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Industry Trends

Inevitably, mason contractors will run into a problem project sometime in their career. It might be a public works project or a design-driven private works project. And it doesn't matter how big or small your business is, these projects seem to be just waiting to pounce on the unsuspecting contractor. Many a contractor's company has been seriously harmed or put out of business because of events that start with a single problem project.

While each trade responds to project delays and disruptions differently, mason contractors have an unusually high burden of proof when it comes to damages. It is this burden that you carry on every project, good and bad. When it comes to recovering losses associated with delays, disruptions, changes in schedule, acceleration, excessive change orders, (to name just a few), every contractor must meet a minimum standard of proof.

There are two categories of damages associated with a claim for additional compensation. On the one side is a Total Cost Claim. After you prove that the other party breached your contract, your damages are the difference between your actual costs and your revised budget (bid plus approved change orders).

Naturally, the courts do not like to see this type of claim come at them. It assumes your bid is correct and it also assumes that the other party is 100 percent at fault. So, don't expect any help from the courts if the best you can do is a Total Cost Claim — especially if you're a mason contractor.

In most locations, to successfully prosecute a Total Cost Claim you will have to meet minimum standards. Those standards include a showing that the other party breached the contract and that it resulted in damages. To apply a total cost calculation to the damages, the following standards are required to be met:

  • You could not prove the losses directly (i.e. by event, disruption or delay);
  • Your bid was reasonable;
  • Your actual costs were reasonable; and
  • You were not the cause of your own losses.
If you can't prove these elements, then no damages will be awarded. You could have the best entitlement and deserve the money, but unless you can prove your damages, it's all a waste of time.

The problem for mason contractors is that they are naturally presumed to know how many block are being installed every day. The defense to a total cost claim from a mason contractor is to point out how simple it would have been to track the claim and that the claim should fail for failure to track losses directly. It's a pretty compelling argument and certainly something that works against you in negotiations.

The way to avoid this problem is with pro-active claims management. By treating the information from the field a little more like data, which can help you, and less like the drudgery of paperwork, you will find that you're ready for almost any eventuality of cost overrun. The data collected from good field notes not only escapes the problems of a Total Cost Claim but it puts you in the stronger position of an Actual Cost Claim.

Actual Cost Claims present a direct causal link between the event in the field and the cost overrun you seek to recover. For example, if a material lift is down for two hours, stalling your material on the ground along with four workers, your direct costs would be four men at two hours, or eight hours of labor. These are actual costs and differ significantly from total costs. In a total cost argument, you would demand the overrun for the entire job and say part of it was down time for material lifts.

Most subcontractors are resistant to preparing better documentation in the field, believing that better documentation means more paperwork. That's not so. With a good project tracking system in place, data can be developed from the tracking system whenever and wherever you want. Like a roll of exposed, yet undeveloped film, you know what pictures are there but you don't have to develop them unless they are needed.

A simple and effective system is all you really need to combat the total cost defense for mason contractors. Good documentation will have the added reward of tightening up your resources and recovering more in change orders, all as a matter of the natural outcome of a good labor tracking system.

There are many ways to track your labor but the trick is to track your labor so that you can tell on any given day (ideally) how many block were installed, where and with how many man-hours (or crew-hours). If you think about the big modern prisons with their hundreds of cells and sprawling housing pods, tracking labor in detail seems like it would be an overwhelming task. Especially if you have to keep it up every day and want to still have time to see the family between shifts.

In order to easily track progress, the measuring tools must be kept in a language your field crews can speak and understand. In the case of mason contractors that means the project drawings. The most efficient way for a mason contractor to track its labor in the field is by identifying labor hours by drawing sheet number and grid line. If the project allows, it is simple enough to number the walls on each sheet as well.

The foreman does not have to count the blocks in the walls because this was already done, either directly or indirectly, in the original bid. If we know that Sheet A2.3 has 1,000 blocks and was given so many man-hours to accomplish the task, all the field should have to do is track man-hours in a given location (drawing reference). Keep it simple: the field crew should track labor and anything that impacts it, including your own errors.

A very strong benefit of this type of documentation is it shows areas that were not impacted by an outside influence and how well your crews produced. This "measured mile" is the keystone of productivity and is translatable into a large number of situations. Periodically, check on productivity in given areas because this helps you compare your pre-bid expectations with what you are seeing. If any given area is seeing a large productivity loss, we can confine the analysis to that area and not have the problem lost in the project.

Once you develop a simple tracking method based on drawing references, it's a small step to actual cost claim documentation. Now you know where the labor is going. What you need to track next is how it might be impacted by any stated or new disruptions. You have the cause (the stated disruption) and the effect (what specific block of workers was impacted and where) and the damages because you know exactly how many hours were impacted.

You will be able to show that in areas which are not impacted are meeting expected productivity rates and that areas that are impacted are sustaining losses of productivity as shown by the increase in man-hours over static material counts.

It is simple to track disruptions as well. Let's say that you are a subcontractor on a mid-rise jail project. Let's assume that it's risky work under an out-of-town general contractor and an owner with a litigious reputation. When you think about documenting disruptions in the beginning of the project, ask yourself what potential problems might occur that could disrupt your project. For example you might be able to anticipate either from experience or the nature of the project these examples of potential disruptions could exist:

  • Late door frames
  • MEP sequencing
  • Late vertical dowels
Labor Tracking Disruptions
Sheet Grid Ref. Man-
hours
Door
Frames
MEP
Sequence
Vertical
Dowel
Est. Hours
Lost
A2.1 F5 line 32 X     4
A2.2 H4 line 16   X   4
Still no door frames on second floor, four guys each lost an hour trying to fit wrong frames. Shipping error. Plumber is still holding us up on the third floor.

With these types of reasonably anticipated disruptions, it is possible to take the simple man-loading data being collected in the field and cross-reference it with these disruptions without any additional efforts on the part of the field. For instance, the man-hour tracking portion of your daily report would look like the above table.

Any time you check a disruption box, you write up a little explanation below. That's it. That's what good field tracking looks like. It doesn't take a lot of writing and editorial comment on how bad the general contractor is treating you. Collecting the cause-and-effect information is what is needed from your eyes and ears in the field.

Now, to be truly useful in a claim for additional compensation, the original estimate also has to be broken out over the drawings. Each drawing should have a breakdown of the walls included in that drawing, estimated block count and any other relevant information (i.e. door frames, lintels, etc.). This information is then transferable to the project schedule and your schedule of values.

In addition, the tools are all there to identify periods of time where there may be additional risk (e.g. schedule shows walls and ducts in the same area at the same time) and to do something now that might mitigate those additional costs. After all, the goal should always be to meet or beat the bid, avoid all claims that you can avoid, and document all the events that impact your performance.

Once a week, a crew should walk the site and identify the progress of the work and, ideally, each wall. When you keep a log of these reviews, your as-built documentation is completed on a day-by-day basis without any additional effort from the field. This practice allows the project management team to identify past trends in the actual construction process that will help in making good decisions in the future, as well as identify impacting features for the change order process.

Daily project documentation is an absolute necessity in these litigious times. As a mason contractor, the burden of detail is perhaps a little higher than other trades and the field crews need to rise to this occasion. They are the eyes and ears of the company in the field and are inevitably responsible for the way a majority of the money on a give job is spent. With strong daily tracking tools, the project will be better cared for and the potential for profits as secure as possible.

Without these "best practices," you may not be able to recover the losses which you deserve simply because you can't prove what happened to you after a breach occurs. Should losses require you to file a claim and you don't have good daily tracking, it will cost twice as much to produce a claim document and will not be as strong as if you had completed your "best practices." To make matters worse, you may end up getting all the way to the courthouse steps and be rejected because you can only show a Total Cost Claim. That would be a waste of time and money for everyone concerned.

So, big job or small, some form of daily tracking must be done every day. This is how risk is reduced without increasing costs. There is a balance between what your crews can and/or will do and what information there needs to be collected. Many companies have been doing the same thing in the same way for so long they have no idea how to improve their systems — to think outside the box. In those cases, bringing in a consultant with litigation experience to help tune-up your administrative systems could be well worth the money. Regardless of how you do it, best practices give you the best opportunity for success.


Douglas D. Harding is a licensed attorney and consultant in Sacramento, Calif. He is a partner in the firm of Capital Project Solutions, dedicated to working with subcontractors for more than 17 years. You can get in touch with Mr. Harding via the firm's website at www.cpsolutions.info or by phone at (916) 447-7038.






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