Make a case for the amount of money you have coming
There are always two components to every construction contract claim. The first is entitlement; the second is quantum. Entitlement consists of your proof that the other party breached the contract or that the contract itself lets you recover, for example, under a changes clause. After you have shown that you should be compensated, then you need to prove the quantum, or the amount of money associated with the breach.
Many contractors get so involved in -establishing the nature of the wrongs committed they do not spend enough time quantifying how much they can legally -recover. And when they do get involved in the exact calculations, they often find they are reduced to guesswork, estimates and studies (e.g., lost productivity). The reason is their job records do not seem to help with the calculation.
This article will outline some good approaches, as well as pitfalls, with the quantum component.
The “total cost” claim approach
Some types of claims are enormously difficult to quantify. How do you calculate lost productivity of manpower or equipment resulting from work that is poorly scheduled? Or lost productivity caused by an excessive number of changes? Or where work is performed out of sequence?
Some discrete components can be estimated/calculated, such as the labor cost of double-handling of materials, shifting crews between floors, or tear-out work. Where the interferences are pervasive, however, a “total cost” calculation may be used.
Assuming your labor costs are coded to work activities, a comparison can be made of planned (estimated) versus actual labor for cable, conduit and wire, for example. Within those broad categories, you may be able to compare planned versus actual to areas of the work.
While the courts do not favor the total cost approach, judges have recognized there are instances where it is the only method to prove your claim. The thoroughness and quality of your original estimate then becomes of paramount importance.
To use the total cost approach you will need to do the following:
1. Review your original estimate for completeness and accuracy. Another estimate may be helpful to prove the reasonableness of your contract price.
2. Account for agreed change orders.
3. Analyze the effects on your work of nonclaimable events, such as turnover in personnel, late deliveries from your suppliers, weather conditions, etc.
4. Check to see if any of your claimed impacts arise from events that were contemplated by the contract (known site conditions, location of lay down and storage areas, etc.).
Equipment usage claims
When a job is delayed, you may be entitled to extended and excess equipment usage costs. Typically, the claim will be a simple calculation of the number of delay days for each piece of equipment multiplied by a rental rate. But beware. This type of calculation may be omitting legitimate costs.
What you should do is determine the length of time you planned to have each piece of equipment on the project. You may find that some pieces were scheduled for use long before the original completion date. Accordingly, the “extended” usage claim starts from that earlier date.
Other pieces may have been planned for occasional use, yet were needed for longer periods of time. Again, a planned versus actual-use calculation should be performed for “excess” usage. Of course, your supporting documentation should be in your daily field reports.
Reports and claims
Daily reports can be extremely useful in quantifying lost labor productivity. When those reports contain activity codes for cable, conduit, wire and terminations, you will be able to track crew movements (stop-and-start work) through those codes. Estimated lost time can then be applied to the manhours for mobilization/demobilization, shifting between areas of the work, trips to storage, moving ladders and manlifts, etc.
For major projects, your daily reports can also be coded to areas of the work and work activities within each area. For smaller jobs, you can track all labor, which shows less than eight hours per day per activity, to show movement of personnel and therefore lost productivity.
Given the available technology, documenting a project through photos is easier than ever before. How can they be used for the quantum portion of your proof?
As an example, consider a claim for acceleration, which often involves over-manning. Explaining the effects of, say three electricians working in a confined space (an equipment room) can be greatly amplified by showing how that congestion really looks.
By studying the photos, you may also detect other problem areas previously forgotten, giving you the ability to put a cost to those problems.
In one case, I asked my electrical contractor client to videotape and time a crew moving scaffolding. This tape was made after project completion, but it showed a calculable amount of lost time and therefore extra cost for the movement. In another case, I had an electrical contractor take a series of photographs to demonstrate lost time in traveling from work areas to the lay-down area. In both instances, the demonstration was very effective in supporting the dollars claimed.
Monthly pay requisitions
I like to plot information, particularly for details such as the number of men per day, hours per day, and the timing and value of change orders. Another aid in damages calculations is a plot of pay-requisition line items. At least three benefits can be gained from such a plot.
1. A monthly comparison, by line item, of dollar value and percent complete, will highlight the months where there were delays in performance.
2. If your records can support the calculation, you can determine the number of manhours needed for each percentage completed by month. This calculation is crude, but it can help us support other productivity analyses.
3. By comparing the approved dollar value of each line item to your estimated value for that line item, you will determine where losses began for discrete areas of the work.
Approved pay requisitions are an inexact measure of performance. However, in the aggregate, they will show trends and will help you focus on those areas of the work that caused you the most serious problems.
In many countries, measured quantities are the foundation of payments. This system is beneficial to the owner as it will better reflect the installed progress of work as opposed to a more general percent complete basis, which is widely used in the United States.
With some adjustment to your recordkeeping, quantity measurements can be added to your daily reports (e.g., number of feet of conduit and wire). You can then develop a productivity analysis by calculating the ratio of manhours to quantities.
On one claim, which was principally lighting, I developed a ratio based on the number of fixtures versus the number of manhours. We then compared that ratio to NECA units and to similar ratios for prior similar jobs where there had been no disruptions. The difference between the ratios supported an acceleration and lost productivity claim.
There is a saying in the law that most litigation arises because of missing documents (e.g., no confirmations, no notice letters, no reservation of rights documents). This saying is particularly apt when it comes to the calculation of damages. Avoid the missing documents syndrome and make the most of the records you do have. EC