A Practical Guide to Disruption and Productivity Loss on Construction and Engineering Projects

Roger Gibson

• Publisher: Wiley-Blackwell
• Year: 2015
• Print ISBN: 9780470657430
• eBook ISBN: 9781118992173
• Edition: 1
• Topic: Law
• Subtopic: Construction Law
• Index: Law

Disruption of a construction project is of key concern to the contractor as any delay to the project will involve the contractor in financial loss, unless those losses can be recovered from the employer. It is, however, acknowledged that disruption claims in construction are difficult to prove, usually the result of poor or inaccurate project records, but the cost of lost productivity or reduced efficiency to the contractor under these circumstances is very real.

Practical Guide to Disruption and Productivity Loss on Construction & Engineering Projects is clearly written to explain the key causes of disruption and productivity loss. Disruption claims rest on proof of causation, so it discusses the project records that are necessary to demonstrate the causes of disruption, lost productivity and reduced efficiency in detail. Quantification of a disruption claim in terms of delay to activities and the associated costs are also fully discussed. With many worked examples throughout the text, this will be an essential book for anyone either preparing or assessing a disruption and loss of productivity claims, including architects, contract administrators, project managers and quantity surveyors as well as contractors, contracts consultants and construction lawyers.

Chapter 1
Introduction

1.1 Introduction

This book is a practical text that seeks to demystify the measurement of site labour/resource productivity.

In line with the Society of Construction Law Delay and Disruption Protocol launched in October 2002, this book also puts forward a rational and sufficiently accurate method of quantifying the effects of disruption in terms of both cost and time.

Disruption claims impact on the whole of the construction industry, so this book is written for all those members of the construction industry who are involved in submitting, evaluating, awarding, managing and resolving disruption claims.

It is my view that the methods used to quantify disruption must be readily usable by site management. Agreement at this level is the target of the solutions proposed, as it is hoped that this prevents the claim escalating to the formal dispute resolution procedures. It has been my experience that resolving claims for delay and disruption at site level reduces the souring of site relationships and prevents loss of senior management/head office time, which in turn prevents the cost of formal dispute resolution (adjudication, arbitration and litigation).

The solutions proposed in this book also seek to be realistic and to recognise that, in practice, any method of quantifying the cost and time effects of delay and disruption must be sufficiently accurate, robust and useful that the method employed at site level can also be used (if needed) by adjudicators, arbitrators and judges.

Construction disputes, albeit nominally about money, invariably involve issues to do with time. Extension of time claims self-evidently involve time, as do claims for Liquidated Damages.

Similarly, claims for prolongation costs, loss and expense or disruption are all fundamentally about time. The effective management of time is therefore a part of everything we do in construction and it is at the heart of all construction contracts.

Cost and time are interdependent. From a project management perspective, the treatment of cost (most commonly in the BoQ) and time (in the programme) as independent models fails to provide a mechanism of direct performance/efficiency comparison. It also prevents the systematic evaluation of the effects of variations and delay. Delay and disruption are associated with time and will often have a related impact on cost.

Whilst it may be tempting to require the development of a system that can quantify the costs associated with disruption to almost laboratory standards, it must be remembered that the construction site is not a laboratory and it is simply uneconomical, impractical, unnecessary and unrealistic to expect to develop such a complex system. In practice, there is a need to balance the desire for extreme accuracy with practical reality; – this book recognises this practical hindrance and therefore proposes a solution that is sufficiently accurate for the quantification of disruption claims.

This book aims to demonstrate how the actual site labour productivity measurements can be used to provide an objective and automatic basis for quantifying the effects of disruption in terms of cost and time to arrive at a figure for the loss/expense payable to the contractor. The present position in construction disruption-based disputes is that settlement is often reached after extensive, and sometimes highly subjective, negotiations. The parties' positions are usually severely weakened by a lack of records that may actually demonstrate the effect of a "disruptive" event on the contractor's work operations. If the contractor's productivity could be recorded sufficiently faithfully and simply, it could be used as objective evidence to accurately demonstrate the effect the disruption has actually had on the site productivity. The equating of labour productivity loss to disruption is therefore a realistic and objective measure of the effect of disruption on the contractor's work operation.

Delays are an endemic feature of the construction and engineering industries. In the construction industry, the aim of project control is to ensure the projects finish on time, within budget and achieve other project objectives. It is a complex task undertaken by project managers in practice, which involves constantly measuring progress, evaluating plans, and taking corrective actions when required. During the last few decades, numerous project control methods, such as Gantt Bar Chart, Program Evaluation and Review Technique (PERT) and Critical Path Method (CPM), have been developed. A variety of software packages have become available to support the application of these project control methods, for example Microsoft Project, Asta Power Project, Primavera, etc.

Despite the wide use of these methods and software packages in practice, many construction and engineering projects still suffer time and cost overruns.

There have been numerous studies on the identification of influencing factors of project time and cost overruns worldwide. These studies have found that the most important variables causing construction delays and disruption are: poor contract management; financing and payment of completed works; changes in site conditions; shortage of materials; imported materials and plant items; design changes; and subcontractors.

1.2 The aims of this book

The aim of this book is to provide guidance in relation to disruption and loss of productivity claims. The contents of this book are intended to give its readers the information and practical details to be considered in formulating disruption and loss of productivity claims.

One of the recurring themes in this book is good record keeping on projects. Whilst a lack of progress related records may not be fatal to a claim, it does make a reasonable settlement into an uphill battle. Readers will observe my continuing advice on good record keeping.

The book has been arranged in six chapters:

• Chapter 1 Introduction: details general principles relating to extensions of time, delay claims and the SCL Protocol.
• Chapter 2 Contracts and Case Law: looks at the relevant loss and expense clauses in the JCT and NEC contracts, plus case law concerning disruption, loss of productivity, mitigation and acceleration.
• Chapter 3 Programmes and Record Keeping’: deals with the fundamental matter of the project programme, together with the important matter of record keeping during the project.
• Chapter 4 Delay and Disruption: looks at the fundamentals of these two issues.
• Chapter 5 Loss of Productivity: included in this chapter are examples of two techniques to demonstrate disruption and productivity loss.
• Chapter 6 Acceleration and Mitigation: this final chapter looks at the fundamentals of these two issues.

At the end of the book are three appendices which I consider the reader will find helpful. These are:

1. Appendix 1: Definitions and Glossary.
2. Appendix 2: Standards for the Levels of a Programme or Schedule.

1.3 Appendix 3: Society of Construction Law: Delay & Disruption Protocol (October 2002) The SCL Protocol

In October 2002, the Society of Construction Law (SCL) published its ‘Delay & Disruption Protocol’. This Protocol provides guidance to people dealing with submissions for extension of time and delay claims, both during a contract and after completion of the works. The Protocol runs to some 82 pages and was drafted by a group of experts from all sections of the construction industry.

The Protocol envisages that decision-takers, e.g. contract administrators, adjudicators, dispute review boards, arbitrators, judges, may find it helpful in dealing with time-related issues.

There are 21 Core Statements of Principle in the Protocol. Of these, about 11 relate to ‘disruption’, ‘loss of productivity’ and/or ‘acceleration’. These are:

1. Programme and records: To reduce the number of disputes relating to delay, the Contractor should prepare and the Contract Administrator (CA) should accept a properly prepared programme showing the manner and sequence in which the Contractor plans to carry out the works. The programme should be updated to record actual progress and any extensions of time (EOTs) granted. If this is done, then the programme can be used as a tool for managing change, determining EOTs and periods of time for which compensation may be due. Contracting parties should also reach a clear agreement on the type of records that should be kept.
2. Concurrent delay – its effect on entitlement to compensation for prolongation: If the Contractor incurs additional costs that are caused both by Employer Delay and concurrent Contractor Delay, then the Contractor should only recover compensation to the extent it is able to separately identify the additional costs caused by the Employer Delay from those caused by the Contractor Delay. If it would have incurred the additional costs in any event as a result of Contractor Delays, the Contractor will not be entitled to recover those additional costs.
3. Identification of float and concurrency: Accurate identification of float and concurrency is only possible with the benefit of a proper programme, properly updated.
4. Mitigation of delay and mitigation of loss: The Contractor has a general duty to mitigate the effect on its works of Employer Risk Events. Subject to express contract wording or agreement to the contrary, the duty to mitigate does not extend to requiring the Contractor to add extra resources or to work outside its planned working hours. The Contractor’s duty to mitigate its loss has two aspects – first, the Contractor must take reasonable steps to minimise its loss; and secondly, the Contractor must not take unreasonable steps that inc...

Table of contents

• Cover
• Title page
• Table of Contents
• Preface
• Acknowledgements
• Chapter 1: Introduction
• Chapter 2: Contracts and Case Law
• Chapter 3: Planning, Programmes and Record Keeping
• Chapter 4: Delay, Disruption and Causation
• Chapter 5: Loss of Productivity
• Chapter 6: Acceleration and Mitigation
• Appendix 1: Definitions and Glossary
• Appendix 2: Standards for the Levels of a Programme or Schedule
• Appendix 3: Society of Construction Law
• Index
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