Construction GLOBAL CONSTRUCTION PRACTICE JULY SEPTEMBER 2015 CONTENTS BRG Global Construction News... 2 Who Owns the Float? Legal and Practical Aspects of Float Ownership Clauses J. Richard Margulies, Esq.... 3 The Virtual Construction Project: The Wave of the Future Paul Bough, Senior Managing Consultant... 5 1
BRG Global Construction News BRG ADDS PARAGON CONSTRUCTION CONSULTING BRG has made a major expansion of its Global Construction practice with the addition of the professionals from Paragon Construction Consulting, Inc. Based in Orange County, California, Paragon has a strong record of advising institutional owners on major projects throughout the United States and internationally. We are excited to bring new areas of expertise and synergies to BRG, said Managing Director and former Paragon Principal Jeff Hall. The move enables us to continue providing dedicated personal attention and world-class capabilities to clients, but with a greatly expanded pool of professionals across a wide array of industry lines and technical areas. Jeff and his team add deep experience in construction intervention, management and consulting services, said Managing Director Richard Fultineer, head of BRG s Construction practice. They will be a valuable asset as we continue to build the go-to firm for construction projects throughout the world. Joining Hall from Paragon are Managing Director David Fernandez, who has 28 years of experience delivering major capital projects and building programs as an owner s representative; Director Justin Markham, who has over 20 years of capital construction experience, including working with preconstruction departments from request for qualification proposals through final contracting with clients; and Associate Director Michael Sears, a former vice president of an ENR Top 100 company with nearly 40 years of experience in the construction industry. GLOBAL CONSTRUCTION PRACTICE EXPANDS TO TORONTO, DENVER, AND ORLANDO BRG now has a hands-on presence in Toronto, Canada, with the addition of Nigel Shelton. Nigel has over 30 years of expertise providing project management, project controls, claims services, and consulting advice in projects involving complex industrial construction, high-rise residential, infrastructure, commercial, public works, institutional, mining, petrochemical, and power. In the last year, BRG s Construction practice has seen sizable growth across Canada, including dispute and risk management engagements on projects in British Columbia, Alberta, Saskatchewan, and Ontario. The Construction practice has also expanded to Denver, Colorado, and Orlando, Florida. Greg Vialpando has joined as an associate director in the BRG Denver office. He specializes in construction claims and litigation, negotiation, forensic analysis, contract compliance, and project management to construction contractors, private law firms, and government contractors. In Orlando, BRG added Paul Bough, a senior managing consultant with over 35 years of construction experience as a project manager, owner s representative, claims consultant, and licensed contractor. 2
WHO OWNS THE FLOAT? LEGAL AND PRACTICAL ASPECTS OF FLOAT OWNERSHIP CLAUSES J. Richard Margulies, Esq., Washington, DC About the Author J. Richard Margulies obtained his B.S. from Cornell University and a master s degree in engineering from George Washington University in 1971. He worked as a contractor prior to obtaining his law degree from Georgetown University in 1974. Mr. Margulies is recognized as one of the finest construction trial attorneys in the Washington, DC, area. He has served on the faculties of the School of Engineering and Applied Science and the National Law Center at George Washington University and is an author of many publications on government contracts and construction law, including Construction Contracting, an oft-cited treatise on construction law published by the George Washington University National Law Center. After the scheduler has created the project logic and assigned durations to the various activities, a computer makes a forward and backward pass through the network and computes the early and late dates for each activity start and finish time. Total float, as used in construction scheduling, is generally defined as the difference in time between the earliest date a construction activity may start (or finish) and the latest date a construction activity must start (or finish) without causing a delay impact to the completion of the project. 1 Thus, float is simply a mathematical property possessed by every activity that is inherent and naturally results from the activity durations and logic selected by the scheduler. It is not a value assigned by the scheduler, but simply the result of how each activity fits within the overall schedule. Those activities with a total float value of zero are critical path activities. Their early and late dates are the same, and their completion can absorb no movement or slippage without causing project delay. Most activities in a construction critical path method (CPM) schedule will be non-critical, since their float values are greater than zero and thus reflect an increment of time that the activity can slip without impacting project completion. The general rule in both federal and non-federal contracts is that float is viewed as a shared commodity; that is, if float is available, either the owner or the contractor may use available float. Where the focus is solely on project completion time, the party who, in good faith, uses the float first is generally entitled to use the float. 2,3 The underlying premise of this rule is that an event that simply delays part of the work, but not substantial completion of the project, does not entitle the contractor to a time extension. Many public contract specifications actually articulate this general rule, with provisions such as: Float or slack time is not for the exclusive use or benefit of either the owner or the contractor. Extensions of time for performance will be granted only to the extent that equitable time adjustments for the activity or activities affected exceed the total float or slack along the channels involved. However, for a variety of reasons, some owners attempt to change the general rule by contract requirements to the effect that the owner owns the float. Presumably, the owner feels that these clauses will minimize the possibility of delay claims by the contractor. Normally, these clauses are brief, with no explanation 1. J. O Brien and F. Plotnick, CPM in Construction Management, sixth ed. (2006), p. 75. 2. See, e.g., Weaver-Bailey Contractors v. United States, 19 Cl. Ct. 478 (1990). 3. Note that where the focus is not solely on project completion time and time extensions, this general rule does not apply. Most states and federal construction law recognize that each party to a construction contract is under an implied duty not to hinder, delay, or make more expensive the performance of the other party. Thus, if an owner delays a portion of the work without exhausting all of the float available for that work, but causing an increase in the cost of performing that work, the contractor would be entitled to a cost adjustment to the contract. 3
as to what the consequence is as a result of a contractor utilizing available float. Other commentators have attempted to articulate some method of equal allocation of float, but such requirements have not been widely adopted and have been criticized. 4 A significant benefit of CPM scheduling is that float values provide an objective measure of the relative importance of completing any individual activity by its early finish date, which aids the manager in determining where supervision and resources need the most focus. It also permits the most efficient allocation of resources. Thus, for example, a manager may utilize float by delaying the start of various activities (within their available float values) to reduce peaks and valleys in labor requirements. The use of CPM scheduling (with its activity float property) provides a rational means of recognizing the amount of slippage, or slack time, that exists on a particular path of activities without delaying project completion. An activity is critical or non-critical (possessing float) not because of its individual importance, difficulty, or duration, but because it is on a path of activities whose mathematical float value is either critical or not critical. Thus, the amount of float on an activity is an inherent characteristic of an activity, determined by how that activity fits within a particular plan of performance composed of many activities. It is not something that is owned. 5 By creating artificial contractual rules regarding ownership of float, the basic purpose of total float to provide a mathematical calculation of the differential between the early and late dates is lost. Arguably, under an owner owns the float clause, the contractor must ignore the late dates, thus making every activity in the schedule critical. Consequently, in response to an owner owns the float clause, a contractor may sequester float by, for example, artificially extending the duration of activities to consume the float, using crew restraints to reduce float, and increasing lags on successor activities. The effect of making every activity critical through float sequestration also means that any owner change would cause compensable critical path delay. Thus, an unintended consequence of the owner owns the float clause is that the owner may find itself subjected to delay claims that, but for the float ownership clause would have been avoided if the delay impact merely consumed the available float on the affected path. Establishing some rule of float ownership to change the mathematical calculation of total float invites schedule manipulation by the contractor and inevitably more delay issues during the construction of the project. Further, if a contractor must bid and plan its work on the premise that every activity is critical, then the price received by the owner for the work may well be higher. While float ownership clauses should be avoided for their practical consequences, at this stage the courts have not addressed their impact, and most of the clauses contain no mechanism for enforcement. The contract should be reviewed for provisions that may alter the traditional rule regarding float ownership, and efforts should be made to negotiate how parties will apply such rules during construction, such that the CPM schedule will reflect a reasonable plan to achieve the work and that only delay impacts that affect the completion of the project will be relevant in determining entitlement for time extensions or, in the case of contractor delay, liquidated damages. The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions, position, or policy of Berkeley Research Group, LLC or its other employees and affiliates. 4. See, e.g., A. Prateapusanond, A Practical Approach to Equal Allocation of Float, doctoral dissertation, Virginia Tech University (2003); J. Wickwire et al., Construction Scheduling: Preparation, Liability, and Claims, third ed. (2010), p. 74, noting attempts to allocate float on individual activities creates horrendous results. 5. J.R. Margulies, Impact of Delay: Cause and Effect, Construction Contracting (1971), p. 666. 4
THE VIRTUAL CONSTRUCTION PROJECT: THE WAVE OF THE FUTURE Paul Bough, Senior Managing Consultant, Orlando, FL About the Author Paul Bough has over 35 years of experience in the construction industry as a project manager, owner s representative, and claims consultant. He obtained a degree in construction management from Purdue University and is a Certified General Contractor in Florida. His project management and owner s representative experience includes rapid transit systems, performing arts centers, sports venues, and multifamily housing, along with construction claims experience in delay analysis and defective construction investigations on a wide range of projects. New technologies are rapidly turning the traditional construction site into a virtual construction project. The technologies include building information modeling (BIM), virtual plan rooms, field access to electronic project data, and LEAN push-pull planning. I have used these techniques during my tenure as owner s representative, including on the $300 million Dr. Phillips Center for the Performing Arts in Orlando, Florida. This project is a harbinger of the inevitable reality of the virtual construction project, which will include the use of drones, 4D scheduling, and other technological applications. Use of BIM in Design and Clash Detection. Today, most projects require BIM, which allows a project to be viewed in three dimensions, making it easier to resolve complex details and resulting in improved constructability and fewer design changes. Further, the use of clash detection has been extremely successful. On the Dr. Phillips project, stakeholders engaged in a collaborative effort with the BIM design team working with the MEP contractors to address conflicts within the model, allowing for rerouting of elements or modifications, resulting in a significant reduction in field conflicts and change orders. Virtual Plan Room. The Virtual Plan Room will eventually replace the old way of maintaining paper copies of plans and specifications. The Virtual Plan Room on the Dr. Phillips project stored PDF versions of all plan sheets, specifications, RFIs, ASIs, and change orders on a cloud-based server. Management of the plans themselves was accomplished by means of a PDF editing software in which a user could jump directly from the plan reference to the RFI or plan details and section callouts. This eliminated many inefficiencies associated with working with two-dimensional plans and communication with the field, since the traditional 2D plan sheets were eliminated by linking the plan sheets to the 3D BIM. Field Access to Electronic Data was accomplished on the Dr. Phillips project by providing storage boxes on the site equipment with computer/wi-fi connections to allow the contractors and subcontractors access to all construction data available in the Virtual Plan Room. The use of tablet computers in the field allowed access to the BIM and other data. LEAN Push-Pull Planning was successfully used on the project, with regular meetings with the trade contractors to set key project milestone dates and to work back from those dates to establish a realistic plan to meet dates. The Virtual Construction Project is here to stay, so get up to speed on the latest techniques! The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions, position, or policy of Berkeley Research Group, LLC or its other employees and affiliates. Note that work took place prior to the author joining BRG. 5
ABOUT BRG Berkeley Research Group, LLC is a leading global strategic advisory and expert consulting firm that provides independent advice, data analytics, authoritative studies, expert testimony, and regulatory and dispute consulting to major law firms, Fortune 500 corporations, government agencies, and regulatory bodies around the world. From testifying in high-stakes litigation to consulting on large-scale projects, BRG experts and consultants combine intellectual rigor with practical, real-world experience and an in-depth understanding of industries and markets. Their expertise spans economics and finance, data analytics and statistics, and public policy in many of the major sectors of our economy. BRG is headquartered in Emeryville, California, with offices across the United States and in Asia, Australia, Canada, Latin America, and the United Kingdom. 1.877.696.0391THINKBRG.COM Berkeley Research Group, LLC, including its subsidiaries, is not a CPA firm and does not provide audit, attest, or public accounting services. BRG is not a law firm and does not provide legal advice. BRG is an equal opportunity employer. 6