Vallez International LLC

Glossary of Construction Management and Claims Terminology

The following definitions are presented for commonly used terms utilized by professionals in scheduling, estimating, project/construction management, and contract administration,as well as construction claims experts who work with engineering and construction projects.

A/B Estimates of Damages

The A/B estimate method is typically employed in cases where the modified work or the reason for the delay or disruption connected to the modified work is quite straightforward. For instance, a contractor bids on a chemical plant expansion project assuming that a large pressure vessel will be located at grade with its own foundation. However, during the course of the work, the contractor discovers that the engineer has relocated the vessel in the structure above grade because of other process changes made by the owner. In such cases, the contractor can establish their damages by subtracting an independent estimate of the work as planned (the “A Estimate”) from the new estimate of the work with the vessel relocated (the “B Estimate”). The “B Estimate” is a fair and reasonable estimate of the value of the work at the time of the bid if the contract documents contained a sufficient description of the issues and changes that occurred during the course of the work. The contractor’s damages using this method would be the difference between the two estimates.

Absenteeism

The absence of crew members may reduce the overall productivity rate of the crew due to the shortage of resources or the differing skill levels of the remaining crew. In general, the contractor is held accountable for the consequences, including delay and loss of productivity, resulting from this issue.

Acceleration

The acceleration of a construction project occurs when the construction schedule for the project, or a portion of the project, is shorter than what would be required using normal sequences of construction on a regular working schedule. If the contractor agreed to a short schedule, it may be responsible for the acceleration costs, unless the owner caused critical path delay to the contractor’s work and did not provide a time extension. Furthermore, compensable acceleration may happen when the contractor is instructed to complete the work in a shorter time period than it believes is allowed under the contract. Compensable acceleration may also occur when additional work is added through contract changes or constructive changes, but extra time for performance is not granted. If both parties are accountable for delays to the work that necessitates acceleration, it may be necessary to allocate the acceleration costs based on an allocation of delay responsibility and other contractual issues, such as the owner’s responses to time extension requests by the contractor.

Activity

An element of the Scope of Work expressed in the schedule. It may also be known as a “task.”

Activity-Based Costing (ABC)

Activity-Based Costing identifies activities in an organization and assigns the cost of each activity resource to all products and services according to the actual consumption by each, thus assigning more indirect costs (overhead) into direct costs. ABC is generally used as a tool for understanding product and customer cost and profitability.

Acts of God

Natural disasters, such as floods, fires, earthquakes, tornadoes, hurricanes, lightning, drought, high tides, and other unusual and severe conditions. Contracts often contain provisions in a “Force Majeure” clause that defines acts of God as events for which the contractor cannot claim additional compensation for increased costs or delays. The contractor is entitled to an extension of time, provided that the activities affected by the acts of God were on the critical path of the project schedule and the contractor was not responsible for other concurrent delays at that time.

Acts of Government (Sovereign Acts)

Actions or inaction by government agencies or officials that stop, delay, disrupt, hinder, or otherwise affect on-going or planned work. These actions or inactions may be covered by a Force Majeure clause and entitle a contractor to an extension of time if they affect critical path work and delay the project. A contractor may also attempt to claim for its increased direct and time-related costs resulting from Acts of Government, provided that the activities affected by the Acts of Government were on the critical path of the project schedule and the contractor was not responsible for other concurrent delays at that time.

Actual Cost

Costs incurred in fact, on the basis of costs incurred, as opposed to a standard, predetermined, forecasted, or estimated cost.

The term “Authorized Work” refers to work that has been specified in the contract and is included in its value. It can also include work that has been authorized in writing, but for which the contract value has not yet been determined and agreed upon. A “Bar Chart,” also known as a Gantt chart, is a scheduling tool that displays the time span of each activity as a horizontal line, with its start and finish dates represented by the ends of the line. A “Baseline” is a quantitative definition of cost, schedule, and scope performance that serves as a base or standard for measurement and control during the performance of a project. Once established, baselines are subject to change control procedures.

A “Bid Error” refers to an error made by the contractor in preparing its bid proposal/cost for performing contract work. Such errors can include incorrect labor rates, labor productivity factors, overhead rates, schedule duration assumptions, estimated quantities, and technical assumptions for which the contractor is responsible. The “Budget” refers to the estimated costs, obligations, and expenditures for performing the project, which is also known as the performance measurement baseline budget.

The “Budgeted Cost of Work Performed (BCWP)” is the earned dollar value of work accomplished during the measurement period. The method used to calculate earned value can be either objective or subjective. The “Budgeted Cost of Work Scheduled (BCWS)” is the sum of budgets for the work scheduled to be accomplished within a given time period.

A “Cardinal Change” is a change or series of changes that are beyond the scope of the contract and constitute a breach of contract. Work within the general scope of the contract is defined as work that “should be regarded as fairly and reasonably within the contemplation of the parties when the contract was entered into.” Indications that a cardinal change has occurred include terms such as “outside contract scope,” “excessive changes,” “beyond contract obligations,” “extent of changes,” and “breach of contract.” There are two tests to determine if a cardinal change exists: the first test asks whether the type of work was within the contemplation of the parties when they entered into the contract, and the second test asks whether the finished product was basically the same in form or function as the originally contemplated product.

If faced with a cardinal change, a contractor has two options: it may perform the change and seek breach of contract damages after completing the work, or it may refuse to perform and claim breach of contract. If the contractor performs the change, it can suffer severe financial hardship until it proves and recovers breach of contract damages. However, if the contractor opts not to perform but the change is ultimately found not to be cardinal, it will have committed a breach of contract because it was obligated by the disputes clause to perform all of the original scope of work and all non-cardinal changes.

Change Control is a process that is documented and requires technical and management review and approval for any changes made to the scope, schedule, or cost baselines of a project. A Change Order Proposal is a document that provides a complete description of a proposed change and outlines the resulting impacts on project baselines. A Change Order, also referred to as Directed Change, is a formal change made to a contract, pursuant to the changes clause in the contract, that either increases or decreases the scope of work or changes the required means or method of performance. The Change Order also identifies any increase or decrease in the contractor’s compensation and may identify any change to the contractual completion date.

A Claim is an assertion or request for a contract price and/or time for completion adjustment by one of the contracting parties. It seeks adjustment or interpretation of an existing contract that is subject to the dispute clause on the contract.

The Code of Accounts is a logical and hierarchical breakdown of a project into controllable elements that are used for cost control and reporting.

Commercial Impracticability refers to two different cases. In the first, Impractical Performance, contract performance becomes extremely expensive, dangerous, or difficult, and such expenses, dangers, or difficulties were unexpected. Unprofitable work, hardship, or high costs alone are not usually sufficient. Depending on the existence of contractual provisions stating otherwise, such impracticability may entitle the contractor to a compensable delay if the work affected by such problems was on the critical path at the time that the delay occurred and if the contractor was not responsible for other concurrent delays at that time. In the second case, Unavailable Material, there is an unreasonable difficulty in locating or obtaining necessary materials, supplies, tools, or equipment, and such items are unavailable despite an exhaustive search for alternative sources. The cost of obtaining the items is commercially senseless or unreasonably high, and procurement or delivery is not possible at the time or place needed. Depending on the existence of contractual provisions stating otherwise, such impracticability may entitle the contractor to a compensable delay if the work affected by such problems was on the critical path at the time that the delay occurred and if the contractor was not responsible for other concurrent delays at that time.

Typically, the agent of the owner attends daily site meetings, maintains a daily diary or log of key issues observed, and receives regular site documents from the contractor. In this regard, the contractor argues that the agent, being the representative of the owner, has direct knowledge of all claim and change events as and when they occur, or constructive notice, even if a formal contract letter has not been issued. Consequently, the contract notice requirements are deemed to have been met.

Constructive Notice is a fundamental aspect of most construction contracts, whether standardized or customized, which contains specific provisions related to the process of giving notice. The notice obliges the Contractor to inform the relevant party responsible for administering the contract, such as the architect, resident engineer, or owner’s representative, of any claim or change event that may result in additional entitlement for time and/or cost. The duty to give notice varies with the form of contract utilized, including the information to be supplied and the time for performing specific and designated obligations.

Contingency refers to the amount set aside to cover costs that may arise from incomplete design, unforeseen and unpredictable conditions, or uncertainties. The amount of contingency allocated depends on the status of design, procurement, and construction, as well as the complexity and uncertainty of the project components.

The Control Budget is a revised version of the original bid estimate in a format that allows for easy comparison between budget and actual costs. It is usually prepared after bid opening and before construction begins. However, the Control Budget is not the contractor’s bid, which is the price sheet used in the contract as the basis for payment for work performed. Instead, it is an estimate of the costs, overheads, and anticipated profit. While the bid proposal hides the makeup of individual cost elements, bid unbalancing is common. Payment is usually based on units of work completed rather than for interim steps along the way. Therefore, the Control Budget, which shows separate estimated costs of forming, finishing, and placement of concrete, is used as the basis for comparison for calculations of damages using the discrete damages/cost variance analysis approach.

The Control Budget is a reiteration of the original bid estimate and commercial proposal, presented in a format that allows for detailed cost account comparisons and reporting between budget and actual costs, quantities, man-hours, and unit productivity rates. It is typically prepared after the contractor’s commercial tender is accepted by the owner and before project-specific engineering and construction begins on a turnkey engineering, procurement, and construction (EPC) project. The Control Budget breaks down the contractor’s total estimated costs, quantities, and man-hours into cost accounts comprising the project scope of work defined by the project work breakdown structure (WBS).

The terms “cost account” and “control account” are often used interchangeably in project management. However, it is important to understand the difference between the two. A control account is the management control point where actual costs are accumulated and performance is determined. It represents the defined work assigned to one responsible organizational element according to the work breakdown structure (WBS) and must contain the specific Scope of Work, definite schedule, assigned budget, unique identification, and method of measuring performance. This concept is applicable to all projects, and large projects may have a series of control accounts that may be divided into work packages and planning packages. Small projects may have only one control account consisting of a single charge number.

On the other hand, a cost account is the management control point in the WBS where an individual becomes responsible for the execution of work for the agreed-upon scope, schedule, and budget. Cost accounts are made up of work packages for near-term effort and planning packages for far-term effort where detailed planning is impractical.

A cost baseline is a budget that has been developed from the base cost estimate for the scope baseline and has been time-phased in accordance with the project schedule. The cost baseline is referred to as a baseline since it is integrated with the scope and schedule baselines and subject to formal change control. Normally, it also contains direct and indirect budget, management reserve budget, undistributed budget, and higher level budgets, and a contingency amount.

Cost benefit analysis (CBA) is the process of quantifying the costs and benefits of a decision, program, or project (over a certain period), and those of its alternatives (within the same period), in order to have a single scale of comparison for unbiased evaluation. Unlike the present value (PV) method of investment appraisal, CBA estimates the net present value (NPV) of the decision by discounting the investment and returns.

Cost contingency is the amount appropriated to cover costs that may result from incomplete design, unforeseen and unpredictable conditions, or uncertainties. The amount of the contingency will depend on the status of design, procurement, and construction and the complexity and uncertainty (risk) of the component parts of the project. However, it is important to note that cost contingency is not a substitute for making an accurate assessment of expected cost.

A cost estimate is a result or product of an estimating procedure which specifies the expected dollar cost required to perform a defined Scope of Work, activity, or project. A cost estimate may constitute a single value or a range of values.

Cost estimates are grouped into four general categories: Planning Estimates, Budget Estimates, Firm Cost Estimates, and Not To Exceed (NTE) or Not Less Than (NLT) Estimates. Planning Estimates, often referred to as Rough Order of Magnitude or Ball Park Estimates, are intended to grossly approximate the value of a given task or program. Budget Estimates are normally required for funding, fiscal planning, or procurement decisions. Firm Cost Estimates are based on well-defined plans and data and are usually in response to a customer firm request for proposal that has a near-term go-ahead. NTE/NLT Estimates are commitments from a contractor as to the maximum amount (or minimum credit) required to accomplish (or delete) a specific task, item, or procurement, and are prepared from Planning, Budget, or Firm Estimate information. The amount of Contingency or NTE/NLT allowance added is strictly an estimator or management judgment factor.

Cost Reimbursement Contract refers to a type of contract that involves payment to the contractor for the allowable costs incurred in carrying out the contractual obligations as specified in the agreement. In some instances, this type of contract may include a Cost Plus Fee or Fixed Fee Contract, where a fixed fee or a fee based on a percentage of the actual costs incurred is added to the contract price.

Craft Turnover refers to a productivity loss that results from the continuous turnover of labor, which can impact the schedule and productivity of the project. Generally, unless it can be demonstrated that the owner is responsible for this problem, the contractor is held accountable for the resulting consequences, including delay and loss of productivity.

Critical Activities are the activities in the schedule network that have zero or negative float values, indicating that any delay in their completion will result in a corresponding delay in the overall project completion date. Activities with negative float values are considered to be on the critical path to the completion of the project. The critical path refers to the schedule portion that comprises the critical activities, and any delay in completing this path will result in a delay in the overall project completion date.

The Critical Path Method (CPM) is an analytical, network-based scheduling tool that utilizes information about the critical path and other sequential paths to demonstrate the schedule paths and constraints towards achieving the specified project objectives. The CPM evaluates the allowable and expected time spans for the activities contained therein and considers activities that, when delayed, can impact the project’s total schedule, referred to as critical activities.

Cumulative Impact refers to the unforeseeable disruption of productivity resulting from the “synergistic” effect of an undifferentiated group of changes. Cumulative impact is referred to as the “ripple effect” of changes on unchanged work that causes a decrease in productivity and is not analyzed in terms of spatial or temporal relationships. This effect is unforeseeable and indirect and arises at the point where the ripples caused by an indivisible body on two or more changes on the pond of a construction project sufficiently overlap and disturb the surface, resulting in entitlement to recover additional costs resulting from the turbulence.

Defective and Deficient Contract Documents refer to errors or omissions in the contract drawings or specifications, incorrect dimensions, or unattainable performance requirements that may make it extremely difficult or impossible to perform contract requirements. Unless the contractor is responsible for the design, such errors or omissions may entitle the contractor to a compensable delay if the work affected by such errors or omissions was on the critical path at the time of the delay, and the contractor was not responsible for other concurrent delays at that time.

Delay refers to the extension of a project timeline due to unanticipated circumstances. Delays can be excusable and compensable, excusable but non-compensable, or non-excusable and non-compensable, depending on the circumstances surrounding the delay.

Delay of Approvals (Slow Turn-around) refers to unreasonable delays by the owner in approving shop drawings, schedules, samples, or other items that the contractor timely, accurately, and completely submitted. Such delays may entitle the contractor to a compensable delay if the work affected by such approvals was on the critical path at the time of the delay, and the contractor was not responsible for other concurrent delays at that time, subject to contractual provisions stating otherwise.

Delayed Notice to Proceed refers to the owner’s failure to issue a Notice to Proceed on the date set forth in the contract or an unreasonable delay in issuing the Notice to Proceed where the contract does not specify a specific time for issuance. The contractor may be entitled to delay costs if the contractor reasonably relied upon the owner’s representations and was not responsible for other concurrent delays at that time.

Deliverables refer to the items that are required to be delivered to another area of responsibility, either contractually or otherwise. These deliverables can include project documents like drawings, schedules, procedures, purchase orders, physical items like equipment or materials to be installed in a facility, or components of the completed facility or project.

The delta estimate damages method involves adding up several change order requests to determine the total claim amount. However, this method becomes challenging to apply when several problems and their effects are interrelated. Additionally, the delta estimate method is often criticized because the sum of the parts may exceed the whole, resulting in cost overrun. For instance, contractors typically calculate overall increases in labor costs by identifying multiple causes of lost productivity like excessive and sustained overtime, stacking of trades, overcrowding, the effect of multiple changes, temperature, and others. Each of these causes of productivity loss is evaluated, and the calculated loss from each cause is summed to yield the overall productivity loss claim. However, without comparing the resulting total labor increase to the actual labor man-hour variance between the contractor’s control budget and the total actual labor man-hours expended, including approved and pending changes, the calculation of the sum of the parts may yield a result that is greater than the whole variance. Thus, an owner should insist on a review of the contractor’s job cost report to evaluate the actual variance between the control budget man-hours and actual labor man-hours for individual work activities.

Design development is a transitional phase of an architect/engineer’s (A/E) services in which the design moves from the schematic phase to the detailed design phase. In the design development phase, the A/E prepares drawings and other presentation documents to crystallize the design concept and describe it in terms of architectural, electrical, mechanical, and structural systems. The design development phase refines the scope of work identified during the conceptual design. As required, large-scale drawings, mock-ups, and detailed plans are developed to present a coordinated, clear view of the project’s major elements with respect to architectural, structural, mechanical, electrical, plumbing, equipment, civil, landscape, and utility infrastructure. In an EPC contract, if a contractor contracts to perform a detailed design from a FEED design (Front End Engineering Design), certain design development must be performed. Certain changes to the FEED design documents would not be considered scope changes and instead design development. For instance, detailing out the small bore pipe with valves, drains, etc., in a piping system from the FEED piping design would be considered design development.

Furthermore, it is essential to note that deliverables can vary depending on the project’s type, scope, and complexity. These can include but are not limited to technical reports, analyses, data sets, software applications, models, samples, prototypes, or any other tangible or intangible output of the project’s activities. Therefore, project managers should ensure that all deliverables are adequately defined, documented, and communicated to all stakeholders to ensure successful project completion.
Destruction or damage to completed or partially completed work can significantly impede a contractor’s ongoing or planned work and may require extra or additional work. Such damage can result from weather problems or vandalism, depending on the party contractually responsible for site security. If the contractor is not responsible for any concurrent delays and the damage occurs after normal working hours, it may be entitled to a compensable delay.

Destruction or damage to tools, equipment, materials, or supplies can also cause delays, disruptions, or hindrances to the contractor’s ongoing or planned work. Weather problems or vandalism can also be the cause, and the contractor may have to recover its costs through its insurance policy. If the contractor is not responsible for any concurrent delays and the damage occurs after normal working hours, it may be entitled to a compensable delay.

Differing Site Conditions (DSC) refers to physical site conditions that differ from those described in the contract or are unusual or extraordinary. The contractor’s prospects of recovering after encountering a DSC are dependent on several factors, including the extent of positive representations made by the owner, the extent to which conditions encountered differed from those represented, the contractor’s ability to anticipate or observe different conditions, the owner’s knowledge of the conditions encountered, and the extent to which the contractor provided notice to the owner when the DSC was encountered.

Dilution of Supervision occurs when crews are split up to perform base work and changed work, or when there is continual replanning and resequencing of work. This can result in less effective supervision and lower productivity. If the owner is responsible for changes to the work that require dilution of supervision, the contractor may be entitled to recover its loss of productivity costs that result from this problem.
Direct Cost refers to any cost that is specifically identified with a particular project or activity, including labor, equipment, materials, supplies, or other costs that directly benefit the project or activity.

Direct Impact refers to the immediate and direct disruption resulting from a change that lowers productivity in the performance of the changed or unchanged work. Direct impact is considered foreseeable, and the disrupting relationship to unchanged work can be related in time and space to a specific change. Additional deliverables in a project can include project documents such as drawings, schedules, procedures, purchase orders, physical items to be installed in a facility such as equipment or materials, or components of or the entire completed facility or project.
Directed Change, also known as Change Order, is a common occurrence in construction projects due to various changes in circumstances or conditions that were not included in the original contract documents. These changes include errors and omissions in plans and specifications, changes instituted by regulatory agencies, minor design changes, overruns or underruns in quantities, and factors affecting time of completion or the method or manner of performance of the work.

A change refers to an alteration to the contract work that involves work already required to be done, while an extra involves additional items of work that are not included in the original contract. Both changes and extras result in modifications to the contract. To address this, construction contracts today typically contain a changes clause that establishes a formal procedure for implementing changes. This includes a written amendment to the contract that describes the new and different work to be performed and the compensation to be made.

The changes process is typically triggered by a communication from the owner notifying the contractor of the requirement for a change to the design and requesting a cost proposal for performing that work. The contractor is expected to respond promptly with a proposal covering their work and that of their subcontractors, as well as any required time extension. The changes clause may provide for compensation on the basis of agreed upon unit prices or “time and material,” depending on the owner’s preference.

The benefits of having a changes clause in the contract are that it allows for greater flexibility by permitting changes without necessitating a new contract for each addition, deletion, or revision on a project. It also allows for adjustment of plans and specifications to make clear the work the design professional and owner intended to be performed by the contractor without breaking contractual requirements. The change order mechanism also encourages the contractor to suggest beneficial changes knowing that they may receive a price adjustment for the additional work performed.

Owners (and contractors) can meet unforeseen contingencies by effectively using the changes clause without risking a breach of contract or being required to renegotiate a new contract. However, the owner’s right to modify the contract is subject to two significant limitations: the modification should not fundamentally change the contract, and the contractor must be compensated if the modification affects their costs or schedule or both. Changes clauses also reduce contingencies in competitive bidding and decrease the overall cost to the owner.

While all changes clauses allow the owner or its representative to initiate the change without the consent of the contractor, the change order generally must be in writing and must be within the general scope of the contract to prevent being designated a “Cardinal Change.”
The extra work/change order process in construction has become increasingly controversial as contractors and subcontractors are becoming increasingly reluctant to proceed with extra work without complete assurance that all direct and impact costs will be paid. Owners are equally reluctant to direct additional work if the time and financial aspects are not firmly established.

The Discrete Damages/Cost Variance Analysis Damages Method is a valuable approach for claimants seeking to provide convincing evidence of damages incurred. This method involves evaluating cost growth for each cost account, as well as quantity, man-hour, cost, unit price, and unit productivity variance information for each account. To ensure accuracy and credibility, this method relies heavily on the contractor’s contemporaneous detailed cost records and reports, and the current budget versus actual variance data derived from this information.

Unlike other methods that quantify only certain parts of the cost or damage analysis, the Discrete Damages/Cost Variance Analysis Method involves the specific distribution of all costs incurred on the project. The method establishes the credibility of the cost growth by separating the cost growth resulting from bid error, non-compensable problems, and compensable problems, and then identifying individual compensable problems with specific costs tied to each problem. The cost growth for each claim problem is applied to each relevant cost account to demonstrate that the “sum of the parts” of each claim does not exceed the whole cost overrun for each cost account.

Disruption is defined as any change in the method of performance or planned work sequence that prevents the contractor from performing in the expected manner. Disruption claims can be asserted by contractors against owners, subcontractors against contractors, contractors against subcontractors, and, where allowed by law, contractors against design professionals. The concept of disruption encompasses three general principles, including the contractor’s right to schedule performance in a series of economical operations, cooperation between parties to the contract, and reasonable planning of contract performance. Contractors may not make unrealistic assumptions about contract performance and must perform their work in a manner that is reasonable and in accordance with the contract.

In the ADM format, a zero-duration activity can be used to connect related activities. Duration refers to the time required to complete an activity. Early Completion Prevented refers to instances where the owner’s actions or inactions hinder the contractor from completing the project, or a part of it, before the established contract completion date, which may result in a claim for delay to early completion. To make such a claim, the contractor may need to show that it informed the owner of its intent to complete the project early and that its plan was reasonable. In a network diagram schedule, Early Finish (EF) is the earliest time an activity can be completed, while Early Start (ES) is the earliest time an activity can be started. Earned Hours are the hours credited to a worker or group of workers for completing a given task or group of tasks, based on the unit productivity rate or budgeted rate for that task. Actual hours may be less than, equal to, or greater than earned hours, depending on the worker’s productivity. Earned Value is the value of completed work expressed in terms of the budget assigned to that work, also known as Budgeted Cost of Work Performed (BCWP).

Under an Engineering, Procurement, and Construction Contract (EPC Contract), the contractor is responsible for the design, procurement, and construction of the project. On the other hand, under an Engineering, Procurement, and Construction Management Contract (EPCM Contract), the contractor has responsibility for supervision and management of construction but not for the construction itself. An Equipment-Factored Estimate is a method of estimating project costs, whereby estimating factors are applied to the total equipment cost estimate to derive the total estimated costs for a project, including the costs of civil work, piping, electrical, instrumentation, and indirect costs. Escalation refers to the use of a price index to convert past to present prices or present to future prices, taking into account cost increases resulting from inflation.

Estimate at Completion (EAC) refers to the total direct and indirect costs actually charged to the Work Breakdown Structure (WBS) element to date, plus the estimate of costs for authorized work remaining. The term Latest Revised Estimate (LRE) is synonymous. Estimate-to-Complete (ETC) refers to the estimated cost and schedule required to complete all remaining project scope. Fatigue is a phenomenon where productivity declines, and more mistakes, injuries, and accidents occur when workers are tired. If the contractor can demonstrate that the owner is responsible for such problems, the contractor may be entitled to recover its loss of productivity costs for such problems. Fee represents an agreed-to amount beyond the costs for work performed and is commonly referred to as profit. It may be fixed at the outset of performance, as in a Cost Plus Fixed Fee (CPFF) arrangement, or may vary during performance, as in a Cost Plus Incentive Fee arrangement.

A Firm-Fixed-Price Contract (FFPC) is a contract that provides a price that is usually not subject to adjustment. FFP contracts are generally used for contracts awarded after formal advertising, or for negotiated contracts when reasonably definite specifications are available, and costs can be estimated with reasonable accuracy to enable the negotiation of a fair price. A Fixed-Price Contract generally provides for a firm price but may provide for an adjustable price under certain contract clauses (change clauses, etc.) for the supplies or services being procured. Float refers to the amount of time an activity may be delayed from its early start without delaying the project finish date, and it can change as the project progresses and changes are made to the project plan. Float is also known as slack, total float, and path float and should be distinguished from free float.
Free Float (FF) refers to the duration by which an activity can be postponed from its earliest start time without affecting the earliest start time of its subsequent activity. This measure is significant in project management as it helps in identifying the amount of time available to complete a task without delaying the overall project schedule.

Front End Engineering Design (FEED) is a contractual agreement between the project owner and an engineering firm to undertake sufficient engineering and preparation of technical specifications and drawings that provide an adequate project description. The purpose of this phase is to enable a contractor to prepare a bid for the detailed design, procurement, and construction of the project. The scope of FEED typically includes the development of functional requirements of a facility, completion of the design basis, detailed scope of work for bidding contractors for the EPC phase, definition of the facility’s configuration and major systems, design specification for detailed engineering, safety studies and risk assessments, definition of major interfaces, and production of drawings.

General and Administrative (G&A) Costs refer to indirect expenses incurred by a company, including general and executive offices, costs of staff services such as legal, accounting, public relations, financial, and other general expenses related to the overall business.
Global Claims are claims where a composite sum is presented as the measure of damage or contractual compensation for two or more specific matters of claim or complaints. These claims are considered global when it is impractical or impossible to provide a breakdown or sub-division of the sum claimed between those matters. Total actual cost or total cost are American expressions used to describe these claims, where the alleged total costs of the contractor are compared with the contract value or price, and the difference is put forward as representing the measure of damage or additional cost caused by one or more matters complained of. A total cost claim constitutes a global claim when more than one separate matter is relied upon.

Impact refers to the indirect delay or interference that a change in one phase of work may create on another phase. The costs of such delay or interference should be recognized as consequential costs and considered as part of direct costs in project management. The owner of a construction project is bound by an implied warranty that the specifications, drawings, and other contract documents it provides to the contractor are accurate, and that compliance with these specifications will result in an acceptable product. Any misrepresentation of soil conditions, water availability, or structural design flaws that breach this warranty of accuracy could lead to a defective product. Similarly, specifications that are unsuitable for the project, such as an inadequate heating system or roof insulation that violates building codes, are a breach of the implied warranty of suitability. The owner also has an implied warranty to not hinder or delay the contractor’s performance, and on multi-prime projects, to coordinate the contractors’ activities to prevent disruptions.

The contractor may also encounter issues such as impossibility of performance due to specification errors, unattainable performance requirements, equipment that fails to meet the specified requirements, or damage to the structure on which the contract performance depends. Improper inspections that disrupt the contractor’s work, either due to overzealous or incorrect standards, may entitle the contractor to recover its delay costs if the affected work was on the critical path of the project schedule and if the contractor was not responsible for other concurrent delays. Inadequate supervision by the owner or its representatives, either by failing to oversee the contractor’s work or by being inaccessible during construction, may cause delays for which the contractor may be entitled to compensable delay damages if the affected work is on the critical path and if the contractor was not responsible for other concurrent delays.

Furthermore, inadequate utilities, such as delayed or inadequate delivery of electrical power or water, may entitle the contractor to compensable direct costs and delay costs if it violates the contract or was reasonably expected. If the owner-provided utilities are insufficient to support contract performance, the contractor may also be entitled to compensable direct costs and delay costs. The contractor may also be held responsible for inadequate supervision of its subcontractors’ work and the resulting delays and costs.

An Incentive Type Contract offers a fixed price or cost reimbursement with a provision for adjusting the price or fee. It includes a target price, target profit or fee, and target cost as a starting point for various incentives. A maximum price or fee is also specified, with adjustments made after the completion of the contract to establish a final price or fee. The final adjustment is based on the actual costs incurred by the contractor, plus a sliding scale of profit or fee that varies inversely with the cost. The contract also includes specific incentive goals for schedule, technical performance, and other factors.

Indirect Costs are expenses incurred by an organization for common or joint objectives that cannot be specifically identified with a particular part of a project or activity.

Interference refers to actions or instructions by the owner that hinder or delay the contractor’s ongoing or planned work. The contractor may be entitled to recover disruption costs for such interference, as well as delay costs if the affected activities were on the critical path of the project schedule at the time of the interference and if the contractor was not responsible for other concurrent delays at that time.
Jury Verdict Damages provide a way for courts or boards of contract appeals to calculate damages when discrete damages are not presented by the contractor or owner. Judges and board panel members serve as triers of fact and award damages based on an approximation of damages suffered.

Labor Relations and Labor Management Factors can result in productivity loss, with labor problems such as union jurisdictional and industrial relations issues, safety issues, evacuation alarms, and late permit and access issues being the responsibility of the party responsible for the problems.
Labor Shortage refers to a lack of available labor resulting from injury, illness, competition from other projects, or other unforeseeable circumstances. The contractor is typically responsible for addressing these issues.

Lack of Access problems can result from restricted or impaired access to work areas, cramped workspaces, and access restricted by other work, strikes, unsafe conditions, etc. Depending on the existence of contractual provisions stating otherwise, such lack of access problems may entitle the contractor to a compensable delay if the work affected by such problems was on the critical path at the time that the delay occurred and if the contractor was not responsible for other concurrent delays at that time.

One of the challenges that contractors may face during a construction project is a lack of information or decision-making. This can occur when there is a delay in receiving instructions, decisions, or clarifications from the owner, which can result in the workforce or activities being shifted or efforts being wasted due to late information. In some cases, the contractual provisions may entitle the contractor to compensable delay, provided that the work affected by such problems was on the critical path at the time of the delay, and the contractor was not responsible for other concurrent delays at that time.

Another issue that may arise is a lack of permits, where the owner fails to secure the necessary permits or licenses for the work, or there is a delay in securing them. If the owner was responsible for obtaining such permits by a contractual date, the contractor may be entitled to recover its delay costs if the activities in its schedule that were affected by the lack of permits were on the critical path of the project schedule at the time that the permits were needed, and the contractor was not responsible for other concurrent delays at that time.

Similarly, a lack of right-of-way can occur when roadways or routes to or from the project are blocked, unavailable, or otherwise impaired. If the owner was responsible for securing the right-of-ways to access the project, the contractor may be entitled to recover its delay costs if the activities in its schedule that were affected by the lack of right-of-ways were on the critical path of the project schedule at the time that the right-of-ways were needed, and the contractor was not responsible for other concurrent delays at that time.

Late drawings can also pose a problem when the drawings or sketches required by the contract are not furnished to the contractor on time, affecting the orderly performance of the work. If the owner was responsible for delivering such drawings, the contractor may be entitled to recover its delay costs if the activities in its schedule that were affected by the lack of drawings were on the critical path of the project schedule at the time that the drawings were needed, and the contractor was not responsible for other concurrent delays at that time.

Finally, the contractor may face delays due to late or defective material or equipment furnished by others, including owner-furnished items. This may occur when the contractor fails to receive the necessary property, equipment, tools, or data in violation of the contract, or when they receive unsuitable items for their intended use. If the owner was responsible for delivering such material or equipment through its other vendors, suppliers, or contractors, the contractor may be entitled to recover its delay costs if the activities in its schedule that were affected by the lack of material or equipment were on the critical path of the project schedule at the time that the equipment or material were needed, and the contractor was not responsible for other concurrent delays at that time.

Late Start (LS) refers to the latest time an activity can be started in a network diagram schedule. In such a schedule, the Late Finish (LF) refers to the latest time an activity can be finished. Another issue that can arise in construction projects is a latent defect, which is a hidden flaw or weakness in a design or constructed component that is known to the designer or contractor but cannot be discovered through reasonable inspection by the owner.

The Leonard Study, also known as “The Effects of Change Orders on Productivity,” was prepared in 1988 by Charles A. Leonard at Concordia University, Quebec, Canada. The study analyzed data from 90 cases drawn from 57 different construction projects to identify and quantify the effects of change orders on productivity. Additionally, the level of detail in a project hierarchy refers to the successively lower elements within the hierarchy, with each element being a further breakout of the next higher element.

To avoid wide fluctuations in resource demand, resources are often scheduled at a steady rate using a technique called leveling resources. Liquidated damages, which are damages whose amount is predetermined by the parties during the formation of a contract for the owner to collect as compensation upon a specific breach by the contractor, may be unenforceable if their purpose is to punish the contractor rather than to compensate the owner. For a liquidated damages clause to be upheld, two conditions must be met: the amount of damages identified must roughly approximate the damages likely to fall upon the owner, and the damages must be sufficiently uncertain at the time the contract is made that such a clause will likely save both parties the future difficulty of estimating damages.

A logic network is a diagram used to identify the sequence and relationships of the Critical Path Method (CPM) schedule activities. It complements and supports the Work Breakdown Structure (WBS) and establishes and gives direction to the work packages and tasks. Finally, a long-lead item is a critical component of the project, often a piece of equipment or material, that requires a significant amount of time to acquire and therefore represents a potential threat to schedule achievement.

Loss of Productivity refers to the situation where the contractor’s actual man-hours per unit of work exceed its planned man-hours per unit of work. This can result in delays and cost overruns, leading to the failure to meet project goals and objectives.A Lump Sum Turn Key (LSTK) Contract is a fixed-price agreement where a contractor is responsible for designing, constructing, and managing a project until it is ready for handover to the owner. LSTK contracts are suitable when the scope of work is well-defined and quantifiable, and no changes are anticipated. However, such contracts typically contain a changes clause for certain events or modifications, and for time extensions under specific circumstances. Comprehensive risk allocation is appropriate for LSTK contracts.

Maladministration occurs when an owner’s actions or inactions interfere with the contractor’s work. Contractors have the right to enjoy least-cost performance, and maladministration is an entitlement recognized by courts to recover costs. Examples of maladministration include constructive change, communication failures, overzealous inspection, or unreasonable disapproval of proposed subcontractors.

The Management Reserve is the portion of a project’s or contract’s total allocated budget withheld for management control purposes rather than designated for the accomplishment of specific work elements. A Master Schedule is compiled to show the total time available for the entire project and how the various portions of the job are to be scheduled.

The Mechanical Contractors Association of America (MCAA) issued Bulletin No. 58 in 1976, entitled “Factors Affecting Productivity.” This document lists sixteen factors that potentially impact productivity and provides a range of productivity losses for each factor, dependent on the severity of the conditions. The factors include Stacking of Trades, Morale and Attitude, Reassignment of Manpower, Crew Size Efficiency, Concurrent Operations, Dilution of Supervision, Learning Curve, Errors and Omissions, Beneficial Occupancy, Joint Occupancy, Site Access, Logistics, Fatigue, Ripple, Overtime, and Season and Weather Change.

Loss of Productivity refers to a situation where a contractor’s actual man-hours per unit of work exceed the planned man-hours per unit of work. This can lead to reduced efficiency, lower quality work, and ultimately, increased costs.

A Lump Sum Turn Key (LSTK) Contract is a type of fixed price agreement that involves the contractor designing, constructing, and managing a project until it is ready to be handed over to the owner. This type of contract is most suitable when the scope of work is clearly defined, quantifiable, and does not require any change orders. However, a comprehensive allocation of risks is necessary to address certain events or modifications that may arise during the project.

Maladministration occurs when an owner’s actions or inactions interfere with a contractor’s work. The contractor has the right to least-cost performance, and the owner may not interfere with the contractor’s sequencing of work or construction methods unless specified in the contract. Maladministration can lead to increased costs for the contractor and is recognized by the courts as an entitlement for contractors to recover their costs. Examples of maladministration may include constructive change, communication failures, overzealous inspection, interference with the contractor’s work, or misinterpretation of specifications.

Management Reserve refers to the portion of a project or contract budget that is withheld for management control purposes rather than for a specific work element or set of work elements.

A Master Schedule is a comprehensive schedule that shows the total time available for the entire job and how the various portions of the job are scheduled.

The Mechanical Contractors Association of America (MCAA) issued Bulletin No. 58 in 1976, which lists sixteen factors that potentially impact productivity, including Stacking of Trades, Morale and Attitude, Reassignment of Manpower, and Season and Weather Change.

Measured Mile Analysis is a methodology for measuring a contractor’s productivity by comparing the productivity achieved during a baseline time frame or area (measured mile) to a different time frame or area impacted by specific problems. The difference in productivity rates can be attributed to the problems that occurred during the impacted period. This analysis involves several steps, including determining the discipline and scope of work, estimating productivity, and estimating the loss of productivity due to owner-caused impacts.

A Milestone is an important or critical event or activity that must occur during the project cycle to achieve project objectives.

The Modified Total Cost Damages Method is a damages analysis method that involves calculating the claim amount by subtracting an adjusted in-place value from an adjusted bid amount. The adjusted in-place value is determined by adjusting the project’s in-place value for identified contractor-caused performance errors and other non-compensable costs, while the adjusted bid amount is determined by adjusting the original bid amount for executed change orders and identified bid errors. This method is similar to the jury verdict method, but the contractor adjusts the total costs for non-compensable costs and bid errors, rather than the trier of fact.

In the context of the Critical Path Method (CPM) network, negative float values occur when the early finish time exceeds the late finish time of an activity or a series of activities, which indicates project delays. The Organization Breakdown Structure (OBS) is a hierarchical system that demonstrates the levels of responsibility in a performing organization based on groups, divisions, projects, or responsible teams. Out-of-Sequence Work results from an illogical planning of work, leading to decreased productivity due to the excessive movement of crews. However, if the owner is responsible for the need to perform out-of-sequence work, the contractor may recover its loss of productivity costs. Overhead refers to expenses necessary for the ongoing functioning of a business that do not directly generate profits, including accounting fees, advertising, rent, and taxes. Overtime work may lead to fatigue, increased absenteeism, decreased morale, reduced supervision effectiveness, and poor workmanship, resulting in productivity loss. If the owner is responsible for excessive overtime work, the contractor may be entitled to recover increased labor costs and loss of productivity costs. Parametric Cost Estimating is a cost estimating methodology that uses statistical relationships between historical costs and program variables, such as physical or performance characteristics. Performance Criteria refers to the fundamental technical, operating, and design requirements necessary for the development and design of an operation. The Performance Measurement Baseline is the time-phased budget plan against which project performance is measured, while Performance Measurement Criteria quantitatively define what products or tasks need to be accomplished to achieve the primary goals of the project. Planning precedes scheduling and aims to identify and set forth the overall objectives of the project. Planning Packages contain scope, schedule, and budget for far-term efforts where detail planning is unpractical. Poor Morale of Craft Labor is caused by excessive work changes and rework, leading to decreased productivity. If the owner is responsible for such problems, the contractor may recover its loss of productivity costs. Productivity refers to the measurement of the rate of output per unit of time or effort, usually measured in engineering man-hours or construction labor hours. A Program is an organized set of activities directed toward a common purpose or goal, and the Program Evaluation Review Technique (PERT) is a model for project management designed to analyze and represent the tasks involved in completing a given project. PERT is event-oriented and is used in R&D-type projects where time is the major factor, and it uses deterministic networks with mean durations derived from a specialized version of the Beta distribution. The mean duration in PERT is found with the formula T = (L + 4ML + H) ÷ 6.

Additional Progress Payments refer to payments made to a contractor during a Fixed Price Contract, based on a percentage of their incurred total cost or total direct labor and material cost. These payments are determined by the actual expenditures and work performed at a specific stage of completion, or a predetermined value based on the completion of particular milestones.

A Project is a significant undertaking within a program that has firmly scheduled beginning, intermediate, and ending date milestones, prescribed performance requirements, prescribed costs, and requires close management, planning, and control. The project is the fundamental building block in relation to a program that is individually planned, approved, and managed.

The Project Baseline Schedule is a document that supports the contractual and internal deliveries of the project, and it is configuration-controlled. Once it is approved and resource-loaded, it becomes the basis for the performance measurement baseline.

Project Control refers to the planning, scheduling, budgeting, estimating, work authorization, cost accumulation, performance measurement, reporting, change control, documentation, and other systems used to plan and control the work.

The Project Control System (PCS) is a planning, scheduling, budgeting, estimating, work authorization, cost accumulation, performance measuring, change control, and documentation system used to plan and control the scope, cost, and schedule for performance of the work.

The Project Management Plan (PMP) is a set of documents designed to describe the policies, standards, strategies, approaches, processes, conditions, parameters, objectives, and deadlines of the project with sufficient detail.

The Project Manager is an individual responsible for the management of the project, who is held accountable for accomplishing the project scope, schedule, and cost objectives.

The Project Office is the organization responsible for overall management of the project. It may be system or product-specific or responsible for many projects in a specific phase of the product.  

Quality Assurance (QA) is a comprehensive approach that involves systematic and planned actions to ensure that a facility, system, structure, or component is capable of functioning satisfactorily under service conditions. On the other hand, Quality Control (QC) comprises all measures taken to regulate and verify the characteristics and features of a product, material, service, or process according to pre-determined requirements. It is a regulatory process that involves assessing actual quality performance against standards and taking corrective actions if needed.

When a contractor is unable to recover damages under the original contract, a quasi-contractual remedy known as Quantum Meruit may be pursued. This remedy allows the contractor to recover the reasonable value of the benefit conferred upon the owner. The contractor must prove substantial performance of the construction contract and an intention to perform fully in good faith to recover under this theory. If the contractor intentionally departs from the contract requirements, it is not considered to be acting in good faith, unless the departure is negligible or caused in part by the defendant. If the express contract is abandoned, courts will seek to compensate the contractor with the reasonable value of their work.

A Relationship is a term used to describe a connection between an event and a subsequent activity that cannot begin until the preceding event has occurred. The term “constraint” is also used to describe a relationship between an activity and a subsequent event in which the event cannot take place until all preceding activities have been completed.

A Request for Information (RFI) is a formal request by the contractor for clarification or information about drawings, specifications, or work scope that may be unclear or not yet provided. The Responsibility Assignment Matrix (RAM) integrates the Organizational Breakdown Structure (OBS) and Work Breakdown Structure (WBS) to assign total contract work scope to responsible parties by WBS element.

Rectification of work due to engineering errors or improperly executed installations leads to a decrease in productivity. The party accountable for engineering errors is held responsible for the resultant delays and productivity loss costs. Usually, the contractor bears the responsibility for improper installations, unless otherwise specified in the contract, such as in a cost-plus or time and materials contract, where the owner bears all expenses.

Risk refers to the level of uncertainty at which a decision-maker is aware of the potential outcomes of an action and can attach subjective probabilities to them.

A schedule baseline is a time-phased plan that includes a logical sequence of interdependent activities, milestones, and events required to complete the project. During the execution of the project, the schedule baseline must be officially modified as necessary.

Schedule contingency is the duration of time calculated that is in addition to the total project duration calculated using activities and logical relationships. This duration is added to the time required to complete all activities in the project schedule. The project manager manages the schedule contingency and applies it as necessary to maintain the schedule baseline.

Scheduling establishes intermediate goals that naturally lead to the achievement of stated objectives. Planning a project involves scope reviews, contract completeness reviews, resource planning, work schedule assignments, calendars, facility utilization planning, management methods, organizational structures, capital expenditure planning, contracts, procurement, and more.

Scheduling difficulties arise due to the contractor’s failure to properly sequence or coordinate work, adhere to the project schedule, timely update schedule, or provide accurate scheduling information. This may include illogical work scheduling or sequencing or manipulation of the schedule, which stops, delays, disrupts, or hinders the contractor’s ongoing or planned work. The contractor is typically responsible for scheduling and coordinating its labor, vendors, and subcontractors and is thus responsible for the delays and disruptions that result. However, if the owner contractually bears the responsibility for scheduling and coordination, the contractor may be entitled to recover its delay and disruption costs if the affected activities were on the critical path of the project schedule and if the contractor was not responsible for other concurrent delays at that time.

In baseline management terminology, scope refers to those performance and design requirements, criteria, and characteristics derived from project needs that form the basis for project direction and execution.

The Spearin Doctrine provides a basis for contractors to request equitable contract adjustments if they incur damages due to problems with the owner’s drawings and specifications. Courts and boards have relied on the implied warranty established by this benchmark case to find in the contractor’s favor. As per the Spearin court, “But if a contractor is bound to build according to plans and specifications prepared by the owner, the contractor will not be held responsible for the consequences of defects in the plans and specifications.”

The occurrence of stacking of trades, wherein multiple trades work in the same area, can lead to reduced efficiency in the contractor’s work due to inadequate workspace and interference from other workers of the same or different trade, resulting in productivity loss. If the owner is responsible for this issue, the contractor may be entitled to recover the loss of productivity costs. The scope of work pertains to the description of a product, facility or service to be provided or performed, along with its requirements.

In the event of unforeseeable strikes or refusal of workers to perform work, the contractor may be entitled to recover delay costs if the affected activities on the critical path of the project schedule were not due to other concurrent delays caused by the contractor and if relief is not barred by the contract. Delays caused by subcontractors usually fall under the responsibility of the contractor, except if the owner caused the problem.

If the contractor performs its duties without knowledge of critical facts that it later learns, and the owner deliberately conceals or fails to disclose those facts, resulting in delays, disruptions, and increased costs, the contractor may recover its direct costs and delay costs if the affected activities were on the critical path of the project schedule and not due to other concurrent delays.

Owners hold the right to suspend work on a contract for a reasonable length and with a valid cause. A suspension that lasts 30 days for analysis of an unexpected and significant change may satisfy the criteria, whereas a suspension of 180 days for a family illness fails to meet the standards and may result in a breach of contract. Contractors cannot initiate a suspension but can halt or alter their operations for damage mitigation. It is crucial to differentiate between a delay and a suspension of work, especially if a “no damage for delay” clause exists in the contract.

The occurrence of suspensions and delays in a construction project usually causes damage, resulting in a loss of revenue or additional expenses. The determination of the contractor’s entitlement to damages depends on the cause of the suspension or delay and the explicit and implicit obligations and risk assumptions stipulated in the contract.

To define the Scope of Work in a construction project, a Technical/Scope Baseline is created, consisting of approved documents and any subsequent changes to those documents. If a party defaults on their obligations under the contract, termination provisions may be exercised, which may allow the innocent party to recover damages resulting from the default and termination. This may be done through an express termination provision or an implied right to terminate for material breach. Public and private construction contracts may contain “termination for convenience” clauses, allowing an owner or prime contractor to terminate the contract without default. In such cases, the contractor is entitled to recover costs incurred for completed work and materials on hand, including overhead and profit, as well as closing out subcontractor and supplier contracts. Terminations can result from a variety of reasons, such as delays, failure to prosecute work, and utility cut-offs. Default termination should be avoided, as it often leads to litigation, while termination for convenience is typically resolved through cost analysis and careful review of contractual provisions.

Time and Materials Contract is a contractual agreement where the owner pays the contractor for the cost of labor hours and materials used, plus a fee. This type of contract is suitable for projects that are difficult to define and cannot be accurately estimated in terms of total costs.

A Total Cost Claim is a claim that asserts the costs incurred by the contractor are not a result of their actions, but due to factors beyond their control, for which the owner is responsible. This claim does not detail separate damages as being the result of each specific event. For the contractor to succeed in making a Total Cost Claim, they must show that their bid and actual costs are reasonable, all events contributing to the loss are compensable, there is no other way to calculate the claim, and the contractor did not contribute to the increased costs in any way.

Total Estimated Cost refers to the budgeted costs for a project that includes land, design, construction, equipment, escalation, and contingency.

Total Float, also known as Float, is the amount of time an activity can be delayed without delaying the entire project.

Undistributed Budget is the budget within the performance measurement baseline that is yet to be assigned to a responsible organization and a WBS element.

The Uniform Commercial Code (UCC) is a set of uniform acts first published in 1952 in an effort to harmonize the law of sales and other commercial transactions across all 50 states of the United States of America.

Unit Cost is the total cost divided by units of production, or smaller elements and their associated unit costs that make up the total unit cost.

Unit Cost Contract is a contractual agreement where the contractor provides unit costs for performing specific work, such as a cost per cubic yard of concrete installed or cost per foot of 2-inch pipe installed. The unit price covers all the contractors’ direct and indirect costs for performing the work, including profit.

In contract law, it is a fundamental principle that a party who succeeds in a breach of contract claim is entitled to be restored to the position it would have been in if the breach had not occurred. Meanwhile, the doctrine of unjust enrichment prohibits a person from gaining an unfair advantage at the expense of another. This occurs when the defendant wrongfully receives and keeps something of value at the plaintiff’s expense. Restitution is the remedy for unjust enrichment, which aims to restore equity between the parties.

In construction contracts, unjust enrichment may arise when the owner unfairly benefits from work performed by the contractor without paying for it. In such cases, the court may use a quantum meruit approach to determine the amount of damages to be awarded to the contractor, rather than relying on the specific terms of the contract. In commercial transactions, restitution may be achieved by returning purchased goods, but in construction, disassembly of the work is not feasible, and damages must be assessed and awarded instead.

Unusually severe weather conditions that deviate substantially from the norm, average, or reasonably expected weather for the locality and season may cause delays and disruptions to construction projects. In such cases, a contractor may be entitled to a time extension if the affected work was on the project’s critical path. The contractor may also be able to recover increased direct and time-related costs resulting from such weather conditions, subject to contractual provisions and concurrent delays.

Variable costs in construction projects include raw material costs, by-product credits, and processing costs that vary with plant output, such as utilities, catalysts, chemicals, packaging, and labor for individual operations.

Divergence, in terms of construction projects, refers to the deviation between the anticipated, budgeted, or planned results and the actual outcomes. One aspect of a claimed cost overrun is the variation in quantities of the materials used by contractors in construction projects. In most construction contracts, materials are purchased based on a unit price, which involves some expected variability in the quantity of materials from the estimated figures. Typically, a contractor procures materials, adds a markup, and passes on the cost to the project owner. However, disputes may arise when an owner reduces the specification in anticipation of a credit to realize cost savings, and the contractor does not pass on the full savings achieved from the owner’s change. To address such situations where the actual quantity deviates from the estimated amount due to imprecise estimates, an owner may use a Variation in Quantity clause. It is crucial for the contractor to determine whether their unit prices adequately cover their overhead and other costs if the quantity significantly varies from the estimated figures used to prepare their bid.

Another area of contention is the limitation on variations. This type of dispute may arise when variations occur in the quantity of work paid for pursuant to a schedule of unit prices or additional works. Many contracts have provisions that allow for adjustments to the unit price after a given percentage of variation, such as 25%. These clauses are generally enforceable and included in contracts to avoid disputes. However, some contracts may be silent on this matter, and in such cases, an owner may argue that there is no entitlement for a contractor to claim if the variation relates to the quantities of work as represented in the tendering documents, which were only approximate.

The owner is entitled to receive materials of the specified quality. Delivery records and supplier invoices may provide extensive information to determine whether the materials meet the prescribed quality. For example, if plumbing specifications require schedule 40 PVC pipes for sewers, and the contractor substitutes them with schedule 21 PVC pipes, there would be a significant reduction in quality and cost. Similarly, a paving contractor may try to substitute thicker layers of cheaper base course hot mix instead of the specified wearing course hot mix. In both cases, the owner is left with an inferior product, and if they have paid for the specified material, they may have a cost claim against the contractor.

Furthermore, war, civil unrest, or other combative hostilities that halt, delay, disrupt, or hinder the contractor’s ongoing or planned work or their ability to procure necessary labor, materials, supplies, or tools are covered by the Force Majeure clause in a contract. This clause entitles the contractor to a time extension, unless the contractor was responsible for other concurrent delays at that time.

The WBS Dictionary, which is an essential tool for project management, lists and defines the specific Work Breakdown Structure (WBS) elements and comprises an Index and Element Definitions.

WBS Dictionary Element Definition

The WBS dictionary index provides a list of preliminary elements extended to the required lowest level, while the element definition describes the individual elements contained in the index. These are configuration-controlled documents that account for planning and executing all work required by the contract, ensuring that work is properly authorized and assigned at the appropriate organizational levels prior to beginning.

WBS Elements

The WBS elements represent individual products specified in the WBS, and may include hardware, services, or data. These elements are discrete portions of the WBS, and are organized in a multi-tier framework that displays the logical relationships between them. The descending levels of the WBS provide increasingly detailed definitions of the end product, allowing for accurate estimation, scheduling, budgeting, and progress reporting.

Work Authorization

Work Authorization is a documented process or system that ensures that work is authorized and assigned at the appropriate levels before being executed. This ensures that work is performed in a controlled manner, and reduces the risk of unauthorized or inappropriate work being carried out.

Work Breakdown Structure

The Work Breakdown Structure (WBS) is a multi-tier framework that graphically organizes elements representing the work to be accomplished in logical relationships. The WBS should be organized in a way that allows for accurate estimation, scheduling, budgeting, and progress reporting, with each element accorded detailed scope, schedule, budget, and a description of activities and responsible managers.

Work Package

Work Packages are subdivisions of the lowest level WBS element that are accorded detailed scope, schedule (start and finish points), budget, a description of scope (including activities), and responsible manager. This allows for greater control and accountability over the work being carried out, ensuring that it is completed efficiently and effectively.

Work Scope

The Work Scope is an objective plan that defines the work necessary to plan, execute, and control a program that meets technical requirements and is approved by the relevant stakeholders. This plan outlines the necessary steps to complete the work, ensuring that it is carried out in a controlled and efficient manner.