June 19, 2024

The Schedule Basis Memorandum: Competing Projects, Owner Reviews, and Weather Considerations

Share

This is the fourth blog post in a six-part series about the schedule basis memorandum. This post briefly discusses additional common risks that may cause delays on large and complex EPC projects. Three potential risks include competing project considerations, owner review comments, and weather considerations.

Competing Project Considerations

A potential risk exists when a project is planned to be constructed in competition with other projects being constructed in the nearby area at the same time. For example, the potential for interferences and delays from other projects due to contractors’ competition for limited labor resources from the local community labor pools, suppliers, and subcontractors could impact a contractor’s ability to complete the project within its bid costs and planned duration. In addition, other contractors’ competition for use of limited construction equipment available at and near the project site could also jeopardize a contractor’s least-cost performance and planned durations.

Thus, the schedule basis memorandum should communicate to project stakeholders what considerations have been included and documented such as any assumptions, allowances, and exclusions regarding competing projects in the area. If the actual conditions are vastly different from what the contractor originally anticipated, as documented in the schedule basis, then a contractor may have a legitimate basis for a recoverable change from the owner. It is recommended that the contractor and owner use the schedule basis as a tool to reach agreement and understanding regarding how the schedule completion date would be adjusted if sufficient resources are not available due to competition from other projects in the area.

Potential Owner Delays in Providing Review Comments

On large EPC projects, the owner’s and contractor’s personnel are often not co-located during the project design phase. This separation may complicate and delay the owner’s design review and approval of the work. Typical contract provisions require the owner to comment on the contractor’s submissions within a given time, such as within 14 calendar days of owner’s receipt of the documents. If the owner is late in providing timely review comments and approvals exceed the stipulated review time, the possible schedule delay may be detrimental to both parties.

Therefore, to mitigate potential misunderstandings between the contractor and owner, it is recommended that a robust schedule basis memorandum identify the schedule activities that require owner review comments or approvals within a stipulated review time. For large EPC contractor-submitted packages, the schedule basis memorandum should document the appropriate review time needed by the owner as well as the size of the submittal package. For example, the schedule basis document may reflect the agreement reached between the contractor and owner regarding submittal packages that can reasonably be reviewed in the agreed time, say 14 days (e.g., not all P&IDs at once). Furthermore, the schedule basis memorandum could establish a limit on the number of packages that can be submitted per week by the EPC contractor without the owner having the right to receive additional review time.

Weather Considerations

Lost time due to unusually severe weather conditions may cause schedule delays. Schedule impacts and delays may stem from days lost due to severe rain, lightning, high-wind conditions, snow, ice, and extreme cold or hot temperatures. Secondary impacts to productivity could include flooding, slippery conditions on scaffolding, muddy conditions, power outages, and repairing damage to installed work.

Most prudent contractors include factors for lost weather days in the bid costs and baseline schedule for normal weather conditions experienced in the project location. However, the contractor and owner often disagree on the reasonable number of lost days due to normal inclement weather that should have been included in a prudent contractor’s bid costs and baseline schedule. It is not unusual for a contractor to use more optimistic predictions for good weather conditions. In contrast, an owner may believe that the contractor should have been more pessimistic and included more inclement weather days. Such disputes may also concern Force Majeure events stemming from flooding, lightening, hurricanes, or other acts of God.

Unless contractually stipulated, a reasonable method for estimating the number of lost workdays is to use a statistical average of the historical weather conditions for a particular work location based on either a 5, 10, or 15-year period. Therefore, it is highly advisable for a contractor to document its weather assumptions within the schedule basis memorandum to help alleviate potential controversy regarding what is included or not included in the contractor’s bid and baseline schedule.

CONTACT US

Experience Matters

Our experts are ready to help.

Our extensive international experience includes large, complex, grass roots, revamp, and reconstruction projects incorporating conventional-phased, fast-track, and EPC turnkey concepts.