contract administration iowa agc

CONTRACT ADMINISTRATION

82nd Annual State Convention

Contract Administration

Cordell M. Parvin Jenkens & Gilchrist, P.C.

CONTRACT ADMINISTRATION CONTRACT ADMINISTRATION

Setting up a Contract Administration System


Why Set Up a System?

•  Owners are less likely to pay for changes and claims

•  Most contractors lose valid claims by failure to •  comply with Contract •  appropriately document claim



  Read and understand the contract.   Identify the risks for the project.   Rank the risks to add to 100.   Who is responsible for the risk and why?   What is the Recovery/Entitlement

Theory?



  What evidence and procedures are necessary for success?

  Design the physical system and files.   Staffing for Contract Administration.   Review and re-evaluate risk allocation

and redesign system as necessary.   Audit Contract Administration System.


Contract Administration System


Identify and Rank The Project Risk (Steps 2 & 3) •  Brainstorm and list risks •  Prioritize by most likely and most

impact


Who is Responsible for Risk?

Entitlement Theories


Entitlement Theories

•  The contractor’s entitlement to additional compensation or additional time must begin with a thorough understanding of the Contract itself


Who is Responsible for Risk? (Steps 2 & 3)

• Understand Contract and Law • Could be:

• Owner • Contractor •  3rd parties • No one


Entitlement Clauses Categories

•  Extra Work •  Significant Changes in Character of

Work; •  Differing Site Conditions; and •  Suspension of Work


Contract Checklist

1.  Who can order extra work or make the changes?

2.  When? 3.  How? 4.  What? 5.  What does the contractor need to do?


Differing Site Conditions Checklist

1. Does the clause include the type of condition encountered?

2.  Do the conditions differ materially from those indicated in the contract documents or those ordinarily encountered?

3. Did the contractor make a reasonable site investigation as required by the contract?


Differing Site Conditions Checklist

4.  Does clause allow Contractor to recover impact costs?

5.  Did the contractor notify the owner/engineer prior to disturbing the conditions?

6. Have the conditions encountered increased the contractor’s costs in performing the work or time required to complete the work?


Delays Checklist

1. Does the Suspension of Work Clause cover both owner-directed suspensions and constructive suspensions of work?

2.  Is there a “No Damage for Delay” Clause in the contract?

3. Was the delay the contractor encountered foreseeable?


Delays Checklist

4. Was the delay the contractor encountered unreasonable?

5.  Did the delay/disruption increase the time necessary to perform the work?

6. Did the contractor comply with the notice requirements of the contract?

7. Did the contractor comply with the schedule update requirements of the contract?


Evidence to Prove Entitlement (Step 6)


Evidence to Prove Entitlement (Step 6)

•  Documentation is a critical component of Contract Administration

•  To be effective and to be admissible in evidence events must be recorded as they occur


Documentation

•  To be effective documents must be organized and filed in a manner that makes them easily retrieved


Examples of Documentation

•  The Schedule (Updated Schedule) •  Productivity Reports •  Deviation Reports •  Daily Time Card •  Diary and Daily Quantities


Examples of Documentation

•  Daily Site Diary/Report •  Videos and Photographs •  Correspondence •  Meeting Minutes •  Change/Work Order Files


The Schedule

•  Must be regularly updated •  When changes or delays occur must meet

schedule requirements in the Contract


Productivity Reports

•  Changes in Productivity need to be monitored and explained


Daily Site Diary/Report

Important to Include: •  Planned v. actual quantities (production) •  Location of work •  Description of work performed •  Production - If low should describe

reasons


Daily Site Diary/Report

•  Describes major events of day •  Accomplishments, problems •  Equipment, mancount •  Should also summarize daily site diaries


Videos and Photographs

•  Picture is worth 1000 words •  Video and digital photographs •  Include:

– Differing site conditions – Design defects – Reduce productivity


Correspondence

•  Correspondence becomes the “record” of what happened on the project

•  From a partnering standpoint do not want to get into a letter writing campaign

•  However, owner’s accusations should be answered


Quantifying

CONTRACT ADMINISTRATION Quantifying Increased Costs and Time

•  The primary materials necessary to quantify increased costs and time: – Contract – Cost Reports – Schedule – Documentation supporting Reports and

Schedule


Increased costs may consist of the direct cost to perform changed work and/or the result of disruption to resources.

Direct Cost Impact Cost to Perform of Performing Changed Work Unchanged Work

Increased Costs


Checklist of Potential Additional Costs

Œ  Labor   Supervision   Materials   Supplies   Equipment ‘  Field office overhead


Checklist of Potential Additional Costs

  Home office overhead (general and administrative expenses)

“  Financing expenses ”  Additional bond costs •  Extended builders risk insurance

coverage


“Simple” Request for Compensation

•  The “simple” request for compensation for changed work: – A single event – Occurring over a reasonably defined

period of time – Involving known resources and no

impact


“Complex” Requests for Compensation

•  “Complex” requests for compensation consist of one or more event that significantly impact unchanged work

•  The complex request for compensation involves the analysis of the effect of the event on the resources committed to perform both the changed and unchanged work


“Complex” Requests for Compensation

•  The Contractor should separate the cost to perform the changed work from the increased cost incurred to perform unchanged work


Identifying Complex Issues

•  When changed work impacts unchanged work, the following cost and time elements must be considered: – Direct costs – Disruption – Delay


Identifying Complex Issues

•  When changed work impacts unchanged work, the following cost and time elements must be considered: – Mitigation costs – Delayed Impact - A combination of any

of the above


Disruption

•  Disruption includes lost productivity, which may result from: –  Slow downs –  Delays –  Acceleration –  Lack of Continuity –  Loss of Morale


Disruption

•  Disruption includes lost productivity, which may result from: – Learning curve fluctuations – Change of sequence – Change of means and methods – Change of time of performance (i.e.

winter)


Crew Productivity

•  In construction, a crew performs at maximum efficiency when each member performs the task assigned consistent with the plan for the entire crew

•  The more often a crew is disrupted, the less likely the crew will ever achieve the high degree of productivity normally expected in a smooth learning curve


Crew Productivity

•  The “ripple effect” – A single event results in disruption and

delay which spreads to other activities – Multiple events result in disruption and

delays which can build on each other


Time, Space and Ordered Sequence

•  The “ripple effect” – If any of the activities delayed or

disrupted are on the critical path, completion of the entire project will be delayed

– If not, then the only effect will be the extra time and cost of having the crew and equipment on the job


Measuring Impact of Productivity

•  Best Proof - measured mile same project •  Second best - productivity on similar work •  Next - expert witnesses •  Last - trade association manuals


Schedules to Prove Delays

•  No proof of the information used to prepare schedule

•  Errors in technical logic •  Incomplete schedules •  Overlooking procurement of critical

materials



•  Failure to consider: – physical restraints – weather restraints – resources – economics of the sequencing – uncertainty and risk in establishing

durations



•  Schedule Deficiencies – Schedule does not “tie in” to the

anticipated means and methods and/or estimate

– Logic intentionally deviates from the manner in which the contractor intends to build the project

– Elimination of float by increasing durations



•  Schedule Deficiencies – Unrealistic productivity of durations – The schedule submitted to the owner

was not used to build the project



•  Today, contract clauses and cases require contemporaneous analysis

•  Time Impact Analysis (TIA) most frequently used

•  Idea is to take a “stop-action” picture after the delay and determine the extent of delay


Cause and Effect

•  The more specific we can get in identifying the cause and effect of each event, the more likely we will be able to convince the owner we have been impacted


Cause and Effect

Questions •  How can you show the time and cost

impact of changes and other events? •  How can you show that you added

engineers and supervisors because of events for which owner is responsible?


82nd Annual State Convention

Contract Administration

Cordell M. Parvin Jenkens & Gilchrist, P.C.

contract administration iowa agc

Business