PERSPECTIVE THE OFFICIAL MAGAZINE OF THE CONSTRUCTION OWNERS ASSOCIATION OF AMERICA
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PERSPECTIVE COVER STORY
THE OFFICIAL PUBLICATION OF:
BUILDING COLLABORATION THROUGH CONSTRUCTABILITY REVIEWS
MAGAZINE EDITORIAL COMMITTEE
Coming together from the start
Stan Scott Committee Chair Scott Consulting
By Steven Massaro
Lisa Berkey Pennsylvania State University Matt Handal Trauner Consulting Services, Inc. Dean McCormick Iowa State University
MediaEdge Communications 5255 Yonge Street, Suite 1000 Toronto, Ontario M2N 6P4 President Kevin Brown Publisher and Senior Vice President Chuck Nervick firstname.lastname@example.org Editor Matthew Bradford email@example.com Senior Designer Annette Carlucci
Account Executive Zoya Zajac firstname.lastname@example.org
Are you interested in having your project profiled in an upcoming issue of Owners Perspective? Please contact Chuck Nervick at 866-216-0860 ext. 227 or by email at email@example.com
Common problems to avoid
By Matthew Bradford
Labor market challenges
By John S. Crane
Designer Jen Carter
Contributing Writers Matthew Bradford Charlie Bacon John S. Crane Matt Handal Steven Massaro John Sier
THE CHALLENGES OF EARLY COMPLETION SCHEDULES
By Dean McCormick By John Sier
10 Member Q&A: Keith Douglas By Matt Handal
© 2016 All rights reserved. The contents of this publication may not be reproduced by any means, in whole or in part, without the prior written consent of the association and publisher.
23 New Members
Calendar of Events SAFETY FIRST: Why should Owners care? By Charlie Bacon
TRANSITIONS, OPPORTUNITIES, AND CHARTING NEW PATHS By Dean McCormick
As we move toward the Fall Owners Leadership Conference in Atlanta on November 9 – 11, and the end of the year, there are several important developments and opportunities to share with COAA members. The Valisade Group, our association management company, has decided not to renew their contract with COAA and pursue other opportunities effective as of the end of 2016. The Valisade Group has been an important part of COAA since 2003, and although they operate in the background and out of the spotlight the vast majority of the time, they have nonetheless been an integral part of COAA's success during the past thirteen years. During this period, COAA has grown it s membership to more than 2,000 members and expanded our programs to include more than 40 annual events, includ in g t he Spr in g / Fa l l O w ner s Leadership Conferences, OTI courses, chapter workshops, and webinars. They have sweated the details of all of these events during that time and ensured each conference offered a quality program, and delivered on time and on budget. Undoubtedly, they have a better record in this regard than many of us Owners have on our own projects. The Valisade Group has contributed a great deal to the success of COAA and we thank them for their commitment and dedication throughout the years. Please take a moment at the Fall Conference to thank Lisa DeGolyer and Valerie Delaney. With the departure of The Valisade Group and the growth of the association over the years, the Board of Directors made the decision to move from an association management company business model to a stand-alone organization under the direction of Karen
Bresson, COAA Executive Director. Karen, The Valisade Group, and staff are working closely together to ensure a seamless transition. As part of that transition, we are pleased that Lucie Castro and Jill McKenzie have agreed to continue with the association, and have accepted positions as COAA employees. In addition, Natasha Patterson joined the COAA staff in August as our newest employee, and we expect to add a marketing and communications manager in the very near future. As we move through this transition, it is business as usual for COAA. You will not see any changes in COAA programs, products, or services. An engaged membership is important to COAA, and as we transition to a new organizational model. Coming up, there will be a number of opportunities for our members to get involved and help shape the future of COAA: • COAA recently issued a Call for Board Candidate Nominations in preparation for the Board of Directors election, prior to the Fall Owners Leadership Conference. Fresh ideas and new perspectives are key to a healthy and vibrant organization, and board service is a chance to grow personally and professionally while making lasting connections with a team of passionate and motivated professionals. Individuals can nominate themselves or someone they believe would make a good board member. Please consider becoming part of COAA's leadership and help chart the future of the organization. The Call for Board Candidate Nominations is available on the COAA website.
• COA A is act ively recr uit ing new committee and task force volunteers who are enthusiastic to get involved, eager to make a difference, and committed to advancing the organization and profession. Joining a COAA committee or task force provides an opportunity to share your experiences and expertise, connect with fellow members, and collaborate with your peers on programs and initiatives aimed at advancing the profession — all while developing skills that will benefit you both personally and professionally. The COAA Call for Volunteers will remain open through November 9, 2016. Information is available on the COAA website, along with a list of available volunteer opportunities for 2017. • The Fall Owners Leadership Conference will also provide an opportunity for conference attendees to weigh in on the future direction of COAA. As we complete the organizational transition, we want to make sure we continue to improve and are a forward-thinking association. During the conference, a session will be devoted to sharing the organization’s history and include a discussion on recent initiatives and changes. A follow-up forum will include an interactive discussion meant to elicit and gather feedback and ideas from our conference attendees. The goal of both of these sessions is to inform a strategic planning effort that will take place in 2017. Whether you are a regular attendee, first-time participant, or something in between, please join us for what we hope will be a meaningful discussion of what COAA can — and will be — in the years to come. I hope you will take advantage of one or all of these opportunities to get involved with COAA. See you in Atlanta! Fall 2016 5
OWNER ALERTS By John Sier
Construction necessarily occurs in the legal environment, which can be unique for each state, district, or circuit. Changes and developments can take place gradually or unexpectedly, and most changes will affect contracts already in place as well as future projects. COAA is a great resource for maintaining currency on industry evolution and identifying best practices.
Delay damages are different from disruption damages, as are direct damages from consequential damages The contractor in County of Galveston v. Triple B Services, LLP completed a road widening project according to the contract time, but sued the County for breach of contract because the County was slow in performing some of the utility relocations, w h ich r e s u lt e d i n t he c ont r a c t or resequencing some of the original work and performing more hand-work and rework. The contract established a baseline schedule, and the schedule included dates by which the County was to move some utilities including gas, water and fiberoptic cables. The contractor argued that the County did not move the utilities until nearly a year later than scheduled. The contractor claimed to have incurred
additional costs to timely complete the project as a direct result of the County's alleged delay in moving the utilities. These costs included additional costs to handform manholes, set and reset barricades, extended field office overhead, additional labor, equipment, street cleaning, flagging, and traffic control, along with lost profit and markup on those costs. The County argued that the statutory waiver of sovereign immunity in Texas only applied to “delay damages” and not to “disruption damages.” The contractor’s expert explained that delay damages were time-based costs while disruption damages were task-based, but disruption damages could result from a delay. Since the project did not extend beyond the original contract completion date, the damages were described as disruption rather than
delay. The County argued to the trial court that the damages sought were not “delay damages,” so the contractor was not entitled to recover against the County. Both the trial court and the Texas Court of Appeals disagreed with the County in reviewing the statute in question and the definitions of “delay damages” and “disruption damages.” T he Cour t of Appeals noted t hat delay damages arise out of delayed completion, suspension, acceleration, or disrupted performance and compensate the contracting part y that is injured when a project takes longer than the construction contract specified. On the other hand, disruption damages are for a project that may be timely completed but compensates the contractor for a reduction in the expected productivity of labor
and equipment. As noted by the Court, an event could both disrupt and delay a critical path activity potentially resulting in a project that finishes on time but at greater expense because of the disruptive events or scheduling errors. The statute in question, Tex. Loc. Gov't Code Ann. § 262.007(b), allowed for recovery of damages against the County under limited circumstances, such as: (1) the balance due and owed by the county under the contract as it may have been amended, including any amount owed as compensation for the increased cost to perform the work as a direct result of Owner-caused delays or acceleration…. In words that only a lawyer could love, the Court described the issue: “[w]hether ‘disruption damages’ can be damages resulting from ‘Owner-caused delays or Fall 2016 7
$700 per day. Piketon granted one extension, but refused f u r t her e x ten sion s. T he contractor finished 397 days late and had not provided the contractually-required not ice s for addit ion a l c o mp e n s a t i o n . W he n t he cont ractor sought final payment following complet ion, Piketon asserted entitlement to $277,90 0 in liquidated damages. The trial court aw a rde d t he liquid ate d damages, but the Ohio Court of Appeals reversed, which resulted in the review by the Ohio Supreme Court. T he cont ractor as ser ted t hat imp o sin g liquid ate d d a m a ge s of for t y percent was unreasonable and disproportionate in the application of the liquidated damages to this delay and amounted to an impermissible penalty. The Ohio Supreme Court reviewed the common definition of a penalty as a “sum inserted in a contract, not as the measure of compensation for its breach, but rather as a punishment for default, or by way of security for actual damages which may be sustained by reason of nonperformance, and it involves the idea of punishment. A penalty is an agreement to pay a stipulated sum on breach of contract, irrespective of the damage sustained. Its essence is a payment of money stipulated as in terrorem of the offending party….” The Latin phrase in terrorem means exactly as it sounds – to induce fear by a threat – and provides the root for English word “terror.” A penalty is meant to scare one party into performing the contract to avoid the imposition of the liquidated damages regardless of whether the other party suffers any damages as a consequence of the breach. However, t he Cour t reviewed t he liquidated damages as described in the contract as imposing a daily rate rather than a stipulated sum, which is more reasonable when related to the estimated damages resulting from a delay. The Court rejected a retrospective analysis looking at the total amount of liquidated damages rather than the daily rate. Instead, the liquidated-damages provision should be
A penalty is meant to scare one party into performing the contract to avoid the imposition of the liquidated damages regardless of whether the other party suffers any damages as a consequence of the breach.
accelerat ion’ hinges on the interpretation of the words ‘delay’ and ‘direct’ and the phrase ‘under t he cont r act .’” T he Court then turned to dictionary definitions of delay as meaning to impede or hinder together with a review of ot her cases f rom a c r o s s t he c o u nt r y to determine that the ordinary meaning of the word “delay” encompasses both delays to the final performance date and delays to specific tasks that must be completed under the contract. Next, the Court examined the more challenging determination of a “direct result.” The statute has been found to exclude consequential damages, so the statute is similar in that regard to many industry contract forms. Direct damages may be recovered, but consequential damages may be waived or excluded. The Court noted that, “direct damages compensate the plaintiff for a loss that is conclusively presumed to have been foreseen by the defendant as a usual and necessary consequence of its wrongdoing.” Again, only lawyers and judges can unabashedly get away with such circular definitions. In reviewing the elements of the claimed damages, the Court clarified by listing “direct” elements of damages such as its additional costs to hand-form manholes, set and reset barricades, and incur additional labor, equipment, street cleaning, f lagging, and traffic control. However, the Court noted that lost profits are a typical example of a non-direct, consequential damage that are waived or excluded. B o t h C o n s e n s u s D O C S a n d t he A I A include s ome for m of w aiver of consequent ial damages. T he ConsensusDOCS form allows the parties to identify particular types of damages that are not waived or are preserved. Both clauses recognize that direct damages remain recoverable by both parties. The challenge will always be definitional. While the ConsensusDOCS forms prompt 8 OwnersPerspective.org
the parties to have a more robust discussion of damages being waived or preserved, the categories of damages should always be a topic of discussion along with the dispute resolution mechanism in establishing the contract language. Liquidated damages for delay in a public works contract are examined prospectively at the time of contracting, not at the time of imposition Some cont ract s lend t hemselves to liquidated damages for delays, and the ConsensusDOCS forms contain prompts for the parties to discuss methods of calculating or agreeing to liquidated damages at the time that the contract is being negotiated or executed. The Ohio Supreme Cour t in Boone Coleman Construction v Village of Piketon reviewed a situation where the liquidated damages imposed exceeded forty percent of the total value of the contract and found that the daily damages were reasonable at the time of contracting, so the total damages imposed were reasonable. The contractor was awarded a contract for $683,300 to perform road widening and install a traffic light in Piketon, Ohio, with a performance period of 120 days to avoid imposition of liquidated damages of
examined in light of what the parties knew at the time the contract was formed: “This prospective or ‘front end’ analysis of a liquidated-damages provision focuses on the reasonableness of the clause at the time the contract was executed rather than looking at the provision retrospectively, i.e., ascertaining the reasonableness of the damages with the benefit of hindsight after a breach.” The Court noted that the amount was large only because the contractor failed to complete the project for more than a year after the agreed upon completion date, with full awareness of the consequences. If t he par t ies make a reasonable assessment of the potential damages resulting from a delay and identify a daily rate that is supportable, the fact that an extended delay may result in the imposition of significant liquidated damages may not invalidate those damages. However, both parties should exercise great care in formulating a realistic calculation of daily damages. Some formulae may have sliding scales of damages depending on the potential or likely losses to be experienced for extended delays. The important point is to seriously consider and discuss the applicability and desirability of liquidated damages in any particular project. Enrolled subcontractors in an Owner or contractor controlled insurance program may be entitled to immunity from suits by employees of other subcontractors Owner or Cont ractor Controlled Insurance Programs (OCIP/ CCIP) sometimes are implemented on larger const ruction projects that satisfy state statutor y requirements to allow the Owner or C ont r actor to pro cu re insurance, including worker comp en s at ion in sur a nce, on behalf of all of the project p a r t icip a nt s or “en r ol le e s.” In exchan ge for reducin g t he subcontract price by the amount of the insurance costs provided for the
project, the subcontractor is enrolled in the program and entitled to the coverages of the various policies. Many Owners experience savings in the cost of premiums and claims-handling, and litigation relating to claims by third-parties can be reduced through an OCIP/CCIP. However, each project must be assessed individually along with any state law requirements. In most states, employers are granted immunity from being sued by employees for work-related injuries, subject to certain exceptions. However, a particular subcontractor is not immune from suit by the employee of another subcontractor who may be injured on a construction project. That dynamic changes entirely for subcontractors enrolled in an OCIP/CCIP as discussed by the Supreme Courts of Texas and Ohio. In Stolz v J&B Steel Erectors, Inc., an employee of the concrete subcontractor who was injured on the Horseshoe Casino project sued the general contractor and other subcontractors for his injuries. The general contractor had implemented
a CCIP under the authority of the Ohio Bure au of Worker s Comp en s at ion, and the trial court granted the general contractor immunity as the “self-insuring employer” but denied that immunity to the other subcontractors. The parties sought review by the Ohio Supreme Court who found that the statute granting immunity to the “self-insuring employer” who did not actually employ all of the workers on the site compensation scheme provides immunity to “subcontractors enrolled in a CCIP from the claims of employees of other enrolled subcontractors who are injured or killed while working on the project, provided that the injury, illness, or death is compensable under Ohio’s workers’ compensation laws.” Si m i l a r l y, i n T I C E n e r g y a n d Chemical, Inc. v. Martin, an employee of the Owner, Union Carbide, was injured on a construction project and sued one of the subcontractors for causing his injuries. The Owner had established an OCIP, and the subcontractor was enrolled in t he program. T he Texas Supreme Court noted that in the absence of the OCIP, the subcontractor would have no legal basis to argue immunity, but the creation of the OCIP consistent with the statutory scheme entitles t he subcont ractor to t he same immunity as the employer. One of the benefits of the OCIP/CCIP implementation is the presumed reduction of litigation between parties seeking indemnification since t he same policy covers the third-part y liability claims. These two decisions illustrate another potential benef it of an OCIP/ CCIP in reducing the litigation bet ween injured employees and o t he r s ub c o nt r a c t o r s . T hi s i s a not her f actor when evaluating the costs and potential savings of an OCIP/CCIP, but any decision should be made carefully and with the assistance of a skilled insurance counselor who is familiar with construction risks.
If the parties make a reasonable assessment of the potential damages resulting from a delay and identify a daily rate that is supportable, the fact that an extended delay may result in the imposition of significant liquidated damages may not invalidate those damages.
Fall 2016 9
Member Q&A KEITH DOUGLAS
EXECUTIVE VICE PRESIDENT, THE WHITING-TURNER CONTRACTING COMPANY By Matt Handal
The Editorial Committee selected Keith Douglas for this issue's interview to acknowledge his long-term contribution to COAA, and for his ability see issues through the eyes of an Owner, which enables him to transcend the labels of membership. Many of us know Keith as “the guy with a microphone in his hand”. He’s one of the most visible people at any COAA conference. Whether leading a session, facilitating audience participation, or engaging in the group conversation, Keith brings value to every COAA conference. Keith has been one of the biggest champions of knowledge transfer within COAA. Through his vast network of Owner contacts, he has contributed multiple sessions to many of our conferences. For example, Keith first introduced the Walt Disney Company and some of their innovations, to our membership. “He’s big hearted, always cheerful, always positive, and, frankly, a joy to work with,” explains Stan Scott, who has worked with Keith in COAA committees over many years. Keith currently serves the COAA Board of Directors as Director-at-Large. We talked with him recently about COAA, his work at Whiting-Turner, and his industry experience. 10 OwnersPerspective.org
On Keith Tell us a little bit about your journey from graduation day at the University of Virginia to your role at Whiting-Turner today? That journey was actually very short. I graduated on a Saturday around noon in Charlottesville, and reported to work at Whiting-Turner the following Monday at 8:00 AM in Richmond as a project engineer. 33 years later, I found myself in Atlanta as an executive vice president for the same company and responsible for ten offices throughout the southeast. There was a lot of luck involved over the last three decades, but as my original boss Dave Hummel always told me, “Luck follows hard work.” What does a typical day for you look like? There is a lot of traveling in my job, so unfortunately I spend a lot of wasted time getting from point A to point B for what are often very short, but very important meetings.
Much of that travel is visiting various projects and customers. This is a people job, and while technology now affords us many options, I still value a face-to-face meeting and an old-fashioned handshake. When I am in the office, like most others, I am glued to the computer and the phone. What’s something about you that COAA members may be surprised to learn? COAA members might be surprised to learn I am an accomplished oil painter; much of the subject matter being inspired by my family and our time together along the coast of Maine (near Acadia National Park). For the last five years, I have attended an annual workshop hosted by Bo Bartlett, who trained under Andrew Wyeth, to learn advanced figurative painting techniques. That valuable experience has really helped me to advance my skills. While painting keeps me grounded at work, I definitely bring my competitive work style into my painting wherein I really push myself far out of my comfort zone in an effort to get better. What were your most challenging projects, and why? The most challenging project was trying to build a 10,000 piece toy castle in my office
on Christmas Eve in 2001. Kidding aside, all projects have their challenges, but that drive to overcome them is what gets you out of bed in the morning! Most of us would agree that the most stressful projects are the ones in which you have to overcome dysfunctional and disruptive team dynamics. Similar to a mission of COAA, much of my time is committed to finding better ways to improve the project team dynamic. Nothing is more rewarding than assembling a high-performing team that then accomplishes something thought to be impossible. Is there a project you are most proud of? That’s an easy one. At age 32, I moved from Richmond to Atlanta with the hopes of opening an office here. I ended up winning the contract to build the Aquatic Center for the 1996 Olympic Games. Never again have I had the same sense of pride with respect to pouring my heart and soul into a project and having the whole world see it. It was also a project that, no matter what roadblock was placed in front of us (or who placed it there), had us committed to all working together to remove it and finish on time with pride. What advice would you give your 30-year-old self? That’s a really good question and one that I often ask myself while mentoring our younger folks. I think that I would tell myself that, “You are going to be far more successful than you think. Aim even higher and invest heavily in your own future. Hire more people than you think you need, because you will need them and more, and train these young people to replace you, because you are going to be needed elsewhere.”
On COAA How long have you been a member of COAA? What prompted you to get involved? In 2006, I ended my term as the president of the South Atlantic Chapter of CMAA (Construction Management Association of America) and was looking for something new to get involved in. It was that fall that I attended my first COAA conference in San Diego at the urging of a few Owner friends. I attended the following spring in New Orleans and got stuck in the airport (probably a little too long) with Lisa DeGolyer at the Delta Crown Room, where she sold me on getting further involved with COAA. Shortly thereafter, I was deeply embedded in the Conference Committee. What really attracted me to COAA was that the conferences were smaller and you could really develop good relationships with like-minded folks who wanted to drive improvements in the industry. How has your involvement with COAA impacted you professionally and personally? I have been involved in a number of different organizations over the years, but COAA has had a profound impact on me. A number of COAA members are like family to me. It’s really nice to have such good friends whereby you can mentor and be mentored, both personally and professionally. What would you say is the biggest benefit of belonging to COAA? Simply joining COAA is not enough. You have to get engaged in it to reap the full benefits. Speaking as a contractor, the biggest benefit that I get is that I glean tremendous insight into
assembling a high-performing team that then accomplishes something thought to be “Nothing is more rewarding than
Owners' needs, as well as the industry trends that emerge to fulfill those needs. This insight allows me to build an organization that is well positioned to help Owners. What do you see as the role of COAA going forward? How do you see it evolving? I would personally like to see COAA grow to become the clear association representing all Owners to compliment AIA (American Institute of Architects) for architects, and the AGC (Associated General Contractors) and CMAA for contractors. On trends in construction What’s been your experience with integrated project delivery (IPD)? Do you see it making a lasting impact on our industry? I have had personal involvement on several highly successful multi-party IPD projects now. This delivery method is definitely here to stay and its popularity and use will certainly grow. That said, I would caution Owners that it is just “another tool in the shed”, and that they should always pick the right tool for the job. I don’t think that IPD is right for all projects and/or all parties. Design-Build and CM At-Risk will remain popular delivery vehicles for years to come. How has your use of technology on projects changed over the years? Is there a technology you’ve used in the last 12-24 months that has really impressed you? It was “only” 33 years ago that I began in this business, and I clearly remember being on site using pre-printed forms and carbon paper. We didn’t yet have copiers, fax machines, personal computers, email, or smartphones. If we really got mad at someone, we had to send a telegram. Today, it would be hard to imagine doing business without email, the internet, and BIM, etc. The point is that technology seems to be advancing at an ever-increasing rate. The “kids” coming into our industry today will need to be prepared to embrace this new technology and use its power to continuously innovate. About the Interviewer Matt Handal is a member of COA A’s editorial committee, works with a team of delay/claims specialists known as Trauner Consulting Services, and loves to receive your thoughts and article ideas at matt. firstname.lastname@example.org. Fall 2016 11
THE CHALLENGES OF EARLY COMPLETION SCHEDULES Common problems to avoid By John S. Crane, PSP, CFCC
In today’s construction contracts, most stakeholders have come to adopt the concept that “float” is a shared commodity. Or, put another way, “float” is available on a first-come, first-served basis until it’s gone.
Although a step in the right direction, there are instances when float continues to be mismanaged and disputed. Schedules showing completion of the project before the contract completion date — early completion schedules — are often one of these instances. In some circumstances, there may be no issue with a contractor providing a schedule indicating a finish date prior to the completion
FEATURE date designated in the contract. Certainly, there are circumstances where an Owner would have increased cost for occupying a facility, or paying utility and maintenance costs prior to when they had planned to do so; and there may also be timing issues with availability of funds to pay at a faster rate than anticipated. Owners must seriously consider all aspects of when they are to accept care, custody, and control of a facility in drafting their contract terms. However, for many construction projects, there is no downside to a project completing early. Many construction contracts do not prohibit contractors from submitting early completion schedules. Still, with this added flexibility comes increased responsibility. Early-completion schedules can increase the risk of disputes regarding the interpretation of the scheduling specifications, definitions of terms, and the contract clauses that address time, money, and “float.” Whether the Owner is writing the contract or a contractor is considering submitting an early completion schedule, the following should be considered: 1. Whether the contractor can, by contract, submit a baseline schedule or subsequent schedule updates showing an early completion date. 2. Whether the Owner is responsible for extensions of time and compensation as a result of excusable delays to a baseline schedule or subsequent schedule updates showing an early completion date where those delays may result in completion after the early completion date but still before the Owner’s originally required completion date. With respect to these questions, many contracts are wide open to interpretation. To illustrate, assume the following project scenario: 1. It is a fixed-date contract that requires the contractor to use Primavera P6 and place a “Must Finish By” constraint on the overall project schedule equal to the contract completion date. Thus, in the event that the completion date of the schedule was either earlier or later than the contract completion date, the critical path activities would show positive or negative float. 2. The contractor is not prohibited from submitting an early completion schedule. 3. The contract states that “float” is a shared commodity. 4. The contractor provides a baseline schedule finishing on the contract completion date, which results in the critical path activities having a total float of zero. 5. Six months into a year-long project, the contractor provides a schedule update showing that it plans to finish 10 workdays
earlier than the contract completion date. Due to the “Must Finish By” constraint, the critical path activities show a total float of 10 workdays. 6. Following its submittal of the schedule update, the contractor encounters an unforeseen condition that results in a 10-workday delay. 7. The parties agree that the delay was excusable (“excusable” means that the contractor was not responsible for the delay and is entitled to a time extension). Given this scenario, consider the following questions: • Is the contractor due a time extension for the delay due to the unforeseen condition? • Is the contractor due compensation for the 10-workday delay? • If the contractor is due compensation, what costs are applicable? • Would the contractor be responsible for liquidated damages if there is a further, non-excusable delay later in the project? Recall that the contractor was not prohibited from submitting a baseline schedule or a schedule update that showed early completion. Also, the contract did not specifically state that the contractor would only be provided additional time and compensation if the fixed completion date was exceeded. Thus, the contract was silent as to whether the contractor should be provided additional time and money for a delay to its early completion schedule. The contractor would most likely argue that it is due a time extension due to the unforeseen condition and cost for extended general conditions. So, not only would the contractor be compensated for the excusable delay, but in the event that there was a further non-excusable delay later in the project, the contractor would argue that they should not be responsible for liquidated damages. Essentially, the contractor’s position would most likely be that it incurred a loss of savings and may represent its loss as extended general conditions. On the flip side, the Owner may argue that the schedule had float at the time of the initial, excusable delay that could be used on a firstcome, first-served basis. Thus, the contractor would not be deserving of a time extension for this delay. With respect to compensation for the delay, the Owner may argue that the contractor was already being paid general conditions costs through the contract completion date, since the Baseline Schedule showed that the contractor planned to be on the project through the contract completion date. As a result, the Owner would most likely argue that the contractor would then be responsible for the time and cost associated with the second non-excusable delay.
Would t hese same questions and interpretations exist if the contract had not required a “Must Finish By” constraint? Without this constraint, the total float value for the critical path activities would be zero, despite the completion date of the schedule being earlier than the contract completion date. One must remember, total f loat is a calculation within the schedule that is determined by the difference between the earliest date an activity can start or finish and the latest date it can start and finish without delaying the completion date of the schedule. In other words, total float does not always automatically represent the difference between the scheduled completion date and contract completion date in the absence of clear contract terms to the contrary. Therefore, not constraining the schedule to match the contract completion date may have changed how the Owner and contractor viewed float, time extensions, and cost. Attempts have been made to resolve disputes that coincide with early completion schedules by automatically adjusting the contract completion date to match the early finish date shown in the schedule. However, this may only promote gamesmanship or padding of the schedule so that any perceived “float” does not exist. Then, the Owner may have a difficult time discerning how the contractor has manipulated the schedule to sidestep this clause, not to mention that the schedule no longer shows the contractor’s actual plan. It is extremely important for Owners to draft contract clauses and specifications to match their intentions when determining time extensions and compensation for delays to early-completion schedules. Provided it is difficult to write contracts that will provide crystal clear determinations for every scenario that may be encountered on a project, one should be reminded that good legalese is not a substitute for good project management. Schedule evaluation and management can be among the most complex of project management efforts and many Owner organizations lack the in-house capability to perform this effectively; therefore, it is important for schedule development and update reports to be as transparent as possible for the team to understand “the plan” and current progress of that “plan” in order to be successful. Lastly, it is important for contractors and Owners to understand and communicate, at the onset of the project, what will happen in the event that there are delays to a contractor’s schedule, including delays to any “early completion schedule” in the event that such is allowed. Fall 2016 13
CONSTRUCTABILTY R Coming together from the start
By Steven Massaro
As an industry, construction is generally a stressful experience for Owners. Building Owners rely on the expertise of architects, engineers, and contractors to manage multi-million dollar projects. They put complete faith in others to design a building to fit specific needs, develop an estimate, and plan a schedule with targeted budgets and timeframes, as well as trust that the building is delivered safely with quality craftsmanship. All of this can be overwhelming for an Owner. This is why an agency construction manager is hired.
Fall 2016 15
“When the documents are clear, the bidder has lower therefore the competition between bidders is high.” One major function of a construction manager (CM) is to conduct a thorough constructability review. Our definition of a constructability review is the CM’s detailed review of the architects’ and engineers’ design development documents to ensure they are complete and clear so that the contractors have the best opportunity to safely complete the work with minimal interruptions or inefficiencies, and stay on schedule and within budget — all while delivering the highest quality of craftsmanship. In theory, contractors should not begin a project without clear design documents from the architect and engineers. However, all too often that is the case, yet the constructability review eliminates this problem. T here are many benef it s in conducting a t horough constructability review. In bringing the team together early, you are creating a collaborative environment where the CM and architect are on the same playing field for the core purpose of ensuring a successful project for the Owner. Within this collaborative environment, team buy-in is encouraged to produce a “tight” set of documents for the Owner.
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In preparation for the constructability review, the team will meet to determine the scope of review, the CM’s deliverables, the architects and engineers deliverables, Owners' deliverables, and to determine the schedule. When the architect has completed the design documents, they are now ready for the CM to bring their contractors’ perspective into play. The CM will utilize AIA’s best practice phase checklists and break the drawing sets into sections for site, structure, MEP/FP, data, and food service. The overarching goal of this process is to identify potential construction risks before the construction team is mobilized. A thorough constructability review will scrub the documents to identify any gaps or unclear information that may come up in construction that will lead to RFIs and change orders. In turn, the architects and CM will spend less time answering and responding to vague information, and the work will pace ahead on schedule. Another benefit is bid coverage. When the documents are clear, the bidder has lower risk, and therefore the competition between bidders is high. The Owner will see more buy-in from the primes and/or subcontractors, and contractors are more likely to reduce or “cut” their numbers due to good clarity in documents. Working in collaboration does not mean t hat conf lict will not occur, but how you choose to handle the conf lict is what leads to project success. Massaro recently completed a constructability review for a high school renovation and addition project. The project is approximately $120M and close to 700,000 square feet in size. The architect, Owner, and us as the CM were all new to each other and were working through the early stages of building team trust. The timing of our review was just prior to bid and incorporated a team of designers and construction professionals focused in various disciplines. Our review became the basis for our recommendation to the Owner that the bid date be pushed back to allow more time for the design to be completed, and for the designers to coordinate documents. In public low bid procurement, the risk is too great to leave gaps in scope at bid day. Our recommendations initially caused tension among the team and conf lict arose; however, we worked through this conf lict together. The postponed bid produced better bid documents and ultimately, a successful bid day for the Owner. The entire team was better for having resolved this conf lict together and before bid day. More importantly, the Owner was provided with a better set of documents to start out on a forty-month construction schedule. In identifying the obstacles before bid day, you are setting your project up for success. The project will bid better, run smoother, and will eliminate the “finger pointing”, therefore leading to a more enjoyable construction experience for the Owner. Steven Massaro is Senior Vice President of Massaro CM Services, LLC
MAY 17–19, 2017
ST. LOUIS AT THE ARCH
CONNECT. 800-994-2622 WWW.COAA.ORG
CHALLENGES David Cozier (DC),
David Dixon (DD)
Howie Ferguson (HF)
Glen Hackemack (GH)
Assistant Director and Senior Project
Facilities & Construction
of Program Management
MD Anderson Cancer Center
Mount Carmel Health System
University of Texas System
University of Florida
University of Texas
Few industries are insulated from labor market challenges, and fewer still are feeling the talent crunch more than construction. For this issue, COAA Owners Perspective reached out to industry stakeholders for their insights and perspectives on today's labor market trends. What are you experiencing with regards to the current market for skilled construction laborers? Is it any different than it was five years ago? DC: Columbus, Ohio is a growing market. All sectors – residential, multi-family, retail, commercial, industrial, education, transportation, public work. and healthcare – are on an upward trend from five years ago. Skilled construction laborers are in high demand, yet workforces are aging and/or retiring and fewer are coming in. The 2008/9 recession also caused a void which is being felt as the markets improve. DD: Over the last several years, we’ve seen a real strain in the market for skilled craft labor for virtually all disciplines due to longdeveloping demographic trends, departures from the industry during the recession, and large public and private sector programs throughout the state and region. The primary impacts to the Owner have been a drop in 18 OwnersPerspective.org
delivered quality and delays to project schedule. HF: On my largest current project – the re-purposing of our third oldest building – we’re experiencing a severe shortage of both bidders and skilled labor. Some of that is due to Gainesville’s relatively small size and a current market that’s flush with work, and some of it can be attributed to the difficulty of the work (historic preservation standards) and the site/location. Still, we literally had to request additional funding for the first time in my 16 years at the University of Florida, and that was after extensive “VE” efforts at every stage of design. There simply wasn’t enough coverage (most packages bid by our construction manager (CM) only attracted one to two bidders) and the bids we did receive were between 20% and 90% beyond what the CM estimated. Beyond the cost impacts, we’re also concerned about quality – especially with trades particular to historic preservation
and rehabilitation (e.g., masonry). So in short, yes, today's conditions have had a significant impact and are very different than 5-10 years ago. GH: In the last five years, we’ve seen a diminishing number of qualified craft workers in all levels of construction, which directly impacts the quality of the finished product we receive. What are you experiencing in regards to the labor market for the construction professionals needed in your internal department? Is it any different than it was five years ago? DC: Similar to the trade markets, there is a shortage of project managers and estimators. The need has increased. I've also seen an increase in "job jumping" among the contractor and designer firms' professional staff as the market grows, resulting in more need and more opportunity. Our department has been pretty stable, but we have to maintain visibility on the salary market and stay competitive. I find that retention is strong thanks to maintaining a positive culture, recognizing individuals for the work they perform, and taking time to have a little fun.
INDUSTRY Q&A DD: For reasons similar to those noted above (especially in terms of demographics), due to the long-term cyclical nature of the industry, and our public-sector pay scale, it has been more difficult to attract and retain strong, experienced project professionals of all stripes. With our “dynamic” programs, providing project management resources briskly has been problematic. However, I’m more optimistic about this than I am about the future availability of skilled craft labor, as there are a lot of talented young professionals rising through the ranks of the construction and design firms.
Masonry trades seem to be one of the most affected with fewer laborers, fewer firms, and less coverage. Five years ago, everyone was bidding on everything.
HF: It has changed somewhat, but it's not nearly as bad as in the trades. Our biggest problem is salary; we simply can’t pay as much as private industry, so we lose many candidates who don’t even bother applying.
GH: Performance is hit or miss with individual subs and is dependent on the particular foremen and crew that you get on a job. The same company that had a stellar performance on one job, can turn around and fail miserably on the next because it had a totally different crew. Some of that failure could probably be tied directly to the level of training of the individual workers.
GH: As a state agency, it's hard for us to hire and retain qualified staff. The well-trained and knowledgeable staff that we make offers to typically turn down our first offers (and usually our second offers) for more money elsewhere. Despite great benefits and a good work/life balance, we can’t compete with the salaries that are available in private industry. What are you experiencing in regards to the availability and performance of subcontractors in your market? Is it any different than it was five years ago? DC: Given the growing market described earlier, subcontractors are all busy and growing their backlog of work. They can choose which projects they bid, and which construction managers and Owners they want to work for. Performance remains strong, but getting sufficient bid coverage can be challenging.
DD: There are fewer of them, especially in some of our remoter locations; they are able to be more selective about the projects they take on. Moreover, with the craft shortages and lack of experienced leadership, quality and schedule have unfortunately suffered. This obviously isn’t true across the board since there are many fine firms, able to attract, train, and retain loyal staff and craft.
Are you seeing trends in any of these areas? Do you have any specific concerns regarding what the labor market might look like going forward? DC: Some of trends mentioned previously – fewer workers entering the construction business – both white collar and blue collar. To make up for fewer workers, we have to become more efficient and change our construction methods. We are seeing more modular and prefabrication, more emphasis on "leaning out" the processes, and more precast versus brick. I am also concerned about the labor market five years from now, which will be a squeeze from both sides in terms of continued retirements and fewer entrants.
As an industr y, we need to address construction career education a nd m a rket in g ; cont inue re s e a rch, development, and early deployment of efficiency improvements; and explore alternative materials and techniques — all the while emphasizing safet y and keeping costs in control. Hang on ... it's going to be a wild ride! DD: I don’t expect the craft labor trend to improve over the foreseeable few years, but increased implementation of modular and pre-fabrication techniques may reduce the time-in-field, drive higher quality, and improve safety. Additionally, Owner engagement is improving with such initiatives as the Construction Career Collaborative in the Houston area, a program focused on training, safety, and pay equity. HF: This ties into my previous responses, but yes, we definitely have concerns about tomorrow, next year, and 5-10 years from now. The construction industry simply must do more to attract, train, and retain quality workers; and we (UF and Owners in general) must find ways to help. That’s why COAA has elevated this to the “front burner” -- to make Owners aware of the problem and to begin sharing ideas on what we might be able to do about it. GH: The mainstream business community is starting to promote the craft trades as a career option and there’s a push in t he g reater Houston area to create vocational education programs as part of the high school curriculum. Owners are also encouraged to participate in the Construction Career Collaborative, a craft training commitment.
“It is becoming increasingly challenging in identifying experienced construction professionals in the area of direct digital controls and building automation to support our major capital projects, as well as our new laboratories. This is especially true for the new laboratories that require specialized skills associated with providing tighter controls, such as temperature and humidity, to support more advanced scientific research. Additionally, the Los Angeles market is much different than it was five years ago, and many of the major qualified subcontractors can be more selective in picking and choosing their projects. We are currently finding that the availability of elevator subcontractors to be very limited. As an Owner, this trend of availability of qualified subcontractors is a concern from both a scheduling and cost perspective.” Don O'Neil, Senior Director for Facilities Design & Construction, Caltech Fall 2016 19
SAFETY FIRST Why should Owners care? By Charlie Bacon
Why should Owners care about safety being a key driver of success on their projects? There are, in fact, very tangible benefits for virtually any project that can come with just small investment of your time and money. As such, it's important to shift the idea of safety from a company "priority" to a company "culture," since doing so is the key to achieving great – and incident free – project outcomes. Twelve years ago, I took over the helm at Limbach, a national mechanical and electrical specialty contractor that offers design, construction, and service for large, complex commercial buildings. My experience since has touched on all aspects of the design, construction, and ongoing maintenance of buildings over thousands of projects. In 2000, however, I had a wakeup call on the subject of safety after several fatalities occurred at the company where I then worked. It was then when I learned about another way to look at safety and embarked upon a transition at that firm to incorporate an integral approach to worker heath and wellbeing. That approach effectively shifted the company’s views on safety from that of a priority to a core aspect of its culture. And it has made a huge difference. In that same year, we launched Incident & Injury Free (IIF). Today many contractors and EPC firms have adopted similar programs, driving safety in the industry to a new level. It's
wonderful to see these changes being realized since more and more people are going home at the end of every shift without incident, and more and more projects are finishing as home runs, with safety being a catalyst to those successful outcomes. Setting a Safety Foundation So how do Owners influence safety? Consider that outstanding project safety outcomes do not happen because safety is made a priority. Success is delivered when safety is culturally embedded in the project. In my ex perience, project success is deter mined by t he O w ner. T hey choose the approach to a project; select the design professionals, consultants, and contractors; and determine what contracting method will be adopted. The Owner also provides expectations to the project stakeholders of what that success will look like at the end of the project or program. Fall 2016 21
Whether it's stated or not, the Owner also defines the culture of the project. How? Design parameters are provided; the budget, schedule, and quality objectives are established; and safety is addressed as a priority since the Owner wants all the participants to deliver safe outcomes. I would hope the majority reading this would agree that their successful projects typically also enjoyed great safety outcomes. I would argue that on those projects, safety was, in some shape or form, culturally emb e dde d i n t he execut ion of the project. A project wit h safety embedded in the minds of the project team and craft workers typically leads to higher execution quality, as well as on-t ime
and on-budget project delivery. The attitude that safety costs money, which is a common response (or a typical thought that most won't admit to), is not the case. Indeed, I would argue that safet y pays huge dividends. How is any cultural element embedded in a company, an institution, a project, or even a family? Just as the CEO of a company sets the tone for its culture, it's determined by the leadership. It may not be written down, but the actions of the leader are adopted by the majority. So in our case, the Owner of a company defines the culture. After all, as the head turns, the body follows. Culture is determined not by words in a Values Statement, but through a leader’s actions. Leaders are closely watched by their people, and the majority of staff fall in line while those that don’t either self-select out or are shown the exit. Safety Culture Advantages The tangible benefits are many when a project enjoys great safety outcomes. For one, I would start with the comments around the idea that lean management principles are naturally adopted. Lean is a growing focus in the design and construction industry. Planning one’s work around outstanding safety outcomes each and every day not only leads to the elimination of injuries, but causes foremen and craft workers to look ahead and eliminate barriers to smart and timely execution, which eliminates wasted efforts. More work in place and less rework equals better quality. Secondly, t he morale on project s improves when super visors genuinely care about the craft workers’ wellbeing. This leads to the craft workers really caring about their work, which then leads to higher quality outcomes. Finally, as an Owner, you will feel great that you led such a successful effort. I caution you, however, that no one will thank you for getting them home safe at the end of every shift. Please take this last point as a “feel good” aspect of the job.
Getting Started How do you create a safety culture on your projects? I could go on about each of the following points in depth, but for the sake of a quicker read, here are the basics: 1. With the Owner’s in-house team, discuss the safety goals of the project just as you would discuss budget and schedule. Then, write down your safety expectations. 2. Assign staff to come back with a plan of action around safety. I strongly suggest they employ a behavioralbased safety consultant if this is your first endeavor, so as to shift from a priority to a cultural focus, which are small dollars compared to the overall investment. If you stay true to the plan, the ROI will be present. 3. When selecting design professionals and cont ractors, present your project plan and start with safety, followed by budget, schedule, and qualit y objectives. Reinforce t he plan and develop joint ly agreedupon ex pect at ions. Monitor t he commitment to the expectations on a quarterly basis with the principals of the firms you employ. 4. St ar t all meet ings wit h a safet y moment. It could be about t he project or some ot her per son a l experience. It takes t wo minutes, but sets the tone of the session and reinforces the idea that a cultural change is in the works. 5. R e m e m b e r t h a t s e t b a c k s m a y occur. Don't give up; use them as a learning experience. As noted before, as the head turns, the body follows. Owners can make a huge difference on their projects if they lead the project with a safety focus. You will realize better financial, schedule, and quality outcomes, as well as feel a sense of personal accomplishment knowing you did a great thing for the hundreds (if not thousands) of people that helped create your project. Charlie Bacon is Chief Executive Officer of Limbach Facility Services
NEW MEMBERS OWNERS American Airlines Palmina Whelan Banner Health-North Colorado Bradley McCaslin Carnegie Mellon University Salonika Garapaty Thomas Truong City of Gaithersburg Ronald Kaczmarek Columbus Regional Airport Authority Ray Fridley Dayton Metro Library Tom Marchesano Emory University Julie McDaniel Georgia State University Melissa Thackery Goucher College Terence McCann Houston Methodist Hospital Emily Thurston Johns Hopkins University Marc De Ocampo Virendra Patel Bill Schaller Adam Smith James Loesch Loudoun County Public Schools Dave Scarangella Maryland National Park and Planning Commission Joseph Arce Hester Jones Chauncey Robbs Glenn Ryan Kiara Sizemore Dominic Turner Miami Dade College Henry Craft Marcel Douge Cheryl Fields Mount Carmel Health Margaret Bornhorst North Carolina State University Shon Burch-Crispin Northern Virginia Community College (NOVA) Ben Dronsick Penn State University Michele Brown Pete Caporuscio Janine Hansel Jonathan Hoffman Christie Holloway
CALENDAR OF EVENTS Penn State University (cont.) Chad Lllig Derek Leonard Nevienne Manning Marcus Marasco Kathy Poissant Travis Scanlan Keith Sunderman Princeton University Lorine Murray-Mechini Sun-Maid Grower of California Ruben Corral Kayhan Hazrati AJ Heaberlin Barry Kriebel Joshua O’Bannon Don Sullivan Jan Van De Velde Texas General Land Office Uly Flores Truman Development, LLC Bryan Burnette University of Central Florida Lee Kernek University of Florida Catherine Mcmahon University of Pennsylvania George Zafiropoulos
NOVEMBER COAA-GA Chapter Recruitment & Networking Event November 3, 2016 5Church Atlanta Atlanta, GA
2016 Fall Owners Leadership Conference November 9-11, 2016 InterContinental Buckhead Atlanta Atlanta, GA
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PERSPECTIVE THE OFFICIAL MAGAZINE OF THE CONSTRUCTION OWNERS ASSOCIATION OF AMERICA
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