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Contract Time and Claims

Construction Engineering 380


Contract Time and Claims
• Time is not usually part of consideration
(like money), and delayed performance is
common in construction
• Hard for owner to press termination and
breach claims for delays
• Also hard to get relief from delay unless
clear and specific damages can be shown
or unless there are express contractual
terms (must not be unconscionable)
Contract Time and Claims
• Commencement usually denoted by a
Notice to Proceed order from owner (a
letter along with necessary permits)
• There can also be contractor notification
clause in the contract stipulating that the
contractor send written notice that work
has begun
Contract Time and Claims
• Constructive acceleration claim is generated by
owner’s refusal to grant a time extension for
changes in scope or condition
• Contractor must then spend more money to stay
on original schedule, justifying the claim for
recovery
• Can also have a request for early completion,
handled like a standard (contract) change order
• Sometimes contractors can be prevented from
early finish because of hardship on owner
Contract Time and Claims
• Project Schedule is often required under
contract terms and can have legal
standing in the case of a litigated claim
• Advent of CPM schedules, which establish
relationships in activities, have made
claims more complex but also probably
made relief more realistic
Contract Time and Claims
• Start with activities and durations on WBS
• Determine relationships between activities
• Longest path through network is critical
• Key is to understand the relationships
• Must be able to re-run schedule as certain
activity durations change. If activity is on
critical path, delay is automatic, if it is not
critical, then must examine if activity falls
within float or creates a new critical path
WBS/Work Packages to
Lowest Circuit
Network
B
element board P-10-1
A
D F K
O Design D-1-1
Design P-10-2 S-22-2 T-13-1
r D-1-2
cost WP D-1-1 Specifications
g WP D-1-2 Documentation C
account
a S-22-1
n
Production Production
i
z cost WP P-10-1 Proto 1
a account WP P-10-2 Final Proto 2
B
t Proto 1
i Test
Test systems 5
o cost
WP T-13-1 Test A D F
account K
Specifications Final Final
U Test
and documentation proto 2 software
n 3
Software Software 2 4 2
i
t cost WP S-22-1 Software preliminary C
s account WP S-22-1 Software final version Preliminary
software
3

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Activity-on-Node Network
Fundamentals
B E

Construction
Staff report
plans
15 15

Occupancy

A C F G 35
Application Traffic Commission Wait for
approval study approval construction
5 10 10 170

ES ID EF Service
check KOLL BUSINESS CENTER
SL Description 5
County Engineers Design Department

LS Dur LF

EF

Irwin/McGraw-Hill ©The McGraw-Hill Companies, 2000


Activity-on-Node Network Forward
Pass
5 B 20 20 E 35

Construction 20
Staff report
plans
15
15 15

35 H

Occupancy
200
A C 20 F G 200 35 235
Application Traffic 15 Commission Wait for
approval study approval construction
0 5 5 10 10 20 10 20 10 30 30 170 200

ES ID EF Service
check KOLL BUSINESS CENTER
SL Description 15 5 20
County Engineers Design Department

LS Dur LF

EF

Irwin/McGraw-Hill ©The McGraw-Hill Companies, 2000


Activity-on-Node Network Backward
Pass
B E

Construction 185
Staff report
plans
5 15 20 185 15 200
20

H
185
Occupancy

A 5 C F G 200 35 235
Application 10 Traffic 20 Commission Wait for
approval study approval construction
0 5 5 15 10 10 20 20 10 30 30 170 200

20
D

ES ID EF Service
check KOLL BUSINESS CENTER
SL Description 15 5 20
County Engineers Design Department

LS Dur LF

LS

Irwin/McGraw-Hill ©The McGraw-Hill Companies, 2000


Activity-on-Node Network with Slack

5 B 20 20 E 35

Construction 185 20
0 165 Staff report
plans
15
5 15 20 185 15 200
20

200 H 235
185
0 Occupancy

5 20
0 A 5 5 C 15 20 F 30 30 G 200 200 35 235
Application 10 Traffic 15 Commission Wait for
0 5 0 0
approval study 20 approval construction
0 5 5 15 10 10 20 10 20 10 30 30 170 200

20
5 D 10

ES ID EF Service
10
check KOLL BUSINESS CENTER
SL Description 15 5 20
County Engineers Design Department

LS Dur LF

LS EF

Irwin/McGraw-Hill ©The McGraw-Hill Companies, 2000


Example of Laddering Using
Finish-to-Start Relationship

Trench Trench Trench AON network


1/3 1/3 1/3

Lay pipe Lay pipe Lay pipe


1/3 1/3 1/3

Refill Refill Refill


1/3 1/3 1/3

Irwin/McGraw-Hill ©The McGraw-Hill Companies, 2000


Finish-to-Start Relationship
Figure 4-16

Lag 2
X Y

Irwin/McGraw-Hill ©The McGraw-Hill Companies, 2000


Start-to-Start Relationship
Figure 4-17

A B

Activity Activity
M P

Activity Lag 5 Activity


N Q

Irwin/McGraw-Hill ©The McGraw-Hill Companies, 2000


Use of Lags to Reduce Detail
Figure 4-18

Trench
1 mile

Lag 3 Lay pipe


1 mile

Lag 3 Refill
1 mile

Irwin/McGraw-Hill ©The McGraw-Hill Companies, 2000


Finish-to-Finish Relationship
Figure 4-19

Prototype
Lag 4

Testing

Irwin/McGraw-Hill ©The McGraw-Hill Companies, 2000


Network Using Lags
Figure 4-22

15 C 20

5 5
Lag 10 Lag 5
20 5 25

0 A 5 5 B 15 15 E 30 30 F 40 40 H 50

0 0 0 0 0 5 0
0 5 5
0 5 5 5 10 15 30 10 45 30 10 45 45 5 50

Lag 10

10 D 25 25 G 40
Legend
Lag 5 Lag 10
ES ID EF 11 11
11 0

SL SL 21 15 36 36 4 40

LS Dur LF

Irwin/McGraw-Hill ©The McGraw-Hill Companies, 2000


Hammock Activity Example
Figure 4-23

6 C 11 11 E 21

0 0

6 5 11 11 10 21

0 A 5 5 B 6 6 D 10 10 F 13 21 F 25

0 0 8 8 0

0 5 5 5 1 6 14 4 18 18 3 21 21 4 25

5 G 13
Legend
Hammock
ES ID EF

8
SL Description

LS Dur. LF

Irwin/McGraw-Hill ©The McGraw-Hill Companies, 2000


Network Plans
• Activity- unit of work requiring time
• Merge activity- dependent on prior activity
• Burst activity- dependent on post activity
• Parallel activities- can occur simultaneous
• Path- sequence of connected, dependent
activities
• Event- zero duration activity (start, end)
Network Plans
• Node marks activity (Activity-On-Node)
• Every activity has a node
• Arrow marks relationships
• 3 relationships must be known
– predecessor activities
– successor activities
– parallel activities
Network Plans
• When relationships and activities are
known, add durations
• Make forward pass for ES and EF days
– add activity times starting from zero
– always choose longest EF number
• Make backward pass for LS and LF days
– set EF to LF or use contractual completion
– subtract durations starting with end node
– always choose smallest LS number
Network Plans
• Calculate slack (float) times
– LS-ES
– LF-EF
– nodes with positive number can have delayed
start without impacting overall project end
– nodes with zero are on the critical path
– negative slack means a prior node has delay
– on average, 10% of activities are critical
Network Plans

• Check for logic loops and number errors


• Create ES Gantt chart (easier to read)
• Add calendar dates w/ weekends &
holidays
• Use ladder activities when starts are
dependent but finishes aren’t
• Note lag activities (conc. cures, shipping)
• Start-to-start lags are like laddering
Contract Time and Claims
• Causation can be by:
– contractor (owner can file claim or liquidated
damages allowed),
– Owner (contractor can file claim for delay or
acceleration)
– No-cause (accidental fire)- no claims
– Mutual cause- no claims
Contract Time and Claims
• Risk allocation and sharing applies to time
similarly to money (as in earlier lecture)
• Force majeure clauses list specific events
for which the contractor will be granted an
extension
• Liquidated damages, no-damage-for-delay
clauses, and excusable/inexcusable delay
were covered in previous lecture
Contract Time and Claims
• Claims (Chapter 27) are largely two-phase
process
– Is the claim legitimate under the contract and
conditions (what are the facts)
– If yes- how much should the damaged party
receive (determination of award)
– The determination of award is largely a
measurement problem, as outlined in the
book
Contract Time and Claims
• Eichleay formula allows contractors to add
standard overhead costs to actual costs
incurred. Overhead is calculated on a pro-
rated daily basis- if your light and heat bill
is $100 per day, and you had to stop work
for 5 days, you would be entitled to the
$500 (oversimplified case)
Contract Time and Claims
• Certainty principle precludes speculative
claim (I would be a starting pitcher for the
Yankees if I hadn’t hurt my back)
• Certainty principle makes documentation
and record keeping critically important in
providing support for a claim
• Consequential damages must be
foreseeable at the time of the contract
Contract Time and Claims
• Both parties have a duty to mitigate-
cannot exploit, cannot recover damages
that you could have avoided- moving
capital equipment onto the job
• Collateral source rule tries to keep costs
and benefits in line
• Non-economic losses, punitive damages
generally not awarded in construction, but
issue of contorts is developing

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