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University of Calgary Continuing Education

University of Calgary Continuing Education

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University of Calgary Continuing Education

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  1. University of Calgary Continuing Education Construction Contract Law and Documents Week 13 Changes Delays Claims Contract Documentation

  2. 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

  3. 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

  4. 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

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

  6. 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

  7. 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

  8. 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

  9. 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

  10. 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

  11. 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

  12. 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

  13. 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

  14. 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

  15. 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

  16. 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

  17. 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

  18. 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

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

  20. 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

  21. 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

  22. 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

  23. 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.

  24. 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

  25. 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.