Building Success into your Next Construction Project

A Special presentation for NJSBA – September 2013 various locations

Introductions

• Rocco R. Vespe, P.E., F.CMAA, Vice President, Hill International

• 40 years of experience in the construction industry including• 20 years as a contractor• 20 years as a consultant on project management, construction management, estimating, schedule analysis, dispute resolution, claims evaluation, delay and damages, contractor and construction manager performance evaluations, troubled project intervention, OSHA and safety evaluations, and provision of expert testimony. • Projects include education, transportation, municipal, hospital and medical, manufacturing, hotel, gaming, roads and bridges, parking structures, shopping centers, casinos, as well as commercial and residential buildings.• Member of the College of Fellows – Construction Managers Association of America• School Board Member for over 25 years

Introductions

• Michael R. Kueny, Construction Manager, Hill International

• Over 23 years of construction management and inspection experience• Skilled in CPM scheduling, project management, estimating and engineering.• Mike has managed the construction of schools, automotive restoration facilities, hospitals and courthouses.• Mike has worked for School Districts, Pennsylvania Department of General Services (PA DGS), and other private clients.• Member of the Construction Management Association of America (CMAA).

Today’s Agenda

• Success• Teamwork• Common Problems• Solutions• Keys to Success

Mission Statement

• Careful selection and effective management of the Construction Team will enhance the chances of success on your next construction project.

Risky Business

• Differing views and objectives result in a risky environment for all parties

• We must understand these views in order to select the right team members

Project Team

• School District/Administration• Architect/Consultants• Contractor(s)

Success Factors

• Cost• Time• Scope (Needs)• Quality

Perspectives of Project Team

• Each team member has a different view regarding the success factors

• For example the contractor’s view of cost (PROFIT) vs the District’s view (BUDGET)

• The architect’s view of quality

Defining Success or Failure - The Perspectives of the Parties

• The District, Contractor, and Designer each have their own objectives as they relate to the project

• These objectives fall into five general categories:

• Cost• Time• Need• Quality• Risk

Perspectives of the Parties - The District

• Cost

• On Budget

• Project Parameters versus Return on Investment

• Time• On time versus educational needs• Cost of late completion• Cost of early completion

Perspectives of the Parties - The District

• Need• Have these been properly defined?• Are cost and time compromises appropriate?

• Quality• Is industry standard acceptable?• Are special quality requirements been properly spec’d?

• Risk• Are cost and time contingencies adequate?

Perspectives of the Parties - The Contractor

• Cost• Price versus Profit• Profit versus Needs• Cost of unknowns • Cost of changes• Design Issues

• Time• Normal versus accelerated effort• L/Ds (Liquidated Damages)

Perspectives of the Parties - The Contractor

• Need• Workload • Typical project versus new market or area (new risk)

• Quality• Clarity of plans and specs• Impact of specified higher standards

• Risk• Cash flow• Claims

Perspectives of the Parties - The Designer

• Cost• On budget?• Owner impact on cost

• Time• How does job fit into other workload?• What impact will a change in timing have?

• Need• Prestige• Client relationship

Perspectives of the Parties - The Designer

• Quality• Normal design versus increased complexity• Staff expertise / standard of care• Owner preferences versus budget

• Risk• Unforeseen changes• Design time versus bidding/construction dates• Performance• Reputation

Building the Team for Success • Team Mission• Team Members

Team Mission

• Team conductor• Establish measurable goals • Develop realistic schedule• Monitor and measure performance & progress• Take action early to stay on track• Ignoring an issue is not acceptable• Process to get issues to proper parties for quick resolution

– the construction clock is running• Document and communicate

School District/Administration

• Building/Property Committee• Superintendent• Business Official/Business Administrator• Facilities/Maintenance • Educators

Architect Selection

• Qualification Based Process• Establish Criteria• Experience• Similar projects• Individuals• Scope of Services

Consultants

• A/E Team / Sub-consultants• Independent Inspections

• Earthwork• Foundations & Superstructures• Mechanical, electrical and security systems

• Commissioning• HVAC design review• Testing and balancing• Systems Commissioning

Local Code Officials

• Owner’s liaison• One party from start to finish• Buildings and grounds representative• Get early involvement and keep no secrets• The keys to the palace

Preparation of Design

• Establish consultant selection procedures; this should include consideration of past claims history

• Perform an adequate evaluation of existing conditions

• Manage the administration and scheduling of the design consultant contract

• Commission a design review by qualified third parties

• Commission a constructability review by qualified third parties

• Consultants should be required to provide professional liability insurance

• Consider the use of a commissioning agent

• If a construction manager is to be hired, bring the CM on early

Contractor Documents

• Clear, concise, fair contract documents• Disclose existing conditions/As-builts• Changes clauses

• Allowable costs• Overhead and profit

• Time-management clauses• Scheduling, delays, time extensions • Define substantial completion

• Read the contract documents in their entirety, including General Conditions, Standard Specifications, Supplemental Provisions, Special Provisions, plans, referenced documents, etc., and address the following:

• Conflicts• Omissions• Ambiguities

Preparation of Contract Documents

Preparation of Contract Documents

• Understand how the contract allocates risk among the stakeholders.

• Be careful of exculpatory language that may be difficult or impossible to enforce.

• Lessons learned on one project should be incorporated into the contract documents of future projects.

Preparation of Contract Documents

• Read the contract as if everything has gone wrong and you are in the middle of litigation, then answer the following question:

“Does this contract provide adequate protection from risk?”

• Make the necessary revisions until your answer to this question is “Yes.”

• Do not ignore the contract or defer its preparation to the last minute. The contract spells out the rules of the game and is your most important tool in claims mitigation.

The New Team Member – The Contractor

• Change of focus for some team members• Who builds your project?• How does contractor view success factors?• Project construction schedule• Open communication

Adding the Contractor to the Team

• The Low Bid Process - Luck of the draw• Prequalification• Communication

Pre-Bid Meetings

• Schedule meetings so that contractors have time to prepare; but well before the bid date to allow time to answer questions.

• Prepare and issue meeting minutes as an addendum.• Consider making attendance mandatory and coordinating the

meeting with a site visit or “showing.”• Answer pre-bid questions promptly and in writing. Issue

answers as addenda.• Provide full disclosure to bidders. This includes borings and

other subsurface investigation results, as-built drawings, etc.

The Bidding and Award Process

• Understand the project timing • Understand the scope and budget• Use alternates• Limit addenda• Award to lowest qualified bidder

Common Problems

• Delays• Change orders• Disputes/Claims

Delay

What is delay?

• Things don’t go as planned

• Critical versus non-critical delay

• Critical – delays to an activity on the longest path

• Non – Critical – activity has float – not on longest path

• Measured in the context of the most current schedule

Beyond Contractor'sControl

Within Owner'sControl

Within Contractor'sControl

Beyond Owner'sControl

Excusable Non-Excusable

Compensable Non-Compensable

This figure represents a generic contract interpretation. Individual contracts will vary.

Types of Delays

Owner-Caused DelayChanges

Differing Site ConditionsSuspensions

Impeded Access to Work

Delay Caused by Neither PartyStrikes

Acts of GodUnusually Severe Weather

Floods and Fires

Contractor-Caused DelaySlow Performance

Subcontractor DelayEquipment Failures

Late Delivery

Change Order Management

• Entitlement• Impacts• Costs• Not all change orders have a guilty party• Not all change orders are bad• Indicative of working RFI process• Scope clarification

Definition of a Claim

• A claim is an unresolved change. It is a demand for money, time, or some other adjustment in the contract terms. A claim can exist when:• A contractor believes a change exists, but the owner

disagrees, or• Both parties agree that a change exists, but cannot

agree on the impacts or costs of the change.• Based on this definition of a claim, the essence of claims

avoidance is reducing potential changes and providing dispute resolution mechanisms.

Claims Avoidance

• A claims avoidance system should be thought of as a system or collection of actions working in concert to reduce the number of claims filed on a project and enhance the chances of quick resolution of disputes.

• Successful claims avoidance systems foster a culture of issue resolution. The roots of these systems are anchored in the design, the contract, and project administration.

Components of a Disputes Avoidance System

1. Careful preparation of design documents2. Careful preparation of contract documents3. Pre-bid meetings4. Open and effective communications5. Maintenance of proper project

documentation6. Effective, project-level dispute resolution

procedures

Project Documentation

• Maintaining proper project documents plays an important role in every claims avoidance system. A lack of proper documentation makes it harder to resolve a dispute.

• Remember: If it wasn’t written down, it didn’t happen.• Maintain a copy of all bid documents for future reference.

This includes the contractor’s estimate, assumptions, schedules, take-offs, and calculations. Consider escrowing bid documents.

Project Documentation

• Take jobsite photographs and videotapes and record the dates taken. Written descriptions should accompany the photographs and videotapes as well. These should be carefully archived to prevent damage. Consult with legal counsel regarding the admissibility of photographs and videotapes as evidence.

Daily Reports

• Reports should be dated and signed.

Daily Reports

• Establish guidelines for daily reports that standardize both format and content.

• Uniform report format helps organize data among multiple projects.

• Ensures that all categories of information are included or considered.

What goes in a Daily Report?

• Headcount by trade and level• Areas of work and crew size,

including subcontractor work• Quantities of work performed• Hours expended• Supervisory personnel• Material deliveries

• Equipment mobilized or demobilized to site; note owned or rented, operating or idle, and record serial numbers

• Work area access restraints• Lack or loss of power or utilities• Weather

Project Schedules

• Maintain all pre-bid and project schedule submissions and updates, including computer files.

• Document when specific schedule items of work begin and when they are completed.

• The schedule should include a narrative report describing what occurred during the update period.

• Note any situations that have occurred that might be construed as a change.

• Make sure any changes in logic or sequence, and the reasons for these revisions, are fully explained and understood.

Project Correspondence

• Every letter or e-mail needs a prompt and complete reply

• Avoid letter-writing wars • Address each issue raised

directly• Use references when

responding• Let the facts and the contract

speak for themselves

• Be professional; remember you wear the “white hat”

• A letter should follow all oral direction

• Insist on timely notice and timely action

• Keep correspondence impersonal

Project Correspondence

• Carefully draft all project documentation; remember your audience

• Preserve original documents• Some documents, usually only those you write to your

attorney, are privileged, which means that the document does not have to be turned over as part of the discovery process. Keep these documents separate.

• Remember that deleted electronic documents are recoverable from computer hard drives

• Good correspondence is essential to effective disputes avoidance.

Other Important Documentation

• Cost and payroll records• Pay requisitions and supporting information• Submittals, test results, and other miscellaneous QA/QC

reports• Change orders, including all back-up information• Requests for Information• Weather data• Daily reports and job diaries

Approach to Problem Resolution

• Define the problem• Review the contract• Review the facts• Identify liabilities• Identify solutions

Maintain Team Approach

• Changes will occur• Disputes will occur• Remember the parties perspectives• Manage changes• Manage disputes• Get independent evaluation

Keys to Success

• Careful selection of team members• Include all parties, ie facilities/maintenance• Clear concise contract documents• Manage changes and disputes• Realistic Project schedule • Maintain team approach• Get advice

Questions

Presenters

Rocco Vespe, P.E., F.CMAAVice President – Hill International

Michael Kueny, Construction Manager – Hill International

Hill International Inc.303 Lippincott CentreMarlton, NJ 08053Tel: 856-810-6262Fax: 856-810-0485roccovespe@hillintl.commikekueny@hillintl.com