This presentation focuses on Contract Administration for Highway Contractors

1. CONTRACT ADMINISTRATION
82nd Annual State Convention
Contract Administration
Cordell M. Parvin
Jenkens & Gilchrist, P.C.

2. CONTRACT ADMINISTRATION
Setting up a Contract
Administration System

3. CONTRACT ADMINISTRATION
Why Set Up a System?
• Owners are less likely to pay for
changes and claims
• Most contractors lose valid claims by
failure to
• comply with Contract
• appropriately document claim

4. CONTRACT ADMINISTRATION
Setting up a Contract Administration System
 Read and understand the contract.
 Identify the risks for the project.
 Rank the risks to add to 100.
 Who is responsible for the risk and why?
 What is the Recovery/Entitlement
Theory?

5. CONTRACT ADMINISTRATION
Setting up a Contract Administration System
 What evidence and procedures are
necessary for success?
 Design the physical system and files.
 Staffing for Contract Administration.
 Review and re-evaluate risk allocation
and redesign system as necessary.
 Audit Contract Administration System.

6. CONTRACT ADMINISTRATION
Contract Administration System

7. CONTRACT ADMINISTRATION
Identify and Rank The Project Risk
(Steps 2 & 3)
• Brainstorm and list risks
• Prioritize by most likely and most
impact

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9. CONTRACT ADMINISTRATION
Who is Responsible for Risk?
Entitlement Theories

10. CONTRACT ADMINISTRATION
Entitlement Theories
• The contractor’s entitlement to additional
compensation or additional time must
begin with a thorough understanding of
the Contract itself

11. CONTRACT ADMINISTRATION
Who is Responsible for Risk?
(Steps 2 & 3)
• Understand Contract and Law
• Could be:
• Owner
• Contractor
• 3rd parties
• No one

12. CONTRACT ADMINISTRATION
Entitlement Clauses Categories
• Extra Work
• Significant Changes in Character of
Work;
• Differing Site Conditions; and
• Suspension of Work

13. CONTRACT ADMINISTRATION
Contract Checklist
1. Who can order extra work or make the
changes?
2. When?
3. How?
4. What?
5. What does the contractor need to do?

14. CONTRACT ADMINISTRATION
Differing Site Conditions Checklist
1. Does the clause include the type of
condition encountered?
2. Do the conditions differ materially from
those indicated in the contract
documents or those ordinarily
encountered?
3. Did the contractor make a reasonable
site investigation as required by the
contract?

15. CONTRACT ADMINISTRATION
Differing Site Conditions Checklist
4. Does clause allow Contractor to
recover impact costs?
5. Did the contractor notify the owner/
engineer prior to disturbing the
conditions?
6. Have the conditions encountered
increased the contractor’s costs in
performing the work or time required
to complete the work?

16. CONTRACT ADMINISTRATION
Delays Checklist
1. Does the Suspension of Work Clause
cover both owner-directed suspensions
and constructive suspensions of work?
2. Is there a “No Damage for Delay”
Clause in the contract?
3. Was the delay the contractor
encountered foreseeable?

17. CONTRACT ADMINISTRATION
Delays Checklist
4. Was the delay the contractor
encountered unreasonable?
5. Did the delay/disruption increase the
time necessary to perform the work?
6. Did the contractor comply with the
notice requirements of the contract?
7. Did the contractor comply with the
schedule update requirements of the
contract?

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25. CONTRACT ADMINISTRATION
Evidence to Prove Entitlement
(Step 6)

26. CONTRACT ADMINISTRATION
Evidence to Prove Entitlement (Step 6)
• Documentation is a
critical component of
Contract
Administration
• To be effective and to
be admissible in
evidence events must
be recorded as they
occur

27. CONTRACT ADMINISTRATION
Documentation
• To be effective documents must be
organized and filed in a manner that
makes them easily retrieved

28. CONTRACT ADMINISTRATION
Examples of Documentation
• The Schedule (Updated Schedule)
• Productivity Reports
• Deviation Reports
• Daily Time Card
• Diary and Daily Quantities

29. CONTRACT ADMINISTRATION
Examples of Documentation
• Daily Site Diary/Report
• Videos and Photographs
• Correspondence
• Meeting Minutes
• Change/Work Order Files

30. CONTRACT ADMINISTRATION
The Schedule
• Must be regularly updated
• When changes or delays occur must meet
schedule requirements in the Contract

31. CONTRACT ADMINISTRATION
Productivity Reports
• Changes in Productivity need to be
monitored and explained

32. CONTRACT ADMINISTRATION
Daily Site Diary/Report
Important to Include:
• Planned v. actual quantities (production)
• Location of work
• Description of work performed
• Production - If low should describe
reasons

33. CONTRACT ADMINISTRATION
Daily Site Diary/Report
• Describes major events of day
• Accomplishments, problems
• Equipment, mancount
• Should also summarize daily site diaries

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37. CONTRACT ADMINISTRATION
Videos and Photographs
• Picture is worth 1000 words
• Video and digital photographs
• Include:
– Differing site conditions
– Design defects
– Reduce productivity

38. CONTRACT ADMINISTRATION
Correspondence
• Correspondence becomes the “record” of
what happened on the project
• From a partnering standpoint do not want
to get into a letter writing campaign
• However, owner’s accusations should be
answered

39. CONTRACT ADMINISTRATION
Quantifying

40. CONTRACT ADMINISTRATION
Quantifying Increased Costs and Time
• The primary materials necessary to
quantify increased costs and time:
– Contract
– Cost Reports
– Schedule
– Documentation supporting Reports and
Schedule

41. CONTRACT ADMINISTRATION
Increased costs may consist of the
direct cost to perform changed work
and/or the result of disruption to
resources.
Direct Cost Impact Cost
to Perform of Performing
Changed Work Unchanged Work
Increased Costs

42. CONTRACT ADMINISTRATION
Checklist of Potential Additional Costs
Labor
 Supervision
 Materials
 Supplies
 Equipment
Field office overhead

43. CONTRACT ADMINISTRATION
Checklist of Potential Additional Costs
 Home office overhead (general and
administrative expenses)
Financing expenses
Additional bond costs
Extended builders risk insurance
coverage

44. CONTRACT ADMINISTRATION
“Simple” Request for Compensation
• The “simple” request for compensation for
changed work:
– A single event
– Occurring over a reasonably defined
period of time
– Involving known resources and no
impact

45. CONTRACT ADMINISTRATION
“Complex” Requests for Compensation
• “Complex” requests for compensation
consist of one or more event that
significantly impact unchanged work
• The complex request for compensation
involves the analysis of the effect of the
event on the resources committed to
perform both the changed and unchanged
work

46. CONTRACT ADMINISTRATION
“Complex” Requests for Compensation
• The Contractor should separate the cost
to perform the changed work from the
increased cost incurred to perform
unchanged work

47. CONTRACT ADMINISTRATION
Identifying Complex Issues
• When changed work impacts unchanged
work, the following cost and time elements
must be considered:
– Direct costs
– Disruption
– Delay

48. CONTRACT ADMINISTRATION
Identifying Complex Issues
• When changed work impacts unchanged
work, the following cost and time elements
must be considered:
– Mitigation costs
– Delayed Impact - A combination of any
of the above

49. CONTRACT ADMINISTRATION
Disruption
• Disruption includes lost productivity, which
may result from:
– Slow downs
– Delays
– Acceleration
– Lack of Continuity
– Loss of Morale

50. CONTRACT ADMINISTRATION
Disruption
• Disruption includes lost productivity, which
may result from:
– Learning curve fluctuations
– Change of sequence
– Change of means and methods
– Change of time of performance (i.e.
winter)

51. CONTRACT ADMINISTRATION
Crew Productivity
• In construction, a crew performs at
maximum efficiency when each member
performs the task assigned consistent with
the plan for the entire crew
• The more often a crew is disrupted, the less
likely the crew will ever achieve the high
degree of productivity normally expected in
a smooth learning curve

52. CONTRACT ADMINISTRATION
Crew Productivity
• The “ripple effect”
– A single event results in disruption and
delay which spreads to other activities
– Multiple events result in disruption and
delays which can build on each other

53. CONTRACT ADMINISTRATION
Time, Space and Ordered Sequence
• The “ripple effect”
– If any of the activities delayed or
disrupted are on the critical path,
completion of the entire project will be
delayed
– If not, then the only effect will be the
extra time and cost of having the crew
and equipment on the job

54. CONTRACT ADMINISTRATION
Measuring Impact of Productivity
• Best Proof - measured mile same project
• Second best - productivity on similar work
• Next - expert witnesses
• Last - trade association manuals

55. CONTRACT ADMINISTRATION
Schedules to Prove Delays
• No proof of the information used to
prepare schedule
• Errors in technical logic
• Incomplete schedules
• Overlooking procurement of critical
materials

56. CONTRACT ADMINISTRATION
Schedules to Prove Delays
• Failure to consider:
– physical restraints
– weather restraints
– resources
– economics of the sequencing
– uncertainty and risk in establishing
durations

57. CONTRACT ADMINISTRATION
Schedules to Prove Delays
• Schedule Deficiencies
– Schedule does not “tie in” to the
anticipated means and methods and/or
estimate
– Logic intentionally deviates from the
manner in which the contractor intends
to build the project
– Elimination of float by increasing
durations

58. CONTRACT ADMINISTRATION
Schedules to Prove Delays
• Schedule Deficiencies
– Unrealistic productivity of durations
– The schedule submitted to the owner
was not used to build the project

59. CONTRACT ADMINISTRATION
Schedules to Prove Delays
• Today, contract clauses and cases require
contemporaneous analysis
• Time Impact Analysis (TIA) most
frequently used
• Idea is to take a “stop-action” picture after
the delay and determine the extent of
delay

60. CONTRACT ADMINISTRATION
Cause and Effect
• The more specific we can get in identifying
the cause and effect of each event, the
more likely we will be able to convince the
owner we have been impacted

61. CONTRACT ADMINISTRATION
Cause and Effect
Questions
• How can you show the time and cost
impact of changes and other events?
• How can you show that you added
engineers and supervisors because of
events for which owner is responsible?

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63. CONTRACT ADMINISTRATION
82nd Annual State Convention
Contract Administration
Cordell M. Parvin
Jenkens & Gilchrist, P.C.