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Implementing Time Impact Analysis On Large, Complex EPC Projects

By: Richard J. Long, P.E., P.Eng., Ronald J. Rider, MBA, and Rod C. Carter, CCP, PSP
Tel: (303) 972-2443
Email: Long International, Inc.


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1. INTRODUCTION

Changes can occur on almost every project and they often lead to delays and other negative impacts to the schedule and cost of a project. Large and complex engineering, procurement, and construction (EPC) projects are particularly susceptible to the negative impacts caused by changes. Changes can cause delay and disruption to engineering, procurement, fabrication, transportation and delivery, installation, and/or commissioning and startup activities. It is not unusual for an engineering change to cause a knock-on impact to successor procurement, fabrication, and installation work activities.

A change order or other impact can be modeled in a project CPM schedule using: 1) a group of added schedule activities, or fragnets; 2) adjustments to the durations of existing activities; 3) the insertion of lags or leads; and/or 4) imposed constraints. The overall objective of adding changes to a baseline or statused CPM schedule is to determine whether the overall completion date is improved, delayed, or remains the same as a result of the change. A well-known and widely utilized schedule delay analysis methodology is the Time Impact Analysis (TIA), which is well suited for large and highly impacted projects and generally accepted as the preferred method to demonstrate a Contractor’s entitlement to a time extension or the Owner’s justification for receiving liquidated damages.

This article examines the various complexities in analyzing the schedule impact of multiple changes, with most examples drawn from a sample gas plant project. However, the topics that are discussed relate to a schedule delay analysis on any large, complex project. The sample gas plant project spanned several years and experienced approximately 16 months of delay and hundreds of alleged impacts. Retrospectively, the Owner had to determine a reasonable amount of time extension to grant an EPC Contractor due to 90 approved change orders. The authors utilized a TIA with multiple analysis windows1 to assess the approved change order delays.

2. MANY EPC CONTRACTS REQUIRE IMPACTS TO BE INCORPORATED INTO THE SCHEDULE

Many EPC contracts require approved change orders and other impacts to be included in the CPM project execution schedules when these events occur. The main reason for a contemporaneous schedule impact analysis is to determine the magnitude of time impact, if any, that the change order or other type of impact would have on the overall remaining duration of the schedule.

Contracts often state that no adjustment to the critical milestones dates or the scheduled completion dates would be made unless the delay exceeds the float value of a critical path activity, as shown in a sample clause below:

The Critical Milestone Dates and Scheduled Completion Date shall be adjusted only when necessary to reflect any actual delay in the performance of a work activity in the critical path either occasioned by force majeure or for which COMPANY is responsible under this contract. The Critical Milestone Dates and Scheduled Completion Date shall not be adjusted for delay if the affected activity is not in the critical path and the duration of the delay does not exceed the activity’s total float as reflected in the latest reviewed Work schedule.

This concept is consistent with industry practice, as stated in the SCL Protocol:2

Unless there is express provision to the contrary in the contract, where there is remaining float in the programme at the time of an Employer Risk Event, an EOT [Extension of Time] should only be granted to the extent that the Employer Delay is predicted to reduce to below zero the total float on the activity paths affected by the Employer Delay.

AACE International also sets forth this requirement:3

In order for a claimant to be entitled to an extension of contract time for a delay event (and further to be considered compensable), the delay must affect the critical path. This is because before a party is entitled to time-related compensation for damages it must show that it was actually damaged. Because conventionally a contractor’s delay damages are a function of the overall duration of the project, there must be an increase in the duration of the project.

Thus, if the effect of adding any delays to the schedule is that float is consumed, but no actual delay to the completion of the project results from adding the delays, then the Contractor has no time extension entitlement.

3. TIME IMPACT ANALYSIS DEFINITIONS AND USES

The TIA is identified in numerous industry publications concerning the subject of delay analysis methodologies. The application of the Time Impact Analysis methodology has many variations.4 AACEI’s Recommended Practice 29R-03 Forensic Schedule Analysis5 includes Method Implementation Protocol Modeled/Additive/Single Base (MIP 3.6) and Modeled/Additive/ Multiple Base (MIP 3.7). AACE International generally defines the TIA as a modeled,6 prospective or retrospective CPM schedule delay analysis technique that adds Owner-caused and other excusable delays7 to the planned CPM schedule network.

Ideally, the TIA is calculated on schedules which are statused up through the day before each impact first occurred. A problem with statusing the schedule on the day before each impact occurred is that the analyst would need to accurately status each existing schedule activity on each day prior to the occurrence of each delay event, which would require the accurate determination of percent complete progress of each activity at the time that the delay occurred. Unfortunately, Contractors usually do not status work activities in their schedules at the time of each delay event, and the supporting activity progress data is typically performed only on monthly reporting cycles. Therefore, common industry practice is to insert the impacts into schedules that were updated prior to the occurrence of the impacts.8 Thus, the TIA is typically calculated by adding impacts to schedules which are statused at the end of specific windows or impact periods, typically the monthly schedule updates prepared during the project. While the TIA can be calculated using the entire period of the project as one as-planned schedule,9 the TIA can also be performed in windows or periods of time, where the statused schedule and its then current critical path can be analyzed separately for each window or period, and cumulatively for the project.10

Figure 1 illustrates conceptually the TIA methodology for a simple sequence of work....


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Long International provides expert claims analysis, dispute resolution, and project management services to the Process Plant Engineering and Construction industry worldwide. Our primary focus is on petroleum refining, petrochemical, chemical, oil and gas production, mining/mineral processing, power, cogeneration, and other process plant and industrial projects. We also have extensive experience in hospital, commercial and industrial building, pipeline, wastewater, highway and transit, heavy civil, microchip manufacturing, and airport projects.

Richard J. Long, P.E., is Founder and CEO of Long International, Inc. Mr. Long has over 40 years of U.S. and international engineering, construction, and management consulting experience involving construction contract disputes analysis and resolution, arbitration and litigation support and expert testimony, project management, engineering and construction management, cost and schedule control, and process engineering. As an internationally recognized expert in the analysis and resolution of complex construction disputes for over 30 years, Mr. Long has served as the lead expert on over 300 projects having claims ranging in size from US $100,000 to over US $2 billion. He has presented and published numerous articles on the subjects of claims analysis, entitlement issues, CPM schedule and damages analyses, and claims prevention. Mr. Long earned a B.S. in Chemical Engineering from the University of Pittsburgh in 1970 and an M.S. in Chemical and Petroleum Refining Engineering from the Colorado School of Mines in 1974.

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