Final Compilation_March 28 Final (2)

Project Management BLDG 6571/ 4

Claim Presented to:

Professor Dr. Zhenhua Zhu

& Mr. Maged Abdelsayed

SAG MILL MECHANICAL CONTRACTOR CLAIM

Prepared by Group 10

Basil Armanazi (4624793) Mohamed Elkaranshawy (6233651)

Syed Mustafa Jibran (6388752) Sagar Maharjan (6032508)

Md Mostafizur Rahman (6384501) Mohammed Hashim Khan (6444741)

29 March 2012

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Contents

1. Project Description.................................................................................................................. 5 1.1 Project History.................................................................................................................. 5

2. Work Break down Structure.................................................................................................. 6

2.1 Area 0: Mobilization / Demobilization ............................................................................ 7

2.2 Area 1: Crusher Building ................................................................................................. 7

2.3 Area 2: Conveyors ............................................................................................................ 7

2.4 Area 3: Coarse Ore Silo ................................................................................................... 8

2.5 Area 4: SAG Mill ............................................................................................................. 8

2.6 Area 5: SAG Mill Other ................................................................................................ 9

2.7 Area 6: Secondary Grinding ............................................................................................. 9

2.8 Area 7: Piping................................................................................................................. 10

2.9 Area 9: Work performed by Millwrights ....................................................................... 10

2.10 Comparison of Planned and Actual Volume of Labor ............................................... 11

3. Summary of Problems........................................................................................................... 12

3.1 Lack of Access to Work Areas ....................................................................................... 15

3.1.1 Area 2 Conveyors ................................................................................................ 16

3.1.2 Area 3 Coarse Ore Silo ........................................................................................ 16

3.1.3 Area 4 Rubber lining Installation ......................................................................... 16

3.2 Late Delivery of Mechanical Equipment ....................................................................... 16

3.2.1 Area 2 Conveyor .................................................................................................. 17

3.2.2 Area 4 - Discharge Head Sections .......................................................................... 17

3.3 Delivery of defective Mechanical Equipment ................................................................ 18

3.3.1 Area 4 Discharge and Feed Head Section ............................................................ 18

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3.3.2 Area 4 Discharge Trunnion .................................................................................. 18

3.4 Late Issuance of IFC Drawings ...................................................................................... 19

3.5 Late Issuance of Vendor Procedures / Manuals ............................................................. 20

3.5.1 Area 4 Bull Gear .................................................................................................. 20

3.6 The conflict on installation method is highlighted from project records ....................... 20 3.6.1 Area 4 - Sole plates ................................................................................................. 21

4. Schedule-delay Analysis ....................................................................................................... 22

4.1 Contractual Requirements .............................................................................................. 22

4.1.1 Schedule .................................................................................................................. 22

4.2 Delay Analysis ............................................................................................................... 22

4.3 Evidence of the contractors compliance ....................................................................... 23

4.4 Construction Schedule.................................................................................................... 24

4.4.1 Contract Schedule ................................................................................................... 24

4.4.2 Delay Analysis ........................................................................................................ 24

4.4.3 As-planned vs. As-built technique .......................................................................... 25

4.4.4 Snapshot technique ................................................................................................. 25

4.4.5 Window technique .................................................................................................. 26

4.4.6 Modified-Collapsed As-built method ..................................................................... 26

5. Delay Cost Analysis and Quantification ............................................................................... 27

5.1 Calculating the delay damages caused by individual impact ......................................... 31

5.2 Overhead damage calculation: ....................................................................................... 31

6. Unapproved Changes ............................................................................................................ 32

6.1 Contract Review Regarding Changes ............................................................................ 32

6.1.1 Change Order .......................................................................................................... 32

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6.1.2 Change Directive .................................................................................................... 33

6.2 Quantification of Unapproved Changes ......................................................................... 34

7. Productivity Analysis ............................................................................................................ 35

7.1 Loss of labor Productivity: ............................................................................................. 35

7.2 Measured mile method: .................................................................................................. 36

7.3 Baseline method ............................................................................................................. 37

7.4 Total Cost Method .......................................................................................................... 37

7.5 Comparison of Productivity Quantification Methods .................................................... 38

8. Loss of Profit......................................................................................................................... 40

8.1.1 Quantification of Loss of Profit .............................................................................. 41

9. Interest .................................................................................................................................. 42

9.1 Contract Review Regarding Interest on Amounts Overdue ........................................... 42

9.2 Interest Cost Analysis and Calculation .......................................................................... 42

9.2.1 Calculation .............................................................................................................. 43

10. Conclusion ......................................................................................................................... 44

11. Reference ........................................................................................................................... 45

12. Appendix A ........................................................................................................................ 46

13. Appendix B ........................................................................................................................ 48

14. Appendix C ........................................................................................................................ 49

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List of Figures

Figure 1. Work Breakdown Schedule ............................................................................................. 6

Figure 2. Actual Work Breakdown Schedule ............................................................................... 11

Figure 3. Equipment Delivery Delay Percentage for Each Area .................................................. 17

Figure 4. Man-hour Comparison Graph........................................................................................ 37

Figure 5. Interest Rates of BOC .................................................................................................... 49

List of Tables

Table 1. Comparison of Planned and Actual Work Volume ........................................................ 11

Table 2. RFC Drawings Issued per Month ................................................................................... 19

Table 3. Schedule Description table ............................................................................................. 28

Table 4. Delay Durations per Area ............................................................................................... 29

Table 5. Compensable and Non-compensable Delay days ........................................................... 29

Table 6. Site Overhead per Day and the Delay Cost .................................................................... 30

Table 7. Productivity Analysis from Measured Mile Method ...................................................... 36

Table 8. Equipment Delivery Dates .............................................................................................. 47

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1. Project Description

1.1 Project History

In this Project, the SAG Mill, it consists of erecting mechanical equipment and installation of piping for a mill plant in which it processes ore and reduces its size. In the tender, the contractor submitted his proposal and negotiated the terms of the contract according to procedures determined by the owner. Contract was administered by an Engineer who was appointed by the owner as his agent in which he represents the owner on his behalf, according to the contract. In the SAG Mill project according to the contract, the price for the lump-sum contract for the mechanical installation was $2,549,130. The Project was scheduled to start and begin on April 30 1990; the completion of the work was scheduled to be finished by August 31 1990. It was outlined in the contract that work was scheduled for 40 hours per week, except from July 9 1990 to August 6 1990 as work was ceased for one month period as plant commercial operation was ceased in that period. Work schedule was increased to 60 hours per week during that period. The mechanical contractor was awarded a contract for installation of equipment from the owner of the SAG MILL on May 03 1990. A list of 107 mechanical equipment and delivery dates was included in the contract as to be supplied by the owner; 39 of them scheduled to be on site at the start of the work, 24 in May, 41 in June and the final 3 pieces are scheduled to be delivered in early July 1990, as the contractor had the responsibility of installing the equipment only. But unfortunately the majority of equipment was delivered late by the owner. So they werent installed as planned in schedule. The contractors schedule was identified on 25 April 1990. As per this schedule the work ends on 31 August 1990 (123 calendar days). On December 1990, the mechanical installation stopped 3 months later than the contract completion date, according to man-hours records. As by that date less than 95% of the project was completed, according to progress billings ending on 18 January 1990. On November 21st, 1990, Engineer appealed for the termination of the contract procedure within the Contractors contract with respect to one portion of the work. On December 13th, 1990, Engineer advised Contractor that he considered the contract to be complete. In fact, the Contractor worked actively on the project from 7 May 1990 to 19 December 1990 (226 calendar days).

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2. Work Break down Structure

The work breakdown structure divides the work to be performed into 7 areas as it has been described in history of work.

Area 0: General - Mobilization / Demobilization Area 1: Crusher Building

Area 2: Conveyors Area 3: Coarse Ore Silo

Area 4: SAG Mill

Area 5: SAG Mill - Other Area 6: Secondary Grinding Area 7: Piping

Area 9: Work performed by Millwrights. (Obtained from man-hour records)

Area 1

9%

Area 2

21%

Area 3

14%Area 4

24%

Area 5

24%

Area 6

8%

Work Breakdown Structure

Figure 1. Work Breakdown Schedule

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2.1 Area 0: Mobilization / Demobilization

In reality the contractor was rewarded the contract on May 03 1990. But the schedule was to begin mobilization on April 30 1990, by the contractor. At that point the contractor could proceed mobilizing his forces and equipment into the project site. However, the work started only from 7 May 1990.

2.2 Area 1: Crusher Building

In this area:

The ore is extracted from the base of a bin after its directly received from the mine.

Then the ore is transported with conveyors to a series of cone crushers, where it can be reduced in size.

Then it is feed elsewhere in the mill for further processing.

The scopes of work to be performed by the contractor in this area are:

Removing the existing belt conveyors (1, 2 and 9). Removing the existing drive, motor and base plate for apron Feeders 1 and 6.

Breaking out the existing concrete bases for the drive, motor and base plate for apron Feeders 1 and 6.

Forming and pouring the new concrete bases for the drives and motors for apron Feeders 1 and 6.

Installing, aligning and coupling the new drives and motors.

Modifying existing chute work for apron feeders 1 and 6.

The relative volume of labor in this area is 9% according to the original contract.

2.3 Area 2: Conveyors

In this area:

It consists of 2 outdoor conveyors transporting the ore between the Crusher Building, the Coarse Ore Silo and the SAG Mill Building.


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Off-loading conveyors, drives and accessories from rail cars and transport to site;

Assembling and erect the bents;

Erecting the conveyor galleries;

Completing assembly of conveyors;

Installing drives, motors, chutes and conveyor belts.


2.4 Area 3: Coarse Ore Silo

In this area:

The ore is temporarily stored inside a Coarse Ore Silo in order to provide a surge capacity between the SAG Mill and the Crusher Building.


Erecting the penthouse steel, roofing and siding;

Installing the apron feeders including drives and associated plate work;

Erecting the silo crane hoist in the penthouse.


2.5 Area 4: SAG Mill

In this area:

It contains installing the SAG MILL which is the largest single item in the contract as it consists of a center shell and two heads.

Coarse ore is fed to the SAG Mill via SAG feed conveyor. Then the coarse ore is broken down into smaller pieces when the SAG mill rotates.

The manufacturer supplied two jacking cradles, together with four 400-ton hydraulic jacks and controls, for the purpose of erecting the SAG Mill.


Installing the 32-foot diameter SAG mill and all accessories;

Aligning the SAG mill per manufacturers requirements;

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Sandblasting the SAG mill shell interior and installing rubber lining;

Installing the SAG mill lube system, lining, grates, lifters and trunnion liners;

Installing and commissioning liner handling machine and mill jack crates; Installing SAG mill main driver motors, cooling fans with drives, motors and cooling coils;

Supplying and installing connecting ducts between cooling fans and mill motors.


2.6 Area 5: SAG Mill Other

In this area:

It contains a number components and equipment other than the SAG Mill itself that relates to the operation.


Installing plate work, magnets, cone crusher, lube system, pumps and vibrating screens.


2.7 Area 6: Secondary Grinding

In this area:

It contains ball mills and cyclone clusters processing the ore originating from the SAG mill.

Ore in the form of slurry, originating from the SAG mill is fed into the cyclone clusters and then into the ball mills.

There is one ball mill for each cyclone cluster.

The ball buckets feed steel balls into the ball mills.

The ball mills rotate and break the slurry down into finer material for further processing.


moving one existing cyclone cluster;

Receiving and installing three new cyclone clusters;

Removing the existing pinion and bearings and replacing them with new assembly components on ball mills 4 and 5;

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Removing the discharge trammel from ball mill 4;

Carrying out piping work on ball mill 3, 4 and 5;

Installing a reservoir and a series of chutes to feed balls into ball mills 3, 4 and 5.


2.8 Area 7: Piping

In this area:

The piping work was spread out over all areas (Areas 1 to 6) and was consequently considered as the 7th work area.

All the piping work is referred to as Area 7.

The works to be performed by the contractor in this area are:

The piping work that had to be done in all areas was considered separately from the mechanical equipment erection work.

2.9 Area 9: Work performed by Millwrights

According to the data available from the man-hour record, it can be seen that the considerable amount of the work was to be performed in this area of project. Due to the lack of sufficient information, it is hard to mention the nature of the work in this area since there was no mention of this area in the contract, the bid man-hours and the daily log sheet.

The actual volume of labor per area was obtained from the man-hour records as shown in next page.

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These records also showed that the Contractor spent man-hours in Area 9, which was work performed by Millwrights.

2.10 Comparison of Planned and Actual Volume of Labor

Area Volume of Labor

Planned Actual

0 - 4% 1 9% 4% 2 21% 10% 3 14% 4% 4 24% 21% 5 24% 9% 6 8% 2% 7 - 22% 9 - 24%

TOTAL 100% 100% Table 1. Comparison of Planned and Actual Work Volume

Area 04% Area 1

4% Area 210%

Area 34%

Area 421%

Area 59%

Area 62%

Area 722%

Area 924%

Actual Volume of Labour per

Area

Figure 2. Actual Work Breakdown Schedule

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Work performed in Area 9 contains the majority of the actual labor volume that was performed (24 %). This area had no information regarding the scope of work and the phases it actually represented during the project. Its presence was only shown in the man-hour sheet from the project records and it had to be included when evaluating the labor distribution due to its overall impact on the project. Area 7, which represents the work done by pipefitters in all areas, Millwrights preformed the mechanical work in all the other areas. Mechanical work continued well after the contract completion date of August 31 1990, according to the records until December 13 1990 as the contractor received a notice of termination by the Engineer which says:

You are hereby advised that Wright Engineers Limited considers Contractor Construction Inc.'s contract to be complete. Contractor is hereby directed to commence demobilization of its equipment and workforce immediately and to complete its demobilization by 4:00 p.m. on Friday, December 14, 1990. Contractor shall return to Wright Engineers Limited all Owner supplied materials, equipment and tools by 4:00 p.m., Friday, December 14, 1990...

As mentioned in the reply to the Engineers letter, the contractor continued to work on a cost plus basis as the contract had not been fully executed. According to the man-hour records, work stopped on December 19 1990 and it was late 110 calendar days than the contract completion date.

There were several problems that the contractor faced during the duration of the project, these problems affected the productivity of the project and resulted in many delays. The contractor overruns the estimated direct man-hours as in the original contract scope of work.

3. Summary of Problems

The Contractor had encountered several problems that occurred throughout the project which affected work performance and imposed significant delays. A summary to those major problems was made and listed according to affected areas:

Area 0

Majority of work carried out was in the form of imposed unapproved changes Extra work for other contractors

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Extra arising from winter conditions

Latest IFC drawing issued in August 1990

Area 1

Late delivery of equipment (feeders, feeder chutes, drives) Delay in completion of civil works (for feeder #1) Lack of access by civil contractor


Area 2

Late delivery of equipment (Pebble conveyor, belt conveyors). Incorrect equipment accessories from suppliers (such as anchors bolts, material for plates). Poor work on concrete foundations by others leading to modification requirements to bents.

Poor design information.

Lack of access - Acadia contractor working on repairs.

Imposed extra work - Rescrubbing conveyor galleries, assisted Acadia contractor with welds.


Area 3

Late delivery of equipment penthouse steel, steel decking, liners, feeders, chutes, crane hoists)

Defect by others(Chute fabrications, liner fabrication, grout under feeders, train trolley)

Incorrect equipment accessories from suppliers (such as anchors bolts, material for plates)

Imposed extra work

Area 4

Late delivery of equipment (discharge head suctions, SAG Mill, liner handler, chutes,

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motors, jack cradles) Over casting of discharge head sections resulting to extra work to drill in the cast

Incomplete sole plate concrete foundations by others.

No manual received for SAG mill erection despite previous requests (No start until June 28th) Imposed extra work due to delays and errors from others

Area 6

Late completion of structural steel work by others

Extra work done by others. (Inco) Defected equipment (cyclones) Late delivery of equipment ( Pinion assembly) Imposed extra work (repositioning of ball mill, other work that should be done by others)

Area 7

Late delivery of equipment ( hydraulic units and cylinders, chute, accessories) Lack of drawings for pipe routings

Area 5

Delay by civil works to finish crusher base

Late delivery of equipment (chutes, lube system, pumps, distribution box) Delay access to Magnets by others

Extra work due to deficiencies in equipment and fabrications ( transition chutes, pump box, distribution box) Delay to start of structural steel by others

The problems just mentioned corresponded to the delays of the schedule and impacts on the performance caused by the Owner. Project progress was affected mainly by changes in information regarding delivery of equipment, changes in access for unloading equipment,

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changes in access for the erection work, changes in the methods specified, and changes to the scope of work to be performed. Those problems are discussed in more detail in the subsequent sections in this report. It should also be noted that delays caused by labor disputes, strikes, lock-outs, fire and such, though beyond the Contractors control, are not subject to compensation per contract clause 6.5.3.

6.5.3 If the Contractor is delayed in the performance of the Work by labor disputes, strikes, lock-outs (including lock-outs decreed or recommended for its members by a recognized contractors' association, of which the Contractor is a member or to which the Contractor is otherwise bound), fire, unusual delay by common carriers or unavoidable casualties, or without limit to any of the foregoing, by a cause beyond the Contractor's control, then the Contract Time shall be extended for such reasonable time as the Consultant may recommend in consultation with the Contractor. The extension of time shall not be less than the time lost as the result of the event causing the delay, unless the Contractor agrees to a shorter extension. The Contractor shall not be entitled to payment for costs incurred by such delays unless such delays result from actions by the Owner.

As such, delays of this nature will only not be evaluated for payment for costs incurred since such delays for this project were not caused by the Owner and are considered as excusable/non-compensable (EN) delays.

3.1 Lack of Access to Work Areas

The project records show that the Contractor was experiencing difficulties executing contract work. In a letter dated June 06th, 1990, the Contractor notified the Engineer the gravity of these problems and addressed several areas, notably conveyors and coarse ore silo. Daily site reports for these areas indicate access problems, such as modifying existing steel and removing existing grids for the conveyors and repairs due to structural errors for the coarse ore silo. In all cases, the Owner was contractually responsible for all site work preparation. Furthermore, access to proceed should have been available on dates specified in the contract.

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3.1.1 Area 2 Conveyors

The contract schedule for Area 2 Conveyors, for instance, showed a start date of April 27th, 1990. According to the daily site reports, the Contractor was performing preparatory work in June 1990 to provide access to begin contract work in that area.

3.1.2 Area 3 Coarse Ore Silo

The contract schedule for Area 3 Coarse Ore Silo also showed a start date of April 27th, 1990. According to the daily site reports, the Contractor was performing preparatory work in June 1990 to provide access to begin contract work in that area.

3.1.3 Area 4 Rubber lining Installation

The installation of the rubber lining of the mill shell and head sections were delayed until testing and quality control on SAG mill head section were performed by Boliden Allis. The Contractor was scheduled to install the rubber lining on July 09th, 1990 but did not begin until July 12th, 1990, whereupon the Contractor was required to perform extra work re-cleaning and re-sandblasting the sag mill head sections due to the testing done by Boliden Allis.

3.2 Late Delivery of Mechanical Equipment

Per contract, the contractor will receive 107 pieces of equipment from owner and erect it according to the procedures, specification and drawings provided by owner. Delivery dates for each piece was also included in the contract. The majority of the equipment was delivered late in the project. The delayed delivery schedule affected work performance in all areas. The equipment delivery dates were repeatedly postponed and oftentimes the Contractor was unaware until the actual delivery date. The equipment was scheduled to be delivered to the site as follows:

39 pieces were be on site at the start of the work

24 units were to be delivered in May,

41 units were to be on site in June

3 pieces were to be delivered in early July 1990.

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In fact, most equipment was delivered late to the site which caused significant delay in the schedule and additional costs to the contractor. See Appendix A for the detailed summary for all the equipment delay for each area.

The areas most affected by equipment delays were areas 4 and 5, which represent the bulk of the contract work. The severities of the impact of these delays are confirmed in Figure 2-1, which shows the breakdown of equipment deliver delay by area.

3.2.1 Area 2 Conveyor

The mechanical equipment list shows that the forecasted delivery date for the 48wide belt conveyor is May 01 1990. In reality, the conveyors were delivered piece by piece and the actual delivery date was postponed several times. The remaining pieces arrived on July 16 1990, 76 calendar days behind schedule, causing a 9-week delay to the Contractor.

3.2.2 Area 4 - Discharge Head Sections

The schedule date for the delivery of the SAG mill discharge head sections was May 31 1990. During a meeting dated June 14 1990, the Engineer postponed the delivery of the SAG mill discharge head sections D, E, F due to a mishap at Boliden-Allis, claiming that said pieces would

3%3%

12%

11%

13%

34%

4%

20%

0 General

1 Crusher Building

2 Conveyors

3 Course Ore Silo

4 SAG Mill

5 SAG Mill Other

6 Secondary Grinding

7 Piping

Figure 3. Equipment Delivery Delay Percentage for Each Area

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be delivered by the second week in August. At the same time, drawings for the installation and erection of the SAG mill were still outstanding; the Contractor was waiting for Boliden-Allis to provide them. The delivery date was once again postponed during a meeting held on July 05 1990. The equipment was finally delivered on 31st August 1990, causing a 13-week delay to the Contractor.

3.3 Delivery of defective Mechanical Equipment

The contract does not require the contractor to inspect the equipment. The Contractor had the sole responsibility of installing the equipment only. However, several pieces of equipment were delivered in a damaged or defective condition.

3.3.1 Area 4 Discharge and Feed Head Section

The discharge and feed head section were fabricated by Boliden Allis and delivered to site, whereupon the Contractor discovered that the shell head section was overcast. As a result, the Contractor performed extra work on grinding the mill head sections to allow socket access for tightening of bolts. The daily site reports show that this extra work was performed from September 14 1990 to November 20 1990.

The bolts no longer matched specified requirements due to overcasting on the head section by Boliden Allis. The Contractor informed the Engineer that bolts would be installed per Boliden Allis and Engineer instructions in a memo dated November 141990. During the bolting operation, the Contractor discovered that the bolts for the discharge head liner were too short and required removal and replacement on November 12 1990. The daily site reports indicate that the Contractor replaced the liner bolts for correct longer ones on November 28 1990.

3.3.2 Area 4 Discharge Trunnion

During the installation of the discharge trunnion on September 11 1990, which was provided by the Owner, the Contractor discovered that the orientation of the mounting holes was incorrectly laid out by Boliden Allis. This discrepancy disrupted the Contractors installation sequence because the discharge trunnion had to be removed and then moved outside to be re-drilled by Boliden Allis. The Contractor performed due diligence by assisting Boliden Allis in solving

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these issues. The daily site reports confirm that all rework on the discharge trunnion had been completed on September 27 1990, causing a 15-working day delay to the Contractor.

The delays caused by the Owner and his selected manufacturer not only impacted the installation of the discharge trunnion, but also affected the SAG mill assembly sequence, which represents the bulk of the contract work to be performed by the Contractor.

3.4 Late Issuance of IFC Drawings

Although the contract did not specify issue dates for RFC drawings, project records indicate that a large number of drawings, new and revised, were issued after April 30 1990, the as-planned start date of the project.

Are

a 1

Are

a 2

Are

a 3

Are

a 4

Are

a 5

Are

a 6

Are

a 7

Are

a 9

Tota

l

March 1990 7 2 36 27 1 9 4 7 93

April 1990

0

May 1990 8 2 26 56 4 9 13 55 188

June 1990 2

21 12 1 2 2

40

July 1990 1

18 9 1

2 31

August 1990 1

7

1 4 13

September 1990

17 7

24

October 1990

5

5

November 1990

2 10 2

3 17

Total 19 4 120 148 9 20 20 71 411

Table 2. RFC Drawings Issued per Month

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The table above shows that a total of 411 drawings were issued throughout the project, of which 130 drawings were issued after the project had commenced in May 1990. As a result, 32% of the total project drawings were issued after work had already begun. Furthermore, revision to drawings occurred frequently until November 1990, even though the project was originally scheduled to end by August 31 1990. The late issuance of drawings had major impacts on all areas as shown in the above table.

3.5 Late Issuance of Vendor Procedures / Manuals

3.5.1 Area 4 Bull Gear

According to the daily site reports, the Contractor performed the installation of the bull gear from October 11 1990 to December 08 1990. The procedure for installation and heating method was not clearly defined and the Contractor issued several requests for information to the Engineer in order to properly install the equipment.

3.6 The conflict on installation method is highlighted from project records

Facsimili dated October 23 1990 from Boliden Allis (BA) to BA site representative: we have decided that our standard tightening procedure as defined in the manual should be used not the one shown on Thyssens drawing.

Daily Site Report dated October 31 1990: The bottom half of gear has been assembled, aligned, bolts sweated on and ready for assembly. Top half is on process.

Facsimili dated October 31 1990 from Boliden Allis (BA) to BA site representative: Bolt Elongation. Attached is corrected value: Head/shell bolt should be 0.03 instead of 0.026 Head/shell/gear bolt should be 0.04 instead of 0.035.

Handwritten memo dated November 05 from the Contractor: Conflict in methods! Between B.A and contractor. Contractor feels Boliden method is a short cut and the possibility exists that tolerances achieved so far maybe lost by loosening whole 1/2 of gear.

The expediency in which these issues were handled impacted the Contractors performance on work performed in this area.

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3.6.1 Area 4 - Sole plates

The work for pinion soles plates started on May 24 1990 without the erection manual for the SAG mill despite several requests made by the Contractor to obtain said manual. At the onset of the operation, the Contractor discovered that the anchor bolts installed by the Owners civil contractor were not accurate. The Contractor informed the Engineer on June 06 1990 about this matter. Response from the Engineer was postponed on several occasions and, when received, was a verbal solution to the pinion sole plate rework performed by others. The installation of the sole plates was completed by September 05, 1990.

The Contractors performance was severely affected by the Engineers lack of urgency on this matter. Indeed, the following contract clauses clearly defined the course of action that the Engineer and the Owner should have followed:

2.2.9 During the progress of the work the consultant will finish supplemental instructions to the contractor with reasonable promptness or in accordance with a schedule for such instructions agreed to by the consultant and the contractor.

3.2.2 When separate contracts are awarded for other parts of the project, or when work is performed by the owners own forces, the owner shall: 5.take all reasonable precautions to avoid labor disputes or other disputes on the project arising from the work of other contractors or the owners own forces.

3.2.3 When separate contracts are awarded for other parts of the project, or when work is performed by the owners own forces, the contractor shall: 4.where part of the work is affected by or depends upon for its proper execution the work of other contractors or owners promptly report to the consultant in writing and prior to proceeding with that part of the work, any apparent deficiencies in such work.

The project records indicate that neither the Engineer nor the Owner executed due diligence concerning work on the pinion sole plates.

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4. Schedule-delay Analysis

4.1 Contractual Requirements

4.1.1 Schedule

The Contractor fulfilled his contractual obligations with regards to the schedule as stipulated in the requirements below:

The Contractor has to:

Prepare and submit to the owner and the consultant prior to the first application for payment, a construction schedule that indicates the timing of the major activities of the work and provides sufficient detail of the critical events and their inter-relationship to demonstrate the work will be performed in conformity with the contract time.

Monitor the progress of the work relative to the construction schedule and update the schedule on a monthly basis or as stipulated by the contract documents and

Advice the consultant of any revisions required to the schedule as the result of extensions of the contract time as provided in Part 6 of the General Conditions Changes in the Work.

4.2 Delay Analysis

The Contractor is eligible for the time extensions for delays caused by the Owner, stop-work orders, labor disputes and strikes as specified in the requirements below:

6.5.1 If the Contractor is delayed in the performance of the Work by an action or omission of the Owner, Consultant, or anyone employed or engaged by them directly or indirectly, contrary to the provisions of the Contract Documents, then the Contract Time shall be extended for such reasonable time as the Consultant may recommend in consultation with the Contractor. The Contractor shall be reimbursed by the Owner for reasonable costs incurred by the Contractor as the result of such delay.

6.5.2 If the Contractor is delayed in the performance of the Work by a stop work order issued by a court or other public authority and providing that such order was not issued as the result of an act or fault of the Contractor or any person employed or engaged by the Contractor directly or indirectly, then the Contract Time shall be extended for such reasonable time as

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the Consultant may recommend in consultation with the Contractor. The Contractor shall be reimbursed by the Owner for reasonable costs incurred by the Contractor as the result of such delay.

6.5.3 If the Contractor is delayed in the performance of the Work by labor disputes, strikes, lock-outs (including lock-outs decreed or recommended for its members by a recognized contractors' association, of which the Contractor is a member or to which the Contractor is otherwise bound), fire, unusual delay by common carriers or unavoidable casualties, or without limit to any of the foregoing, by a cause beyond the Contractor's control, then the Contract Time shall be extended for such reasonable time as the Consultant may recommend in consultation with the Contractor. The extension of time shall not be less than the time lost as the result of the event causing the delay, unless the Contractor agrees to a shorter extension. The Contractor shall not be entitled to payment for costs incurred by such delays unless such delays result from actions by the Owner.

6.5.4 No extension shall be made for delay unless notice in writing of claim is given to the Consultant not later than ten working days after the commencement of delay, providing however, that in the case of a continuing cause of delay only one notice of claim shall be necessary.

4.3 Evidence of the contractors compliance

Contractor sends letter to Engineer on June 6th, 1990 regarding changes and difficulties quantifying changes in areas 2/3/4.

Contractor sends letter to Engineer requesting 3 month extension.

Contractor sends letter to Engineer on Aug. 16th regarding effects of imposed changes made on the project.

CONTRACTOR submits quotation [on 22 Aug 90] regarding drawing revisions and note as follows: due to significant number and extent of the attached revisions and the total number of man-hours required to complete this work, CONTRACTOR will require an extension of 4 weeks to their construction schedule.

During Project Review Meeting No. 4 [dated 05 Jul 90], CONTRACTOR submitted a revised schedule dated July 4th, 1990. Revised schedule shows a completion date of November 30th, 1990.

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During Project Review Meeting No. 10 [dated 30 Aug 90], CONTRACTOR submitted a revised schedule dated August 30th, 1990 indicating a completion date of December 30, 1990.

In a letter dated 22 Oct 90, CONTRACTOR submits latest schedule and record major problem relating to the SAG mill only. Approximate delays are shown for each.

From the information listed above, it is clear that the contractor was constantly updating the client about any changes, difficulties, delays and extension requests during the project execution.

4.4 Construction Schedule

4.4.1 Contract Schedule

Three schedules were provided on different dates i.e., on April 17 1990, April 25 1990 and August 30 1990. The schedule dated April 17 1990 is considered as the original as-planned schedule. The schedule dated April 25 1990 is considered to be the revised as-planned schedule made following the bid clarification meeting dated April 23 1990. The schedule dated August 30 1990 is the revised project schedule submitted by the contractor showing a completion date of December 30, 1990. This schedule incorporates as-built progress as well as forecasted activity schedule for the remaining work until completion. The last schedule issued prior to contract award is the one considered as the contract planned schedule, i.e. planned schedule dated April 25 1990. This schedule shows the project start date on April 30, 1990 and end date on August 31, 1990.

4.4.2 Delay Analysis

Delay analysis is categorized as process-based, mathematical and computer-based models. There are various methods developed and used for analyzing and measuring Construction schedule delays. However, these methods have different analytical approaches and require different Information. For a complicated delay case, different method may provide different results, and require different input data. That is, no single method is universally accepted by all project participants, suitable for all situations. The common delay analysis techniques used will be discussed in addition to a modified technique that was carried out on the current case named Modified Collapsed As-Built method.

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4.4.3 As-planned vs. As-built technique

An as-planned schedule is an initial approved schedule submitted by the contractor to the owner for a project. The as-planned schedule is regarded as a baseline schedule or a target schedule for managing a project. An as-built schedule is the final schedule for a project and is usually prepared when the project is completed and contains all the actual start and finish dates, and the disruptions (for example, delays) that have occurred in the project. An adjusted schedule is obtained by modifying the as-planned or as-built schedule according to the method dictated by the chosen delay analysis technique. This method simply compares the baseline or as-planned schedule with the final or as-built schedule. The time owed is calculated by subtracting the time planned from the actual time expended to determine. The forward path method systematically calculates the delay value from an as-planned schedule to an as-built schedule; the backward path method systematically calculates the delay value from an as-built schedule to an as-planned schedule; and the dynamic method systematically calculates the delay value in specific time frames forward or backward from as-planned and as-built schedules.

Although this method is simple to apply and is straight forward in comparison to the other methods, it is not usually accepted as a strong base to support a claim. This is due to its lack of detailed examination on the delays, the assumption that full blame is on the other party, lack of addressing real time CPM and concurrent delays. The delay calculation is simply the difference between the finish date of the As-Built and the finish date of the As-planned schedule holding the other party full responsibility on the entire delay duration.

4.4.4 Snapshot technique

The snapshot analysis (SA) method is based on the as-planned, as-built and any revised schedules that have been implemented during the execution of a project. This method divides the as-built schedule into a number of consecutive snapshot (time period) and updates the as-planned schedule by imposing all delays that occur in each snapshot and in succession. The method records the delay caused by each update, and then summarizes all the recorded delays. The total project duration is divided into a number of time periods, called snapshots. The dates of these snapshots usually coincide with major project milestones, significant changes in planning or times when a major delay or group of delays is known to have occurred. The relationships and

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duration of the as-built schedule within the snapshot period are imposed upon the as-planned schedule, while maintaining the relationships. The SA method calculates the delay value based on each snapshot from the as-planned schedule and then summarizes project delay values from all analyzed snapshots for each contract party.

4.4.5 Window technique

The windows analysis (WA) method, also called the contemporaneous period analysis method, analyzes delay event(s) on a predefined time period (termed as a window). This section focuses on the traditional windows analysis method, although variants such as the daily windows and delay section methods have been proposed. The analyst identifies several analysis windows from the as-planned schedule, and then puts delays in their proper windows within the overall context of the project to calculate the delay value in one window. Like the SA method, the WA method also computes the delay value according to each window from the as-planned schedule, and then summarizes project delay values from all analyzed windows for each contract party. However, the main differences between the SA and WA methods are the algorithms to determine the analysis timeframe and to settle the relationships and duration of activities within the timeframe.

4.4.6 Modified-Collapsed As-built method

This technique uses the As-built schedule with all delays injected in the schedule indicating clearly when there was actual work done and when nothing was done. The As-built schedule is then collapsed removing all the delays resulting to an As-built schedule that would portray the progress that could have been made if the delays did not occur. The delay duration in this case can be computed by calculating the difference between the finish dates of the As-built schedule delays included- and As-built schedule delays removed-. Furthermore, this technique can be applied to multiple phases in the project and can thus be used to address and parallel delays taking place and take the net values in constructing the As-built schedule.

This method offers the following:

Draws an accurate picture in identifying every single delay that has occurred throughout the project.

Address parallel delays.

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Provides the ability to draw an accurate comparison between the Collapsed as-built schedule and the original as-planned schedule to verify whether the work could have been performed according to the original schedule or not if the delays did not occur.

Just like the other analysis tools, the Modified-Collapsed As-Built method has disadvantages such as:

It assumes full delay responsibility on the other party since the delays in the schedule can only indicate the delay duration rather than responsibility.

It assumes that the CPM logic is constant and does not change throughout the project. This can lead to inaccurate results since the critical path most likely will change during the course of the project.

In this case, it was decided to use this method among the other methods due to the following reasons:

It was assumed in this case study that the CPM logic did not change.

There was a series of continuous problems which had significant impacts on the project. (See problem summary)

This method was able to establish an accurate detailed as-built schedule showing all the delays at all phases of the project.

The snapshot method is more accurate and acceptable but is a time consuming method. It was attempted at start to apply the snapshot technique on this case but after a series of trials and research, and with different results on test cases, it was aborted since the snapshot technique appeared to be greatly time consuming and was providing indefinite results.

As a result, it was decided to proceed with the Modified-Collapsed As-Built method to perform the delay analysis.

5. Delay Cost Analysis and Quantification

The table below was compiled from bar graphs showing the project schedules. The full detailed scheduled by area representing the As-planned, As-built, Collapsed As-Built, and Collapsed As-Built (with no extra work) can be found in the graph in Appendix B of this report.

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Activity Description Schedule Type START DATE END DATE

Entire Project Planned 30-Apr-90 31-Aug-90 Entire Project As-Built 03-May-90 19-Dec-90 Entire Project Collapsed As-Built 03-May-90 4-Oct-90

Entire Project Collapsed As-Built (No Extra work)

03-May-90 11-Sep-90

Table 3. Schedule Description table

Delay = Difference between the finish dates of the actual As-built and the Collapsed-as-built -with no extra work

This table was produced for each area of work throughout the project before producing the above table (and schedule). By applying this method to all areas, it was possible to derive an actual as-built schedule with all the delays that have taken place. The purpose of applying this method to all areas was to remove any parallel delays and parallel work done on the project as a whole and thus to produce an accurate as-built schedule that contains the actual delays encountered by day and take the earliest and latest finish dates among the work areas to produce the start and end dates of the as-built schedule. Additionally, the areas with major delays act as an indicator to where and why such delays occurred and how they affected the project. Basically, each are was analysed by comparing four schedules (As-planned, As-built, Collapsed-as-built, Collapsed as-built without extra work-). Collapsed as-built without extra work- refers to what the collapsed as-built schedule would look like if the unapproved extra work not included in the original contract were also extracted from the schedule. The delay imposed by unapproved change orders was computed by using the man-hour data.

Rate of work spent on extra unapproved work (R) = (Extra man-hours / total man-hours) * 100 Number of extra work days = R/100 * Project duration (collapsed as-built) Extra man-hours = 11643 hrs.

Total man-hours = 75814 hrs.

R = (11643/75814) x 100 = 15.4% Delay from extra work days = 0.154 x 158 = 24 days

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This way one can make a more accurate comparison with the original as-planned to determine whether the work would have been executed according to plan. The numerical details of the delay durations can be found on the schedule graph in Appendix B. It can be noticed from table 4 that the collapsed as-built after removing the extra work exceeds the as-planned duration by twelve days. Those twelve days are the contractors responsibility and are regarded as non-excusable (NE) non-compensable (NC) delays.

Area As-built

start date

As-built

finish

date

Duration

(As-built)

As-built

collapsed

start

As-built

collapsed

finished

Duration

(As-built

collapsed)

Delay

days

0 05-Jul-90 19-Dec-90 235 30-Apr-90 22-Aug-90 116 119

1 27-Jul-90 13-Dec-90 229 30-Apr-90 13-Jul-90 75 153

2 15-May-90 13-Dec-90 229 30-Apr-90 17-Sep-90 141 87

3 13-Jun-90 06-Dec-90 222 27-Apr-90 25-Jul-90 87 134

4 24-May-90 13-Dec-90 229 30-Apr-90 04-Oct-90 158 70

5 22-Jun-90 13-Dec-90 193 04-Jun-90 04-Oct-90 123 70

6 25-Jul-90 11-Dec-90 191 04-Jun-90 05-Aug-90 63 128

7 09-Jul-90 13-Dec-90 229 30-Apr-90 25-Aug-25 119 110

9 07-May-90 19-Dec-90 227 - - - -

Table 4. Delay Durations per Area

The delays listed in the table above were then compiled to filter out the parallel delays where the latest finish and earliest start dates amongst all the areas were used as the start/end time frame for the entire project and any parallel delays eliminated. (Graphical presentation can be seen in Appendix B)

The delays encountered can be summarized as follows:

Delays (days) Excusable Non-Excusable

Compensable 95 -

Non-compensable 5 11

Table 5. Compensable and Non-compensable Delay days

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The overall duration of the project was increased by one hundred days. This number includes delays caused by the labor strike that took place in November 1990. However, the contractor is not entitled to compensation caused by the labor strike as stipulated in contract clause 6.5.3:

...The Contractor shall not be entitled to payment for costs incurred by such delays unless such delays result from actions by the Owner.

Since the Contractor is only entitled to a time extension as a result of the strike, the equivalent of one working week, or five working days, was deducted from the delta duration. As such, a total of ninety-four days is subject to reimbursement by the Owner for costs incurred by the Contractor as a result of delays. The cost per unit for each item was converted to a daily cost using conventional duration for years as 365 days, months as 28 days and weeks as 5 days corresponding to the company costs provided in the project documents. The overall duration of the project is to be increased by one hundred days. This number includes delays caused by the labor strike that took place in November 1990. However, the contractor is not entitled to compensation caused by the labor strike as stipulated in contract clause 6.5.3.

...The Contractor shall not be entitled to payment for costs incurred by such delays unless such delays result from actions by the Owner.

Since the Contractor is only entitled to a time extension as a result of the strike, the equivalent of one work week, or seven calendar days, was deducted from the delta duration. As such, a total of ninety days is subject to reimbursement by the Owner for costs incurred by the Contractor as a result of delays. The cost per unit for each item was converted to a daily cost using conventional duration for years as 365 days, months as 28 days and weeks as 7 days.

Description Per Year ($) Per Month ($) Per Week

($) Per Day ($)

1 Project Manager's Salary 75000.00

1442.31 288.46 2 General Foremans Salary 54000.00 4500.00 1038.46 207.69 3 Phone / Utilities on site 4800.00 400.00 92.31 18.46 4 Site office trailer and support

500.00 100.00 5 Crane/tools

250.00 Total Costs incurred per day 864.62

Delay Costs = 95 days * $ 864.62/ day = $ 82,139.00 Table 6. Site Overhead per Day and the Delay Cost

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Total cost after the markup of 3% = 1.03 * $ 82,139.00 = $ 84603.17

5.1 Calculating the delay damages caused by individual impact

Individual impact is the claims for the recovery of unabsorbed or misallocated indirect expenses. Such claims arises whenever the performance of a contract has been suspended, delayed or disrupted reducing the stream of direct costs upon which overhead or indirect costs are distributed. DCAAs Audit Guidance Delay and Disruption Claims states that: A claim for unabsorbed overhead is really a request to recoup increased overhead costs allocated to other work because of the work stoppage which occurred on the delayed contract. Stated another way unabsorbed overhead is that amount of indirect expense actually incurred which would have been allocated to the contract had the delay not occurred, and is not recoverable in the revenue from any other work. (Government Contract Accounting.Howard W. Wright and James Bedingfield, 1979).

5.2 Overhead damage calculation:

The Eichleay formula is designed to approximate a daily overhead rate for a contract that has been delayed. The daily overhead rate is then multiplied by the number of days of delay in order to determine the amount of recovery. The recovery can be determined by certain conditions such as. First, a valid unabsorbed overhead claim requires proof of a compensable delay, meaning that the contractor must have experienced a delay or disruption, or series of delays or disruptions, of contract performance for which the government bears responsibility. Second, the contractor must prove that it was on standby during the delays or disruptions. Third, the contractor must show that it was unable to take on additional work during the delays or disruptions. Once these three elements are established, the contractor is entitled to recover unabsorbed overhead as measured by the Eichleay formula; no other method of calculation may be used.

Eichleay formula states:

=

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= .

The Eichleay formula was used to calculate the overhead damages throughout the project as explained below.

Total Contract Billings = $ 2,500,000.00 Total Company Billings = $ 8,000,000.00 Total Home Office Overhead = $ 600,000.00 Work duration (delay included) = 160 days Allocable Overhead = (2,500,000 / 8,000,000) * 600,000 = $ 187,500.00

Daily Allocable Overhead = $ 187,500 / 160 days = $ 1172 / day Excusable-compensable (EC)delay days = 95 days Overhead Damages = $ 1172 x 95 = $ 111,340 * Working day duration included in calculation above is without weekends (224 days with weekend)

6. Unapproved Changes

This portion of the claim covers the costs incurred by Contractor for changes requested by Owner or Engineer, actually executed, but that were never approved for progress billings.

6.1 Contract Review Regarding Changes

The contract provides the following information regarding project changes.

6.1.1 Change Order

A Change Order is a written amendment to the Contract prepared by the Consultant and signed by the Owner and the Contractor stating their agreement upon.

The- a change in the Work.

method of adjustment or the amount of the adjustment in the Contract Price, if any; and The extent of the adjustment in the Contract Time, if any.

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6.1.2 Change Directive

A Change Directive is a written instruction prepared by the Consultant and signed by the Owner directing a change in the Work within the general scope of the Contract Documents.

6.1.2.1 General Conditions relating to Changes:

4.1.5 The Contract Price shall be adjusted by Change Order to provide for any difference between the actual cost and each cash allowance.

4.1.6 The value of the work performed under a cash allowance is eligible to be included in progress payments.

As discussed earlier, the owner caused problems encountered during the project basically resulted to major changes to the work performance and planning. Those include lack of work access, late equipment delivery, and lack of owner information, imposed extra work, late issuance of drawings and manuals, and others. These changes were imposed upon Contractor without the prior issue of a Change Order or Field Work Instruction and resulted to delays and damages that were discussed and quantified in section 5 of this report.

6.1.1 The Owner, through the Consultant, without invalidating the Contract, may make changes in the Work consisting of additions, deletions, or other revisions to the Work by Change Order or Change Directive.

6.1.2 The Contractor shall not perform a change in the Work without a Change order or a Change Directive.

6.2.1 When a change in the Work is proposed or required, the Consultant shall provide a notice describing the proposed change in the Work to the contractor. The Contractor shall present, in a form acceptable to the consultant, a method of adjustment or an amount of adjustment for the contract Price, if any, and the adjustment in the Contract Time, if any, for the proposed change in the Work.

6.2.2 When the Owner and Contractor agree to the adjustments in the Contract price and Contract Time or to the method to be used to determine the adjustments, such agreement shall be effective immediately and shall be recorded in a Change Order, signed by Owner

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and Contractor. The value of the work performed as the result of a Change Order shall be included in applications for progress payment.

6.3.2 Upon receipt of a Change Directive, the Contractor shall proceed promptly with the change in the Work. The adjustment in the Contract Price for a Change carried out by way of a Change Directive shall be determined on the basis of the cost of expenditures and savings to perform the work attributable to the change. If a change in the Work results in a net increase in the Contract Price, an allowance for overhead and profit shall be included.

6.3.3 If a change in the Work results in a net decrease in the Contract Price, the amount of the credit shall be the net cost, without deduction for overhead or profit. When both additions and deletions covering related work or substitutions are involved in a change in the Work, the allowance for overhead and profit shall be calculated on the basis of the net increase, if any, with respect to that change in the Work.

Furthermore, the man-hour sheets and daily work sheets were used where information was extracted about work executed that was regarded as extra (out of contract scope) work-11643 hours -.The projects progress billings does not include those extra hours and thus the contractor never got paid for this work. As a result, those hours were considered as unapproved changes imposed on the contractor for which the contractor carried out the work without any approved change order.

6.2 Quantification of Unapproved Changes

Man-hours worked on extra work = 11643 hrs.

Labor rate = $40 /hour Unapproved Extra Work = 11642.75 x $ 40 /hours = $ 465,710.00 The contract also states the following:

6.3.2 Upon receipt of a Change Directive, the Contractor shall proceed promptly with the change in the Work. The adjustment in the Contract Price for a change carried out by way of a Change Directive shall be determined on the basis of the cost of expenditures and savings to

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perform the work attributable to the change. If a change in the Work results in a net increase in the Contract Price, an allowance for overhead and profit shall be included.

6.3.3 If a change in the Work results in a net decrease in the Contract Price, the amount of the credit shall be the net cost, without deduction for overhead or profit. When both additions and deletions covering related work or substitutions are involved in a change in the Work, the allowance for overhead and profit shall be calculated on the basis of the net increase, if any, with respect to that change in the Work.

According to the contract, this extra work which resulted to a net increase in the contract price is attributable to overhead and profit. This will yield the following calculation:

Unapproved Extra Work = $ 465,710.00

Overhead Damages = $ 111,340.00

Total = 465,710 + 111,340 = $577,050.00

The profit will be assumed to be 3%, making the final total of overhead and profit equal to

577,050 x 1.03 = $594,362.00

7. Productivity Analysis

Productivity is defined as a measure of the efficiency of production. Productivity is a ratio of production of output to what is required to produce the inputs. The measure of productivity is the total output per one unit of a total input. Extensive knowledge of contract requirements and a thorough administration of the contract on behalf of all parties involved are required to identify and track the impacts of change on project performance, or productivity. Change orders when requested on work already in progress, will often impact the productivity of the labor force to detriment of the entity of performing the work. This impact is referred to as loss of productivity and has been the subject of many studies in the construction industry.

7.1 Loss of labor Productivity:

The loss in labor productivity can be calculated using the total cost and the measured mile method. Productivity can be defined as the ratio between man-hours spent and man-hours earned. This information is readily available in the progress billings report as well as the man-

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hour records. The loss in productivity is technically distinguishable from delay damage and if the delay causes the contractor to alter its method of performance so as to proceed in a less productive manner the contractor may claim inefficiency as delay damage.

7.2 Measured mile method:

The measured mile method compares the productivity rate during periods that have no impacts with that of periods that were impacted by changes. This method requires the analyst to find a representative period of the project were there is no or very few problems affecting the productivity. We know that the work was severely impacted by problems in all areas till the end of November 1990 and that the work was impacted by many changes during the months of November and December.

Area Impacted Estimated Man-hours Spent

Man-hours Productivity Normal Hours

(A) (B) (C) (D) (E = D/C) (F =C*Normal Productivity)

0 YES 120 3323.75 27.70 - 1 YES 1,368 2,687 1.96 - 2 YES 3,491 7,475 2.14 - 3 YES 1,589 3,084 1.94 - 4 YES 3,018 15,936 5.28 - 5 YES 3,012 6,513 2.16 - 6 YES 790 1,808 2.29 - 7 YES 16,529 16,652 1.01 - 9 - - 18,672 -

TOTAL

29,817 76,151 2.55

Table 7. Productivity Analysis from Measured Mile Method

Although the measured mile method is widely acceptable and is regarded as a more credible method compared to the total cost method, it can be seen from the table above that the project was in fact impacted at all areas and it was not possible to derive a productivity factor below 1.00 due to the effect of impacts to the project. Consequently, the measured mile method was discarded to calculate loss of productivity in this case study.

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7.3 Baseline method

The baseline method is similar to the measured mile method. However, the baseline method can be used when there is no measured mile. This method requires calculating the median productivity over a minimum of 5 best productivity periods. This median is then considered as the productivity rate that would have been achieved during the entire project, if no significant problem has affected the work. However, in this specific case, there have been numerous problems with significant impacts that were discussed in the problem summary section.

7.4 Total Cost Method

This method calculates the loss of productivity as the difference between man-hours spent and man-hours earned on the project. The average labor rate of $40/hour will be used. The man-hours spent on performing extra work are also subject to productivity losses because they represent change themselves. Thus, these hours will be added to the earned man-hours as billed by the Contractor. The graph below shows the significance in the changes that have taken place between numbers spent and earned man-hours during the project phase.

Figure 4. Man-hour Comparison Graph

0

10000

20000

30000

40000

50000

60000

70000

80000

7-May 1-Jun 1-Jul 1-Aug 1-Sep 1-Oct 1-Nov 8-Dec 19-Jan

Date

Manhours

Cumulative Earned

(hrs.)

Manhours Total

Cumulative Spent

(hrs.)Man

-hou

rs

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From the man-hour graph, it is clear that at the end of the project term, there was more than a100% man-hour increase in the actual man-hours spent than it was anticipated during the project bid. This significant increase is due to the changes that were invoked on the contractor. The changes include:

Approved change orders (three change orders) by the owner/Engineer. Changes imposed on contractor with no change orders issuance. (drawing revisions, late

equipment delivery, lack of work access, lack of information) Unapproved extra work on site (obtained from man-hour sheets and daily work sheets)

We know that the contractor was notifying the engineer during the project phase about changes taking place, effects on productivity and difficulties in quantifying losses as a result.

7.5 Comparison of Productivity Quantification Methods

The total cost method measures productivity loss using man-hours earned and spent by the contractor. The measured mile method, on the other hand, compares the production rate obtained during periods of work unaffected by change with the rate of work impacted by change. This can be done by calculating the ratio between estimated and spent man-hours. While both methods included man-hours spent by the contractor on extra work, the measured mile method is seen as unachievable since all areas of work were impacted given the numerous problems encountered throughout the project and their repercussions on the Contractors performance of work in all areas. Furthermore, in order to estimate loss of productivity in an accurate manner, it is necessary to estimate the man-hours for the change orders in the project. The measured mile method, the Leonard study and other industry standards all use an estimate for the man-hours spent on change orders given the change orders were issued. With the project data that is in hand in this case, such information is not possible to derive for the following reasons:

Change orders that were approved only include the price value with no mention of the hours spent on the change orders.

The changes involving drawing revisions, lack of access, deliver problems also do not include man-hour equivalents.

A change order (Change Order No.4) was submitted and not signed by the engineer with no information on the amount of man-hours spent.

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Extra work was performed on site according to the man-hour records with no change order issued.

Conclusively, the changes imposed on the project were not following a stable procedure and the engineer failed in many occasions to issue change orders when necessary and partially approved some orders giving rise to further disruptions. The messages sent to the engineer taken from the project records display the inconsistencies that were taking place. 6 Jun 90 CONTRACTOR letter to ENGINEER. Record of problems CONTRACTOR are experiencing in the performance of the contract works and the severe impact these problems are having on the schedule and costs (areas addressed: conveyors, new coarse ore bin, SAG mill area, construction drawings.) CONTRACTOR notes that it is not possible to quantify the problems at this point in time.

16 Aug 90 During Project Review Meeting No. 9, CONTRACTOR advised ENGINEER that they have incurred considerable lost time and lost productivity due to late equipment deliveries, missing fasteners, equipment not fitting and required civil work not completed. ENGINEER instructed CONTRACTOR to itemize and substantiate all lost time and loss in productivity instances that CONTRACTOR has not been compensated for as soon as possible.

22 Aug 90 CONTRACTOR submits quotation re drawing revisions in the amount of $345,271 and note as follows:

Due to the significant number and extent of the attached revisions and the total number of man-hours required to complete this work, CONTRACTOR will require an extension of 4 weeks to their current construction schedule.

In addition to the additional costs for drawing revisions we also submit our additional cost for site overheads and equipment which is not included in the values submitted in our revised drawing pricing. Our additional cost for site overheads and equipment which is not included in the values submitted in our revised drawing pricing. Our additional cost for site overheads and equipment for 4 weeks is $104,188.(Breakdown follows)

With such ambiguity and difficulties that were taking place that were owner caused, it was impossible to estimate the loss of productivity in an accurate manner. As a result, the amount claimed for loss of productivity will be determined using the total cost method as follows:

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Earned Bid Man-hours: 29578 hrs.

Earned Extra Man-hours: 11642.75 hrs.

Total Earned Man-hours = 29578 + 11642.75 = 41220.75 hrs.

Total Spent Man-hours = 75813.75 hrs.

Loss of Productivity (in Man-hours) = 34,593 hrs.

Loss of productivity ($) = 34593 x $40 / hr. = $ 1,383,720.00

8. Loss of Profit

We know that the Contractors work was terminated prior to completion of the contract. The contract provides the following information regarding Contractors loss of profit associated with the uncompleted work:

7.2.3 The Contractor may notify the Owner in writing, with a copy to the Consultant, that the Owner is in default of the Owner's contractual obligations if:

1. The Owner fails to furnish, when so requested by the Contractor, reasonable evidence that financial arrangements have been made to fulfill the Owner's obligations under the Contract, or

2. The Consultant fails to issue a certificate as provided in GC 5.3 PROGRESS PAYMENT, or 3. The Owner fails to pay the Contractor when due the amounts certified by the Consultant or

awarded by arbitration or court, or 4. The Owner violates the requirements of the Contract to a substantial degree and the

Consultant, except for GC 5.1 - FINANCING INFORMATION REQUIRED OF THE OWNER, confirms by written statement to the Contractor that sufficient cause exists.

7.2.4 The Contractor's notice in writing to the Owner provided under paragraph 7.2.3 shall advise that if the default is not corrected within 5 Working Days following the receipt of the notice in writing, the Contractor may, without prejudice to any other right or remedy the Contractor may have, stop the Work or terminate the Contract.

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7.2.5 If the Contractor terminates the Contract under the conditions set out above, the Contractor shall be entitled to be paid for all work performed including reasonable profit, for loss sustained upon Products and construction machinery and equipment, and such other damages as the Contractor may have sustained as a result of the termination of the Contract.

From the billings schedule, it can be concluded that the contractor was only receiving payments according to the contract bid man-hours. From the communication exchange that was taken place, it can be shown that there were three approved change orders for which the contractor never received payment for:

21 Nov 90 Issue by ENGINEER to CONTRACTOR of fully executed Change Order No. 1 in the amount of $24,173.00 re feeder No. 1 support steel - Crusher building. (This work was carried out during the month of November.

21 Nov 90 Issue by ENGINEER to CONTRACTOR of fully executed Change Order No. 2 in the amount of $139,979.04 re FWI's 1 to 7 inclusive, 9 to 17 inclusive and 19 to 22 inclusive.

06 Dec 90 Issue by ENGINEER to CONTRACTOR of fully executed Change Order no. 3 in the amount of $43,061.98 re FWI's 23, 29, 33, 34, 37, 39, 41, 42, 44 and 51.

21 Dec 90 Issue by CONTRACTOR to ENGINEER of signed Change Order No. 4 in the amount of $455,342.92 re drawing revisions and FWI's 58 and 59. This Change Order was never signed by ENGINEER.

It can be seen from the communication documented above that there was a fourth change order issued by the contractor for which the owners engineer failed to sign and comply with the contractor. The contractor has the right to demand a compensation for loss of profit as a result when the work was terminated.

8.1.1 Quantification of Loss of Profit

The full contract value was $ 2,549,130.00 including profit.

From Contractors progress billings, we note that the Contractor only received $1,814,180.00 for

the difference of $734,950.00; the Contractor is eligible to recover profit loss.

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Since 3% profit was assumed on the project, Profit loss = $734,950 * 3% = $22,049.00

9. Interest

9.1 Contract Review Regarding Interest on Amounts Overdue

We consider that the unpaid amounts for changes to the work are subject to interest calculation. The contract provides the following regarding payment of interests:

5.3.1 Should either party fail to make payments as they become due under the terms of the Contract or in an award by arbitration or court, interest at of __________ percent ( %) per annum above the bank rate on such unpaid amounts shall also become due and payable until payment. Such interest shall be compounded on a monthly basis. The bank rate shall be the rate established by the Bank of Canada as the minimum rate at which the Bank of Canada makes short term advances to the chartered banks.

5.3.2 Interest shall apply at the rate and in the manner prescribed by paragraph 5.3.1 of this Article on the amount of any claim settled pursuant to Part 8 of the General Conditions - DISPUTE RESOLUTION from the date the amount would have been due and payable under the Contract, had it not been in dispute, until the date it is paid.

9.2 Interest Cost Analysis and Calculation

For the purpose of that claim, we assume an interest rate of business prime rate (as it figures on the website of the Bank of Canada) + 3%. The amount on which the interest is calculated is $678,964.67. The project records indicate: On November 21st, 1990, Engineer invoked the contract procedure for termination of Contractor's contract with respect to one portion of the work. Engineer advised Contractor in writing as follows:

"In accordance with the General Terms and Conditions Article 41 - Owner's Right to Terminate the Contractor's Right to Proceed with the Work, the Contractor is hereby given

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forty-eight (48) hours notice of Owner's intention to delete the Work described in Part I, Scope of Work, Sub-Article 3.7.4 from its scope of work. As stated in Sub-Article 41.5, the Contractor is indemnified against any extra costs or penalties incurred by this cancellation and against any extra costs reasonably incurred by the Contractor as a direct result of this termination." And as of December 13 1990, the Contractor received a letter from the engineer invoking the end of the contract:

"You are hereby advised that Wright Engineers Limited considers Contractor Construction Inc.'s contract to be complete. Contractor is hereby directed to commence demobilization of its equipment and workforce immediately and to complete its demobilization by 4:00 p.m. on Friday, December 14th, 1990. Contractor shall return to Wright Engineers Limited all Owner supplied materials, equipment and tools by 4:00 p.m., Friday, December 14, 1990.

We consider December 14th 1990 being the first day to start interest calculation. We assume that the claim could be resolved within approximately a 6 months period. Thus, the interest would run approximately from December 14th 1990 to August 14th 1991.

9.2.1 Calculation

As such, December 14 1990 is considered as the first day to start interest calculations. The claim resolution is assumed to be resolved within one (1) year. Therefore, the interest would run from December 14 1990 to August 14 1991.

Since the interest rate shall be the bank rate established by Bank of Canada per contract clause 5.3.1, the above-the-bank-rate percentage is considered to be 3%.

Historical data shows that Bank of Canada had established the interest rate at 12%. See Appendix C for historical Bank of Canada rates from 1975 to present.

The total interest rate can be calculated as: 12% (BOC rate) + 3% = 15% per annum compounded monthly.

The total cost of unapproved changes on which the interest will be calculated is $ 678,964.67 Per contract clause 5.3.1, the interest rate shall be compounded on a monthly basis.

Total cost to calculate interest = $ 678,964.67, Months = 8 Then, 678964.67 $1 + '(')*

+= $749907.4

Thus, the total cost associated with interest for this project is $70,942.73

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10. `Conclusion

Bid Amount $2,549,130.00

Progress Billing $1,814,180.00

Total balance due $734,950.00

Total days on site according to contract = 123 days

Total days on site = 226 days

Total working days = 160 days

Total delay days = 100 days

Labor strike (Incompensable delay days) = 5 days

Total compensable delay days = 95 days

Claim Summary

Delay Costs $ 82,139.00

Head office overhead damages $ 111,340.00

Unapproved extra work cost $ 465,710.00

Total cost $ 659,189.00

3% profit markup $ 19775.67

Subtotal $ 678,964.67

Loss of productivity $ 1,383,720.00

Profit loss $22,049.00

Total Cost to claim interest $ 678,964.67

Interest loss $70,942.73

Total Claim Amount $ 2,155,676.4

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11. Reference

Presentation and case study files of Mr. Maged Abdelsayed.

Leonard, C.A, (1988), The Effects of Change Orders on Productivity, Thesis, M.Eng. (Building), Centre for Building Studies, Concordia University, Supervisors: P. Fazio and O. Moselhi.

Moselhi O., Charles L., Fazio P. (1991), Impact of Change Orders on Construction Productivity, Canadian Journal of Civil Engineering.

Barrie, D., and Paulson, B., (1996), Professional Construction Management, 3rd ed., McGraw Hill, New-Jersey.

The Open Construction and Building Technology Journal, 2009, 3, 81-89 by Prof Jyh-Bin Yang and Chih-Kuei Kao.

Unabsorbed or Miss-allocated indirect expenses - The Eichleay formula by Sam Davidson, Principal Gaffey & Associates Government Services Group.

Dr. Patricia D. Galloway, Cumulative Impact, Volume 2.6, June 2007, Nielsen-Wurster Communiqu.

William Ibbs, Impact of Changes Timing on Labour Productivity, Journal of Construction Engineering and Management, ASCE, November 2005.

H. Randolph Thomas, Victor E. Sanvido, Quantification of Losses Caused by Labor Inefficiencies: Where Is The Elusive Measured Mile?, Journal of Construction Law & Business, published in 2000

Hanna and others, Cumulative Effect of Project Changes for Electrical and Mechanical Construction, Journal of Construction Engineering and Management, ASCE, November/December 2004

Manya Milkovich & Roloff Veld http://www.bcrealtor.com/d_bkcan.htm#bkcannow

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12. Appendix A

Equipment Area Contract delivery dates

Actual delivery dates

DRAIN GATE FOR CONCRETE SUMPS 0 1-Mar 13-Jun APRON FEEDER DISCHARGE CHUTE

1 30-Apr 25-Jul

APRON FEEDER 15-Jun 18-Sep APRON FEEDER 15-Jun 18-Sep 48" WIDE BELT CONVEYOR

2

1-May 24-Aug 48"*1150'LONG CONVEYOR BELTG. 1-Jul 22-Aug MOTOR - 48" WIDE BELT CONVEYOR 28-May 17-Jul 24-BC-101 HEAD CHUTE 30-Apr 30-Apr 48" BELT CONVEYOR (PEBBLE) 1-Jun 18-Aug 48"*200' LONG CONVEYOR BELTG. 1-Jul 17-Jul MOTOR - 48" WIDE BELT CONVEYOR 15-Jun 10-Jul 33-BC-102 HEAD CHUTE 15-May 10-Jul 48" WIDE BELT CONVEYOR 1-May 8-Nov MOTOR - 48" WIDE BELT CONVEYOR 30-Jun 17-Jul 33-BC-101 HEAD CHUTE 1-May 10-Jul 54"*750' LONG CONVOYER BELTG. 1-Jul 24-Jul 48"*450' LONG CONVEYOR BELTG. 1-Jul 22-Aug C.O. BIN DISCHARGE CHUTE

3

5-Jun 20-Aug FEEDER DISCHARGE CHUTE 5-Jun 26-Jul APRON FEEDER 20-Apr 15-Jul 5 TON ELECT. HOIST & TROLLEYS 20-May 3-Aug MOTOR FOR 5 TON ELEC.HOIST/TROLLEY 20-Jun 9-Aug MOTOR FOR 1 TON ELEC.HOIST/TROLLEY 20-Jun 9-Aug 1 TON ELECT. HOIST & TROLLEYS 30-Jun 3-Aug 3 TON ELEC. HOIST & TROLLEYS 30-Jun 3-Aug MOTOR FOR 3 TON ELEC.HOIST/TROLLEY 20-Jun 9-Aug RECLAIM TUNNEL SUMP PUMP 30-Jun 11-Jul MOTOR - RECLAIM TUNNEL SUMP PUMP 31-May 31-May SAG MILL MOTOR A COOLING COIL

4

15-Jun 15-Aug SAG MILL LINER HANDLER 15-Mar 20-May SAG MILL FEED CHUTE 15-May 13-Jun MOTOR FOR JACKING CRADLE 23-Mar 23-May SAG MILL 31-May 11-Dec MOTOR DRIVE SAG MILL 30-May 12-Nov MOTOR DRIVE SAG MILL 15-Jun 12-Nov SAG MILL JACKING CRADLE 30-Mar 13-Jun SAG MILL TROMMEL SCREEN 30-Apr 13-Jun DISCHARGE HEAD SECTIONS D,E & F 31-May 31-Aug

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TROMMEL UNDERSIZE CHUTE

5

30-May 27-Jun TROMMEL REJECT CHUTE 30-May 6-Jun CRUS