University of Calgary Continuing Education Construction Contract Law and Documents Week 12 Changes Delays Claims Contract Documentation

Why do companies lose money? They do work for nothing Either they don’t insist on proper instructions, or They don’t keep proper records to prove their costs, or They don’t ask properly for more money

Changes to the Work No right unless stated Right necessary to prevent Owner being held “hostage” Safeguards Work must be consistent with base contract Contractor must do the work – no matter if there is an agreement with respect to price Owner must pay for work

Changes to the Work Both time and cost Time Failure to agree to reasonable extension is direction to accelerate Float owned by contractor Change in time is change to project overall time – non-critical activities my not effect end-date but simply increase risk

Changes to the Work Cost What is cost? What components are already in and which are extras?

Delays Work interruption caused by anyone Notice must be given Accurate records are key to claim Equally important to record what happened as well as what was delayed

Claims Request for compensation for work undertaken or delays encountered for which no compensation has been received. Typically as a result of work done under protest or pursuant to a change directive

Claims When to start the claim – the day of award Critical that a “base line” is defined Generally the original project schedule Provided at the outset to owner Don’t use up float – the long bar Make sure that all assumptions documented Treat Project Plan as insurance

Claims Project Plan – critical to recovery of additional monies Must be able to show how you were going to achieve the work Updating to account for progress allows you to take advantage of situations where you have improved the project schedule and incorporate situations where you have delayed yourself

Claims Must find your basis for claim in the contract Proper notice must have been given Isolate the claimed extra from the base contract Identify all delays – including those caused by you Ideally, each change must be isolated from all others to determine the “impact” of it

Claims Impact of change Each change will create consequential changes in all other surrounding activities Possibly change equipment utilization, resource profiles When evaluating – ensure all implications investigated

Claims Impact of change Change itself  Adding xxx m3 of material Material changes  Effect on material order – did you have sufficient in your original commitment to allow you to price this at same level.  Material price escalation  Site handling – does this overstress logistical abilities of jobsite – cranes, access, personnel

Claims Impact of change Installation of materials – impact on labour  Resource profile – using critical trades  Overtime loading – extensive overtime causes fatigue and loss of productivity  Crowding – loss of productivity  Move work to different season or time of day – productivity  Move to different season – wage escalation

Claims Impact of change Impact on site plant  Additional site equipment required  Site services – roads, power, heat, scaffold  Change in fuel rates due to shift in time

Claims Impact of change Site Supervision  Stress supervision – inefficiency sets in  Additional QC required  Review of documents more extensive  Other work suffers from lack of supervision

Claims Impact of change Office supervision  Engineering costs – estimates and revised schedules  Project Management Costs – more intensive work, review project planning Financial  Effect on cash flow

Claims Impact of change Measurement of impact  From base line – add change and determine change to overall end cost and time  As change proceeds – updates will show ongoing impact

Claims Impact of changes on each other Impact of number of changes – magic number (15-25%) When job changed more than xx% - revert to cost reimbursable Not materially the same job

Project Documentation Project budget Your cost – not revenue Enumerate all resource profiles Show all anticipated cost changes (ie: prices)

Project Documentation Project schedule Detailed so that changes in order of work can be identified Show resources on critical activities Show owner supplied deliveries or work Allowance for approvals shown explicitely

Project Documentation Updating Project Plan Critical to ensure credibility (we do this normally – not just to show the error of the other party) Must reflect true activity – don’t try to hide your own dirty laundry Should be accurate record of the plan revisions necessitated by changing conditions

Project Documentation Correspondence Must be formal and organized All formal documentation, initially, should be to the notice address Subsequent, project kickoff meetings would define operational changes to flow of documents – must be confirmed in writing to notice address Separate files for each claim – suggested

Project Documentation Review Contract Note all notice requirements Note notice address No matter what, unless you have a formal instruction, always send Notices to Notice Address Pay particular attention to notices regarding delays, unexpected work, changes to the work – these are the prime source of claims for extras.

Project Documentation Routine Each level of management should review reports from level below Each level of management should prepare material for level above Concept of overlapping and complementary information

Project Documentation Examples Superintendent daily diary (independent corroboration of all site activity – personnel changes, tardiness, everything) Weekly site report by superintendent  Perhaps prepared by site engineer by endorsed by site supervisor  Reviewed by Project Manager Monthly report by project manager  Reviewed by company management.