Aace Cost Engineering Journal 36f1b

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. Because P6 calculates to the minute; review the detailed work hours/day to that the day start/finish times are consistent for each work period, as well as with other calendars used in the project and enterprise. Inconsistencies can cause unusual start/finish times in the schedule, as well as unwanted overlapping of days between activities. When modifying existing calendars (i.e., 5 day to 6 day), detailed work hours/day for each day of the workweek to remove any inconsistencies. It is recommended that the global calendars be correctly defined initially to avoid these inconsistencies from the start. After calendars are established they are then assigned to individual activities. Each activity will have an assigned calendar (activity details, general tab). The should be aware that the use of multiple calendars within one project, although common, can impact float

calculations for the project (i.e., 7 days in a 7 day calendar or 7 days in a 5 day calendar). Workday Definition After calendars are assigned to their respective activities, durations for each activity will reflect not only the workweek per activity but any nonwork time associated to the activity’s calendar. The must be aware of the work day definition (i.e., 8 hour workday or 10 hour workday, etc.). In P6 (prior to version 7) the work day was defined at the or level with only one selection available, therefore causing issues when multiple calendars were used. In P6 version 7 ( menu, preferences, time periods), the workday can be defined at the calendar level. The system can define either global hours per time period (day, month, etc.) or set the hours per time period at the calendar level. The can modify how durations (i.e., hours, days, etc.) are displayed across the s’ projects under the edit menu, preferences option, time units tab. It is important for the scheduler to understand the different duration types in P6 and the relationship between the duration of the activity and the cost and/or resources assigned to the activity. The scheduler must choose the correct duration type for each activity in the schedule for the schedule model to accurately reflect the project plan. Establish Schedule Requirements The next step is to establish the project or contract time limitation requirements and the date constraints within the plan [1]. These can be contract milestones such as fixed dates for substantial completion and phased turnovers. P6 allows for several type of constraints (both primary and secondary constraints are available). The must understand the use of constraints, their impact on date calculations, and understand which constraint type to use. Because of contractual requirements and/or time limitations, precedence relationships may not be the driving consideration for specific activities (i.e., contract or project completion, phase startup and/or

completion). In these cases the use of imposed time constraints might be required to reflect the activity’s importance within the path of precedence relationships. When asg these constraints (whether contractual or internal) (activity details, status tab) the should consider the level of priority of the date (contract completion over a material date), in other words, a level of priority or process for change should a change in date be required. If a date change is not optional you might choose one type of constraint versus another type. There are varying types of constraints that can be applied to an activity’s start or finish date. Dependent on the type of constraint, the imposed date might affect the activity’s early dates or late dates. A start on or after constraint imposes a restriction on an activity’s early start date. This activity cannot start earlier than its constrained start date although precedence relationships might cause the activity to start later. A finish on or after constraint imposes a restriction on an activity’s early finish date. This activity cannot finish earlier than its constrained finish date although precedence relationships might cause the activity to finish later. A start on or before constraint imposes a restriction on an activity’s late start date. This activity cannot start later than its constrained start date and will override precedence relationships possibly causing negative float. A finish on or before constraint imposes a restriction on an activity’s late finish date. This activity cannot finish later than its constrained date and will override precedence relationships possibly causing negative float. A start on constraint imposes a restriction on an activity’s early and late start dates. This activity cannot start earlier or later than its constrained start date without impacting its criticality, but this constraint will not override precedence relationship. The finish on constraint imposes a restriction on an activity’s early and late finish dates. This activity cannot finish earlier or later than its constrained finish date without impacting its criticality, but this constrain

will not override precedence relationship. Mandatory start and mandatory finish impose restrictions on an activity’s early and late start dates and on an activity’s early and late finish dates respectively. This activity cannot start or finish later than its constrained date. Unlike other constraints, these mandatory constraints override any precedence relationship. The as late as possible constraint removes all free float from the activity. The activity moves to its latest possible date without impacting is successor’s early start date. Allocate Resources Estimating activity resources is the process of estimating the type and quantities of material, people, equipment, or supplies to perform each activity [2]. If the contract documents require resource and/or cost loading, the scheduler must assign resources to the activities. Even if the contract does not require resource/cost loading, it is good practice; by asg (i.e., loading) resources for each activity, available resources can be scheduled in accordance with resource consumption limitations (i.e., money, labor hours, etc.) by resource leveling or balancing [1]. When considering activity resource development and assignment the determination must be made either contractually or internally what ‘types’ of resources will be tracked and will costs be associated to each resource or tracked independently. Secondly will resources be updated based on activity work performance and will payment be based on percentage complete. If this is the case, the and/or project team must consider the amount of time that is required to not only input resource/cost data but the time involved to manage and report resource updates. Resources in Primavera P6 are global in that a single resource dictionary houses all projects’ resources. This dictionary is hierarchical in its structure which allows for controls to be in place for overall resource management. Resources are global in that a single resource (dependent upon access) can be assigned to multiple activities

COST ENGINEERING JULY 2011

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within across multiple projects within the EPS. In P6 cost loading is typically defined at the resource level. Dependent upon the requirements of both the organization and the project contract, cost loading is achieved as either a lump sum nonlabor resource or a price per unit labor/material resource. Three areas or levels within P6 contain the settings which govern resource allocation, costing, and updating options. It is important that the be aware of these settings prior to defining the resource and allocating resource units/costs. Once a resource is assigned to an activity, any changes to the resource settings will apply to new assignments only. The first of the three areas which contain settings governing resource allocation is the resource itself. These default global settings, specific to each resource, affect the resource regardless of the project and the activity to which it is assigned. Secondly, the project also contains default settings which affect all resources within the specific project. And finally the activity specific settings affect the individual resources assigned to that activity. To control these settings within each of the three levels, a basic understanding of P6™ and each option with its function is required. The first setting is calculate units from costs. By definition, costs are recalculated whenever resource unit quantities are modified. By default, this setting, found at the resource level (resource details, details tab) and at the activity location (activity details, resources tab, columns), applies to any new resource assignment. This option is not used for resources requiring lump sum loading where units/time are not considered. A second setting that should be understood is auto compute actuals. By definition, resource actual and remaining units, as well as start and finish dates are updated automatically based on the activity’s planned dates, budgeted units, and percent complete. This option can only be modified at the resource level (resource details, details tab) and therefore applies to the resource globally across its activity assignments. The nomenclature for this

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setting should not be confused with what appears to be the same option at the activity level. Although the naming convention is identical, another setting for updating activity information (found in the columns in the activity window) is used in conjunction with the apply actuals option within Primavera P6. A third setting that should be understood is link actual and actual this period units and cost. By definition, resource costs/units are updated when either actual or actual this period are updated. This option must be selected when using financial periods and store period performance. Found at only the project level (project details, calculations tab) this option applies to all resource assignments within the project. Other considerations relating to resource assignments include activity types. As discussed previously, milestones cannot have assigned resources and therefore cannot be cost loaded. Duration Types Each activity’s duration type defines how resource modifications adjust the activity’s duration, its budgeted resource quantities, and/or its resource production by period. When an activity’s duration type is fixed duration and units, P6 will recalculate the units per time for each of the activity’s resource assignments when either the activity’s duration or its budgeted units are updated. When an activity’s duration type is fixed duration and units/time, P6 will recalculate the budgeted units when either the activity’s duration or production rate (units/time) is updated. When an activity’s duration type is units, P6 will recalculate either the activity’s duration or production rate (units/time) when the budgeted units are updated. As mentioned previously, costs are allocated to each activity as either a lump sum resource cost or based on price/unit resources. When cost loading the P6 schedule, financial periods are then used to store actual period performance as opposed to spreading actual work performance across the timeline. These financial periods are set at the globally across the enterprise by the

Figure 10 —Three Factors Determining Duration Type system (under the menu, financial periods option). They are set at periodic intervals for cost/production tracking. Cost s Cost s can be established within P6 (enterprise menu, cost s) to identify organizational ing codes to specific resource/cost times within the schedule and across the enterprise. They are typically created by the cost engineer or controls engineer. This hierarchical structure is associated to each activity at the resource level (activity detail, resources tab, cost s column). Resource Curves and Future Bucket Planning Resource curves (under the enterprise menu, resource curves option) define how resource units/costs are distributed across an activity’s duration. They are associated to each activity’s resource (activity details, resources tab, curves column). Primavera P6 also offers future bucket planning for resource units/cost forecasting, where distributions are manually entered in the resource usage spreadsheet for future resource projections. These manually spread distributions are displayed in the activity details, resource curves column as manual. Percent Complete Types When determining the process of updating resources and the contractual and/or internal requirements for resource/payment obligations, the must consider the means of updating each resource at the activity level. When payment is based on work performance, the must consider how each activity’s update will affect the resource cost/quantities for that activity. Work

performance in P6 is updated automatically (unless specified) in Primavera using percent complete. There are three percent complete types at the activity level: duration percent complete, physical percent complete, and units percent complete. Duration percent complete is directly associated to the activity’s original duration and remaining duration. This default setting within P6 is used to update resource costs/units. However, when payment is based on work performance and stored materials, duration percent complete might not reflect actual costs to date. Percent Complete = (Original Duration – Remaining Duration) / Original Duration * 100. (equation 1) Physical percent complete is a manually entered (or resource entered) percentage of work. This percentage type has no correlation with the activity’s duration or units complete. At this time this option cannot be used to update resource costs/units. Units percent complete is directly associated with the activity’s labor and nonlabor resources. This option can be used to update resource costs/units. Percent Complete = Actual Units / At Completion Units * 100. (equation 2) In most instances where work performance in the schedule is directly tied to payment, the use of either duration percent or units percent (when associated with a lump sum activity) cannot be used. The should be aware that actuals will need to be manually entered at the resource level within each activity. Optimize Schedule (Simulation and Optimization) This process step is wherein the scheduler, based on his or her cost engineering judgment and team input and , iteratively modifies the plan and schedule inputs until the most satisfactory schedule is obtained [1]. The scheduler using P6 must have an understanding of the software

Figure 11—Schedule Options in P6 schedule options and the impact each has on the calculation results. Optimization of the schedule requires consistent auditing of resource definition and activity detail during the course of schedule development. Assessment and analysis of critical events within the schedule define the schedule’s ability to plan and manage the life of the project. Understanding the rules of schedule calculation which determine these critical activities is fundamental in the early stages of schedule development as well as maintenance of the mature schedule. P6 provides multiple sources for schedule optimization during the schedule development phase of the project. The schedule log (an option found when updating and/or calculating the schedule) analyzes schedule data based on these predefined M rules. As data is entered and the schedule is calculated from the defined data date to project completion and back, a log of schedule analytics can be produced for evaluation of schedule development and overall critical path. The log displays the calculation settings currently in place for the particular project(s) (set within the tools menu, schedule, options). These options define whether the calculation considers purely duration and sequence of work or whether resource leveling (based on resource allocations and limitations) is used for calculation and at

what point. They also allow assignment costs of resources to be automatically recalculated each time the project is scheduled updating activity costs to reflect any new price/unit values modifications. In P6 the has the ability, if granted access, to sequence activities in one project to activities in other projects based on program requirements. The scheduling options allow the to ignore these ‘inter project’ ties to review project specific critical events or to consider these ties, analyzing an overall critical path of the program (multiple projects) where the latest finish date of the latest open project is used as the starting point for the backward . Each schedule will have a ‘start’ activity (an activity with no predecessor) and a ‘finish’ activity (an activity with no successor). Other than these two openended activities, all activities within the schedule must have predecessor and successor relationships with few exceptions. P6 scheduling rules determine how these exceptions are handled in relationship to its criticality. As activity precedence relationships are added P6, through its scheduling options, can set the schedule to calculate latest data automatically as changes are made. When developing precedence between activities, the use of lag, and the number of time periods the lag represents is determined, by


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default, based on the predecessor’s calendar or work period. The , through the scheduling options, can choose to use the successor’s calendar for lag measurement as well as the project’s default calendar (project details, defaults tab), or a 24 hour calendar. Other calculation rules are defined by determining how P6 displays openended activities in relationship to the critical path and whether total float (based on a defined number of hours) will be used for measuring the critical path or whether longest path will be used. Under the advanced options tab within the schedule options, the can select whether P6 will calculate multiple float paths based on either total float or free float. When using total float the application determines, based on the most critical precedence relationships, each critical path. When using free float, the application uses longest path to identify the latest calculated finish date tracing driving relationships backward through the schedule. Based on the specified number of paths to calculate, P6 will store each path within the Float Path field (column). In P6 there are three options available when scheduling progressed activities: retained logic, progress override, and actual dates. Retained logic maintains the as-built sequence of activities regardless of actual work. The predecessor’s inherited driving relationships drive the successor. In progress override the activity as-built sequence can be overridden based on actual work. The direct predecessor activity’s dates (remaining early) drive those successor activities which have not started. When the predecessor is assigned an actual finish, the activity’s dates (remaining early) are driven by the data date. When the activity has an actual start, its remaining duration drives the remaining early finish. The option actual dates allows for future actualized activity dates to calculate sequence. If the actual dates option is selected, then the predecessor’s late finish is set to the time unit before the actual start of the out-of-sequence

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predecessor. This assignment has the potential of creating negative float [5]. P6 also contains two options on how to calculate start-to-start lag which determines how a predecessor’s resume date (when suspended) impacts its successors start date when using a startto-start tie with lag. The options are early start and actual start. Early start – drives the successor’s start date from the predecessor’s remaining early start. Actual start – drives the successor’s start date from the predecessor’s actual start. Warnings on the schedule log report include open-ended activities, out-ofsequence activities, activities with actual dates on or after the data date, and milestones with invalid relationships. Primavera P6 will allow for milestones to have finish-to-start relationships, although not always recommended because of start and finish times. A start milestone should only have a start-tostart relationship with its predecessor and a start-to-start and/or start-to-finish with its successor. A finish milestone should only have a finish-to-finish relationship with its successor and a finish-to-finish or start-to-finish with its predecessor. Unsatisfied constraints and relationships are created when a relationship overrides the assigned activity constraint (i.e., start on or finish on) or when a constraint overrides the assigned relationship. Claim Digger (issued as part of the Primavera P6 software: tools, Claim Digger) allows the to compare two schedules and evaluate the differences between them, including but not limited to: changes in durations, dates, relationships, added / deleted activities, added / deleted WBS, added / deleted assignments. P6 also contains many standard tabular reports which can be helpful in analyzing a schedule, such as logic reports. Many contract documents are now requiring the use of the latest version of Primavera software (P6) because of its enterprise capabilities and its use of latest technologies including the capabilities to interact other software applications. The scheduler should be able to apply the implementation and execution “lessons learned” outlined in

this article to develop schedules quickly and efficiently using P6. ◆ ACKNOWLEDGMENTS The authors would like to thank Ron Winter, PSP and F. Burak Evrenosoglu, CCE PSP, for their invaluable help in reviewing this article. REFERENCES 1. AACE International. Chapter 7.2 Schedule Planning and Development. Total Cost Management Framework – A Process for Applying the Skills and Knowledge of Cost Engineering, First Edition. Pages(s) 129-138. AACE International, Morgantown, WV. 2006. 2. Project Management Institute. Chapter 6: Project Time Management. A Guide to the Project Management Body of Knowledge (PMBOK ®), Fourth Edition. Page(s) 129-164. Project Management Institute, Newton Square, PA. 2008. 3. AACE International, Recommended Practice No 23R-02 Identification of Activities, AACE International, Morgantown, WV. 2007. 4. AACE International, Recommended Practice No 24R-03 Developing Activity Logic. AACE International, Morgantown, WV. 2004. 5. Winter, Ronald M., PSP, and F. Burak Evrenosoglu, CCE PSP. PS.15, Much Ado About Dates Understanding P6 Date Information. 2009 AACE International Transactions. AACE International, Morgantown, WV. 2009. ABOUT THE AUTHORS

Hannah E. Schumacher, PSP, is with Kitchell Contractors. She can be ed by sending email to: [email protected]

Charlie Jackson is with Hill International. He can be ed by sending email to:

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TECHNICAL ARTICLE PEER REVIEWED

Practical Problems With Pricing Delay Using Eichleay James G. Zack, CFCC and Dr. David W. Halligan, PE Abstract: Since 1960, the Eichleay Formula has been used to price extended and/or unabsorbed home office overhead. Most in the construction industry treat the Eichleay Formula as an ing mechanism – seldom understanding that the US Armed Services Board of Contract Appeals created this “formula” as an estimating tool, not an ing method. There are some practical problems with the Eichleay Formula. From the ing perspective, there are several major flaws built into the formula. From the project owner’s perspective, there is a risk of overcompensation unless certain contractual defenses are employed. And, from the contractor’s perspective, there are issues with the applicability and the use of the formula. This article examines the traditional Eichleay Formula from all three viewpoints, to identify the problems and offer some recommendations on how to alleviate them. Key Words: Audits, delay, Eichleay Formula, estimating, home office overhead, and pricing

D

elay is a common occurrence on construction projects. Delay may be caused by action or inaction of the owner, their designer or construction manager; or by the contractor, their subcontractors, suppliers, or deliverymen; or by outside forces such as weather, labor actions, war or acts of terrorism, material shortages, etc. The list of potential causes of delay is extensive. What owners and contractors focus on in the event of delay is how to deal with the issue under the and conditions of the contract. Most standard form contracts, in both the public and the private sector, deal with at least three types of delay in their and conditions, as follows. • Inexcusable Delay – This is delay caused by the contractor, or one his subcontractors or suppliers at any tier. Typically, most contracts deny any time or cost recovery to the contractor in the event of inexcusable delay and require the contractor to recover the lost time, or pay actual or liquidated damages for late completion. • Excusable Delay – This is delay brought about by a third party (that is, neither the owner nor the contractor) or some outside force such as weather, acts of God, acts of war or terrorism, labor actions, etc. Private contracts frequently deal with this situation in the Force

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Majeure clause, while many public contracts include this type of delay in the Termination for Default clause [19]. Most standard form contracts allow the recovery of the delayed time but award no time related costs for the period of the excusable delay. Thus, the contractor receives time but no time related costs, while the owner grants the time and cannot assess late completion damages for the delayed time. • Compensable Delay – This is delay caused by the owner or someone for whom the owner is responsible (such as delayed return of drawings which impact the project schedule) or by an event for which the owner has assumed liability (for example, differing site conditions). Most standard form contracts allow the contractor to recover both the lost time, as well as time related damages from the owner. Contractors are most often allowed to recover extended field office, storage, and equipment costs; idled labor and equipment costs; impact costs; lost productivity costs; and such other costs that can be shown to have been incurred as a result of the delay. Additionally, contractors may be allowed to recover extended or unabsorbed home office overhead costs. While there are several other types of delay – pacing delay, concurrent delay, early completion delay and impact delay – which may be recoverable under

contracts, each will, depending upon the and jurisdiction of the contract, be dealt with as one of the above types of delay. Once the cause of the delay is identified the argument turns more technical. What is the extent of the delay? Because of the complexity of modern day scheduling and multiple ways to perform forensic schedule analysis, negotiations over the extent of a delay are often difficult. Delay analyses performed by two different parties, concerning the same event, can and often do yield results substantially at odds with one another. However, if both the owner and the contractor stay focused on resolution, some agreement can be reached on both the extent of delay and the resulting recovery (i.e., non-excusable, excusable, compensable or concurrent). Then the argument turns to financial impact. That is, what is the cost of a day of compensable delay? Provided the contractor maintained reasonably good job cost records, determining daily field office overhead (“FOOH”) costs is not terribly difficult. Additionally, other costs such as idled labor and equipment, extended equipment and storage, etc., are not difficult to ascertain if good job cost records have been maintained. However, in owner-caused delay situations, contractors frequently seek recovery of extended or unabsorbed home office overhead (“HOOH”). This is where negotiations often deadlock. Why? There is no standard method of calculating HOOH. Most contractors want to use formulas to calculate their damage. Most owners want to see “real damage” based on some sort of audit – “Prove your overhead increased as a result of my delay!” This article addresses the issue of the recovery of HOOH. Specifically, the article identifies practical problems with the use of the Eichleay Formula as a method of calculating extended/unabsorbed HOOH. The article discusses these problems from the viewpoint of ants/auditors, owners and contractors. Finally, the article offers some practical remedies to be considered when addressing this issue while preparing contracts for bid.

What is Home Office Overhead? To begin, let’s define the term, “home office overhead,” and identify what expenses are typically allocated to this cost by contractors. “Home office overhead is the general and istrative expense (G&A) an enterprise expends to its various revenue generating activities. Characteristically, the home office overhead costs can not be directly allocated to a specific project. It is composed of numerous items of indirect cost, typically referred to as the “overhead pool”. . . [28].” HOOH, generally, are those costs incurred by a contractor for the benefit of all projects in progress. This is an actual cost, which is an essential part of the cost of doing business [40]. These are costs that cannot be directly allocated to a project. This definition excludes those costs incurred by the contractor solely in of a single project or group of projects. Typical examples of HOOH discussed in the industry include the following: • • • • • • • • • • • • • • • • • • • • • •

executive and istrative salaries; legal and ing expenses; home office rent and expenses; advertising; company insurance; recruiting costs; utilities, telephone, fax and computers; human relations costs for the home office; interest on company borrowings; travel for home office staff; bad debt; depreciation of company assets; entertainment; professional fees; contributions; bid costs; automobiles; licenses and fees; property taxes; data processing; office supplies; and, photocopying.

Total Contract Billings Total Company Billings For Performance Period

x

Total Company = Overhead for Performance Period

HOOH Allocable to Contract Actual Days of Contract Performance

=

HOOH Allocable to Contract

Daily Contract HOOH Rate

Daily HOOH Rate x Days of Compensable Delay = HOOH Recoverable Figure 1—The Classic Eichleay Formula “Thus, for the contractor’s enterprise to remain viable, a portion of the contract revenues from each project must be available to pay for or ‘absorb’ the home office overhead expense. By comparison, certain items of istrative provided in the field usually are treated as direct costs of the project, for example, site istrative personnel, field office trailers, utility services, and the like. These are generally referred to as field office overhead or general conditions costs. . . . items of cost that can be directly allocated to a specific contract are not properly part of the [home office] overhead pool.” There are, however, few regulations concerning ing for HOOH costs. Contractors are reasonably free to for such costs in whatever manner they choose. They must, however, use the same system at all times and on all contracts [14]. While Federal Acquisition Regulations (“FAR”) limit the recoverability of some types of HOOH costs, these limitations apply only to contracts directly with agencies of the US federal government [1]. “Compensation sought by the contractor for unabsorbed home office overhead can be one of the more contentious issues faced on . . . projects [43].” However, if the project owner is an agency of the US government, or if a contractor has a contract directly with the US government and is seeking recovery of HOOH, then they are required to use the classic Eichleay Formula to estimate the cost of the unabsorbed HOOH [47]. What is the Eichleay Formula and How Does it Work? The Eichleay Formula, brought about initially by decisions issued by the US Court of Claims, is a method to

equitably determine the allocation of unabsorbed overhead to allow fair compensation to a contractor for a government caused delay. It is used to determine the compensation to a contractor for unabsorbed overhead costs because of government-caused delay [41]. “There is no exact method to determine the amount of home office expenses to be allocated to any particular contract or part of a contract. It is not necessary to prove a specific amount of home office expenses, but only to determine a fair allocation for the purpose of compensating a contractor for delay by the government. . . . The Eichleay Formula calculates allocable overhead costs as the ratio of billings of the subject contract to total firm billings during the contract period, multiplied by the total overhead incurred, divided by the actual days of performance, times the number of days the contractor was delayed. The basic formula is outlined as an allocation of the total recorded main office expense to the contract in the ratio of contract billings to total billings for the period of performance. The resulting determination of a contract allocation is divided into a daily rate, which is multiplied by the number of days of delay to arrive at the amount of the claim [33].”


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Stated more directly, the classic Eichleay Formula described above is as shown in figure 1. Looked at this way and viewed in the context of the citations above, it is obvious that this is a method of estimating delay damages for unabsorbed HOOH and is not an ing formula, contrary to popular belief. Genesis of the Eichleay Formula Again, contrary to popular belief, the Eichleay Formula was not created out of whole cloth by the Armed Services Board of Contract Appeals (“ASBCA”) in 1960. Rather, the foundation of this delay allocation formula was put in place by the US Court of Claims nearly 20 years earlier. The dispute arose from a 1933 Veteran’s istration construction contract in Fresno, California, on which there were a large number of changes and stop work directives issued by the government, resulting in a 58 day delay. Baruch pursued a claim which included a claim of $3,107 for “general office overhead.” After trial, the Court of Claims awarded “general office overhead” damages, stating in part – “During the delay occasioned by the defendant’s stop order . . . the contractor gave prompt notice to the contracting officer that such delay was occurring, that damages therefor were accumulating and that claim for such damages against the Government would be demanded . . .

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that the plaintiff company engaged in other construction work at the time the contract work involved in this litigation was being done. … We have therefore apportioned the general office overhead and allotted the proper part of same to this particular contract. In turn, we have allotted the proper part of the net result thus obtained to the unforeseen delay. . .[21]” (Emphasis supplied.) Four years later, in a case involving a 1935 contract to construct facilities at a migratory waterfowl refuge in Bennett County, South Dakota, the US Court of Claims ruled – “Where the contractor, by negligence of the defendant amounting to a breach of the contract, is delayed in the completion of the work; it is held that plaintiff is entitled to recover a proper proportion of main office overhead for the period of delay, without any precise proof of the amount by which plaintiff’s overhead was ultimately increased by the delay. Brand Investment Co. v. United States, 102 C. Cls. 40, cited [20].” (Emphasis supplied.)

Manifestly this delay was not in the contemplation of the parties at the time of the making of the contract. . . . It was not the fault of the contractor . . . He should be permitted to recover the actual and necessary costs proximately flowing from the delay that was occasioned by this action on the part of the defendant. . . .

Neither of these decisions, however, included the formula(s) they must have devised and relied upon in order to allocate the home office overhead due the contractor as a result of the government caused delay. These rulings did not say how they arrived at the damages awarded. Finally, in 1960 the ASBCA heard the appeal of the Eichleay Corporation from a Corps of Engineers determination concerning home office expense allocable as a result of delays encountered during the construction of a Nike Missile Base in Pittsburgh, Pennsylvania. The ASBCA decision stated –

As to the general office overhead, the evidence shows

“The problem out of which this dispute arises is how to allocate


home office overhead expenses incurred during a period of suspension of work. These expenses continue during temporary or partial suspensions, and it was in this case not practical for the contractor to undertake the performance of other work which might absorb them. There is no exact method to determine the amount of such expenses to be allocated to any particular contract or part of a contract. It has been held a number of times that it is not necessary to prove a specific amount, but only to determine a fair allocation for the purpose of compensating a contractor for delay by the Government [8].” (Emphasis supplied.) The ASBCA recognized that when a contractor encounters government caused delays of an unknown duration, the contractor’s HOOH continues to accrue but is no longer ed by revenue from the delayed project. The ASBCA acknowledged previous Court findings that there is no exact way to calculate unabsorbed HOOH in order to determine the compensation owed the contractor. It appears that the ASBCA reached back to the Fred R. Comb case discussion of proportioning a contractor’s HOOH and sought a way to equitably compensate contractors in such situations. The appellant in this case, The Eichleay Corporation, offered a formula to proportionately allocate their HOOH from the corporate level to the project level and then reduce it to a daily cost. The ASBCA in their decision adopted the appellant’s proposed method of computing unabsorbed HOOH delay costs – and thus the Eichleay Formula was born! Let’s now examine the practical problems with the use of the Eichleay Formula when pricing unabsorbed HOOH. This examination looks at the Eichleay Formula from three viewpoints – those being ants or auditors, owners and contractors.

Practical Problems – ant’s and Auditor’s Perspective While the Eichleay Formula is considered by the courts and the boards of contract appeals to be a fair and realistic estimating method to allocate unabsorbed HOOH to determine the compensation owed the contractor, ants and auditors recognize that this is not an ing formula. ants and auditors who examine the Eichleay Formula and who are familiar with the construction industry understand that “The Eichleay formula is based upon a number of presumptions, the correctness of which determines the formula’s accuracy and usefulness [7].” There are six major ing assumptions embedded in the Eichleay Formula which give ants pause and reason to question the “accuracy and usefulness” of the formula as a way of establishing compensation for unabsorbed HOOH. The presumptions referred to in Anderson’s thesis are the following. 1.

2.

That a proportional relationship exists between contract billings and fixed indirect costs. This is a questionable presumption. Anderson notes that contract billings are rarely used as the base for distribution of indirect costs because “contract billings” is the cost of sales plus profit. As the amount of profit included in contract billings varies by contract they are not necessarily directly proportionate between the contract billings and the indirect cost pool as is assumed in the Eichleay Formula. That the indirect cost pool does not include any variable costs. Again, this is an assumption that may or may not be correct. Even home office costs, which are typically fixed costs, sometimes contain variable costs. “To the extent that a claim includes expenses that vary over time, the Eichleay Formula does not reliably measure the contractor’s actual loss [22].” Home office costs and indirect cost pools should be carefully examined to identify and remove such variable costs.

3.

4.

5.

6.

That the contractor during delay period does not perform any substituted work. This too should be closely examined. The fact that the contractor cannot take on another project the same size as the delayed or suspended contract does not necessarily mean that the contractor’s work force was idled entirely and provided no benefit to the contractor. Substituted work mitigates the contractor’s damages and is not ed for in the Eichleay Formula, That the contractor was working at full capacity during the entire period of contract performance. This is an assumption that may or may not be true and which needs to be examined carefully. If a contractor has one large contract underway when a second, government contract is awarded and then, during performance of the government contract the larger contract completes, the contractor does not win another contract to replace it and the government contract is delayed or suspended, then the contractor’s compensation However, the is increased. increased compensation has nothing to do with the government caused delay. That the effect of the delay on the contractor is the same, regardless of when the delay occurs. This may or may not be true and needs to be examined closely. If, in a northern climate, the delay occurs during a winter period when the contractor is less productive and has fewer personnel in the field may have less impact on the contractor than a delay which occurs during the summer when larger and more productive forces are in the field. The Eichleay Formula, however, compensates the contractor the same in both cases. That the period of contract performance is an acceptable base period for accumulating fixed indirect costs. That is, this period is representative of the contractor’s

fixed indirect costs. This presumption is more likely to be accurate when a contractor is operating under normal and relatively stable business conditions. However, in times of economic turbulence the degree to which costs may be fixed varies. The Eichleay Formula does not deal with this sort of ing sensitivity. Additionally, from the viewpoint of ants and auditors the Eichleay Formula has the following additional shortcomings which are not and cannot be addressed when using the Eichleay Formula. 1.

The Eichleay Formula cannot be adjusted for the following: a. b. c.

Seasonal work fluctuations; Substituted work during delay periods; or To for the capacity at which contractor was working before the delay period.

2.

HOOH recovered through mark-ups on added or changed work is not ed for in the context of the Eichleay Formula. Thus, if an owner uses the Eichleay Formula to price delay they should make an adjustment to the resulting damage calculations to reduce the damages by that amount of HOOH paid earlier in marks ups for changes. As these markups are typically added by application of a single percentage number, the owner is, perforce, required in enter into a second negotiation – that is, of the 10 percent markup on changes issued during the delay period, how much was HOOH? This is a difficult negotiation indeed.

3.

Some also argue that the Eichleay Formula fails to consider that a delay simply defers recovery of HOOH costs from one ing period to another. Thus, there is no true economic loss to contractor.

ants and auditors are frequently aware of these shortcomings in the strict application of the Eichleay


27

Formula but as their work takes place long after the contract is executed they are powerless to change the formula or its application. Some practical remedies are offered in the last section of this paper to help address some of these objections.

Practical Problems – Contractor’s Perspective Contractors too, have some concerns and objections with the application of the Eichleay Formula. Among them are the following. 1.

Practical Problems – Owner’s Perspective Owners, too, have a view concerning strict application of the Eichleay Formula. Among the owner objections frequently voiced are the following. 1.

The Eichleay Formula, strictly applied, may cause “overpayment” of the contractor’s damages as noted above.

2.

The owner may end up paying for the contractor’s Skybox at Angel Stadium, their condominium in Sun Valley, or their golf club hip in Palm Springs, any or all of which may be charged to HOOH under the guise of “employee health, welfare and morale” expenses in accordance with ing and tax rules. The contractor being compensated via the Eichleay Formula may be “double dipping” unless some portion of the overhead markup paid on previously issued change orders is deducted from the Eichleay Formula calculation.

3.

2.

Despite the fact that the Eichleay Formula is now 50 years old and has been employed in literally hundreds of cases, the Eichleay Formula is not recognized in all state courts throughout the US. In an informative article published in 1996 [28], it was noted that only Florida, Maryland, Massachusetts, Ohio, Rhode Island and Washington have state case law accepting the Eichleay Formula and, even then, had some restrictions on when the formula could be employed. Some states specifically disallow the use of the Eichleay Formula [11]. Even more interesting is the fact that 43 other states, as of 1996, had “no appellate level court cases discussing the acceptability of Eichleay…[28]” US federal courts have proscribed when and under what circumstances the Eichleay Formula can be employed. Some state courts have followed suit likewise. The rules currently in effect as to when the Eichleay Formula may be employed are the following.

for estimating the impact of an owner caused delay which resulted in unabsorbed HOOH. For a contractor seeking to resolve delay claims as they progress through the project, the Eichleay Formula does not offer any avenue for relief. Some Potential Remedies Practically speaking, the only opportunity to make changes concerning delay damages and the recovery of extended/unabsorbed HOOH is to do so when drafting the contract. Changes after contract award either (a) have to be negotiated with the contractor (who has little incentive to enter into such negotiations) or (b) will require an expensive court case and, perhaps, require the judge to “make new law” (something most judges are loathe to do). Therefore, some practical, potential remedies offered for consideration are the following. Prohibit Recovery of Extended/Unabsorbed HOOH Some owners seek to avoid payment of extended/unabsorbed HOOH all together on the belief that these are not real damages. For owners who want to adopt this approach, the following are two potential ways to implement it by contract. 1.

No Damage For Delay Clause – The owner who seeks to prohibit recovery of extended or unabsorbed HOOH may include a no damage for delay clause in the contract. Such an exculpatory clause attempts to eliminate or substantially reduce the damages a contractor may seek compensation for resulting from owner caused delay. In some states, such a clause is enforceable (i.e., New York [37]), while in other states, the courts acknowledge some or all of the six widely recognized exceptions to the enforceability of such contract language [10, 25]. These exceptions are, generally, the following –

a.

A delay not covered by the language of the clause;

The contractor – 4.

Finally, for those owners who truly want to resolve delays during the life of the project and not wait until the end of the work to tackle such thorny issues, the Eichleay Formula cannot be applied. The Eichleay Formula is an end of the project formula as the costs and the period of performance employed in the formula all have to be calculated when the project is complete. Eichleay cannot be used during the life of the project!

Some practical remedies are offered in the last section of this article to help address some of the concerns and objections raised by project owners.

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a. b. c. d.

e. f.

3.

Must experience government caused (compensable) delay; Of indefinite (unknown) duration; Suspending most, if not all, of the project work; Resulting in a substantial disruption or decrease in the income stream from the project; Remain ready to resume contract work immediately; and, Is unable to secure comparable replacement work during the impacted period in order to replace the reduced cash flow from this project [23, 24, 48]. Finally, as noted earlier, the Eichleay Formula is an end of the job formula

b.

c. d.

e. f.

A delay not contemplated by the parties when executing the contract; A delay of “unreasonable duration”; A delay resulting from active interference or other wrongful conduct of the owner; Waiver of the clause by actions of the parties; or, Fundamental breach of the contract by the owner justifying nonenforcement of the clause [12].

this clause is more finely tuned in that it limits only extended/unabsorbed HOOH. Again, though, owners thinking of employing this approach need to seek competent legal advice to determine whether courts in their jurisdiction have been enforcing the AIA consequential damage clause. 3.

Finally, there are a number of states where no damage for delay clauses are unenforceable by statute. As of the 2006 – 2007 timeframe, some 15 states had prohibited, in whole or in part, including Arizona [9], California [13], Colorado [16], Kentucky [4], Massachusetts [27], Minnesota [29], Missouri [30], Nevada [31], North Carolina [32], Ohio [34], Oregon [36], Rhode Island [38], Texas [42], Virginia [45], and Washington [46]. Therefore, owners who decide to employ this approach need to seek the advice of competent legal counsel to determine whether such a clause is enforceable in the owner’s jurisdiction. 2.

Include Unabsorbed HOOH in the Consequential Damage Clause – The American Institute of Architects (“AIA”) standard form construction general conditions (AIA Document A201-1997, ¶8.3.3) “…does not preclude recovery of damages for delay by either party… [5].” However, in the Claims for Consequential Damages article the AIA document has the owner and the contractor waiving claims against one another for “… consequential damages arising out of or relating to this Contract.” This mutual waiver language includes – “damages incurred by the Contractor for principal office expenses including the compensation of personnel stationed there…[6].” Unlike the broad brush of the no damage for delay clause approach

“Grace Period” or “Dead Band” Clause – Under this approach the owner may establish, by contract, a grace period or dead band beyond the original contract completion date, during which period no claims for extended/unabsorbed HOOH are allowed. If owner caused delay exceeds this period then the contractor may seek compensation for HOOH costs. While this approach does not eliminate claims for extended/unabsorbed HOOH entirely, it allocates the risk of such costs should owner caused delay fall within this period. That is, the owner gambles that his delays will not exceed this period and the contractor is free to include some potential owner caused delay costs in his bid – holding these costs in his contingency should such delay arise. If the owner caused delay does not occur or occurs but does not consume the entire grace period, the remaining unused contingency cost drops straight to the contractor’s bottom line.

generally found when challenged in court and there is no reason to believe this trend will not continue. 2.

The Mortensen Rule – Owners seeking to limit recovery for owner caused delay may incorporate the Mortensen Rule [26] into the and conditions of the contract. Under this rule a contractor is given the option of choosing either a percentage markup rate for HOOH costs on changes or a per diem rate. Following the Mortensen Rule, the contractor must use the same method at all times subsequent to selection of the method. To incorporate this approach, owners should consult with legal counsel, review the case law and craft a clause that contractually incorporates this approach into the bidding documents.

3.

Absorption Rate Formulas – Stipulate the use of an absorption rate formula in the contract for recovery of owner caused delay costs. Absorption rate formulas calculate underabsorption by comparing a potential or reasonable overhead absorption rate against the actual absorption rate for the purpose of calculating the effect of the delay on the contractor’s HOOH absorption [43]. The two absorption rate formulas are shown in figure 2.

Change the Rules for Recovering Extended/Unabsorbed HOOH Other owners are willing to compensate contractors for delay damages arising from owner caused delay but are loathe to adopt the Eichleay Formula as they believe it over compensates contractors. For owners seeking to take this approach, the following remedies may be employed. 1.

Audit – Access to Records Clause – An Audit/Access to Records clause should be included in all contracts giving the owner the right to audit the contractors job cost records and any other records related to change order cost proposals or claims [44]. Such clauses, properly worded, have

It should be noted that while a number of ants/auditors have recommended this approach, courts understand that these formulas are more suitable for manufacturing operations than construction projects. Therefore, owners seeking to take this approach need to seek advice of legal counsel to determine whether courts in their jurisdiction are likely to uphold such a clause. 4.

Fixed Mark Up Rates – Include a fixed markup rate in the contract which specifically covers unabsorbed or extended HOOH costs. The General Services


29

istration, the Veteran’s istration and the US Postal Service have all adopted contractually fixed overhead rates which have withstood court challenges [39]. To see the Veteran’s istration overhead limitation clause see FAR § 8-7.65021, Contract Changes [3]. The General Services istration overhead limitation clause may be found at FAR § 552.243-71, Equitable Adjustments [2]. 5.

6.

“Extended vs. Unabsorbed Overhead Recovery” – Owners may preclude recovery of unabsorbed HOOH by contract using language similar to AIA Document A201-1997, ¶8.3.3), but then allow recovery of “extended HOOH” based on the actual value of the additional istrative services the contractor had to employ because of the delay, The approach would be to determine the istrative services the contractor had to provide while the project was proceeding as expected and compare them to the istrative costs incurred during the period of delay [7].


Alleghany Method –

The Allegheny Formula is set forth below. Incurred Overhead Rate During - Actual Overhead Rate for = Actual Period Projected Performance Overhead Period Excess Overhead Rate b.

x

Contract Base Cost

Excess

Rate

= Unabsorbed HOOH

Carteret Method –

The Carteret Formula is displayed below. Incurred Overhead Rate During Overhead Delay Period Rate Excess Overhead Rate

x

-

Normal Overhead Rate =

Excess

Total Base Cost = Unabsorbed HOOH During Delay Period

Figure 2—Absorption Rate Formulas contract, most legal forums are likely to enforce use of the formula.

d.

Incorporate “Federal Rules” in the Contract

e.

1.

f.

Alternative Formulas – Owners may include alternative formulas for calculating extended/unabsorbed HOOH in the contract. If clearly worded in the contract it is likely that such an approach would be upheld by courts, boards and arbitration s. Some alternative formulas for consideration are set forth in figure 3.

The list of formulas in figure 3 is certainly not all inclusive. There are, undoubtedly, other formulas in use and many more that can be crafted and included in contracts. The point here is that with thought and careful wordsmithing owners can create their own methods of calculating how extended / unabsorbed HOOH will be compensated in the event of owner caused delay. It is believed that if the formula is clearly stated and the conditions under which it may be employed are likewise clear in the

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a.

a. b. c.

Adopt Federal Rules on Recovery of Unabsorbed HOOH – Some owners are comfortable with the use of the Eichleay Formula as a way of estimating the compensation owed a contractor because of owner caused delay. However, they seek to limit when such compensation is owed or, rather, under what circumstances may the contractor employ the Eichleay Formula. In this case, legal analysis of the current Federal Court rules on the subject can be written into the contract. A contract clause can be crafted that states clearly the contractor is not owed extended/unabsorbed HOOH unless all of the following conditions are met. The delay encountered must be owner caused delay; Of indefinite (unknown) duration; Suspending most, if not all, of the project work;

Resulting in a substantial disruption or decrease in the income stream from the project; The contractor is required to remain ready to resume contract work immediately; and, Is unable to secure comparable replacement work during the impacted period in order to replace the reduced cash flow from this project. Certainly judges and arbitrators are likely to recognize such rules as being applicable to direct US federal contracts and if they find the same rules clearly incorporated into the and conditions of the contract in dispute, it is presumed they will enforce what was clearly written and agreed to.

2.

Incorporate FAR Unallowable Cost Provisions – Some owners do not object to the Eichleay Formula but want to insure that certain of the contractor’s HOOH costs are disallowed when calculating their HOOH costs. Inclusion of language in the contract to the effect that the disallowed overhead costs from the FAR [18] are disallowed under the of this contract when

calculating extended/unabsorbed HOOH. The Audit/Access to Records clause mentioned earlier can be employed to see that such a cost limitation clause is strictly enforced. Create Mid-Contract Unabsorbed HOOH Rule in Contract 1.

2.

Limited Reservation of Rights – Many owners understand the value of settling delay claims as such situations arise. They understand that this is one way to avoid a major end of the project legal battle, as well as a way to effectively eliminate constructive acceleration claims on their projects. Owners who have studied this approach understand that the Eichleay Formula cannot be employed on a mid-project basis. That is, they are cognizant of the fact that the Eichleay Formula cannot be employed until the end of the project. This effectively cuts against the owner’s intent to settle delay claims during the course of the project. However, inclusion of a clause which provides for payment of direct delay costs (such as, extended equipment and storage costs, extended FOOH costs, etc.) but allows the contractor to reserve their rights to recover extended/unabsorbed HOOH costs until end of project may help resolve this conundrum. Create a Mid-Project Formula – Again, owners who want to resolve delay claims as they arise may want to consider choosing one of the formulas above to employ as an interim or mid-project mechanism to use for calculating and paying extended /unabsorbed HOOH but with the owner reserving their rights to apply the Eichleay Formula at the end of the project to determine if previous payments for delay should be adjusted, upwards or downwards, depending upon the outcome of the final calculation.

Bid Daily Delay Cost 1.

Time Related Overhead Approach – The California Department of

a.

Anderson’s modified Eichleay Formula [7]

Delayed Contract’s Value Allocable for Normal Period Total Value of All Contracts For Normal Period b.

Total Fixed x

Home Office Expenditures for Delay Period

=

HOOH

Canadian Method [43]

% Markup from Bid x Original Contract Sum Rate Original Days in Contract

=

Daily Overhead

Daily Overhead Rate x Days of Compensable Delay = HOOH Owed c.

Florida Method [43]

Average Overhead/Day d.

=

Original Contract Amount x 8% Original Contract Time

Ohio Method [43]

HOOH % [35]

=

Days of Delay x (Original Contract Value x 5.5%) Original Contract Duration

Figure 3—Alternative Formulas Transportation (“Caltrans”) has employed a unique mechanism on some of their larger projects (the San Francisco – Oakland Bay Bridge replacement project for example). They use a Time Related Overhead (“TRO”) bid item and specification to implement the approach [15]. One of the line items in the bid form requires the contractor to fill in their daily time related cost and multiply this daily rate times the number of working days in the Time of Performance clause. The cost is stipulated to include FOOH as well as HOOH. The contractor is paid monthly as the project progresses based upon the number of work days consumed each month. If delays arise during the performance of the work, the TRO number is used to price the delay once agreement is reached on causation and liability. The TRO number is only subject to unit price adjustment if delay exceeds 149 percent of the original number of work days stipulated in the contract. This specification generally avoids the need for audit concerning delay costs and makes settlement of delay claims easier.

Further, Caltrans has tied this requirement to their Escrow Bid Document requirement such that the work sheets used to calculate and bid the daily delay costs are preserved in a neutral location for examination in the event that one or the other party has a need to review the calculation in order to settle a delay claim. 2.

Bid Your Delay – A variant of the above is for the owner to insert a line item in the bid for “x” number of days of owner caused delay. (The owner stipulates the number of days in the bid form.) The contractor is required to fill in the cost per day and carry out the multiplication for that line item. The specification implementing this approach states that the Owner Caused Delay line item is an allowance. Thus, the number of days and payment therefor will be subject to upward or downward adjustment depending upon the number of days of actual owner caused delay at the end of the project; provided that, the line item cost is not subject to adjustment


31

[49]. The US General Services istration (“GSA”) has successfully used the Bid Your Delay approach to contractually define delay damages, including HOOH damages, to which a contractor is entitled [17]. It is interesting to note that the contract under consideration in these motions also required the contractor to “bid the percentage markup” it was top received for added work. Thus, this particular contract closed a potential loophole under which a contractor might claim that the contract did not allow for the recovery of additional HOOH incurred as a result of added work. The Eichleay Formula is now a half century old. It is, however, nearly as controversial today as it was when it was first created. Some US federal agencies employ the Eichleay Formula because of US federal court rulings, while others use different approaches. For those comfortable with the use of the Eichleay Formula, use it judiciously. For others, uncomfortable with the formula, this article offers a number of potential ways to deal with the issue of compensating the contractor for delay costs arising from owner caused delays. The key to the successful employment of any of these alternatives is for owners to think through the situation while the contract is being drafted; decide how they want to calculate compensation for delay damages in the event they delay the project; seek competent legal advice concerning their decisions; and carefully craft and clearly incorporate such language into the contract documents. Failure to do so may put the owner in the unenviable position of having to close out their project in an arbitration hearing room or a courtroom. Disclaimer The opinions and information provided herein are provided with the understanding that the opinions and information are general in nature, do not relate to any specific project or matter and do not necessarily reflect the official policy or position of

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Navigant Consulting, Inc. Because each project and matter is unique and professionals can differ in their opinions, the information presented herein should not be construed as being relevant or true for any individual project or matter. Navigant Consulting, Inc. makes no representations or warranties, expressed or implied, and is not responsible for the reader’s use of, or reliance upon, this paper, nor any decisions made based on this paper. ◆ REFERENCES 1. 48 C.F.R. §§31.205-1 to 31.205-23 (1990). 2. 48 CFR 552.243-71. 3. 34 FR 15470, October 4, 1969, as amended at 38 FR 5478, March 1, 1973; 39 FR 13263, April 12, 1974; 41 FR 48519, November 4, 1976; 45 FR 15930, March 12, 1980. 4. 371 Ky. Rev. St., 45 A-245, §371-160. It is interesting to note that this statute is applicable to some private contracts in addition to public works contracts entered into after June 26, 2007. 5. AIA Document A201-1997, ¶8.3.3. 6. AIA Document A201-1997, ¶4.3.10. 7. Anderson, David G. Recovery of Indirect Costs in the Pricing of Equitable Adjustments and Terminations for Convenience, LL.M. Thesis, The National Law Center, George Washington University, Washington, D.C., May, 1988. 8. Appeal of Eichleay Corporation, ASBCA, 60-2 B.C.A. (CCH); 1960 ASBCA LEXIS 1207, July 29, 1960, citing Fred R. Comb Co. v. United States, (Ibid); B.W. Construction Co. v. United States, 104 C. Cls. 608, 643-644 (1945), cert. den. 327 U.S. 785; Irwin & Leighton v. United States, 101 C. Cls., 455, 481 (1944); Brand Investment Co. v. United States, 102 C. Cls. 40, 58 Fed. Supp. 749 (1944), cert. den. 324 U.S. 850. 9. Ariz. Rev. Stat. §41-2617. 10. Beattie, Carl S. Beattie. Apportioning the Risk of Delay in Construction Projects: A Proposed Alternative to the Inadequate “No Damages for

11.

12.

13. 14.

15.

16. 17.

18. 19.

20.

21.

22.

23.

Delay” Clause, William and Mary Law Review, March, 2005. Berley Industries, Inc. v. City of New York, 398 N.Y.S.2d 353 (N.Y. App. Div. 1977), reversed, 45 N.Y.2d 683, 385 N.E.2d 281 (N.Y. 1978) and Manshul Construction Corp. v. Dormitory Authority, 436 N.Y.S.2d 724 (App. Div. 1981). Bramble, Barry B. and Michael T. Callahan, Construction Delay Claims, 3rd Edition, Aspen Publishers, New York, N.Y., 2000. Cal. Pub. Cont. Code §7102. Callan, John L. and Hugh L. Rice, Construction ing Deskbook – Financial, Tax, ing, Management and Legal Answers, 5th Edition, Aspen Publishers, New York, 2004. Caltrans Program Procedure Bulletin B 00-8, Contract istration Time-Related Overhead (TRO), December 15, 2000. Colo. Rev. Stat. Ann. 24-91103.5(1)(a). Cross Motions—The Bid Your Delay approach to defining delay damages was recently upheld by the Civilian Board of Contract Appeals (“CBCA”). See “Cross Motions for Partial Summary Relief Granted in Part, July 29, 2010: CBCA 420, 450, 451, 1307, 1855; Dick/Morganti, A t Venture v. General Services istration.” FAR 31.205. FAR 249-10(b) for a list of excusable delay causes in typical US government construction contracts. Fred R. Comb Co. v. United States, 103 Ct. Cl. 174; 1945 U.S. Ct. Cl. LEXIS 21, February 5, 1945. Herbert M. Baruch Corporation, Ltd., Herbert M. Baruch and Milton Baruch v. United States, 93 Ct. Cl. 107; 1941 U.S. Ct. Cl. LEXIS 141, March 3, 1941. Home Office Overhead as Damage for Construction Delays, 17 Georgia Law Review 761, 7904 (1983). See also, Salt Lake City Contractors, VABCA 1362, 80-2 BCA 14713 at 72,559 (1980). Jones, Reginald M. Recovering Extended Home Office Overhead: What is the State of Eichleay?,

24.

25.

26.

27. 28.

29. 30. 31. 32.

Procurement Lawyer, Vol. 40, No. 1, Fall, 2004. Howrey LLP, Unabsorbed Home Office Overhead – Making a Prima Facie Case for Entitlement to Recovery Under Eichleay, Construction Weblinks®, August 28, 2006. Leavitt, Josh M. and Joseph C. Wylie, Recent Trends in Exceptions to Enforceability of No Damages for Delay Clauses, Real Estate Law and Practice Course Handbook, Practising Law Institute, New York, 2005. M.A. Mortenson Co., ASBCA No. 40750, 97-1 B.C.A. (CCH) ¶ 28,623 (1997), aff’d on recons. 9801 B.C.A. (CCH) 29,658 (1998). See also Caldwell Construction Co., Inc., ASBCA No. 49333, 00-1 B.C.A. ¶ 30,702, aff’d on recons., 00-1 B.C.A. (CCH) ¶ 30,859 (2000). Mass. Gen. Laws Ann., Chapter 30, §390. McGeehin, Patrick A. and Carleton O. Strouss, Learning from Eichleay: Unabsorbed Overhead Claims in State and Local Jurisdictions, 25 Public Contract Law Journal 351, Winter, 1996. Minn. Stat. Ann. §15.411(2). Mo. Ann. Stat. §34.058. Nev. Rev. Stat. Ann. §§108.2453(e), 624.622(2)(c). N.C. Gen. Stat. Ann. §143-134.3.

33. Oak Environmental Consultants, Inc. v. U.S., 77 Fed. Cl. 688; 2007 U.S. Claims LEXIS 252, August 7, 2007. 34. Ohio Rev. Code Ann. §4113.62( C)(2). 35. Ohio DOT has currently established the HOOH percent they will pay under their contracts at 5.5 percent. 36. OR. Rev. Stat. §279CV.315(1). 37. Phoenix Contracting Corp. v. New York City Health and Hospital Corp., 118 A.D.2d 477, 499 N.Y.S.2d 953 (1986). 38. R.I. Gen. Laws §37-2-42(a),(d). 39. Santa Fe Engineers v. United States, 801 F.2d 379 (C.A.F.C. 1986); West Land Builders, VABCA 1664, 83-1 B.C.A. 16325. 40. Schwartzkopf, William, John J. McNamara and Julian F. Hoffar, Calculating Construction Damages. New York, NY: John Wiley & Sons, Inc., 1992. 41. Sunshine Construction & Engineering, Inc. v. U.S., 64 Fed. Cl. 346; 2005 U.S. Claims LEXIS 55, March 4, 2005. 42. Tex. Gov’t. Code Ann. §2260.003(a)(3), ( c)(5). 43. Transportation Research Board, Compensation for Contractor’s Home Office Overhead: A Synthesis of Highway Practice, Federal Highway istration, Transportation Research Board, Washington, D.C., 2003.

44. US Government’s Audit Clauses at FAR 52.214-26 or 52.215-2. 45. Va. Code Ann. §2.2-4335(A). 46. Wash. Rev. Code Ann. §4-24.360. 47. Wickham Contracting Co. Inc... v. Fischer, 12 F.3d 1574, 1580-81 (Fed. Cir. 1994). 48. Zack, James G. Jr., Calculation and Recovery of Home Office Overhead, AACE International Transactions, AACE International, Morgantown, WV, 2001. 49. Zack, James G. Jr., “Claimsmanship”: Current Perspective, American Society of Civil Engineers Journal of Construction Engineering and Management, Vol. 119, No.3, September, 1993. ABOUT THE AUTHORS James G. Zack, Jr., CFCC, is executive director, Navigant Construction Disputes Forum, the industry’s resource for thought leadership and best practices on avoidance and resolution of construction project disputes globally, based in Irvine, CA. Dr. David W. Halligan, PE, is the Associate Director, Global Construction Practice, with Navigant Consulting, Inc., located in San Francisco, CA.

AACE's New Recommended Practice The Technical Board recently voted to approve AACE International Recommended Practice No. 58R-10 "Escalation Estimating Principles and Methods Using Indices." This recommended practice (RP) of AACE International defines basic principles and methodological building blocks for estimating escalation costs using forecasted price or cost indices. There is a range of definitions of escalation and escalation estimating methodologies; this RP will help guide practitioners in developing or selecting appropriate methods for their definitions and situation. Other RPs are expected to cover methods that do not involve indices, that cover specific examples of fully elaborated methodologies for specific project situations, technologies, industries, and probabilistic applications. Also, while the RP discusses the relationships of escalation estimating to other risk cost s (namely contingency and currency exchange), dealing with those costs is not this RP's focus. Escalation estimating is an element of both the cost estimating and risk management processes. Like other risks escalation is amenable to mitigation, control, etc. However, this RP is focused on quantification, not on escalation treatment (i.e., how it is addressed through contracting, bidding, schedule acceleration, hedging, etc.) or control. In of cost estimating, this RP covers practices applicable to all classification of estimates. The examples in the RP emphasize capital cost estimating, but the principles apply equally to operating, maintenance and other cost.

For a list of all AACE Recommended Practices visit www.aacei.org/resources/rp


33

AACE AACE News News Flash Flash All AACE Books to Become "Print-on-Demand" Products Later this year, AACE will be reformatting each of its print products (i.e., the Skills and Knowledge of Cost Engineering; CCC/CCE Certification Study Guide; EVP Study Guide; PSP Study Guide; and the TCM Framework) to be produced by a subsidiary of Amazon.com. Our goal is to begin 2012 with each of these AACE publications available online from Amazon.com. We will maintain a link from the AACE website to Amazon.com and recommend products as well.

AACE Merchandise Available Through Land's End In addition to using Amazon.com as the provider of AACE print products in a "printon-demand" service, all AACE hats, teeshirts, and member or speaker gift logo products have already been outsourced to Land's End, another recognized business product provider. A link is already available to these product offerings from the AACE online store.. Similar to "print-on-demand," the merchandise and services available through Land's End increases what is available to AACE , sections, and anyone wanting to place an order. The AACE logo can be printed on a wide variety of clothing products and merchandise. have access to the full range of sizes and colors that Lands End carries and offers. Orders are placed with and ship directly from Lands End. ◆

34


PROFESSIONAL SERVICES DIRECTORY

RECENTLY REVISED RECOMMENDED PRACTICES Recommended Practice No. 17R-97 Cost Estimate Classification System Recommended Practice No. 18R-97 Cost Estimate Classification System: As Applied in Engineering, Procurement, and Construction for the Process Industries Recommended Practice No. 29R-03 Forensic Schedule Analysis

Recommended Practice No. 42R-08 Risk Analysis and Contingency Determination Using Parametric Estimating Recommended Practice No. 43R-08 Risk Analysis and Contingency Determination Using Parametric Estimating - Example Models as Applied for the Process Industries To access these and all other recommended practices, visit: www.aacei.org/resources/rp

INDEX TO RS

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35

THE AACE® INTERNATIONAL BULLETIN

SECTION NEWS

Arizona Section On April 15, the last of the three scheduled presentations on project controls was conducted at the Del E. Webb School of Construction, Arizona State University. Speakers included Chris Hudson, Cindy King, Hannah Schumacher, Marina Sominsky and Max Shoura. They discussed potential career paths, industry trends, specific project experiences and growth opportunities through involvement in organizations and achieving certifications. Throughout the course of the presentation, the speakers answered various student inquires and questions, making it a lively interactive session. 4D BIM for Delivery The Arizona Section and guests were pleased to have Kirk Olson, executive vice president of Synchro Ltd, as its guest speaker on April 21, at Kitchell's Training Center.

FROM AROUND THE WORLD

During his presentation, Mr. Olson introduced a 4D technology solution, called Synchro that addresses, “BIM for Delivery.” The essence of Synchro is to integrate BIM design models and schedules to continue the data flow into the delivery process of the project in a visual and synchronized mode. Synchro is a highly functional 4D simulation and planning tool that allows every construction team to deliver large, complex projects in a totally new synchronized paradigm. The presentation highlighted the use of Synchro in largescale complex construction projects and illustrated how sharing this information in a collaborative environment for the construction team creates a very powerful visual dynamic. Mr.Olson also demonstrated how different construction scenarios can be run side-by-side using Synchro graphical simulation capabilities, as well as how to incorporate project costs into what becomes Synchro 5D model. This highly informative and interactive presentation allowed participants to ask many questions about

Submitted photo

On April 15, the last of the three scheduled presentations on project controls was conducted at the Del E. Webb School of Construction, Arizona State University. Shown above from left are Dr. Leonard Kawecki of ASU with AACE presenters: Chris Hudson, CCC, CEP; Marina Sominsky, Hannah Schumacher, PSP; Cindy King, and Max Shoura, PE PSP.

36


Submitted photo

Kirk Olson, executive vice president of Synchro Ltd., above left, receives a gift from AACE Arizona Section Secretary Marina Sominsky, PMP , at right. This followed Mr. Olson’s presentation at the Arizona Section’s April meeting.

Submitted photo

William Ellie Daniel, a senior communications specialist from the Alvin W. Vogtle Electric Generating Plant, presented the April program for the Central Savannah River Area Section. Submitted photo

Arizona Section Board Max Shoura, PE PSP, shown above top along with Hannah Schumacher, PSP; Chris Hudson, CCC, CEP; Cindy King, and Marina Sominsky, above photo, participate in an Arizona Section board meeting on May 19. particular project situations and challenges. Mr. Olson is the executive vice president of Synchro and is based out of Sacramento, Ca. His previous positions include: President of KMS Homes (regional builder in the Bay Area); CEO of CustomerLink Systems (a market leader in the customer retention and data analytics of the automotive aftermarket industry); and EVP with International Business Systems (ERP software company in the wholesale distribution market place). Mr. Olson graduated from California State University Sacramento with a degree in business management in 1992. The Arizona Section’s Board Meeting was conducted on Thursday, May 19, at Kitchell’s Training Center, 1661 E Camelback Rd, Suite 375, Phoenix, AZ. The subjects discussed included election results; section excellence award status, and the backup documentation; and the calendar of events.

Central Savannah River Area Section The April Meeting for the CSRA Section was held at the North Augusta Community Center and featured William Ellie Daniel Senior Communications Specialist from the Alvin W. Vogtle Electric Generating Plant as our guest speaker. The increased demand for energy is driving the need for new baseload capacity at Plant Vogtle. The population of the southeastern United States continues to expand rapidly and according to the US Department of Energy, 40% of the US population will live in the Southeast by 2030. The state of Georgia alone is expected to grow by 4 million people by 2030. During the next 15 years, electrical demand on the Georgia Power system is projected to grow 30%. Plant Vogtle is located approximately 34 miles southeast of Augusta Georgia, on the Savannah River. Southern Company is the founding member of a consortium of utilities that has been awarded funds from the US Department of Energy for the de-

Submitted photo

The Central Savannah River Area Section’s April meeting featured William Ellie Daniel, senior communications specialist from the Alvin W. Vogtle Electric Generating Plant, as the guest speaker. velopment, construction, and operation of 2 new nuclear plants at Plant Vogtle. The recently signed contract with Westinghouse & Shaw for construction, is the 1st EPC Contract Signed in the U.S. in Almost 30 Years. The NRC approved an Early Site Permit in August of 2009, making it the first technology and site specific ESP in 30 years. The project is on schedule to receive Construction & Operating License in late 2011, and expects both units to be on line in 2016 and 2017 The CSRA Section Nomination Committee presented the roster for the 2011-2012 AACEI-CSRA Board. of the CSRA Section tendered their votes by May 1 and the results were announced.

Central Texas Section The Central Texas Section conducted its third meeting of 2011 on April 14, at Spire Consulting Group's office in Austin, Texas. Jared Carlson, sales manager at US Cost in Atlanta, Georgia, presented on, “Web Technology and Collaborative Estimat-


37

Submitted photo

Submitted photo

Jared Carlson, sales manager at US Cost in Atlanta, Georgia, was the guest speaker at the April Central Texas Section meeting. He presented on, “Web Technology and Collaborative Estimating.”

The Charles V. Keane Distinguished Service Award for 2011 was awarded at the Annual Meeting to Arthur Kowalchuk. the award was announced at the April Chinook-Calgary Section meeting. Shown above from left are: Steve Revey, Arthur Kowalchuk, Mahendra Bhatia, and Ginette Basak.

ing.” During his presentation, he focused on the technology aspects and benefits of companies moving toward web based applications, specifically for cost estimating. Also, he highlighted the perceived benefits to companies that are using a central platform for this work, allowing all estimators and project managers to access and collaborate.

Chinook-Calgary Section President Deborah Clark welcomed 27 Chinook-Calgary Section to the May 09, Annual General Meeting. She introduced the Board Directors for the 2011-12 sessions. A number of items were discussed. Deborah Clark then introduced incoming President Donna Kainth who will be presiding

over the next sessions. The thanked Deborah for handling the 2010-11 sessions. The AGM was then adjourned. Some 57 and guests attended the Chinook-Calgary Section’s technical dinner meeting in the Riverview Room of the International Hotel on Wednesday, April 20. Donna Kainth introduced Stephen Revay who made a couple of announcements. He announced that the Awards Committee of AACE International has selected long-time Chinook-Calgary member Arthur Kowalchuk as the 2011 recipient of the AACE Charles V. Keane Distinguished Service Award. Arthur received a standing ovation from the session attendees. Stephen Revay announced that a second Chinook-Calgary mem-

Submitted photo

of the 2011-2012 Chinook Calgary Board of Directors.

38


ber, Mahendra Bhatia, has been appointed a Fellow of AACE International. Mahendra also received an ovation from the attendees. Mahendra Bhatia introduced the evening speaker, Dave Weatherby, P.Eng., of SNC Lavalin Transport Vancouver division. His presentation was on, Challenges in Design and Construction for the West Calgary LRT Expansion Project. He began with a series of photographs showing various aspects of the facilities which are still under construction. The project includes 8 kilometres (about 5 miles) of line, six LRT stations and two park and ride sites. It was divided into elevated areas, cut and cover tunnels and open trench areas. The project was further complicated with temporary rerouting of traffic, minimizing impact on residential areas, shopping malls and schools. There were significant costs for re-routing utilities below grade, constructing retaining walls, disposal of material from open trench excavation, as well as providing grade separation at major intersections. Year round construction required allowances for cold and snow during winter seasons. Traction Power Stations for power distribution had to be provided at strategic locations. Engineering also had to provide design for pedestal towers carrying overhead tracks over 14th Street, R Rail lines and along the Bow River. The trench and tunnel sections required solid for embankments, track base and several curved sections of rail lines. Prefabricated sections of tunnels required heavy lift equipment for installation. Curved steel was provided for roof at LRT Stations. The Sarcee Trail Interchange involved complex grade requirements. Safety was always considered and carried out at all construction areas. A question/answer period followed the presentation.

Submitted photo

East Tennessee Section Vice President Jeff Morton, above left, presents a presenter’s gift to Elizabeth Phillips following her presentation at the section’s April meeting.

East Tennessee Section The East Tennessee Section’s April meeting was a lunch meeting at the University of Tennessee Out Reach Center in Oak Ridge, TN. The guest speaker was Elizabeth Phillips of the DOE Environmental Management Team for the DOE Oak Ridge Operations (ORO). Elizabeth’s presentation topic was, “How Do You Estimate a Billion Dollar Remediation Project?” with the subtitle of “With Multiple Risks and Uncertainties.” The focus was on the Y-12 Mercury Remediation. As part of an industrial separation process at Y-12, between 1955 and 1963, the inventory of Mercury was 24 million pounds and some of the mercury was lost on site and remains on the Y-12 site today. The big problems arise as mercury can turn into methyl mercury which is a human neurotoxin and bioaccumulates in the food chain and can get into humans from fish consumption. Mercury poisoning can cause nervous disorders, loss of hair and teeth, loss of memory and insanity. Starting in the 1980s numerous remediation efforts and projects were undertaken including investigations and studies. Records of Decision were signed in 2002 and 2006. In 2008, the Integrated Facility Disposition Project expanded the scope of EM cleanup actions to include 97 more buildings and 5 more remedial actions at Y12. Then in 2009 the Recovery Act (ARRA) helped to direct funds to several additional clean up projects. The current remediation strategy that has been developed

Submitted photo

Shown above is an overview of East Tennessee Section’s April lunch time meeting at which Elizabeth Phillips presented the section’s technical program. through a variety of workshops, technical reviews and studies include breaking projects into several WBS elements for separate funding and estimating. Besides the funding requirements, the sequencing of projects is a key to success where buildings are first torn down and then the soils underneath them are remediated. New mercury remediation strategies continue to evolve and numerous preventative strategies have been implemented at Y12 to help keep the mercury contamination from getting worse. But, there are continuous risks with the mercury that still exists and there are still many unknowns about mercury contamination. Research continues through the Remediation of Mercury and Industrial Contaminants (RoMIC) applied Field Research Center to help develop solutions to the problems. From all the risk and technical mysteries involved with mercury remediation it is not hard to see how difficult it is to estimate remediation projects and there are numerous methods and solutions that can be used. Elizabeth outlined the current options for estimating remediation at Y-12 and the numerous pros and cons with three proposed methods. The take away here is that there is no

COST ENGINEERING MARCH 2011

39

one, right way to remediate the mercury, and there is no one right cost estimate when there are so many variables. It appears that Elizabeth has many challenges ahead and we wish her success on this very important endeavor.

San Francisco Bay Area Section The San Francisco Bay Area Section conducted its monthly meeting on May 17, at Sinbad’s restaurant in San Francisco. and friends gathered to hear Adam Ross’s presentation on Green Energy Feasibility. ◆

Northern West Virginia Section The Northern West Virginia Section and the West Virginia Society of Professional Engineers met Thursday, May 19, at the Engineering Sciences Bldg, Room G84, Evansdale Campus, WVU. The meeting included a tour of the new West Virginia University basketball practice facility, currently under construction adjacent to the WVU Coliseum above the Mountaineer Tennis Courts. The $19 million facility will be used by the Mountaineer men’s and women’s programs. The state-of-the-art facility will help showcase Mountaineer Basketball and provide the necessary practice, strength and conditioning, sports medicine, team meeting, video, equipment, and locker room facilities all necessary to compete at the highest levels. This one-of-a-kind structure will provide Mountaineer teams with 24-hour facility access and eliminate the time scheduling battle currently associated with the WVU Coliseum. The tour was led by Bill Linn, Capital Project Manager with West Virginia University Facilities Management Construction Services. The meeting opened at 6:15 p.m. with social drinks and snacks. At 7 p.m. was the technical program with a project overview presentation at ESB. The overview was followed by walking tour of the new Basketball Practice Facility. This was the section’s last meeting until September.

Pittsburgh Section

Submitted photo

Bernie Fedak, a member of the Pittsburgh Section and a project executive with Aker Construction, above left, receives a Certificate of Recognition from Section Vice President Rich Easler. Mr. Fedak presented the technical program at the section’s May meeting.

40


Submitted photo

San Francisco Section Ex-President Des Orsinelli is shown presenting a speaker’s certificate and bottle of wine to Adam Ross, presenter of the section’s May program.

HOW TO SUBMIT SECTION NEWS TO THE COST ENGINEERING JOURNAL All submissions should be e-mailed to [email protected]. Information may be included in the body of the e-mail or as an attachment. Microsoft Word files are the preferred format. All photos should be sent as PC tiff or jpg files at 300 dpi. If submitting at only 72 dpi, please send the photo as large as possible as conversion will reduce its size. Include the names and titles of each person shown in any photos. Many times AACE International Sections have been referred to as chapters. The correct reference should always be to a Section. AACE International does not have chapters. Please do not refer to Sections as chapters. If an event is during the month of publication, it will be listed as an event even if will not receive their journal in the mail until after the listed event. The journal goes to press about one months in advance of the issue date, which is always the first of each month, at which time the electronic version should be posted. AACE International reserves the right to edit all submissions and to refuse to publish any submissions determined by the editor or executive director to not meet the standards of the journal. Anyone with questions on submitting copy or photos may :

Managing Editor - Marvin Gelhausen, [email protected]

IN MEMORIAM

Dolores Evan Neil (1930-2011) Dolores Evon Neil, born August 14, 1930, lost her 11 year battle with cancer on May 22, 2011. This stunning woman was the daughter of William Patrick and Ella Sophie Conlon, born and raised in Minot, North Dakota. Dolores dedicated her life to enhancing the lives of others though love, caring and working to bring opportunity in their lives. As a young lady, Dolores obtained her ed Nurse degree and worked to help end pain and suffering for those she tended for. Her beautiful smile and loving encouragement gave her patients hope and comfort. In 1951, Dolores married the love of her life, Col. James M. Neil, Ph.D. For the next 51 years, Dolores dedicated her life to Jim's career, her loving family and service to the communities where they lived. As a military wife, Dolores volunteered her time to help enhance the lives of military families. At four different military installations, Dolores served as President of the Officers Wives Club. In this position she raised money for college scholarships, developed welcome pantries for new military families needing assistance and helping to fund the Army Emergency Relief fund. After Jim's retirement from the military, Dolores continued her community with focus in the city in which they lived. In 1974, Dolores served at the President of the Retired Officers Wives Club, in Bryan, Texas. In 1981, Jim accepted a position with Morrison-Knudsen Company in Boise, Idaho. There Dolores found a new joy in her life that helped bring hope in the community, the Assistance League of Boise. Both she and Jim dedicated hours to help the less fortunate children in this community by helping to provide new clothing, school supplies and hearing aids. From 19992000, Dolores served as President of this wonderful organization, where she continued to evolve the League's Mission to

AACE Headquarters Office Moves to New Location AACE International Headquarters office will be moving to a new location in July. We will be posting more information about the move on our website in the weeks to come Our new mailing address will be:

AACE International Headquarters 1265 Suncrest Towne Centre Dr Morgantown, WV 26505 U.S.A. Our phone, fax, website, and email addresses will remain the same.

bring a smile to the children of the Boise Community. After Dolores' term as president, she continued to provide her loving . Dolores blessed this world with three wonderful children, Terry Loofbourrow of Boise, Scott Neil of Boise, and David Neil and his wife Tammy from Bryan, Texas. This loving family continued to grow with the blessing of six beautiful grandchildren, Trina Loofbourrow Iovino, Jenny Loofbourrow, Brandon Neil, Ava Neil, Ryan Neil and Brittany Neil Allen. Dolores extended her love and family with the addition of Richard D'Agostino, Richard Crimin, Dr. Robert and Magdie Teears, and their children, Laurel and Matthew Teears. Dolores is also survived by her brother and his wife, Bruce and Ginny Conlon and their two sons, Daniel and Thomas. Her husband preceded her in death in 2003. Dolores wanted to thank the wonderful staff and her ive friends at the Plantation Place Assisted Living for making her final years so special. A celebration of Dolores' life was conducted from 1-4 p.m. on May 25, 2011, at her long time residence in The Plantation. Dolores requested that a donation to the Assistance League of Boise be made in honor of her, in lieu of flowers. Please allow her legacy to continue to bring joy to the children of this community.

Word has also been received of the following deaths: Fred G. O’Donnell of Spire Consulting of Austin, Texas. John Davis Warren on April 21, 2011, at Toronto, Ontario, Canada. ◆

HAVE YOU RENEWED? If you haven't done so already, now is a good time to renew your dues. You can do so now via our secure website https://www.aacei.org/PortalTools/.cfm If you have changed your address, phone number, or e-mail address in the past year, please update it once you have logged into your profile so we can provide hip services to you without interruption. If you need assistance, AACE Headquarters: +1.800.858.2678 / +1.304.296.8444 [email protected]


41

ARTICLE REPRINTS AND PERMISSIONS

COST ENGINEERING Vol. 53, No.7/July 2011

of AACE International have access to free s of selected articles that are published with an AACE International reference number. These articles are available at the online Virtual Library at www.aacei.org. Electronic files of each month’s technical articles are posted and can an Adobe Acrobat (PDF) version of any of the technical articles for free. You can search for articles using the reference numbers listed in the Cost Engineering journal. Non- can subscribe to the AACE Virtual Library at an annual cost of US $100.00. AACE International no longer offers reprints of individual articles.

Pages 13-23

Lessons Learned — Schedule Development Using Primavera P6 TM

Hannah E. Schumacher, PSP, and Charlie Jackson

TO ORDER : AACE International Publications Sales at [email protected]

Photocopying Prices: For permission to photocopy individual articles for personal use, or to request permission for bulk photocopying, please the Copyright Clearance Center at 978.750.8400, and pay the required photocopying fees. For any other use or reprint requests, please e-mail: [email protected].

Us AACE International 209 Prairie Avenue, Suite 100 Morgantown, WV 26501 USA Phone: 304.296.8444 Fax: 304.291.5728

Many contract documents are now requiring the use of the latest version of Primavera software (P6™) because of its enterprise capabilities and its use of latest technologies, including the capabilities to interact other software applications; therefore it is important for the scheduler to understand how to use this software most efficiently in their battle to complete their projects in a timely manner. Primavera’s latest release of P6™ contains many features that can assist in developing schedules quickly and efficiently. However, a new or in-experienced would be overwhelmed in the struggle to prepare the schedule using P6™ and these advanced features without proper training or “basic training.” This article will focus on the authors’ experiences and their lessons learned regarding the effective use of P6 ™ in the schedule development process as they apply this to the TCM planning and scheduling development processes (TCM 7.2). This article was first presented as PS.11 at the 2010 AACE International Annual Meeting in Atlanta.

Article Reference Number - 21865 Pages 24-33

Practical Problems With Pricing Delay Using Eichleay James G. Zack, CFCC and Dr. David W. Halligan, PE Since 1960, the Eichleay Formula has been used to price extended and/or unabsorbed home office overhead. Most in the construction industry treat the Eichleay Formula as an ing mechanism – seldom understanding that the US Armed Services Board of Contract Appeals created this “formula” as an estimating tool, not an ing method. There are some practical problems with the Eichleay Formula. From the ing perspective, there are several major flaws built into the formula. From the project owner’s perspective, there is a risk of overcompensation unless certain contractual defenses are employed. And, from the contractor’s perspective, there are issues with the applicability and the use of the formula. This article examines the traditional Eichleay Formula from all three viewpoints, to identify the problems and offer some recommendations on how to alleviate them.

Article Reference Number - 21866

For Information Concerning Other Reuse Requests If you are seeking permission to quote or translate into another language any material from any issue of the Cost Engineering journal, please our Managing Editor, Marvin Gelhausen at [email protected]


43

CALENDAR OF EVENTS OCTOBER 2011

8-11 AACE International’s

16-20 ACI Fall 2011 Convention,

56th Annual Meeting, AACE International Mariott Rivercenter Hotel San Antonio, TX

The American Concrete Institute (ACI), Millennium Hotel and Duke Energy Center Cincinnati, OH : www.concrete.org

NOVEMBER 2011 11-17 2011 ASME Mechanical Engineering Congress and Exposition, The American Society of Mechanical Engineers (ASME), Hyatt Regency Denver and Colorado Convention Center Denver, CO : www.asmeconferences.org

JULY 2012 5-8 AACE International Education Seminars, AACE International Mariott Rivercenter Hotel San Antonio, TX : phone 1-800-858-COST fax (304) 291-5728 [email protected] www.aacei.org

44


: phone 1-800-858-COST fax (304) 291-5728 [email protected] www.aacei.org

12-13 AACE International Education Seminars, AACE International Mariott Rivercenter Hotel San Antonio, TX : phone 1-800-858-COST fax (304) 291-5728 [email protected] www.aacei.org

Please submit items for future calendar listings at least 60 days in advance of desired publication. AACE International, 209 Prairie Avenue, Suite 100, Morgantown, WV 26501 USA phone: 304-296-8444 fax: 304-291-5728 e-mail: [email protected] website: www.aacei.org

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