Surety Bond Quarterly - Summer 2015 - 34

CONTRACTOR
PRACTICES THAT
MAY RESULT IN
CONSTRUCTION
CLAIMS TO
RECOVER
FOR DELAYS AND
INCREASED COSTS

Feature

BY RICHARD J. LONG
IN A PERFECT world, the owner never
changes his mind, the engineer never
alters her drawings, the contractor never malperforms, the resident
engineer's decisions are perfect, and
Mother Nature behaves herself. That
perfect world does not exist.
In the real world, with geometric
precision, the forces of owner, engineer, contractor, and Mother Nature
combine to make change. The owner
changes his mind. The engineer
changes her drawings. The contractor fails to manage his job. Mother
Nature then changes what the others
have missed.
Depending on which party is assessing and determining the causes for
claim generation, the perspectives
cover a broad range. Voluminous
claims are not foolproof indications
that a compensable claim exists and
often mask the contractor's responsibility for the problems that have
occurred. It is frequently necessary
to examine the project history in detail
before intelligent judgments can be
made on the validity of the claim.
The following are regarded as the
primary contractor practices that
often result in construction claims by
the contractor to recover its increased
costs and counterclaims by the owner

34

as a result of the contractor's failure
to perform. Bond producers and other
surety professionals would be prudent to advise their contractors to
avoid such practices and, in turn, help
prevent claims.
Inadequate cost and schedule
control systems
Possible explanations for why estimated costs for project activities
are so inaccurate when compared
to actual costs, and why planned
schedules experience significant
delay, include lack of integrated costs
and schedule control systems; poor
definition of work activities; failure
to prepare an accurate, logic-linked,
baseline CPM schedule; improper
updating of progress schedules; and
inaccurate cost allocation of contract
and actual man-hours and costs to
a sufficiently defined cost accounting system that can recognize cost
overruns in sufficient time to enable
mitigation to occur. Contractors often
attempt to inappropriately blame the
owner and file claims for the delays
and cost overruns that have occurred.
Late and inadequate submittal
of change order requests
Changes are the leading cause of
delays and increased costs on construction projects. Contractors must
follow the contractually required procedures for preparing and submitting

SURETY BOND QUARTERLY | SUMMER 2015

change order requests. These procedures include an adequate assessment
of the cost and schedule impact of the
proposed change. Not only does the
contractor have to make an adequate
estimate of the direct costs of material,
equipment, and labor costs associated with the change, but also it must
address the schedule impact and associated time-related costs. This assessment will often require a time impact
schedule delay analysis to determine
the potential delay associated with the
change. When the man-hours associated with the changes approach a level
where the cumulative impact of the
change may affect the contractor's
labor productivity, the contractor must
include the costs for increased labor
man-hours that most likely will occur.
If the contractor fails to perform these
analyses, it may attempt to submit
an end-of-project claim to recover its
increased costs and avoid liquidated
damages in an owner's counterclaim.
Inadequate site investigation
before bidding
Contractors often venture into new
geographic areas to broaden their
opportunities. Too often, the contractor will bid work without performing
an adequate site investigation into
areas such as availability of qualified
labor, labor productivity, weather patterns, underground conditions, and
other projects in the area that would



Table of Contents for the Digital Edition of Surety Bond Quarterly - Summer 2015

NASBP Upcoming Meetings & Events
2015-2016 NASBP Executive Committee
From the CEO - There is Poetry in Surety Claims, Surely
Practical Insights: What You Need to Know - Hiding in Plain Sight: Specifications as a Source of Risk
Profile: President Susan Hecker
Developing Your Leadership Vision
Liability Issues - Can Public Owners be Held Liable to Subcontractors and Suppliers for Failure to Require General Contractors to Obtain Required Payment Bond?
An Introduction to Probate Bonds
Class Act - Surety Team’s Cooperative Efforts Enable School to Open on Time
NASBP’s Attorney Advisory Council - Participants Opine on Current Risk Management Challenges and Business Opportunities
The AIA Describes Updated and Expanded Design-Build Documents Family
Contractor Practices That may Result in Construction Claims to Recover for Delays and increased Costs
NASBP Annual Meeting Speakers - Veterans can benefit private sector, but need help finding jobs
Index to Advertisers
Surety Bond Quarterly - Summer 2015 - cover1
Surety Bond Quarterly - Summer 2015 - cover2
Surety Bond Quarterly - Summer 2015 - 3
Surety Bond Quarterly - Summer 2015 - 4
Surety Bond Quarterly - Summer 2015 - 5
Surety Bond Quarterly - Summer 2015 - 6
Surety Bond Quarterly - Summer 2015 - 2015-2016 NASBP Executive Committee
Surety Bond Quarterly - Summer 2015 - From the CEO - There is Poetry in Surety Claims, Surely
Surety Bond Quarterly - Summer 2015 - 9
Surety Bond Quarterly - Summer 2015 - Practical Insights: What You Need to Know - Hiding in Plain Sight: Specifications as a Source of Risk
Surety Bond Quarterly - Summer 2015 - 11
Surety Bond Quarterly - Summer 2015 - Profile: President Susan Hecker
Surety Bond Quarterly - Summer 2015 - 13
Surety Bond Quarterly - Summer 2015 - Developing Your Leadership Vision
Surety Bond Quarterly - Summer 2015 - 15
Surety Bond Quarterly - Summer 2015 - Liability Issues - Can Public Owners be Held Liable to Subcontractors and Suppliers for Failure to Require General Contractors to Obtain Required Payment Bond?
Surety Bond Quarterly - Summer 2015 - 17
Surety Bond Quarterly - Summer 2015 - 18
Surety Bond Quarterly - Summer 2015 - 19
Surety Bond Quarterly - Summer 2015 - 20
Surety Bond Quarterly - Summer 2015 - 21
Surety Bond Quarterly - Summer 2015 - An Introduction to Probate Bonds
Surety Bond Quarterly - Summer 2015 - 23
Surety Bond Quarterly - Summer 2015 - 24
Surety Bond Quarterly - Summer 2015 - 25
Surety Bond Quarterly - Summer 2015 - 26
Surety Bond Quarterly - Summer 2015 - Class Act - Surety Team’s Cooperative Efforts Enable School to Open on Time
Surety Bond Quarterly - Summer 2015 - 28
Surety Bond Quarterly - Summer 2015 - 29
Surety Bond Quarterly - Summer 2015 - NASBP’s Attorney Advisory Council - Participants Opine on Current Risk Management Challenges and Business Opportunities
Surety Bond Quarterly - Summer 2015 - 31
Surety Bond Quarterly - Summer 2015 - The AIA Describes Updated and Expanded Design-Build Documents Family
Surety Bond Quarterly - Summer 2015 - 33
Surety Bond Quarterly - Summer 2015 - Contractor Practices That may Result in Construction Claims to Recover for Delays and increased Costs
Surety Bond Quarterly - Summer 2015 - 35
Surety Bond Quarterly - Summer 2015 - NASBP Annual Meeting Speakers - Veterans can benefit private sector, but need help finding jobs
Surety Bond Quarterly - Summer 2015 - 37
Surety Bond Quarterly - Summer 2015 - Index to Advertisers
Surety Bond Quarterly - Summer 2015 - cover3
Surety Bond Quarterly - Summer 2015 - cover4
Surety Bond Quarterly - Summer 2015 - outsert1
Surety Bond Quarterly - Summer 2015 - outsert2
Surety Bond Quarterly - Summer 2015 - 43
Surety Bond Quarterly - Summer 2015 - 44
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