Scope of Work – Baseline
This McLaughlin and McLaughlin (M&M) post is the sixth in a Subject Series Construction Claims and Disputes. This Subject Series contains discussions regarding potential and actual construction claims and disputes situations.
In the realm of construction claims and disputes, claims regarding scope of work are the largest or highest single category. The George Washington University publication Construction Contracting states that “Not surprisingly, specifications and plans are the focal point of most construction contract performance disputes and requests for price adjustments.” While this source pertains to US Federal government contracting, the same pattern can be seen in the private sector on a worldwide basis. Even more general, scope of work disputes extend beyond construction contracting, into engineering and procurement in the Engineering, Procurement and Construction (EPC) industry.
This series of posts will address scope of work within the overall subject of Construction Claims and Disputes. Since disputes and claims regarding scope of work are such a pervasive problem, some degree of detail will be presented. Further, the majority of the discussion will address entitlement to recovery (rather than pricing or quantum).
The source of all disputes and claims is departures from the baseline. These variances (cost, time or other) create the dispute. Therefore, understanding the baseline is essential.
In construction claims and disputes, the baseline is (almost always) the contract. The contract is the “deal” or the agreement between the parties. While it must meet several legal tests, the contract is the baseline that will be the focus of this discussion. You must have, know and understand the contract, or at least all portions and provisions that relate to scope of work.
Success in this area of claims and disputes depends almost exclusively on how well you know the contract. More specifically, how well you know and understand the scope of work.
Later in this post, the formulation of a Claims Management Plan (CMP) is discussed and related to contract scope of work.
Terminology and definitions that are used include:
“The Works” – The works are the subject of the construction contract, the completion of which is the responsibility of C (contractor) and which result in the building or engineering project, or the execution of that part of the construction project.” (Pickavance)
“Project Scope” – The work that must be performed to deliver a product, service, or result with the specified features and functions. (PMBOK)
“Scope” – What will be provided. (Wickwire)
In Construction Change Order Claims, Callahan presents the following two elaborations:
[A] Work Clause
The typical work clause provides:
The term “Work” means the construction and services required by the Contract Documents, whether completed or partially completed, and includes all other labor, materials, equipment and services provided or to be provided by the Contractor to fulfill the Contractor’s obligations. The Work may constitute the whole or a part of the project.
The work clause stands as a bar to recovery for extra work, unless the contractor can prove that the work performed was outside the contractor’s obligations, as defined by the relevant contract documents.
[B] Scope-of-Work Clause
The typical scope-of-work clause allows the owner and contractor to be as broad or as narrow as they wish in defining what will constitute “the work.” It is critical, however, that both the contractor and owner understand the importance of the scope of work clause and that each party understands as precisely as possible the work to be done for the agreed payment.
The drafter of the scope-of-work clause should carefully examine all the documents related to the project. Among those are the plans and specifications, the instructions provided to the bidders on the project, the bid and bid estimates submitted by the contractor awarded the job, correspondence, shop drawings, and all other provisions of the agreement (even though these documents may not be a part of the contract documents).
In the ABA publication Construction Damages and Remedies, Chapter 7 separates Contractor and Subcontractor Remedies for Breach into (among others) Changes within the Scope of the Contract and Changes beyond the Scope of the Contract. Of course, the implication is that one understands the scope of the contract, including scope of work.
In Allen and Martin’s Construction Law Handbook, the discussion regarding Changes and Extras states:
Few projects are completed with no changes or extras to the original contract documents. A “change” is defined as an alteration to an existing contract requirement concerning the work that is already required to be done. An “extra,” on the other hand, is an addition to the contract involving work that had not been included in the original agreement.
When we consider the Contract, it must include all contents and 100% of the entire document. This includes:
- With (Conformed to) all updates, changes, amendments, and other alterations
- All documents, exhibits, appendices, attachments and all other pieces of the full contract
Scope of work portions of the contract (imperative that you have all of the documents, not excerpts, lists or opinions by others):
- List of all contract documents
- Entirety of the agreement provisions
- Order of precedence
- Governing or Applicable law
- Industry practices (local normal and customary practices)
- Description of the scope of work, services, facilities, deliverables, supply and other
- Specifications and drawings
In this area, seek advice from competent and experienced advisor. Types of advisors include: contract administrator, contract manager, contract attorney, project controls manager, technical manager, business manager, commercial project manager and any other subject matter expert that is comfortable with the form of contract in question. The focus is on understanding the contract baseline scope of work.
Common mistakes include using the Request for Proposal or the proposal (bid) as the contract. Routinely, these documents are excluded or selectively included in the actual signed contract. Other mistakes include using contract documents that have not been properly administered or kept current (such as changes entered).
Look for scope of work, scope of facilities, scope of services, scope of supply and other allocations of required efforts to complete the project. Consider what party will provide design, equipment, materials, construction support, site infrastructure, completion and other aspects of a completed project.
As an example, consider that the contract scope of work requires the contractor to perform mechanical erection of a piece of equipment that is supplied by others (commonly called “free issue equipment” or “owner-furnished equipment”). This interface needs to be well defined. Precision regarding the status of preassembly and detailed erection instructions can become issues. Vendor support is important. Handling fabrication problems rework and missing parts should be addressed in the scope of work.
M&M recommends the preparation and use of a Claims Management Plan (CMP). In formulating the CMP, prepare a matrix of contract scope of work items compared to (verse) parties to the contract and stakeholders. Use this effort to identify gaps and interfaces. The gaps and interfaces should be used to prepare and focus the strategy and plan for the scope of work portion of the CMP.
We wish you good luck in your construction claims and disputes challenges and endeavors. Enlightened understanding of contract scope of work is a fundamental key to success. Develop a Claims Management Plan (owners, prime contractors and subcontractors) and follow the plan.
McLaughlin and McLaughlin has extensive experience and expertise in major construction claims and disputes. This experience includes work for both owners and contractors. Further, the experience includes testimony on this topic.
It is important to note that McLaughlin and McLaughlin [M&M] is not a law firm and is not intending to provide legal advice. M&M is a consulting firm providing (among other services) non-legal expertise in construction claims, dispute resolution and litigation support. The Resource Center is for the convenience of blog visitors and M&M does not offer this for commercial purposes. For further information on M&M services, please see www.McLaughlinandMcLaughlin.com.