Common Causes for Project

Overruns &
Construction Claims

Stephen Revay CCP, CFCC, FCSC, FAACE

 AGENDA
COMMON CAUSES - Overruns
Typical failings
Communication / Email
Schedules
COMMON CLAIMS
 Typical claims
 Resolution
 IMPORTANT
QUALIFICATION
STEPHEN REVAY IS NOT A LAWYER.
THE OPINIONS EXPRESSED DURING THIS PRESENTATION
ARE NOT NOR SHOULD THEY BE CONSTRUED AS LEGAL
OPINION. THESE OPINIONS ARE SIMPLY BASED ON 37
YEARS OF COMMERCIAL EXPERIENCE.
JUDICIAL OUTCOMES WILL VARY DEPENDING ON
SPECIFIC FACT SCENARIOS AND THE RELEVANT
CONTRACT – ONE CAN NOT APPLY OUTCOMES TO
SEEMINGLY SIMILAR FACT SCENARIOS.
 AGENDA – Typical Failings

Owners

Design Consultants

Contractors
 Warning Signs

Owners who:

 have unrealistic expectations

 fail to properly develop project

 cut corners on investigations and design

 inappropriately shift risks to contractor

 inexperienced personnel
Realistic Schedule

DELAY
Engineering Project Completion

Overlap

Increased overlap

Construction

Failure to move start and end dates notwithstanding

initial delays causes unrealistic schedule
Fast Track
 Fast Track
&
Hard money (LS)
Excellent source of business for claims consultants
 Warning Signs
Engineers who:
 pass on design responsibilities to
Contractors
 agrees to unrealistic expectations
 have vested interest in disputes
 produce ambiguous or conflicting
documents
 inexperienced personnel
 Industrial Megaprojects
Concepts, Strategies and Practices for
Success BY Edward W. Merrow
It is far more important to be carefully
monitoring engineering than construction!
When problems start to show up in
engineering, it actually may be possible to do
something about them. If the problems are not
seen until construction, it is usually too late
 Warning Signs
Contractors who
 don’t satisfy notice provisions
 cut corners to offset bid deficiencies
 abuse subcontractors
 don’t read the contract or assume it will not be
enforced
 fail to keep adequate project records
 don’t document claims properly
 fail to develop and update schedules
 inexperienced personnel
The Problem:
Insanity is doing the
same thing over and
over and expecting a
different result.
Albert Einstein
Lessons
Learnt

Repeated
Owner Issues
Best practices are known but
not practiced
 Lip Service
 SCOPE DEFINITION
 STAGE GATING
 RISK MANAGEMENT
 CONSTRUCTABILITY / VALUE
ENGINEERING
CONSULTANT ISSUES

IMPARTIALITY
PROPER MANDATE
ARBITER DESIGN
CONSULTANT
Contractor Issues

Contract Familiarity
ARTICLES TO READ
 NOTICE PROVISION

 CHANGES/EXTRAS

 DISPUTES

 AUTHORITY

 SOIL SITE CONDITIONS

 DELAY

 PAYMENT
R T F C
 Words of Wisdom
“ Education is what you get
when you read the fine print
…
...experience is what you get
when you don’t. ”
 SET THE STAGE
Satisfy notice provisions;

Avoid surprises;

Ensure project records are not adverse to

the claim position;

Understand the position of the other side;

Most importantly keep emotion out of the

equation;
Email: Out of Control
 EMAIL
 Poor form of Communication – easily
misunderstood
 Responses in anger increase animosity
 Keyboard jock writes sentiments which
would not otherwise be expressed
 Careless often smoking gun
 Communication Elements

A. Barbour, Louder Than Words: Nonverbal Communication,

 Project Documentation Shall:
 Provide information needed to effectively tender,
plan, manage and construct the work.
 Be an accurate and complete record of on-site
conditions, problems encountered and their
effect on project.
 Be readily available to cost effectively
reconstruct an accurate history of the project
should a dispute not be resolved by Final
Completion of the Project.

http://emailcharter.org
 Monitoring
At each and every coordination job site
meeting each and every contractor or
subcontractor is asked if they are aware of
any current or potential situation that is
affecting or might affect their time and or
cost to complete their work.
Monitoring
The response to this question
must be minuted for each and
every contractor /
subcontractor.
What is being said - What is happening
Contractors say
Owners say
Owners become
We want to defensive and more
know early on rigid with no give
when there and take -
are problems becomes war zone
Can Claims be Avoided?
Effective Project Planning:
Degree of design
completion at
construction start

Number and severity of

design changes
The number and during execution
magnitude of claims
The reaction time of
will depend on:
the customer to
these changes

Construction manager’s
ability to coordinate the
various activities

30
"Plans are nothing.
Planning is
everything."
Dwight D Eishenhower
 State of the Art - POOR

Deliverables not tools

Unrealistic schedules
 Options for Improvement
 Contract Language

 Schedule Audits

 Work Face Planning / Look Ahead Sch.

 Integrated Project Schedule

 TEAM CONCEPT
 Contractor
 Owner
 Design Consultant
 Construction Manager
Integrated Project Schedule
 TEAM CONCEPT
 Contractor
 Owner
 Design Consultant
 Construction Manager
SCHEDULE REVIEW
 reduction in adversarial and
defensive attitude
 fostering early and open
communications
 development of common
objectives
CONTRACTOR RESPONSIBLE

 Means

 Methods

 Sequence of Work
KEEP ACTUALS
Very expensive after the
fact
CLAIMS BY CONTRACTORS

Stephen Revay CCP, CFCC, FCSC, FAACE

 CLAIM
Ingredients – Fixed Price Contracts

Poor Scope Definition: Extensive Growth / Rework

Acceleration: Overtime / Congestion

People : no communication and no

 TRUST
 BETWEEN PROJECT PARTICIPANTS

AND

 WITHIN THE PROJECT TEAM

 SUSTAINABLE ALLIANCES
J. W. Carss-Gofton

Cost Trust . . . . . . . . .expectation of a

fair and equitable
exchange of value

Competence Trust . . confidence in

a party’s capability
to perform a task.
CLAIMS BY CONTRACTORS
 IMPEDED and/or NO ACCESS TO SITE
 DELAY IN SUPPLYING DRAWINGS
 DELAY IN SUPPLYING PRE-PURCHASED
EQUIPMENT/MATERIAL
 OWNER’S NON-DISCLOSURE OF
RELEVANT INFORMATION
 ACTIVE INTERFERENCE ON PART OF
OWNER
ACTIVE INTERFERENCE
 IMPROPER REJECTION OF AN EQUALLY SUITABLE

ALTERNATIVE

 INTERFERENCE WITH METHOD OF CONSTRUCTION

 INTERFERENCE WITH SEQUENCE OF CONSTRUCTION

 UNDULY DEMANDING INSPECTION

 (Quality Assurance - Safety)

 CLAIMS BY
SUBCONTRACTORS
Same issues as Contractor
Pass Through after Review
Satisfy Notice Provisions
Performance of other
Subcontractors
OTHER CAUSES OF CLAIMS

OWNER’S FAILURE TO GRANT

TIME EXTENSION
CONSTRUCTIVE ACCELERATION
 CONTRACTOR IS ENTITLED TO EXTENSION OF TIME

 CONTRACTOR REQUESTED EXTENSION IN A TIMELY

MANNER
 EXTENSION DENIED IN WHOLE OR PART
CONSTRUCTIVE ACCELERATION
• OWNER MUST DIRECT TO COMPLETE WORK WITHIN
UNEXTENDED TIME

• CONTRACTOR MUST PROVIDE NOTICE THAT THEY

CONSIDER ACTION TO BE CONSTRUCTIVE
ACCELERATION

• OWNER MUST BE SILENT or DISAGREE

• CONTRACTOR MUST ACCELERATE

OTHER CAUSES OF CLAIMS

OWNER’S FAILURE TO GRANT

TIME EXTENSION
SUSPENSION OF WORK
TERMINATION OF WORK
TERMINATION

 Convenience

 Cause
 Convenience / Cause
Abide by Contract terms
 Categories of Cost
Termination / Suspension
 Work completed to date ( not invoiced)
 Unusual / special demobilization costs
Termination
 Profit on uncompleted work ??
Usually excluded
 Non Adversarial
Communication

Claims are about

money not people
Project Neutral Approach

ADR during construction

In the event parties have a legitimate
difference of opinion

Requiring analysis
Options
• Each party engages claims
consultant

• Each party diverts project people to

perform analysis

• Two parties engage independent to

provide objective basis
 Proposed Best Alternative
The appointment of an impartial independent claims
consultant to offer:

 Unbiased advice and decisions

 Assist in negotiation

 Conduct forensic analysis at half the cost to each

party
Forensic Analysis
• Initiation of Process
• Fact Finding
• Draft Report
• Final Report
Recommended Sources
 Revay web page: www.revay.com

 AACE : www.aacei.org

 COAA: www.coaa.ab.ca

 CII: http://www.construction–institute.org
 www.aacei.org/resources/rp/
Recommended Practices (RPs) cover many topic
areas such as estimating, planning and
scheduling, claims and dispute resolution and
more! Listed below are a few of the topics covered
in AACE's RPs:

 RP 25R-03 Estimating Lost Labour

Productivity
 RP 29R-03 Forensic Schedule Analysis
 RP 45R-08 Scheduling Claims Protection
 RP 52R-06 Time Impact Analysis
That’s all , thank you
and good luck