Project Management Experts and Construction Claims: Part 1

This is the first blog post in a three-part series that discusses the role of a project management expert in preparing or opposing claims during mediations, arbitrations, and court cases associated with Design-Build (D-B) projects or Engineering, Procurement, and Construction (EPC) projects.

This first post discusses life-cycle phases of D-B and EPC projects. The second post will discuss the importance of sound project management practices and project management requirements typically stated in a contract. The third post will identify support that a project management expert can provide during the evaluation of delay, disruption, change order, and cost overrun claims associated with D-B and EPC projects.

Any party to a contract, i.e., an owner, contractor, subcontractor, or supplier, can create project management performance problems. When an attorney is developing or defending against a construction claim for delays, disruption, and cost overruns associated with allegations of project management performance problems and disputed change orders, a project management expert can be invaluable by providing technical, factual, and analytical support throughout the process.

Project management experts often engage with construction-related legal disputes associated with large infrastructure, power plant, or process or manufacturing plant projects. Their role is usually to provide independent, technical, and procedural expertise to help the court or arbitration panel understand whether decisions, delays, increased costs, or scope changes align with professional project management standards.

The Project Management Institute (PMI) details such standards in A Guide to the Project Management Body of Knowledge (The PMBOK® Guide) and further discusses the uniqueness of construction projects in the Construction Extension to the PMBOK® Guide.

Life-Cycle Phases of D-B and EPC Projects
The life-cycle phases of D-B projects typically include the following, although some tasks may be performed or updated in earlier or later phases:

1. Procurement/Preliminary Phase. The owner defines project scope, selects the project site, and performs a site survey, geotechnical investigation, and environmental assessment for the chosen property. The owner establishes performance requirements and a preliminary budget and schedule and issues a Request for Qualifications (RFQ) and/or Request for Proposals (RFP) to potential D-B teams (either joint ventures or D B firms). The owner then reviews the technical approach, experience, design concepts, cost, and schedule and selects the Design-Builder based on best value or qualifications (sometimes including price). A D-B contract is then executed.
2. Preliminary or Conceptual Design Phase. The Design-Builder reviews the owner’s project requirements and develops preliminary architectural, structural, mechanical, and site designs. The integrated team then optimizes design decisions early to reduce cost and risk, and the Design-Builder prepares Project Execution Plans (PEP) and a preliminary cost estimate and design and construction schedule.
3. Design Development Phase. The Design-Builder creates detailed architectural and engineering designs, which the owner reviews to ensure compliance with project goals. The Design-Builder manages regulatory approvals and permitting. The owner and Design-Builder prepare a quantitative schedule and cost risk assessment. A Guaranteed Maximum Price (GMP) and the baseline construction schedule are often established once design is sufficiently developed.
4. Construction Phase. Construction is performed, and the Design-Builder further develops the design as required. Activities include construction mobilization, site grading, foundations, procurement of materials and equipment, and subcontracting while later design packages are finalized. The designers, builders, and owner continuously collaborate to resolve field issues. The facility is completed and turned over to the owner.
5. Commissioning and Closeout Phase. The Design-Builder commissions and tests systems, sometimes with the owner’s participation, to confirm performance per contract. The Design-Builder delivers operations and maintenance manuals, trains the owner’s staff, and completes punch lists.
6. Warranty Period. The Design-Builder remains responsible for design and construction.

The life-cycle phases of an EPC project are typically described as a Stage-Gate Process involving Front-End Loading (FEL), which is a project management and planning approach that emphasizes making critical decisions early in the project life cycle to reduce uncertainty, identify risks, and make sure the project is technically feasible and economically justified before committing major capital. EPC project phases typically include the following:

1. Conceptual Phase (FEL-1). The owner develops the project’s business plan, objectives, design concepts, location, initial design calculations, order-of-magnitude cost and schedule estimates, and key stakeholder requirements. The owner identifies financing mechanisms, takes the pulse of public and regulatory agencies on the concept, and determines local content requirement and labor availability and quality if the project is outside the U.S., etc.
2. Concept Selection Phase (FEL-2). The owner determines the basis of design (pre-FEED), chooses the site, performs soils and hydrology reports, completes labor surveys, completes the basic design (preliminary Process Flow Diagrams (PFDs) and Piping and Instrument Diagrams (P&IDs)), and determines utility requirements. The owner prepares the preliminary Project Execution Plan (PEP), other execution strategies, schedules, cost estimates, and preliminary schedule and cost risk assessments. Some of these tasks may be performed or updated in the FEL-3 stage.
3. Preliminary Phase (sometimes called the Basic Design Phase or FEL-3). The owner contracts with an engineering contractor to prepare preliminary design calculations, equipment sizing, preliminary plot plans, basic design drawings, and engineering and construction schedules, perform Hazardous Operations (HAZOP) and Layers of Protection Analysis (LOPA) studies, develop permit packages and file major permit applications, develop a detailed design and construction contracting strategy and detailed PEP and other plans, update the project schedule and cost estimate, prepare a quantitative schedule and cost risk assessment, obtain approval of major financing, order long-lead-time equipment, and develop an EPC contract and bid package. Some of these tasks may be performed in the FEL-2 stage and updated in this phase, which provides a Front-End Engineering Design (FEED) package.
4. Bid Phase (or Contracting Phase). The owner identifies qualified bidders and solicits, analyzes, and clarifies bids. If the project is feasible, the owner makes a Final Investment Decision (FID). The owner negotiates and awards the EPC contract, which sets forth the owner’s and contractor’s project management responsibilities for the remaining phases of the project.
5. EPC (or Execution) Phase. The EPC contractor performs all detailed engineering, procurement, and construction activities. Project management activities are performed as set forth in the contract. Pre-commissioning, commissioning, and startup activities also occur, and possibly initial operations activities associated with a performance test.
6. Commissioning and Initial Operations Phase. This phase only occurs if these activities do not occur in the EPC Phase.
7. Warranty Period. The EPC contractor remains responsible for design, equipment, and construction warranty issues.

On a D-B project, claims typically arise during the Construction Phase and later phases. On an EPC project, claims typically occur during the EPC Phase and later phases.

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