CONTRACT ADMINISTRATION82nd Annual State Convention Contract Administration Cordell M. Parvin Jenkens & Gilchrist, P.C.
CONTRACT ADMINISTRATION Setting up a Contract Administration System
CONTRACT ADMINISTRATION 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
CONTRACT ADMINISTRATIONSetting up a Contract Administration System 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?
CONTRACT ADMINISTRATIONSetting up a Contract Administration System 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 ADMINISTRATIONContract Administration System
CONTRACT ADMINISTRATIONIdentify and Rank The Project Risk(Steps 2 & 3)• Brainstorm and list risks• Prioritize by most likely and most impact
CONTRACT ADMINISTRATIONWho is Responsible for Risk? Entitlement Theories
CONTRACT ADMINISTRATIONEntitlement Theories• The contractor’s entitlement to additional compensation or additional time must begin with a thorough understanding of the Contract itself
CONTRACT ADMINISTRATIONWho is Responsible for Risk?(Steps 2 & 3) • Understand Contract and Law • Could be: • Owner • Contractor • 3rd parties • No one
CONTRACT ADMINISTRATIONEntitlement Clauses Categories• Extra Work• Significant Changes in Character of Work;• Differing Site Conditions; and• Suspension of Work
CONTRACT ADMINISTRATIONContract Checklist1. Who can order extra work or make the changes?2. When?3. How?4. What?5. What does the contractor need to do?
CONTRACT ADMINISTRATIONDiffering Site Conditions Checklist1. 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?
CONTRACT ADMINISTRATIONDiffering Site Conditions Checklist4. 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?
CONTRACT ADMINISTRATIONDelays Checklist1. 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?
CONTRACT ADMINISTRATIONDelays Checklist4. 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?
CONTRACT ADMINISTRATIONEvidence to Prove Entitlement (Step 6)
CONTRACT ADMINISTRATIONEvidence 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
CONTRACT ADMINISTRATIONDocumentation• To be effective documents must be organized and filed in a manner that makes them easily retrieved
CONTRACT ADMINISTRATIONExamples of Documentation• The Schedule (Updated Schedule)• Productivity Reports• Deviation Reports• Daily Time Card• Diary and Daily Quantities
CONTRACT ADMINISTRATIONExamples of Documentation• Daily Site Diary/Report• Videos and Photographs• Correspondence• Meeting Minutes• Change/Work Order Files
CONTRACT ADMINISTRATIONThe Schedule• Must be regularly updated• When changes or delays occur must meet schedule requirements in the Contract
CONTRACT ADMINISTRATIONProductivity Reports• Changes in Productivity need to be monitored and explained
CONTRACT ADMINISTRATIONDaily Site Diary/ReportImportant to Include:• Planned v. actual quantities (production)• Location of work• Description of work performed• Production - If low should describe reasons
CONTRACT ADMINISTRATIONDaily Site Diary/Report• Describes major events of day• Accomplishments, problems• Equipment, mancount• Should also summarize daily site diaries
CONTRACT ADMINISTRATIONVideos and Photographs• Picture is worth 1000 words• Video and digital photographs• Include: – Differing site conditions – Design defects – Reduce productivity
CONTRACT ADMINISTRATIONCorrespondence• 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
CONTRACT ADMINISTRATIONQuantifying Increased Costs and Time• The primary materials necessary to quantify increased costs and time: – Contract – Cost Reports – Schedule – Documentation supporting Reports and Schedule
CONTRACT ADMINISTRATIONIncreased costs may consist of thedirect cost to perform changed workand/or the result of disruption toresources.Direct Cost Impact Costto Perform of PerformingChanged Work Unchanged Work Increased Costs
CONTRACT ADMINISTRATION Checklist of Potential Additional Costs Labor Supervision Materials Supplies Equipment Field office overhead
CONTRACT ADMINISTRATION Checklist of Potential Additional Costs Home office overhead (general and administrative expenses) Financing expenses Additional bond costs Extended builders risk insurance coverage
CONTRACT ADMINISTRATION“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
CONTRACT ADMINISTRATION “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
CONTRACT ADMINISTRATION“Complex” Requests for Compensation• The Contractor should separate the cost to perform the changed work from the increased cost incurred to perform unchanged work
CONTRACT ADMINISTRATIONIdentifying Complex Issues• When changed work impacts unchanged work, the following cost and time elements must be considered: – Direct costs – Disruption – Delay
CONTRACT ADMINISTRATIONIdentifying 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
CONTRACT ADMINISTRATIONDisruption• Disruption includes lost productivity, which may result from: – Slow downs – Delays – Acceleration – Lack of Continuity – Loss of Morale
CONTRACT ADMINISTRATIONDisruption• 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)
CONTRACT ADMINISTRATIONCrew 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
CONTRACT ADMINISTRATIONCrew 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
CONTRACT ADMINISTRATIONTime, 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
CONTRACT ADMINISTRATIONMeasuring Impact of Productivity• Best Proof - measured mile same project• Second best - productivity on similar work• Next - expert witnesses• Last - trade association manuals
CONTRACT ADMINISTRATIONSchedules to Prove Delays• No proof of the information used to prepare schedule• Errors in technical logic• Incomplete schedules• Overlooking procurement of critical materials
CONTRACT ADMINISTRATIONSchedules to Prove Delays• Failure to consider: – physical restraints – weather restraints – resources – economics of the sequencing – uncertainty and risk in establishing durations
CONTRACT ADMINISTRATIONSchedules to Prove Delays• 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
CONTRACT ADMINISTRATIONSchedules to Prove Delays• Schedule Deficiencies – Unrealistic productivity of durations – The schedule submitted to the owner was not used to build the project
CONTRACT ADMINISTRATIONSchedules to Prove Delays• 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
CONTRACT ADMINISTRATIONCause 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
CONTRACT ADMINISTRATIONCause and EffectQuestions• 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?