The Schedule Basis Memorandum: Considerations for Common Risks that May Cause Delay

This is the third blog post in a six-part series about the schedule basis memorandum. This post briefly identifies several considerations for common risks that may cause delay on large and complex EPC Projects.

Schedule Basis Considerations for Common Risks that May Cause Delay on Large and Complex EPC Projects

Certain risks are inherent in performing large and complex EPC projects that often result in claims and disputes between the contractor and the owner. These inherent risks should be thoroughly addressed when developing a schedule basis document for executing a project. Many of the sections and sub-sections identified in Table 2, in the prior second blog post, require detailed consideration to properly document the schedule basis. The following are examples of items that should be examined closely during schedule development to ensure that the planned project completion date is feasible and that potential requests for time extensions due to alleged delays can be properly evaluated against a reasonable baseline:

1. Labor Productivity Assumptions
2. Competing Project Considerations
3. Potential Owner Delays in Providing Review Comments
4. Weather Considerations
5. Camps Size Considerations
6. Camp Catering and Other Service Considerations

It is recommended that the schedule basis memorandum document details assumptions for these issues. If a claim or dispute arises from one or more of the above issues, the schedule basis memorandum documents what was known or not known at the time of the CPM schedule development, and what assumptions or allowances were considered. Consequently, the schedule basis memorandum could be the deciding document to either validate or discredit a contractor’s claim against an owner. The following sections discuss these schedule basis considerations to promote awareness for both contractors and owners regarding potential claims and disputes.

Labor Productivity Assumptions

An EPC contractor’s estimated labor productivity is a significant factor for determining the labor requirements needed to develop activity durations. Productivity assumptions should be based on: 1) a contractor’s experience in performing work in the project location or as close in proximity as possible, and 2) the availability and skills of the labor to be utilized for the project. If the labor productivity assumptions are overly optimistic, then the durations of construction activities will likely be too short, and the actual durations will become extended resulting in schedule delays. For example, if durations for construction work are based on an average productivity factor of, say, 1.7 compared to U.S. Gulf Coast, and the actual productivity turns out to be 3.4 rather than 1.7, then the planned durations could be 50 percent shorter than required from the outset and the actual construction work may take twice as long as planned to perform.

Therefore, it is vital that both the EPC contractor and owner fully understand the productivity factors used in the schedule basis for developing activity durations. If the owner believes that the EPC contractor’s estimated labor productivity factors for the project are overly optimistic as documented in the schedule basis, then the owner should request that the EPC contractor prepare alternative schedules and manpower loadings using a range of productivity factors that may depict a more appropriate and realistic schedule basis for the project.

ADDITIONAL RESOURCES

Blog

Discover industry insights on construction disputes and claims, project management, risk analysis, and more.

MORE

Articles

Articles by our engineering and construction claims experts cover topics ranging from acceleration to why claims occur.

MORE

Publications

We are committed to sharing industry knowledge through publication of our books and presentations.

MORE