Join the thinkers - think outside the box and Outsource
Managing Disruption and Delays in Construction During the Covid-19 Pandemic
Managing Disruption and Delays in Construction During the Covid-19 Pandemic
In my earlier blog on Claims I have highlighted the necessity to prepare your documentation in REAL Time whilst this is tedious and labor intensive it is much easier than the alternative both in time and cost.
Last Minute efforts at the project completion to substantiate any claim you hope to pursue is definitely not good but even worse to find the right type of detailed records are not even on file and your Claim most likely to fail or not attain your full entitlements.
Now is the time for each project team to start reviewing its contractual rights and obligations.
Production of tools, equipment, and material will likely be in short supply, as factories worldwide are already shutting down production and halting shipping operations. This will lead to both delays in acquiring the necessary items and increased costs as demand outpaces supply.
While the terms and conditions of each contract vary, the legal ramifications of this outbreak will ultimately be left to the courts. In the meantime, there are basic steps you can take right now.
Review the contract, specifically the force majeure clauses as well as the sections on giving notice. Do not assume “everyone knows” the effects. Put everything in writing.
Document everything. Daily reports have always been key to managing a project but are even more so today. Daily reports must include specific information such as the number of Skilled workers, helpers and staff on site as well as the number unable to work; why those affected cannot work; specific tasks affected; all owner or GC directives; etc.
While Job Site work is slow, take advantage of the time to update the project’s work plans and to review the schedule. Once projects ramp up work again, every project will start chasing the same materials. Get ahead of this curve by assuming all items now have a long lead time and place orders as soon as possible.
Positive actions for mitigation of disruption and delay must be well documented, recorded and the Real Time records updated daily
Communicate with ALL parties your efforts including OUTSOURCING to attain specialist support in these challenging times
Construction claims for delays and cost overruns will increase in the Industry so if you do not have the skilled in -house staff Join the Thinkers and Think outside the Box and Outsource
Smaller companies and Sole traders may not have the inhouse staff or skillsets to manage the Preparation of a claim however a specialist can put you in the right direction or even do the work as part of your support team.
Claim Heads that Smaller companies and Sole traders should consider are:
Unabsorbed Home Office Overhead
Home office overhead costs are not associated with a particular project or incurred at a project job site but are necessary to support construction operations. These costs include but are not limited to executive and administrative salaries, legal fees, accounting fees, home office rent and operating expenses, advertising, recruiting costs, general insurance, utilities and taxes. The home office is typically required to support the project longer than originally anticipated when there is an extension to the as-planned period of performance.
There are several calculation methods used to quantify unabsorbed home office overhead costs associated with a particular project, but the Eichleay formula continues to be the preferred and most accepted method.
Extended Job Site Overhead
Jobsite office overhead costs, also known as general conditions, are incurred at the project job site and cannot be identified with a specific construction activity but support overall project construction operations.
These costs include but are not limited to supervision, timekeeping and clerical work, engineering, Job Site office rent and operating expenses, utility costs, material handling and cleanup. Job Site office overhead costs are typically time-related and can increase when there is an extension to the Project.
Idle Labor and Equipment
During a work stoppage delay, the contractor may incur idle labor and/or equipment costs. These costs are typically quantified by the actual costs incurred during the work stoppage period. When determining the cost incurred for idle labor and equipment, the following questions should be considered:
When was the labor and/or equipment idle?
How long was it idle?
What was the actual cost incurred for the idle time?
When claiming idle equipment costs, the contractor can only claim rental costs or ownership costs (e.g., depreciation, cost of facilities capital, insurance, taxes, etc.). The contractor cannot claim operating costs such as fuel, filters, oil, grease, and minor repairs.
It is important that the contractor provides documentation (such as daily reports) showing that the labor and equipment were not able to perform work during the work stoppage period.
De-Mobilization and Re-Mobilization
The contractor may incur de-mobilization and re-mobilization costs resulting from work stoppages. These costs are typically quantified by the actual costs incurred for de-mobilization and re-mobilization, which typically include the transportation of material, labor, and equipment to/from the project job site among other costs.
Labor and Material Cost Escalation
Delays can push the performance of a contract into a period of higher labor wages and material costs. Typically, the contractor bears the risk of increased labor wages and material costs during the original period of contract performance but can claim increased costs if required due to delays.
Productivity loss is experienced when work is not accomplished as originally anticipated and can be a result of work stoppages, out of sequence work, restricted site access, unavailability of manpower and other disruptions.
The measured mile analysis is a widely recognized and preferable productivity loss quantification method in construction. This analysis estimates costs resulting from lost productivity by comparing scope production during the disrupted period of performance against scope production during a period of unaffected performance. The unaffected performance period represents the “measured mile”, which serves as a basis for comparing impacted labor productivity and determining lost man-hours and equipment-hours for the impacted scope of work.
A pre-COVID-19 vs. COVID-19 scope production comparison could be made to determine any productivity loss. It is imperative that proper documentation is maintained to substantiate actual production and items such as work stoppages and unavailability of manpower.
The information provided above is general in nature, has been prepared for informational purposes only and does not constitute legal advice. All parties need to evaluate their specific project conditions, contract, local codes and ordinances and contact their attorney or consultant to understand and apply these and other general principles for their project. The information is intended but not guaranteed to be correct, complete, and up-to-date. No representations or warranties are made, express or implied, that this information is correct, complete, or up-to-date.
COLIN ANTHONY ADDLEY MCIOB, MAIB, MSAIB
Colin is a highly experienced Professional Quantity Surveyor and Project Manager with over three decades in the International construction and Marine Industry.
He is a specialist in the fit out sector having executed many prestigious, Luxury high quality and Technically Complex Projects.
He is also a creative writer having penned many industry related articles.