Engineering & Computer Science

Department of Building, Civil and Environmental Engineering

BLDG-6571 Project Management

Claim Report
On

SAG Mill Mechanical Contract

Professor:
Dr. Zhenhua Zhu
Mr. Maged Abdelsayed
Submitted By
Group 3

Student Id

Junaid Rafiq
Mahsa Sarabadani
Pedram Pakzad
Qianli Xu

7492685
7672926
6723020
6781608
March 2015

Letter for Claim (Executive Summary)

March 28th, 2015
-

Owner of Project
Wright Engineer Limited (Consultant)

Subject:

Construction claim for the installation of pipes and erection of mechanical

equipments for the SAG mill mechanical contract.

To whom it may concern

With reference to above cited subject, we, the contractor, would like to inform you that we were
awarded a lump sum contract of installation of pipes and erection of mechanical equipments on
May 3rd, 1990. We were provided a lump sum amount of $2,549,130 for the project. As per the
Contract, the SAG mill project was scheduled to finish on August 31, 1990 but the project
completed on December 19, 1990.
In this project, due to various reasons a lot of delays and loss in productivity were caused
because of which an extra amount has been utilized to complete the project. These delays and
loss were not caused by the contractor and all the details are provided in the attached claim. We
are submitting the report which is attached with this letter will clearly describe the basis of the
claim, the contractual analysis and the quantification of our claim and will be supported by the
following:
Late delivery of equipments
Late issuance of drawings
Various changes (approved, unapproved) throughout the projects
After analyzing the data which is mentioned in the attached claim, we, the Contractor are
submitting the claim of amount $_________. We request your good self to resolve this claim in a
reasonable time to avoid the damages. This amount which we are claiming will cover all the
prejudices after considering our good intentions in offering our best services at a competitive
price. During the execution of work for this project, this amount is fair and reasonable to claim
the additional costs.
Thanking you and assuring our best services all times.
Yours sincerely,

Contractor

Table of Content

1. Description of Project
1.1 History of the Project
In this SAG Mill Mechanical contract, the project comprise of erecting mechanical equipment
and pipes installation for a mill plant in which it treats ore and minimizes its size. After receiving
the invitation to tender, contractor submitted his proposal and according to procedures
determined by the Owner, negotiated the terms of the contract. As per the contract, the Engineer
represents the Owner on his behalf to administer the contract for him and act as an agent for the
Owner. A lump sum price was provided in the amount of $2,549,130 for this mechanical
installation work as per the contract of SAG Mill project. On April 30th 1990, the contractor was
scheduled to start and begin the work at site and complete the work on or before August 31 st,
1990. It was mentioned in the contract that most of the time the plant was to be in commercial
operation and the work was scheduled for forty hours per week but the plant was shutdown from
July 9th to August 6th, 1990 as the work was ceased for four week period. During the shutdown
period, the work schedule was increased to 60 hours per week. Therefore the contractor had four
months to execute and complete the work in which three months were at regular working hours
and one month at extended working hours. On May 03 1990, the owner of the SAG Mill
awarded a contract to the mechanical contractor for installation of the equipments. A list of 107
pieces of mechanical instruments and their delivery dates were provided in the contract which
was supposed to be provided by the owner and the contractor had the responsibility of installing
the equipments only. At the start of contractors work, 39 pieces were scheduled to be on site;
some 24 pieces were supposed to be delivered in May, 41 in June, and the final 3 pieces of
conveyor belt in early July 1990. But, unfortunately the owner was not able to deliver the
majority of the equipments on time. Because of the delay by the owner, these equipments were
not installed as planned in schedule. On 25 th April 1990, the contractors schedule was identified
in which the scheduled work ends on 31 August 1990 (123 calendar days). According to the
man-hours records, the installation of mechanical work stopped 3 month later than the contract
completion date. According to progress billings ending on 18 January 1990, less than 95% of the
project was completed as by that date. With respect to the portion of the work, Engineer appealed
on November 21st, 1990 for the termination of the contract procedure within the contractors
contract. Engineer advised Contractor on 13th December, 1990, to consider the contract to be
completed. In point of face, the contractor worked effectively for 226 calendar days from 7 th May
1990 to 19th December 1990 on the project.

2. Work Break down Structure

As per the contract, the mechanical equipment erection work was divided into six main physical
areas of the site. General mobilization/demobilization was considered as Area 0 and the piping
work as Area 7.

Work break down structure

Area 6; 8% Area 1; 9%

Area 5; 24%

Area 2; 21%

Area 3; 14%
Area 4; 24%

Figure 1 Work Break down Structure

Area 0: General Mobilization / Demobilization

Area 1: Crusher Building
Area 2: Conveyors
Area 3: Coarse Ore Silo
Area 4: SAG Mill
Area 5: SAG Mill Other
Area 6: Secondary Grinding
Area 7: Piping
Area 9: Work performed by Millwrights. (Obtained from man-hour records)

2.1 Area 0: Mobilization / Demobilization

On May 3rd, 1990, contractor was awarded by the SAG Mill mechanical award by the owner. As
per the contract, the mobilization date was anticipated three days earlier than the contract
awarded date. After receiving the award, contractor mobilized its forces and equipment
immediately on the project site but was not given the access to execute the work on the
scheduled date. However, contractor was able to start the work from7th May, 1990.
2.2 Area 1: Crusher Building
The crusher building is one of an existing building which is used as a storage bin for the
CLARABELLE Mill and receives the ore directly from the mine.
In this area:

Apron feeders are used to extract the ore from the base of the bin and feed the ore onto

conveyors.
These conveyors transport the ore to a series of cone crushers where its size is reduced and
fed elsewhere in the mill for further processing.

In this area, the scopes of work performed by the contractor are:

Removing the existing belt conveyors (1, 2 and 9).

Removing the existing drive, motor and base plate for apron Feeders 1 and 6.
Breaking out the existing concrete bases for the drive, motor and base plate for apron Feeders

1 and 6.
Forming and pouring the new concrete bases for the drives and motors for apron Feeders 1

and 6.
Installing, aligning and coupling the new drives and motors.
Modifying existing chute work for apron feeders 1 and 6.

In this area the relative volume of labor is 9% according to the original contract.

2.3 Area 2: Conveyors

In this area:

The Ore silo feed Conveyor and the SAG mill feed conveyor are two exterior conveyors
which are used to transport the ore from Crusher building to the mill building.

In this area, the scopes of work performed by the contractor are:

Off-loading conveyors, drives and accessories from rail cars and transport to site;

Assembling and erect the bents;

Erecting the conveyor galleries;

Completing assembly of conveyors;

Installing drives, motors, chutes and conveyor belts.

In this area, the relative volume of labor is 21% according to the original contract.

2.4 Area 3: Coarse Ore Silo

In this area:

The coarse ore silo stores the ore temporarily in order to provide a surge capacity between

the SAG mill and the existing Crusher Building.

Inside the penthouse structure, Ore enters through the Coarse Ore Silo and feeds conveyor at
the top of the silo and is later discharged into the Silo.

In this area, the scopes of work performed by the contractor are:

Erecting the penthouse steel, roofing and siding;

Installing the apron feeders including drives and associated plate work;

Erecting the silo crane hoist in the penthouse.

In this area, the relative volume of labor is 14% according to the original contract.

2.5 Area 4: SAG Mill

The installation of the SAG Mill was the largest item of work in contractors contract as it
consists of a center shell and two heads. Two jacking cradles, together with four 400 - ton

hydraulic jacks and controls were supplied by the manufacturer for the purpose of erecting the
SAG Mill.
In this area:

Coarse ore is fed into the SAG Mill from the Coarse Ore Silo through the SAG feed

Conveyor.
This coarse ore is crushed into small pieces due to the rotation of SAG Mill.

In this area, the scopes of work performed by the contractor are:

Installing the 32-foot diameter SAG mill including trunnion bearings and all accessories;

Aligning the SAG mill per manufacturers requirements;

Sandblasting the SAG mill shell interior and installing rubber lining;

Installing the SAG mill lube system, lining, grates, lifters and trunnion liners;

Installing and commissioning liner handling machine and mill jack crates;

Installing SAG mill main driver motors, cooling fans with drives, motors and cooling
coils;

Supplying and installing connecting ducts between cooling fans and mill motors.

In this area, the relative volume of labor is 24% according to the original contract.

2.6 Area 5: SAG Mill Other

Within the Mill building, this area contains a number of equipments and components other than
the SAG mill itself which relates to the SAG mill operations and processes beyond the SAG mill.
In this area, the scopes of work performed by the contractor are:

Installing plate work, magnets, cone crusher, lube system, pumps and vibrating screens.

In this area, the relative volume of labor is 24% according to the original contract.

2.7 Area 6: Secondary Grinder

This existing area was required for installation of new equipments, modification and removal of
existing instruments by the Contractor. In this area, Ore is originated from the SAG mill in the

form of slurry to feed into the cyclone cluster and after that into the ball mills. For each cyclone
cluster there is one ball mill. The ball buckets feed steel balls into the ball mills.
In this area, the scopes of work performed by the contractor are:

moving one existing cyclone cluster;

Receiving and installing three new cyclone clusters;

Removing the existing pinion and bearings and replacing them with new assembly
components on ball mills 4 and 5;

Removing the discharge trammel from ball mill 4;

Carrying out piping work on ball mill 3, 4 and 5;

Installing a reservoir and a series of chutes to feed balls into ball mills 3, 4 and 5.

The relative volume of labor in this area is 24% according to the original contract.

2.8 Area 7: Piping

The piping work was spread out over all areas (Areas 1 to 6) and was consequently
considered as the 7th work area.

In this area, the scopes of work performed by the contractor are:

The piping work that had to be done in all areas was considered separately from the
mechanical equipment erection work.

2.9 Area 9: Work performed by Millwrights

As per the details and records provided in the man-hour, it was observed that in this area of
project the considerable amount for was to be performed. About this area, no information was
given in the contract, the bid man-hours and the daily log sheet due to which it is difficult to
mention the nature of work in this area.
After analysis the man-hour records, actual volume of labor per area was obtained which is
mentioned below.

Area 0

Area 1

Area
2
24%

4% 4%
Area 3 10%
Area 4

Area 5

Area 6

4%

Area 7

Area 9

21%

22%
2% 9%

Figure 2 Actual work breakdown structure

From the above data and records, it is clear that the contractor spent man-hours in Area 9
performed by Millwrights.
2.10

Comparison between planned and actual volume of labours

Volume of Labour in %
Area
0
1
2
3
4
5
6
7
9
TOTAL

Planned

Actual

9%
21%
14%
24%
24%
8%
100%

4%
4%
10%
4%
21%
9%
2%
22%
24%
100%

Table 1Comparison between Planned and Actual volume of Labours

The majority of actual labour volume was observed as 24% which performed the work in Area 9.
The data of Area 9 was only available in the man hour sheet from the project records. During

this project, no information related with the scope of work and representation of phases was
given. Due to the overall impact on the project during the evaluation of labour distribution it had
to be included. The work performed by the pipefitters in all area is represented by Area 7 and
mechanical work in all the other areas was performed by Millwrights. After the completion date
of contract which was August 31 1990, mechanical work was in good pace and worked well until
December 13 1990. The contractor received a notice by the Engineer to terminate the work
which states that:
You are hereby advised that Wright Engineers Limited considers Contractor Construction Inc.'s
contract to be complete. Contractor is hereby directed to commence demobilization of its
equipment and workforce immediately and to complete its demobilization by 4:00 p.m. on
Friday, December 14, 1990. Contractor shall return to Wright Engineers Limited all Owner
supplied materials, equipment and tools by 4:00 p.m., Friday, December 14, 1990...
As the contract had not been fully executed, the contractor continued to work on a cost plus basis
as mentioned in the reply to the Engineers letter. Work stopped on December 19, 1990 as per the
man-hour records and it was observed that the work was 110 calendar days late then the original
completion date.
During the project duration, the contractor faced a number of problems which affects the
productivity and resulted in may delays of the project. As in the original contract scope of work,
the contractor overruns the estimated direct man-hours. Below are the problem summaries which
contractor faced during the project.

3. Summary of problems

Throughout the project, there were so many problems which contractor faced during the
execution of work due to which work performance was affected and also imposed significant
delays. According to affected areas, a summary of those major problems are listed below:
Area 0

Majority of work carried out was in the form of imposed unapproved changes
Latest IFC drawing issued in August 1990
Extra arising from winter conditions
Extra work for other contractors

Area 1

Late delivery of equipment (feeders, feeder chutes, drives)

Latest IFC drawing issued in August 1990
Lack of access by civil contractor
Delay in completion of civil works (for feeder #1)

Area 2

Late delivery of equipment (Pebble conveyor, belt conveyors).

Latest IFC drawing issued in August 1990
Poor design information.
Poor work on concrete foundations by others leading to modification requirements to bents
Incorrect equipment accessories from suppliers (such as anchors bolts, material for plates).
Lack of access - Acadia contractor working on repairs.
Imposed extra work - Rescrubbing conveyor galleries, assisted Acadia contractor with welds.

Area 3

Late delivery of equipment penthouse steel, steel decking, liners, feeders, chutes, crane

hoists)
Incorrect equipment accessories from suppliers (such as anchors bolts, material for plates)
Defect by others (Chute fabrications, liner fabrication, grout under feeders, train trolley)
Imposed extra work.

Area 4

Late delivery of equipment (discharge head suctions, SAG Mill, liner handler, chutes,

motors, jack cradles)

Imposed extra work due to delays and errors from others
Incomplete sole plate concrete foundations by others
Over casting of discharge head sections resulting to extra work to drill in the cast
No manual received for SAG mill erection despite previous requests (No start until June
28th)

Area 5

Delay by civil works to finish crusher base

Delay access to Magnets by others
Late delivery of equipment (chutes, lube system, pumps, distribution box)

Extra work due to deficiencies in equipment and fabrications (transition chutes, pump box,
distribution box)

Delay to start of structural steel by others

Area 6

Late completion of structural steel work by others

Defected equipment (cyclones)
Late delivery of equipment ( Pinion assembly)
Extra work done by others. (Inco)
Imposed extra work (repositioning of ball mill, other work that should be done by others)

Area 7
Late delivery of equipment (hydraulic units and cylinders, chute, accessories)
Lack of drawings for pipe routings
The impact on the performance and the delays in the schedule was caused by the owner as per
the list of problems in all areas. It was observed that the progress of project was affected mainly
by changes in information regarding delivery of equipment, changes in access for unloading
equipment, changes in access for the erection work, changes in the methods specified, and
changes to the scope of work to be performed. All the delays which happen due to labour

disputes, lockouts, strikes, and fire should be noted that they are beyond the Contractors control
and are not subjected to compensation as per the contract clause 6.5.3.
6.5.3 If the Contractor is delayed in the performance of the Work by labour disputes, strikes,
lock-outs (including lock-outs decreed or recommended for its members by a recognized
contractors' association, of which the Contractor is a member or to which the Contractor is
otherwise bound), fire, unusual delay by common carriers or unavoidable casualties, or
without limit to any of the foregoing, by a cause beyond the Contractor's control, then the
Contract Time shall be extended for such reasonable time as the Consultant may
recommend in consultation with the Contractor. The extension of time shall not be less than
the time lost as the result of the event causing the delay, unless the Contractor agrees to a
shorter extension. The Contractor shall not be entitled to payment for costs incurred by such
delays unless such delays result from actions by the Owner.
For this project, these types of delays are not caused by the owner and will not be evaluated for
the payment for cost incurred. These delays are considered as excusable or non compensable
(EN) delays.
3.1 Lack of Access to work areas
The contractor came across many difficulties during the execution of contract work as per the
project records. The contractor notified the Engineer in a letter dated June 06, 1990 about the
gravity of these problems and mentioned several areas especially conveyors and coarse ore silo.
Access problems such as modifying existing steel and removing existing grids for the conveyors
and repairs were indicated by the daily site reports for these areas due to structural errors for the
coarse ore silo. For all site work preparation in all cases, Owner was contractually responsible.
Moreover, access to proceed on site for executing contract work should have been available on
dates specified in the contract.
3.1.1 Area 2 - Conveyors

A start date of April 27, 1990 was shown in the contract schedule for area 2 conveyors. In June
1990, contractor was executing preparatory work in that area to provide access to begin contract
work as per the daily site reports.
3.1.2 Area 3 Coarse Ore Silo
It was also shown in the contract schedule that the start dates for area 3 Coarse Ore Silo was
April 27, 1990. But contractor was executing the preparatory work in that area in June 1990 to
provide access to begin contract work.
3.1.3 Area 4 Rubber lining installation
There was a delay in the installation of the rubber lining of the mill and head sections which
happened due to the delay in performing testing and quality control on SAG mill head section
which was performed by Boliden Allis. The Rubber lining was scheduled to install by contractor
on July 09, 1990 but didnt execute until July 12, 1990. Due to the testing done by Boliden Allis,
the contractor was required to execute some extra work in re-cleaning and sandblasting the SAG
mill head sections.
3.2 Late Delivery of Mechanical Equipments
As per the contract, owner will provide procedures, specifications and drawing including the
equipments of 107 pieces to the Contractor to execute the contract work. Also, in the contract
delivery dates of all equipments was also mentioned. But due to the delay by Owner, most of the
equipments were delivered late in the project. The work performance of the project was affected
by the delay in delivering the equipments in all areas. The delivery dates of the equipments were
postponed repeatedly and most of the times the contractor was unaware of the delivery until the
actual delivery date. The following schedule was prepared to deliver the equipments to the site:

39 pieces were be on site at the start of the work

24 units were to be delivered in May

41 units were to be on site in June

3 pieces were to be delivered in early July 1990

Most of the above equipments were delivered late to the site due to which delay occurred in
schedule during the execution of work and it also involved the additional costs to the contractor.
The detailed summary is provided in Appendix A for each area for all the equipment delays.

20%

3% 3%
12%

Area 0 General
Area 1 Crusher Building
Area 2 Conveyors

4%

11%

Area 3 Course Ore Silo

Area 4 SAG Mill

13%
34%

Area 5 SAG Mill Other

Area 6 Secondary Grinding
Area 7 Piping

Area

Figure 3 Equipment Delivery Delay Percentage for each area

and Area 5 were the most affected areas by delay in equipments, which represents the bulk of the
contract work. The impacts of these delays are confirmed in figure 2 which shows the breakdown
of delivery delay of equipments by area.
3.2.1 Area 2 - Conveyor
As per the delivery dates mentioned in mechanical equipment list, the 48 wide belt conveyor
was supposed to deliver on May 01 1990 but in reality the actual date was postponed several
times and the parts of the conveyors was not delivered on the same day. They were delivered
parts by parts. It was mentioned that the remaining pieces arrived on July 16 1990 which was
almost 76 days behind the actual schedule due to which 9 weeks of delay was caused to the
Contractor.
3.2.2 Area 4 Discharge head Sections
As per the schedule date, the discharge head sections of the SAG mill were supposed to deliver
on May 31 1990. But the delivery of the SAG mill discharge head sections D, E, F were
postponed by the Engineer, due to a mishap at Boliden-Allis, during a meeting which was held

on June 14 1990. The Engineer claimed that the above mentioned pieces would be delivered by
the second week of August. The installation and erections drawings of the SAG mill were also
pending which were supposed to be provided by Bolidin-Allis to the Contractor. During a
meeting which was held on July 05 1990, the delivery date was once again postponed. On 31
August 1990, the equipments were finally delivered due to which 13 week of delay was caused
to the Contractor.
3.2 Delivery of defective Mechanical Equipment
As per the contract, the Contractor doesnt require to inspect the equipments. The Contractor had
the sole responsibility of installation of the equipment only. However, many parts of the
equipments were delivered in a damaged and defected condition.
3.3.1 Area 4 Discharge and Feed Head Section
Boliden Allis was responsible for fabricating the discharge and feed head section and deliver it to
site. After receiving it on site, the contractor observed that the shell head section was overcast.
Due to this, Contractor has to perform some extra work on grinding the mill head sections to
allow socket access for tightening of bolts. This extra work was performed from September 14
1990 to November 20 1990 as per the daily site report.
Due to overcastting the head section by Boliden Allis, the bolts no longer matched the specified
requirements. In a memo dated 14 November 1990, the Contractor informed the Engineer that
the bolts would be installed as per Engineer and Boliden Allis instructions. On November 12,
1990 the contractor observed during the bolting operation that the bolts were too short for the
discharge head liner and requires removal and replacement. On November 28, 1990, the
Contractor replaced the liner bolts and used the correct length ones as per the daily site report.
3.3.2 Area 4 Discharge Trunnion
The discharge trunnion was provided by owner and the orientation of the mounting holes was
incorrectly laid by Boliden Allis which was discovered by the Contractor during the installation
of the equipment on September 11, 1990. They installation sequence by the Contractor was
disrupted due to this discrepancy. The discharge trunnion had to be removed and again taken
outside to be re-drilled by Boliden Allis. To solve these issues, the contractor worked effortless

by assisting Boliden Allis and performed the task. As per the daily site reports, it was observed
that all the rework related to discharge trunnion had been completed on September 27, 1990
which causes 15 working days delay to the Contractor.
3.4 Late Issuance of IFC Drawings
As per the project reports and data, a large number of new and revised drawings were issued
after April 30, 1990 to the Contractor which was the as planned start date of the project. The
contract didnt specify the issue dates for RFC drawings. Below is the table which shows the
number of RFC drawing issued to the Contractor each month in each area.
Month

Total

March 1990

93

April 1990

May 1990

188

June 1990

40

July 1990

31

August 1990

13

September 1990

24

October 1990

November 1990

17

Total

411

Table 2 RFC Drawings issued per month

3.5 Late Issuance of Vendor Procedures / Manuals

Area 4 Bull Gear
From October 11 1990 to December 08 1990, the Contractor performed the installation of the
bull gear as per the daily site reports. In order to install the equipments properly, the Contractor
issued several requests for information to the Engineer as the procedure for installation and
heating method was not clearly defined.

3.6 The conflict on installation method is highlighted from project records

Facsimile dated October 23 1990 from Boliden Allis (BA) to BA site representative: we
have decided that our standard tightening procedure as defined in the manual should be
used not the one shown on Thyssens drawing.

Daily Site Report dated October 31 1990: The bottom half of gear has been assembled,
aligned, bolts sweated on and ready for assembly. Top half is on process.

Facsimile dated October 31 1990 from Boliden Allis (BA) to BA site representative:
Bolt Elongation. Attached is corrected value: Head/shell bolt should be 0.03 instead of
0.026 Head/shell/gear bolt should be 0.04 instead of 0.035.

Handwritten memo dated November 05 from the Contractor: Conflict in methods!

Between B.A and contractor. Contractor feels Boliden method is a short cut and the
possibility exists that tolerances achieved so far maybe lost by loosening whole 1/2 of
gear.

In these areas the contractors work performance was impacted due to the expediencies in which
these issues were handled.
3.6.1 Area 4 Sole plates
On May 24, 1990, without the erection manual for the SAG mill, the work for pinion sole plates
was started. Contractor made several requests to obtain the erection manual. The anchor bolts
installed by the Owners civil contractor were not accurate and was discovered by the contractor
at the onset of the operation. The Engineer was informed by the Contractor about this matter on
June 06, 1990. But on several occasions, the response from the Engineer was postponed but
when the response was received by the contractor was a verbal solution to the pinion sole pate
rework which was performed by others. By September 05, 1990, sole plate installation was
completed.
On this matter, the lack of urgency by the Engineer had severely affected the contractors
performance. The Engineer and Owner should have followed the following contract clauses
which clearly defines the course of action:

2.2.9 During the progress of the work the consultant will finish supplemental instructions to the
contractor with reasonable promptness or in accordance with a schedule for such
instructions agreed to by the consultant and the contractor.
3.2.2 When separate contracts are awarded for other parts of the project, or when work is
performed by the owners own forces, the owner shall: 5.take all reasonable precautions
to avoid labor disputes or other disputes on the project arising from the work of other
contractors or the owners own forces.
3.2.3 When separate contracts are awarded for other parts of the project, or when work is
performed by the owners own forces, the contractor shall: 4.where part of the work is
affected by or depends upon for its proper execution the work of other contractors or
owners promptly report to the consultant in writing and prior to proceeding with that part
of the work, any apparent deficiencies in such work.
As per the data and records of this project, it was observed that neither the Engineer nor the
Owner shows their strong concern about the work on the pinion sole plates.

Schedule-delay Analysis
Contractual Requirements
Schedule

As stipulated in the requirements below the contractor fulfilled his contractual obligations
according to the schedule:
The Contractor has to:

Prepare and submit to the owner and the consultant prior to the first application for
payment, a construction schedule that indicates the timing of the major activities of the
work and provides sufficient detail of the critical events and their inter-relationship to
demonstrate the work will be performed in conformity with the contract time.
Monitor the progress of the work relative to the construction schedule and update the
schedule on a monthly basis or as stipulated by the contract documents and
Advice the consultant of any revisions required to the schedule as the result of extensions
of the contract time as provided in Part 6 of the General Conditions Changes in the
Work.

Delay Analysis
Delays caused by the Owner causes the contractor to be eligible for the time extensions, stopwork orders, labor disputes and strikes as specified in the requirements below:
6.5.1 If the Contractor is delayed in the performance of the Work by an action or omission of the
Owner, Consultant, or anyone employed or engaged by them directly or indirectly,
contrary to the provisions of the Contract Documents, then the Contract Time shall be
extended for such reasonable time as the Consultant may recommend in consultation with
the Contractor. The Contractor shall be reimbursed by the Owner for reasonable costs
incurred by the Contractor as the result of such delay.
6.5.2 If the Contractor is delayed in the performance of the Work by a stop work order issued by
a court or other public authority and providing that such order was not issued as the
result of an act or fault of the Contractor or any person employed or engaged by the
Contractor directly or indirectly, then the Contract Time shall be extended for such
reasonable time as the Consultant may recommend in consultation with the Contractor.
The Contractor shall be reimbursed by the Owner for reasonable costs incurred
6.5.3 If the Contractor is delayed in the performance of the Work by labor disputes, strikes,
lockouts (including lock-outs decreed or recommended for its members by a recognized
contractors' association, of which the Contractor is a member or to which the Contractor
is otherwise bound), fire, unusual delay by common carriers or unavoidable casualties, or
without limit to any of the foregoing, by a cause beyond the Contractor's control, then the
Contract Time shall be extended for such reasonable time as the Consultant may
recommend in consultation with the Contractor. The extension of time shall not be less

than the time lost as the result of the event causing the delay, unless the Contractor agrees
to a shorter extension. The Contractor shall not be entitled to payment for costs incurred
by such delays unless such delays result from actions by the Owner. The Contractor as the
result of such delay.
6.5.4 No extension shall be made for delay unless notice in writing of claim is given to the
Consultant not later than ten working days after the commencement of delay, providing
however, that in the case of a continuing cause of delay only one notice of claim shall be
necessary.

Evidence of the contractors compliance

Contractor sends letter to Engineer on June 6th, 1990 regarding changes and difficulties
quantifying changes in areas 2/3/4.
Contractor sends letter to Engineer requesting 3 month extension.
Contractor sends letter to Engineer on Aug. 16th regarding effects of imposed changes
made on the project.
CONTRACTOR submits quotation [on 22 Aug 90] regarding drawing revisions and note
as follows: due to significant number and extent of the attached revisions and the total
number of man-hours required to complete this work, CONTRACTOR will require an
extension of 4 weeks to their construction schedule.
During Project Review Meeting No. 4 [dated 05 Jul 90], CONTRACTOR submitted a
revised schedule dated July 4th, 1990. Revised schedule shows a completion date of
November 30th, 1990.
During Project Review Meeting No. 10 [dated 30 Aug 90], CONTRACTOR submitted a
revised schedule dated August 30th, 1990 indicating a completion date of December 30,
1990.
In a letter dated 22 Oct 90, CONTRACTOR submits latest schedule and record major
problem relating to the SAG mill only. Approximate delays are shown for each.
From the information listed above, it is clear that the contractor was constantly updating
the client about any changes, difficulties, delays and extension requests during the project
execution

Construction Schedule
Contract Schedule

There were three schedules provided on different dates i.e., on April 17 1990, April 25 1990
and August 30 1990. The schedule dated April 17 1990 is considered to be the original
as-planned schedule. The schedule dated April 25 1990 is the revised as-planned
schedule made following the bid clarification meeting dated April 23 1990. The
schedule dated August 30 1990 is considered as the revised project schedule submitted
by the contractor showing a completion date of December 30, 1990. As-built progress
as well as forecasted activity schedule for the remaining work until completion is
integrated in this method. The last schedule issued prior to contract award is
considered as the contract planned schedule, i.e. planned schedule dated April 25
1990. This schedule represents the start day of project on April 30, 1990 and the end
day on August 31, 1990.

Delay Analysis

There are different categorizes for delay analysis as process-based, mathematical and computerbased models. However various methods are developed and used for analyzing and measuring
Construction schedule delays, these methods have different analytical approaches and require
different Information. Different method provides different results, and requires different input
data for a complicated delay case. There is not a single method accepted universally by all
project participants, suitable for all situations. Here in the common delay analysis techniques will
be discussed in addition to a modified technique that was carried out on the current case named
Modified Collapsed As-Built method.

As-planned vs. As-built technique

The first approved schedule submitted by the contractor to the owner for a project is an asplanned schedule. The as-planned schedule regards as a baseline schedule or a target schedule to
manage a project. When the project completes and contains all the actual start and finish dates,
and the disruptions (for example, delays) that have occurred in the project, an as-built schedule
which is the final schedule for a project is usually prepared. According to the method chosen for
delay analysis technique, an adjusted schedule obtains by modifying the as-planned or as-built
schedule. This method simply compares the baseline or as-planned schedule with the final or asbuilt schedule. By subtracting the time planned from the actual time expended to determine, the
time owed calculates. The forward path method systematically calculates the delay value from an
as-planned schedule to an as-built schedule; the backward path method systematically calculates

the delay value from an as-built schedule to an as-planned schedule; and the dynamic method
systematically calculates the delay value in specific time frames forward or backward from asplanned and as-built schedules. This method is not usually accepted as a strong base to support a
claim; however it is simple and straight forward compared to other methods due to its lack of
detailed examination on the delays, the assumption that full blame is on the other party, lack of
addressing real time CPM and concurrent delays. The difference between the finish date of the
As-Built and the finish date of the As-planned schedule holding the other party full responsibility
on the entire delay duration is the delay calculation.

The limitations of this methodology are:

It does not scrutinize delay types and this makes it easy for it to be manipulated and
distorted
To reflect either the position of the claimant or the defendant

It ignores the dynamic nature of the critical path and any changes in schedule logic
No attempt is made to determine the individual impact of each delay on the project
completion. All delays, including delays on non-critical path, were summed up and their
Net effect calculated.

Impacted As-Planned
This method measures the impact of the delays on the contractors as-planned CPM schedule.
The various delays are formulated as activities and added to the as-planned network in a
chronological order showing the effect of each delay at a time and demonstrating how the project
is being delayed. The amount of delay equals the difference in completion dates between the
schedules before and after the impacts. The technique can be used for analysis of delay during
and after project completion.
As-Planned But for
This method entails injecting the as-planned schedules with all the delays of a particular party to
form an adjusted schedule. The completion date of this adjusted as-planned schedule compared
with the actual completion date gives the amount of delay for which the other party is
responsible.
A contractor using this method would identify and add all non-excusable delays to the as-planned
schedule, whereas the owner would add all excusable delays. The advantage of this method is
that it can be performed quickly because there is no need to consider actual progress of the work.
This technique is applied to the sample project first for contractors point of view and then for
owners point of view.

The limitations of this method include the following:

It does not take into account any changes in the critical path schedule during the course of
the project
It assumes that the planned construction sequence remains valid during the project
duration.
Owners point of view and contractors point of view may yield different results resulting
in disputes.

Collapsed As-Built
In principle, this method is a form of but for which does not use the as-planned as a baseline
Schedule, but rather uses the as-built schedule (and thus also referred to as as-built but for
technique). It involves removing the delays of each party from the as-built network so that the
resulting schedule will give the completion date of the project but for the delays of the other
party.
This technique and the as-planned but for could give similar results if the planned logic
remains unchanged in the course of the project. The perceived advantage of this technique is that
it is based on actual events on the project, making it one of the techniques of high credibility.
However, its short comings include the following:

In collapsing the schedule, the analyst is typically forced to insert after-the-fact logic ties
which may not reflect the thinking of the executor of the schedule during actual
performance.
The removal of the delays from the schedule could result in an unrealistic as-built but-for
Schedule, particularly when the schedule sequence has been so much impacted by those
delays;
Adjusting the collapsed schedule to suit what the contractor is likely to follow requires
experience and sound judgments beyond the capability of most analysts.
It ignores the circumstances at the time of the delay and the dynamic nature of the critical
path;
The identification of the as-built critical path requires great deal of effort on judgment
and schedule manipulation.
The use of as-built information to prepare the as-built schedule is subjective and highly
enable to manipulation.

Snapshot technique

This method is based on the as-planned, as-built and any revised schedules that are carried out
during the execution of a project. As-built schedule is divided into a number of consecutive
snapshot (time period) by this method and snapshot method also updates As-built schedule by
imposing all delays that occur in each snapshot and in succession. The delay caused by each
update records by the method and then summarizes all the record delays. The total project
duration divides into a number of time periods, called snapshots. When a major delay or group of
delays defines to have occurred, the dates of these snapshots usually coincide with major project
milestones, significant changes in planning or times. Duration of the as-built schedule within the
snapshot period and the relationships are imposed upon the as-planned schedule, however
maintaining the relationships. Delay value is calculated by SA method based on each snapshot
from the as-planned schedule and then summarizes project delay values from all analyzed
snapshots for each contract party.
Window technique
The windows analysis (WA) method, also called the contemporaneous period analysis method,
analyses delay event(s) on a predefined time period (termed as a window). This section focuses
on the traditional windows analysis method, although variants such as the daily windows and
delay section methods have been proposed. The analyst identifies several analysis windows from
the as-planned schedule, and then puts delays in their proper windows within the overall context
of the project to calculate the delay value in one window. Like the SA method, the WA method
also computes the delay value according to each window from the as-planned schedule, and then
summarizes project delay values from all analyzed windows for each contract party. However,
the main differences between the SA and WA methods are the algorithms to determine the
analysis timeframe and to settle the relationships and duration of activities within the timeframe.
The limitations of this technique include:

It is time consuming and costly to operate and also demands complete project records,
which are often available
differences in the time periods (or windows) can produce different results
Periodic updates may not be exist which may then require the analyst to perform a
highly laborious analysis of project records to create updates.

Modified-Collapsed As-built method

The As-built schedule with all delays injected in the schedule is used in this technique indicates
when there was actual work done and when nothing was done. All the delays resulting to an Asbuilt schedule is removed when the As-built schedule is collapsed and the progress that could
have been made if the delays did not occur would portray. The delay duration in this case
computes by calculating the difference between the finish dates of the As-built schedule delays
included- and As-built schedule delays removed-. Furthermore, this technique can be

considered to be applied to multiple phases in the project and can thus be used to address and
parallel delays taking place and takes the net values in constructing the As-built schedule.
This method offers the following:

An accurate picture in identifying every single delay that has occurred throughout the
project is drawn by this method.
Address parallel delays.
The ability to draw an accurate comparison between the Collapsed as-built schedule and
the original as-planned schedule to verify whether the work could have been performed
according to the original schedule or not if the delays did not occur is provided.
Just like the other analysis tools, the Modified-Collapsed As-Built method has
disadvantages such as:
Full delay responsibility is assumed on the other party; however the delays in the
schedule can only indicate the delay duration rather than responsibility.
The CPM logic is assumed to be constant and does not change throughout the project.
Inaccurate results can be emerged since the critical path most likely will change during
the course of the project.
In this case, it was decided to use this method among the other methods due to the
following reasons:
in this case study the CPM logic was assumed did not change.
A series of continuous problems with important impacts were in the project. (See problem
summary)
An accurate detailed as-built schedule is provided in this method showing all the delays
at all phases of the project.
Although the snapshot method is more accurate and acceptable, it is a time consuming
method. After a series of trials and research, and with different results on test cases, the
snapshot technique on this case didnt use since the snapshot technique was providing
indefinite results, and seemed to be time consuming.
As a result, it was decided to proceed with the Modified-Collapsed As-Built method to
perform the delay analysis.

4. Delay Cost Analysis and Quantification

4.x Delay Analysis Result
The following table is compiled from the original planned schedule (as-planned) and the project
daily report (as-built).
Activity

Schedule Type

START

END DATE

Duration

Description
Entire Project
Entire Project

Planned
As-Built

DATE
30-Apr-90
07-May-90

31-Aug-90
19-Dec-90

123
226

Table1. Schedule Description table (as built vs as planned)

According to the above table, the project actually took 226 calendar days to finish. But in the
original as-planned schedule, its duration should be 123 calendars. The total duration of the
project was extended by 103 days. And the delay is equal to the difference between the end dates
of as-planned and as-built which is 110 calendar days.
All the delays can be categorized into two types - excusable delays or non-excusable delays. And
for the excusable delays there are two branches, excusable-compensable delays and excusable
non-compensable delays. Excusable non-compensable can only result into time extension. Every
contract should have related clauses to identify how a delay should be categorized.
According to the projects documents, there was a labor strike happened during the November,
1990. The delays caused by this labor strike were also included in the total delays. However, it is
written in the contract that the contractor shall not be entitled to get the compensation caused by
the actions not from the Owner in contract clause 6.5.3:
6.5.3 If the Contractor is delayed in the performance of the Work by labour disputes, strikes, lockouts (including lock-outs decreed or recommended for its members by a recognized
contractors' association, of which the Contractor is a member or to which the Contractor is
otherwise bound), fire, unusual delay by common carriers or unavoidable casualties, or
without limit to any of the foregoing, by a cause beyond the Contractor's control, then the
Contract Time shall be extended for such reasonable time as the Consultant may
recommend in consultation with the Contractor. The extension of time shall not be less than
the time lost as the result of the event causing the delay, unless the Contractor agrees to a
shorter extension. The Contractor shall not be entitled to payment for costs incurred by
such delays unless such delays result from actions by the Owner.
Therefore, those delays caused by the labor strike should be categorized as excusable but noncompensable. In this case, the contractor can only be entitled to a time extension for the
equivalent of five working days, or one working week. In a word, the number of excusablecompensable days is110-5= 105 days.

The table below shows the summary of the encountered delays:

Excusable Delays
(days)
Compensable
Non-compensable

110
105
5

Table2. Summary of excusable delay days

5. Quantification of Claims:
5.1 Change orders
In project management, a change order is a written amendment to contract prepared by the
consultant and signed by the owner and the contractor to approve changes in the scope of the
work.
5.1.1 Contract review of the Change orders
The contract provides the following clauses regarding the change orders which may happen
during the whole construction process:
2.2.11 The Consultant will prepare Change Orders and Change Directives as provided in GC 6.2
CHANGEORDER and GC 6.3 - CHANGE DIRECTIVE.
4.1.5 The Contract Price shall be adjusted by Change Order to provide for any

difference

between the actual cost and each cash allowance.

4.1.6 The value of the work performed under a cash allowance is eligible to be included in
progress payments.
6.1.1 The Owner, through the Consultant, without invalidating the Contract, may make changes in
the Work consisting of additions, deletions, or other

revisions to the Work by Change

Order or Change Directive.

6.1.2 The Contractor shall not perform a change in the Work without a Change order or a
Change Directive.

6.2.1 When a change in the Work is proposed or required, the Consultant shall provide a notice
describing the proposed change in the Work to the contractor. The Contractor shall
present, in a form acceptable to the consultant, a method of adjustment or an amount of
adjustment for the contract Price, if any, and the adjustment in the Contract Time, if any,
for the proposed change in the Work.
6.2.2 When the Owner and Contractor agree to the adjustments in the Contract price and
Contract Time or to the method to be used to determine the adjustments, such agreement
shall be effective immediately and shall be recorded in a Change Order, signed by Owner
and Contractor. The value of the work performed as the result of a Change Order shall be
included in applications for progress payment.
6.3.2 Upon receipt of a Change Directive, the Contractor shall proceed promptly with the change
in the Work. The adjustment in the Contract Price for a Change carried out by way of a
Change Directive shall be determined on the basis of the cost of expenditures and savings
to perform the work attributable to the change. If a change in the Work results in a net
increase in the Contract Price, an allowance for overhead and profit shall be included.
6.3.3 If a change in the Work results in a net decrease in the Contract Price, the amount of the
credit shall be the net cost, without deduction for overhead or profit. When both additions
and deletions covering related work or substitutions are involved in a change in the Work,
the allowance for overhead and profit shall be calculated on the basis of the net increase, if
any, with respect to that change in the Work.
6.3.7 If at any time after the start of the work directed by a Change Directive, the Owner and the
Contractor reach agreement on the adjustment to the Contract Price and to the Contract
Time, this agreement shall be recorded in a Change Order signed by Owner and Contractor.
Clause 6.3 is regarding the Change Directive for this project. A Construction Change Directive
(CCD) is a written order generated by the designer directing a change in the project and stating a
proposed basis for adjustment, if any, to the contract sum or contract time. Issuance of a CCD
orders changes in the work within the general scope of the contract, consisting of additions,
deletions, or other revisions, the contract sum and contract time being adjusted accordingly,
without invalidating the contract. CCDs authorize the contractor to make changes that affect the
cost and/or schedule of a project.

As mentioned in section 4, the major changes to the work performance and planning are caused
by the owner and lead to the project delays. The reasons of the change orders include drawing
revisions, late delivery of owner supplied equipment and material, lack of access to work areas,
lack of required information and etc.The contractor is incurred of these changes without the prior
issue of a Field Work Instruction. Therefore the only way to find out the accurate workload for
these change orders is digging into meeting minutes and the communication record between
engineer and contractor.
5.1.2Approved but Unpaid Change Orders
According to the communication records between the engineer and the contractor, there are 4
change orders have been issued directly by the engineer. The first 3 change orders were fully
approved by the engineer and executed:
1. 21 Nov 90: Issue by ENGINEER to CONTRACTOR of fully executed Change Order No. 1
in the amount of $24,173.00 re feeder No. 1 support steel - Crusher building. (This work
was carried out during the month of November).
2. 21 Nov 90: Issue by ENGINEER to CONTRACTOR of fully executed Change Order No. 2
in the amount of $139,979.04 re FWI's 1 to 7 inclusive, 9 to 17 inclusive and 19 to 22
inclusive.
3. 06 Dec 90, Issue by ENGINEER to CONTRACTOR of fully executed Change Order no. 3
in the amount of $43,061.98 re FWI's 23, 29, 33, 34, 37, 39, 41, 42, 44 and 51.
4. 21 Dec 90: Issue by CONTRACTOR to ENGINEER of signed Change Order No. 4 in the
amount of $455,342.92 re drawing revisions and FWI's 58 and 59. This Change Order
was never signed by ENGINEER.
However, the engineer never signed on change order No. 4 which in the amount of $ 455,342.92.
Therefore it needs to be considered as an unapproved change order.
Therefore, the total amount of the unpaid change orders is:
$ 24,173.00 + $ 139,979.04 + $ 43,061.98 = $ 207,214.02
5.1.3 Unapproved Changes orders
Except change order No.4, the revisions of the construction drawings are the significant part of
the unapproved change orders:

1. 22 Aug 90: CONTRACTOR submits quotation re drawing revisions in the amount of

$345,271 and note as follows:"Due to the significant number and extent of the attached
revisions and the total number of man-hours required to complete this work,
CONTRACTOR will require an extension of 4 weeks to their current construction
schedule.
2. 17 Oct 90: Submission of costs by CONTRACTOR re drawing revision in the amount of
$4,049.CONTRACTOR stated in this letter:"Since our drawing revision submittal of
August 22, 1990, CONTRACTOR has not received a change order from Wright's for this
work. However, we have received a verbal instruction to proceed with the work and that
CONTRACTOR will receive compensation for this additional work.
3. 26 Nov 90: CONTRACTOR submits quotation for drawing revision in amount of
$155,342. Costs associated with extended contract schedule will be addressed at a later
date.
4. 11 Dec 90: CONTRACTOR submits additional costs from BOLLIDEN-ALLIS vendor
drawings in amount of $568,407.
Total Amount of revisions of drawings:
$ 345,271.00 + $ 4,049.00 + $ 155,342.00 + $ 568,407.00 = $ 1,073,069
Total Amount unapproved change orders: $ 1,073,069+ $ 455,342.92 = $ 1,528,411.92
5.3 Head office expense
Head office expense is the expense incurred by a head office for the benefit of its branch office
operations that are charged proportionately to the branch office. The expenses must consist of
normal, justifiable revenue expenditures that can be attributed to branch operationsfor the tax
deduction purposes. Simplistically, Clark and Lorenzni (1997) cited These fixed (overhead)
costs include items, such as office rental, utilities, janitorial services and corporate management.
The RICS (2000) defined it as expenditure on support services and general running costs,
Overheads refer to the contractors general running of business as distinct from site costs of any
particular contract. Overheads include, the rental of the contractors building and general support
staff, and if they are proved to have been increased by the contracts delay, there is no doubt, in
principle, that they can be claimed (Finnegan and Sheffield City Council 1998).

To calculate the head office overhead expense, the Eichleay formula can be one of the most
common methods. This formula was developed by the Armed Services Board of Contract
Appeals in 1941. They used this formula almost identical to that used in Comb to calculate an
amount of unabsorbed head office overhead.
The basic Eichleay calculation usually comes at the very end of the project after all the works
have been done. In the calculation, the following 3 stepsprocedure is used to determine the
damages.
Step 1: Calculate Allocable Overhead.
Firstly, the total contract billings are divided by the total company billings. Then the result is
multiplied by the total head office over head to produce the allocable overhead. The calculation
is to determine the portion of the head office overhead which should be allocated to the project.
The project is expected to pay its fair share of head office overhead.
Total contract billings
office
Allocable
Total home
ead =
ead
Total company billings
h
h
Step 2: Calculate Daily Allocable Overhead
The second step is to divide the allocable overhead by the total number of contract performance
days (including all the delays) to get the daily allocable overhead rate for the allocation of home
office overhead.
Allocable
ead
h
Number of days of contract performance ( including delay )

Daily

allocable
ead rate
h

Step 3: Calculate Home Office Overhead Damages

The final step is simply a matter of multiplying the daily allocable overhead rate by the total
number of excusable-compensable delay days to produce the final home office overhead
damages caused by the delay.
Daily

allocable
ead rate Number of days of delay
h

Home

office
ead damages
h

Below is the calculation of the head office overhead for this sag mill project:
Total company billings:

$8,000,000.00/year

Total contract billings:

$2,500,000.00

Total head office overhead:

$600,000.00/year

Total contract performance days:

226

Total excusable-compensable delay days:

105

Table3. Data summary for the Eichleay Formula

Step 1: Allocable Overhead = ($2,500,000.00/$8,000,000.00) $600,000.00 = $187,500.00
Step 2: Daily Allocable Overhead Rate = $187,500.00 / 226 days = $ 829.65 / day
Step 3: Head Office Overhead Damages = $ 829.65 105 = $ 87,113.25
5.4 Site overhead expenses for the delay period
Except the head office overhead, as a result of the delays, the contractor has to pay the extra
money for the additional on-site days. In the calculation, the cost unit for each item is converted
to the daily cost using conventional duration for the years as 364 days (52 weeks), month as 30
days and weeks as 7 days.
Item
1
2

Cost Type
Site Supervision

Description

Rates

Daily Rates

Project Manager's Salary

$ 75,000 / year

$ 206.04

General Foremans Salary

$ 4,500 / month

$ 150.00

3
4
5

Site services

Phone / Utilities on site

Site office expense

Site office trailer and

$ 400 / month

$ 13.33

$ 500 / week

$ 71.43

$ 250 / day

$ 250.00

support
Site equipment
expense

Crane/tools
Total Costs incurred per day

$ 690.80

Table4. Site overhead daily expenses

Therefore, the total site overhead cost for the delay period is $ 690.80 105 days = $ 72,534

Impact Analysis (Loss of Productivity)

One of the most important steps in preparation of claim is impact analysis. In construction
industry, once a change is applied to a part of the project or when part(s) of the project is
delayed, it will result in a negative impact on unchanged parts. This is usually referred to as
ripple effect during which ripples expand across the water when an object is dropped inside. In
most cases, the cost of the impact is hard to quantify due to its disputable nature and lack of
availability of data, and higher than direct cost of the change itself. The impact usually affects
the productivity of the labor force and referred to as loss of productivity.
There exists variety of methodologies for calculation of loss of productivity, but they are all open
to challenge with respect to validity and applicability to particular case. The productivity is the
ratio of spent time/effort (usually in the form of crew hour) over output which can be in the form
of cubic meters of concrete placed or meters of conduit installed or some other standard measure

(AACE Recommended Practice No. 25R-03). Then the loss of productivity will be experienced
when the contractor is not accomplishing anticipated achievable or planned productivity rate.
Hence the loss of productivity is the actual productivity minus the normal (baseline) productivity.

1.1 Causes of Productivity Loss

As mentioned before in the change order analysis and description of the problems (basis of the
claim), there was a huge amount of change orders and change directives in this project. In fact
one of the main reasons that contracture could not perform with his normal productivity rate was
the huge amount of ad-hoc improvisations made during the project. Furthermore as mentioned
before the majority of equipment delivered late and once delivered some had imperfections. This
reduced the productivity of contractor to a huge extent. According to studies conducted by the
US Veterans association, an average of change order in the projects should be no more than
5.3% (Schwarzkopf). For this project the increase in man-hours due to the change orders is
13,300 hours (43% of planned hours), which is well beyond the expected increase.

One should also consider that, the overwhelming majority of drawings were delivered after
commencement of the project. In a lump sum contract, most of the drawings are supposed to be
delivered to
the contractor prior to actual onset of construction. In this project, out of 411 drawings issued for
the project, only 93 were issued before the start of the project, 188 during the first months of the
project, the rest were issued late during the project. From drawing register sheet, it can be seen
that 46 of the drawing issued not earlier than Aug 30 th (the planned finish date of the project). It
was agreed upon in the contract that the sole responsible for on-time delivery the drawings is the
owner, however, his failure to do so, made major problems for the contractor to plan the project
and install the machines appropriately.
In addition to this, many other factors affected the contractors productivity. Case in point lack of
access to loading and construction sites, unavailability of owners worker and/or incompletion of
owners work (work that was supposed to be performed by other contractors), change of
construction methods/standards and lack of access for unloading equipment. By reviewing the
contractors daily repot sheet, among 250 problems that caused delay or affected the productivity,
235 items where the outcome of the owners actions/inactions. Table below summarizes some
issues affecting productivity. Since the contractor has always been compliant and noticed the
owner/engineer on-time regarding the problems faced during the project, he will assume no
responsibility in owner-induced productivity losses.
Responsible Nature of Problem
Number of Problems
Owner
Changing delivery dates, problem in works 235

performed by Owners forces, lack of access,

late issuance of drawings, uncompleted civil
works, etc.

Contractor

Schedule problem, learning curve, safety 15

issues, site organization, etc
TOTAL = 250

It is important to note that if the loss of productivity is a direct effect of a delay, this inefficiency
can be claimed as delay damage. In fact, the loss of productivity is distinguishable from delay
damage and as the ripple effect suggests it is an indirect effect of delay (not direct).

1.2 Methods of Calculation of Loss of Productivity

AACE suggests variety of methods for calculation of loss of productivity. The methods which
showed successful previous stories in claim resolution are:
Cost Basis Methods (total cost method, modified total cost method, total labor cost
method, etc)
Project Specific Methods(measured mile, earned value analysis, work sampling,
craftsmen questionnaire sampling)
Specialty Industry Studies (acceleration, changes, cumulative impact and rework,
learning curve, overtime and shift, project characteristics, project management, weather)
General Industry Studies (US Army Corps of Engineers Modification Impact
Evaluation Guide, Mechanical Contractors Association of America, National Electrical
Contractors Association, Estimating Guides)
Project specific methods are more favorable since courts, boards of contract appeals and other
legal forums are more favorably impressed by damage calculations that related directly to the
project in dispute and supported by contemporaneous project documentation (McDonald and
Zack). Among project specific methods the measured mile method, which is essentially
comparison of identical activities in impacted and non-impacted sections of the project in order
to ascertain the loss of productivity resulting from the impact of a known set of events, is very
popular.

Measured mile method considers only the actual effect of the alleged impact and thereby
eliminates disputes over the validity of cost estimates, or factors that may have impacted
productivity due to no fault of the owner (e.g. project mismanagement, subcontractor-related
problems, voluntary acceleration, etc). The productivity loss can be calculated by subtracting the
impacted productivity rate from the un-impacted productivity rate.
Another project specific method is earned value analysis during which physical work units
completed are multiplied by budget hours to measure the earned man-hours. Then, the calculated
earned man-hour can be compared with actual man-hours and the difference between the two can
be used to calculate the loss of productivity.
In addition, if project documents are not fully available, estimate of loss of productivity can be
made using general and specialty industry studies. The Effects of Change Orders on Productivity,
Concordia University, Montreal, Quebec (known as Charles Study) and Impact of Change Orders
on Labor Efficiency for Mechanical Construction, Journal of Construction Engineering and
Management (known as Hanna Study) are two methods which are used frequently. Hanna Study
establishes a mathematical model to quantify the loss of productivity due to the change orders. In
this model, there are 12 different input variables, including impact classification, timing of
change, number of change orders, amount of change measured as change order hours in
relationship of percent of base estimated hours, type of projects, size of project as estimated base
hours, construction deliver system, owner type, specified work performed, years of experience
project manager had in industry, number of similar-type projects project manager had completed,
number of similar size projects project manager had completed. The author assigned a coefficient
to each of these variables, and then calibrated his model with the impacted and un-impacted
projects with complete documents. An acceptable correlation was found.
It is also worthwhile to note that the cost basis models are very general and they fail to address
the contractor-caused impacts and possible cost estimate mistakes in the contract documents.
Hence, they only can be used when other methods are not applicable and possible to perform.

1.3 Selection of the Appropriate Method

The measured mile method, having the highest rank in AACE, was not selected because, within
the original scope of the work there was no area that was un-impacted, and no other data from
contractors previous projects was available to calculate the measured mile for un-impacted
evaluation. The 3D table chart and the table below show the comparison between actual and
earned man hours in each area. As it can be seen all the areas are affected and normal
productivity cannot be calculated.

Area

Impacted

0
1
2
3
4
5
6
7
9
TOTAL

YES
YES
YES
YES
YES
YES
YES
YES
YES

Estimated
Man-hours
120
1,368
3,491
2,089
3,018
3,512
1,326
16429
31,353

Spent
Productivity
Man-hours
3323.75
27.70
2,687
1.96
7,475
2.14
3,084
1.47
15,936
5.28
6,513
1.85
1,808
1.36
16,652
1.01
18,672
76,151
2.43

In cases like this, a variation of measured mile method called baseline method can be used which
considers the median productivity over a minimum of 5 best productivity periods/areas as the
measured mile. Since in this case study huge difference exists between productivity of areas, and
the areas were affected by different events having completely different natures, this method is
neglected.
The earned value analysis has been selected since a reasonable initial estimate was performed by
the contractor and agreed upon by the owner and engineer, so the earned (paid) man-hours is
straightforward to calculate. In addition, all the extra work completed, is very well documented
in man-hours sheet, which make the calculation of loss of productivity easier. Lastly,

responsibility can be easily determined based on the contractual documentations, which makes
the attribution of cause of impact much easier.
1.4 Quantification of Loss of Productivity
The earned man-hours can be found from billings sheet and the actual hours can be found using
data in the man-hour sheet. Once the data on man-hour sheet were arranged in monthly basis,
they can be plotted as shown above. Now the difference between actual man-hours and earned
man-hours would be the loss of productivity.

It is important to note that the actual man-hours consists of work done based on contract and
extra work due to approved or unapproved changes, while the earned hours are only based on
hours spent on the main project and not extra works. Since, we have already claimed the extra
hours due to changes in the change order part on this case study, those can be subtracted actual
man-hours. One can argue that the man-hours spent on the extra work are also subject to loss of
productivity and should be added to earned hours. Hence these man-hours (due to changes) are
either added to earned man-hours or subtracted from actual man-hours, both yielding the same
result. Here these man-hours are subtracted from actual hours.

From man-hours sheet the sum of work hours on extra work (changes) calculated to be 13,300
hours. It is important to note that to calculate this hours, according to Commission de
Construction du Quebec, the applicable overtime rate should be two times of the original salary
rate, therefore each premium hour spent will be calculated as such (multiplied by 2), and shift
wok will remain 1:1 as to regular hour (however, it should be added 1$ per hour according to the
same document from CCQ). The same modification should be applied to the actual total manhours and is presented below.

Total
Modified
Total (Regular)

Regular man-hour
66,642.75
66,642.75
85,319.75

Premium man-hour
9,171
18,342

Shift differential man-hour

335
335

Now the change order hours can be subtracted to find actual hours without the effect of change
order.
85,319.75 - 13,300 = 72,019.75 hours
So the difference between this modified actual man-hour and earned man-hour would be:
72,019.75 29,538 = 42,481.75 hours
So the total hours lost due to productivity loss is 42481.75.

According to the table in section 1.1, and based on contractors daily reports it can be seen that
among 250 problems faced around 15 were attributable to the contractor (directly or in-directly)
hence those cannot be claimed by contractor. The percentage of contractor-caused problems is
6%. Hence:
42481.75 hours 6% = 2,548.9 hours (contractor-caused)
42,481.75 2,548.9 = 39,932.845 hours (owner/owner workers- caused)
39,932.845 hours $40/hr = $1,597,313.8 loss of productivity

Cost Escalation
Cost escalation is defined as changes in the cost or price of specific goods or services in a given
economy over a period. It includes the general inflation related to the money supply, but it is also
driven by changes in technology, practices, and particularly supply-demand imbalances that are
specific to a good or service in a given economy.
Inflation (monthly basis)
January 1990 - December 1989
February 1990 - January 1990
March 1990 - February 1990
April 1990 - March 1990
May 1990 - April 1990
June 1990 - May 1990
July 1990 - June 1990
August 1990 - July 1990
September 1990 - August 1990
October 1990 - September 1990
November 1990 - October 1990
December 1990 - November 1990

Inflation
0.79%
0.65%
0.39%
0.00%
0.52%
0.39%
0.38%
0.13%
0.25%
0.89%
0.63%
-0.12%

Table5. 1990 inflation Canada (CPI)

Since the finish date was changed from August to December, the inflation of the last 4 months
should be considered in the claim.
Inflation affects from September to December:
1 (1+0.25%) (1+0.89%) (1+0.63%) (1-0.12%) = 1.0166