This Subject Series addresses the sources and implementation of a contract schedule specification. The Subject Series structure is and will be multiple parts and be a logical extension of the series titled MANAGING RISK OF DELAY.
The overview of this series is:
- Managing Risk of Delay – Schedule Preparation and Maintenance (Part 4)
- Managing Risk of Delay – Schedule Specification Sources and Implementation (Part 8)
- Schedule Specification Implementation Overview (Part 2)
- Making State of the Art Scheduling Specifications Work (presented in multiple parts).
The balance of this post and subsequent ones in this series are/will be from the paper. In general, this informative work compares two approaches to schedule specification implementation.
This extract from the paper covers:
- WHO OWNS THE FLOAT?
- THE RIGHT TO FINISH EARLY
- WARNING (understanding of value and commitment)
- PRELIMINARY SCHEDULE SUBMITTAL
WHO OWNS THE FLOAT?
The Corps [US Army Corps of Engineers] specification states that float or slack is not time for the exclusive use or benefit of either the Government or the Contractor. In other words, the float belongs to whoever needs it first. This is the most equitable method of allocating float.
For example, if the Contractor owns the float and the Owner puts a hold on site signage, an activity with 300 calendar days of float and an early start date six weeks after notice to proceed, the Contractor would be entitled to a time extension and possibly even delay damages for a delay with no impact on the project at all. This violates both common sense and common law which requires that the Contractor mitigate damages when confronted with a delay.
On the other hand, if the Owner owns the float, the Contractor is not only obligated to perform according to the early start schedule, but if the Contractor falls 30 days behind schedule on an activity with 90 days of float this becomes a concurrent delay with a 30 day Owner delay to a critical path activity. Thus, the Owner has delayed the project by 30 days, entitling the Contractor to a 30 day time extension, but the Contractor is not entitled to delay damages since the Contractor has caused a concurrent delay even though to a non-critical activity. This is just as unfair to the Contractor as the previous example is to the Owner.
THE RIGHT TO FINISH EARLY
But, agreeing (or specifying) that the float belongs to whoever needs it first doesn’t solve every problem. What happens when the Contractor submits a schedule demonstrating a plan to finish early? The Corps specification is silent on this issue while the courts have upheld the Contractor’s right to finish early. This is especially true when the Contractor’s bid is based on finishing early, and the Contractor puts the Owner on notice of his plan to finish early with the initial schedule submittal. One of the new clauses in the DFW Airport spec states,
“In the event that the approved Schedule indicates the Contractor’s plan to finish prior to the contract completion date, the Contractor and the DFW Airport BOARD shall execute a contract modification adjusting the contract completion date to coincide with the Contractor’s planned finish date at no expense to the BOARD.”
This clause makes the plan to finish early a commitment. It eliminates the argument of whether submitting a plan to finish early creates float for the exclusive use of the Contractor between the planned finish date and the contract completion date. It commits the Contractor to either meet the plan to finish early or be subjected to liquidated damages and even termination for default just as if the Contractor’s original plan had shown completion on the contract completion date.
In analyzing schedule related disputes between Contractors and Owners, it becomes frighteningly clear that even when CPM scheduling is properly specified, it is not used to its full potential and often not used properly at all. Two major factors in the underutilization of scheduling are a lack of understanding of the value of monitoring actual performance against a reasonable plan, and a lack of commitment on the part of both the Contractor and the Owner to the use of CPM as the cornerstone of project control. To increase the awareness of the importance of the CPM scheduling specification, DFW has added the following paragraph in a prominent location on each Request for Proposal,
“Careful evaluation and pricing of the schedule provisions of this contract are important to assure compliance with the language and intent of the schedule specification. The schedule provisions are designed to provide the Contractor with a tool for planning and controlling the work. The schedule provisions must be strictly followed to insure both timely progress payments and equitable compensation for changes and delays. The Contractor must perform in accordance with the approved CPM schedule to achieve timely completion of all contract milestones and to avoid acceleration, termination for default, and end-of-contract claims for liquidated damages. Please give the schedule provisions particular consideration and resolve any areas of uncertainty by asking appropriate questions at the pre-bid conference.”
This warning encourages the Contractor to read the scheduling specification prior to bidding rather than after award when the first schedule problems occur. It also encourages a dialogue at the pre-bid conference to clearly define the role of CPM scheduling in monitoring performance and measuring the impact of delays. Finally, the warning increases the likelihood that the successful bidder will include the cost of complying with the schedule specification in its proposal.
PRELIMINARY SCHEDULE SUBMITTAL
One of the difficulties encountered in successfully administering a scheduling system is the requirement that the Owner receive a schedule from the Contractor reflecting the Contractor’s original plan to perform the original scope of services. When the initial schedule submittal is due several weeks after contract award, sometimes the Contractor’s logic has been adjusted to exaggerate the impact of an early Owner delay; for example, planning to start pier construction for an aerial transitway at the location where overhead power lines interfere with the piers when the other 100 pier locations are unobstructed.
The DFW Airport specification requires the Contractor and major subcontractors to meet with the BOARD’s representative at the time of the Pre-Award Conference to discuss the contract schedule requirements.
“The apparent low bidder must prepare a Preliminary CPM Network Diagram for this meeting showing in detail the activities to be accomplished during the first sixty (60) calendar days of the Project. Costs of activities expected to be completed or partially completed during the 60 day period shall be included on the Preliminary CPM Network Diagram.”
The detailed progress schedule is required within 20 calendar days after receipt of Notice to Proceed.
By requiring a detailed sixty day network diagram prior to award and a complete schedule within three weeks after Notice to Proceed, the Owner is more likely to get a schedule reflecting the original plan than if the original schedule submittal were required six weeks after Notice to Proceed as in a typical Corps specification. Also, by meeting with the Contractor and major subcontractors with Preliminary CPM Network Diagram in hand, prior to contract award, the likelihood of receiving an acceptable initial schedule submittal is greatly enhanced.
By requiring costs on activities on the sixty day network diagram, DFW can use the schedule for determining the amount of the first progress payment. This provides the Contractor with an additional incentive for timely submittal of a realistic schedule.
This series of posts will continue with further extracts from the paper (please see above for title).
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 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.