четвъртък, 24 ноември 2011 г.

BRASINGTON'S LAWS

Hope you"ll like it!

http://herdingcats.typepad.com/my_weblog/2010/08/brasingtons-laws-from-the-mouth-of-bil-brasington.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+typepad/HerdingCats+%28Herding+Cats%29


CUMULATIVE IMPACT CLAIMS (LOSS OF PRODUCTIVITY)-PART 2

C. Measured mile approach
In comparison, the measured mile approach is an accepted form of impact cost analysis, that examines retrospectively what the project should have cost. This method involves a comparison of the productivity achieved by the contractor in an undisrupted  area of work with the contractor's productivity on a similar task during a disrupted work period. In most cases, the contractor will select an unimpacted area on the same project, but also may select an unimpacted area of work from a different project involving the same or similar type of work. This approach can provide an excellent basis for calculating the extent of damages if a suitable benchmark can be selected. The greatest obstacle lies in identifying an unimpacted period in which the work being performed was sufficiently similar to that work performed in the impacted period. 

D.Jury verdict method
Boards and courts primarily apply the jury verdict method after they have determined that causation has been established but the amount of damages cannot be ascertained with certainty. This approach amounts to nothing more than an educated guess based on information available to the trier-of-fact. Given the uncertainty of the state of cumulative impact claims, it would be unwise for a contractor to base its case on the jury verdict approach until it was confident that causation had been established. Further, in light of the fact of that proof of quantum often implicates causation, both a measure mile analysis and the modified total cost method provide better measure for calculating inefficiency than the jury verdict method.

Causation is the most difficult element to prove. Without proof of a casual link between the owner directed changes and the ensuing loss of efficiency, there is no entitlement to recovery . The contractor seeking recovery must submit  evidence that the number, timing and effect of the changes that were issued impacted its ability to plan and perform its work. Making this connection is not easy. One point is clear from the case law: the existence of substantial number of changes in itself is insufficient evidence of causation.
Much like the difficulties of demonstrating resultant injury, the biggest problem with proving causation, involves separating internally (contractor) caused inefficiencies from externally (owner) caused inefficiency. So, a contractor seeking to recover for cumulative impacts, must carefully develop it claim by combining expert testimony with lay witnesses who experienced first-hand the effects of numerous owner-directed changes. The credibility of the contractor's lay and expert witnesses appears in many cases to be the most essential element of a successful claim. The foundation for any credible expert is reliance on, and an understanding of the contract and contemporaneous project documents. Further, if an expert uses exhibits that summarize or use representative examples of the effects of numerous changes, the contractor should be sure to present into evidence the documentation that backs up the exhibit and be able to demonstrate that the evidence is in fact representative. 

Boards also have included "foreseeability" of the changed working conditions as an additional factor in determining whether a claim is compensable. If the contractor could foresee that unchanged work would or even could be impacted by a change request, then the contractor is expected to negotiate the cost of that impact in a change order that should follow the impact immediately. The corollary to this rule is that the contractor must prove that the impact was either unforseeable or simply not known when parties agreed to the price of the change order closest in time to the impact. An impact is foreseeable, and therefore direct and compensable, if it can be related in time to a specific change.

The initial obstacle to recovering for a  cumulative impact claim is avoiding release or waiver of the claim before the contractor is even aware that such disruption has occurred. The trend in the law appears to require contractors to expressly reserve the right to request an equitable adjustment for the cumulative disruption even before any impact becomes known. Where a contractor has included express reservations of right in the change orders the cases consistently hold that express reservations of right preserve the contractor's right to make a claim in the future. In contrast, where a change order or particular contract provision contains language releasing the owner for liability for delays and disruption stemming from the change, the owner may raise waiver as defense. In the most recent federal case to touch on this issue, the US Court of appeals affirmed the finding of fact that the contractor reserved its right to seek additional time and compensation in the future for impact

The Courts and various boards of contract appeals have recognized a general entitlement to an equitable adjustment for the cumulative disruptive impact of multiple owner directed changes, whose effect on productivity and cost exceed the direct costs of the changed work associated with each underlying change order. No matter how claim is characterized, the contractor still must prove the essential elements of liability, causation and resultant injury. A contractor seeking to recover must demonstrate that the impact was not foreseeable, and that when the disruptive effect became known, the contractor documented its occurrence ant requested reimbursement. In order to establish the elements, the contractor must rely on mutually supportive combination of expert and lay testimony, based on first-hand proper experience and on a detailed  review of contemporaneous project documentation. 

четвъртък, 17 ноември 2011 г.

CUMULATIVE IMPACT CLAIMS (LOSS OF PRODUCTIVITY)-PART 1

Many courts of claims and the various boards of contract appeals have recognized a general right to recover for the cumulative effect of multitude of owner-directed changes that, when taken collectively, can be greater than the sum of the effects of the individual change orders. Although a change order may directly add, subtract, or change the type of work being performed in one particular area of a construction project, it also may affect others area of work that are not addressed by the change order. In one theory for recovery the issuance of unreasonable number of change orders creates a synergistic disruptive impact such that the total disruption caused by the changes exceeds the sum of the disruptive impacts caused by the the individual change orders when looked independently. Cumulative impact claims are exceedingly difficult to prove.

Cumulative impacts  cannot be captured in a forward-priced change order because one cannot foresee the impact of an  unreasonable number of changes yet to occur. Following this dichotomy to its logical conclusion, a contractor is able to price its cumulative impacts only in backward-priced change orders.

Synergistic effect is at the core of the definition of "cumulative impacts". Synergism is defined as the simultaneous action of separate agencies, which together have greater total effect than the sum of their individual      effects. Contractors claim that it is that compounding effect that should allow them to recover for the effects of numerous changes.

The allure of the cumulative impact claim lies in the simple idea that the effect of two or more changes to a project may be more severe than the effect of one change but it is difficult to determine how a contractor should establish that the size, number, or quality of contract changes caused the resultant injury. Courts and boards want to ensure that the owner and not the contractor was in fact the source of any inefficiency. Consequently, a contractor seeking to recover should attempt (as close a s feasible under the circumstances) to quantify the size of the disruption and connect the impact to its owner-related sources.

The essential elements of a cumulative impact claim are the same as those that courts and boards require for most other cost overrun  cases. The contractor must prove:
-liability;
-causation;
-and resultant injury.

Liability can be established with proof that the owner breached its contractual obligation by initiating a substantial number of contract changes, modifications, or design clarifications.

Resultant injury is the claimed loss of productivity. Contractors often seek to relate loss of efficiency to cost overruns and unanticipated schedule delays. Contractors must offer clear proof of damages suffered as the result of the breaching disruption. They can do so through a number of common methods:

A. Total cost method

The total cost method is the most basic approach to calculating damages for loss of productivity. Under this method, the estimated labor costs for the project are subtracted from the costs as actually incurred, including  profit to arrive at the amount of the equitable adjustment. Contractors generally rely on this method only when no documentation in either the project or field files exists to prove damages with greater certainty. Although courts and boards are reluctant to allow contractors to rely on the total cost method, on occasion they have allowed the method in the disruption cases on the theory that the very factors that produce loss of productivity can also serve to preclude the accurate and precise record keeping. The total cost method is not favored and often is not accepted by courts and boards because it does not eliminate the casual factors for which the owner was not responsible. A simple comparison of the estimated  cost and the actual cost to complete the project does not differentiate among problems caused by the owner and the contractor. The total cost method is a method of last resort and could be used only if the contractor showed:
-the impracticality of proving actual losses directly;
-the reasonableness of its bid (or estimate for the project);
-the reasonableness of its actual costs, and;
-lack of responsibility for the added costs.

B. Modified total cost method

As is evident from the discussion above, the two most significant shortcomings of the total cost method are
that it fails to consider problems caused by the contractor and it assumes the contractor's underlying bid is correct. The modified total cost method eliminates the dependence on the original estimate and accounts for non-owner-related performance factors by requiring the contractor account for performance factors for which the owner is not responsible. In order to calculate the inefficiency cost, the contractor must begin with actual cost of performing the project and subtract out (1) costs incurred due to contractor error and (2) the bid price for the project.

четвъртък, 10 ноември 2011 г.

SCOPE, COST, TIME, RISKS

These days I have been involved in a tender for construction of 20,000 m2 office building. My team hold several meetings with the prospective contractors and we tried hard to make clear that the scope, cost, time and risks are well defined by the contractors. Today I came across an article by Jason Westland which although is for client-project manager "scope, cost, time, risk" meeting I think is suitable for the client-contractor meeting:

Define the |Work Techniques
Establish the Triple Constraint when the Project Charter is Approved
At the end of the Definition and Planning process you should have an agreement with your sponsor on the work that will be completed and the cost (time) and duration that are needed to complete the work. These three items form a concept called the “triple constraint”. The key aspect of the triple constraint is that if one of the three items change, at least one, if not both, of the other items need to change as well. (The triple constraint is actually written a couple similar ways. The cost item can also be referred to as effort, which makes more sense if the labor costs are all internal and if there are no non-labor costs. Sometimes, the scope item is referred to as quality, which then focuses on delivering a certain quality level for a certain cost and duration. This is a more narrow aspect of the triple constraint, but the general concepts still hold true.)
Try to Understand Your Client’s Expressed Needs and Their Real Needs
The Project Charter describes the project at a high level. The Project Charter specifically describes the needs of the client, as well as the project team’s estimate of the effort, duration and cost to fulfill those needs. The details of the client’s need are then defined in more detail through the gathering of business requirements.
It is important for the project manager and project team to understand that the true needs of the client may or may not be the same as the needs that are expressed to you and that are the foundation of the Project Charter and the business requirements. In many cases, the client does not understand his true needs when the project starts. The true needs can sometimes evolve over the course of the project. Likewise, the client may have a clear vision of his needs, but he may have a hard time expressing the needs to the project team. To a certain extent, this is the purpose of scope change management – to allow the client to change the requirements of the project while it is in-progress.
The project team can document the expressed needs of the client and use the expressed needs as the basis for the approval of the Project Charter and the Business Requirements. However, the project team should do as good a job as possible uncovering the true needs of the client. This involves techniques such as asking good questions, asking targeted follow-up questions, gathering input from all key stakeholders, asking more questions when requirements don’t seem to make sense, etc. Obviously, the project team should do whatever it can to try to uncover the true needs of the client. The closer the true needs of the client are to his expressed needs, the closer you will be to getting the project right the first time.