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
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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
Lowest
element
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WBS/Work Packages to
Network
Circuit
board
Design
cost
account
Production
cost
account
Test
cost
account
Software
cost
account
B
P-10-1
Design
WP D-1-1 Specifications
WP D-1-2 Documentation
A
D-1-1
D-1-2
D
P-10-2
F
S-22-2
K
T-13-1
C
S-22-1
Production
WP P-10-1 Proto 1
WP P-10-2 Final Proto 2
B
Proto 1
5
Test systems
WP T-13-1 Test
Software
WP S-22-1 Software preliminary
WP S-22-1 Software final version
Irwin/McGraw-Hill
D
Final
proto 2
4
A
Specifications
and documentation
2
F
Final
software
2
K
Test
3
C
Preliminary
software
3
©The McGraw-Hill Companies, 2000
Activity-on-Node Network
Fundamentals
B
E
Construction
plans
Staff report
15
15
H
Occupancy
A
C
Application
approval
5
F
Traffic
study
10
Commission
approval
10
G
35
Wait for
construction
170
D
ES
ID
EF
SL
Description
LS
Dur
Service
check
5
KOLL BUSINESS CENTER
County Engineers Design Department
LF
EF
Irwin/McGraw-Hill
©The McGraw-Hill Companies, 2000
Activity-on-Node Network Forward
Pass
5
B
20
20
20
Construction
plans
E
35
Staff report
15
15
15
H
35
Occupancy
A
Application
approval
0
5
20
C
5
Traffic
study
10
10
F
Commission
approval
15
20
10
20
10
200
G
30
200
35
235
Wait for
construction
30
170
200
D
ES
ID
SL
Description
LS
Dur
Service
check
EF
15
5
20
KOLL BUSINESS CENTER
County Engineers Design Department
LF
EF
Irwin/McGraw-Hill
©The McGraw-Hill Companies, 2000
Activity-on-Node Network Backward
Pass
B
E
Construction
plans
5
15
185
Staff report
20
185
15
200
20
H
185
Occupancy
5
A
Application
approval
0
5
5
C
Traffic
study
10
15
F
10
10
Commission
approval
20
20
G
20
10
30
200
35
235
Wait for
construction
30
170
200
20
D
ES
ID
SL
Description
LS
Dur
Service
check
EF
15
5
20
KOLL BUSINESS CENTER
County Engineers Design Department
LF
LS
Irwin/McGraw-Hill
©The McGraw-Hill Companies, 2000
Activity-on-Node Network with Slack
5
0
5
B
20
Construction
plans
15
20
185
20
E
35
165
Staff report
185
15
15
20
200
20
200
H
235
185
0
0
5
5
5
Application
approval
10
5
A
0
0
5
5
15
C
15
Traffic
study
20
20
15
20
10
10
20
5
D
10
10
0
20
F
30
Commission
approval
10
30
30
0
30
G
200
200
Occupancy
35
235
Wait for
construction
170
200
20
ES
ID
EF
10
SL
Description
15
LS
Dur
LS
EF
Service
check
5
20
KOLL BUSINESS CENTER
County Engineers Design Department
LF
Irwin/McGraw-Hill
©The McGraw-Hill Companies, 2000
Example of Laddering Using
Finish-to-Start Relationship
Trench
1/3
Irwin/McGraw-Hill
Trench
1/3
Trench
1/3
Lay pipe
1/3
Lay pipe
1/3
Lay pipe
1/3
Refill
1/3
Refill
1/3
AON network
Refill
1/3
©The McGraw-Hill Companies, 2000
Finish-to-Start Relationship
Figure 4-16
Lag 2
X
Irwin/McGraw-Hill
Y
©The McGraw-Hill Companies, 2000
Start-to-Start Relationship
Figure 4-17
A
B
Activity
M
Activity
P
Activity
N
Irwin/McGraw-Hill
Lag 5
Activity
Q
©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
Irwin/McGraw-Hill
Refill
1 mile
©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
5
Lag 10
20
0
A
0
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5
5
5
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5
5
C
B
5
5
Lag 5
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10
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5
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0
5
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Lag 10
10
Legend
D
25
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Lag 5
ES
ID
SL
LS
Dur
Lag 10
EF
11
SL
21
11
15
36
11
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0
4
40
LF
Irwin/McGraw-Hill
©The McGraw-Hill Companies, 2000
Hammock Activity Example
Figure 4-23
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Legend
ES
ID
EF
SL
Description
LS
Dur.
21
0
8
1
E
18
G
21
F
25
4
25
0
3
21
21
13
Hammock
8
LF
Irwin/McGraw-Hill
©The McGraw-Hill Companies, 2000
Network Plans
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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
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•
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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 prorated 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 mitigatecannot 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