Project Management Experts and Construction Claims: Part 2

This is the second 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.

The first post discussed life-cycle phases of D-B and EPC projects, and this second post discusses 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.

The Importance of Sound Project Management Practices
Sound project management practices allow construction project stakeholders to meet their objectives, including that a project (i.e., a building, infrastructure facility, or plant) achieves its intended purpose and quality and is completed on time, at intended cost, and safely, while protecting the environment.

Unsound project management, by owners or contractors, often leads to construction delays and extra costs for both parties. Completed facilities may not meet specified quality and suitability of materials; not produce intended products; fail safety, environmental, and emissions requirements; or not operate for the intended life span. This usually results in contractor claims and owner counterclaims, or vice versa, depending on who sues whom.

Reasons for project failure that are often cited during disputes include the following:

• The owner failed to stage project development and prepare an adequate FEED package upon which to base the contract cost and schedule.
• The owner did not control scope changes throughout the project.
• The contractor’s project management team did not adequately plan the work, or, when a plan was developed, did not properly execute the plan.
• The owner and/or the contractor did not provide adequate human resources, staff, or direct labor.
• The contractor did not develop adequate project schedules or did not maintain those schedules throughout project execution.
• The contractor failed to control costs and manage the impact of scope changes throughout project execution.

At some level, the above failures can be attributed to inadequately trained or under-resourced owner and/or contractor project management teams.

In today’s business environment, sound project management principles are not only the means to the ends listed above but, during disputes, can also help defend against alleged management deficiencies resulting in delays and additional costs. Demonstrating that you used sound project management practices, and that the other party did not, can help your side win disputes.

Project Management Requirements Typically Stated in a Contract
Major D-B and EPC contracts usually state each party’s project management duties, which typically include requirements for development, review, approval, and implementation of the following:

• Project Execution Plans and additional detailed supporting plans for each management area, such as an Engineering Plan, Procurement Plan, Construction Plan, and, in the case of process plant and power plant projects, a Commissioning and Startup Plan and Tie-in and Shutdown Plans
• Scheduling requirements naming the types of schedules that must be produced, their level of detail, how frequently they should be produced, and how they are to be updated
• Change management and control
• Cost control and reporting
• Risk Management Plan
• Quality Management
• Resource Management Plan including staffing and hourly labor manpower levels
• Communications Management
• Stakeholder Management
• Progress and performance reporting
• Performance Testing Plan
• Insurance and bonding
• Subcontract Management
• Management and transportation of materials and permanent equipment
• Surplus Materials Plan
• Job site safety
• Protection of the environment
• Claims procedures

If a contractor fails to perform its duties under the above requirements, it may lose entitlement to any time extension or damages attributable to those failures. Similarly, if an owner does not perform its duties, it may not be able to defend against delay and additional cost claims attributable to that negligence.

One of a contractor’s key arguments in a dispute is often that the owner overstepped the bounds of what the contractor argues was the owner’s “limited” project management role by interfering with the contractor’s means and methods of execution. A project management expert may be able to support or defeat this argument by demonstrating that the owner did or did not perform in accordance with contract requirements and responsibilities.

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