Professional Documents
Culture Documents
Agenda
I.
Project Overview
II.
I. PROJECT OVERVIEW
Project Description
Construction of the Newhealth Hospital redevelopment.
Project consisted of interior finishes and fit-ups for the new
four-level addition to the hospital and renovations to the
existing structure.
Project Layout
Contract Dates
On March 1, 2006, the Service and Supply Department of
Newhealth (SSDN) awarded a contract to Supreme
Contracting inc. (Supreme).
This was a design-bid-build (fixed price) contract.
Planned construction was to be executed from April 1, 2006 to
December 30, 2006.
Delay Overview
Apr. 1, 2006
Planned
Extended
Duration
5.5 months
9 months
Apr. 1, 2006
Actual
14.5 months
Level 1
Unanticipated Interferences in the Ceiling on Level 1
Excessive Modifications to Patient Service Units (PSU)
Late Drawings of Device Location and Elevation
Excessive Modifications to Door Frame and Layout
Unanticipated
Interferences in the
Ceiling on Level 3
Mechanical and electrical
systems located in the ceilings
of Level 3 had excessive
interference issues.
The contractor discovered that
there was insufficient space to
accommodate the specified
mechanical and electrical
equipment.
Several mechanical and
electrical systems, including the
ventilation, required significant
design modifications.
Unanticipated Interferences
in the Ceiling on Level 3 (contd)
ITEMS TO BE INCLUDED
- Seismic hangers
- Lighting fixtures
- Spacings
- Cable tray
- Controls
- Vav box
- Medical equipment
Installation Impossibility
758 mm of materials into a 650 mm space
Someone did not CAD it, lets see what the
contract says
Whose pre-planning?
Delayed for circumstances beyond the
contractors control
Incorrect Slab
Openings for
Ductwork Systems
Existing openings in the
concrete slabs did not have
the correct dimensions to
accommodate ductwork
systems as designed.
No timely design was
provided by the design
professionals, so the
subcontractor proposed a
solution.
Unanticipated
Interferences in the
Ceiling on Level 1
Mechanical and electrical
systems located in the
ceilings of Level 1 had
excessive interference
issues.
The contractor discovered
that there was insufficient
space to accommodate the
specified mechanical and
electrical equipment.
Several mechanical and
electrical systems,
including the ventilation,
required significant design
modifications.
Excessive Modifications
to Patient Service Units
(PSU)
Owner requested
modifications related to
the medical gas located in
the PSUs
As seen, this request
introduced changes to
many of the rooms located
on Level 1
QTY
% OF CCOS
Incomplete Design
450
82
User requests
74
13
Others
20
Site conditions
Incomplete Design
82%
Others
4%
User Requests
13%
Site Conditions
1%
Entitlement Issues
V. DELAY ANALYSIS
Presented by: John Owens
Examples of Different
Delay Analysis Methods
As-Planned vs As-Built
Window or Snap Shot Analysis
Impacted As-Planned
Collapsed As-Built
Time Impact Analysis
Level 1 - Partitions
Level 1 Delays
CONTRACTUAL INITIAL
COMPLETION DATE
DEC 1, 2007
CLAIM 1
COMPLETION DATE
JUNE 10, 2008
2.
Extended Equipment..
160,000
3.
42,000
4.
Inclement Weather.
45,000
5.
Overtime Premiums .
23,000
6.
Productivity Loss ..
28,000,000
7.
Material Handling ..
150,000
8.
Safety .
75,000
9.
Disputed Extras .
457,000
300,000
135,692
SUBTOTAL :
$ 29,512,432
SUBTOTAL :
13. Claim Preparation (3.5%) .
TOTAL :
$ 124,740
2,951,243
$ 32,463,675
1,136,228
$ 33,599,903
Superintendent. $ 8,250
Secretary/timekeeper (labour burden incl) 3,000
Telephone (service & long distance) 450
Fax (rental, paper, long distance)
250
Couriers ..
250
Sundry Trucking .
400
Temporary Power ..
400
Temporary Toilets .
450
Office Building & Supplies ...
950
$27,000
$108,000
10,800
SUBTOTAL :
Profit (5%).
TOTAL :
$ 118,800
5,940
$ 124,740
950
550
2,500
2,000
2,200
2,270
600
1 530
Supremes Extended
Field Overhead Costs
Extra Work field O/H
Duplication! Typical pricing of extra work contains monies for field O/H
Actual O/H
Estimated costs
Extra work O/H
Optimum claimable O/H cost
Supremes Extended
Field Overhead Costs
Home Office O/H & Profit
Duplication! Supreme has claimed for home office O/H and profit
on:
- each individual item
- within the charge out rates used to calculate labour impact
- as a separate component at the end of the claim
- under the guise of lost revenue
Supremes Extended
Field Overhead Costs
Substantiation Should be Requested
It is possible that Supreme erred in making its claim and that some of the
amounts are not as high as is suggested.
Must ensure that Supreme is only claiming for ongoing time related costs
Supremes Extended
Field Overhead Costs
Extended Warranty Period
Due to delays, the gap between these two periods has extended
considerably
The owner could simply indicate that it will accept a warranty period
based on when the equipment was put into service.
2. Extended Equipment
4 months x $ 40,000/month
VALID
$ 160,000
- Justification required
INVALID
$ 31,500,000
3,150,000
$ 42,000
VALID
INVALID
Valid claim IF: the contract does not indicate that financing costs are part of
the mark-up for profit and home office overhead
The contractor has suffered additional costs because it was required to finance
the holdback for a longer period of time than would otherwise have occurred,
as the project duration incurred from 9 months to 14.5 months. Thus, it is
entitled compensation. It did not, however, finance the whole holdback for an
additional 5.5 months. Therefore, the calculation should be corrected to reflect
the varying level of holdback during the life of the project.
4. Inclement Weather
Additional Heaters
Temporary Protection .
Additional Labour ..
TOTAL:
VALID
$ 15,000
15,000
15,000
$ 45,000
- Justification required
INVALID
5. Overtime Premiums
a) Premium Portion of Overtime
Total Cost of Premium O/T Worked.....
Premium Cost Agreed by Owner .
SUBTOTAL:
b) Second Shift Differential
Total Second Shift Premium .....
Amount Agreed by Owner .
SUBTOTAL:
TOTAL PRICE: .....
VALID
INVALID
$ 25,000
(5,000)
$ 20,000
$ 4,000
(1,000)
$ 3,000
$ 23,000
5. Overtime Premium
Arguments:
Supreme contends that it accelerated the work with the knowledge of the
owner who should pay for the cost.
The owner contends that whereas it was aware that an acceleration program
was ongoing, it was not aware that it was to the owners account. It assumed
the contractor was making good its own delays.
Valid Claim?
6. Loss of Productivity
Hours Expended (includes subcontractors): ...
Hours Estimated at Bid:
Includes scaffolding
400,000 manhours
120,000 manhours
The following list identifies all the adverse conditions experienced in executing the work. Pursuant to industry
averages and taking a very conservative approach, we have calculated the following efficiency losses.
Adverse Productivity Factors
Manhours
Inclement Weather (5%) .......... 20,000
Shift Work (5%) .. 20,000
Overtime (5%) 20,000
Impact from Changes (10%) 40,000
Owner Interference (10%) 40,000
Congestion (5%) 20,000
VALID
INVALID
7. Material Handling
Additional equipment costs arising from
down time and standby time.. $ 150,000
VALID
- Justification required
INVALID
8. Safety
Additional tool box meetings
and indoctrination down time.$ 75,000
VALID
- Justification required
INVALID
9. Disputed Extras
Justified extras refused by consultant...$ 457,000
VALID
INVALID
Depending on the contract there may be some potential entitlement problems. One
should ascertain if the contractor has satisfied the requirement to provide the
appropriate Notice of Dispute.
If the alleged extra is deemed not to be an extra then the allocated hours and material
are in fact an underbid. If they were in the bid they would obviously not be an extra.
These disputed extras are frequently very telling about the project and the personalities
involved. The reasonableness of the parties becomes quite apparent as one reviews these
extras. Additionally, it is surprising how often one can resolve the claim by dealing with
these extras which are frequently the root source of the friction between the parties.
VALID
- Justification required
INVALID
In Supremes case, whereas there might be some validity to the claim, the
amount is clearly considerably inflated. A five and half month delay to a 14.5
month project should not cause 40% of the labour to be expended in a
higher wage rate.
The revenue guaranteed towards the support of his home office will be
reduced (if not eliminated) when a contractor encounters compensable
delays
This allowance will yield the required contribution to allow the head office to function
Therefore:
REVENUE
LOSS OF
REVENUE
COMPENSABLE DELAY
PLANNED
ACTUAL
TIME
Contract Billing
Total Billing X Total Overhead = Overhead Allocatable to the Contract
Allocatable Overhead
= Allocatable Overhead Per Day
Actual Contract Duration
Daily Overhead X Delay Days =
Loss of Revenue
Note:
Eichleay formula has been accepted in Canada several times.
In the USA, it is generally accepted when the delay is akin to a suspension during
the work but is still greeted with some skepticism as a means of calculating
compensable overhead at the end of the job.
The amount of money calculated may have absolutely no relation to the actual
losses of the contractor, who in fact may not even have suffered damages.
Step 1:
31.5 million
500 million
Step 2:
$ 441,500
13 months
Step 3:
X 7 million =
$ 441,500
VALID
=
$ 33,923/month
$ 33,933 X 4 months =
$ 135,692
INVALID
In the case at hand Supreme has several problems with the calculation.
the calculation for loss of revenue duplicates the amount charged for overhead and
profit in the next item
this claim item also duplicates the overhead and profit charged on individual items for
if they are paid Supreme has not suffered unabsorbed overhead
there also exists duplication with the amounts included for overhead and profit in the
extra work.
This claim item is a hard sell and Supreme is better off simply applying the mark-up
allowable in the contract, even if it yields a lower result. Applying the mark-up will cause less
confusion and controversy and will usually be resolved much quicker with the same or a
higher end result - i.e., money.
Step 2:
Step 3:
Unabsorbed Overhead
Contract Billing
X Total Overhead = Overhead Allocatable to the Contract
Total Billing
Step 2:
Allocatable Overhead
Original Contract Duration
Step 3:
Daily Overhead
Delay Days =
Unabsorbed Overhead
EMDEN
Overhead calculation based on historical average over 2 to 3
years
Financing
Insurance
Bonding
Extended Warranty
Business Development
VALID
- Justification
required
INVALID
Duplication. This item duplicates costs that have been included in the other
heads of claim.
The mark-up used in pricing this item should be equivalent to the mark up
allowance in the contract for extra work.
Administration
Purchasing
Engineering
Tendering
Financing
VALID
INVALID
- Rationale:
It should be noted, however, that if the dispute enters the arena of arbitration
or litigation the costs of experts are considered valid compensable costs.
2.
Extended Equipment..
160,000
3.
42,000
4.
Inclement Weather.
45,000
5.
Overtime Premiums .
23,000
6.
Productivity Loss ..
28,000,000
7.
Material Handling ..
150,000
8.
Safety .
75,000
9.
Disputed Extras .
457,000
300,000
135,692
SUBTOTAL :
$ 29,512,432
SUBTOTAL :
13. Claim Preparation (3.5%) .
TOTAL :
$ 124,740
2,951,243
$ 32,463,675
1,136,228
$ 33,599,903
Objectives
Discuss how and why Disruption claims are
failing
Describe a better way to get more or all of
your Rightful Entitlement earlier, and possibly
even avoid performance impediments that
would otherwise continue or worsen
My Experience
GC/CM
At Revay:
Claims Review
Project Planning and Control on major
infrastructure, ICI, tunnelling, heavy civil, road,
airport projects
Negotiated settlement of delay and disruption
claims
A Better Result
Recover rightful
entitlement in a timely
fashion
Improved project
performance thru more
efficient and effective
execution improves
bottom line
Definitions Impact/Disruption
Impact Costs: increased costs of one or several related
construction activities, in excess of those which would have
been but for an incident, action or omission relating to a
separate (discrete) item of work. Often referred to as ripple
effect, because originate in one or more isolated problems
and spread like ripples through the project. Not the direct
(or discrete) cost of making a change.
Sometimes referred to as disruption costs or loss of productivity
costs.
End-of-project Total-Cost
Disruption Claim
As Built
C.O. with direct
cost only
Changes
priced/
approved
without
disruption
(or timebased) costs
Forecast
Total Cost
Impact Claim
Delay
Electrical
conduit in
formwork; or
winter work
Forecast
Total Cost
Impact Claim
Delay
Impact
Total Cost
Impact Claim
Forecast
Delay
Numerous changes
over past 5 months
For past 3 months,
productivity below
plan & declining
Base contract
activities delayed,
taking longer.
Factors:
MCAA
Overtime/Over-crowding/Congestion:
US Dept of labour; NECA; CII; Army Corps
Studies re. work density, manpower pl.v. act
2. A SUCCESSFUL APPROACH
Activity Duration(w.d.) =
Productivity (s.f./m.h.)
9.75 s.f./m.h.
11,184 s.f.
932 s.f./w.d.
Effort m.h./w.d.
96 m.h./w.d.
932 s.f./w.d.
Measured Mile
Impacted vs. Non-Impacted Period
2,000
250
225
IMPACTED PERIOD
NON-IMPACTED PERIOD
200
1,400
175
1,600
Lost Productivity
1,200
150
1,000
125
Underbid
Sep - 94
Aug - 94
Jul - 94
Jun - 94
May - 94
Apr - 94
Mar - 94
Feb - 94
Jan - 94
Dec - 93
Nov - 93
Oct - 93
Sep - 93
Aug - 93
Jul - 93
Jun - 93
May - 93
25
Apr - 93
200
Mar - 93
50
Feb - 93
400
Jan - 93
75
Dec - 92
600
Nov - 92
100
Oct - 92
800
1,800
RESULTED IN
Productivity Monitoring
To gain experience and
expertise, and support
in your productivity
claims.
Conclusions
Contract compliance requires timely notice of reasonably
discernable effects so owner can mitigate its own damages
Deferring disruption claims until the end of the project is high risk
for the contractor
The project is best served by identifying performance problems
early so as to possibly avoid further delay and disruption
Contract change mechanism usually affords an opportunity to
claim for damages contemporaneously
Distinguish between cumulative and other types of impact in
quantifying claim
Even cumulative impact claims can be resolved contemporaneously
if the parties are willing and reasonable
Track project-specific productivity data to feed MM and EV analysis
3rd party monitoring
Negotiate settlement at the time, or make use of dispute resolution
provisions
89