Case Study - Delay Claim for a Contractor
Let's look at a real life case study of a delay claim where the Contractor was delayed by the Owner and was awarded an excusable, non-compensable time extension. The project was an airport renovation where the security check-in point was being remodeled. There were several different "sub-projects" being performed under the "airport renovation" master planned project so this security check-in renovation was just one of the sub-projects. Some of the details of the project have been changed to ensure the identity of the project is not revealed as some of the information may still be sensitive.
Also, always refer to the project specifications as that will give you the directions on how to report a delay claim on your specific project. This article is only for information purposes and is not meant to give directions on how you should report a delay claim on your project.
So, whose side were you on?
I was representing the Contractor and putting together the delay claim. The Owner in this case was the airport operations.
So what happened? What was the claim about?
The project was stopped after the subcontractor's bids were received from all qualified bidders and the Contractor found that the bids received were significantly higher than the engineer's estimate. This kicked off a value engineering exercise between the Contractor and the Owner to review if there were any areas of the project's scope that could be reduced or removed to save on cost.
When putting together a delay claim, most of the time I follow the same process:
Claims can become more complex if the delay is compensable. If so, the team will have to determine the cost per day to run the job so that the Contractor can be made whole for the additional time they had to spend beyond the original contract date. However, in this 'case study' we won't review how to determine the compensability portion since this was a non-compensable delay.
Let's go through each one of the steps listed above to see how this delay claim came together.
Create a Timeline of the Delay Event
First thing to do is to list out the activities that make up the "delay event". In this case, a simple excel table will work as we identify when the delay event started, what happened after the delay event started, and when did the delay finish where it was no longer impacting the Contractor's base scope. The following table shows a simplified version of the timeline we came up with for the delay event:
What you'll see shortly is that the original bid period was delayed which prevented the Contractor from awarding subcontracts. This was caused by the Owner wanting to run through a value engineering exercise to reduce the scope of the project and save on cost.
How do you come up with the timeline?
The tools used to come up with the timeline are typically formal project documents and correspondence between the project team which may include RFIs, Change Orders, Change Order Requests, Notice of Non Compliance, Daily Reports, Stop Work Notice, and Inspection Reports. Also, email correspondence between parties can often show the date of when major events started and/or ended. This step in developing the time impact is usually the most tedious and time consuming as it requires putting together a historical timeline (if the delay is forensic) of what happened that everyone agrees on. Once the timeline is put together and vetted by the project stakeholders, it's usually downhill from there.
Choose the Correct "Pre-Impacted" Schedule File
Typically you would choose the schedule file that immediately preceded the delay event. Since the delay event started October 1st, 2015, we would typically use the September 2015 schedule update as the pre-impacted schedule. However, the project was just starting out and we only had the Baseline Schedule to use as the pre-impacted schedule. We could have created a September 2015 schedule update to be used, but the Owner agreed that the Baseline could be used instead.
Once the pre-impacted schedule file has been identified, I like to show the critical path prior to the delay being inserted into the schedule.
From the pre-impacted critical path above, we can see that the subcontractor bidding process was driving the longest path as that was preventing the start of construction on the job.
Insert the Delay Event Timeline into the "Pre-Impacted" Schedule File
We'll now insert the activities from our first step into the pre-impacted schedule file, and make sure they are linked up correctly. In this case, I simply added a new "Issues & Impacts" WBS section and inserted the new activities into it. To tie in my delay sequence, I added a relationship between "Re-Bid Project" and the existing "SubContract Execution" activity. Lastly, I extended the subcontractor bidding activity to finish on September 30th, 2015 to match what actually took place.