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Written by: Carlos Delgado

Created: 25 October 2020

About the relevance of control

Reports, information compilation, organization and format for consolidation and issuance. What is the purpose of the control reports?

In general terms, the greater the rank and responsibility of the person in charge of an organization, the less time he, or she, can spend reviewing the details of any operation, even if the business depends on those operations. Of course, if a particular operation is especially large or important, it is possible and advisable for that manager to take time to familiarize himself with the details and find out if there are any actions that need to be taken to ensure a positive outcome.

Obviously, if in general terms the person in charge of the organization cannot take the time to review the details of most of the specific operations, such individual can only be guided by standardized reports that feed him with the essential information needed to understand the essential issues and, in the ideal world, ask questions and make decisions that add value.

Is that the reason why information is collected, organized and issued through reports? In part yes, definitely, but I postulate here that it is not the only reason, since control reports serve to generate value long before they are issued.

How come? Because the mere exercise of collecting and organizing the information, which is - or should be - reviewed by those responsible for each of the specific operations that generate said information, transforms the reports into decision-making tools for those responsible for the source operations.

For more than 25 years I have worked in the world of engineering and construction, and what I have discovered is that reports are not for senior managers, first of all they are for each project manager and to know, not only where we are standing, but, and much moreimportantly, what is the effect of the decisions we have been making and what is the urgent need for action to take today - yes, today, not at the end of the month or at the beginning of the next quarter or, much less, for the next year - in order to align or realign the project according to plan or, at the very least, in order to mitigate cost overruns and maximize profit opportunities.

In the world of engineering and construction the most useful system that I have found, to date, is that of Earned Value Management (EVM), widely used by the Project Management Institute, PMI. Stephen Hawking warned in the "History of Time" acknowledgements that someone told him that, for each formula he would include, his book sales would be cut in half. I am no one to contradict the late Dr. Hawking, so I will discuss the concepts, rather than the formal mathematical relationships.

In general terms, the application of the EVM requires three fundamental points: define and plan over time a target cost or Planned Value, (PV), and then periodically control two values: Earned Value (EV) and Actual Cost, (AC). Everything is transformed to monetary units, that is money.

The Planned Value is nothing more than the accumulated target cost (theoretical, anticipated, desired, planned) that we have defined that we must have produced (manufactured, built) at each moment of time throughout our project. Thus, if our project is to manufacture 30 units of equipment in three days, that is, 10 units / day, and we have a cost of USD 10 / unit as a goal, the PV at the end of the first day will be USD 100, at the end of the second USD 200 day and at the end of the project USD 300.

Once the curve that represents PV has been defined throughout the time programmed for the project, it is enough that in each control time milestone (let's say each of the three days of our project) we compare the value that we have earned, EV, that is, that we have actually produced or built, physically. If at the end of the first day we have only manufactured 4 units of the product, our EV will be USD 40, clearly less than the USD 100 planned for the end of the first day. This means that we are behind, and we even have the exact value of our delay, precisely the USD 60 that we are short to reach the PV at the end of the first day.

The actual cost, AC, is usually the trickiest part of the issue. It turns out that calculating actual cost, particularly in construction, requires a lot of information, or at least generally a lot more information than forecasting PV and reporting EV. In a real project we have labor, equipment, materials, subcontracts, etc.

Furthermore, the allocation of costs to each “reportable” productive unit can be somewhat complex. However, and continuing with our simple example of a team manufacturing project, let's say we know for a fact that in materials, labor, tools and equipment, each unit actually costs USD 9. The AC report should indicate those USD 9 / und for the quantity actually manufactured at each control time- milestone. In this case, if at the end of the first day our actual advance is only 4 units, not the planned 10 units, the AC for that milestone will be USD 36.

All right, by the end of the first day we have a report with PV = USD 100, EV = USD 40 and AC = 36. What does the report tell us?

Everything, absolutely everything, is compared to EV. If PV is greater than EV, we are behind because the physical reality, EV, is less than planning. This is the case in our example. If AC is less than EV, as in our example, the real cost is less than expected and we can expect that the “pure” economic result of the operation will be positive (we are not yet taking into account potential penalties for delay); if it were the other way around and AC were greater than EV, we would be over costed, that is, each production unit would be costing more than expected.

Returning to the initial question: What is the purpose of control reports?

Let's imagine now that we are the Project Manager of this manufacture of 30 pieces of equipment and at the end of the first day we see that we are behind, but the cost is going well, what do we do? Do we just issue the report to our supervisor?

Obviously we must issue the report, the point is that before issuing it we have reviewed it, validated it and known it. We know where we stand and we have specific resources and knowledge under our control that can allow us to take corrective action. For example, if we know that we have cost savings and the problem is the speed of execution, it is reasonable to schedule overtime or incorporate some additional subcontract to speed up and recover the delay, since we have a budget that we can invest for that purpose.

At the end of the day it is not so important to define what the solution is, the important thing is that the day-to-day manager has a decision-making tool in real time and with an economic measurement of the effect of his decisions. That is priceless.

In sum, control reports are not only for their recipients, control reports are a fundamental project management tool that serve, first, the day-to-day decision makers, the managers of the operation. It is there, in the day-to-day operation, when they are most useful because they allow timely decision-making.

I have seen engineering and construction companies trying to make decisions based on accounting information. Unfortunately, accounting information is not designed to operate, it is designed for tax and management issues at organizational, commercial, financial and market levels, but it tends to be extremely untimely for project decision-making, and it is the project decisions that determine the economic outcome of each of these projects. Thus, in engineering and construction, we cannot escape the establishment of specific and timely operational control systems - control and reporting systems - for each project.

In times of change, when agility and economy are needed at all levels, the use of specialized services provides that precise mix of capacity, effectiveness and efficiency that organizations need to succeed.

At DC&R we are able to meet these requirements with professional solvency and the experience of more than 25 years in complex engineering and construction environments for heavy industrial markets of high demand such as mining, gas & oil, or energy, as well as for infrastructure and commerce.

DC&R also offers technical assistance services to businesses that need to interact with engineering and construction companies, from tender and project management to contract administration.

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Written by: Carlos Delgado

Created: 23 May 2023

Managing a construction project can be a complex and challenging task, with many factors that can impact the success of the project. One of the most common challenges that project managers face is dealing with delays. Construction projects are particularly prone to delays due to the many variables involved in the process - from weather conditions to material shortages and labor shortages.

Concurrent delays occur when two or more delays happen at the same time, leading to a compound impact on the project timeline. For example, if a contractor experiences a delay in receiving materials due to supply chain issues, and at the same time, there is severe weather that prevents work from being completed, the delays can compound and prolong the overall project timeline. Concurrent delays can cause significant problems due to controversies when the responsibility is shared between two or more parties.

It is important for project managers to identify and analyze concurrent delays so they can take appropriate action to mitigate their impact on the overall project timeline. Here are some key steps that project managers can take to analyze concurrent delays:

"If concurrent delays have been identified, it's important to allocate responsibility for each delay"

1. Identify the delays: The first step is to identify all the delays that have occurred on the project. This includes any delays that are the result of issues with the contractor, as well as any external delays such as weather or supply chain issues.
2. Determine the impact of the delays: It is important to understand the impact of each delay on the project timeline. This can be done by estimating the amount of time that each delay will add to the overall project timeline.
3. Assess for concurrency: Once you have identified the individual delays and their impact on the project, you can assess whether there are any concurrent delays. This means looking for delays that occurred at the same time and analyzing their impact on the project timeline.
4. Allocate responsibility: If concurrent delays have been identified, it is important to allocate responsibility for each delay. This means determining which parties are responsible for each delay and working with them to find a solution to mitigate the impact on the project timeline.
5. Mitigate the delays: With an understanding of the causes and impact of the concurrent delays, you can take action to mitigate their impact on the project. This can involve adjusting the project schedule, increasing resources to get the project back on schedule, or finding alternative solutions to keep the project moving forward.

By following these steps, project managers can effectively analyze concurrent delays in a construction project and take appropriate action to mitigate the impact on the overall project timeline.

Key insights on concurrent delays in a construction project are:

• Responsibility: In cases where there is a concurrent delay, it is crucial to identify the responsible party or parties. This can help determine who should be held accountable for the delay and for any resulting costs or damages.
• Communication: Clear and timely communication between parties is essential in managing and mitigating concurrent delays. All parties involved should keep each other updated on any issues or delays that may impact the project timeline.
• Documentation: It is important to document all aspects of a concurrent delay, including the root causes, the impacts on the project, and any resulting costs or damages. This documentation can help support any claims or disputes that may arise.
• Mitigation: In order to avoid or mitigate concurrent delays, it is important to have clear project plans, schedules, and risk management strategies in place. This can help anticipate and address any potential issues before they become significant delays.
• Legal implications: Concurrent delays can have legal implications, particularly in cases where there are disputes over responsibility or costs. It is important to seek legal advice and guidance in managing and resolving any such disputes.

Overall, concurrent delays can be challenging to manage and can have significant impacts on a construction project. However, by taking a proactive and collaborative approach, and by following best practices in communication, documentation, and risk management, it is possible to effectively manage and mitigate these issues.

In a following paper we will discuss what the recognized international standards recommend to address concurrent delays involving both contractor and owner responsibilities.

In times of change, when agility and economy are needed at all levels, the use of specialized services provides that precise mix of capacity, effectiveness and efficiency that organizations need to succeed.

At DC&R we are able to meet these requirements with professional solvency and the experience of more than 25 years in complex engineering and construction environments for heavy industrial markets of high demand such as mining, gas & oil, or energy, as well as for infrastructure and commerce.

DC&R also offers technical assistance services to businesses that need to interact with engineering and construction companies, from tender and project management to contract administration.

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Written by: Carlos Delgado

Created: 16 September 2020

Is common to consider the contracts a “thing for lawyers”. Clearly the legal support is im- portant, but it should not be forgotten that contracts are, especially and mainly, the organized reflection of the will of two or more parties. In short, the contract - as a written docu- ment - is what those who decide to contract, let's call them the "decision makers", have agreed.

As a consequence, it is important to take into account that contracts are mainly the respon- sibility of those who close the agreement, that is, the decision makers.

During the last 25 years I have worked basically in the engineering and construction sector, mainly in heavy industrial and high demand markets: mining, oil & gas, energy and large in frastructure.

“Construction activity is conflictive per se” was the title of an extremely interesting interview (El Comercio, August 26, 2015, B4) with Gustavo Paredes, founding partner of the NPG Abogados law firm, and he was not wrong. In that interview Paredes proposed that the cha- llenge was to prevent conflict and detailed how as a result the State was introducing dispu- te resolution boards, made up of experts who know the problem, within the new State con- tracting law.

Since, as Paredes related, “In its DNA, construction has the conflict, the claim, the dispute as part of the construction process.”, the dispute resolution boards would be a way to pre- vent and control the conflict.

It cannot be denied that dispute boards are a way to control conflict, but it is necessary to recognize that they are not really a way to prevent it. If we come to knock on the door of a dispute board, it is that we have already reached the conflict. Preventing the conflict in an economic way would be the remedy, the “gene therapy”, that the construction requires. Now, how can conflict be prevented?

To answer this question, it is necessary to analyze what a contract is. A contract - in the broad sense - is the agreement that two or more parties have reached and which is then reflected in a written document as clearly as possible. If we think about this, we find that the parties agree on rights and obligations, but they are also agreeing on risks. The parties are agreeing who takes what risk. Risk is here understood as the cost associated with con- trolling an occurrence.

Thus, it is usual for the contractor to cover the risks related to labor and materials, while the owner generally bears the risks of the ground and, if he supplied the design, also the errors of the project (of course said owner surely has a contract that protects him from his desig- ner for the latter's errors). My thesis is that the origin of the disputes is the incorrect distri- bution of risks.

It turns out that, as in almost any field, the most economical way to solve a problem is to entrust it to the person who has the best knowledge and means to achieve the solution. Perhaps the phrase "why me if that corresponds to ... (this or that area or person) sounds familiar to many?" when a complicated assignment is decided in a company.

When an owner seeks the contractor to bear responsibility for a design provided by the owner or a contractor wants the owner to bear the risk of labor, we are sowing conflict.

There are of course hundreds of examples and cases in which, by forcing the wording of the contract to carry a risk inefficiently, we sow conflict and the negotiators of the parties sit at the table in a belligerent attitude.

It also happens that some party presses for agreements that are excessively onerous. I have had clients who demanded that there be no limit of liability or that said limit be the entire value of the contract. What such clients were asking was that if a normal, bona fide mistake was made - nothing involving fraud or unacceptable mistakes usually called negligence - the culprit paid for everything no matter what it cost.

This may sound fairly logical, but if we put it in context we must take into account that, generally, the owners are much larger companies than the contractors. If a bona fide contractor error causes damage to mining equipment, the replacement value of that equipment may cost more than the entire contract of the contractor who entered the job expecting to
earn a percentage, just a fraction, of such a contract and ends up exposed to losing several times more than the expected winnings.

The "classic" solution is of course to agree on a reasonable limit for liability and to work with insurance to cover the cost of such contingencies, and the smartest solution I have seen is that the client is the one who contracts this insurance. Why is it the smartest I've ever seen? Well, because usually the client already handles large insurance packages and only needs to carry out the procedures to cover the risks of any contractor who enters to work within their premises, which is why they have the best costs and instruct the contractor not to consider such insurance costs in its price. Thus the total cost of the project is reduced.

It is this concept that I consider essential: the overall cost is reduced and this happens be- cause the party that is best prepared to bear the cost of controlling risk is the one that is left in charge of that risk.

Applying this concept we must understand that a project, whatever it may be, is a collabo- rative effort between two or more parties and success is to achieve its completion in the most economical way possible. The "economy" of course refers to both cost and time. This implies that the parties who sit at the table to negotiate a contract should not be seen as antagonists, but as partners with a common goal: to reach port at the highest speed and at the lowest cost. To this end, their objective should be to distribute the risks in such a way that they are assigned to whom better - faster and with less cost - can handle them; instead of looking to pass on all the trouble to the antagonist.

To the extent that all parties feel that they have been left in charge of risks for which they are prepared or, at least, better prepared than their counterparts, the germ of conflict is reduced. We will hardly be able to eliminate the conflict, but it is clear that we are mitigating it.

Returning to the thread of the first paragraphs of this article, if we consider that those res- ponsible for the contract are the decision makers of the agreement and we recognize that the legal areas are the specialized advisers, not those responsible, we will see that the ne- gotiation must be carried out by the aforementioned decision makers, since they are the ones who, simultaneously, have the best knowledge of the project and of their own organizations, which is why they are in the best position - the most economical - to define what risks each party should take.

Rule of thumb that I learned and have always maintained: never pass the contract to legal review without first having made the substantive review as a decision maker. The legal area has the right to receive the contract already discussed by the decision makers, so that their own contributions can be better focused and with less need for consultations or clarifica- tions. In short, we can also achieve savings in the use of the time of our legal advisors.

In times of change, when agility and economy are needed at all levels, the use of specialized services provides that precise mix of capacity, effectiveness and efficiency that organizations need to succeed.

At DC&R we are to meet these requirements with professional solvency and the experience of more than 25 years in complex engineering and construction environments for heavy industrial markets of high demand such as mining, oil & gas, or energy, as well as for infrastructure and commerce.

DC&R also offers technical assistance services to businesses that need to interact with engineering and construction companies, from tender and project management to contract administration.

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Written by: Carlos Delgado

Created: 27 June 2023

As promised, we will now discuss what international standards recommend when dealing with concurrent delays.

We already know that concurrent delays occur when two or more delays happen at the same time, leading to a compound impact on the project timeline. The really interesting case is when some delays are the contractor’s responsibility, while others are the owner’s. Concurrent delays refer to situations where multiple factors contribute to a delay in the project, making it challenging to assign responsibility for the overall delay.

“Both parties need the project to be completed. As a natural outcome, owner and contractor are actually partners, instead of opponents.”

When something like that happens, we need to explore what international standards recommend to achieve a reasonable solution, meaning a solution able to be accepted by both parties.

At the end of the day, both parties need the project to be completed. The owner needs a productive project generating income as soon as possible, while the contractor needs to be paid for a successfully completed project. As a natural outcome, owner and contractor are actually partners, instead of opponents in a fight.

The most important international standards dealing with concurrent delays are the Association for the Advancement of Cost Engineering (AACE), the American Society of Civil Engineers (ASCE) and the Society of Construction Law (SCL).

• Association for the Advancement of Cost Engineering

AACE takes a position of recognition and appropriate management regarding concurrent delays in construction projects and acknowledges that concurrent delays can present significant challenges for all parties involved in a construction project. While there is no single, universally accepted definition of concurrent delays, AACE advocates for a clear understanding of this concept and the implementation of project management practices that adequately address these situations.

AACE emphasizes the importance of properly identifying and documenting concurrent delays throughout the course of the project. This involves gathering accurate data and records, including the start and finish dates of each activity, the allocated resources, and any external events that may have affected the project's progress. This accurate documentation is crucial in establishing a solid foundation when dealing with concurrent delays.

Furthermore, AACE stresses the importance of transparency and effective communication among all parties involved in a construction project. It is essential for
owners, contractors, and subcontractors to collaborate and share information in a timely and accurate manner to resolve concurrent delays fairly and equitably.

In terms of dispute resolution, AACE suggests the use of alternative methods such as mediation or negotiation before resorting to costly and protracted legal processes. These alternative approaches can help parties reach mutually satisfactory agreements and
avoid escalating conflicts.

In summary, the AACE's position regarding concurrent delays highlights the importance of accurate documentation, transparency, and effective communication in construction project management. It promotes a collaborative approach and the adoption of alternative dispute resolution methods to address and resolve concurrent delays in a fair and efficient manner. By following these guidelines, construction projects are expected to minimize the impact of delays and achieve successful outcomes.

• American Society of Civil Engineers

ASCE emphasizes the importance of proactive management and effective communication to address and mitigate the impacts of concurrent delays.

Firstly, the ASCE recommends implementing a robust project management system that includes accurate scheduling and documentation. This involves developing a detailed project schedule that identifies critical activities and their dependencies. By maintaining an up-to-date schedule and recording any changes or disruptions, it becomes easier to identify and analyze concurrent delays.

The ASCE also emphasizes the importance of proactive communication and
collaboration among all project stakeholders. Timely and transparent communication can help identify potential delays and enable the parties to collectively explore mitigation measures. Regular project meetings, progress reports, and clear lines of communication should be established to foster a collaborative environment.

In the event of concurrent delays, the ASCE suggests using a dispute resolution mechanism to assess the impact of each delay factor and determine their respective responsibility. This may involve engaging independent experts or a dispute resolution board to evaluate the delay claims objectively. The ASCE encourages parties to consider alternative dispute resolution methods, such as mediation or arbitration, to achieve a fair and timely resolution.

To minimize the impact of concurrent delays, the ASCE recommends implementing concurrent delay analysis techniques. These methods involve assessing the critical path of the project and analyzing the effects of different delays on the project timeline. By quantifying the effects of concurrent delays, project stakeholders can better understand their impact on the overall schedule and identify potential mitigation strategies.

It is important for project participants to document all delay events and maintain accurate records throughout the project. This includes recording the dates, causes, and
impacts of delays, as well as any mitigating actions taken. Proper documentation provides a reliable basis for assessing concurrent delays and can help in the resolution of disputes.

In summary, the ASCE recommends proactive project management, effective communication, and collaborative dispute resolution mechanisms to address concurrent delays. By implementing these strategies, project stakeholders can better manage and mitigate the impacts of concurrent delays, leading to successful project completion.

• Society of Construction Law

The SCL emphasizes the importance of understanding the complexities of concurrent delays and suggests various approaches to deal with them effectively.

One key recommendation by the SCL is the use of contemporaneous records. It is crucial to maintain accurate and detailed records throughout the project, documenting the events, causes, and effects of delays as they occur. This includes recording the progress of activities, any disruptions, and the reasons behind them. Contemporaneous records serve as a valuable resource for analyzing and assessing concurrent delays.

The SCL also suggests conducting a time impact analysis (TIA) to evaluate the effects of concurrent delays on the project schedule. A TIA involves assessing the critical path of the project and analyzing the impacts of various delays on the project timeline. This analysis helps identify the extent to which each delay has affected the project and provides a basis for determining responsibility and entitlement for time extensions.

To address concurrent delays, the SCL recommends implementing a collaborative approach and open communication among project participants. It is essential for parties to engage in timely and transparent discussions regarding the delays and their potential impacts. This allows for early identification of concurrent delays and facilitates the development of appropriate mitigation strategies.

The SCL also advocates for the use of alternative dispute resolution (ADR) methods to resolve disputes arising from concurrent delays. ADR methods such as mediation or expert determination can help parties reach mutually acceptable resolutions in a more time-efficient and cost-effective manner compared to traditional litigation. By choosing ADR, parties can work together to find practical solutions that mitigate the impact of concurrent delays.

Furthermore, the SCL highlights the importance of contract management and proactive risk management practices. Clear and well-drafted contracts should address the allocation of risks associated with concurrent delays and provide mechanisms for addressing them. Proactive risk management involves identifying potential concurrent delays early on, implementing mitigation measures, and promptly notifying relevant parties to mitigate their impact.
In summary, the SCL recommends maintaining contemporaneous records, conducting time impact analysis, fostering collaboration and open communication, utilizing alternative dispute resolution methods, and practicing proactive contract and risk management to effectively deal with concurrent delays in construction projects. By adopting these recommendations, parties can better manage concurrent delays and mitigate their impacts on project schedules and costs.

As we can see, there are some common recommendations across all the reviewed standards: appropriate and proactive management (which includes risk and contract management), data and contemporaneous records, transparency, collaboration, open and effective communication, and alternative (collaborative) dispute resolution mechanisms.

It seems obvious that the underlying principle to all reviewed standards is that owner and contractor are part of the same team, since both share the same goal: to finish the project as close as possible to the plan, both in time and cost. Any deviation increasing time or cost means a common problem, the approach should be a collaboration, not a confrontation.

In times of change, when agility and economy are needed at all levels, the use of specialized services provides that precise mix of capacity, effectiveness and efficiency that organizations need to succeed.

At DC&R we are able to meet these requirements with professional solvency and the experience of more than 25 years in complex engineering and construction environments for heavy industrial markets of high demand such as mining, gas & oil, or energy, as well as for infrastructure and commerce.

DC&R also offers technical assistance services to businesses that need to interact with engineering and construction companies, from tender and project management to contract administration.