In comparison to delay claims, construction disruption claims are a slippery slope when it comes time to make a claim. That’s because delays have finite start and end dates, where there is no work performed, whereas construction disruption claims occur when planned work is interrupted for variable timeframes that can be elusive to represent. For this reason, very few compensable disruption claims are awarded by the courts, if for no other reason than the inability to quantify them.
Disruption claims are therefore insidious in nature – they creep up on you, and quietly amass in the background. Depending on the degree and scope of disruption, it may impact all trades, or just one trade. Construction contracts – especially AIA, are engineered to deflect liability and indemnify ownership against such claims, and often invoke liquidated damage clauses. It’s not unusual that a contractor is disrupted by a third-party, and that ownership will make a late claim against them.
If a project eclipses its turnaround date, there may be disruption and delays to blame for all or part of the breach of deadline. Before that happens, project teams endeavor to recover lost time by increasing manpower, for which they may or may not be compensated. Thus, a project finishing on time may have encountered delays and disruption.
The phenomenon of disruption is easy to notice, but difficult to quantify. It may start with small encumbrances, such as redesigns, RFIs, trade-congestion, or access issues. The project team dances around the encumbrances as best they can in order to minimize disruption, and inevitably play catch up ball for the duration of the project. The impact translates into a drop in production rates.
In some cases, the encumbrance is caused by the owner and his design team. Alternatively, one trade’s lackluster performance may disrupt or delay another’s, or a trade simply can’t get out of its own way. This distinction must be made when a claim is made. Contractors may be squeamish of making claims against other trades whom they are otherwise partners, and more so of making a claim toward ownership – that such action might threaten their relationship. As disruption costs escalate, a contractor may become ess sympathetic about making a delay claim against ownership or other trades.
The secret to managing disruption impacts and claims is fairly simple, but not always so obvious. If it were more obvious, contractors would be more likely to avail themselves. There are some key concepts to keep in mind in the process, which I will iterate below, taken from an actual scenario in which I helped an electrician. Hopefully, readers will take note and be in more secure positions for their next claim.
An electrician replaced another on a project involving a wireless system for a rail station. The project was considerably delayed. Before too long, the new electrician realized that the former’s as built drawings depicted a few thousand feet of in-slab conduit to carry the wire, however, in actuality, the conduit was never placed. The concrete, however, was poured nevertheless, thus it was not readily apparent that the conduit was missing until no stub-ups were found. Additionally, a great deal of redesign ensued. As the contractor realized his scope of work was misrepresented, he saw his costs escalate, and sought my assistance.
The electrician essentially wanted to represent that the contract scope of work had changed, which could be addressed with change orders, but that his general conditions and overhead skyrocketed with the disruptions. The general contractor was tenacious in rebuffing him until we made a solid claim.
In order to qualify this claim, it was necessary to recall the estimated hours and rates of production for the contract scope of work, and compare them with the actual duration. Fortunately, for this contractor, he had these records. It was necessary to validate and substantiate the base contract productivity rates before comparing them. If the rates were not plausible, the claim would be rejected.
This story had a happy ending. When we issued our disruption claim, a big general contractor and design team suddenly found themselves on the ropes – unchartered territory. The claim was accurate and compelling enough to silence any rebuttals, and the contractor was awarded both time and money for the disruption without hiring an attorney.
Finally, be diligent and timely in establishing valid production rates as early as possible, and track those rates with actual rates. Keep record of personnel hours and the volume of work they achieve, in the event that a delayed or disrupted project is imminent.
Before you are ready to issue your claim, you will need to create a visual representation of the disruption, optimally using a CPM platform that can track estimated vs. actual. I have found Oracle Primavera serves this purpose well, and has wide acceptance in the legal system.
Just like the extra-cost calculation, the disruption schedule must be verified and validated, and compared with the contract baseline. If the baseline is valid, the disruption path may be plotted against it. If not, the claim can be refuted. Regardless of the source of the baseline, if it is not a valid baseline, you will have to extrapolate the project logic into a valid baseline to compare with the disrupted schedule.
The latter is the most common circumstance, given the chronic inability of contractors to develop valid baseline schedules, or schedules that don’t adequately represent a contractor’s scope of work. For example, if a schedule for a medical lab has one bar for all MEP rough, you will have to deconstruct that duration into specific activities that are disrupted.
