King or Queen for a Day

Suppose that you were made King or Queen for a day and were given the task of changing the asset delivery industry – you were given the responsibility to change anything and everything to make the process of planning, designing, procuring, constructing, operating and decommissioning assets a delightful experience instead of one fraught with problems.  What would you do?

Perhaps, first make the process more collaborative.  Reshape regulations to streamline approvals, establish consistency across political boundaries, support new technologies and discourage prescriptive outcomes. Encourage integrated project delivery contracts and processes that ensure that each party involved in the delivery of a project takes responsibility for the risks that they can and should control and that all parties share appropriately in the success or failure of the project.  Maybe implement effective communications and management tools that allow project information to be rapidly and completely distributed to all involved stakeholders.  Ensure that all stakeholders are involved so that decisions are made considering the whole life of an asset instead of what is most beneficial at that point of the process.

Second improve productivity.  Encourage use of cutting-edge tools, equipment and processes with the understanding that the industry will share in the development of new technologies that provide benefit and that the risk of technology development is shared.  Encourage disrupters that will help the asset delivery industry achieve productivity gains as good as or better than other industries have achieved.  Recognize that labor must be trained to take advantage of these new technologies and that respect and support for the worker is vital in order to convince talented people to be a part of the asset delivery process.   Respect includes making certain that the work environment is safe and that an individual can earn enough to live with dignity.  Support includes providing training and technology that allows everyone to be productive enough to pay their way.

Third consider the environmental footprint of an asset over its entire life.  Decision making focused on each phase of an asset’s life may result in a higher overall environmental cost than when decisions are made based on the entire asset life.  Reducing environmental impact by limiting the impact on the land, energy efficiency, recycling of materials, use of renewables and similar decisions all require consideration of the entire life of the asset.

Last, measure success, demonstrate what works and what doesn’t so that the entire industry benefits and can focus on improving and evolving.

It might be a long day, but it would certainly be worth the effort.

The Joy of Not Traveling

I spent a large part of my working life as a road warrior, attending to business all over the world.  I can relate to virtually every situation in the movie “Up in the Air”.  I made the decision a few years ago to stop.  While I would not trade the experience that I had and the opportunities that it provided me for anything, I don’t miss it.  There are perks that keep on giving, like permanent gold status on a few airlines and a few unused accumulated points that have not been used up for hotels, flights and cars.  I am also able to immediately fall asleep on an airplane, often before it leaves the ground.  I am a proficient user of Skype and WeChat.

I recently had the opportunity to visit with another ex-road warrior.  We shared stories of waking up at odd hours in hotel rooms wondering what city you where in; of planes missed or nearly missed; of hard to get used to foreign customs; and having to explain to folks that it is less exotic than it sounds when your trip consists of airport to taxi to hotel to meeting back to taxi to airport and then out – it doesn’t really matter what city or country that you are in.  My personal favorite observation is the number and variety of complicated alarm clocks in hotel rooms and their ability to be off by 12 hours or some other random number of minutes, even though there was no apparent way to re-set them – thank goodness for smart phones in recent years.

There is a lot to be said for coming home to the same place every night, being able to plan on attending a local event, and being available for family when needed.  I no longer must fly out on a holiday to attend a meeting in a country that does not recognize that holiday or try and create a special occasion while the family is living in a hotel room.  I no longer wake up or get sleepy at random times while consistently in the same time zone.

I occasionally speak to groups about working globally and often get the chance to mentor others about overseas or heavy travel opportunities.  The ability to live in other cultures is the best way to see the world and to become a part of the global community.  Working remotely greatly increases your chances for greater responsibility and to hone your skills.  However, it is far more stressful on both you and your family than you might imagine.  I almost always say – take the chance but know the risks.

Using Artificial Intelligence in Risk Management

One of the challenges that the construction industry has is a lack of coordinated data sharing.  Some agencies have started to collect large amounts of data, but it tends to be project specific, not particularly accessible and not organized in a way that it can be easily analyzed to develop usable information. 

Data mining could be particularly valuable for risk management and improving the quality of design and planning contracts.  If an agency had multiple years of change order data from its construction contracts it may be possible through data mining to extract information as to the types and severity of changes.  This information could be studied to identify reoccurring problem areas.  For example, if it was determined that large and consistent geotechnical related change orders occurred, it might point toward changing the design and planning process to require more geotechnical investigation. 

This same data mining could help categorize changes so that the severity and probability of various types of changes could be better understood, allow for better contingency forecasting, and promote better planning for how to handle individual changes.  For example, knowing that weather related changes occur on a certain percentage of a certain type of project and have a certain average impact would provide a better foundation for predicting the impact of these changes on individual projects and encourage more effective contract language and decision making for dealing with these impacts.

If such data is available, and before analysis starts, it needs to be reviewed to see if individual change descriptions accurately explain the reason for the change (for example, is there a bias against stating that there was a “design error” or the owner “changed criteria”) and whether the data is sufficiently detailed to extract usable keywords and phrases.  This exercise would also help contract administrators better coordinate with management to identify key data that should be tracked in the future and promote consistent change order language.

Is Dispute Resolution a Part of Risk Management

Isn’t Risk Management what you do prior to a problem occurring and Dispute Resolution what happens after the problem has occurred?

I often talk of construction dispute resolution and risk management as if they are the same thing.  If risk management is the identification, management and monitoring of each risk, that implies that a process has been established to determine how each risk will be handled.  This would include establishing who is best able to handle the risk, an approach to dealing with the risk, and subsequent monitoring to see whether those decisions are appropriate. 

If we define dispute resolution more broadly as implementing systems to deal with and reduce the impact of issues as they are identified – are the two that much different?  Some dispute resolution processes encourage consistent third-party involvement with a project from initiation to completion.  For example, Dispute Resolution Boards (DRBs) are often required to meet regularly throughout the course of a project so that they are familiar with progress and potential issues and, because of this familiarity, are able to quickly understand and deal with issues as they develop.

Many construction risks are not discrete, stand-alone occurrences, but are hard to separate from normal productive activities and often have related residual issues.  There is usually a period of time where consensus on the extent of the issue and appropriate resolution can be initiated prior to there being a significant impact if systems are in place to allow this to happen.  This process does not even have to be non-contentious – as long as there is alignment of purpose, agreements can be reached for many different and divergent reasons.

If dispute resolution is included as a part of a project’s issues escalation process, it would go a long way to meet the desired objective of avoiding or expeditiously resolving issues that could impact a project’s success.  This requires looking at ADR as not the last resort before litigation or what to do when everything else has failed, but rather as an integral part and an important element of the risk management process.

Better RFPs, Better Proposals

Owners often misunderstand how much effort goes into preparing a focused and informative proposal and, regrettably, professional service providers often don’t bother to go to the effort to prepare one because it is not always apparent that it makes a difference in the selection.  It is certainly no fun to slog your way through voluminous boilerplate that begins to look the same between each proposal.  It is also no fun to spend the time and incur the expense of preparing a comprehensive and detailed proposal if it seems that it will not be read.  

As the number of project opportunities starts to pick up with the renewed emphasis on rebuilding and expanding our infrastructure, proposers can become selective on what they seriously pursue, and owners will want to do everything possible to get the best teams working on their projects.

So, what can an owner do to improve this process? 

1) Decide what is important and tell the proposers what you want to know

This means spending the time to honestly evaluate how you will make your decision and to clearly describe the keys to making that decision.  Is it valuable to have each proposer discuss in depth their approach to every aspect of the project delivery process?  Do you value innovation?  How do you value company experience versus individual staff experience?  If what is important to you can be addressed in 20 pages instead of 120 pages, why not encourage brevity?

If an owner takes the time to explain what they want, it is incumbent upon proposers to respond accordingly. 

2) Provide all available information

Proposers spend a lot of time trying to locate and obtain all available information related to a project.  While it may be impressive that a company has the resources to dig up difficult to locate background information, it does not mean that they are the best team to do the work.

Providing all available studies and plans and conducting a thorough and informational pre-bid meeting shows that you as a client are serious and helps all proposers work from an even playing field. 

3) Shortlisting

The shortlisting process allows an owner the opportunity to tell individual proposers that they have a limited chance of being selected due to not addressing what is important, a lack of experience, or a lack of capability. 

While shortlisting might increase the amount of time and effort needed to make a selection, it will certainly increase the number of highly qualified bidders who might pursue your project and it allows you to focus on more detailed discussions ensuring better alignment between you and the successful proposer.

4) Pricing

Providing a price for professional services at proposal submission, at interview time, or in advance of a discussion of the exact scope and expectations is rarely a valuable exercise for either owner or proposer and detracts from the time that can be spent preparing a responsive proposal.  Also, for most public works projects, using price as a part of the selection for professional services is inconsistent with regulations.

While an owner may want to have some idea of the cost of what they are buying, depending on the assumptions made by each proposer, the pricing might vary significantly for what is seemingly the same work.  Wait until there is alignment on the scope of work before asking for pricing.

The Future of Construction

I take my role as a grandpa seriously and spend time visiting my granddaughter (and daughter and son-in-law).  I have been able to combine my hobby of tinkering with my visits by making improvements and building a fancy fort and swing set in their recently purchased home.  I am pleased that my two-year-old granddaughter takes her role as tinkerers assistant very seriously and shadows me as I work on various tasks around the house.  Not only does she love to play with the tools but she will watch closely what her parents or I am doing and can be seen copying the efforts with spare tools in her fort.  She has no lack of electronic toys and limited access to television, but she has a real interest in putting things together with spare materials or with Legos.  As we bemoan the lack of skilled craftspeople in the construction industry it is heartening to see that building can compete with all the other distractions that children currently have.  I look forward to bringing my granddaughter the miniature workbench that my father built for me and that my daughter played with through her childhood.  I don’t know what direction my granddaughter’s development will take but I know that she will continue to have a knowledge of the role of craftsmanship in the world that we live in and how it has a direct impact on how we live.

We need to focus on how to interest not just Millennials, but Gen Z and Gen Alpha children in the construction and engineering industry.  These are the future engineers and managers that will continue to bring 21st century tools and ideas to our industry and that will provide the ingenuity to take our infrastructure to unimagined levels of dependability and ease of use.  Equally important, we need to recognize the need to train and mentor in both directions, so that new members of the industry get the benefit of the experience of seasoned professionals and to help seasoned professionals close the technology gap that is evident in our industry.

Robust Risk Management Can Lower Costs

The intent of risk management is to identify potential issues before they occur; track these issues throughout planning, design, construction and operations; develop ways to accommodate these issues that best allocates risk; and monitor the issues as your project progresses to see if they develop and whether the plan to deal with them is appropriate.  A robust program of risk management helps to properly price and schedule a project and helps reduce those surprises that prevent a project from progressing as planned.  Tips for effective use of your risk management program include:

·        Start early.  Every assumption made during planning and design results in a potential risk.  Keep track from the beginning of the planning stage so that they are not forgotten or overlooked.  Go back regularly to check if the approach to handling each risk is appropriate and the potential impacts and probability of occurrence still make sense.

·        Be fair.  If you made the decision as an owner to limit your budget for design or research (geotechnical exploration for example), don’t be shocked if there are change requests due to differing site conditions.  Expect to set an appropriate probability of occurrence and contingency for unforeseen conditions and be prepared to deal with them in a timely manner.

·        Share your risk register.  Keeping information of where there may be problems from your contractor may not be the best way to protect yourself.  Consider whether it is better for everyone to know and discuss issues in advance or to find out the issue in the field when crews are mobilized, and delay costs are substantial.

·        Recognize that all risks can have an impact on project progress.  Advances in schedule management promote having several work areas available – dependent upon the effective flow of resources and equipment and the ability to work unimpeded – with less focus on a single critical path.  Knowing where potential problems might be helps to identify where to shift resources when there are delays and lower potential impact costs.

·        Appreciate that information collection has improved spectacularly in the past years and contractors are able to accurately measure productivity.   Calculating and claiming for a loss of productivity (the “measured mile” approach) is much more credible.  Anticipating and planning will reduce the impact when change occurs.

·        Not all change is negative.  Tracking of potential positive issues is just as important as tracking potential negative ones.  The ability to capitalize on a positive change that has been identified and monitored is just as important as avoiding problems.

Why Contractors Do What They Do

What is the impact of some common contract terms:

·        Claim notification must be submitted within ?? days of an occurrence or the claim is void

·        All costs must be submitted within ?? days or they will not be considered.

·        The amount negotiated is full and final settlement for that change

·        No total cost claims are allowed

Each of these requirements is perfectly sensible, you need to be notified in a timely manner, costs should be collected expeditiously, and once negotiated, the costs of changes should be final.  Unfortunately, many changes are not so clear-cut as to have definite start and completion dates (do you make a claim for changed conditions after the first hard driving pile of 500, the 10th, ???).  A series of changes may have a different cumulative impact than the sum of the individual changes and some changes result in incremental increases in the cost of the work (for example, a high-water table impacting the rate at which material can be excavated).   If you work in area where strict notice regulations apply, as a contractor, you may have little choice but to claim quickly and claim often in order to protect your right to recovery.  Even if substantial compliance with contractual notice is accepted in your area, why take the chance?

What constitutes notice is sometimes an issue as well.  Is formal written notice of a potential claim required, are site meeting minutes sufficient, is the change so obvious that notice is a given?

A contractor has every right to be compensated for changed conditions and, as an owner, you should want your contractors to be paid for the work that they have done and to be recognized as a partner, not a combatant, in delivery of your projects.  Ignoring contract requirements is not a solution for either party, but appreciate that your contactor may be playing by the rules that you established and react accordingly.

Alternative Dispute Resolution

It is a fact of construction life that there will be disagreements on a project.  Whether it be contract or design interpretation, site conditions, failure to deliver in a timely manner or any one of a dozen common issues that appear on a daily basis, we need to learn how to deal with them.  For a long time, we operated with two resolution approaches – settle amicably (or at least civilly) or proceed to some sort of quasi-litigious process.  While settling amicably was desirable, proceeding to more litigious solutions tended not to contribute to a good working relationship if the project was still in progress, or if resolution was delayed until the end of the project, tended to contribute to a worsening relationship as the work continued. 

Partnering evolved as an approach that encouraged amicable settlement.  It does not change contract processes but attempts to identify informal paths through which disagreements can either be resolved or passed on to a different group of individuals that may be able to reach an amicable resolution.  

While partnering has been helpful in reducing the number of unresolved disputes, some disputes will remain unresolved and this has encouraged the creation of a range of methods to resolve conflict – more complex than partnering but less expensive than litigation.  Sometimes getting independent people involved in the dispute resolution process can help. From facilitating discussions to reach a solution to bringing in experts to make recommendations, there are a range of alternatives that may help achieve agreement without damaging the working relationship.

A healthy project is one where both parties are able to achieve timely, fair, equitable and amicable settlements that allow the work to continue as intended.  We recognize that sometimes negotiations and partnering do not achieve the desired result and are able to assist clients with additional tools from Facilitation through assembling Joint Experts to get issues resolved.

New California Public Works Claims Resolution Process

New California Public Works Claims Resolution Process

Effective January 1, 2017, California Public Contract Code Section 9204 was added.  This new regulation establishes a claims resolution process for state and local public contracts.  The intent of the regulation is to ensure that contractors are paid for undisputed claims in a timely manner, that interest is due for amounts not paid in a timely manner, and that there is a process for resolving disputed issues.  Except for those entities specifically excluded, the new regulation applies to all California public entities – state agencies, local cities and counties (including charter cities and counties), districts, special districts, public authorities and others. 

The regulation puts into place a multi-step process for the handling of construction claims with specified notification and response times:

  • A contractor submits a claim, in writing, by registered or certified mail.
  • An owner has no more than 45 days to review and provide the contractor with a written response stating what parts of the claim are disputed or undisputed.  The time can be extended by mutual agreement and, if the owner must get approval from a governing board that does not meet within the allowed time period, the response must be provided within three days of the meeting of the governing board.
    • Payment of undisputed amounts must be made within 60 days after issue of the written response
    • Failure of the owner to respond within the time allowed shall result in the claim being rejected in its entirety.
  • If the contractor disagrees with the response, or of the owner fails to respond, the contractor may request in writing (registered or certified mail) an informal conference to meet and confer on the issues in dispute.  The owner has 30 days to schedule such a conference (it is unclear whether the conference must be scheduled or held within 30 days)
    • Payment of undisputed amounts must be made within 60 days after issue of the written response
  • Within 10 days following the conference, the owner must provide a written statement of any items that remain in dispute.
  • The contractor may notify the owner in writing (no time restriction is stated) of any outstanding disputed items. 
  • Any disputed issues that remain shall be submitted to non-binding dispute resolution, the costs of which will be split equally.  Agreement on the mediator must be done within 10 days after the remaining disputed issues have been identified in writing ( no time restriction is stated for submitting the dispute to the mediation process or for action by the mediator).

The last step in the process is to take the disputed claim to mediation or some other non-binding dispute resolution process.  The agency and contractor may agree to waive this step and proceed directly to arbitration or litigation, however, the intent of the regulation is to create an avenue for timely, fair and practical resolution of construction claims.  There are a variety of options available for non-binding dispute resolution but it makes sense to anticipate which approach is best for each project and agency and to include language in the contract appropriate to the option desired so that the process moves forward smoothly within the relatively short window provided.    If mediation is the desired approach, the contract should state where and how a mediator will be selected.  If it is intended to use a Project Neutral, the process for selection of this individual and the schedule for selecting this person should be stated.  If a Dispute Resolution Board (permanent or ad hoc) is the selected process, the process for member selection, selection schedule and the responsibilities of the Board need to be described.  Each of these approaches have advantages and disadvantages as well as varying costs.

The regulation does allow public agencies to be reimbursed for higher administrative costs associated with the new process so it is important that each agency have a system on place that allows for the collection of costs and time spent associated with administration of the new process.

The new law applies to all public works projects contracted after January 1, 2017 and is scheduled to sunset on January 1, 2020.