In Part One of Drafting Scheduling Specifications, we addressed twelve major factors that should be considered in drafting construction contract scheduling specifications. In this section, Part Two, we will further address a number of areas of potential conflict that must be given consideration in the drafting of specifications to enhance the chances of a successful procurement. Each of these issues has the potential to subvert otherwise worthy efforts to schedule and execute construction of a quality project in an economical and timely manner. 

Reasonableness of the Schedule 

Will the schedule actually be used to run the project, or merely be a software exercise? One of the most serious problems in the construction industry today is the lack of commitment by the parties to the construction process to the actual use of the network schedule to plan and execute the work. In the 1960s and 1970s, on major projects, a number of master schedulers worked with the general contractor project superintendents to develop (1) a plan, and (2) a network diagram reflecting preferential and absolute logic, sequence, and duration. These master schedulers would also frequently meet with the project managers for the major trade contractors as well. The computer work for the CPM was done on mainframes and frequently the original plan and updates were hand-drawn. What was significant in these projects was the commitment of the key participants in the project to developing a meaningful plan for executing the work and then actually executing the work.

However, the advent of the mini- and microcomputer (and attendant software), coupled with the failure of specifications to require participation of the master scheduler in execution of the project schedule, has damaged the construction process. The general contractor (or the at-risk Construction Manager) bidding the project today frequently approaches the cost of preparing the detailed project schedule as an exercise driven not by the benefits of a good plan for performance and network schedule, but rather as another place for cutting the bid to become the low bidder. Thus, if some computer processing concern, which will merely process the paper without any knowledge of construction, gives a price of $20,000 to do computer scheduling for the project, as contrasted with an experienced and talented master scheduler who quotes $100,000, then the general contractor invariably takes the low price. The effect of this trend from the 1960s to the present has been to move almost all experienced master schedulers into the role of claims consultants, rather than positive participants in the development of a good plan and network at the inception of a project. The claims arena was the only marketplace prepared to pay reasonable compensation for the skills of the master scheduler. 

As a result of these developments, the master scheduler who could deal with tough construction superintendents as a positive force was lost as a resource to planning and execution of the project. A frequent alternative source today for the construction schedule is a computer service or a junior project engineer. The ill-equipped computer service frequently prepares the network with the assistance of the junior project engineer, or the junior engineer does it herself. As a result, preparation of the plan and schedule frequently lacks real participation or commitment by the executors of the project. The remedy in this area is for the owner to reestablish its willingness to require and pay for a real commitment to the scheduling process—not just a paper exercise that lays the groundwork for later claims disputes. 

Approval / Non-Approval Issue 

A question frequently asked by owners is whether they should approve the contractor’s schedules. The fear is that somehow the owner will warrant the schedule by its approval. Experience makes it clear, however, that this is an unwise course. The problem is that failure to approve the schedule deprives the owner of the ability to reject unreasonable plans for performance, opens the owner up to potential claims for early completion (which may be based upon defective or unrealistic logic), and denies the parties a baseline from which to evaluate delays. If neither party is operating from an approved baseline schedule, then how will the owner or the contractor have any idea how to evaluate time extensions? In short, the unapproved schedule is frequently a recipe for disaster. 

The problem of liability for approving the schedule is minimal as long as two rules are followed. First, the owner should add cautionary language to any approval, noting that the contractor remains the party responsible for development and execution of the means, method, and timing of performance reflected in the project plan with the owner. Second, the owner should review any time frames shown on the project plan for performance of review functions, shop drawing approvals, supply of owner-furnished equipment, etc., to make certain that the owner is not being called upon to act in a manner quicker than that called for in the contract, or in unreasonably short time frames. Presumptions of correctness as to time durations for action by the owner may be inferred when the owner accepts time approval durations shorter than those called out in the specifications. See G. Blindzius Contractors, Inc., ASBCA No. 37,707, 90-2 BCA 22,835 (1990).

Approval Standoff 

The type of project that illustrates this issue may be one, two, three, or even four years into construction—without an approved schedule for the project. The typical problem here is failure of the owner to make provision for appropriate leverage to enforce the approval process. The remedy to this problem is very simple. The owner, by a clear contract clause, should provide that no payment will be made on contract billings until a schedule is approved by the owner (absent, perhaps, some initial stipulated funding in the first month or two). If the contractor submits unreasonable or unrealistic logic, sequences, or durations (including overall project duration), the owner has the opportunity, through the power of the purse, to require that a reasonable schedule be submitted. The owner should also provide, by contract, that the contractor will be required to make all necessary schedule changes directed by the owner to arrive at a reasonable, realistic, and acceptable schedule.

Failure to Require Initial & Continuing
Involvement of Major Trade Contractors 

One philosophy of a certain type of general contractor is for the general contractor to provide as little information as possible to trade contractors concerning development of the original schedule, updates of the schedule, or the time status of contract completion or milestone dates, as well as the status of change orders on the project. The attitude is one of telling the trade contractor only what the general thinks is good for it. Frequently, this type of general contractor advises the trade contractor “to follow the progress of the work,” and further directs the work of the various trades by weekly superintendent meetings, where weekly or monthly “lookahead” schedules are handed out. In many cases, the weekly or monthly “lookahead” schedules bear no relation to the current (or properly adjusted) contract completion dates, but may represent accelerated recovery schedules (or even in some cases undisclosed bonus schedules). 

This deliberate policy of hiding information critical to trade contractors’ performance is ironic when we consider the worthy and valiant efforts by general contractor organizations to sell the concept of “partnering” to the owner community. The idea in partnering is for a commitment on the part of principals to share views and resolve problems on a timely basis with structured means of resolving issues. Central to the concept is telling each other the truth. If the contractor will not have a slab poured for four weeks, then he should not lie and tell the owner it will be done in two weeks. If the owner will not have a change order issued for another month, it cannot expect to maintain credibility by saying that the modification (necessary to proceed with critical work areas) is forthcoming shortly. Successful projects must, therefore, reflect a commitment to teamwork by all the parties to the process. Although some general contractors feel they expose themselves to claims or litigation by involving trade contractors in the scheduling process, case law makes it clear that the opposite is true. Only by involving trade contractors in the scheduling and updating process can the general bind the subs to the desired logic, sequence, and durations. 

Vague & Defective Updating Procedures
& Necessity for Joint Updates 

Another area that frequently gives rise to conflict is the failure of the parties to establish monthly procedures to ensure that the historical work on the project is properly recorded and that the parties agree on the contractor’s game plan for completing the work. The purpose of the updating process is threefold. First, the update should tell you where the project has been (or how you got to the point you are in the process of the job). Next, the monthly update should tell you where you are currently (as of that given point in time). Finally, the update should reflect the plan as to where you are going. Unfortunately, the recent advent of some computer software allows the contractor to override the logic of the planned diagram (without advising the owner of changes in logic, sequence, or durations). Further, it is possible to perform construction projects, using such programs as Primavera, without inserting the actual completion dates for work performed during the preceding month, and override the logic in the planned CPM without making appropriate logic changes. See Jon M. Wickwire & Stuart Ockman, Use of Critical Path Method on Contract Claims – 2000 , The Construction Lawyer, Vol. 19, No. 4, October 1999.

Another problem frequently occurs on updates of construction projects. Even though the contractor may be properly updating the CPM for the project and transmitting it to the owner monthly, owner representatives (because of laziness, ignorance, or the press of other duties) may simply file the document without performing any sort of analysis as to its validity. An argument can later arise as to the actual job status as of a given update. The purpose of the joint monthly updating meeting is to force proactive and timely engagement by the parties, so that they specifically agree on the progress on the various activities during the preceding month. The record of the joint updating meeting also can be a vehicle for contemporaneous quantification of time impacts for changes and other delays. If such delays are not priced and negotiated at the time, the historical record of the joint updating (which should include both a disk which includes associated backup and a copy of the CPM diagram with historical progress to date highlighted) will provide the necessary factual background for the parties at a propitious future date, to discuss merit and quantum. 

Provision of Definitive Procedures for
Approval & Incorporation of Logic Revisions 

Logic revisions concern activities, sequencing of work, or durations. In this area, the failure of owners to specify clearly approval requirements can result in major problems on projects. For example, the contractor, to avoid showing its own delay on a project, may modify otherwise valid sequential logic (of a lineup of predecessor and successor activities) to one of concurrent logic (with concurrent activities) without any notification to, or knowledge on the part of, the owner. 

Failure to Provide a Definitive Baseline &
Methodology for Approval & Incorporation of Time Extensions 

One of the worst areas of conflict relating to project time relates to the failure of the specifications to spell out properly the baseline and the methodology for evaluating time requests on projects. Failure to identify clear rules for evaluating merit and quantum on time leads to a lack of clarity as well as unnecessary and unproductive gamesmanship on the part of the participants. One party states, “Let’s use a contemporaneous evaluation” on one occasion. When the next issue comes up, the same party states that we should not look at the update relevant for the period, but rather should look at later updates under some theory of supervening delay. This tailoring of approaches to achieve only results favorable to one’s own position results in needless disputes. A number of decisions have castigated experts and their clients for this type of attitude.

Submission of the Early Completion Network for Approval 

One of the things most capable of raising the ire of an owner is a contractor that submits a schedule for approval which provides for an early completion to the project. Courts have long held that where the owner causes a contractor’s performance to extend beyond the contractor’s planned completion date, the owner may be liable to the contractor for damages, even though the contract may be completed before the contractually specified completion date. The damage the contractor suffers is the loss of the benefit gained by completing the project prior to the scheduled completion. These damages are measured by defining the contractor’s per diem costs in awarding the contractor delay damages equivalent to the time performance was extended beyond the early completion date. See, e.g., Metropolitan Paving Co. v. United States, 163 Ct. Cl. 420, 325 F.2d 241 (1963); Maurice L. Bein, Inc. v. Housing Authority, 157 Cal. App. 2d 670, 321 P.2d 753 (1958).

There are a few potential answers to this problem. First, the owner may simply decide to discourage early completion efforts by calling out in the specifications that any submission, coupled with subsequent approval, of a contractor schedule showing an early completion will have the effect of moving the contract completion date to the earlier date, which will be the new point for the assessment of liquidated or actual damages. Another approach is simply to refuse to approve a schedule calling for early completion, so long as the owner can establish that the submitted schedule does not reflect a reasonable plan for performance. See, e.g., Sierra Blanca, Inc., ASBCA Nos. 32161 et al., 90-2 BCA  22,846 (1990). Finally, the owner who receives an early completion schedule about which it is concerned, but which it is not prepared to state is clearly wrong, may wish to consider the following course. First, indicate doubts about the reasonability of the proposed early date. Second, indicate that the owner will have to change its economic position to accommodate the early date (assuming this is correct). Third, advise that the owner will suffer damages if the early date is not met, because of the change in position. Finally, note that if the contractor wishes the owner to approve the early date, written confirmation must be provided acknowledging the contractor’s liability for any damages incurred by the owner’s change in position in the event the early date is not met (or adjusted for any time extensions). Importantly, courts have recently found that approvals of early completion schedules will be thrown out if the underlying schedule is based on unrealistic logic and durations. See Neal & Co. v. United States, 36 Fed. Cl. 600 (1996), aff’d 121 F.3d 683 (Fed. Cir. 1997)

Conclusion

Sophisticated methods of scheduling, such as the network technique of critical path method have become widely used and accepted. When used properly, the project schedule is effective in project management, analysis, control, and overall performance, not just as a device for telling trade contractors where to move their work forces. The project schedule is an important management tool that enables the contractor to use personnel wisely and provide advance warning of situations threatening the profitability of a project, such as cost overruns, claims, and other difficulties. The project schedule is also an analytical device for claim recognition, preparation, and proof. If a claim does arise, the project schedule assists in determining what went wrong and who is responsible by comparing planned with actual performance. Courts and administrative boards of appeals now consider proper scheduling techniques, particularly CPM, as one of the only valid means for proving liability and damages. Without appropriate scheduling specifications at the front end of a construction project, many of the benefits that can be gained from a well devised project schedule may be lost.

About the Author: Jon M. Wickwire is a shareholder in the law firm of Wickwire Gavin, P.C., and is President of Construction Strategies, Inc., a construction consulting firm providing Alternative Dispute Resolution and strategic planning services to the construction industry. He has published extensively on using critical path method techniques in contract claims and is nationally recognized as the premier legal historian in this field.