Session 10 and 11 EXECUTING THE WORK & CLAIMS AND DISPUTES
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1 Audio Sessions Session 10 and 11 EXECUTING THE WORK & CLAIMS AND DISPUTES Education Program Certified Construction Contract Administrator (CCCA) Preparatory Course This presentation is protected by US and International copyright laws. Reproduction, distribution, display and use of this presentation without written permission of the speaker and is prohibited AIA is a Registered Provider with The American Institute of Architects Continuing Education Systems. Credit earned on completion of this program will be reported to CES Records for AIA members. Certificates of Completion for non-aia members available on request. This program is registered with the AIA/CES for continuing professional education. As such, it does not include content that may be deemed or construed to be an approval or endorsement by the AIA of any material of construction or any method or manner of handling, using, distributing, or dealing in any material or product. Questions related to specific materials, methods, and services will be addressed at the conclusion of this presentation. 2 1
2 Audio Sessions Session 10 EXECUTING THE WORK Education Program Certified Construction Contract Administrator (CCCA) Preparatory Course This presentation is protected by US and International copyright laws. Reproduction, distribution, display and use of this presentation without written permission of the speaker and is prohibited Learning Objectives To understand the purpose and importance of schedules and complying with schedules To explore project time provisions typically established with the contract documents, and the ramifications of not performing responsibilities in a timely manner, including the effect on the project schedule To define typical contract provisions for handling delays, and which types of delays are and are not excusable To understand liquidated damages and bonus/penalty clauses 4 2
3 Session Outline STUDY GUIDE: Subject Matter Area No. 10 6% EXECUTING THE WORK A. Sequencing the Work B. Scheduling the Work C. Project Time Provisions 1. Time limits 2. Weather delays 3. Other delays 4. Liquidated damages and bonus/ penalty clauses 5 EXECUTING THE WORK STUDY GUIDE AREA NO
4 SEQUENCING THE WORK STUDY GUIDE: Submit Matter Area No A. 7 Sequencing the Work Effective sequencing requires understanding of construction processes Tasks are dependent on each other, for example Concrete forms are built first Reinforcing steel is placed Concrete is placed Forms striped Walls are framed Electrical is roughed in Plumbing is roughed in Mechanical is roughed in Wall framing is covered with wallboard
5 Sequencing the Work Common sense and experience dictate much of sequencing Contract documents may specify certain sequences Project phasing may be contractual sequencing of work that is typically established by Owner Usually set forth in Division 01 Requirements shown in construction progress schedule Common for completion of a phase is a milestone event SCHEDULING THE WORK STUDY GUIDE: Submit Matter Area No B. 10 5
6 Scheduling the Work Contractor responsible for Scheduling and timing the work Expected to keep project team informed of - Progress - Expected delivery dates - Start dates for tasks - Other issues Obtaining accurate schedules and delivery dates from subcontractors and suppliers Scheduling the Work Unanticipated events can affect schedule Labor strikes Inclement weather Plant shutdowns Availability of materials Discontinued product lines When product is late to be incorporated into project Has ripple affect on subsequently installed products Contractor should have a contingency plan for delays
7 PROJECT TIME PROVISIONS STUDY GUIDE: Submit Matter Area No C. 1. Time limits 2. Weather delays 3. Other delays 4. Liquidated damages and bonus/ penalty clauses 13 Project Time Provisions Construction progress schedule Important in context of sequencing and coordination Accurate, thorough and realistic is important Should show critical dates Should also include impact to completion when a date is not met Planning tool If project falters Recovery schedules should be required implemented by - Increased manpower - Lengthening of workday - Other methods Allows project to get back on track
8 Project Time Provisions Construction progress schedule should include anticipated weather delays Weather delays are sometimes defined in contracts as only those days in excess of those included that can be granted as extensions of time Weather delays can be included as an activity or time allowance within the critical path schedule Project Time Provisions Liquidated damages Included in many contracts that include time is of the essence provision Defined as amount that Owner has determined it will cost to not have use of facility Usually assessed for each day the project is not completed by indicated date or within indicated time Not assessed for Owner caused delays and
9 Penalty clauses Project Time Provisions Can be assessed against Contractor if: - Designated time is exceeded - Some portion of work does not comply with minimum requirements Bonus clauses Can be rewarded to Contractor if - Project is finished before designated date - Some portion of work exceeds minimum requirements and Review Outline STUDY GUIDE: Subject Matter Area No. 10 EXECUTING THE WORK A. Sequencing the Work B. Scheduling the Work C. Project Time Provisions 1. Time limits 2. Weather delays 3. Other delays 4. Liquidated damages and bonus/ penalty clauses 18 9
10 Audio Sessions Session 11 CLAIMS AND DISPUTES Education Program Certified Construction Contract Administrator (CCCA) Preparatory Course This presentation is protected by US and International copyright laws. Reproduction, distribution, display and use of this presentation without written permission of the speaker and is prohibited Learning Objectives To understand the differences between a claim and a dispute To identify the sources of claims To explore the methods for initiating and handling claims, including the determination and verification of valid claims To list the A/E s responsibilities in the claims process To understand the methods of preventing disputes and dispute resolution procedures 20 10
11 Session Outline STUDY GUIDE: Subject Matter Area No. 11 8% A. Claims and Disputes B. Claims CLAIMS AND DISPUTES 1. Sources of claims a. Contractor claims b. Owner claims c. Third-party claims 2. Contractual provisions governing claims a. Subcontractors, suppliers, and other third party must make claims through the prime contractor (an exception is the mechanic s lien) b. General conditions of the construction contract promote expeditious settling of claims by stipulating strict time constraints for filing, handling, and deciding c. A/E may request documentation form the claimant 3. Submitting claims a. A/E s responsibility as the impartial interpreter of the Contract Documents b. Claims must be filed initially with the A/E (or initial decision maker) c. Claims are initially decided by the A/E (or initial decision maker) as a condition precedent to dispute resolution Continued on following slide 21 Session Outline STUDY GUIDE: Subject Matter Area No Processing and settling claims C. Entitlement CLAIMS AND DISPUTES 1. Contractor entitlement a. Work not reasonably inferred in the contract documents b. Timely initiation of the claim 2. Owner entitlement a. Work not reasonably inferred in the Contract Documents b. Timely notification D. Resolving Claims Continued from previous slide 1. Claims involving adjustment in contract sum or time require supporting documentation a. Claims for additional cost are reviewed against A/E s independent estimate of cost, based on Contractor s schedule of values and published estimating guides b. Claims for extra time rely on documentation in the form of planned schedules, asbuilt schedules, and contemporaneous job site records Continued on following slide 22 11
12 Session Outline STUDY GUIDE: Subject Matter Area No A/E may order additional testing and sampling to prove or disprove defective or nonconforming work a. Testing should be in accordance with recognized standards b. Interested parties should have the opportunity to witness testing 3. Dispute avoidance a. Each party understanding the interests and limitations of the other b. A/E s role CLAIMS AND DISPUTES Continued from previous slide E. Disputes c. Keys are communication, documentation, and claim resolution action plans 1. When a claim cannot be resolved through negotiation 2. Contractual provisions governing disputes 3. Notification of demand for dispute resolution 4. Alternative dispute resolution 5. Methods of ADR a. Binding binding arbitration, judicial reference b. Nonbinding mediation, nonbinding arbitration, minitrial, disputes review board 23 CLAIMS AND DISPUTES STUDY GUIDE AREA NO
13 Claims and Disputes STUDY GUIDE: Submit Matter Area No A. 25 Successful project Claims and Disputes Completed on time Within budget With all claims resolved Claim is request for compensation for dealing with a situation that differs materially from what was anticipated by the parties at time of entering into the contract Change order is an undisputed claim Effective management of claims is important to success Dispute is a claim that cannot be resolved by parties of contract without intervention of independent third party
14 Claims STUDY GUIDE: Submit Matter Area No B. 1. Sources of claims 2. Contractual provisions governing claims 3. Submitting claims 4. Processing and settling claims 27 Sources of Claims Standard general conditions typically stipulate procedures and requirements about claims Filing Settling Disputing
15 Contractor prepares pricing based on Procurement documents Other factors that are reasonably foreseen at the time If during course of project, a condition is encountered contrary to those stipulated or inferred in contract documents, a claim may be initiated Sources of Claims Sources of Claims Contractor can encounter changed conditions that include Active interference by Owner or A/E Conditions beyond control of Contractor or Owner Unknown or concealed conditions affecting extent of work Modifications made to contract documents Errors and omissions in contract documents Contractor required to document changed condition was not foreseeable at time of pricing and resulted in demonstrable damages Types of breach of contract claims by Contractor For untimely payment or nonpayment Improper or ineffective construction contract administration
16 Sources of Claims Owner has firm price to perform work of the project Owner may initiate a claim if Owner believes Value of work received not commensurate with contract price Owners costs have increased because of inactions by Contractor Owner initiated claims may include Correction of nonconforming or defective work Repair of damages to existing property Liquidated or compensatory damages for late performance Ineffective management or control of the work by Contractor resulting in added costs Claims are also grounds for withholding payment Contractual Provisions Governing Claims Standard general conditions typically stipulate mechanisms for seeking relief when claims arise Promotes timely resolution Early notification by party making claim Discouraged from accumulating claims or delaying response Forfeiture of rights is consequence if time limits are exceeded Privity of contract only allows Owner and Contractor to make claims against the other Subcontractors, suppliers, and other participants rely on Contractor to pursue claims on their behalf A/E may request additional information to support claims and
17 Submitting Claims Standard general conditions typically stipulate A/E is responsible to interpret contract documents impartially A/E makes - initial - decision about claim If either party takes exception to A/E s decision, claim may be Negotiated Mediated Arbitrated Litigated Processing and Settling Claims Contractually based and focused on timely and equitable resolution Claims initially addressed by reviewing contract documents to determine entitlement Once entitlement established, cost and time adjustments should be determined If process produces desirable results, disputes can be avoided
18 Claims Management Process Figure Entitlement STUDY GUIDE: Submit Matter Area No C. 1. Contractor entitlement a. Work not reasonably inferred in the Contract Documents b. Timely initiation of the claim 2. Owner entitlement a. Work not reasonably inferred in the Contract Documents b. Timely notification 36 18
19 Entitlements Entitlement is defined as the right to benefits specified by law or contract Contractor Entitlement Involves two determinations Evaluation of contract documents to identify claim as being within Contractor s contract obligations - If found to not be reasonably inferable, Contractor entitled to modification - If found to be reasonable inferable, entitlement of claim denied Timing of claim - Standard general conditions typically stipulate Contractor required to notify Owner or A/E before performing extra work - Owner has right to proper notification - Allows Owner to evaluate situation and attempt to identify most cost effective action - Intended to avoid situations where passage of time prejudiced Owner s ability to challenge claim - Failure to properly notify can result in forfeiture of entitlements
20 Owner Entitlement Involves determination if work is reasonably inferred from contract documents If found to be reasonably inferable, Owner s claim may be upheld without modification If found not to be reasonable inferable - Owner s claim denied - Work either dismissed or provided by modification Resolving Claims STUDY GUIDE: Submit Matter Area No D. 1. Claims involving adjustment in contract sum or time require supporting documentation a. Claims for additional cost are reviewed against A/E s independent estimate of cost, based on Contractor s schedule of values and published estimating guides b. Claims for extra time rely on documentation in the form of planned schedules, as-built schedules, and contemporaneous job site records 2. A/E may order additional testing and sampling to prove or disprove defective or nonconforming work a. Testing should be in accordance with recognized standards b. Interested parties should have the opportunity to witness testing 3. Dispute avoidance a. Each party understanding the interests and limitations of the other b. A/E s role c. Keys are communication, documentation, and claim resolution action plans 40 20
21 Claims Involving Adjustments Require Supporting Documentation Upon receipt of claim, A/E may request supporting documentation Once claim clearly documented and understood, it is appropriate to issue preliminary response timeliness - Summarizing essence of claim Identify concerns toward reconciliation Summarize potential solution to resolve claim Justification of many claims apparent from outset; can be handled Properly addressing issues Negotiate a settlement Claims for Additional Costs Reviewed For stipulated sum contracts, claims reviewed against A/E s independent estimate of cost Contractor s schedule of values Published estimating guides For unit price contracts Claims reviewed against published estimating guides if unit price items do not apply to extra work A/E should verify if costs claimed are representative of total impact of conditions giving rise to claim
22 Claims for Extra Time Reviewed Contractor provides supporting documentation Planned schedules Historical or baseline schedules Site records supporting extent and duration of activities must be tied to critical path Additional Testing of Defective Work A/E / Owner may require additional testing or sampling if claim arises from defective or nonconforming work Procedures should conform to recognized industry standards Testing should certified by independent testing laboratory Samples should be accompanied by report indicating method of sampling A/E should - Establish procedures - Meet with Contractor and testing laboratory - Schedule testing or sampling so interested parties have opportunity to witness event Generally, costs responsibility of party against whom claim is decided
23 Dispute Avoidance Dispute avoidance is defined as management of claims and disputes Understanding interests and limitations of other party is first step Contractor accountable for cost elements reasonably inferable at time of pricing Owner s need for thorough documentation justifying claim Owner has right to claim for compensation for - Nonperformance - Poor performance - Negligence resulting in damage to Owner A/E s role is to Dispute Avoidance Interpret Contract Documents impartially Recommend settlement to parties A/E s role may be burdensome responsibility If decision favors Contractor rather than Owner Contractor s claim stem from errors and omissions in design A/E s integrity and sense of accountability can make difference between Claim being settled Claim becoming dispute
24 Dispute Avoidance Disputes occur when participants refuse to accept its contractual responsibilities Settling claims relies on Individual integrity Cooperation among participants Dispute avoidance Requires proactive approach that recognizes that claims are an expected part of construction Administration should be planned Dispute Avoidance First key is communication Establish methods and protocols that offer best opportunity for early identification and discussion of issues, events, or circumstances producing a claim Respecting required lines of communications Second key is documentation Precise Pertinent Accurate Timely
25 Dispute Avoidance Third key is claim resolution action plan Prioritizes claims and promptly submits detailed documentation for evaluation Identifies parties with responsibility and authority for settling claims Advances claim to higher authority when initial parties are in dispute Disputes STUDY GUIDE: Submit Matter Area No E. 1. When a claim cannot be resolved through negotiation 2. Contractual provisions governing disputes 3. Notification of demand for dispute resolution 4. Alternative dispute resolution 5. Methods of ADR a. Binding binding arbitration, judicial reference b. Nonbinding mediation, nonbinding arbitration, minitrial, disputes review board 50 25
26 Disputes occur Disputes One or both parties do not agree with A/E s decision Claim cannot be resolved through negotiations Failure to negotiate effectively is due to one of more of participants failing to understand and accept rights, responsibilities and requirements established by Contract Documents Disputes Standard general conditions typically stipulates that specified method of dispute resolution should be used when claim cannot be negotiated successfully Either party can demand the other party to file for mediation If other party does not file, then both parties waive mediation If mediation unsuccessful, parties may choose to - Invoke any dispute resolution process specified - Submit to another dispute resolution process acceptable to both parties - Submit to a court of competent jurisdiction Standard general conditions typically stipulates that A/E make a final determination on claim prior to dispute Then notify Owner and Contractor
27 Disputes Litigation is the least desirable method of dispute resolution Parties lose control of outcome Cost and time detract from success of project Alternative dispute resolution (ADR) Prevents a single party from initiating litigation Provides suitable method for economically and expeditiously addressing disputes Types of ADR - Binding - Nonbinding Disputes Binding dispute resolution is defined where both parties agree to resolve disputes by specified method and to honor findings and award, usually without appeal or litigation Binding Arbitration - Parties select neutral arbitrator, or panel of arbitrators, that have construction experience - Similar to litigation but with more expeditious resolution Judicial reference - State statutes establish authority to retain independent private party to decide claim - Appeal is same as for litigation
28 Disputes Nonbinding dispute resolution is defined where both parties agree to resolve disputes by specified method and to honor findings and award, however appeal or litigation is still an option Mediation is an extension of negotiation whereby neutral party acts as facilitator to assist in finding mutually acceptable settlement Nonbinding arbitration is a form of arbitration that can be appealed Mini-trial is not an actual trial, but structured process that allows parties to present claim to neutral party in a compressed time Disputes review board is a three member board of construction experts who periodically convene to review status of project - To detect areas of potential conflict - Make recommendations for resolution of issues before they become claims A. Claims and Disputes B. Claims C. Entitlement D. Resolving Claims E. Disputes Review Outline STUDY GUIDE: Subject Matter Area No. 11 CLAIMS AND DISPUTES Continued on following slide 56 28
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