CPM Scheduling And Lost Productivity Claims - Ocbar

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 Mark Guevara, Esq., CFCC, PSP, PMP Andrew Dick, PSP, PMP ARCADIS U.S., Inc. Imagine the result

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 2

Speaker Mark Guevara 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 3

Speaker Andrew Dick 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 4

Construction Scheduling Basics 5

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 6 * AACEI RP 49R-06 Identifying the Critical Path

Critical Path Method (CPM) Scheduling 7 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

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? 8

Construction Scheduling Basics Baseline and Update Schedules 9

Baseline Schedule Review Realistic Complete Baseline should be: Workable In accordance with Contract requirements Baseline Schedule Narrative Describes the Baseline Puts the What, Who, When, Where & How into words Provides the general workplan Inclusions, Exclusions & Assumptions 10 * AACEI RP 38R-06 Documenting the Schedule Basis

Baseline Review Process Pre-analysis quality checks Relationship analysis Project requirements checks Lag and lead checks Activity analysis Constraint analysis Calendar analysis Total Float / Longest Path analysis Activity code analysis Resources / cost analysis 11 * AACEI RP 78R-13 Original Baseline Schedule Review

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 12

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 13

Sample Update * Screenshot of schedule updates by Oracle Primavera V.18 14

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 * Screenshot of an update checker output by Scheduler Analyzer software Modified start / finish dates Constraints Resource assignments * Screenshot of a Schedule Comparison output by Oracle Primavera V.18.8.0.29254 15 * AACEI RP 53R-06 Schedule Update Review

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 edged sword 16

Construction Delay Analysis 17

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. 18

Delay Analyses Retrospective or Prospective VS Prospective Retrospective 19 Impact of the event is calculated after the delay takes place. Performed while project is ongoing prior to the delay event. The extent of the delay is known, but the argument is over responsibility for the delay and concurrency with other delays. 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. * AACEI RP 29R-03 Forensic Schedule Analysis

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. 20 * AACEI RP 52R-06 Prospective Time Impact Analysis

Prospective - Time Impact Analysis DDo DD1 A B C A FRAGNET B D C D E E REQUESTED TIME EXTENSION Legend As-planned unimpacted activities As-built activity, updated to the point of the delay Fragnet showing impacted activities 21 * AACEI RP 52R-06 Prospective Time Impact Analysis

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. 22

Prospective - Collapsed As-Built Delay A B A C B D C E D E CLAIMED DELAY PERIOD Legend As-Built Activity, shown with Actual Duration and 100% Progress Delay activity, shown with actual duration and 100% progress 23 * AACEI RP 29R-03 Forensic Schedule Analysis

Schedule Tricks and Tips 1. Late Baseline Schedules 2. Early Completion Schedules 3. Inaccurate Update Schedules 24

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. 25

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. 26

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. 27

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. 28

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. 29

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. 30

Lost Productivity Claims 31

Industry Buzz Words Lost Productivity Inefficiency Disruption Impact Claim Ripple Effect Cumulative Impact 32 Disruption Delay

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 33

Common causes of lost productivity 1. Planned productivity Plan sheet take-off errors 5. Inclement weather 6. Owner-caused reasons - Bid blunders 2. Inefficient labor crews Inexperienced in type of work Inadequate supervision Access restrictions Changes to the work Untimely responses to RFIs Rework and errors Defective plans & specifications Learning curve Differing Site Conditions 3. Equipment breakdowns Untimely inspections of work 4. Untimely delivery of materials Delays and accelerations 34

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). 35

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 36

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 37

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. 38 Unimpacted Period Impacted Period Disruption Unimpacted Period

Measured Mile Cherry Picking the Peaks Ignoring the Valleys Measured Mile Productivity Mean Productivity Abusing the Measured Mile 39