Construction Schedules & Delay Claims -- Schedule Uses, Schedule Importance & Schedule Updates

This is the first in a series of articles on Construction Schedules and Delay Claims.  This article addresses (1) schedule uses; (2) schedule importance; and (3) schedule updates.

I.  Schedule Uses.

The Schedule has several uses.  The Baseline Schedule explains how the contractor is going to build the project.  The Schedule also aids in subcontractor management.  It is an important tool for both general contractors and subcontractors for coordination of activities.  Schedule Updates allows the parties to graphically determine progress when compared to the Baseline Schedule.  A proper Schedule also depicts changes in scope and the effect on the Schedule.  Schedules are obviously used for claim prosecution and claim defense.

II.  Why is the Schedule Important.

All construction contracts should have two basic elements in the scope of work.  The first element of the scope of work is the labor and materials to construct the building.  The second element of the scope of work is to construct the building within a stated amount of time.  A delay in the schedule is a breach of the contract -- for the Owner, for the contractor, for the subcontractors.

Delay claims are difficult to prove because there are so many variables, so many different entities involved, a lot of educated guesses, and great expense (lawyers and experts).  However, these claims serve practical purposes, aside from litigation and arbitration of these claims:         

• Negotiation at project close-out with owner.  Often, the final payment is the most difficult payment to receive.  At that time, general contractors may receive numerous backcharges from the owner against the final contract balance.  Even if some of those claims are legitimate, a well documented and noticed delay claim can be used to negotiate a final close-out that is acceptable, even if the general contractor does not receive delay damages.
• Negotiation at project close-out with subcontractors.  Some subcontractors routinely submit delay or inefficiency claims, using so-called industry data to support the claim.  Using the subcontract and the schedule during the project to notice the subcontractor of its schedule delays will assist in a timely project close-out.  Additionally, when faced with a troubled project from a schedule standpoint, the contractor must, during the project, be able to document specific delaying events and impacts for each subcontractor.

III.  Schedule Updates.

Periodic Schedule Updates serve several uses:

• They keep all parties (owner, contractor, subcontractor) up to date on the progress and what needs to occur to remain on schedule (or to catch up on the schedule)
• They serve as a control for the contractor.  The Schedule Update shows the contractor where it is on the schedule, where it can pick up time, where and who is falling behind schedule. 
• Schedule Updates can also serve as a cost control mechanism.  If the project is falling behind schedule and that is depicted on the schedule updates, the contractor knows that it will incur additional expense either (1) through extended general conditions; or (2) acceleration payments to subcontractors.  Often, without proper updating, the contractor will fall behind schedule, start paying subcontractors for overtime to accelerate, but not know (1) who is responsible; or (2) how much it will cost.  More often than not, it is too late when the costs are realized.                    

Schedule Updates generally show one of three things:  (1) on schedule; (2) behind schedule; or (3) ahead of schedule.  As a result, distribution of schedule updates can be a sensitive issue.  As an initial matter, the general contractor must review the contract requirements.  Many contracts require that periodic schedule updates be published to the owner.  In these instances, the schedule updates must be drafted with care.  It is never wise to ignore bad facts or bad news regarding the schedule until the end of the project.  However, it is also not good practice to overload the owner with information that consists mostly of projections.  A reasonable way to approach schedule updates that are distributed to the owner is to provide summary schedule updates (if allowed by the contract).  If the summary shows a delay, then the general contractor should be prepared to discuss (1) the reasons for the delay; and (2) possible solutions to mitigate the delay.

For additional information, please contact Jack DiNicola at DSU.