In the context of construction projects in Peru governed by NEC 03 contracts, managing compensable events presents significant challenges, especially when discrepancies arise between the Employer and the Contractor regarding the analysis methodology to be employed. This article examines a specific scenario in a riverbank defense construction project where difficulties are encountered in evaluating compensable events that have either concluded or are ongoing. It analyzes retrospective and prospective methodologies, proposes appropriate approaches for each situation, and complements the analysis with insights from internationally recognized experts, aligning with the principles of NEC 03 contracts and international best practices.
NEC 03 contracts have been adopted in Peru to enhance efficiency and collaboration in construction project management. However, practical application can present challenges, particularly in evaluating and managing compensable events that affect the project's schedule and costs.
This article addresses a scenario where the Employer and the Contractor disagree on the methodology for analyzing compensable events. While the Employer proposes a retrospective analysis without specifying the methodology, the Contractor advocates for a prospective analysis, respecting the proactive and collaborative spirit of NEC 03 contracts.
To enrich the analysis, summaries of articles by internationally recognized experts are included, providing insights into the methodologies they propose for similar cases.
In a riverbank defense construction project under an NEC 03 contract in Peru, the following situations arise:
- Delayed Analysis of Compensable Events: Compensable events are evaluated several months after the impacted activities have concluded.
- Conditioned Data Date: The data date is based on the last approved schedule, which is usually prior to the onset of impacts.
- Unilateral Schedule Modifications: The Employer removes previously approved lags in the monthly schedules, affecting the logical sequence of activities.
- Lack of Defined Methodology: The Employer proposes a retrospective analysis without specifying how it would be applied or which methodology to follow.
Given this situation, it's essential to define criteria and methodologies that allow for an objective and fair analysis of compensable events, facilitating an agreement between the parties.
Principles of NEC 03 Contracts
NEC 03 contracts are founded on principles of:
- Collaboration and Mutual Trust: Promoting open communication and cooperation between parties.
- Proactive Management of Changes and Risks: Encouraging early identification and efficient management of events that may affect the project.
- Transparency: Requiring parties to share relevant information promptly.
- Retrospective vs. Prospective Analysis Retrospective Analysis: Evaluates the impacts of events that have already occurred and concluded, based on historical data. Without a clear methodology, it can generate subjectivity and controversy. Prospective Analysis: Conducted before or during the occurrence of the event, allowing anticipation of impacts and implementation of mitigating measures. Aligned with the proactive approach of NEC 03 contracts.
- Data Date and Schedules
Using the data date from the last approved schedule, prior to the impacts, may not reflect the actual conditions during the events. It's advisable to update the data date to the moment immediately before the compensable event's onset.
- Unilateral Schedule Modifications
Removing previously approved lags and logical relationships affects the schedule's integrity and can distort the analysis. Modifications should be consensual and documented.
- Lack of Defined Methodology
The absence of a clear methodology for retrospective analysis creates uncertainty and may lead to subjective results. It's crucial to agree on a recognized and accepted methodology.
Proposed Analysis Methodologies
To address the presented challenges, specific methodologies are proposed for compensable events that have concluded and for those whose impacts have not yet ended.
A. Methodology for Concluded Compensable Events: Adapted Retrospective Impact Analysis
1. Establish a Reliable Baseline Schedule
- Baseline Selection: Use the most recent approved schedule before the event's onset, maintaining all previously approved lags and logical relationships.
- Validation: Ensure the schedule accurately reflects the execution plan at that time.
2. Update the Schedule to the Point Before the Event
- Data Date: Update the schedule with actual progress up to the date immediately before the event's onset.
- Verifiable Data: Use records and documentation to support updates.
3. Incorporate the Compensable Event into the Schedule
- Event Modeling: Add activities representing the compensable event, assigning appropriate durations and logical relationships.
- Clear Identification: Label event activities to facilitate analysis.
4. Analyze the Event's Impact
- Schedule Execution: Run the updated schedule to determine the impact on the critical path and completion date.
- Delay Determination: Identify delays attributable to the event and their responsibility per the contract.
5. Documentation and Support
- Supporting Evidence: Gather documentation supporting the analysis, such as correspondence and site records.
- Detailed Report: Prepare a report explaining the process and results.
6. Joint Review and Approval
- Work Sessions: Organize meetings to review the analysis and address concerns.
- Formal Agreements: Document agreements and make adjustments as necessary.
Advantages of this Methodology
- Objectivity: Based on actual data and a validated schedule.
- Contractual Compliance: Respects NEC 03 contract principles.
- Dispute Reduction: Minimizes misunderstandings by following an agreed-upon process.
B. Methodology for Ongoing Compensable Events: Prospective Time Impact Analysis (TIA)
1. Establish an Updated Baseline Schedule
- Approved Schedule: Use the most recent schedule reflecting the plan before the event.
- Validation: Ensure realism and coherence.
2. Identify and Document the Event
- Detailed Description: Clearly define the event, its cause, and responsibility.
- Formal Notification: Issue notice to the Employer per the contract.
3. Update the Schedule to the Data Date
- Actual Progress: Incorporate progress up to the data date, reflecting the current status.
4. Incorporate the Event into the Schedule
- Event Modeling: Add activities representing the event and its future impacts.
- Logical Relationships: Establish correct dependencies.
5. Analyze Potential Impact (Prospective Analysis)
- Schedule Execution: Run the schedule to assess how the event will affect future activities.
- Potential Delay Determination: Identify possible delays and repercussions.
6. Evaluate Mitigation Options
- Alternative Analysis: Explore measures to mitigate impact, such as adjustments in activity sequencing.
- Cost-Benefit Evaluation: Assess the feasibility of proposed measures.
7. Communication and Collaboration
- Presentation to Employer: Share the analysis and discuss findings.
- Review Meetings: Encourage collaborative decision-making.
- Event Monitoring: Update the analysis with new information.
- Periodic Reports: Keep the Employer informed about status and impacts.
9. Formalization of Agreements
- Documentation: Record agreements on time extensions and additional costs.
- Contract Modifications: Follow contract procedures to formalize changes.
Advantages of this Methodology
- Proactivity: Anticipates problems and enables preventive measures.
- Collaboration: Encourages joint efforts to minimize impacts.
- Alignment with NEC 03: Complies with early risk management principles.
- Dispute Prevention: Addresses impacts in real-time, reducing future conflicts.
Clarification on Prospective Analysis
In Proposal B, after the data date, a prospective analysis is conducted. Since the compensable event's impacts have not yet concluded, projections are made on how they will affect the project's future. This approach allows for anticipating delays and planning mitigating actions, in line with the proactive principles of NEC 03 contracts.
Insights from Internationally Recognized Experts
To further support the proposed methodologies, insights from internationally recognized experts in construction delay analysis and contract management are summarized below.
1. Society of Construction Law (SCL) Delay and Disruption Protocol
- Overview: The SCL Protocol, first published in 2002 and updated in 2017, provides guidance on dealing with delay and disruption issues in construction contracts.
- Prospective vs. Retrospective Methods: The Protocol emphasizes the use of Time Impact Analysis (TIA) for prospective analysis of delays, aligning with the proactive management principles.
- Recommendation: For events in progress, the SCL advocates for a prospective approach to assess the impact of delay events as they occur, facilitating timely decisions and minimizing disputes.
- Reference: Society of Construction Law Delay and Disruption Protocol, 2nd Edition, February 2017.
2. AACE International Recommended Practice No. 29R-03 (Forensic Schedule Analysis)
- Overview: The AACE International provides comprehensive guidelines on forensic schedule analysis methods.
- Method Implementation: The Recommended Practice No. 29R-03 outlines various methodologies, including both retrospective and prospective analyses, such as: Observational Methods: Suitable for retrospective analysis using as-built data. Modelled Methods: Including TIA for prospective analysis.
- Recommendation: For ongoing events, the use of TIA (Method Implementation Protocol 3.4) is recommended to model the impact of delay events on the schedule prospectively.
- Reference: AACE International Recommended Practice No. 29R-03, "Forensic Schedule Analysis," April 25, 2011.
- Expertise: Dr. Pickavance is a renowned expert in delay and disruption analysis, with significant contributions to construction law and scheduling practices.
- Perspective: He advocates for the use of prospective analysis methods during the project execution phase to allow parties to manage delays collaboratively.
- Key Points: Emphasizes the importance of using contemporaneous data and schedules. Supports the maintenance of accurate and updated schedules to facilitate timely analysis.
- Reference: Pickavance, K. (2010). Delay and Disruption in Construction Contracts, 4th Edition, Informa Law.
4. James Zack and Ted Trauner
- Expertise: Both are recognized authorities in construction claims and schedule delay analysis.
- Perspective: They highlight the importance of choosing the appropriate analysis methodology based on the project circumstances and the availability of data.
- Methodologies: As-Planned vs. As-Built Analysis: Suitable for retrospective analysis when comprehensive records are available. Windows Analysis: Segments the project schedule into periods (windows) to analyze delays incrementally.
- Recommendation: For events already concluded, a Retrospective Windows Analysis can provide an objective evaluation of delays.
- Reference: Zack, J.G., & Trauner, T.J. (2010). Construction Delays: Understanding Them Clearly, Analyzing Them Correctly, Elsevier.
- Expertise: A prominent figure in construction dispute resolution and schedule delay analysis.
- Perspective: Advocates for collaborative scheduling practices and real-time delay analysis to prevent disputes.
- Key Points: Emphasizes that schedules should be living documents, updated regularly. Supports the use of TIA for assessing the impact of ongoing events.
- Reference: Hohns, H.M. (2003). Managing and Settling Construction Claims: The Essential Guide to Processes, Principles, and Procedures, ASCE Press.
Implications for the Analyzed Case
- Alignment with Expert Recommendations: The proposed use of Prospective Time Impact Analysis (TIA) for ongoing events aligns with the recommendations of the SCL Protocol, AACE International, and experts like Dr. Pickavance and Dr. Hohns. For concluded events, utilizing an Adapted Retrospective Analysis, such as the Windows Analysis, is supported by experts like Zack and Trauner.
- Importance of Accurate Scheduling: Experts consistently emphasize the necessity of maintaining accurate, updated schedules to enable effective analysis.
- Collaborative Approach: A common theme is the promotion of collaboration and open communication between parties to manage delays proactively and minimize disputes.
Effective management of compensable events in projects under NEC 03 contracts requires applying analysis methodologies that are objective, transparent, and aligned with contractual principles. Incorporating insights from internationally recognized experts strengthens the proposed methodologies and underscores their validity.
Whether for concluded events or ongoing ones, it's essential for the Employer and the Contractor to collaborate closely in evaluating impacts and agreeing on solutions. The methodologies proposed—Adapted Retrospective Analysis and Prospective Time Impact Analysis (TIA)—offer structured frameworks consistent with expert recommendations and industry best practices.
- Formalize Agreements: Document methodologies and results to prevent misunderstandings.
- Continuous Training: Ensure teams are familiar with methodologies and tools.
- Adaptability: Maintain flexibility to adjust methodologies according to project needs.
By adopting these methodologies and recommendations, parties can strengthen their contractual relationship and contribute to the project's success, respecting the collaborative spirit and mutual trust characteristic of NEC 03 contracts.
- Society of Construction Law. (2017). Delay and Disruption Protocol (2nd ed.).
- AACE International. (2011). Recommended Practice No. 29R-03: Forensic Schedule Analysis.
- Pickavance, K. (2010). Delay and Disruption in Construction Contracts (4th ed.). Informa Law.
- Zack, J.G., & Trauner, T.J. (2010). Construction Delays: Understanding Them Clearly, Analyzing Them Correctly. Elsevier.
- Hohns, H.M. (2003). Managing and Settling Construction Claims: The Essential Guide to Processes, Principles, and Procedures. ASCE Press.
This article aims to provide a technical and professional perspective on managing compensable events in construction projects under NEC 03 contracts, offering practical tools and methodologies to facilitate agreements between involved parties, enriched by insights from internationally recognized experts.
