15 April 2008
The incidence of disruption to construction and engineering projects is probably even more common than that of delay. Although many projects eventually complete on time, many more suffer some form of disruption along the way.
Disruption (as opposed to delay or acceleration) has been defined as “an interruption to the flow or continuity of an activity that can proceed but not as quickly as ought to be the case” (Lowsley and Linnett). It is also described as “disturbance, hindrance or interruption to a contractor's normal working methods, resulting in lower efficiency” (The UK's Society of Construction Law).
In practical terms, disruption means out of sequence working, interrupted working, restricted access, “stacking” of many trades within restricted work spaces and standing time of plant or other resources. Disruption leads to wasted costs being incurred, either by the main contractor itself or by members of its supply chain.
For example, a project which has been heavily disrupted by a large amount of variations and late design information, frequently requires additional main contractor management. This leads to what is known as “thickened preliminaries”, where the additional cost to the contractor arises from employing extra supervision to manage and action the changed and late design information.
Disruption costs are different to acceleration costs, which arise when a contractor's costs rise when completing a project earlier than originally planned or to reduce delays. Examples of acceleration costs are staff overtime payments or payments for additional plant
In 'cost reimbursable' forms of contract, recovering disruption costs is not quite as difficult as it is under lump sum fixed price or measured works contracts. In these forms of contract, proving the additional amounts of disruption costs caused by individual employer risk events is very challenging. In practice, disruption costs often end up as the last element of any final account to be agreed because they are so difficult to ascertain.
In the UK, there are very few reported cases which directly deal with how disruption is best valued. Perhaps the best and most up-to-date guidance is to be found in the UK Society of Construction Law's protocol dealing with delay and disruption claims. It should be noted, however, that this protocol is not legally binding. Nevertheless, the guidance it gives is very useful as it explains three key ways to prove disruption costs:
&#bull; The most appropriate method it recommends is the ”measured mile”. This involves taking an element of a project that has not been subject to the disruptive events and comparing it with those areas of the project that have suffered. This enables comparison between the productivity achieved on an un-impacted part of the project with that achieved on the impacted part and calculating the effect and cost of that disruption.
&#bull; The protocol recognises that it may be difficult to find completely un-impacted parts of a project to use for this comparison. In those circumstances, it suggests comparing productivity on other projects executed by the same contractor. But the ability to carry out such a comparison is dependent upon whether sufficient records of progress and productivity are available on the two projects to be compared on a ”like for like” basis.
&#bull; In cases where neither of the above comparisons is possible, the protocol states that it may be acceptable to use model productivity curves. These have been developed by different industry organisations to establish the loss of productivity on various different types of work.
Managing the Risk
In view of the above protocols, the best strategy for minimising the risk for disruption is the development of a system for the keeping of properly detailed records. These objectively record 'cause and effect' – namely where additional expenditure has been incurred and can be discretely recorded and attributed. It is of course particularly difficult to do this on projects which suffer disruption, because the resource available to keep records is already being stretched by the disrupting events. Nevertheless, it is these disrupted projects where the keeping of sufficiently detailed records is of most value.
It is also important to be able to put those records of disruption into context. This is best done by compiling a detailed as-built programme of the project, including recording the interruptions, stops and starts and out of sequence working. Records of progress and productivity in areas of the project which have not been impacted by disruption also allow the use of 'measured mile' comparisons.
If no part of the project can be identified as 'disruption free', productivity records on a range of types of work which have not been impacted by disruption become invaluable to a contractor. While it may seem like a waste of time and costs for a contractor to record productivity on projects which do not suffer from disruption, they become an essential weapon in the contractor's armoury when disruption is suffered elsewhere.
The costs incurred when a project is disrupted can make the difference between commercial success or failure for contractors, sub-contractors and owners alike. Proving disruption costs is perhaps the most challenging area of any claim. In practice, the records are rarely available to enable this to be done in an easy, accurate manner and leads to unhelpful and expensive disputes throughout the industry.
The keeping of detailed records is perhaps the best way to minimise the risk of proving disruption costs. In an ideal world, however, the answer must be to design, manage and plan the works fully from the outset so as to avoid the disrupting events occurring at all.