Construction claims and disputes

CAPITAL PROJECTS COST CONTROL

January 19, 2017 By George T McLaughlin PMP CCM

In light of the 2017-2018 Construction Forecasts, Capital Projects Cost Control is paramount and one to take a more acute focus.

In Project Execution, Field Labor Shortages Represent The Highest Risk To Achievement Of Time & Cost Objectives Large And Complex Projects.

Major Shortages in Construction Field Labor Will Influence (Negatively) US Construction Costs.

In Execution (After Stage Gate Three), A Major Risk to Project Cost Management Resides in Labor Cost (overruns),

The Highest Risk to Achieving Project Cost Management Occurs In Execution – After Stage Gate Three/Full Funding.

Driven By A Long History of Cost and Schedule Overruns, Managerial Thinking Now Prioritizes Cost Certainty.

On Complex Capital Projects, Cost Certainty Has Become a Compelling Objective.

McLaughlin & McLaughlin has assisted numerous Major Capital Projects successfully over the years by providing cost effective business solutions and recovery plans.

What makes McLaughlin & McLaughlin unique from the others is that we not only perform project management services but dispute resolution as practitioners.

It is important to note that McLaughlin and McLaughlin Project and Dispute Consulting LLC [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. For further information on M&M services, please see www.McLaughlinandMcLaughlin.com.

Filed Under: Featured, General, Productivity, Project Planning, Projects Tagged With: Best Practice, Capital Projects, claims and disputes practitioners, Construction claims and disputes, Construction Field Labor Productivity, Cost and Schedule Certainty, Craft labor Shortages, Dispute Resolution, Field Labor Productivity, George T. McLaughlin PMP, large and complex industrial projects, PMI, Project Execution Plan, Project Management Institute (PMI), Time Management Strategy, Troubled Projects, www.mclaughlinandmclaughlin.com

LABOR OVERRUNS

January 13, 2017 By George T McLaughlin PMP CCM

As the increase of projected Major Capital Projects for 2017-18 emerge with all its implications troubled projects are a likely result. LABOR OVERRUNS are a typical component in troubled projects.

LABOR OVERRUNS – impact several project baselines. Cost, Schedule and Progress are at risk.

LABOR OVERRUNS – Labor Overruns are a major risk in any project with a significant labor component.

LABOR OVERRUNS – Early detection, correction and management require use of proper KPI’s.

LABOR OVERRUNS – Use of thoughtful KPI’s facilitate early/proactive corrective action.

LABOR OVERRUNS – Labor Shortages in 2017 and beyond will lead to upward pressure in labor rates.

LABOR OVERRUNS – Labor shortages in 2017 and beyond will lead a man-hour overruns (poor productivity).

McLaughlin & McLaughlin has assisted numerous troubled Major Capital Projects successfully over the years by providing cost effective business solutions and recovery plans.

Filed Under: Claims, Featured, General, Productivity, Project Planning, Projects Tagged With: AACE International, Business solutions, Capital Projects, Construction claims and disputes, Cost Certainity, Field Labor Productivity, George T. McLaughlin PMP, Labor Overruns, Labor Productivity, McLaughlin & McLaughlin, Progress, Project Execution Planning, Schedule Certainty, Troubled Projects

CONSTRUCTION CLAIMS and DISPUTES – (Part 9) Why Scope of Work?

July 3, 2014 By George T McLaughlin PMP CCM

Why Scope of Work?

This McLaughlin and McLaughlin (M&M) post is the ninth in a Subject Series Construction Claims and Disputes.

Scope of Work is (or should be) the basis for most claims and disputes. As we previously discussed, claims and disputes regarding scope of work are a widespread problem and represent the most common issue. Perhaps 75 to 90% of all engineering and construction claims and disputes involve contract scope of work. But the issue goes further. Scope of work influences and is a foundation for delay, acceleration, disruption, payment and many other types of disputes. Consequently, virtually all claims (should) start with scope of work.

Scope of work is a huge factor in capital investments. In the engineering and construction market, investments total in the hundreds of billions of dollars (USD). These investments are increasing, particularly in areas such as the US Gulf Coast. Typical budgets for changed work are targeted for 10% which makes this market of tens of billions of dollars (USD). However, this is merely the budget, not the reality.

Most of these investments involve contracting for goods and services. Each of these transactions must consider scope of work (services, facilities, supply) as primary to the transaction. Consequently, each transaction has risk of claims and disputes regarding the related scope of work. Stakeholders include: owners, prime contractors, subcontractors, engineers, architects, lawyers, consultants, investors, lenders, sureties, governments and others.

Recognition, entitlement, pricing and proving (if necessary) claims for additional compensation related to scope of work is a huge challenge with large amounts of money at risk. Largely, this is not legal work. However, it requires expertise. If the project team lacks this expertise, a subject matter expert (SME) is needed. The SME must possess the expertise in recognition, entitlement, pricing, evidence and related impacts to the project’s performance (time, cost, and other considerations).

CONSTRUCTION CLAIMS and DISPUTES – (Part 8)

January 27, 2014 By George T McLaughlin PMP CCM

Scope of Work – Impacts

This McLaughlin and McLaughlin (M&M) Project Professionals post is the eighth in a Subject Series Construction Claims and Disputes.

Recent posts (Parts 6, 7) address scope of work within the overall subject of Construction Claims and Disputes. Claims and disputes regarding scope of work are a widespread problem and represent the most common issue. Perhaps 75 to 90% of all engineering and construction claims and disputes involve contract scope of work. However, this is not confined to engineering and construction.

Direct compensation for a scope of work change may merely be the proverbial “tip of the iceberg.” What about the rest of the story? Is the contractor missing many other costs or schedule impacts? Often, this is the case. This issue may be broader that an added piece of equipment, redesign to avoid a conflict or similar events.

Scope of work disputes are building blocks to other claim elements in the dispute.

Delay – Changes can add work to the project critical path. If so, this would cause the forecasted project completion date to be extended (potentially later than planned).
Progress – Changed work adds to the overall project work content, thereby changing the progress measurement and reporting (Earned Value).
Disruption / Productivity – Changed work impacts field labor productivity, a major risk to contractors.
Overheads / Indirects – Changed work may add requirements for additional construction support, supervision, insurance and other indirects.
Terms and Conditions – The cost of bonding, insurance, warranties, guarantees, and many others can be impacted by changed work.
Profit / Fee – proper compensation in this area can be challenging.

The majority of the discussion will address entitlement to recovery (rather than pricing or quantum). For pricing (or quantum), please see McLaughlin & McLaughlin’s Project Professionals Construction Claims and Disputes Part 4 and Part 5. [Read more…]

Filed Under: Claims, Featured, General, Productivity, Project Planning, Projects Tagged With: Change Orders, Construction claims and disputes, construction claims damages, Construction Claims Management, Construction Claims Management Plan, construction claims pricing, Construction Claims Quantum, Delay, Disruption, Disruption/Productivity Impacts, Field work orders, George T. McLaughlin PMP, McLaughlin & McLaughlin, Plans and Specifications, Scope of Work Claims, Time Impacts, www.mclaughlinandmclaughlin.com

PROJECT PROFESSIONALS POSTING RESUMPTION

January 2, 2014 By George T McLaughlin PMP CCM

McLaughlin and McLaughlin [M&M] is pleased to announce that they will resume postings at their blog, Project Professionals. Since mid-2013, M&M has been heavily involved with several large assignments [Construction claims regarding several power plant projects]. Now that workload permits, new blog postings will be offered.

M&M wishes to remind followers (new and ongoing) that there are many offerings at the Project Professional site. They are organized by what we call Subject Series.

These Subject Series are:

M&M will resume with additional posts in the Subject Series Construction Claims and Disputes. This Subject Series focuses on methodologies, process, reference resources, techniques and other practical advice regarding the preparation, evaluating and managing construction claims and disputes.

We hope that you will find these existing and new posts informative and relevant.

We wish you the best of luck in this New Year.

Please 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 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.

Filed Under: Claims, Featured, General, Productivity, Project Planning, Projects Tagged With: Best Practice, Best Practices, Construction Claims, Construction claims and disputes, Construction Contract Planning and Scheduling, Engineering and Construction Disputes, Forecasting, McLaughlin & McLaughlin, Notice of Recognition, PMBOK, Productivity, Productivity Management, Progress, Progress Assessment, Project Execution Plan, Project Execution Planning, Project Management, Project Management Institute (PMI), Project Management Planning, Recognition, Schedule Specification, Stakeholder Management, Stakeholders, Ways of Working, www.mclaughlinandmclaughlin.com

CONSTRUCTION CLAIMS and DISPUTES – (Part 7)

August 6, 2013 By George T McLaughlin PMP CCM

Scope of Work – Plans and Specifications

This McLaughlin and McLaughlin (M&M) post is the seventh in a Subject Series Construction Claims and Disputes. This Subject Series contains discussions regarding construction claims and disputes.

Recent and subsequent posts (Parts 6, 7 and the next few) (will) address scope of work within the overall subject of Construction Claims and Disputes. Disputes and claims regarding scope of work are a highly pervasive problem and represent the most common type of claim or dispute. Perhaps 75 to 90% of all engineering and construction claims and disputes involve contract scope of work.

Virtually all disputes and claims arise as a result of 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.

In this discussion, the plans and specifications are the scope of work baseline. Typically, the plans and specifications are augmented by other contract documents (such as terms and conditions, site services, execution plan documents and others). Using the term “design specifications,” let us view these documents as “…the specific requirements for constructing, testing, inspecting, and the materials provided for the project” (Brams and Lerner).

The majority of the discussion will address entitlement to recovery (rather than pricing or quantum). [Read more…]

Filed Under: Claims, Featured, General, Projects Tagged With: Change Orders, Construction Claims, Construction claims and disputes, construction claims damages, Construction Claims Management, Construction Claims Management Plan, construction claims pricing, Construction Claims Quantum, Construction Contract Claims, Field work orders, George T. McLaughlin PMP, McLaughlin & McLaughlin, Plans and Specifications, Scope of Work Claims, www.mclaughlinandmclaughlin.com

CONSTRUCTION CLAIMS and DISPUTES – (Part 6)

June 25, 2013 By George T McLaughlin PMP CCM

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. [Read more…]

Filed Under: Claims, Featured, General, Projects Tagged With: Claims Management Plan, Construction claims and disputes, construction claims damages, Construction Claims Management, Construction Claims Management Plan, construction claims pricing, Construction Claims Quantum, George T. McLaughlin PMP, McLaughlin & McLaughlin, Scope of Work Claims, www.mclaughlinandmclaughlin.com

CONSTRUCTION CLAIMS and DISPUTES – (Part 4)

March 17, 2013 By George T McLaughlin PMP CCM

Pricing Construction Claims

This post is the fourth in McLaughlin & McLaughlin’s Project Professionals Subject Series Construction Claims and Disputes which are (will be) discussions regarding challenges in potential and actual construction claims and disputes situations. In this series, we focus on the key aspects of construction claims and disputes management. This discussion addresses the pricing of claims and disputes. The compulsion or question is – “How much is a potential claim worth?” In virtually all disputes, the central issue is the money. Since it is a win-lose situation, the outcome may be that someone (one party) will pay another party. Hence, the money is the ultimate issue (sometimes time is at issue, generally presenting itself in money or damages related to the time).

There is an old saying “win the battle, lose the war” which applies to damages in construction claims and disputes. With facts, logic and analyses on their side, one party (Party A) can prepare and present a very compelling argument regarding the claim (against Party B). However, winning the argument on the cause (or as it is called, entitlement) is relatively useless without winning the argument on the money related to the effect (or sometimes called damages, quantum, compensation).

Even more compelling, the decision to proceed with a claim (and potentially spend millions of dollars on expenses such as legal fees) should be heavily driven by the potential recovery (the money). Consequently, parties must have a reasonable assessment of the true value of the dispute and the ability to successfully demonstrate or prove these damages in the resolution process. Without the ability to prevail on a suitable and acceptable level of damages, pursuing a construction claim through a costly dispute resolution process could be an unwise decision.

In this discussion, we are guided by a highly useful and well grounded newly published book. It is published by the American Bar Association (ABA) and has been recently (2013) been updated. This publication is Construction Damages and Remedies, second edition, by Forum on the Construction Industry, American Bar Association. It is edited by W. Alexander Moseley of the law firm Hand Arendall LLC. There are nine authors. [Read more…]

Filed Under: Claims, Featured, General, Projects Tagged With: Construction claims and disputes, construction claims damages, Construction Claims Management, construction claims pricing, Construction Project Management, constructions claims quantum, EPC Project Management, George T. McLaughlin PMP, McLaughlin & McLaughlin, Project Management, Project Management Institute (PMI), Project Management Plan, www.mclaughlinandmclaughlin.com

CONSTRUCTION CLAIMS and DISPUTES – (Part 3)

March 4, 2013 By George T McLaughlin PMP CCM

Current Project Professionals Posts

McLaughlin & McLaughlin’s Project Professionals post is the third in a Subject Series. Construction Claims and Disputes which are (will be) discussions regarding managerial challenges in potential and actual construction claims situations. In this series, we focus on the managerial aspects of construction claims and disputes management. This summary discussion addresses the many posts that have been presented in the past and are at the Subject Series tab of Project Professionals.

In the engineering and construction industry, claims and disputes take many forms and focus on many topics. For simplicity of discussion, we will use the follow the following categories:

Scope of Work, Changed Work or Variations
Delay and Acceleration, Time-Related
Disruption / Productivity (usually labor/labour)
Terms and Conditions (and other subjects).

McLaughlin & McLaughlin’s Project Professionals has posted (or published) greater than 60 posts regarding one or more aspects of Construction Claims and Disputes.

The balance of this post identifies the Subject Series and posts that are at Project Professionals and are relevant to construction claims and disputes. [Read more…]

Filed Under: Claims, Featured, General, Projects Tagged With: Best Practice, Best Practices, Construction claims and disputes, Construction Claims Management, Construction Claims Management Plan, Construction Contract Claims, Construction Project Management, Delay, Disruption/productivity, EPC Project Management, Free Issue Equipment, Free Issue Materials, George T. McLaughlin PMP, McLaughlin & McLaughlin, Project Execution Plan, Project Execution Planning, Project Management, Project Planning, www.mclaughlinandmclaughlin.com

PROJECT PLANNING – (Part 5)

February 20, 2013 By George T McLaughlin PMP CCM

A Key Planning Resource

Industrial Megaprojects by Edward W. Merrow (Merrow, 2011)

This post is the fifth in a series of discussions regarding challenges in project planning and management situations. In this series, we focus heavily on program / project planning and management. This post addresses a major resource that can be highly useful in the planning and initial management of large and complex projects.

This resource is Industrial Megaprojects by Edward W. Merrow. The subtitle is Concepts, Strategies, and Practices for Success. This subtitle is particularly appropriate and compelling.

While the title is focused on “megaprojects,” the advice and guidance has value and merit in considering the planning and management of large and complex projects. Smaller projects may be better guided by previous Project Professionals discussions. Some of the key discussions are summarized in the previous post, PROJECT PLANNING (Part 4) Summary of Posts.

As presented on the dust cover of this fine book, “Mr. Merrow is the founder and CEO of Independent Project Analysis, Inc. (IPA), the world’s leading consulting firm evaluating billion-dollar megaprojects of national and international oil, chemical, pharmaceutical, and major mineral companies, and benchmarking their cost, schedules, safety, startup, and operational performance.”

While this lofty description can be both impressive and intimidating, the book has a wealth of information regarding project planning and initial execution. [Read more…]

Filed Under: Featured, General, Project Planning, Projects Tagged With: Construction claims and disputes, Contracting, Edward W. Merrow, EPC, George T. McLaughlin PMP, Industrial Megaprojects, McLaughlin & McLaughlin, Project Execution Plan, Project Execution Planning, Project Initiation, Project Management, Project Planning, www.mclaughlinandmclaughlin.com

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