Chapter 7 Risk and Schedule Delay – Core Concepts of Project Management

Chapter 7

Risk and Schedule Delay

Key Points

  • The impact of delays in projects
  • Allocation of relative responsibility for delays

We have contended that projects are often (in fact usually) late, due to the complex interaction of activities with probabilistic durations. This has been found to be true in many repetitive project environments to include construction as well as software system development projects.

In the construction industry, delay types, or allocation of blame (owner versus contractor, or acts of nature), is often important. Delay types are also categorized as excusable (compensable or noncompensable) and nonexcusable. Project delay has received a great deal of attention in civil engineering.1

There are several techniques comparing as-planned and as-built schedules reviewed by Alkass et al. (1996).2

  1. Global impact
  2. Net impact
  3. Adjusted as-built critical path method (CPM)
  4. “But-for” or collapsing
  5. Snapshot
  6. Time impact

The global impact technique plots all delays and disruptions on a bar chart, with start and finish dates for each event determined. Total project delay is calculated as the sum of durations of all delaying events. The issue with this approach is that the effect of concurrent delays is disregarded, and delay types are not differentiated as every delay has an equal impact, resulting in an overstatement of entitlement as liability.

The net impact technique displays only the net effect of all claimed delays on a bar chart of the as-built schedule. Time extension is the difference between the as-planned and the as-built completion dates. This method also does not differentiate the type of delay and the true effect of a particular delay on overall project completion is difficult to determine.

The adjusted as-built technique uses a CPM format for the as-built schedule, displaying delays as activities linked to work activities. Critical paths are identified using the as-planned schedule, and again using the as-built schedule. The net effect on project completion date is again used. Again, however, delay types are not considered.

The “but-for” technique is also called a collapsing technique, using the CPM format. One party takes the as-planned schedule and inserts all delays that they accept responsibility for. The updated schedule yields a revised project completion date, which is compared with the as-built schedule, implying that this party is responsible for this much delay. The as-built schedule is calculated from both owner and builder perspectives.

The snapshot technique gives a means to determine the amount of delay in a project, when it occurred, and its causes. Total project duration is divided into time periods (snapshots), often coinciding with major project milestones. The project completion of this extended schedule is compared with the as-planned schedule, determining delay. Then the causes of delay are assessed. This approach is systematic and objective, but involves significant effort.

The time impact technique is similar to the snapshot technique, examining effects of delays at different project times. As opposed to the snapshot technique, the time impact technique concentrates on specific delays, not time periods. This method also takes significant effort, and requires analysis to apportion entitlement.

The “but-for” approach seems the most straightforward. Usually a contractor has a penalty to pay for being late. The “but-for” contractor schedule is a way to show a fair and reasonable finish time given no contractor fault. It is possible that a management firm is the agent for the owner, in which case responsibility needs to be allocated across the two entities, and the “but-for” schedules for both contractor and manager can be compared, and serve as input to the negotiations to assess relative penalty.

Demonstration Schedule

The following case is widely used in civil engineering publications. The project consists of ten activities (A through J) with the following durations and precedence relationships (Table 7.1).

Table 7.1 Kraiem and Diekman CPM data

Activity

Planned duration (days)

Actual duration(days)

Predecessors

A

7

11

-

B

5

10

-

C

7

12

A

D

9

9

B

E

6

15

B

F

4

6

C

G

3

5

D

H

9

11

E

I

5

12

F

J

3

5

H

This yields the planned schedule shown in Figures 7.1 and 7.2.

Figure 7.1 Planned schedule

Figure 7.2 Network diagram of planned schedule

Delays are categorized as excusable noncompensable (EN)—nature, excusable compensable (EC)—manager’s responsibility, and nonexcusable (NE)—contractor’s responsibility. In the example, delays by activity and category are given in Table 7.2.

Table 7.2 Demonstration of project delays

Activity

EN delay—excusable

EC delay—manager

NE delay—contractor

A

1 day

3 days

B

3 days

1 day

1 day

C

2 days

3 days

D

E

5 days

3 days

1 day

F

2 days

G

1 day

1 day

H

1 day

1 day

I

2 days

2 days

3 days

J

2 days

Figure 7.3 gives the bar chart for this project, beginning at an arbitrary starting time on September 2, 2019.

Figure 7.3 Kraiem as-built schedule

These delays result in the as-built schedule shown in Figure 7.4.

Figure 7.4 As-built schedule

This as-built schedule is 18 days later than the planned finish time of 23 days. We can create the “but-for” schedule to show what would have happened but for delays due to management by taking out the “M” delays, obtaining the “but-for” schedule from the perspective of the contractor (Figure 7.5).

Figure 7.5 But-for contractor perspective

Figure 7.5 shows that but for the delays that were the responsibility of management, the contractor would have finished the project in 36 days. The argument would thus be that the contractor is responsible for 13 days of penalty rather than 18. If there is joint responsibility to be considered, the “but for” schedule from the perspective of the management firm is shown in Figure 7.6.

Figure 7.6 But-for manager perspective

Here we see that the delays due to contractor responsibility taken out result in project completion time of 39 days. This is 16 days late. There is an overlap of 13 days, with the management firm responsible for the extra 3 days.

Such an exercise usually involves exercise of negotiation skills, arguing over who is responsible for what. This exercise generally starts with the project participants, but often then extends to the involvement of lawyers, and if that is not resolved, courtrooms.

Summary

Schedule delay is usually present in projects. Contracts are usually written to cover contingencies. The material in this chapter demonstrates some methods that might be utilized to reconcile delay responsibility in an equitable manner. But ultimately, the analysis usually will be material upon which lawyers can base their arguments.

Glossary

As-built. Schedule that actually occurred.

But-for. Schedule that would have occurred but for delays for which one party is responsible.

Compensable. Delay for which one party to the contract is liable to the other party.

Excusable. Delay for which the entity (owner or contractor) is not liable.

Nonexcusable. Delay for which fiscal liability is present.

PMBOK Items Relating to Chapter 7

8.1 Plan Quality Management—process of identifying quality requirements and/or standards for the project and its deliverables and documenting how the project will demonstrate compliance with quality requirements.

8.2 Manage Quality—process of auditing the quality requirements and the results from quality control measurements to ensure that appropriate quality standards and operational definitions are used.

8.3 Control Quality—process of responding to quality issues identified.

11.1 Plan Risk Management—process of defining how to conduct risk management activities for a project.

11.2 Identify Risks—process of determining which risks may affect the project and documenting their characteristics.

11.3 Perform Qualitative Risk Analysis—process of prioritizing risks for further analysis or action by assessing and combining their probability of occurrence and impact.

11.4 Perform Quantitative Risk Analysis—process of numerically analyzing the effect of identified risks on overall project objectives.

11.5 Plan Risk Responses—process of developing options and actions to enhance opportunities and to reduce threats to project objectives.

11.6 Implement Risk Responses—process of dealing with risk issues as they arise.

11.7 Monitor Risks—process of auditing project quality performance.

Thought Questions

  1. Describe the definitional differences between excusable and nonexcusable delays.
  2. Describe the system of conflict resolution for projects, ending with the means of last resort.
  3. Discuss how project risk can be dealt with.

Notes

  1. Kraiem, Z.M., Diekmann, J.E. (1987). Concurrent delays in construction projects. Journal of Construction Engineering Management 113(4), 591–602.
  2. Alkass, S., Mazerolle, M., Harris, F. (1996). Construction delay analysis techniques. Construction Management and Economics 14, 375–394.