| | EXPANDING THE ROLE OF THE SUBCONTRACTOR IN PROJECT SCHEDULING
By: William M. Hart, P.E., PMP
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Introduction
The scheduling of a project affects many project stakeholders, but most directly the Owner, the General Contractor (the Contractor) and the key subcontractors (e.g. excavation, foundation, steel, concrete, electrical, and mechanical). Once a project is underway, the responsibility for scheduling is usually left in the hands of a single participant, the Contractor, who, while required to follow the requirements as outlined in the contract's schedule specifications, is typically left on its own with respect to the choice and control of the level of participation of the other stakeholders. This article will focus on how the Contractor typically engages the subcontractors in the scheduling process in today’s construction environment and then offers guidance on how subcontractor involvement might be optimized to improve project control and mitigate schedule-related claims. While this article is written in the context of the traditional project delivery approach of Design-Bid-Build with a single General Contractor, the lessons learned and recommendations do generally apply to other project delivery methods.
Scheduling Under Traditional Project Delivery
In traditional construction project delivery, the Owner enters into two contractual relationships. The first is with an Architect / Engineer who is contracted to design the project as well as to serve as the Owner’s agent during construction. The second contract is with the General Contractor. The Owner is responsible for providing to the Contractor a reasonably accurate and complete project design, a site that is generally in conformance with the specifications found in the contract documents, and access to that site. The Contractor assumes responsibility for execution of the actual construction, including determination of the means and methods for that construction, project scheduling, and coordination. For scheduling, the Contractor may hire an outside consultant or may have in-house scheduling expertise. The General Contractor assumes full responsibility for coordinating and resolving conflicts in the work schedules of the various subcontractors and suppliers.
A Cynical Attitude Toward Scheduling
The majority of Contractors do not involve subcontractors in the scheduling process to the extent that they should. This does not necessarily reflect the Contractor’s attitude toward subcontractors, but rather, this lack of involvement of the subcontractors may be the result of the Contractor's attitude toward the scheduling process itself.
Schedulers as a Commodity
It is not uncommon for the Contractor to look at scheduling services as a commodity to be purchased at the lowest possible price. Many Contractors see scheduling as an opportunity to increase profit margin on a tightly bid project. For the sake of this discussion, let’s assume that the Contractor retains an outside consultant rather than employing in-house scheduling expertise. With the blossoming of CPM scheduling techniques in the 1960's, the construction industry saw the emergence of what has been called the master scheduler. The master scheduler was an individual who had a wealth of knowledge and experience in the construction industry (perhaps having been a construction superintendent "in a past life"). The master scheduler combined this experience with the necessary skills in preparing CPM schedules, in those days employing a combination of mainframe computing and manual techniques. In the past two decades, the success of CPM-based scheduling as the accepted norm on both construction as well as other industry projects, coupled with the advent of powerful and inexpensive PC-based CPM software, has led to considerable growth of the scheduling profession. It is possible for someone today to get a few days of training on a particular computer software program and begin creating impressive project schedules without years of training and experience. This results in a wide range in the quality and pricing of scheduling services being available in the marketplace. Now, the Contractor can fulfil its base contractual requirement to supply a schedule by hiring the scheduling firm that has little or no in-house construction experience and relies on limited interviews with project personnel to create the schedule logic. That firm can put together an impressive-looking construction schedule for perhaps a third of the cost of what the Contractor might pay to have a master scheduler create the initial schedule. However, the result is a rather "shallow" schedule which demonstrates little insight into construction practices and will more likely lead to a loss of control over a project. Does that mean that the Contractor always needs to hire a scheduler with 20 years of experience as a construction superintendent? Of course not; a Contractor might hire a scheduling firm where no single individual is a construction and scheduling guru. But that firm will recognize their limitations and understand that to produce a high-quality product, they will have to spend much more time in interviewing project participants and seeking the input from mentors with greater scheduling and construction experience. Unfortunately, when a Contractor as a potential client comes to your firm and tells you that vendor "X" will create an initial schedule for $30,000 and you realize that a proper schedule will cost at least $90,000 to put together, your firm must make one of three less than optimal choices: (1) quote $90,000 and lose the job; (2) quote $30,000, produce a poorly detailed or perhaps inaccurate schedule and damage your reputation; or (3) quote $30,000, produce a good schedule and lose money on the job. When in-house expertise is relied-upon, the cynical Contractor might invest a few thousand dollars in a scheduling package and hand it to a junior engineer and tell them they’ve got two weeks to create the schedule for the latest project. The bottom-line is that the cynical Contractor does not appreciate the differences in the quality of scheduling services available, perhaps nor the benefit of having a workable and efficient schedule which is like an insurance policy for enhancing project success.
A Perceived Lack of Value of the Schedule
That lack of interest in procuring the best scheduling services possible might be related to how the cynical Contractor views the value of a schedule in general. There do exist a "breed" of Contractor who thinks they’re so good at what they does, that a given structure is so typical, and the sequence of construction so presumably "common sense," that they really don't need a schedule. Consider the following: a hypothetical client, DC Construction. DC was hired to construct a five-story cast-in-place concrete condominium in Tampa, Florida. DC never got the Owner to approve a baseline schedule, so he never bothered to perform even a single schedule update. After all, as the president of DC boasted, he knows how to build a concrete condominium without a schedule: "...you start at the bottom and work your way up. Dig, pilings, form, pour, strip, following with electrical, mechanical, interiors, etc...it’s not rocket science!" Unfortunately, the cost to complete the condo was $30M above its contract price of $60M and DC had hired an attorney and a scheduling consultant before the last coat of paint was dry. In this example, the schedule updates were never performed.
How the Subcontractor is Usually Involved...or Not
The Contractors should actively involve not only their own staff, but also the Owners and the subcontractors in the scheduling process. The contract provides provisions for involving the Owner. These provisions can be explicit (e.g. participation of the Owner in monthly schedule update meetings), or implicit (e.g. the Owner has the power to withhold progress payments when those payments are tied to progress marked by a schedule). However, the level of involvement of the subcontractor is often left to the discretion of the Contractor. In the process of "buying-out the project," that is, the issuing of subcontracts, supply contracts and purchase orders for the work to be done, the Contractor will attempt to firm-up schedule commitments from subcontractors. Those schedules will include time for performance of the work as well as other duties such as preparation of submittals. This information will be input to the development of the Contractor’s preliminary contract schedule, typically due to the Owner within weeks of the award of the contract. Most subcontractors will never see the completed baseline schedule; rather the Contractor will feed them bits and pieces of the schedule focusing on their specific area of work. These subcontractors may be only remotely involved in the monthly schedule update process and will be made aware of schedule changes that affect their work only after the schedule changes have been applied. The attitude of the Contractor is that the subcontractor will find a way to respond to whatever schedule changes affect them. Indeed, the Contractor may fail to provide information to its subcontractors that would make that subcontractor a vital ally in the fight against project delay. Types of information that may be withheld include the following: - The critical path of the project - the impression may be given, true or not, that all the work of a subcontractor is "critical"
- The "late" dates. Discussions with subcontractors focus on early start and early finish dates
- Total float
- As-built information and the overall construction sequence may not be included in any of the computer outputs provided
- Predecessor and successor relationships that extend outside of the particular subcontract
- Information about any project delays that were or may be encountered as well as the party responsible
- The inclusion of any changes to the contract
Without the above information to provide the proper context to the subcontractor’s work, it is difficult for that subcontractor to monitor, control or forecast their own work and thus contribute to the degree possible to the overall success of the project. The withholding of this information is an even greater concern when the Contractor performs little or none of the work with his own forces. Scheduling activities need the involvement of parties knowledgeable with what’s happening "on the ground."
So, why do the Contractors keep the subcontractors in the dark? The control and distribution of information to the subcontractors are often a calculated choice made by the Contractors. By limiting access to the schedule data as enumerated above, the Contractors may feel that they are decreasing the likelihood that the schedule may be used against them by the subcontractors in future claims. This is of course a truly cynical approach that, while perhaps providing short-term comfort to the Contractors, only hurts the overall project in the long term. Moreover, schedules are certainly going to be "discoverable" evidence should a subcontractor elect to pursue litigation. Subcontractors and indeed Owners should not only be involved in schedule development, but they should, to the extent possible, insist on receiving a complete initial project schedule along with complete copies of the periodic schedule updates in electronic scheduling software format - not in PDF files or hardcopies. The best way to make this happen is to structure the contracts properly. The Owner could include such requirements in the scheduling specification of their contract with the Contractor, and the subcontractor could insist on making it part of its subcontract with the Contractor.
Subcontractor Apathy
Even if a Contractor can be persuaded to more actively engage key subcontractors in the ongoing scheduling aspects of a project, we cannot presume that all subcontractors will go along willingly down this path of cooperation. Apathy is sometimes the attitude of subcontractors toward the project schedule. Subcontractors often believe that because prime contractors manipulate project schedules to their benefit, there is no reason to become involved in the scheduling process. Therefore, subcontractors may neglect their rights in regards to project scheduling and prefer to react to events, rather than attempting to control them. Subcontractors should understand that an active role in scheduling will afford them fairer treatment by Contractors, enhance their legitimate positions in potential claims situations and generally increase their profit margins.
Job Coordination Meetings
A common way for subcontractors to directly participate in the scheduling process is through job-coordination meetings. These meetings between the Contractor and subcontractors are often an efficient means of resolving and avoiding schedule-related disputes. Job-coordination meetings also serve another important function for subcontractors. Subcontractors may find that the Contractor’s interest in the project and the scheduling process declines as the Contractor finishes its portion of the work. Having fulfilled the majority of its performance, the Contractor may not take an effective active role in scheduling the remainder of the work, even if the subcontractors' work has not yet begun. In such circumstances, subcontractors should conduct their own job-coordination meetings to schedule the remainder of the project and enable the various subcontractors to complete their performances in a timely and economical manner. Where a Contractor has abdicated responsibility for project scheduling, the job-coordination meeting may be the only effective means available for subcontractors to complete performance without incurring increased costs.
The Contract
While there are many forms of contracts used in the construction industry, as an example, AIA A201 General Conditions of the Contract for Construction summarizes the central role of the Contractor with regard to scheduling: § 3.10 CONTRACTORS CONSTRUCTION
§ 3.10.1 The Contractor, promptly after being awarded the Contract, shall prepare and submit for the Owner’s and Architect’s information, a Contractor’s construction schedule for the Work. The schedule shall not exceed time limits current under the Contract Documents, shall be revised at appropriate intervals as required by the conditions of the Work and Project, shall be related to the entire Project to the extent required by the Contract Documents, and shall provide for expeditious and practicable execution of the Work.
The General Conditions allow for the possibility of schedule updates and their submittal to the Owner for approval: § 3.10.3 The Contractor shall perform the Work in general accordance with the most recent schedules submitted to the Owner and Architect.
AIA A201 that provides guidance on how the Contractor should involve others in scheduling: ARTICLE 6 CONSTRUCTION BY OWNER OR BY SEPARATE CONTRACTORS...
§ 6.1.3 The Owner shall provide for the coordination of the activities of the Owner’s own forces and of each separate Contractor with the Work of the Contractor, who shall cooperate with them. The Contractor shall participate with other separate Contractors and the Owner in reviewing their construction schedules when directed to do so. The Contractor shall make any revisions to the construction schedule deemed necessary after a joint review and mutual agreement. The construction schedules shall then constitute the schedules to be used by the Contractor, separate Contractors and the Owner until subsequently revised.
Unfortunately, the above clauses are ambiguous if left "as-is." What type of project delivery method are they talking about, Design-Bid-Build, Design-Build / EPC...? Who are the "separate Contractors" that must be coordinated? Are they subcontractors or separate prime Contractors? In the author’s experience, one way that this clause is NOT construed is for the "separate Contractors" to be the key subcontractors. Following is an excerpt from a contract let a few years ago by a regional U.S. rail owner. Keeping in mind that the Owner was utilizing a traditional design-bid-build / single Contractor project delivery method, think about how the following clause might affect the scheduling process: 8.1. CPM Schedule Updating
A schedule review and update meeting shall be held each month on a day designated by the Project Manager. At this meeting, all progress during the reporting period shall be addressed and reviewed and the Coordinating Contractor shall collect progress data from the other Prime Contractors for incorporation into the monthly Schedule update submission. The updated CPM shall reflect actual start and actual finish dates for all completed activities and actual start and estimated completion dates for all in-progress activities. Each Prime Contractor shall be represented at each monthly progress meeting by its project manager and / or superintendent, who shall be prepared to provide progress information. [Emphasis Added]
The good news is that the Owner has resolved much of the ambiguity that was found in AIA A201. The bad news is that it clearly deals with a multi-prime contract situation which has nothing to do with the underlying project!
A Starting Point
Notwithstanding, the problems with paragraph 8.1 of our example, it does provide clues on how a contract could be structured to better engage the subcontractors. Our Owner’s contract may serve as a template that the Owner can use to develop a contract that is applicable to a single Contractor / multiple key subcontractor situation. Effectively, our paragraph 8.1 would be modified so that it would treat key subcontractors in much the same manner that it currently treats prime Contractors. Owners should consider how, with the guidance of their attorneys, they might modify their scheduling specifications to encourage greater involvement of key subcontractors in the scheduling process. Look at what happens when we replace "Prime Contractor" with "key subcontractors" in paragraph 8.1: 8.1. CPM Schedule Updating
A schedule review and update meeting shall be held each month on a day designated by the Project Manager. At this meeting, all progress during the reporting period shall be addressed and reviewed and the Contractor shall collect progress data from the key subcontractors for incorporation into the monthly Schedule update submission. The updated CPM shall reflect actual start and actual finish dates for all completed activities and actual start and estimated completion dates for all in-progress activities. Each key subcontractor shall be represented at each monthly progress meeting by its project manager and / or superintendent, who shall be prepared to provide progress information. [Emphasis Added]
Now, our contract provides the very prudent requirement that the Contractor would be joined at a monthly update meetings by not just the Owner (Project Manager), but also key subcontractors.
Subcontractor Involvement in Schedule Updates
With a properly structured contract, the Owner could thus require subcontractor involvement in the planning and scheduling process beyond just Job Coordination Meetings. The key subcontractors can now be much more involved in the schedule update process and even attend schedule update meetings. The reasons for working closely with subcontractors in performing the schedule updates is that for a construction schedule to be used successfully, all key parties must regularly communicate, participate with active input and abide by agreements reached collectively to achieve timely completion. In general, joint update meetings are encouraged for maintaining proper communication and understanding regarding the project schedule. Joint Update Meetings are to provide, as of the end of the updating period, a complete and accurate report of current design, procurement and construction progress, and to show how each project participant plans to continue work to meet all the contract completion dates. In addition, the update meetings will help enable participants to identify any problems or delays (and their causes), determine real or potential impact, consider alternatives, make decisions, and set responsibility and timing for responses. Some points to remember about these meetings are: - The Contractor should chair these meetings. Recall that contractually, it is ultimately their responsibility for scheduling and coordination.
- All parties who are concerned with schedule and performance - especially key subcontractors (e.g. excavation, foundation, steel, concrete, electrical, mechanical...).
- A series of update meetings may be necessary on large and complex projects where there are multiple key subcontractors. This will help to keep the meetings more focused and for each participant to provide the necessary level of input.
- By updating the schedule with actual performance will add credibility to the overall project plan / schedule among the key subcontractors.
- The update meeting provides an opportunity to raise any project issues, but also provides a means to focus attention on those that have a greater impact on overall project performance. Less critical items may be taken "offline" to avoid sidetracking critical discussions.
- All meeting participants, the Contractor as well as the key subcontractors, benefit from exchange of information regarding performance to date, issues, responsibility and actions to be taken in order to complete their work on time.
- While open discussions are encouraged by keeping a somewhat informal tone to the meetings, meeting minutes should still be taken to formalize any agreements. These minutes should be sent to all the participants of the meeting. Both the schedule updates and the meeting minutes document not only the facts as discussed, but also any agreements achieved at the meeting. These documents are of value to all parties in helping to avoid future claims. And, if there are to be claims, this documentation will help the parties resolve these disputes more promptly and with minimized cost.
- The updating record should include copies of, or references to, all source documents that were used during the updating process.
- These meetings help in successful project execution by uncovering potential areas of dispute as early as possible, allowing the parties to resolve these issues / disputes during project execution when not only the parties can benefit, but also the project itself can benefit.
The actual schedule update will require the key subcontractors to provide or simply confirm a variety of data that has been collected during the project. Preparation for the meetings by Subcontractors should include gathering status information on its share of the work during the report period. All such information should be reviewed, validated, and incorporated into the schedule-updating process at the joint meeting. Also, prior to the meeting, each party compiling schedule update data is encouraged to review and assess the schedule to identify all activities that were scheduled to start or be completed during the report period. The data that will be validated at the meeting includes: - Actual start and finish dates for any activities commenced or completed during the reporting period. The project records should not only include the schedule update as evidence of these dates, but also other contemporaneous documents that act as a source record for the update.
- The status of all activities that were in progress during the reporting period. At the meeting, actual completion dates will be recorded for activities that were concluded and for activities that remain in-progress or started during the reporting period, and estimate of the remaining performance time should be made and recorded.
- If the project plan has changed, those activities that need to be added, deleted, resequenced, or changed in some way to reflect the particular change in plan should be discussed and the agreed-upon schedule modifications properly documented and recorded in the update.
- Any fragnets that have been developed to reflect delays or changed conditions should be discussed as to their effect on the schedule along with steps that might be taken to mitigate the effect that the schedule effects that the fragnet represents.
If, during the schedule update process, it is determined that the project is genuinely behind schedule, the Contractor and the key subcontractors need to work jointly toward resolution. The remaining schedule should be reviewed to determine areas of opportunity for recovery when deemed appropriate. Because many activities are planned and sequenced on a preferential rather than an absolute basis, it is possible for some time to be recovered by resequencing certain activities. There may be some activities that can be reduced in duration by increasing manpower, employing multiple shifts, dovetailing tasks and increasing the amount of support equipment. Another option would be to extend the workweek. Every effort should be made to take advantage of time and prevent disaster in terms of ultimate cost and timely completion. The party responsible for maintaining and controlling the schedule should establish a systematic approach for gathering and analyzing all project information and should coordinate and lead the update process by determining the time, date, and place for the meeting. Specific details about how to accomplish this should be included in the contract specifications for scheduling.
Conclusions
The project schedules help us to ensure that the construction project participants are working collectively and cooperatively toward agreed-on objectives. Typically, Contractors have the responsibility for not only creating and maintaining the schedule, but also for coordinating and resolving conflicts in the work schedules of the various subcontractors and suppliers. All too often, the Contractors attempt to meet these obligations with limited involvement of subcontractors in the development and maintenance of the project schedules. The reasons for Contractors limiting subcontractor involvement may be several. Regardless of the specific reasons, the proposition set forth in this paper is that Owners should work with legal counsel to develop contract scheduling specifications that require greater involvement and participation of key subcontractors in planning and scheduling of work activities. That is, the contract should ensure that the relationship between the General Contractor and the key subcontractors, with respect to planning and scheduling, be as partners (not equals, but partners nonetheless) in the scheduling process, working towards mutual goals. Moreover, considering that successful completion of the project, on time and on-budget is to the benefit of all major stakeholders, not only should the Owner mandate increased key subcontractor involvement, but the Contractor and subcontractors should embrace it.
References
- Construction Scheduling: Preparation, Liability, and Claims; Jon Wickwire, Thomas Driscoll, Stephen Hurlbut, Scott Hillman; Aspen Publishers, 2nd edition
- AIA Document A201, General Conditions of the Contract for Construction, The American Institute of Architects, 1997
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