Guiding Principles of Risk Allocation: 7, 8 & 9
7. Cost and Schedule Controls
The control of costs and schedule remains one of the most difficult goals to accomplish on any construction project. One technique is the requirement that contractors report (with their monthly invoices) any claims regarding the performance of the work in connection with cost and schedule changes during that monthly period.
Every month, before payment is made by the owner, the consultant completes a report based upon the work performed during that month. That report becomes the monthly progress certificate, and is given to the contractor for review and approval. If the contractor does not report a claim that has become apparent during that period, it looses its right to make that claim in the future. In every monthly report, the contractor must report new claims as well as any outstanding ones from previous months. This forces the parties to acknowledge the existence of any outstanding issues every pay period and requires them to address the matter promptly.
8. As-Built Schedules
Owners may require the contractor to submit an as-built schedule every month before the Consultant issues his Certificate for Payment as well as before releasing the final payment on the project. The as-built schedule will become the basis for review of any after-completion claims.
By submitting a schedule that reflects the actual construction sequence and total duration, this will discourage the submission, at a later date, of delay claims that were not previously shown.
The as-built schedule can be required by the owner to be submitted monthly during the course of the work since the schedule itself is a summary of all of the construction activities and their duration throughout the project.
9. Forward-Price Change Orders
Impact or indirect costs, such as home office overhead, field staffing or overtime work, represent change order work beyond straight hard costs, such as labor, equipment and materials.
To reduce disputes, owners and contractors can agree in their contract on the guidelines and methods for determining impact costs. A series of impact factors and formulae can be developed for issues like the timing of changes, number of trades involved, effect on the schedule, effect on office and field staffing and the cumulative nature of disruptions.
Subsequently, when change orders are priced and negotiated, owners and contractors will be in a position to incorporate both hard costs and impact costs, and they will be in a position to more easily settle on a final adjustment to the contract value.
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Guiding Principles of Risk Allocation: 5 & 6
