cpm scheduling and lost productivity claims
TRANSCRIPT
ORANGE COUNTY BAR ASSOCIATION
CONSTRUCTION LAW SECTION WEBINAR
CPM Scheduling and Lost Productivity Claims
Wednesday, March 3, 2021
CPM Scheduling and Lost Productivity Claims
March 3, 2021
Imagine the result
Mark Guevara, Esq., CFCC, PSP, PMP
Andrew Dick, PSP, PMP
ARCADIS U.S., Inc.
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Agenda
1. Critical Path Method (CPM) Scheduling
a) Basics
b) Baseline Schedule
c) Updated Schedule
d) Delay Analysis
e) Tips and Tricks
2. Lost Productivity Claims
a) Basics
b) Common Causes
c) Analysis
d) Quantification
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Education, License & Certifications
• BS, Construction Management
• JD, University of La Verne COL
• Esq., CFCC, PSP, PMP, EIT
• Chairman (2016-19), CFCC Bd, AACEi
• Secretary/Treasurer, Const Law, OCBA
Industry Experience: 30+ years
• JW Design & Construction, SLO, CA
• U.S. Army, 39th Engr. Bn., Ft Devens, MA
• U.S. Army Corps of Engineers, LA District
• Mahaffey & Associates, Irvine, CA
• Fluor Corporation, Aliso Viejo, CA
• Case Ibrahim & Clauss, Irvine CA
• PinnacleOne and Arcadis, Irvine, CA
Speaker | Mark Guevara
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Education, License & Certifications
• BSc, Industrial Management, 2016
• AACEi-PSP, CMAA-CMIT, PMI-PMP
Industry Experience: 20+ years
• Claims analyst, scheduler, project controls
engineer, risk manager.
• Specialty in planning, time management,
scheduling & project risk management.
• Worked for various contractors, consultants
and represented various owners in the
public, private and government sectors.
• Work experience includes buildings,
infrastructure, wastewater, oil & gas, mining
& metals, defense
Speaker | Andrew Dick
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Construction Scheduling Basics
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The Critical Path
▪ Longest Path or series
of activities [critical
activities] in a
schedule network
▪ Longest Path dictates
the earliest possible
completion
▪ Delays to critical
activities delay
completion
▪ Total Float (flexibility)
= Zero
* AACEI RP 49R-06 Identifying the Critical Path
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Critical Path Method (CPM) Scheduling
1. A list of all activities required to complete the project
2. The time duration that each activity will take to complete
3. The dependencies between the activities
4. Logical end points such as milestones
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Is the Critical Path Reasonable?
▪ Are the right activities critical?
▪ Is anything missing?
▪ Review near critical activities and logic
▪ How many activities should be on the critical path?
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Construction Scheduling Basics____________________________________________
Baseline and Update Schedules
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Baseline Schedule Review
Baseline Schedule Narrative
Describes the Baseline
• Puts the What, Who, When, Where & How into words
• Provides the general workplan
• Inclusions, Exclusions & Assumptions
Realistic
Complete
Workable
In accordance with Contract requirements
Baseline
should be:
* AACEI RP 38R-06 Documenting the Schedule Basis
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Baseline Review Process
▪ Pre-analysis quality checks
▪ Project requirements checks
▪ Activity analysis
▪ Calendar analysis
▪ Activity code analysis
▪ Relationship analysis
▪ Lag and lead checks
▪ Constraint analysis
▪ Total Float / Longest Path
analysis
▪ Resources / cost analysis
* AACEI RP 78R-13 Original Baseline Schedule Review
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Reasons for Disapproval
▪ The plan does not meet Contract requirements
▪ The plan depicted is determined to be unachievable
▪ Does not represent the contractor’s plan for completion
▪ When there are fatal, technical errors
▪ Missing contract specified dates
▪ Negative float
▪ Incorrect sequence
▪ Imposed constrained dates
▪ Sequestered [Hidden] float
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Why?
▪ Confirm that the Contactor's work plan meets the Contract
requirements
▪ Confirm a common understanding of the Contractor's
means and methods
▪ Does not represent the contractor’s plan for completion
▪ Basic understanding for the Contractor’s planned
production rate and sequence of operations
▪ Start the project on the right foot
▪ At all times the project schedule should tell you what you
need to know, NOT what you want to hear
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Sample Update
* Screenshot of schedule updates by Oracle Primavera V.18
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Update Review Process
▪ Revised Durations or
Descriptions
▪ Added or deleted
activities, relationships,
or revised lags
▪ Impacts on the
critical path
▪ Calendar assignments
▪ As-built dates
▪ Modified start /
finish dates
▪ Constraints
▪ Resource assignments
* AACEI RP 53R-06 Schedule Update Review
* Screenshot of an update checker output by Scheduler Analyzer software
* Screenshot of a Schedule Comparison output by Oracle Primavera V.18.8.0.29254
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Why?
• Help keep the project on track
• Early warning for time slippage, out-of-sequence progress and loss of production
• Facilitate the timely resolution of issues during the project
• Identify potential risks and enable opportunities for mitigation
• Reduce future claims
• A well managed schedule should be a double edgedsword
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Construction Delay Analysis
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Construction Delay
▪ At most basic level, delay is “later than planned
completion”.
▪ Construction Delay – An unanticipated event or
interference to the critical path that causes the end date to
be extended.
▪ Contractor alleges a delay or series of delays that causes
an actual or potential extension of the project completion
date.
▪ Requires analysis of the delay to determine (1)
responsibility and (2) duration of the delay.
▪ General Types – Excusable, non-excusable, may either be
compensable or non-compensable.
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Delay Analyses Retrospective or Prospective
▪ Impact of the event is
calculated after the delay
takes place.
▪ The extent of the delay is
known, but the argument is
over responsibility for the
delay and concurrency with
other delays.
▪ Performed while project is
ongoing prior to the delay
event.
▪ Forecast (Estimate) of
Schedule Impact due
to the delay event.
▪ Intended to resolve the
delay dispute prior to
actual impacts, shifting
risk back to contractor.
Retrospective Prospective
VS
* AACEI RP 29R-03 Forensic Schedule Analysis
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Prospective Analysis
▪ Performed while project is
ongoing and prior to
the delay event.
▪ Time Impact Analysis
(TIA) is a typical provision
in construction contracts.
▪ Intended to resolve the
delay dispute prior to
actual impacts, shifting
risk back to contractor.
* AACEI RP 52R-06 Prospective Time Impact Analysis
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Prospective - Time Impact Analysis
Legend
As-planned unimpacted activities
Fragnet showing impacted activities
As-built activity, updated to the point of the delay
DD1DDo
A
B
C
D
E
REQUESTED
TIME EXTENSION
A
B
C
D
E
FRAGNET
* AACEI RP 52R-06 Prospective Time Impact Analysis
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Retrospective Analysis
▪ The impact of the delay is
calculated after the delay
takes place.
▪ The extent of the delay is
known, but the argument
is over responsibility for
the delay and concurrency
with other delays.
▪ There are many different
methods to perform a
retrospective delay
analysis.
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Prospective - Collapsed As-Built
Legend
Delay activity, shown with actual duration and 100% progress
As-Built Activity, shown with Actual Duration and 100% Progress
A
B
C
CLAIMED
DELAY
PERIOD
Delay
D
E
* AACEI RP 29R-03 Forensic Schedule Analysis
B
C
D
E
A
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Schedule Tricks and Tips
1. Late Baseline Schedules
2. Early Completion Schedules
3. Inaccurate Update Schedules
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1. Tricks - Late Baseline Schedules
▪ No shared understanding of
contractor’s plan.
▪ Not a tool available to the Owner for
planning purposes.
▪ Owner can’t measure performance.
▪ No baseline to measure delays.
▪ Contractor has benefit of hindsight in
crafting a late baseline.
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1. Tips - Late Baseline Schedules
▪ Require acceptance of the baseline
schedule prior to start of certain work.
▪ Tie monthly payments to specific work
in the project schedule.
▪ Enforce payment penalties for late or
unacceptable schedules.
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2. Tricks - Early Completion Schedules
▪ Unrealistic planned performance.
▪ Tighter schedule and less float.
▪ Spring-loaded to take advantage
of upcoming owner delays.
▪ Difficult to measure delays.
▪ Earlier operation and
maintenance costs.
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2. Tips - Early Completion Schedules▪ To prevail on early
completion claims
▪ Contractual prohibition on
early completion schedules
▪ If allowed by contract, then
require a resource-loaded
schedule.
▪ Revise contract milestones
per early completion
schedule.
▪ Monitor actual progress and
resources used by
Contractor.
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3. Tricks - Inaccurate Update Schedules
▪ Inaccurate progress can distort the
schedule and even shift the critical path.
▪ Inaccurate dates
▪ Work may not be complete when the
scheduler says it is.
▪ Historical (As-Built) information is critical
for schedule delay analysis.
▪ Even if owner ignores updates, Courts
deem such inaction as acceptance.
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3. Tips - Inaccurate Update Schedules▪ Verify progress of all activities, including
offsite and procurement activities.
▪ Document accurate activity progress
reporting, esp. those activities taking
longer than planned.
▪ Analyze CPM update revisions,
including activity durations, logic, total
float & constraints.
▪ Always require submission of updated
schedules, even if approval is contingent
on owner’s comments.
▪ Enforce payment penalties for
unacceptable or late update schedules.
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Lost ProductivityClaims
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Industry Buzz Words
▪ Lost Productivity
▪ Inefficiency
▪ Disruption
▪ Impact Claim
▪ Ripple Effect
▪ Cumulative Impact
Disruption ≠ Delay
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What is Productivity?
▪ Units produced compared to effort put in.
▪ Ratio of output/input, i.e., output per unit of input.
▪ Units completed compared to work-hours.
▪ Related to project cash flow and profitability.
▪ Also called “efficiency” and vice versa “inefficiency”.
▪ Production: measure of output (things produced), e.g.,
how many feet of pipe installed per work-hour; cannot
be used interchangeably with “productivity”.
AACEI RP 25R-03 Estimating Lost Labor Productivity in Constr. Claims
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Common causes of lost productivity
1. Planned productivity
▪ Plan sheet take-off errors
▪ Bid blunders
2. Inefficient labor crews
▪ Inexperienced in type of work
▪ Inadequate supervision
▪ Rework and errors
▪ Learning curve
3. Equipment breakdowns
4. Untimely delivery of materials
5. Inclement weather
6. Owner-caused reasons -
▪ Access restrictions
▪ Changes to the work
▪ Untimely responses to RFIs
▪ Defective plans &
specifications
▪ Differing Site Conditions
▪ Untimely inspections of work
▪ Delays and accelerations
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Analysis of Lost Productivity Claims
1. Liability (entitlement or merit)
▪ Impacting events are unforeseeable, beyond the
Contractor’s control but within the Owner’s control.
2. Causation (nexis or causal connection)
▪ Disruptive event caused a change in performance.
3. Resultant Injury (damages or quantum)
▪ Calculated with reasonable certainty.
Contractual Compliance
▪ Including Notice, Exculpatory Clauses and
Change Orders.
* Servidone Constr. v. United States, 931 F.2d 860, 861 (Fed. Cir. 1991).
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Quantifying Lost Productivity
“One of the most contentious areas in construction claims is the
calculation or estimation of lost productivity. Unlike direct costs, lost
productivity is often not tracked or cannot be discerned separately and
contemporaneously.… Many methods of calculation are open to
challenge with respect to validity and applicability to particular cases –
thus making settlement of the issue on a particular project problematic.”
AACEI RP 25R-03 Estimating Lost Labor Productivity in Constr. Claims
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Quantifying Lost Productivity
In order of preference:
1. Project Specific Studies
▪ Measured Mile, Earned Value, Work Sampling, Craftsmen Questionnaire
2. Project Comparison Studies
▪ Comparable Work or Project Study
3. Special & General Industry Studies
▪ MCAA, NECA, USACE, Learning Curve, Overtime, and Weather studies
4. Cost Basis
▪ Total & Modified Total Cost methods
5. Productivity Impact on Schedule
▪ Schedule Impact Analysis
AACEI RP 25R-03 Estimating Lost Labor Productivity in Constr. Claims
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Measured Mile
▪ Most widely accepted and credible
method to calculate inefficiency
costs.
▪ Compares identical or very
similar work for impacted to
unimpacted periods.
▪ Difference in productivity of
unimpacted periods compared to
impacted periods.
▪ Does not rely upon the original
estimate.
Disruption
Unimpacted
Period
Impacted
Period
Unimpacted
Period
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Measured Mile
Abusing the Measured Mile
Mean
Productivity
Cherry Picking the Peaks Ignoring the Valleys
Measured Mile
Productivity
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Measured Mile: The Pitfalls
▪ Claimant cherry-picks a “measured yard” of the best
productivity as basis for comparison.
▪ Work being compared is not really comparable or similar work.
▪ Including dissimilar work.
▪ Claimant ignores items that do not fit the story.
▪ Fails to account for all relevant factors, including Contractor-
caused inefficiencies, unrealistic bid or learning curve.
▪ Claimant fails to provide an objective assessment of data or
demonstrate lost productivity based on cost accounting
records.
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Project Comparison Studies
When a Measured Mile Approach cannot be used
Comparable
Work StudyCompares productivity on an
unimpacted, similar activity
performed on the same contract.
Comparable
Project StudyCompares same activity in
dispute to a similar project.
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Industry Studies
Mechanical Contractors
Association of
America (MCAA)
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Industry Studies: The Pitfalls
Combining
multiple impact
factors can
result in
unrealistically
high losses
Blind reliance
upon studies
and ignoring
other available
project
information
Extrapolating
the industry
studies beyond
reason
Ignoring
industry study
limitations
AACEI RP 25R-03 Estimating Lost Labor Productivity in Constr. Claims
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Cost Basis
Total Cost
Method
Modified Total
Cost Method
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Total Cost Claims
Difference between As-Bid and
As-Built Costs.
▪ By project or affected items.
▪ Include all cost categories:
Labor + Material +
Equipment + Sub. +
Overhead.
▪ Variations may specify cost
category or type, i.e. labor,
equipment, hours or costs.
As-Bid Cost As-Built Cost
Change
Orders
Claim
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Total Cost Claims: The Pitfalls
A method of last resort -
▪ Quick and inexpensive for Contractor to present.
▪ Assumes entitlement and ignores causation.
▪ Allows grossly overstated damages.
▪ Assumes Owner is 100% responsible for entire loss.
▪ Assumes work plan and bid amounts were perfect.
▪ Least accepted method of the Courts.
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Total Cost Claims
Four-part
test
1. The impracticality
of proving actual
losses directly
2. Contractor’s bid
was reasonable
3. Contractor’s
actual costs
were reasonable
4. Contractor was
not responsible for
the added costs
* Boyajian vs. United States, 191 Ct. Cl. 233 (1970).
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Modified Total Cost Claims
▪ Attempts to correct the inaccuracies of the Total Cost Method
▪ Adjusts for variations due to
▪ Bid Errors
▪ Bid Omissions
▪ Contractor caused inefficiencies
▪ Lack of mitigation
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Modified Total Cost Claims
Similar to Total Cost method but includes adjustments to address the four prerequisites
As-Bid Cost As-Built Cost
Change Orders
Claim AmountContractor Issues
Estimate
Adjustment
End of Presentation
Imagine the result
Mark Guevara
(714) 508-2609
Andrew Dick
(213) 797-5300