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Sunday, 27 February 2011 18:32
Minimizing Extension of Time related dispute by adopting integrated schedule management FeaturedWritten by Ashutosh Maurya
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[... this Technical Paper was submitted by Ashutosh Maurya for Certified Cost Engineer (CCE) Certification in April
2010 ...]
Abstract
Considerable number of construction contract experience delays. Project can be delayed due to default either by
the contractor or by the employer or by both of them together. Delay in the contracts necessitates undergoing
Extension of Time (EOT) procedures. EOT computations are complex. Forensic Delay Analysis (FDA) methods are
used to determine EOT. There are several FDA techniques. All these techniques are based upon Critial Path
Method (CPM) method. Impacted as Planned, Collapsed as Built, As-Planned vs. As-Built Time Impact Analysis
and Windows Analysis are few FDA techniques. FDA techniques are not precise methods and need expert
judgment while determining EOT. These characteristics of FDA technique leads to disagreement between the
parties and EOT related disputes are caused.
Regardless of the FDA method being used, Baseline Schedule and delay records documents remains the key input to forensic schedule analysis. Scheduler skills play major roles too.
Schedule lifecycle in project can be broken into four phases of schedule development, schedule approval, schedule update and control, and schedule revision. Adopting an integrated
approach towards these schedule phases is helpful in project schedule management. A schedule management and control plan can be developed addressing all the scheduling phases
and integration between them. If integrated with cost and risk planning of the project, it can be more powerful in achieving project objectives.
Recommendations and best practices require meticulous implementation to produce results. The best way to achieve this purpose is by enforcing it through the contract. Therefore,
schedule specification requiring implementation of integrated schedule management and control is must for minimization of EOT related disputes.
IntroductionContracts are most common methodology of construction projects delivery. Regardless of where the contract is being executed or which facility is built, considerable numbers of
construction contracts fail to complete within the duration stipulated. The reasons for delay may vary extremely, from design changes to problematic commissioning and numerous issues
in-between. This necessitates contracts to undergo EOT procedures.
Computing EOT is a difficult task at first place, this requires professional and costly resources. Scheduling is more art than science and no Forensic Delay Analysis (FDA) method is
precise. In the absence of establish project controls framework and procedures these analysis tend to be more judgmental rather facts based. This lead to disagreements between the
parties, thus thw root cause of disputes. Application of project management tool and technique in schedule management can help to setup project schedule management framework and,
help minimizing delays and EOT related disputes.
The author has more than 11 years experience in construction scheduling, costing and claims. He is certified Project Management Professional by PMI and worked both on the contractor
and employer side on EOT claims preparation and approval. Author has used this knowledge and experience to design and arrange this article. Current body of knowledge on EOT has
also been studied. SSL-Delay and Disruption protocol and AACEI RP No. 29 R-03, Forensic Schedule Analysis, are two primary document which are referred in synthesis of this
technical paper.
For propose of standardization of taxonomy, term Schedule is used for Programme or CPM Schedule. Term Baseline Schedule is used for planned schedules and subsequent
schedule updates thought the project duration are referred as Updated Schedule. Term Employer refers to the both the employer, owner team, and their authorised representative i.e.
engineer, project manager, contract administer and cost consultant.
Delays in construction contractsSimplest approach to minimize the EOT related dispute is by not having them at all, i.e. No Delays, the contract is closed within the stipulated duration. However, project delays are
reality, the complexity of the construction process, and its dependence on numerous factors within and outside the project boundaries often leads to delays.
Employer is obliged to provide certain information, release site and provide timely approvals. Contractor is responsible for providing a commissioned facility to the Employer with the time
frame stipulated in project. In general small project have one completion date, whereas big projects involving several facilities, various trade Contractors, require partial handover may
have several milestones completion dates.
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Employers delays are generally-
- Late Notice to proceed
- Delay in making Site available to contractor
- Delay in release of Design Information
- Delay in Release of Provision Sub Item
- Funding changes
- Suspension of works
- Delay in Appointing Nominated Contractor
- Delay in Providing approval to Contractor
- Delay in Obtaining statuary approval (in Employer scope)
- Delay in sourcing utilities (power, water etc.) for testing and commissioning
- Defective contract documents
- Change directive/order work additions
Contractors delays are generally-
- Poor workmanship requiring rework
- Insufficient labour equipment and their low productivity
- Failure to handover the facility with timeframe stipulated in the Contract
- Failure to provide access to Employers nominated contractor
- Failure to partially handover of facilities (as per the contract the contract milestone)
- Failure obtain certain performance result (as per the contract the contract milestone)
There can be other set of reasons which are neither through default of employer nor by the contractor, but due to unforeseen conditions not envisaged at the time contract. These
events are called force majeure. Contractor in generally eligible for EOT due to the delays caused by force majeure, but without additional cost, such delay event can be-
- Exceptionally adverse climatic condition
- War, riots
- Subsurface condition exceptionally different from pre-contract soil investigation report
Impact of delays on project time and cost baseline depends upon project team approach towards its mitigation. Delay impact can be proactively reduced and in worst scenarios small
delay events can lead to large schedule creep.
Some delay can have clear impact on the project critical path e.g. delay in release project site to the contractor, suspension of works, non-releasing of payment allowing contractor to
suspend the works etc. These explicit delays are easy to identify. Prompt agreement can be made both in the terms of the individual responsible for the delay and its impact on the
project, while comparing to other ambiguous delays.
Certain delay events does not impact the project critical path distinctively as they occur. These ambiguous delays, for example delay in material for non critical activity, do not seem to
delay the contract completion date as it occurs. However, what if the other delays in the project has put this non critical activity to project critical path? Another example can be
continuous change in design on non critical activity causing frustration to project team therefore leading to productivity loss on whole project including the critical path. This complexity is
further amplified due to the fact the EOT procedure are generally done retrospectively. Prospective delay analysis and grating of EOT can be done; it is not a widespread practice. In
additional to being complex to identify, such delay do poses big challenge while analyzing their impact on the project time and cost. These delays are root causes of EOT related
disputes.
EOT procedure and disputesEOT process in construction contract starts with contractors notification to employer about the event which had delayed or could potentially delay the project. However, the roots of the
EOT procedure go deeper into preparation of contract schedule and even in some case in formation of contract. The flowchart below shows the generic extension to time procedure.
A contractor is only entitled to EOT if he can successfully demonstrate that the delay event had caused or was likely to cause a delay to the completion of the project. In other words the
contractor must demonstrate to the extent possible that the event has affected critical path of project, therefore additional time would be required to complete the project. On the
successfully demonstrating that the delays are not through the default of the Contractor, he may eligible for additional cost incurred due to delays. Failing to do so, the Employer may levy
the Penalty or Liquidity damages for not meeting the dates stipulated in the Contract. Note that the key is Contractors ability to demonstrate the delay event to the acceptance of the
Employer.
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Invariably EOT ends with some sort of disagreements and disputes. Some are resolve by the mediation of higher management of Contractor and Employer, some goes to arbitration
board. However, some of the EOT disputes do end up lengthy and costly legal proceedings. Extent of disputes may vary from outright rejection of EOT request, disagreement on amount
of extension, party at default, and amount of additional cost due to delay.
Disputes arise for a number of reasons, but typically because of contractors improper presentation of the delay events, their causes and impact on project critical path, a lack of
perspective toward resolution of agreement by the parties involved, and political and commercial reasons related to the project.
Forensic Delay Analysis (FDA) methodsComplex nature of construction process leads to intricate delay analysis framework. Delay analysis techniques can be prospective (during the life of the project, before the full impact of
the event is known) or retrospective (after the impact of the delay event has occurred). Term Forensic relate to the retrospective delay analysis method, however following common
industry practice Forensic Delay Analysis (FDA) has been used for both for prospective and retrospective delay analysis methods.
Critical path method is the most commonly used tool for Forensic Delay Analysis. S Curves showing resources, earn value or cash flow can also be used to establish or substantiate
delays, however they all are based upon on schedules prepared using the Critical path method.
There is no standardization of classification or taxonomy of FDA technique. Some commonly used techniques are discussed below in order to review how the use of FDA techniques
influences EOT related disputes and their resolution.
a. Impacted as Planned (IAP)
In this method the original planned schedule for the project simply has the delay events superimposed or impacted on to the Baseline schedule and the effect on the overall completion
date measured by the change in completion date as a result of the delay impact. This method can be utilized both prospective and retrospectively.
This method possesses two major pitfalls. First it is assumed that sequence of the works remains the same as it was planned in the Baseline, which is not generally the scenario in the
construction projects. Secondly, this analysis usually ignores all the delays caused by the contractor; therefore, answer generated is not necessarily based on all the actual delays that
occurred on the project. In addition to this, certain type of delay event like lower rate of progress cannot be incorporated in this analysis.
b. Collapsed As Built (CAB)
This method subtracts delays from the as-built programme and as a result determines the earliest date that the contractor could have completed the project if the delay event would not
have occurred. This deductive approach to modelling delay relies upon the use of the as-built programme, therefore, generally limited to retrospective delay analysis. This method uses
exactly the opposite philosophy to that relied on in the IAP and TIA (discussed later) methods. The what if questions posed in the collapsed as-built method are What if these delay
events didnt occur? or When would the project have finished but for these events?
The delay events are repeatedly extracted from the As-Built Programme in the reverse chronological order and it effect on movement of completion date is recorded.
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c. As-Planned v As-Built
This method is based on the comparison between Baseline Schedule and how the actual work is carried out i.e. As Built Schedule, difference between the overall completions dates of
the two being the basis of the delay claim. This technique can be used when sufficient as built information is available. This method can have several variant based upon its application
on Baseline and As Built Schedule. At its simplest, comparison can be done between Baseline and final As Built Schedule. On the other hand scenario analysis can be developed by
making comparisons between Baseline and final As Built Schedule at different period of the Contract.
d. Time Impact Analysis (TIA)
An evolution of the impacted as-planned (IAP) method is known as the time impact analysis (TIA). The TIA methodology differs from the IAP technique because it uses multiple
baselines, rather than the original as-planned baseline, to measure the likely impact of delay events. Each Base Schedule is a CPM schedule representing the contractors intentions for
completion of all remaining work, prior to the insertion of delay events. This can be carried out both prospectively or retrospectively. If done retrospectively scheduler places data date at
the point in time when the delay event occurred.
The scheduler is required to create Base Schedule (not baseline schedule) contemporaneous to the for each delay event. This can be created as a new As built Programme based on the
progress records or by identifying the contemporaneous updated Schedule closest to the date of each delay event and then updating each of those Schedule with update data up to the
point immediately prior to the commencement date of each delay event.
These Baseline Schedules needs to include sufficient logic such that it is robust and reactive to change when rescheduled. If the Baseline Schedule does not contain sufficient logic to
reflect the impact of delay, addition of further logic may be required. However, any such additions should not be added to simply make the schedule to react in a certain way in the favour
of one party, and should be agreed/approved by another party. Also, such changes in Baseline Schedule can be reason of disputes when one party wins and the other loses the
argument by making logical changes in the Baseline Schedule.
Delays are then inserted one at a time, chronologically, into their respective base Schedules and Project completion date is calculated for each successive delay event. Cumulative
ahead or behind the Schedule scenarios are established including concurrency and party culpable for each delay.
Windows analysis is other FDA method which is derivative of TIA and CAB method. This technique adopts a given time window while doing delay analysis using TIA or CAB method.
Two prominent factors emerges from our review of FDA methods-
a. Regardless of the FDA method being adopted, Baseline Schedule remains the key input to forensic schedule analysis. Therefore, the EOT computation quality, its presentation and
acceptance are dependent upon the approach followed while preparing the Baseline Schedule.
b. The other input to the FDA is delay event information. These information can be records of the acknowledgement of late drawing receipts, late site release etc. Records of site
document such as letters, drawing log, various format of notification play a very crucial role in FDA. Delay events and their occurrence are also recorded in the Update Schedules. Good
record keeping is must for the EOT computation quality, therefore to reduce FDA related disputes.
Schedule Management and Control ProceduresIn additional to being a PM tool, true test of good baseline schedule is its compatibility with the FDA. Disputes may arise due to change in baseline schedule during its validation for use in
FDA, if the other party does not accept the changes. Therefore, in order to reduce disputes, it recommended to prepare the baseline schedule which can be input to the FDA with
minimal, if not without any changes. However, this not always true, in the beginning of the project, at the time of preparation, baseline schedule is treated as a project management tool
rather than an instrument which may undergo to forensic or even legal scrutiny in future.
All construction contracts require contractor to prepare a detail baseline schedule, and submit to the employer for his approval within certain duration stipulated in Contact. Unreasonably
short schedule submission deadline for complex project leads pressure on scheduler. This may shift the schedule preparation focus. Instead of creating a project management tool and
instrument for EOT computation, time pressure may lead the Scheduler to merely produce a piece of document to fulfill the contractual obligation, such situation should be avoided. While
early submission of baseline schedule is must to start schedule control without elapsing substantial project duration, on the other hand Baseline Schedule should be through in both
aspect of schedule control and forensic analysis.
Scheduler skills play major roles too. With advent of professional scheduling software, term Scheduler now much referred as Software Jockeys. In contrary good, scheduler should have
general understating of construction contract practices, construction methodology and, experience on activity time and cost estimation. The scheduler should read, fully understand the
contract. He should be fully aware of the various time windows in the contract and contractual implication of the Schedule as a whole.
Team buy-in is another factor for the successful preparation and implementation of the schedule. In large and complex project where number of stakeholder are more and the complexity
of the project limits the scheduler capability to prepare the realistic schedule, several iterations of schedule review should be carried out within the contractors personnel before it is send
to employer for their review. It is good practice to obtain signoff from the departments involved.
Schedule life cycle can be managed in four distinct phases-
a. Schedule Development
b. Schedule Approval
c. Schedule Update and Control
d. Schedule Revision/Change
A well defined approach, integrating these phases can be helpful in not only preventing the EOT related disputes, but also reduce delays in project.
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a. Schedule Development
Schedule should consist of whole contract scope. Ideally scheduler must start the schedule preparation with understanding scope specified in the contract. WBS should be prepared so
that none of the project scope is missed in the schedule. This WBS can also be used for other project control item like cost and documents. It is good to have risk management approach
towards contract administration at the beginning. Identification of risks in the contract, their probability and impact helps the project team to understand project in better way therefore to
produce more realistic schedule. Project phases such as engineering, procurement, construction and commission and their integration to WBS should be defined. Contract scope should
be broken down by the responsibilities i.e. by employer, contractor or sub-contractor. Integration of responsibilities to WBS is also recommended.
Milestone dates should be taken out from the contract and incorporated in the schedule, these milestones can be supply of design information to contractor by employer, partial handover
date etc. If contracts are silent on milestones date, in such situations the scheduler should rationally determine the dates for such milestones. Turnaround duration for submittal should be
captured in schedule appropriately. Materials, method statements, specialized vendor or suppliers require employer approval before commencing the work/procurement. Generally
contract specifies approval duration; the same must be taken in schedule. If the contract does not specify such duration, an appropriate duration should be assumed recoded as schedule
assumptions.
Schedule should be compatible with project contract/information management system of contractor, employer and subcontractors. Scheduling software, its version should be agreed
between the parties involved before the preparation of schedule. Same way activity, WBS code logic, schedule calendars should be agreed prior to commencement of schedule
preparation.
It is also good to agree the level of detail of the schedule prior to schedule preparation. It is recommend that duration of individual activity be less than 1.5% to 2% for project duration and
always less than successive schedule updating period. If the information is not available to decompose the activities as sufficient detail level, a summary level activity can be inserted in
the schedule and assumption should be recorded.
Another important aspect at time of schedule preparation is project control methodology which is planned to be followed in the project. Earn value, work done quantity based performance
indicator bases reporting may require loading of cost and resources to the schedule. This may lead to substantial work for scheduler to prepare the schedule. Assumption like workmen
and equipment productivity should also be recorded.
Schedule should be forwarded to the employer along with brief method statement describing how project delivery is planned. Assumption made to prepare the schedule should also be
specified in the method statement. It is good practice that the project teams reviews the whole schedule before it is sent to the employer for obtaining approval. Several iteration may be
carried out make produce realistic schedule.
b. Schedule Approval
This stage schedule lifecycle relates to validation to contractors prepared schedule with the contract requirement. Employer should verify that the schedule confirms to be contract
completion date requirements. This may be date for whole project, or the partial completion as required by the contract.
Employer should do sanity check for schedule being realistic; review the processor-successor relationship. Look on the resource and time estimation. Employer should use the contract
schedule for his own purposes. All the efforts should be made to have one schedule in the project.
c. Schedule Update and Control
Schedule update is important for delay identification. In this phase actual progresses is tracked, critical and near critical activities are monitored, and variance is reported to stakeholders.
Variance analysis between baseline and updated schedule helps to identify the delays. Following the update, if stakeholders proactively act to resolve the issues causing schedule
delays, delays can be controlled. Accumulated unresolved and complicated claims are major cause of EOT related disputes, therefore, proactively addressing disputes can help reducing
EOT related dispute.
Key item for this phase are frequency of schedule update, level and method of reporting, baseline schedule logic overriding, float ownership. Update validation by the employer is another
important issue. As-built records should be maintained so that the schedule update validation can be carried out by the employer in parallel. These as-built records can be daily, weekly
and month reports, photographs, meeting minutes, procurement log, change orders etc.
d. Schedule Revision
Schedule baseline should only be revised for approved changes. Baseline can also be revised if EOT is granted during the execution of project.
A schedule management and control plan can be developed addressing all above mentioned items. If integrated with cost and risk planning of the project, it can be more powerful in
achieving project objectives.
All the recommendations shall remain best practices unit they are being adopted in the projects. The best way to achieve this purpose is by enforcing it through the contract. A schedule
specification can be can developed to incorporating all recommendation made above. SCL Delay and Disruption Protocol, Appendix B, provides a good set of Model Specification
Clauses. Caution should be exercised while using them. Coherency with the form of general condition of contact both at individual clause, contract principles at whole level and project
needs should be keep in mind, as ambiguity in contract may lead to other set of disputes.
Contract should also outline the record keeping requirements, frequency of report, daily weekly, monthly, their content and the time limits for submission of such reports. Document
management and project collaboration software too can be helpful for speedy communication and for maintaining document records.
ConclusionThere shall be quite some time until project management, contract management, financial management practices and construction technology are mature enough to complete project
without any delays. Project on time as well within budget can remain distant dream for construction professionals. Until then project delays shall remain reality, so shall be the EOT
related disputes.
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& oc ial s ha ring
Appropriate application of project management tool and technique promise delivery within the stipulated time frame therefore reduces project delays and eventually reduced EOT related
disputes. In the event of delay, selection of appropriate FDA technique can be big help presenting the delays and increase the probability on the agreement on EOT related issues.
Schedule management is vital to FDA analysis. An integrated approach is required for schedule preparation, review and update. Preparing a schedule management plan summarizing all
these aspects of schedule management can help in producing better results. Good document management is also important. Last but not the least contractual enforcement of judiciously
selected schedule management and control specification are must to reduce the EOT related disputes.
References1. AACE International, ' ecommended Prac tice ( o . 2 ) ' -02* + o rens ic & chedule , na lys is , 2009.
2. AACE International, ' ecommended Prac tice ( o . 4 5 ' -0. * & c heduling / la im Protection Method , 2009.
3. The Society of Construction Law, 0 e lay and 0 is ruption Protocol, 2002.
4. Project Management Institute, , 1 u ide to Pro 2 ect Management 3 ody of 4 no 5 ledge 6 PM3 7 4 1 u ilde 8 4th edition, 2008.
5. Roger Gibson, / on s truc tion 0 e lays Extens ions o f time and prolonga tion c laims , 1s t edition, 2008.
6. Keane, P. J. & Caletka A. F., 0 e lay , na lys is in / ons truc tion / ontrac ts , 1s t edition, 2008.
7. Nael G. Bunni, The + 9 0 9 / + o rms of / on tract, 3rd edition, 2005.
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