When the Rules Are Changed - How to Analyze a Claim

Some time ago, I represented a pharmaceutical company, which for years had employed an electrical contractor for maintenance and upgrades to its plant on a time-and-material basis. The owner then contracted for a new building to manufacture and package a dietary powder. The new building had an unusual configuration. Each of its 14 floors supported separate processes. As a result, each level had unique heights, some with mezzanines. The job was very difficult to estimate.

There were a lot of rules on this construction project. No smoking was permitted in the building, or even on the owner’s property. (A parking area for smokers was 200 yards away.) No food or drinks were permitted in the building, to maintain Food and Drug Administration (FDA) standards. Only one hoist was available, and that was used for material, or on an as-available basis, as a man-lift. Most of the time the workers had to use ladders to move from one level to another.

Structural work ran behind schedule. By the time the interior electrical work was to begin, the project was six to eight weeks behind schedule. The original milestone schedule in the electrical contract had to be modified both in sequences and durations.

A revised schedule was sent to all the trades with a request from the owner for comments and for an estimate of any increase in costs for the change. At that time, the electrical contractor was represented on site by an experienced general foreman who knew little about the critical path method (CPM) of scheduling. The revised schedule was CPM.

The nature of the beast

Union rules allowed for two 15-minute breaks, in the morning and afternoon, and a half-hour for lunch. In reality, these times translated into two 30-minute breaks, and a 45-minute lunch to account for the crews’ time required to wait for the hoist, walk to the parking lot or lunch wagon, and then climb ladders on their return. The impact of these known site conditions was compounded by the altered schedule, which now mandated a second shift for a few months.

The document problem

A great deal of scholarly research has been done on labor productivity. According to one study, in a normal eight-hour day, less than two hours of a tradesman’s time involves actual installation. The conclusion is that six hours per day should be used for planning, material, and equipment setup, and simply getting to the work area.

So, how can you account for productivity? Your area foremen keep daily reports, but how do they factor in crew moves on a disrupted job?

At trial in my case, the electrical contractor presented credible evidence of the disruptions encountered (primarily from the mason), the general unavailability of the hoist (or man-lift), and delays that pushed the work into winter weather conditions. What the contractor did not have were detailed daily records of where the crews were and what activity (cable, wire, conduit, or terminations) they were working on at any given time.

The company had a good story, but no details. Everybody knew that every job impact was amplified by the site rules, but there were no specifics.

What would you do? Here are some suggestions.

• Add planning staff.

• Alter the format of your daily reports to track crew locations and movements.

• Monitor the schedule.

• Make sure you ask for additional compensation as the financial impacts occur.

• Send “notice” letters as impacts arise.

None of these was done, and the owner interpreted the electricians’ apparent confusion as disorganization of the contractor (a credibility problem).

The challenge to the estimate

The contractor argued that the problems encountered were so pervasive and so regular that no documentation system could have kept track of the cost impacts. Possibly true, but the contractor did not try to document the problems, leaving the court to wonder if these allegations were true.

The contractor attempted to set up a foundation for a “total cost” claim. This unfavored calculation of damages has four elements:

• Problems of such complexity that documentation of each impact is not feasible.

• The original bid is shown to be adequate for the project as planned.

• The owner caused all the problems.

• The contractor did its best to control overruns.

This standard of proof is very difficult.

The court focused on the bid. The contractor had used NECA’s level two formula in its estimate. However, the estimate (take-offs, extensions, labor units) did not seem to account for the site rules.

There was no allocation for the lost time associated with the no smoking/no eating regulations, or for the distances from the various levels to the field trailer. In addition, the estimating documents showed no correlation to the original contract milestone schedule. (For example, how many crews? How many levels at a time?)

The revised schedule

Schedule analysis should not only be done after the job is finished. Here, the owner asked the electrical contractor to look at the revised schedule and present a change order proposal for the impact. Unfortunately for the contractor, a schedule comparison and analysis was not performed. A great opportunity was lost for revisiting the estimate, recalculating manpower allocation, and reanalyzing the job rules and their effect on productivity at a time when the owner was open for renegotiation. A second opportunity was lost because the contractor did not adjust itself to the new environment by assigning an expediter, scheduler, and/or field engineer to assist the general foreman for the duration of the job.

Learning from the mishaps of others

One of the most helpful reasons to read case studies is to examine what went wrong, if the harm could have been prevented, and how to recover money for the harm suffered. There are a lot of lessons in my case, but there is one I have saved for the end of this article. Even though you have worked with someone for years, you must give each new project a sharp look and lots of attention. Experience teaches us, but in this business nothing happens exactly the same way every time. EC 

Note: This is the second article in a nonconsecutive series concerning “Analyzing a Claim.” The first article ran in the May 2001 issue of Electrical Contractor on page 128.

ITTIG, of Ittig & Ittig, P.C., in Washington, D.C., specializes in construction law. He can be contacted at (202) 387-5508, e-mail: USBuildlaw@aol.com, or visit his Web site, www.ittig-ittig.com.

About the Author

Gerard W. Ittig

Legal Columnist
Gerard Ittig, of Ittig & Ittig, P.C., in Washington, D.C., specializes in construction law. He can be contacted at 202.387.5508, USBuildlaw@aol.com or www.ittig-ittig.com .

Stay Informed Join our Newsletter

Having trouble finding time to sit down with the latest issue of
ELECTRICAL CONTRACTOR? Don't worry, we'll come to you.