CPM schedule updates: contractors avoid at their own peril

There are always a few ‘economy’ accounts I have on my book. ‘Economy accounts’ belong to contractors who want to skimp and save on scheduling services by planning for only what they feel they can get away with. The minimum service is to provide a baseline, and for many, that’s all they ask for, despite having contractual requirements that stip monthly or periodic schedule updates.

In many cases, the baseline is enough, because they either aren’t being pressured, don’t feel the need for the schedule updates, or even more importantly -can’t conceive of a delay. The likelihood that most any project won’t be delayed is about 1:4, which demonstrates that a no-delay assumption is a false one

Many baselines I prepare are never really digested or understood by my contractors and SHs, but that doesn’t seem to bother them much. Not until the schedule starts slipping – then they begin to sound panicky

I can pretty much tell which contractors are going to call me back after the baseline is approved, and which aren’t, by the way they approach the schedule. When they start skipping updates, I can confirm my speculations that there won’t be any. Sometimes the contractor does this by design, and sometimes not. It’s too bad to lose the project, but I don’t take it personally.

Due Diligence

As a matter of due diligence, I never advise a contractor to skip an update. I tell them what best practice dictates:

• That he can forgo schedule updates at his own peril: if one of his projects experiences a compensable delay, he will be hard put to submit a claim without his schedule updates
• That if he forgoes schedule updates, that may preclude his claim, for lack of contract compliance. If the claim is substantial enough, forensic scheduling kicks in, and the skipped updates are generated, along with the critical path. This is a tedious and costly process exacerbated by poor, or lack of, record-keeping practices.

Best practice dictates that a contractor should weigh the risks. If he thinks he can get by without issuing updates, he will invariably do so. This can be weighed as a simple mathematical equation that yields a risk assessment that contractors often seem oblivious to.

The Usual Suspects

A contractor is working on a one-year project. Because the project is disrupted by access issues, the contract work drags out over eighteen months. A few change orders are implemented over the eighteen-months – some of them driving the critical path and end date. The contractor’s general conditions and overhead are averaging $10,000/month.

Although there was some extra work, over the extended period, the contractor was caused to work at a 50% reduced rate of production (12 months v. 18 months), or 150% effort.

The contractor  believes he has a compensable delay of $60,000, or 6 x $10,000. The documents will specify the minimum required documentation to make the claim, which will include schedules, schedule updates, critical paths, notices of delay, and other background material. In some cases, the specifications will have onerous requirements intended to discourage contractors from making a claim in the first place. Quite often these requirements are not binding, or rather, they don’t necessarily follow ADR guidelines.

decathletic claim requirements are simply fluff that the drafter hopes will fool contractors, but only precludes good faith.

As I will demonstrate, a contractor who maintains updates has considerably more leverage, and will expend much less effort preparing his claim, than the contractor who didn’t want to bother with the expense. His attitude was that the updates were a service he provided to SHs and saw no value in them for his own purpose; in fact, a debit, as opposed to a credit.

Contractors who are update trained, and those who don’t participate remind me of the fable of The Ant and the Grasshopper.

The trouble it seems to many, is that they can get the scheduler on board, but they don’t have an in-house interface to feed them the data. Or, that the person they assign to feed the scheduler update back-up simply isn’t able to deliver – wasting resources. Enough of this sort of experience repeated will disincline contractors to focus on, or bother with, updates in the future. The rub is that they become jaded to the fact that updates are to their own benefit, as I shall try to demonstrate.

From the Scheduler’s Viewpoint

A CPM scheduler has a proposal for the above one-year project. He will be paid for the baseline $5,000, and will ask $500 for each of the schedule updates, or $6,000

Total contract value $6,000 with NTX $11,000

Since the project extended six-months, another six updates, costing an additional $3,000 may be recoverable by the contractor as a change order, in addition to some smaller works.

Total contract value $11,000 + $3,000 change orders = $14,000

The contractor paid a scheduler $5,000 for the baseline. He asked no further work from the scheduler.

Notice of Delay: is it a shot that will be heard?

At such time as the contractor notices that he has lost general conditions and overhead on the project, he finds that an RFI remains open, awaiting final design.

He files a (late) Notice of Delay (NOD), with the intention of filing a claim for the extra six-months.

SHs reject the NOD out of hand as untimely, and has no comment on the mention of compensable delay.

Contractor calls the scheduler to determine the effort to put together a delay claim.

The scheduler will indicate that as a consequence of failing to issue schedule updates and narratives, the effort to forensically regenerate each critical path may range from tedious, to insurmountable. It even may be impossible to gauge the effort, as it is largely an inestimable quotient. In such cases, the scheduler may submit an hourly proposal, contingent on the quantity,quality, and veracity of available documentation.

The Claim Conundrum

Why would someone pay a ‘claims expert” 2X what a top-level scheduler gets to do virtually the same thing, and in many cases, does even better? Because the are uneducated in CPMs.

So here’s a wake-up call: there are top-level schedulers can do most of what the “claim experts” purport to provide as a professional service. In fact, the claims experts rely on the schedulers to supply them with the backup to do their ‘higher order’ work. Claim experts sometimes are leery of top-level schedulers because they perceive them as a threat: someone who could easily expose their shortcomings, or establish their superfluity, rather than work with them as partners.

a weak claim expert might seek to suppress a scheduler’s work for fear it will make him look bad.

The best contractors and claim experts realize the value of top-level schedulers as a resource and an asset, and will insist, rather than refuse to work with them. Depending on the complexity of a claim, even the best schedulers won’t have the training that the better experts have.

If the claim expert is pre-emptively disparaging of a good scheduler, that’s a red-flag.

In the example, the scheduler knows he didn’t get to perform the update service. Accordingly, he will indicate a minimum represented by the cost of 18 updates, or $9,000, as a starting point – the same as if he had received the backup timely, and in good order. It’s much more work for him to slog through six months of fragmented documentation for six updates, than it would be if the update back-up was timely.

Doing The Math

The forensic scheduling data sourcing effort and outcome hereon will be increase as the quality of accurate information decreases, and be charged by the hour.

If it is a complex claim, or record keeping is suspect, contractors will be hard put to collect all the data accurately from their project staff, and could waste many man hours in a losing effort. Add to this the foreknowledge that the average return on investment for delay claims may be as little as  $ .20/$1 – and that’s for properly prepared claims.

Thus, two compelling reasons why a contractor who neither issued schedule updates, nor kept the necessary records to facilitate a claim: it will cost him too much to generate the claim, and promises no guarantee above 20% maximum ROI.

Accordingly ,the above example, if the contractor maintained monthly updates and narratives, he would have the critical paths in hand to readily demonstrate a basic disruption claim to SH. This would cost him nothing (bearing in mind a change order for six months schedule update services he intends to claim). Depending on the veracity of his information and the validity of his computations, he can expect a minimum ROI of 20% (+change order), with nothing at risk, and no additional investment.

What’s the difference between a lot of claims “experts” and top CPM schedulers? The experts come from consulting firms with old-school names and notions: engineers, certifications, and cheap grey-suits. They act the part because their employer tells them to, regardless of their acumen.

This contractor would seek $60,000 in general conditions as a consequence of disruption, with prospects of an award of no more that 20%, or $12,000 of the claim. Subtracting $9,000 minimum for the missed updates, there is only $3,000 left in his claim, most of which would vaporize early in the effort to generate it.

Bringing in the “Big Guns”

If the contractor needs to file a more sophisticated, or more cost prohibitive claim, or if he expects SH to bring in their experts to contest and refute the claim, he might be induced to retain a claims expert – if he can afford one, as a sandbagging measure, as opposed to a methodical one.

The contractor’s first instinct should be to first rely on his scheduler for the claim because a) like it or not, the scheduler is the brain-trust of the schedules that facilitate and graphically demonstrate aspects of the claim; he is the conductor of the orchestra. Without him in the mix, he handicaps his claim, with him, he has all the cards, so to speak, and b) because he can’t afford to pay an “expert’s” extortionary rates.

A scheduler I knew ceded to a claims expert, work on a large delay claim from a project he had baselined and dutifully updated, that is, until the contractor stopped sending the update backup, and was in a pickle such that he really needed an expert. He had offered to provide the claim service, and had all the backup, including  Acumen Fuse Scenarios for every update. As it turned out, the “expert” had never even heard of Deltek, or Acumen, and dismissed those reports out of hand.

In any event, the contractor should always have the maneuverability to weigh the decision as whether or not to prosecute a disruption claim. Savvy contractors understand that part of the equation of making a compelling claim is largely contingent on his own efforts. The ones that don’t get it are wasting their time and money. If a contractor can’t realize the value of maintaining progress updates to begin with, my argument falls on deaf ears.

Derek Graham, President, RepOne Project Controls

#project management #delay claims #disruption claims