CPM Scheduling and Lost Productivity Claims

ORANGE COUNTY BAR ASSOCIATION

CONSTRUCTION LAW SECTION WEBINAR

CPM Scheduling and Lost Productivity Claims

Wednesday, March 3, 2021

CPM Scheduling and Lost Productivity Claims

March 3, 2021

Imagine the result

Mark Guevara, Esq., CFCC, PSP, PMP

Andrew Dick, PSP, PMP

ARCADIS U.S., Inc.

2

Agenda

1. Critical Path Method (CPM) Scheduling

a) Basics

b) Baseline Schedule

c) Updated Schedule

d) Delay Analysis

e) Tips and Tricks

2. Lost Productivity Claims

a) Basics

b) Common Causes

c) Analysis

d) Quantification

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Education, License & Certifications

• BS, Construction Management

• JD, University of La Verne COL

• Esq., CFCC, PSP, PMP, EIT

• Chairman (2016-19), CFCC Bd, AACEi

• Secretary/Treasurer, Const Law, OCBA

Industry Experience: 30+ years

• JW Design & Construction, SLO, CA

• U.S. Army, 39th Engr. Bn., Ft Devens, MA

• U.S. Army Corps of Engineers, LA District

• Mahaffey & Associates, Irvine, CA

• Fluor Corporation, Aliso Viejo, CA

• Case Ibrahim & Clauss, Irvine CA

• PinnacleOne and Arcadis, Irvine, CA

Speaker | Mark Guevara

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Education, License & Certifications

• BSc, Industrial Management, 2016

• AACEi-PSP, CMAA-CMIT, PMI-PMP

Industry Experience: 20+ years

• Claims analyst, scheduler, project controls

engineer, risk manager.

• Specialty in planning, time management,

scheduling & project risk management.

• Worked for various contractors, consultants

and represented various owners in the

public, private and government sectors.

• Work experience includes buildings,

infrastructure, wastewater, oil & gas, mining

& metals, defense

Speaker | Andrew Dick

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Construction Scheduling Basics

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The Critical Path

▪ Longest Path or series

of activities [critical

activities] in a

schedule network

▪ Longest Path dictates

the earliest possible

completion

▪ Delays to critical

activities delay

completion

▪ Total Float (flexibility)

= Zero

* AACEI RP 49R-06 Identifying the Critical Path

7

Critical Path Method (CPM) Scheduling

1. A list of all activities required to complete the project

2. The time duration that each activity will take to complete

3. The dependencies between the activities

4. Logical end points such as milestones

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Is the Critical Path Reasonable?

▪ Are the right activities critical?

▪ Is anything missing?

▪ Review near critical activities and logic

▪ How many activities should be on the critical path?

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Construction Scheduling Basics____________________________________________

Baseline and Update Schedules

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Baseline Schedule Review

Baseline Schedule Narrative

Describes the Baseline

• Puts the What, Who, When, Where & How into words

• Provides the general workplan

• Inclusions, Exclusions & Assumptions

Realistic

Complete

Workable

In accordance with Contract requirements

Baseline

should be:

* AACEI RP 38R-06 Documenting the Schedule Basis

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Baseline Review Process

▪ Pre-analysis quality checks

▪ Project requirements checks

▪ Activity analysis

▪ Calendar analysis

▪ Activity code analysis

▪ Relationship analysis

▪ Lag and lead checks

▪ Constraint analysis

▪ Total Float / Longest Path

analysis

▪ Resources / cost analysis

* AACEI RP 78R-13 Original Baseline Schedule Review

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Reasons for Disapproval

▪ The plan does not meet Contract requirements

▪ The plan depicted is determined to be unachievable

▪ Does not represent the contractor’s plan for completion

▪ When there are fatal, technical errors

▪ Missing contract specified dates

▪ Negative float

▪ Incorrect sequence

▪ Imposed constrained dates

▪ Sequestered [Hidden] float

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Why?

▪ Confirm that the Contactor's work plan meets the Contract

requirements

▪ Confirm a common understanding of the Contractor's

means and methods

▪ Does not represent the contractor’s plan for completion

▪ Basic understanding for the Contractor’s planned

production rate and sequence of operations

▪ Start the project on the right foot

▪ At all times the project schedule should tell you what you

need to know, NOT what you want to hear

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Sample Update

* Screenshot of schedule updates by Oracle Primavera V.18

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Update Review Process

▪ Revised Durations or

Descriptions

▪ Added or deleted

activities, relationships,

or revised lags

▪ Impacts on the

critical path

▪ Calendar assignments

▪ As-built dates

▪ Modified start /

finish dates

▪ Constraints

▪ Resource assignments

* AACEI RP 53R-06 Schedule Update Review

* Screenshot of an update checker output by Scheduler Analyzer software

* Screenshot of a Schedule Comparison output by Oracle Primavera V.18.8.0.29254

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Why?

• Help keep the project on track

• Early warning for time slippage, out-of-sequence progress and loss of production

• Facilitate the timely resolution of issues during the project

• Identify potential risks and enable opportunities for mitigation

• Reduce future claims

• A well managed schedule should be a double edgedsword

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Construction Delay Analysis

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Construction Delay

▪ At most basic level, delay is “later than planned

completion”.

▪ Construction Delay – An unanticipated event or

interference to the critical path that causes the end date to

be extended.

▪ Contractor alleges a delay or series of delays that causes

an actual or potential extension of the project completion

date.

▪ Requires analysis of the delay to determine (1)

responsibility and (2) duration of the delay.

▪ General Types – Excusable, non-excusable, may either be

compensable or non-compensable.

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Delay Analyses Retrospective or Prospective

▪ Impact of the event is

calculated after the delay

takes place.

▪ The extent of the delay is

known, but the argument is

over responsibility for the

delay and concurrency with

other delays.

▪ Performed while project is

ongoing prior to the delay

event.

▪ Forecast (Estimate) of

Schedule Impact due

to the delay event.

▪ Intended to resolve the

delay dispute prior to

actual impacts, shifting

risk back to contractor.

Retrospective Prospective

VS

* AACEI RP 29R-03 Forensic Schedule Analysis

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Prospective Analysis

▪ Performed while project is

ongoing and prior to

the delay event.

▪ Time Impact Analysis

(TIA) is a typical provision

in construction contracts.

▪ Intended to resolve the

delay dispute prior to

actual impacts, shifting

risk back to contractor.

* AACEI RP 52R-06 Prospective Time Impact Analysis

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Prospective - Time Impact Analysis

Legend

As-planned unimpacted activities

Fragnet showing impacted activities

As-built activity, updated to the point of the delay

DD1DDo

A

B

C

D

E

REQUESTED

TIME EXTENSION

A

B

C

D

E

FRAGNET

* AACEI RP 52R-06 Prospective Time Impact Analysis

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Retrospective Analysis

▪ The impact of the delay is

calculated after the delay

takes place.

▪ The extent of the delay is

known, but the argument

is over responsibility for

the delay and concurrency

with other delays.

▪ There are many different

methods to perform a

retrospective delay

analysis.

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Prospective - Collapsed As-Built

Legend

Delay activity, shown with actual duration and 100% progress

As-Built Activity, shown with Actual Duration and 100% Progress

A

B

C

CLAIMED

DELAY

PERIOD

Delay

D

E

* AACEI RP 29R-03 Forensic Schedule Analysis

B

C

D

E

A

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Schedule Tricks and Tips

1. Late Baseline Schedules

2. Early Completion Schedules

3. Inaccurate Update Schedules

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1. Tricks - Late Baseline Schedules

▪ No shared understanding of

contractor’s plan.

▪ Not a tool available to the Owner for

planning purposes.

▪ Owner can’t measure performance.

▪ No baseline to measure delays.

▪ Contractor has benefit of hindsight in

crafting a late baseline.

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1. Tips - Late Baseline Schedules

▪ Require acceptance of the baseline

schedule prior to start of certain work.

▪ Tie monthly payments to specific work

in the project schedule.

▪ Enforce payment penalties for late or

unacceptable schedules.

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2. Tricks - Early Completion Schedules

▪ Unrealistic planned performance.

▪ Tighter schedule and less float.

▪ Spring-loaded to take advantage

of upcoming owner delays.

▪ Difficult to measure delays.

▪ Earlier operation and

maintenance costs.

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2. Tips - Early Completion Schedules▪ To prevail on early

completion claims

▪ Contractual prohibition on

early completion schedules

▪ If allowed by contract, then

require a resource-loaded

schedule.

▪ Revise contract milestones

per early completion

schedule.

▪ Monitor actual progress and

resources used by

Contractor.

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3. Tricks - Inaccurate Update Schedules

▪ Inaccurate progress can distort the

schedule and even shift the critical path.

▪ Inaccurate dates

▪ Work may not be complete when the

scheduler says it is.

▪ Historical (As-Built) information is critical

for schedule delay analysis.

▪ Even if owner ignores updates, Courts

deem such inaction as acceptance.

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3. Tips - Inaccurate Update Schedules▪ Verify progress of all activities, including

offsite and procurement activities.

▪ Document accurate activity progress

reporting, esp. those activities taking

longer than planned.

▪ Analyze CPM update revisions,

including activity durations, logic, total

float & constraints.

▪ Always require submission of updated

schedules, even if approval is contingent

on owner’s comments.

▪ Enforce payment penalties for

unacceptable or late update schedules.

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Lost ProductivityClaims

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Industry Buzz Words

▪ Lost Productivity

▪ Inefficiency

▪ Disruption

▪ Impact Claim

▪ Ripple Effect

▪ Cumulative Impact

Disruption ≠ Delay

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What is Productivity?

▪ Units produced compared to effort put in.

▪ Ratio of output/input, i.e., output per unit of input.

▪ Units completed compared to work-hours.

▪ Related to project cash flow and profitability.

▪ Also called “efficiency” and vice versa “inefficiency”.

▪ Production: measure of output (things produced), e.g.,

how many feet of pipe installed per work-hour; cannot

be used interchangeably with “productivity”.

AACEI RP 25R-03 Estimating Lost Labor Productivity in Constr. Claims

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Common causes of lost productivity

1. Planned productivity

▪ Plan sheet take-off errors

▪ Bid blunders

2. Inefficient labor crews

▪ Inexperienced in type of work

▪ Inadequate supervision

▪ Rework and errors

▪ Learning curve

3. Equipment breakdowns

4. Untimely delivery of materials

5. Inclement weather

6. Owner-caused reasons -

▪ Access restrictions

▪ Changes to the work

▪ Untimely responses to RFIs

▪ Defective plans &

specifications

▪ Differing Site Conditions

▪ Untimely inspections of work

▪ Delays and accelerations

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Analysis of Lost Productivity Claims

1. Liability (entitlement or merit)

▪ Impacting events are unforeseeable, beyond the

Contractor’s control but within the Owner’s control.

2. Causation (nexis or causal connection)

▪ Disruptive event caused a change in performance.

3. Resultant Injury (damages or quantum)

▪ Calculated with reasonable certainty.

Contractual Compliance

▪ Including Notice, Exculpatory Clauses and

Change Orders.

* Servidone Constr. v. United States, 931 F.2d 860, 861 (Fed. Cir. 1991).

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Quantifying Lost Productivity

“One of the most contentious areas in construction claims is the

calculation or estimation of lost productivity. Unlike direct costs, lost

productivity is often not tracked or cannot be discerned separately and

contemporaneously.… Many methods of calculation are open to

challenge with respect to validity and applicability to particular cases –

thus making settlement of the issue on a particular project problematic.”

AACEI RP 25R-03 Estimating Lost Labor Productivity in Constr. Claims

37

Quantifying Lost Productivity

In order of preference:

1. Project Specific Studies

▪ Measured Mile, Earned Value, Work Sampling, Craftsmen Questionnaire

2. Project Comparison Studies

▪ Comparable Work or Project Study

3. Special & General Industry Studies

▪ MCAA, NECA, USACE, Learning Curve, Overtime, and Weather studies

4. Cost Basis

▪ Total & Modified Total Cost methods

5. Productivity Impact on Schedule

▪ Schedule Impact Analysis

AACEI RP 25R-03 Estimating Lost Labor Productivity in Constr. Claims

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Measured Mile

▪ Most widely accepted and credible

method to calculate inefficiency

costs.

▪ Compares identical or very

similar work for impacted to

unimpacted periods.

▪ Difference in productivity of

unimpacted periods compared to

impacted periods.

▪ Does not rely upon the original

estimate.

Disruption

Unimpacted

Period

Impacted

Period

Unimpacted

Period

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Measured Mile

Abusing the Measured Mile

Mean

Productivity

Cherry Picking the Peaks Ignoring the Valleys

Measured Mile

Productivity

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Measured Mile: The Pitfalls

▪ Claimant cherry-picks a “measured yard” of the best

productivity as basis for comparison.

▪ Work being compared is not really comparable or similar work.

▪ Including dissimilar work.

▪ Claimant ignores items that do not fit the story.

▪ Fails to account for all relevant factors, including Contractor-

caused inefficiencies, unrealistic bid or learning curve.

▪ Claimant fails to provide an objective assessment of data or

demonstrate lost productivity based on cost accounting

records.

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Project Comparison Studies

When a Measured Mile Approach cannot be used

Comparable

Work StudyCompares productivity on an

unimpacted, similar activity

performed on the same contract.

Comparable

Project StudyCompares same activity in

dispute to a similar project.

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Industry Studies

Mechanical Contractors

Association of

America (MCAA)

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Industry Studies: The Pitfalls

Combining

multiple impact

factors can

result in

unrealistically

high losses

Blind reliance

upon studies

and ignoring

other available

project

information

Extrapolating

the industry

studies beyond

reason

Ignoring

industry study

limitations

AACEI RP 25R-03 Estimating Lost Labor Productivity in Constr. Claims

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Cost Basis

Total Cost

Method

Modified Total

Cost Method

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Total Cost Claims

Difference between As-Bid and

As-Built Costs.

▪ By project or affected items.

▪ Include all cost categories:

Labor + Material +

Equipment + Sub. +

Overhead.

▪ Variations may specify cost

category or type, i.e. labor,

equipment, hours or costs.

As-Bid Cost As-Built Cost

Change

Orders

Claim

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Total Cost Claims: The Pitfalls

A method of last resort -

▪ Quick and inexpensive for Contractor to present.

▪ Assumes entitlement and ignores causation.

▪ Allows grossly overstated damages.

▪ Assumes Owner is 100% responsible for entire loss.

▪ Assumes work plan and bid amounts were perfect.

▪ Least accepted method of the Courts.

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Total Cost Claims

Four-part

test

1. The impracticality

of proving actual

losses directly

2. Contractor’s bid

was reasonable

3. Contractor’s

actual costs

were reasonable

4. Contractor was

not responsible for

the added costs

* Boyajian vs. United States, 191 Ct. Cl. 233 (1970).

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Modified Total Cost Claims

▪ Attempts to correct the inaccuracies of the Total Cost Method

▪ Adjusts for variations due to

▪ Bid Errors

▪ Bid Omissions

▪ Contractor caused inefficiencies

▪ Lack of mitigation

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Modified Total Cost Claims

Similar to Total Cost method but includes adjustments to address the four prerequisites

As-Bid Cost As-Built Cost

Change Orders

Claim AmountContractor Issues

Estimate

Adjustment

End of Presentation

Imagine the result

Mark Guevara

mark.guevara@arcadis.com

(714) 508-2609

Andrew Dick

andrew.dick@arcadis.com

(213) 797-5300