to
situations such as those outlined
above. Being able to document that
the contractor reviewed all available
site information, participated in the
prebid conference and performed a
prebid site visit is, likewise, critical.
Contractors must be able to document
their interpretations of available site
information and why they reached
such interpretations. Contractors must
also be able to document how they
relied upon these interpretations
when preparing their bids. Attention
to notice and documentation
requirements is critical. Strict
adherence to all contract
requirements concerning differing site
condition claims is an absolute must.
Finally, whenever a contractor files a
notice of differing site condition,
separate accounting of all costs
related to the differing condition and
schedule tracking of the time impact
of the differing site condition are
critical to the success of any differing
site condition claim.
END NOTES
1. See Trends in Construction Claims
& Disputes, Navigant
Construction Forum, December
2012.
2. Max E. Greenberg, It Aint
Necessarily So!, 40 Muni. Eng. J.
Paper 263 (2d Quarterly Issue
1954).
3. Robert F. Cushman and David R.
Tortorello, Diering Site Condition
Claims, Wiley Law Publications,
John Wiley & Sons, Inc., New York,
1992.
4. Neal J. Sweeney, Thomas J.
Kelleher, Jr., Philip E. Beck and
Randall F. Hafer, Smith Currie &
47
 Hancocks Common Sense
Construction Law, John Wiley &
Sons, Inc., New York, 1997.
5. Owen S. Walker, Diering Site
Condition Claims: What is Below
the Surface of Exculpatory
Clauses or Other Disclaimers?,
The Procurement Lawyer,
Summer 2013, American Bar
Association, Chicago, IL.
6. J.F. Shea Co., Inc. v. United States,
4 Cl. Ct. 46, 50 (1983) citing Peter
Kiewit Sons Co. v. United States,
109 Ct. Cl. 517, 522-23, 74 F. Sup.
165, 168 (1947).
7. Contingency An amount
added to an estimate to allow for
items, conditions, or events for
which the state, occurrence, or
eect is uncertain and that
experience shows will likely
result, in aggregate, in additional
costs. Typically estimated using
statistical analysis or judgment
based on past asset or project
experience. (AACE International
Recommended Practice 10S-90,
Cost Engineering Terminology,
Rev. January 14, 2014.)
8. Citing Weeks Dredging &
Contracting, Inc. v. United States,
13 Cl. Ct. 193, 219 (1987) ad
861 F. 2d 728 (Fed. Cir. 1988).
9. Jerey M. Chu, Diering Site
Conditions: Whose Risk Are
They?, The Construction Lawyer,
April 2000, American Bar
Association, Chicago, IL.
10. Irv Richter and Roy S. Mitchell,
Handbook of Construction Law
and Claims, Reston Publishing
Company, Inc. A Prentice Hall
Company, Reston, VA, 1982.
11. Oce of Engineering, GT
Guideline No. 15, April 30, 1996.
12. David Michael Pronchick, The
Diering Site Conditions Clause:
Time for A Change, Master of
Laws Thesis submitted to The
National Law Center, George
Washington University,
September 30, 1990.
13. 96 Ct. Cl. 148, 164 (1942).
14. Oce of Engineering, GT
Guideline No. 15, April 30, 1996.
48 COST ENGINEERING JANUARY/FEBRUARY 2016
15. Federal Acquisition Regulation,
52.236-2, Diering Site
Conditions (APR 1984) (48 FR
42478, Sept. 19, 1983, as
amended at 60 FR 34761, July 3,
1995). American Institute of
Architects Document A201
2007, General Conditions of the
Contract for Construction, 3.7.4,
Concealed or Unknown
Conditions. ConsensusDocs 200,
Standard Agreement and General
Conditions Between Owner and
Constructor, 3.16.2, Concealed
or Unknown Site Conditions,
2011, Revised July, 2012.
16. Construction Management
Association of America, Inc.,
4.19.4.1.2, Physical Conditions
and Facilities Aecting the Work:
Existing Facilities, 2004.
17. Design Build of America
Document No. 535, Standard
Form of General Conditions of
Contract Between Owner and
Design-Builder, 4.2.1, Diering
Site Conditions, 1993.
18. Engineers Joint Contract
Documents Committee C-700,
Standard General Conditions of
the Construction Contract, 4.03,
Diering Subsurface or Physical 29.
Conditions, 2007.
19. Oce of Engineering, GT
Guideline No. 15, April 30, 1996.
20. Federal Acquisition Regulation,
52.236-2, Diering Site
Conditions (APR 1984). (48 FR
42478, Sept. 19, 1983, as
amended at 60 FR 34761, July 3,
1995).
21. American Institute of Architects
Document A201 2007, General
Conditions of the Contract for
Construction, 3.7.4, Concealed
or Unknown Conditions.
22. ConsensusDocs 200, Standard
Agreement and General
Conditions Between Owner and
Constructor, 3.16.2, Concealed
or Unknown Site Conditions,
2011, Revised July, 2012.
23. Construction Management
Association of America, Inc.,
2004, 4.19.3, Physical Conditions
and Facilities Aecting the Work:
Existing Facilities.
24. Design Build of America
Document No. 535, Standard
Form of General Conditions of
Contract Between Owner and
Design-Builder, 4.2.1, Diering
Site Conditions, 1993.
25. Engineers Joint Contract
Documents Committee C-700,
Standard General Conditions of
the Construction Contract, 4.03,
Diering Subsurface or Physical
Conditions, 2007.
26. Design Build Contract Between
Los Angeles County Metropolitan
Transportation Authority and
Kiewit Pacic Company I-405
Sepulveda Pass Widening Project,
April 23, 2009, Section 6.7,
Diering Site Conditions.
27. The Greenbook Standard
Specications for Public Works,
2012 Edition, 3-4(c), Changed
Conditions, BNi Building News,
Vista, CA.
28. American Institute of Architects
Document A201 2007, General
Conditions of the Contract for
Construction, 10.3.1, Hazardous
Materials.
ConsensusDocs 200, Standard
Agreement and General
Conditions Between Owner and
Constructor, 3.13, Hazardous
Materials, 2011, Revised July,
2012.
30. Design Build of America
Document No. 535, Standard
Form of General Conditions of
Contract Between Owner and
Design-Builder, 4.1, Hazardous
Conditions, 1993.
31. Engineers Joint Contract
Documents Committee C-700,
Standard General Conditions of
the Construction Contract, 4.03,
Diering Subsurface or Physical
Conditions, 2007.
32. Neal J. Sweeney, Thomas J.
Kelleher, Jr., Philip E. Beck and
Randall F. Hafer, Smith Currie &
Hancocks Common Sense
Construction Law, John Wiley &
Sons, Inc., New York, 1997.
33. Robert F. Cushman and David R.
Tortorello, Diering Site Condition
Claims, Wiley Law Publications,
John Wiley & Sons, Inc., New York,
1992.
34. Hallman v. United States, 68 F.
Sup. 204 (Ct. Cl. 1946); Robert E.
McKee Gen. Constr., Inc., ASBCA
No. 521, 60-1 B.C.A. (CCH) 2,526
(1960).
35. Tobin Quarries, Inc. v. United
States, 114 Ct. Cl. 286 (1949);
Baltimore Contractors, Inc.,
GSBCA 4808R, 80-2 B.C.A.
14,676; Blaze Constr. Co., IBCA
No. 2863, 91-3 B.C.A. (CCH)
24,071 at 120,506 (1991).
36. See Neal J. Sweeney, Thomas J.
Kelleher, Jr., Philip E. Beck and
Randall F. Hafer, Smith Currie &
Hancocks Common Sense
Construction Law; Robert F.
Cushman and David R. Tortorello,
Diering Site Condition Claims; Irv
Richter and Roy S. Mitchell,
Handbook of Construction Law
and Claims.
37. Foster Construction C.A. v. United
States, 435 F.2d 873, (Ct. Cl.
1970).
38. Pacic Alaska Contractors, Inc. v.
United States, 193 Ct. Cl. 850, 436
F. 2d 461, 469 (1971).
39. Metropolitan Sewerage
Commission v. R. W. Construction,
Inc., 241 N.W.2d 371 (Wis. 1976).
40. Reliance Enterprise, ASBCA Nos.
27638, 27639, 85-2 B.C.A.
18,045.
41. George D. Ruttinger, The Diering
Site Condition Clause: What Are
Contract Indications?, NCMA
Journal, National Contract
Management Association,
Summer 1986.
42. R. L. Spencer Constr. Co., ASBCA
No. 18450, 75-2 B.C.A. (CCH)
11,604 at 54,423 (1975).
43. Caesar Constr., Inc., ASBCA No.
41059, 91-1 B.C.A. (CCH) 23,639,
at 118,417 (1990).
44. Blacks Law Dictionary (Revised
Fourth Edition), West Publishing
Company, St. Paul, MN, 1968.
45. Bernard Kamine, Diering Site
Conditions, Kamine Law PC, 2014.
46. Overton A. Currie, R. B. Ansley,
Kenneth P. Smith, Thomas E.
Abernathy, Diering Site
(Changed) Conditions, Brieng
Papers No. 71-5, Federal
Publications, Inc., Washington,
D.C., 1971.
47. James J. Tansey, Analyzing
Contractor Claims, Construction
Briengs 88-8, Federal
Publications, Inc., Washington,
D.C., July 1988. See also,
Metropolitan Sewerage Comm. v.
R. W. Construction, Inc., 241 N.W.
2d 371 (Wis. 1976); Roy Strom
Excavating & Grading Co., Inc. v.
Miller-Davis Co., 501 N.E.2d 717,
(Ill. 1986); Contra Cruz Constr. Co.
v. Lancaster Area Sewer Auth.,
439 F. sup. 1202 (E.D. Pa. 1977).
48. George D. Ruttinger, The Diering
Site Condition Clause: What Are
Contract Indications?, NCMA
Journal, National Contract
Management Association,
Summer 1986.
49. Foster Construction C.A. v. United
States, 4356 F.2d 873, 888 (Ct. Cl.
1970).
50. Woodcrest Constr. Co. v. United
States, 408 F.2d 395 (Ct. Cl. 1969).
51. Schouten Construction Co.,
DOTCAB 78-14, 79-1 B.C.A.
13,553; Turnkey Enterprises, Inc.
v. United States, 597 F.2d 750 (Ct.
Cl. 1797); Roen Salvage Co., ENG
BCA 3670, 79-2 B.C.A. 13,882.
52. Praxis-Assurance Venture, ASBCA
No. 24748, 81-1 B.C.A. (CCH)
15,028 (1981) (abnormal
rainfall); Arundel Corp. v. United
States, 103 Ct. Cl. 688, 711-12
(1945) (hurricane); Hardeman-
Monier-Hutcherson v. United
States, 458 F.2d 1364, 1370-71,
(Ct. Cl. 1972)(adverse sea and
wind conditions).
53. George E. Jensen Contractors,
Inc., GSBCA Nos. 3242, 3249, 71-1
B.C.A. 8,735.
54. Robert E. McKee General
Contractor, Inc., ASBCA 521, 60-1
B.C.A. 2526.
55. Dunbar & Sullivan Dredging Co.,
ENG BCA 3165-3167, 3191, 73-2
B.C.A. 10,285.
COST ENGINEERING JANUARY/FEBRUARY 2016
56. Keang Nam Enterprises, Ltd.,
ASBCA No. 13747, 69-1 B.C.A.,
7,705.
57. Dyer & Dyer, Inc., ENG BCA 3999,
80-2 B.C.A. 14,463.
58. Bates-Cheves Construction Co.,
ICBA No. 670-967, 68-2 B.C.A.
7,167.
59. Cross Construction Company,
ENG. BCA No. 3636, 79-1 B.C.A.
13,708.
60. Edwards v. United States, 19 Cl.
Ct. 663 (1990).
61. Randall H. Sharpe, ASBCA No.
22800, 79-1 B.C.A. 13,869; Acme
Missiles and Construction Co.,
ASBCA No. 10784, 66-1 B.C.A.
5,418.
62. Homan v. United States, 166 Ct.
Cl. 39, 340 F.2d 645 (1964); Frank
W. Miller Construction Co., ASBCA
No. 22347, 78-1 B.C.A. 13,039;
Arkansas Rock & Gravel Co., ENG
BCA No. 2895, 69-2 B.C.A. 8,001;
Security National Bank of Kansas
City v. United States, 184 Ct. Cl.
741, 397 F.2d 984 (1968).
63. Brezina Construction, Inc., ENG
BCA No. 3215, 75-1 B.C.A.
10,989.
64. Dunbar & Sullivan Dredging Co.,
ENG BCA No. 8265, 73-2 B.C.A.
12,285.
65. John Murphy Construction Co.,
AGBCA No. 418, 79-1 B.C.A.
13,836.
66. Leavell & Co., ENG BCA 3492, 75-
2 B.C.A. 11,596.
67. United Contractors v. United
States, 177 Ct. Cl. 151, 368 F.2d
585 (1966).
68. Weeks Dredging & Contracting,
Inc. v. United States, 13 Ct. Cl.
193, 218 (1987), ad 861 F.2d
728 (Fed. Cir. 1988); Simpson
Constr. Co., VABCA No. 3176, 91-1
B.C.A. (CCH) 23,630 (1990);
Shumate Constructors, Inc.,
VABCA No. 2772, 90-3 B.C.A.
(CCH) 22,946 (1990); Weston-
Bean Joint Venture v. United
States, 115 Fed. Cl, 215, 2014 U.S.
Claims LEXIS 417, March 14, 2014.
69. See, for example, FAR 52.237-1,
Site Visit, which is contained in all
Federal construction contracts.
49
 70. See, for example, FAR 52.236-3,
Site Investigation and Conditions
Aecting the Work, which is also
contained in all Federal
construction contracts.
71. See Top Painting Co., Inc., ASBCA
No. 57333, 12-1 BCA 35,020;
D&M Grading, Inc. v. Dept. of
Agriculture, CBCA No. 2625, 12-1
BCA 35,021; Orlosky, Inc. v.
United States, 64 Fed. Cl. 63,
(2005).
72. Stuyvesant Dredging Co. v. United
States, 834 F.2d 1576, 1581 (Fed.
Cir. 1987).
73. FAR 52.236-2, Diering Site
Conditions.
74. McDevitt & Street Co. v. Marriott
Corp., 713 F. Supp. 906, 919 (E.D.
Va. 19089), ad in part, revd in
part, 911 F.2d 723 (4th Cir. 1990).
75. Brinderson Corp. v. Hampton
Roads Sanitation District, 825 F.2d
41 (4th Cir. 1987).
76. FAR 52.236-2, Diering Site
Conditions.
77. Ibid.
78. Holland v. Green Mountain Swim
Club, Inc., 470 P.2d 61 (Col. 1970).
79. FAR 52.233-1, Disputes.
80. FAR 52.249-10, Default (Fixed
Price Construction).
81. FAR 52.236-2, Diering Site
Conditions.
82. VACAB No. 1236, 79-2 BCA
13,900.
83. Perini Corporation v. United
States, 180 Ct. Cl. 768, 381 F.2d
403 (1967).
84. ASBCA No. 53882, 2006-2 B.C.A.
(CCH) P33, 420; 2006 ASBCA
LEXIS 88, October 5, 2006.
85. Citing Randa/Madison, Joint
Venture III v. Dahlberg, 239 F.3d
1264, 1270-72 (Fed. Cir. 2001);
Billington Contracting, Inc.,
ASBCA Nos. 54147, 54149, 05-1
B.C.A. P 32,900 at 162,994.
86. Citing Comtrol, Inc. v. United
States, 194 F.3d 1357, 1362 (Fed.
Cir. 2002); H. B. Mac, Inc. v.
United States, 153 F.3d 1338,
1345 (Fed. Cir. 1998).
87. 351 F.2d 980, 985 (Ct. Cl. 1964).
88. 2013 Alas. LEXIS 118, September
6, 2013.
50 COST ENGINEERING JANUARY/FEBRUARY 2016
89. Citing Morrison-Knudsen Co. v.
State, 519 P.2d 834, 841 (Alaska,
1974); see also Conner Bros.
Constr. Co. v. United States, 65
Fed. Cl. 657, 688 (Fed. Cl. 2005);
see also Philip L. Bruner and
Patrick J, OConnor, Jr, Bruner &
OConner on Construction Law,
5:108 at 176 (2002).
90. 732 F.2d 913; 1984 U.S. App.
LEXIS 15001; 32 Cont. Cas. (CCH)
P 74,426.
91. Citing Arundel Corporation v.
United States, 207 Ct. Cl. 84, 515
F.2d 1116, 1128 (Ct. Cl. 1975).
92. Citing Foster Construction C.A.
and Williams Brothers Company
v. United States, 193 Ct. Cl. 587,
435 F.2d 873, 881 (Ct. Cl. 1970).
93. Citing S.T.G. Construction co., Inc.
v. United States, 157 Ct. Cl. 409,
414 (1962).
94. 128 Ct. Cl. 156, 159, 120 F. sup.
768, 769 (1954).
95. Foster Construction C.A. and
Williams Brothers Company, A
Joint Venture v. The United States,
193 Ct. Cl. 587, 435 F.2d 873,
1970 U.S. Ct. Cl. LEXIS 74.
96. 368 F.2d 585, 595 (Ct. Cl. 1966).
97. Neal & Co. v. United States, 36
Fed. Cl. 600, 617 (1996), ad, 121
F.3d 983 (Fed. Cir. 1997).
98. 98 F.3d 1314, 1315 (Fed. Cir.
1996).
99. 1936 Ct. Cl. 587, 435 F.2d 873,
1970 U.S. Ct. Cl. LEXIS 74.
100.102 Fed. Cl. 334; 2011 U.S. Claims
LEXIS 2329.
101.294 F.3d at 1357, 1367 at 1363
(Fed. Cir. 2002).
102.742 F.3d 984; 2014 U.S. App.
LEXIS 2515, February 11, 2014.
103.CBCA 490, 491, 492, 716, 1555,
1763; 2012 WL 1144972, (Civilian
B.A. A.).
104.ASBCA No. 57328, 2012-2 B.C.A.
(CCH) P 35,138; 2012 ASBCA
LEXIS 85, August 21, 2012.
105.732 F.2d 913, 916 (Fed. Cir. 1984).
106.157 Ct. Cl. 409, 414 (1962).
107.See Delivering Dispute Free
Projects: Part III Alternative
Dispute Resolution, Navigant
Construction Forum, June,
2014.
108.834 F.2d 1576; 34 Cont. Cas. Fed.
(CCH) 75,414 (1987).
109.420 F.2d 968, 982, 190 Ct. Cl. 546
(1970).
110.However, contractors are
expected to use past experience
when bidding new contracts.
111.Ace Constructors, Inc. V. United
States, 70 Fed. Cl. 253, 273
(2006).
112.435 F.2d 873 (1970).
113.Donald OToole, Troutman
Sanders.
114.See Trends in Construction Claims
& Disputes, Navigant Construction
Forum, December 2012.
ABOUT THE AUTHORS
Steven A. Collins, is
with Navigant
Consulting, Inc. He
can be contacted by
sending email to:
scollins@navigant.com
James G. Zack, Jr.,
CFCC FAACE, is
employed with
Navigant Consulting,
Inc. He can be
contacted by sending
email to: jim.zack@navigant.com
FOR OTHER RESOURCES
To view additional resources on
this subject, go to:
www.aacei.org/resources/vl/
Do an advanced search by au-
thor name for an abstract listing of
all other technical articles this author
has published with AACE. Or, search
by any total cost management subject
area and retrieve a listing of all avail-
able AACE articles on your area of in-
terest. AACE also oers pre-recorded
webinars, an Online Learning Center
and other educational resources.
Check out all of the available AACE re-
sources.
 PROFESSIONAL SERVICES DIRECTORY

D R McNatty INDEX TO ADVERTISERS

software professional services
)URPGHQLQJDVWUDWHJ\
WRH[HFXWLRQVROXWLRQV
that VLPSO\ZRUNN.
GUPFQDWW\\FRPVDOHV#GUPFQDWW\FRP
hosting
D.R. McNatty and Management
Associates, page 29 and Technologies, this page
this page
Ron Winter Consulting,
EcoSys, back cover page 22
Infinitrac, this page
For additional information about the listed advertisers or about ad-
vertising with us, please phone Jennie Amos, 1.304.296.8444 x106, or
e-mail jamos@aacei.org

New Recommended Practice -

86R-14, Variance Analysis and Reporting Now Available
This RP is intended to provide guidance for planning, performing, managing,
and controlling the variance analysis process. Earned value management
(EVM) practitioners would consider this guidance to be advisable for analyz-
ing earned value (EV) metrics and addressing any potential inuences to proj-
ect execution. The target audience for this RP is anyone with a need to
understand how to prepare an EV variance analysis and perform a root cause
analysis.

As with all AACE International recommended practices, this document is not

intended to be a standard, but provides further clarication of recommended
EVM practices as they apply to planning, implementation, and reporting a
variance analysis.
This RP is aligned with the Total Cost Management Framework, as well as
the American National Standards Institute (ANSI) Electronics Industries Al-
liance (EIA) - 748 Earned Value Management Systems (EVMS) guidelines
(Guidelines 22-26). This document also provides further explanation of the intent and application of level of eort (LOE)
that is not contained in the ANSI/EIA-748 standard and the National Defense Industries Association (NDIA) Earned Value
Management Systems Intent Guide. All RPs are available free of charge to AACE members.

To access this RP, go to AACE's website www.aacei.org (login required.)

RPs are available for purchase for non-members. For new and previously published RPs, go to the AACE website.

52 COST ENGINEERING JANUARY/FEBRUARY 2016

 CALENDAR OF EVENTS
JANUARY 2015
14 Workshop: Smart and Effective
Project Controls,
Cost Engineering
Zwijndrecht(TheNetherlands)
Contact: www.costengineering.eu
15 CMAA Breakfast with
Champions,
The Southern California Chapter of
the Construction Management As-
sociation of America (CMAA)
CityClubLosAngeles
LosAngeles,CA
Contact: www.cmaasc.org
FEBRUARY 2016
4 Owners Night,
The Southern California Chapter of
the Construction Management As-
sociation of America (CMAA)
TheGrandEventCenter
LongBeach,CA
Contact: www.cmaasc.org
15-17 Petroleum Engineering for
Non-Engineers,
Mobility Oil & Gas Limited,
London,UnitedKingdom
22-24 Risk Management for Oil
and Gas Projects,
Mobility Oil and Gas Limited,
Houston,TX
Contact:
www.mobilityoilandgas.com
training@mobilityoilandgas.com
MARCH 2016
4-6 Western Winter Workshop,
The San Franscisco Bay Area and
Southern California Sections of
AACE International
TheHyattRegency
IndianWells,CA
Contact:
www.westernwinterworkshop.com
MAY 2016
24-29 EURO-MED0-SEC-1,
The First European and Mediter-
ranean Structural Engineering and
Construction Conference,
The International Structural Engi-
neering and Construction Society
(ISEC),
DavutpasaCampus,YildizTechnical
University
Instabul,Turkey
JUNE 2016
26-29 AACE Internationals 2016
Annual Meeting,
AACE International
Sheraton Centre
Toronto, Ontario, Canada
Contact: phone 1-800-858-COST
fax (304) 291-5728
info@aacei.org
www.aacei.org
Please submit items for future calen-
dar listings at least 60 days in advance
of desired publication.
AACEInternational,
1265SuncrestTowneCentreDr,
Morgantown,WV26505-1876
USA
phone:304-296-8444
fax:304-291-5728
e-mail:editor@aacei.org
website:www.aacei.org

Contact: Contact: www.isec-society.org

www.mobilityoilandgas.com
training@mobilityoilandgas.com

17-19 International Roofing Expo,

Informa Exhibitions U.S.,
OrangeCountyConventionCenter
Orlando,Florida
Contact:
www.theroongexpo.com

COST ENGINEERING JANUARY/FEBRUARY2016 53

BOOST YOUR VISIBILITY.
ASTRONOMICALLY.
From a high vantage point, you gain insights into
the big picture. In the same way, EcoSys EPC delivers
a strategic set of tools to gain visibility into your
project portfolios, to improve capital planning, and
to achieve the flexibility to adapt as long-term plans
meet the worlds constant state of change. Then in
the very same software, drill down to make sure your
project performance hasthe right stuff.

Learn more about EcoSys EPC, the industry

standard for enterprise project controls software.
ecosys.net/therightstuff

EcoSys Management LLC

Enterprise Project Controls

Capital Planning Budgeting & Forecasting Progress Measurement
Project Portfolio Management Change Management Performance & Earned Value
Workforce Planning Contract Management Data Integration & Reporting