Professional Documents
Culture Documents
PS.841
ABSTRACT Construction managers, program managers, contractors, owners, and planning and
scheduling professionals in the construction industry work with schedules every day. Yet what do
they know about the legal import of a schedules creation, approval, acceptance, management,
modification and updating? Further questions include: Do you need to have a schedule? Will a
PDF barchart of your P6 schedule meet the CPM schedule requirement? Do more detailed
schedules change the legal landscape? Do approvals/acceptances make a difference? Is having a
baseline important? If you want to finish early, what are the requirements? Do contractors have
to coordinate with their subcontractors in order to have a legally sufficient schedule? What role do
schedules play in the legal determination of negligent management? This paper reviews historic
and recent case law on these issues as well as proposes resolutions for topics not yet addressed by
the courts.
PS.841.1
2012 AACE INTERNATIONAL TRANSACTIONS
Table of Contents
Abstract ............................................................................................................................... 1
Introduction ........................................................................................................................ 3
Do Contractors have to follow the specification methodology for Time Extensions? ..... 10
Conclusion ......................................................................................................................... 11
Bibliography ...................................................................................................................... 12
PS.841.2
2012 AACE INTERNATIONAL TRANSACTIONS
Introduction
Construction managers, program managers, contractors, owners, and planning and scheduling
professionals in the construction industry work with schedules every day. Yet what do they
know about the legal import of a schedules creation, approval, acceptance, management,
modification and updating? Further questions include: Do you need to have a schedule? Will a
PDF barchart of your P6 schedule meet the CPM schedule requirement? Do more detailed
schedules change the legal landscape? Do approvals/acceptances make a difference? Is having
a baseline important? If you want to finish early, what are the requirements? Do contractors
have to coordinate with their subcontractors in order to have a legally sufficient schedule?
What role do schedules play in the legal determination of negligent management?
These are but a few of the more intriguing questions revolving around CPM scheduling and its
real-world application in the practical art of project controls. Unfortunately, courts and
contract appeals boards at both the state and federal level have left huge areas of schedule law
unresolved. CPM scheduling, developed in the 1950s, only became reasonably common in the
1970s and 1980s it simply has not been around long enough to develop a detailed body of
legal decisions. Most of the legal decisions have been rendered in the very narrow venues of
the US Federal Courts and Boards of Contract Appeals. These decisions have resulted in a small
cadre of judges who are expert in construction issues. While there are decisions in state courts,
virtually all technical/legal issues facing a trier of fact in state court venues have no local
precedence to rely on [24]. Further, with the increasing cost of litigation and the greater use of
more cost-effective dispute resolution mechanisms, the volume and detail of published
decisions concerning schedule law is decreasing and likely to continue to do so in the
future[24]. With that caveat, we offer our best understanding of what the Law of Schedules is
today in the format of questions and responses.
The Problem
Question: The contract specification requires a schedule that depicts the orderly development
of optimized, time-phased, logically-related plans for project execution. The result of these
processes is a graphic depiction or listing, or both, of planned project events, their expected
start dates, duration, and relationships to other planned project events. Does this mean a CPM
schedule is required?
Answer: No. For an owner to require a contractor or a construction manager to provide a CPM
schedule, that requirement must be specifically identified in the contract. The reason is
manifest: projects, even complicated ones, were built before CPM schedules existed. Even in
the world of detailed construction contracts, which started in the mid-1800s , CPM scheduling
is a relatively new planning tool. The board concluded in H.I. Homa that even when the
specification stated that the submitted schedule must be acceptable to the contracting officer
(owner), unless the specification was explicit, there was no requirement for a CPM schedule
[12]. In this case, the contracting officer insisted upon a CPM schedule, and the contractor
provided one. The board ruled that contractor was entitled to additional compensation for this
change. However, the benefits of CPM scheduling to the contractor extend beyond answering
PS.841.3
2012 AACE INTERNATIONAL TRANSACTIONS
a contractual need or providing owners with progress information. The contractors overall
performance is likely to be improved by the simple process of preparing and updating a CPM
schedule. Further, the contractor may need to demonstrate the impact that project events had
on either the completion date or the costs to achieve the completion date. The contractor
bears the responsibility of proving the extent of delays and of relating the delays to specific
actions by the government [42]. Furthermore, the contractor bears the burden of separating
and apportioning delays, and for determining the existence of concurrency [35, 43]. The
contractor, then, would be well advised to develop a CPM schedule that can provide the best
support in these tasks, irrespective of the contract provisions. Bar charts are often insufficient
to prove the existence of delays and to tie causes with effects [19].
If the designer develops the schedule, it is usually developed in the context of determining
overall duration feasibility and general sequence. For example, a major governmental entity on
the east coast of the US has traditionally required the designer to develop a CPM schedule, a
graphic representation of which is then included with the contract documents. This CPM
generally has no legal standing in the relationship between the owner and contractor. The
contractor is often specifically prohibited from relying on the feasibility and practicality of the
designers CPM schedule. Under this view, the schedule is developed only as an aid to the
contractor to establish that there was a reasonable basis for the contract duration. However,
unless the contract specifically states that the included schedule is for information purposes
only and cannot be relied upon, the Spearin Doctrine holds that there is an implied obligation
from the owner (acting in this case as principle for the designer) to the contractor, that the
project can be built in accordance with the construction documents, and that the project can be
completed within the time indicated [17, 33]. The designer has no liability to the contractor in
this case, although it is theoretically possible that liability could accrue as between the owner
and designer if the schedule had defects in it. This situation rarely occurs because courts and
boards of contract appeals usually find that since the contractor is not required to use the
designer-generated CPM, there is no liability against the designer for its defects. [10]
Much the same problem can arise if the owner independently develops a schedule. This occurs
rarely since it is uncommon for the owner to have the technical capability to develop a CPM
schedule. However, some owners are beginning to develop those skills, and are identifying
overall project durations and other schedule development functions. Additionally, the owner
does often develop contractual milestones that impose some schedule control and logic. These
milestones often carry liquidated damage charges and as such are almost always included in a
CPM schedule.
Contractor-generated CPMs are the responsibility of the contractor and generally do not create
any duty from the owner toward the contractor for performance. Since the contractor is
responsible for the means and methods of construction, the CPM is viewed as part of those
PS.841.4
2012 AACE INTERNATIONAL TRANSACTIONS
means [15]. Owners should be aware, however, of contractors are representing owner activities
in the CPM schedule, and may assign original durations to those activities which are not
realistic. Given the fact that contractors will try to use these schedules to demonstrate delays,
owners will want to ensure that their responsibilities are reasonably represented in the
contractors schedules.
Subcontractors generally have no responsibility for the development of the initial project
schedule or its subsequent changes. Nevertheless, this is a bad policy and general Contractors
are well advised to not only involve subcontractors in the development of the schedules, but
also to advise them of progress and changes. If the general contractor fails to consider the
needs of the subcontractor and excludes the subcontractor from participating in the schedules
development, the prime contractor may have created a liability for its poor management [38].
Subcontractors that do participate in the development of the initial schedule may have even
greater rights than those who dont. Some courts have found that the prime contractor may
not alter the schedule in a manner so as to adversely affect the performance of the
subcontractor without incurring liability for the action [21]. This position is largely corrected by
the now typical clause that requires subcontractors to adhere to the contractors schedule.
Development of schedules by an agency construction manager (CMa) is a grey area in the law.
The CMa is an agent of the owner and has no responsibility for means and methods of
construction. However, an overreaching CMa can functionally assume the responsibility
normally of the general contractor. In a multi-prime situation typical of EPC contracts, the CMa
can assume overall CPM responsibility [5a].
The schedule for this contract shall be constructed to show the order in which the
general contractor proposes to carry out the work, and to indicate the
restrictions of access, availability of work areas, and the availability and use of
manpower, materials, and equipment. The contractor shall use the schedule in
planning, scheduling, coordinating, and performing the work under this contract
(including all activities of subcontractors, equipment vendors, and suppliers). The
schedule must reflect the complete scope of work, and must present a feasible
and reasonable plan for the sequence of work, the duration of individual
activities, and for the overall duration of phases and the project.
The requirement for a feasible and reasonable plan is supported by significant case law as
courts have often found that the absence of a feasible and reasonable plan makes the
PS.841.5
2012 AACE INTERNATIONAL TRANSACTIONS
schedule useless as a tool to either manage the ongoing work, or to evaluate time extension
requests [7, 23, 27].
Specifications are unfortunately often silent on the exact submission requirements of the CPM
schedule. For example, in one project, the contractor interpreted the following specification
clause as only requiring the submission of a PDF of the baseline and monthly update schedules.
The owner interpreted the contract language to require the submission of a CPM in native
format:
The requirement for cost loaded scheduling is still rare in most US contracts, either those based
on industry standards such as the AIA, or custom specifications such as quoted above.
Schedules that are resource loaded put a burden on both the Contractor and the owner
because the Owner may have to maintain independent records to check on the loading. In the
US, this seldom happens [22, 39].
Owners correctly believe that accepting a schedule means they agree that the schedule
constitutes a reasonable plan for the execution of the work [9]. Failure to either approve or
PS.841.6
2012 AACE INTERNATIONAL TRANSACTIONS
reject a schedule submission has also been ruled as to act as if it were approved [8]. As a result
some owners use the language that states they accept or assent to the schedule.
However, there is no legal difference in this situation between approval and acceptance or
assent. In these situations the owner has agreed that the plan presented by the contractor is a
feasible and reasonable approach to the construction.
If it appears during the execution of the project that the original schedule was not feasible and
reasonable, the owner can present evidence of the schedules inadequacies. Current law
seems to be that there is a rebuttable presumption of the baselines schedule reasonableness
a presumption that can be rebutted in subsequent litigation. Defect more recent U.S. cases say
that approval/acceptance of a schedule creates a rebuttable presumption that the schedule
was sufficient and in accordance with the contract. The owner is free to rebut that
presumption. This is clearly a better and more modern position [22, 31].
Corrected logic that reflects actual and planned events in the field
Revised durations that reflect actual experience
Revised logic that corrects out-of-sequence work
Identification of logic tie changes
Accurate actual start and finish dates
Written narrative
In addition to the palpable benefits to project management that these good scheduling
practices will yield, providing fully developed updates in this way will document the changing
nature of the critical path of the project. It is widely held that the critical path is not static on
most projects, and that it shifts based on relative levels of progress within different areas,
resources, unexpected changes, or other issues [34]. Schedule updates that fail to meet these
criteria may be deemed useless in any subsequent proceedings under the theory that they fail
to accurately represent the project [15].
A related issue is the concept of re-baselining. This occurs when circumstances require a radical
revision to logic and to durations that reflect a significantly altered plan for the remainder of
construction after a major change or series of delays. If a project experiences significant delay
PS.841.7
2012 AACE INTERNATIONAL TRANSACTIONS
or disruption, then it may be necessary for the contractor to completely revise the planned
sequence of work. Although the scale of the changes may differ from those implemented in a
typical update, the best way to handle this eventuality is through the existing updating process.
PS.841.8
2012 AACE INTERNATIONAL TRANSACTIONS
The shared resource rule does not allocate the risk for the delay to the party
best able to control responsibility. Since the schedule is virtually always created
by the contractor and a construction law fundamental is that the contractor is
responsible for means and methods of construction, and the party best able to
manage owner delays is the owner, the contractor has significantly more
potential risk under this rule.
The shared resource rule deprives the contractor with a contingency that is
part of its bid. No one seriously argues that when a contractor includes an
additional amount of money to cover unknown risks, the owner is entitled to
demand using that money for owner changes. Yet the shared resource rule
allocates contractor time-contingency to the party that gets there first.
The contrary view is that the shared resource rule reflects six different reasons for shared
float ownership [37]:
Float is less important now with the common use of precedence diagramming
method (PDM), than it was 20 years ago when arrow diagramming method
(ADM) was commonly used.
The current law clearly supports the common understanding that float is a shared resource
available to the party that gets there first. However, the recent articles cited here are likely to
re-invigorate the discussion on this topic.
PS.841.9
2012 AACE INTERNATIONAL TRANSACTIONS
Such clauses have generally fallen out of favor in the past decade as it has proven virtually
impossible to enforce such provisions and still allow the contractor to be responsible for the
development and maintenance of the schedule. However, there seems to be no decisions
prohibiting the inclusion of such provisions or even interpreting their meaning and application.
PS.841.10
2012 AACE INTERNATIONAL TRANSACTIONS
damages even if the eventual completion date is timely. There are four requirements for
asserting an early completion claim in the US [14]:
Some contracts in the US now prohibit early completion. In this case, most contractors will
increase activity durations to absorb the float that might otherwise show as excess float at the
end of the project or as contractor retained float. Such contracts are intended to prevent early
completion claims. Some contracts do not prohibit early completion, but advise the contractor
that should they submit a schedule that indicates early completion, they will be issued a no-cost
change order adjusting the completion date to match the contractors schedule.
Risk adjusted schedules pose difficult and as-yet unresolved contractual problems. Some
contractors can choose to build in float to their schedule that accommodates the 90%
probability of finishing on time rather than the often 40% probability associated with typical
schedules. Again, the contractor must be careful how this information is treated in the
contract.
Conclusion
Although there are many manuals and guidebooks [11, 26, 32] on good scheduling practice,
schedulers must understand that little of the detailed work they perform in developing and
implementing CPM scheduling is supported by case law, or is ever likely to be so supported.
The primary guides to what is required for a CPM schedule flow from the contractual
requirements, which are often weak, to professional guides prepared by knowledgeable
experts.
PS.841.11
2012 AACE INTERNATIONAL TRANSACTIONS
Bibliography
No. Description
(It should be noted that EPC contracts come in both multi-prime and single
prime varieties.)
5b Bruner, P. and OConnor, J.,
2007
Section 15.125
Bruner & OConnor Construction Law
Volume 2
West Thompson Reuters, New York.
5c Bruner, P. and OConnor, J.,
2007
Section 15.9
Bruner & OConnor Construction Law
Volume 2
West Thompson Reuters, New York.
6 Callahan, Michael T and Hohns, H. Murray
1998 & Supp. 2003
Construction Schedules
2nd edition
(Quoting in part H. Murray Hohns, Preventing and Solving Construction
Contract Disputes, 1st ed., 1979)
Page 73
Matthew Bender & Co.
7 Fortec Contractors v. U.S. 8 Cl.Ct. 490 (1985).
8 Freeman Darling Inc., GSBCA LEXIS 191, 89-2 BCA 21,882 (1989).
9 Fullerton Construction Co., ASBCA No. 12275, 69-2 BCA 7876 (1969).
PS.841.12
2012 AACE INTERNATIONAL TRANSACTIONS
PS.841.13
2012 AACE INTERNATIONAL TRANSACTIONS
PS.841.14
2012 AACE INTERNATIONAL TRANSACTIONS
John C. Livengood
ARCADIS
john.livengood@arcadis-us.com
Patrick M. Kelly
ARCADIS
Patrick.Kelly@arcadis-us.com
PS.841.15