Time is money
When Benjamin Franklin coined the phrase “time is money” over 200 years ago in his Advice to a Young Tradesman, he introduced the concept that time lost is money spent. Nowhere is this concept truer than in the modern day construction industry. This paper presents a case study that clearly illustrates that time is money when it comes to capital projects because of the interrelationship between project schedule and cost issues. The paper focuses on how recovery schedules mitigated schedule impacts in a cost-effective way.
The case study used is the $132 million stage III ammonia and stage II phosphorus removal project at the Metropolitan Syracuse Waste Water Treatment Plant (Metro). The project owner is Onondaga County, New York; the design engineer of record is Environmental Engineering Associates, Inc.; and the construction manager is Camp Dresser & McKee/C&S Engineers, A Joint Venture.
The scope of the work and timeline for completion for the Metro project both stem from a 1998 amended consent judgment (ACJ) settling litigation between the State of New York, the Atlantic States Legal Foundation, and Onondaga County, in connection with alleged violations of state and federal water pollution control laws. The ACJ established criteria for discharge of effluent into Onondaga Lake including a limit of 2 mg/day for ammonia by May 1, 2004, and a limit of . 12 mg/l for phosphorus by April 1, 2006. The ACJ effluent limits are some of the most stringent requirements in the United States.
To achieve these criteria and the aggressive timeline for completion, the Metro upgrades were designed as three separate facilities combined into one large complex—a biological aerated filter facility (BAF), a high-rate flocculated settling facility (HRFS), and an ultraviolet disinfection facility (UV). These systems employ processes specifically targeted to reduce ammonia and phosphorus concentrations in the waste flow and disinfect the effluent prior to discharge into nearby Onondaga Lake. Flow from Metro is conveyed to the complex through a new 130-million-gallon-per-day secondary effluent pumping station (SEPS).
The county controls the new facilities and all of the systems of the existing 50-acre, 240-million-gallon-per-day plant from a new three-story plant operations center that was constructed as part of the project. Contributing to the complexity of the Metro project was its location on a brownfield site. Contaminated soils and groundwater deposited from a manufactured gas plant (MGP) operation had to be remediated. As a condition of a separate New York State Department of Environmental Conservation (NYSDEC) consent order, Niagara Mohawk Power Corp., or NiMo (now National Grid), the site's previous owner, was responsible for remediation of the 3.2-acre site. Through a negotiated agreement with NiMo for acquisition of the land, the county was responsible for the clean up of the Metro site with partial reimbursement of the costs from NiMo.
Metro is the biggest complex of its kind in North America, and the $132 million project generated a significant amount of construction work:
- More than 150,000 tons of MGP contaminated soils were removed and 270 million gallons of contaminated ground water were treated.
- A total of 1,108 H14 × 102 steel piles were driven about 250 feet.
- A total of 28,500 cubic yards of structural concrete were used.
- $13.8 million in owner-supplied, pre-procured process equipment was employed.
- An estimated 466 trillion polystyrene beads were installed in the 18 BAF cells.
- The BAF units have 130,000 nozzles that allow treated effluent to leave the BAF cells while trapping the biostyrene beads for continued use in the treatment process.
- The HRFS uses 100 tons of microsand, which is recycled continuously to the system.
- More than 790 linear feet of pile-supported, 72-inch prestressed concrete cylinder pipe (PCCP) force main and 360 linear feet of pile supported 84-inch PCCP effluent pipe were installed.
- More than 5,000 linear feet of additional mechanical piping was installed within the existing plant.
- The existing plant's boilers were replaced.
- The existing plant's electrical distribution and supply system was expanded.
Initial Project Timeline and Sequencing
The ACJ required the successful operation of a BAF pilot ammonia removal demonstration project by November 1, 1999, followed by submittal of approvable engineering reports and plans for the BAF to NYSDEC by December 1, 2000. Although the ACJ milestone for submittal of approvable engineering reports and plans to NYSDEC for the HRFS was not until June 1, 2005, the county elected to pilot the HRFS technology for phosphorus removal during the BAF pilot program.
The pilot programs for the BAF and HRFS both successfully demonstrated the new technologies. Based on the positive results, the county combined the HRFS and BAF into one project to achieve the ACJ requirements for both phosphorus and ammonia removal simultaneously. A new UV facility would also be built at the same time to replace an existing liquid sodium hypochlorite disinfection system. Combining the three facilities resulted in a significant reduction in project costs and made it possible to achieve the ACJ goals for phosphorus removal almost two years ahead of schedule. This change, however, required the engineer of record to complete design of the combined Metro complex by the ACJ milestone date originally established for completion of the BAF design alone.
Engineering reports and plans for Metro were completed on schedule and the notice to proceed for the first construction contract for the test pile program was issued in June 2001. This allowed only 29 months for completion of the remaining bid documents; remediation activities; and construction and performance testing of the BAF, SEPS, and UV facilities; and an additional 7 months for completion of construction and performance testing of the new plant operations center and HRFS facility.
To achieve the aggressive construction schedule, the project was fast-tracked, meaning that when site remediation and other site-work activities were underway, the bidding documents for the general construction of the BAF, SEPS, HRFS, and UV facilities were not yet complete. In fact, during this time frame, several changes to the final design of Metro were made, including the addition of an 84-inch, PCCP, pile-supported, underground bypass system, which permitted operation of the BAF prior to completion of construction of the HRFS. Although the bypass system added significant upfront project cost, it added flexibility in the aggressive construction schedule by allowing the more-critical BAF to go on-line first. The bypass system also increased flexibility during operation by allowing the county to completely divert flow to the HRFS for maintenance and other purposes. Paradoxically, while the 84-inch bypass system added flexibility to the schedule, construction of it directly impacted and delayed the remediation, site work, and pile driving work because its hydraulic design considerations required the deepest excavation on site.
In summary, the original sequence logic for execution of the 11 prime contracts was as follows:
Exhibit 1- Original Sequence Logic Diagram
The 11 prime contracts were structured so that the site work contract, including the remediation of 154,700 tons of contaminated soil, was a prerequisite to the start of pile driving and all successive facility work. This structure accommodated the special requirements for handling the contaminated materials, including health and safety regulations. This method limited owner risk by confining the remediation activities to one contract.
The remainder of the project was sequenced to coincide with the ACJ major milestones for the BAF and HRFS facilities. The ACJ included major milestones for both completion of construction and successful operation of both the BAF and HRFS facilities. Successful operation of the BAF and HRFS was defined by achievement of set limits for ammonia and phosphorus effluent. The BAF facility was required to meet the effluent limits much sooner than the HRFS, thus the BAF facility became the critical path of the project.
Delays to the Site Remediation Contractor
When the site remediation contractor (Contract 2A) began work in July 2001, it was well known that the aggressive nature of the schedule left very little available float to allow for any delay in the start or execution of the work. Because of the direct relationship between the start of pile driving (Contract 3) and the finish of the site remediation activities, any slippage in the start or execution of the site remediation activities would directly impact to the major milestones for completion of the BAF and HRFS. When scheduling the project, this was a noted concern given the general nature of remediation work and the high risk associated with the uncertainty of scope.
Unfortunately, these concerns were realized when a number of unforeseen site conditions severely impacted the progression of the remediation work. Excavation uncovered several large, below-grade, pile-supported concrete structures that obstructed installation of the supports for the excavation system. The concrete obstructions and the timber piles beneath them had to be removed prior to continuation of the work. Once excavation was underway, the poor consistency of the contaminated material made handling and disposal very difficult, requiring the contractor to “amend” the material with imported sand prior to disposal. The sand and the over-excavation for the removal of the concrete obstructions increased the quantity for disposal at the landfill by 95 percent over the estimated amount in the unit price bid item, and the quantity of backfill by more than 200 percent. The situation was further worsened by a 60-day slippage in the start of activities due to the late development and approval of the contractor's health and safety plan and other contractual issues.
Winter conditions also impacted the schedule by November 2001 these cumulative delay events had impacted the critical path by eight months.
Special Provisions for Recovery Schedules
Because the major milestones were court mandated and enforceable through significant fines for non-achievement, special provisions were included in the prime contracts to ensure compliance with the project's schedule goals. In New York State, public projects are subject to the provisions of the Wicks Law, which requires that separate contracts be competitively bid and awarded to a minimum or four prime contractors: general, electrical, HVAC, and plumbing trades. The Wicks Law also stipulates that the public owner, not the general contractor, is responsible for coordination of the multiple prime contracts. Because of these requirements, many public owners in New York State use a construction manager to act as the owner's agent to schedule and coordinate the work of the multiple prime contractors. At Metro, the construction manager was responsible for developing an integrated master CPM schedule for the project. The scheduling provisions focused on ensuring that the prime contractors provided detailed schedule information for their individual work activities. Each prime contractor was required to submit a comprehensive list of work activities, which included submission and approval of all project deliverables; all required tasks for the procurement of equipment and materials; all construction work tasks; and project closeout tasks, including punch list and testing activities. The prime contractors were also required to furnish a brief description of each activity, provide the activity duration, establish predecessor and/or successor activity relationships, and discretely load each activity for revenue, equipment, and manpower requirements. Based on the information provided, the construction manager prepared the integrated master CPM schedule that was used as the baseline to monitor schedule performance.
The types of contract requirements outlined above for CPM scheduling are common on large/complex construction projects like Metro in the United States. What was unique on the Metro project was the effective use of special provisions regarding recovery schedules. This provision read, in part: “... if in the view of the Construction Manager, the Contractor is in jeopardy of not completing the Work on time, or not meeting any schedule project milestone, the Construction Manager may request the Contractor to submit a recovery schedule. The recovery schedule shall show, in such detail as is acceptable to the Construction Manager, the Contractor's plan to meet all schedule project milestones, and that the Work will be completed within the time frame stipulated in the Contract Documents …”
Recovery schedules were further defined as an adjustment to the updated integrated master CPM schedule, through either schedule logic revisions or duration acceleration, which eliminated any forecast delays to the major milestones. If a recovery schedule was requested by the construction manager, the affected prime contractor had to provide a narrative explaining the adjustments to their work plan that would be implemented to guarantee the project would be completed on time. Explanations could include items such as adding resources to accelerate activities on the critical path, working additional hours, working through holidays and weekends, change in means and methods, or revision of the overall sequence logic of the CPM to adjust the critical path. The specifications also stipulated that all payment to the contractor would be withheld if an acceptable recovery schedule was not provided within 30 days of request.
The provision was careful to identify the construction manager, and not the prime contractors, as having the authority to request and implement a recovery schedule. This was done because of issues regarding cost versus benefit of recovery, contractual requirements such as the effect on liquidated damages, the potential impact of recovery efforts on the other prime contractors, and the potential impact of recovery efforts on existing plant operations. This special provision did not address the issue of reimbursement for the cost of implementing the recovery plan. Other contract provisions in the general specifications, including “changes” and “time provisions,” addressed this issue. The idea here was to address the issue of payment through the contract modification process.
Implementation of Initial Recovery Efforts
As discussed above, the first major impact to the schedule occurred during the site remediation activities. Because of the uncertainty associated with this type of work, the construction manager decided to implement only minor recovery efforts during this phase of the project. The most significant recovery effort involved reimbursing the contractor to send the contaminated materials to the landfill without amending the soils with sand. Although this resulted in a surcharge of $27 per ton from the landfill, the excavation production rate on site nearly doubled, greatly reducing the impact of this delay. Not only did this save time, but the cost of the surcharge was more than offset by the reduced weight of material entering the landfill (because no sand weight was added).
Once this recovery was implemented, the focus for the construction manager became the acceleration of successive work, particularly the 50 miles of piles that had to be driven (Contract 3). It was important to accelerate this work because work on the process facilities (Contract 4) could not begin without the piles in place. After consideration of cost and risk factors, a recovery schedule was implemented as follows:
- The start of pile driving operations was allowed to overlap with the finish of the site remediation activities, meaning that pile driving activities began before the remediation work was complete. As a result, the pile driving contractor was issued a change order for $149,281 to implement a health and safety plan to work on the contaminated site.
- The prime contractor agreed to increase the number of production pile driving rigs from three to five at no additional cost. This required that the owner relax rules that stipulated the working distance between the pile driving rigs and other activities. The contract required the pile driver to maintain a minimum distance of 100 feet between the production rigs and other work activities, but this requirement was relaxed to 50 feet to allow for the additional cranes and the overlap of work activities.
- The prime contractor agreed to alter the specified means and methods for pile driving at no cost. Although the specifications called for the use of a vibratory hammer, this was relaxed to allow a more efficient impact hammer method, which greatly increased production.
Work on the pile driving contract commenced in February 2002 and was completed within the original contract duration of 150 days. The recovery efforts ensured that the original contract duration was maintained even though there were several modifications that directly impacted the work:
- Unforeseen buried concrete structures.
- Issues regarding coordination of work with Contract 2.
- Impact and stoppage of work due to health and safety precautions related to contaminated materials handling.
- Several changes in the design of the facility that increased the quantity of piles by 25,372 linear feet from the estimated amount in the unit price bid item.
Had recovery efforts not been implemented, these impacts would have resulted in at least a 60-day extension of the 150-day contract duration.
Consideration of Formal Recovery for the General Contractor
Notice to proceed for the Contract 4 contracts was issued in January 2002, and the general contractor immediately began preparation of a CPM schedule. In April 2002, based on the analysis from the CPM schedule, which included the impacts from the Contract 2 and 3 delays, the general contractor submitted a request for a 13-month time extension.
Even with the great deal of effort to mitigate impacts to the schedule, in April 2002, the project still faced what appeared to be an insurmountable task. Was it even possible to recover from a 13-month impact to a project with an overall duration of 29 months? Could the construction manager count on the prime contractors, owner, and engineer to buy into any proposed recovery plan? How much would recovery cost and who would pay for it? Could it be done and still maintain the quality standards established by the project team?
The construction manager took a very formal approach to answering these questions and better communicating the issues to the project team. First, the construction manager carefully performed a “what if” analysis of the integrated master CPM schedule to determine if implementation of a recovery schedule was feasible. If a recovery was feasible, then a cost-benefit analysis would be performed to determine if it was the best course of action.
The following table illustrates the issues addressed during this process. Exhibit 2 includes the feasibility analysis and Exhibit 3 includes the cost-benefit analysis.
Exhibit 2—Feasibility of Recovery
Exhibit 3—Cost Vs. Benefit Analysis
The Successful “Time is Money” Argument
From April 2002 through July 2002 the project team debated what the best course of action would be, based on the issues identified in exhibits 2 and 3. During this debate, the most difficult concept for the construction manager to convey was that regardless of which choice was made—delay or recovery—there would be a significant impact to the project budget. As shown in Exhibit 4 below, significant cost could be demonstrated under either scenario.
Exhibit 4 - Cost of Recovery Vs. Delay
Time is money. Schedule impacts, delays, and the recovery of lost time, are all economically devastating to both the owner and contractor. Unproductive time is money lost to all parties. To better convey that concept to the owner of the Metro project, it was important to conduct a detailed analysis of the costs associated with each scenario, delay or recovery (as shown in Exhibit 4). The general specifications contained a “no-cost-for-delay” provision that some members of the project team felt eliminated most of the potential cost for delay. This debate focused on whether the no-cost-for-delay clause would completely preclude the prime contractors from recovering damages as a result of the schedule impacts from delay in the site work activities. Although much has been written about the enforceability of no-cost-for-delay provisions in the United States, it was still a dividing issue and greatly impacted the decision-making process. The construction manager argued that, even if these cost savings were factored out, other cost savings, such as the elimination of extended project soft costs for the owner, CM, and engineer, extended time-related unit price items, and the ACJ penalties, clearly favored recovery.
Some project team members were also not convinced that the proposed recovery schedule could be implemented without negatively impacting the quality of the work. The construction manager agreed with this assessment only if additional focus and procedures to ensure quality were not implemented during the recovery efforts. The CM argued that ensuring a high level of quality during recovery required that the construction manager, inspection team, and contractors have added diligence in applying the established quality control and assurance procedures. It also required that additional procedures, such as formal concrete placement and equipment start-up check lists, be implemented.
In the end, the construction manager upheld its recommendation for proactive recovery because it was shown to be the least expensive option and the costs could be reimbursed by the funding agencies. The “time is money” argument prevailed, and the recovery schedule was implemented in July 2002. Although the construction manager's analysis clearly showed this was the best option, it was by far the most difficult choice because it required the project team to take a proactive approach to the situation. This approach required that change orders be issued to the general contractor to pay them for the planned recovery efforts. It also required that the project team feel confident that the general contractor could achieve the recovery goals and not negatively impact project quality.
Results of the Recovery Efforts
In July 2002, prior to the start of the recovery efforts, the updated integrated CPM schedule showed a delay in the major milestone for successful operation of the BAF facility of 13 months. The schedule projected the achievement of the ammonia removal limits in June 2005 instead of the ACJ major milestone of May 2004. Through the implementation of the recovery schedule, the actual date for achievement of the ammonia removal limits occurred in March 2004, 15 months earlier than originally forecast and 2 months ahead of schedule. Implementing the recovery plan cost $4.9 million less than it would have cost if the project was delayed 13 months.
In addition to completing ahead of schedule and for less cost, the project was built to a high standard of quality; to date, the entire complex systems are functioning successfully. The project achieved its goal of meeting stage III ammonia limits in the effluent discharged by Metro into Onondaga Lake within the time frame established in the ACJ.
Conclusions and Lessons Learned
The experience of the Metro project demonstrates the time-tested adage that “time is money.” Schedule impacts will almost always result in additional cost to the owner and contractor. Because of this, as managers we should look for proactive and cost-effective ways to mitigate schedule impacts. Proper execution of recovery schedules is one effective way to ensure projects are completed on time and within budget. The successful implementation of the recovery schedule at Metro involved the following steps:
- The need for a recovery schedule was effectively established.
- The feasibility of the recovery schedule was verified.
- A cost-benefit analysis of implementing the recovery schedule was performed.
- The project team committed to the recovery schedule.
- The recovery schedule was effectively monitored using real-time controls to ensure conformance to the plan.
Lessons learned in implementation of the recovery schedule at Metro include:
- Schedule impacts will almost always negatively impact the project budget due to the additional cost to recover lost time or through the cost of delay.
- A cost-benefit analysis should be performed to determine the best course of action; delay or recovery.
- Even if recovery is shown to be feasible and cost less, this proactive choice is often the most difficult to make.
- The entire project team (contractors, owner, construction manager, and engineer) must commit to the recovery efforts.
- There is the potential for quality to be negatively affected by recovery efforts. Additional focus on the project quality goals is required during recovery efforts.
- Recovery can be an effective means of mitigating schedule impacts in a cost-effective way.
© 2005, Joseph W. Delaney, P.E.
Originally published as a part of 2006 PMI Global Congress Proceedings, Bangkok, Thailand