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CONSTRUCTION CLAIMS and DISPUTES – (Part 8)

January 27, 2014 By

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: , , , , , , , , , , , , , , , ,

CONSTRUCTION CLAIMS and DISPUTES – Subject Series Summary

January 8, 2014 By

Construction Claims and Disputes is the most popular subject on Project Professionals and has been for several years.  Further, it is the most requested line of services provided by McLaughlin & McLaughlin.    M&M are project management practitioners (in the field) and, yes, we practice what we preach.  Further, our choice of topics for Project Professionals posts is driven by and reflective of practical and current issues.  This is not esoteric, academic or hypothetical “stuff”.

This summary update provides readers with an overview of prior posts and provides a baseline for future posts that will follow on a timely basis.  Initially, this Subject Series, Construction Claims and Disputes, was posted during January 2011 through August 2013.  During the past several years, greater than 25% of views by visitors have been to this Subject Series.

Ideally this Subject Series  provides a starting point to investigate best practice on many planning and execution features of construction claims and disputes.

Construction Claims and Disputes (Part 0)  – This introduction formats the discussion with definitions, claim categories and key industry references.  This post is consistent with M&M experience in many years of professional services.

The Overview (Part 1)  –Part 1 updates Part 0, the introduction.

Construction Claims Management Planning (Part 2) – This is the most popular post in this (most popular) Subject Series.  Construction claims (or the risk of claims) can and should be professionally managed.  View this process as a piece of project (execution) planning [link].  This post outlines elements of a Construction Claims Management Plan.  Further, it addresses elements of defining a Claim Strategy.  Stakeholders include Owners, Prime Contractors and Subcontractors.  Do not miss this post.

Current Project Professionals Posts (Part 3) – Claims are organized into four general categories.  These categories are consistent with the frequency of occurrence, methods of management and other key managerial considerations.  The categories are

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

Pricing Construction Claims (Part 4) – This post addresses the…  Think you know how to price your (or other’s) claims?   Andrew (Andy) Ness, 2012-13 Chair, ABA Forum on the Construction Industry probably disagrees with your answer.  Read this post and consider Andy’s position as well as other considerations regarding claim pricing/damages.  The content of the recent ABA book on the subject is covered.

Pricing Construction Claims (continued) (Part 5) – Are construction claims and disputes “all about the money?”  Some believe this to be the case.  This post (Part 5) expands on Part 4 by addressing pricing and citing additional references.

Scope of Work – Baseline (Part 6) – It is widely believed and accepted that Scope of Work and/or Changed Work is the single largest source of claims and disputes in engineering and construction (as well as many other contracted services).  In order to establish departures from the baseline scope of work, you must be able to define the applicable baseline.  This post cites various sources for baseline definition,

Scope of Work – Plans and Specifications (Part 7) – Several industry sources (publications) are used to elaborate on execution and contracting strategies that rely on plans and specifications as a major component of scope or work definition.  This discussion includes typical contract documents and contract provisions wherein scope of work, services, supply and / or facilities is / are defined.  Suggestions for configuration and change management in the field are included.

Other Subject Series that are both relevant and popular include:

Going forward, we will post other features of CONSTRUCTION CLAIMS and DISPUTES.

My we wish you the best of luck and let us all attempt to confront and deal with these and other project management challenges.  It is crucial that recognition and anticipation of these issues occur during initiation and planning.  However, the recognition and management should continue through execution, controlling and closeout.

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, Projects, Uncategorized Tagged With: , , , , , , , , , , , , , , , ,

PROJECT PROFESSIONALS POSTING RESUMPTION

January 2, 2014 By

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: , , , , , , , , , , , , , , , , , , , , , , , ,

MANAGING RISK OF DELAY – Managing Contractor Schedules (Part 13)

September 28, 2013 By

This McLaughlin & McLaughlin post is the thirteenth (13th) in a series  of discussions regarding various aspects of time management as it relates to the risk of delay.  This post addresses managerial considerations for dealing with schedules prepared by contractors and submitted to owners or their agents (construction managers, managing contractors, advisors, etc.).

Recently, Mr. Chris Carson authored an excellent article titled “Dealing with Contractors Schedules That Cannot be Approved.”  This fine article was published in COST Engineering(September/October 2013).

This article contains excellent advice for project teams regarding schedule management.

Mr. Carson’s article is, in reality two articles in one.  While Mr. Carson’s article presents a methodology for problematic situations (which he calls DSAB), the preamble and initial discussion for this article is highly useful and applicable to project management teams as they address the frontend of project planning and execution.  This post summarizes the sage advice provided by Mr. Carson regarding frontend project management challenges as they relate to scheduling and time management. [Read more…]

Filed Under: Claims, Featured, Projects, Uncategorized Tagged With: , , , , , , , , , , , , , , , , , , ,

CONSTRUCTION CLAIMS and DISPUTES – (Part 7)

August 6, 2013 By

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: , , , , , , , , , , , , , ,

CONSTRUCTION CLAIMS and DISPUTES – (Part 6)

June 25, 2013 By

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: , , , , , , , , , ,

A View from the Field Project Execution / Contracting Strategies Large and Complex Industrial Projects

May 6, 2013 By

This article from the Division 1 of the ABA Forum on the Construction Industry Newsletter “The Dispute Resolver” represents George T. McLaughlin’s “View from the Field” formed throughout the course of his 30+ year career in the industrial marketplace.[1]   His article is broken into four parts.  Part 1, below, describes the evolution of the delivery systems in large and complex industrial projects[2]. The remaining sections, which we will publish in our next three newsletters, will discuss the legal implications (Part 2), impact on claims, disputes, and resolutions (Part 3), and prevention and corrective processes (Part 4).

Part 1 of 4 – Framing the Issue 

When the earth’s tectonic plates shift, unless there is a resulting earthquake, it goes unnoticed.  The movement is not perceptible.  Nevertheless, major changes are occurring.  In large and complex projects, with three to five (or longer) year schedules, industry shifts may not be perceptible.  Nevertheless, major changes and related impacts may be in progress.  Trends and changes in project execution and contracting strategies are similar.  These trends, however gradual and unnoticed on a daily or monthly basis, cause major impacts on existing and future projects.  While industry experts cite or drive these changes, the impact on the field may be delayed or go unrecognized by many, if not all stakeholders.  The business motivations driving the trends discussed below are varied and complex.  Perhaps, the central theme is risk tolerance or management.  The large worldwide prime contractors (typically Engineer Procure Construct) migrated toward limiting major risks by limiting scope of work, insisting on reimbursable cost (as opposed to fixed price) commercial  terms, or both.  Owners chose to limit or compartmentalize risks by breaking scope of work into smaller packages and seeking fixed price on these smaller packages.  Construction Contractors retained a willingness to work on fixed price commercial terms; but, increased their tendency toward claims and disputes processes in order to manage their risks.  Collectively, we see a myriad of fixed price scope of work packages being pieced together to form a complete project.  Formerly, this mosaic of work scopes was under one Prime Contract. [Read more…]

Filed Under: Claims, Featured, General, Productivity, Project Planning, Projects, Uncategorized Tagged With: , , , , , , , , , , , ,

CONSTRUCTION CLAIMS and DISPUTES – (Part 5)

April 1, 2013 By

Pricing Construction Claims – (continued)

McLaughlin and McLaughlin’s Project Professional post is the fifth in a Subject Series Construction Claims and Disputes.  This Subject Series contains discussions regarding potential and actual construction claims and disputes situations.  In this series, we focus on the key aspects of construction claims and disputes management (rather than mechanics).  This discussion is a continuation of Part 4 regarding 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, pricing).

Even more compelling, the decision to proceed with a claim (and potentially spend millions of dollars on expenses such as legal and expert 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 managerial decision.

McLaughlin and McLaughlin  has extensive experience and expertise in the strategy and pricing of major construction claims and disputes.  This experience includes work for both owners and contractors.  Further, the experience includes testimony on this topic.

In this discussion, we are guided by another highly useful and well written book.  This reference is Calculating Construction Damages, Second Edition, by William Schwartzkopf and John J. McNamara. [Read more…]

Filed Under: Claims, Featured, General, Projects Tagged With: , , , , , , , , , , , , ,

CONSTRUCTION CLAIMS and DISPUTES – (Part 4)

March 17, 2013 By

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 – (Part 3)

March 4, 2013 By

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: , , , , , , , , , , , , , , , , , ,
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