By: Christopher J. Brasco Partner, and Matthew D. Baker Attorney, Watt, Tieder, Hoffar & Fitzgerald, LLP.
Critical path delay plays a central role in allocating responsibility for project delay. The interrelated concept of concurrency is also frequently determinative of entitlement on a range of claims including by owners for liquidated damages and by contractors for delay damages. What constitutes critical/concurrent delay, however, is hotly debated by scheduling experts. The lack of real consensus regarding how critical/concurrent delay should be determined and analyzed has created significant uncertainty in scheduling disputes. Indeed, courts have adopted differing and at times conflicting theories of concurrency that can produce divergent outcomes for the parties. In an effort to reduce uncertainty, stakeholders have increasingly adopted specialized contractual provisions and scheduling techniques which have significant implications for the evaluation of the companion concepts of criticality and concurrency. One such mechanism is float sequestration. Regardless of whether float sequestration is ultimately in the construction industry’s broader interest, stakeholders must be able to recognize its use and appreciate the implications for delay disputes on their projects.
Simply defined, float is the number of days an activity can be delayed before affecting the project’s critical path (i.e., the longest chain of activities which determines the project’s minimal duration). Typically, only delays affecting the critical path can produce concurrent delay. Consequently, the concept of float is integral to understanding and resolving issues of both criticality and concurrency.
When determining the cause of project delays, stakeholders have historically wrestled over who owns a project’s float. A general consensus now exists that, unless the contract provides otherwise, float belongs to the project and constitutes a shared resource to be used for the benefit of the project as opposed to any single party. Nevertheless, express contractual provisions investing ownership of the float in one party can upend this general understanding. Such provisions and their associated risks can be easily overlooked during contract formation. An even more subtle risk shift can occur through a group of less direct scheduling requirements and methods which are being increasingly used to take control of or sequester float.
A. Float Sequestration by Owners
Owners typically have significant control over the drafting of project contracts. Accordingly, owners have an opportunity to incorporate provisions and schedule specifications aimed at controlling float for themselves. These float sequestration provisions are frequently buried deep in a contract’s technical scheduling specifications. Far from being mere scheduling boilerplate, such provisions can significantly affect the parties’ rights. For example, float consumption provisions, by determining which parties have priority to use float, can at least partially inoculate a party from the consequences of its own delays by permitting it to avoid responsibility for concurrent delay. For example, a typical float consumption provision is as follows:
All float in the schedule shall first be for the benefit of the Owner, the Engineer, the Design Engineer and then for the benefit of the Contractor.
Float consumption provisions can also be drafted to provide that specific types of activities will have priority to the usage of float. Such provisions can be even more subtle in their effect and who they favor than float consumption provisions providing priority based on party identity. For example, float consumption provisions specifying that activities for which the owner is traditionally responsible (i.e., submittal review) will have priority in connection with float consumption, effectively hand owners control of the float.
Owners can also gain control over the schedule and build float into the schedule for their own use through contractually mandated review / approval durations. Such provisions both compress float in contractor-controlled activities and provide owners with a means of creating float for their own use by inflating their own activity durations.
Owners may also impose scheduling requirements on contractors to reduce float in contractor-controlled activities. Activity duration limits or not-to-exceed-activity-durations prevent contractors from creating summary activities which build float into their intended work-flow. Activity duration limits also function to increase the number of points where a contractor-delay could affect the critical path. Another means by which Owners limit a contractor’s access to float can be found in weather day provisions. Weather day provisions specifying an anticipated number of weather days for the entirety of the project rather than an individual month make it less likely based on the law of averages that a single unusual weather event will entitle the contractor to an extension.
B. Float Sequestration by Contractors
Contractors generally use the project schedule to build some flexibility into their program. Although the owner may be able to control theproject schedule’s format, contractors generally control the sequence of activities and their intended durations. In constructing the schedule, contractors can build-in “float” for themselves through a variety of scheduling techniques.
Perhaps the simplest way for contractors to sequester float is by inflating anticipated activity durations. If a contractor uses an activity duration that is 10% longer than necessary to complete an activity which the contractor performs, the contractor has effectively created float which it can control. The contractor unlocks this float when it completes the activity ahead of schedule. Similarly, contractors can create float which they control by grouping multiple activities into a single summary activity. Such a technique creates float for the total summary activity if a task included in the summary activity is finished early. Summary activities also provide contractors with an opportunity to catch-up and avoid delay to the critical path if an initial task included in the summary activity is finished late.
Contractors can also create float by scheduling activity durations using workdays (5 day weeks) instead of calendar days (7 day weeks). When a contractor schedules an activity whose duration is in reality determined based on calendar days using a workdays schedule calendar, the contractor can create float when the activity overlaps a weekend. For example, concrete cures within a certain number of calendar days. However, if the contractor schedules concrete cure durations in terms of workdays, the contractor can create float where the activity spans the weekend.
Float sequestration, whether employed by owners through contract specifications or by contractors through schedule preparation, can significantly affect the outcome of scheduling disputes. By aggregating float for itself, a party can make it more likely that delay runs through activities controlled by the other party. Float sequestration makes a concurrent delay defense by the other party less likely and increases the opposing party’s exposure for critical path delay. Consequently, although subtle, the use of highly technical schedule specifications to shift the risk of project delay cannot be ignored.
Project stakeholders have increasingly embraced both scheduling techniques and contractual provisions to effectively shift the risk of delay. In part this seems to be a response to the significant uncertainty regarding what constitutes concurrent delay and how it should be analyzed. These developments make it more important than ever to evaluate how a particular contract will affect a party’s rights in connection with project delays.
[1] Chris Brasco is a Senior Partner at Watt, Tieder, Hoffar, & Fitzgerald, LLP with over 30 years of experience resolving complex construction disputes. Matt Baker is an Associate at Watt, Tieder, Hoffar, & Fitzgerald, LLP. This article is adapted from a recent white paper by the authors and Dackus Gunn with Delta Consulting Group. Please contact the authors at cbrasco@watttieder or mbaker@watttieder if you would like a full copy of this white paper.
Watt Tieder is one of the largest construction boutique law firms in the United States, with a diverse and experienced team of attorneys representing many of the world’s leading corporations, developers and contractors on both domestic and international projects. We represent more than half of the Top 30 Engineering News Record contractors and most of the nation’s top sureties. With offices in six cities in the United States, the firm is a dynamic, mid-size boutique that provides knowledgeable and practical legal representation to the construction, surety, government contracts and bankruptcy industries world-wide.
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