dispute resolution [txdot class con209]

Dispute Resolution by Juan F. Urrutia, P.E., TxDOT - CST 94th Transportation Short Course, October 13-14, 2020

Dispute Resolution[TxDOT Class CON209]

Juan Francisco Urrutia, P.E.Contract Claims & DisputesConstruction Division (CST)


Agenda

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Dispute Resolution by Juan F. Urrutia, P.E., TxDOT - CST 94th Transportation Short Course, October 13-14, 2020 3

Course Introduction

This course is designed to introduce fundamental techniques in resolving disputes. Problem solving concepts are presented to facilitate the successful resolution of project issues encountered during the administration of a contract.

NOTE: There are other acceptable analysis methods & negotiation techniques. While this course is a great reference, it is not fully comprehensive of all your options.


Dispute vs. Claim

Section 1A -Dispute vs. Claim


Dispute vs. Claim

Definitions:

Dispute: An issue that requires negotiated resolution that is administered by the area office, district, or administering division prior to the claims meeting.

Claim: A formal claim filed in accordance with the Title 43, Texas Administrative Code, Part 1, Subchapter A, Section 9.2, “Contract Claim Procedure,” to be discussed at a meeting conducted by the Contract Claims Committee.


Dispute vs. Claim

See Texas Administrative Code, Title 43, Part 1, Chapter 9, Subchapter A, §9.2.g. Claims must be certified by the prime contractor and include the following signed statement as part of the claim filed:

“I certify that the claim is made in good faith; that the supporting data are accurate and complete to the best of my knowledge and belief; that the amount requested accurately reflects the contract adjustment for which the contractor believes the department is liable; and that I am duly authorized to certify the claim on behalf of the contractor.”

There is a distinction that sets a claim apart from a dispute.


TxDOT Dispute Resolution Policy

Section 1B -TXDOT Dispute Resolution Policy



Defined responsibilities of the District and Construction Division

Districts: Are to make every effort, within the provisions of the

contract, to resolve disputes while the dispute is current.

Construction Division: Assist in the resolution of disputes with the contractor

when requested by the District. Assist the Contract Claims Committee (CCC) in evaluating

contractor claims

Administrative Circular No. 10-87.



TxDOT’s intent is to administer contracts equitably so that both parties give and receive the benefits specified in the contract.

TxDOT should not attempt to obtain more work than that specified in the contract or to impose additional risks and/or costs on the contractor that are not imposed by the contract.

Sample General Note

Administrative Circular No. 10-87.


Legal Framework: Contract Claims Procedure

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Section 1C1 -Legal Framework: Contract Claims Procedure


Legal Framework: Contract Claims Procedure

Aviation Projects Logo Sign Projects Professional and Consulting Service Contracts Highway Improvement ProjectsIncludes Construction, Building & Maintenance Projects

Claims not heardSubcontractor claims not submitted properly through the prime

contractorMaterial supplier and subcontractor claims for non-paymentClaims associated with purchase orders

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Claims Heard by CCC


Claim Submittal Process

Section 1D -Claim Submittal Process



A Contractor may file their formal claim through any one of the following:

Contract Claims Committee (CCC)

Construction Division (CST)

The TxDOT Engineer responsible for the administration of the contract in question

When claims are received at the District, it is important to forward the claim to CST within 5 business days

Filing Location Options



A contract claim must be filed no later than 1 year after notice of the following:

Date of Final Acceptance

Date of Termination

Date of Default

For claims resulting from the enforcement of a warranty:

Expiration of the warranty period

Filing Time Frame


Dispute Escalation Process

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Area Office Dispute Resolution Attempt

District Dispute Resolution Attempt

Contract Claims Committee (CCC) Review

Administrative Law Judge

Court of Law

If unsuccessful, the A.E. or Contractor escalates to District

The Contractor either accepts the CCC’s offer or has 20 days to request a formal administrative hearing

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If unsuccessful, the District may involve CST or Contractor may escalate to CCC


Key Legal Concepts

Section 1E -Key Legal Concepts


Key Legal Concepts

Differing Site Conditions: Type 1 and Type 2 when conditions differ materially from those shown in the contract when unknown physical conditions of an unusual nature differ

materially from those ordinarily encountered and generally recognized as inherent in the work

Superior knowledge: Withholding or negligent representation of information Defective or Deficient Design:

are one of the most frequent basis used for claims made against owners

Implied Warranty: “If the drawings and specifications are followed, a satisfactory product will result.”

Ambiguity Patent: The ambiguity is so obvious that an experienced contractor

should detect it prior to bid submittal Latent: The ambiguity is sufficiently subtle enough that an experienced

contractor would not be expected to detect the problem prior to bidding


Key Legal Concepts

Order of Precedence

Note: Our contracts contain a standard “Order of Precedence” clause under Article 5.4, “Coordination of Plans, Specifications, and Special Provisions,” which can often assist towards resolution of possible contract disagreements.

In the case of conflict between plans (including general notes) and specifications regarding responsibilities for hazardous materials and traffic control in Items 1 – 9, and Item 502 “Barricades” the standard “Order of Precedence” clause is modified.

Special Provisions

Plans (General Notes)

Standard Specifications / Special Specs

Special Provisions

Plans (General Notes)

Standard Specifications / Special Specs


Key Legal Concepts

Is defined as a breach of contract by the owner that occurs when an owner causes an alteration in the work so drastic that the contractor is required to perform duties materially different from those for which it contracted. A change which is outside the general scope of the construction contract may be deemed as a Cardinal Change.

Can be a single large change, or a series of small changes that, in total, constitute a significant change (e.g., “death by a thousand cuts”).

Analyzing a sheer number of changes as being excessive does not automatically mean that a cardinal change has occurred.

In some states, it is also referred to as Abandonment of the contract. The key question: Is the completed project substantially the same as

the project contemplated by the parties?

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Cardinal Change


Key Legal Concepts

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Preventive Measures

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Section 2A – Preventive Measures: Make Partnering Work For You


Preventive Measures

Ensure PS&E are complete, clear, and concise

Keep thorough and accurate documentation

Look at the problem from the contractor’s perspective

Be reasonable, be objective, and do not let the conflict get

personal

Don’t allow third parties to delay progress

Base arguments & positions purely on facts

Make decisions in a timely manner

Elevate disputes when needed (Issue Escalation Ladder)

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Preventive Measures

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TxDOT

Contractor

TxDOT Inspector, Project Engineer, Project Manager

Informal Level Area

EngineerLevel

1

Director of Construction

Or

Director of Maintenance

Level

2

District Engineer

Level

3

Maximum agreed calendar days to

respondIssue escalates to DE within agreed upon

number of calendar days

Contractor Superintendent and Foreman

Informal Level Contractor’s

RepresentativeLevel

1Contractor’s

RepresentativeLevel

2Owner/

ManagerLevel

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Issue Escalation Ladder

Presenter

Presentation Notes

No enforceable penalties are really set if either party chooses to take issue with not using the escalation ladder, or with not coming to an agreement. In the case an agreement cannot be made, then CST needs to be involved, and/or the Contractor can certainly submit a claim to support their position.


Avoiding Disputes

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Section 2B – Avoiding Disputes: Watch for Problem Indicators

CHECK ENGINE


Avoiding Disputes

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Project Delay Problems – Possible TxDOT Factors

Lack of access to worksite

Excessivechange orders

Time suspensions Shop drawing approval delays

Not enough inspectors

Rejection of previously inspected

work/materials

Presenter

Presentation Notes

Also note, Inspector-specific opinions of how the work should be done, or a “This is how we do things in this District” attitude.


Avoiding Disputes

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Project Delay Problems – Possible Contractor Factors

Poor planning and/or unrealistic

schedules

Frequent equipment

failuresInadequate resources

Slow Contractor and/or

Subcontractor performance

Material supplier delays

Frequent failing test reports

Contractor and/or Subcontractor management

problems


Issue Analysis

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Section 2C – Issue Analysis: Analyzing Disputes


Issue Analysis

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Step 1: Identify the Cause

Step 2: Determine Responsibility

Step 3: Analyze the Impact

Step 4: Price the Impact


Issue Analysis

Contract administration i.e. time administration, late decision making, interpretations,

etc. Contract ambiguity Plan design error or omission Differing site condition Utility/right of way conflict Restricted access to the worksite Frequent equipment failures or inadequate resources Subcontractor/supplier slow performance Unusual weather or acts of God Widespread material shortage

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Step 1: Identify the Cause


Issue Analysis

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Risk Allocation Review Determining responsibility for an alleged issue involves

researching the contract to identify areas of risk and/or responsibility as assigned within the contract.



Issue Analysis

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Implied Contract Responsibilities

TxDOT Provide complete, clear, and concise

PS&E for bidding and construction Do not interfere with or direct use of

contractor’s resources Provide reasonable access to work

site Provide timely contract

administration decisions (COs, TEs, etc.)

Timely test results and payment for work done

Contractor Provide means and methods of

construction Provide adequate work plan and

schedule Provide adequate workers,

materials, equipment, and supervision

Construct project according to plans and specifications



Issue Analysis

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Joint Contract Responsibilities:

Safety of the workforce and traveling public

Timely completion of the project

Open and honest communication

Cooperation

Problem solving

Maintaining a good working relationship



Issue Analysis

It is important to know the different impacts, in order to determine how to analyze disputes.

Some typical claimed impacts are: Disruptions Inefficiencies Escalation Acceleration Time Suspensions Delays Contract Ambiguity Unpaid Extra or Additional Work

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Issue Analysis

The Decision Tree for Categorizing Impacts

Impact

Excusable Non-Excusable

Compensable Non-Compensable

The Time Decision

The Dollar Decision

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The Decision Tree for Categorizing Impacts

Impact

Excusable Non-Excusable

Compensable Non-Compensable

The Time Decision

The Dollar Decision



Issue Analysis

Direct Costs – Expenses directly attributable to production of work items

Indirect Costs – Expenses not directly chargeable to specific items of work, yet are necessary for the prosecution of the project as a whole

Markups – Not paid on damages because the intent is to make the contractor whole. The contractor should profit from the production of Extra Work, but not profit from impacts. Numerous court cases support this approach Article 4.6 (2014), “Requests for Additional Compensation and

Damages” or 4.4.A.(2004), “Delay Claims” provide for labor burden as the only exception allowed.

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Issue Analysis

Disruptions: entitled to direct cost of labor, labor burden, equipment, subcontractor’s costs, and material only; no profit or project overhead considered

Inefficiencies: compensated similarly to a disruption and typically determined through a “measured mile” comparison of un-impacted vs. impacted production rates

Escalation: compensation may include the direct material, labor, and equipment costs only

Acceleration: direct cost of the acceleration Delays: project office overhead is usually compensated for the extended

period along with other compensable direct costs Ambiguities: compensation may include both direct and indirect costs and

are dependent on the circumstance Extra Work: compensation may include direct costs, indirect costs, and

markups

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Escalation Impacts

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Section 3A – Escalation Impacts


Escalation Impacts

In the absence of any escalation clause provisions in a contract, and absent any TxDOT-caused delay, the contractor assumes the risk for material escalation costs and wage rate increases.

Essential elements in determining an Owner’s (TxDOT’s) responsibility for escalation: Excusable and compensable delay Contractor experienced a cost increase

TxDOT is not responsible for escalation if either of the above elements has not occurred.

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Escalation Impacts

Considerations for Material/Labor Escalation:

Anticipated purchase /activity before performance

Anticipated costs of materials/performance

Actual purchase date/activity during performance

Actual costs of materials/performance

Compare the difference between actual and anticipated costs

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Delay Impacts

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Section 3B – Delay Impacts


Schedule Analysis Methods for Project Delay Impacts

Delay: An impact or series of impacts that extends the project duration beyond the expected completion date There are a variety of causes for delays, not all of which entitle a

contractor to compensation. The issue of delay is typically addressed within contract

documents in a risk assignment, risk assumption, or risk sharing manner.

Practically all delay disputes will require some type of schedule analysis

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Recap on Delay Impacts


Schedule Analysis Methods for Project Delay Impacts

3 most common methods:

As-Built-But-For Analysis: Removes owner-caused delays

As-Planned Impacted: Adds owner-caused delays

Contemporaneous Schedule Analysis

Article 8.5.5.4, “Time Impact Analysis,” (TIA) to evaluate impacts

It consists of the following 4 steps:

1. Determine the status of the project before an impact occurs2. Model and predict the effect of the impact: Insert the delay3. Track the effects of the impact during the updates4. Establish the status of the project after the impact

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Analyzing Project Delay Impacts


Inefficiency Impacts

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Section 3C – Inefficiency Impacts


Analysis Methods for Project Inefficiency Impacts

Claims using terminology such as Efficiency Loss, Productivity Loss, or Inefficiency are essentially the same type of claim.

An Efficiency Loss of 20% is the same as being Inefficient by 20% These types of claims are typically due to impacts which cause an

under-utilization of resources, resulting in loss of efficiency or production ratios.

Inefficiencies primarily cause increases in the direct costs of labor and equipment due to increased hours to perform the work. Markups and profits are not allowed, except for labor burden.

Decreased productivity can be very difficult to document, quantify, and calculate because it can result from various factors, including acceleration orders, changes in work, project management, labor morale, weather, plant shutdowns, etc.

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Analysis Methods for Project Inefficiency Impacts

There are several ways to calculate losses of efficiency, productivity, or an inefficiency percentage

The preferred and most widely accepted method of analysis within construction is referred to as the “Measured Mile” approach. Defined as a continuous period of time when the labor and

equipment productivity is nonimpacted Is the recommended analysis for these types of claims when a

suitable comparison exists and data permits Compare actual efficiency to: Planned efficiency: the original plan was realistic & achievable Actual efficiency on a comparable project with same resources A theoretical efficiency: Means Building Construction Cost Data

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Course Objectives

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After completing this course, participants will be able to:

Discuss the Laws, Rules, and TxDOT policy governing the administration of a dispute/claim.

Identify possible project issues such as communication problems, possible project delays, design problems, and contract administration issues.

Distinguish between some of the different categorical types of disputes and the damages associated to each.

Apply the methods presented and improved their ability to provide fair and reasonable recommendations leading towards the resolution of disputes.


Contacts

Contract Claims Section

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Rolando Besa, P.E.(512) 416-2451

Juan Urrutia, P.E.(512) 416-2455

Coral Arce, PMP(512) 416-2084

Matthew Burgis, EIT(512) 416-2367

Michael Underwood(512) 416-2525


Questions?

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dispute resolution [txdot class con209]

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