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 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:
- Whether the contractor can, by contract, submit a baseline schedule or subsequent schedule updates showing an early completion date.
- 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:
- 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.
- The contractor is not prohibited from submitting an early completion schedule.
- The contract states that “float” is a shared commodity.
- 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.
- Six months into a year-long project, the contractor provides a schedule update showing that it plans to finish 10 workday earlier than the contract completion date. Due to the “Must Finish By” constraint, the critical path activities show a total float of 10 workdays.
- Following its submittal of the schedule update, the contractor encounters an unforeseen condition that results in a 10-workday delay.
- 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 first-come, 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 these 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 float 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.
John S. Crane, Jr., PSP, CFCC, is an expert in critical path method scheduling, construction management, delay analysis, and claims analysis. He manages scheduling and claims prevention and resolution assignments for private, local, state, and federal construction projects and clients. He loves to field questions at John.Crane@TraunerConsulting.com.