TECHNICAL ARTICLE

Multi-Primes and

Multiple Critical Paths

John C. Livengood, CFCC PSP

Abstract: Numerous states throughout the country require or permit governmental entities to perform major construction through the use of multiple prime contractors. These multi-prime contract laws that usually include a general contractor and at least three mechanical, electrical, and plumbing (MEP) contractors, were intended to reduce costs to the owner through greater competition and reduced redundant overheads. While there is evidence that the intended purpose succeeds that success only follows from a vigorous management system that actively coordinates work between the multi-primes, either through additional owner staff or paid consultants. Unfortunately, an all-too-common result of this delivery system, when the management system misfires, is the development of separate CPM schedules for each prime contractor, with critical path delays along each schedule, which leads to schedule chaos. This article will discuss how forensic schedule analysis should approach, identify, dissect, and quantify delays among multi-primes as the parties prepare for litigation. This article was first presented as CDR-842 at the 2012 AACE International Annual Meeting in San Antonio, Texas. Key Words: Costs, CPM schedules, multi-prime contracts, and schedule analysis

The owner may have specific contractors it wishes to work with. The owner may use the system in anticipation of costs savings by using specialized contractors and eliminating overhead. The project may be a fast-track project where it is important to have work advance on portions designed even if the total scope and cost is unknown. The owner may wish to minimize potential prime-subcontractor problems. Private use of multi-prime contracting lies primarily in large EPC contracts. Under this situation the usual model is for the designer to administer and to coordinate the numerous major equipment supplies, as well as the more incidental construction contractors. Owners using this system do so for primarily for reasons two, three, and four, as discussed above.

hy would an owner choose a multi-prime project delivery system? Under this system, the owner contracts directly with several prime contractors to provide the full scope of services. There can be as few as three prime contractors on a particular job, and sometimes as many as 20. Each prime contractor goes through the entire procurement system of reviewing technical drawings, submitting a bid, having the bid evaluated, and issuance of a contract. The owner, in addition to having more management of the bidding process, often hires an agency

construction manager (CMa) to provide coordination and management for the owner. Finally, the designer may have had to package the technical documents in a manner that supports/enables multiprime bidding. This often is more work for an owner who may not have the necessary staff or expertise to manage this greater workload. There are five reasons that an owner Why States Use Multi-Prime Contracting Outside of large industrial might choose a multi-prime contracting /manufacturing projects, the chief reason system: [9] for using multi-prime contracting is state The most common is that state law. Multi-prime contracting is almost statutes require it for certain types or exclusively a creature of state legislatures. Very few owners, who are values of construction [10]. not mandated to use multi-prime

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contracts by law, do so. But, why do Owners Responsibilities In Multi-Prime states prefer to use multi-prime delivery Contracts systems? There are three underlying If cost is the primary reason an reasons: owner might choose a multi-prime contract system, then the increased risk Specialty contractors argue that and legal exposure associated with being a direct prime contractor with increased management responsibility are the state speeds the payment the prime reasons an owner might process and eliminates the risks choose not to go multi-prime. Absent a associated with non-paying general successful delegation of the specific contractors. Therefore, such coordination responsibility, owners have contractors lobby heavily with state an implied duty to coordinate and legislatures to implement and to schedule the work of the prime maintain such statutory provisions. contractors [13]. While a general contractor has the It is claimed that multi-prime contracting is less expensive than a duty to coordinate in a typical prime single prime contractor. There are contractorsubcontractor agreement, the two reasons for the lower costs: a.) question arises as to which implied lower risk for non-general obligation belongs to the owner in a contractors by eliminating potential multi-prime situation, even if there is a bid-shopping; and b.) lower risk for general delegation of the coordination non-general contractors by assuring obligation [5]. This is true even in the case prompt payment and reducing risk of where one of the primes is a so-called general contractor [21]. This non-payment. Savings associated with the responsibility of the owner can only be reduction of general contractor delegated where there is a very specific delegation [14]. overhead and profit [16]. The owners obligation to provide There are several studies that coordination to its contractors has been support the conclusion that multi-prime long established, initially in the form of construction is less costly. These studies, providing site access [3]. This owner conducted starting in the 1970s with the obligation has generally expanded over most recent completed in 2007, generally the decades to require prompt decision identify a five percent savings with 80 of all types, scheduling management, and timely percent of those savings resulting from non-interference, lower non-general contractor pricing management including prompt time extensions. (reasons one and two above). Failure of this coordination could Not all the studies were conducted with the same rigor, and some were result in delay damages against the based on small samples, yet one study owner. In response, owners now attempt was able to compare the same project to provide a contractual bar for this type both as a single prime contract with of obligation by delegation to prime subcontractors, and as a multi-prime contractors or owner agents, and the contract. The state of New Jersey bid implementation of no-damages-for-delay certain projects both ways to assure it got clauses. [2]. This implied duty to coordinate the best prices and found that multiprime contracts were 8.67 percent less worksite activities to ensure timely expensive, even after adjusting for progress exists even if that duty has been increased administration costs associated contractually delegated to a consultant or with the multi-prime delivery system one of the prime contractors [15]. The [16]. It should be noted that none of implied duty is so strong that exculpatory these studies considered the increased language inserted to protect the owner in costs of owner activity or potentially such situations is usually insufficient [20]. The owners coordination greater CMa costs. responsibility has been found to be so strong as to require owners to actively attempt to resolve time-related disputes [8]. Owners have also attempted to pass

the coordination onto all the prime contractors by making them coordinate among themselves. Such schemes have been accepted [4]. Disputes and Multi-Prime Contracting Virtually every attorney and claims consultant views multi-prime contracting as a good source of business [12]. Because the owner seldom has the capability of providing the needed expert coordination, and its CMa agent seldom holds sufficient power over the prime contractors because it does not control payment, a high percentage of multiprime contracts seem to end in dispute. Further, the uncertainty of the coordination responsibility often results in the following positions: Prime Contractor: I was delayed by other prime contractors failing to perform a timely manner. The owner or its agent (CMa) had coordination and schedule responsibility. My coordination responsibility was limited to nearterm coordination/schedule since I had no control over the entire schedule, and little input into its development and updating. Owner: I hired a construction manager to manage the project, including all coordination and schedule control. Whatever schedule and coordination responsibilities remained was delegated to the contractors. Construction Manager: The owner made, agreed to, or approved all the major decisions. The contractors were required to coordinate / schedule among themselves. My only obligation was to facilitate the coordination and scheduling between the contractors and the owner. The result is potentially massive litigation between numerous parties. For the schedule delay analyst, such disputes create special problems, including the following:

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The project is likely to be large and inherently complex. There are multiple parties which will entail detailed review and investigation of multiple sets of documents. The schedule development and conceptualization is likely to be defective. The schedule updates are less likely to be accurate since the CMas power over the prime contractors for data requests is weak. There will be a project critical path, but most of the delays experienced by the prime contractors will fall off that project critical path. And, Each prime contractor will have its own critical path, which will only occasionally be coincidental with the project critical path. While the CMa is the obvious party to control and to monitor the overall schedule, each of the multi-primes is likely to have their own schedule. As-Built Project Critical Path In disputes involving claims of delay by multi-prime contractors, the normal forensic schedule delay process of identifying the critical path through the project may actually be counterproductive. When working on behalf of the owner, such identification of the project critical path disguises the real delays that are at issue the delays particular to each of the multi-prime contractors. When working on behalf of either the CMa or one of the multiprimes, the delays to the overall project are also usually irrelevant. Multi-prime delay disputes usually involve the owner negotiating, mediating, and litigating separately with each of prime contractors. As such, the possibility for inconsistent decisions is great. For example, prime contractor A might prevail in the first case litigated arguing that its delays were a result of delays by contractor B, for which the owner was responsible. In the second case, contractor B might prevail arguing that its delays were the result of the delays of contractor A, for which the owner was responsible. Since most disputes are resolved through negotiation in which the other prime contractors are absent, it is difficult

to have the prime contractors arguing against each other. The owners position is made even more difficult in these single-party negotiationssince the owner, even if supported by the CMa, will have only limited factual knowledge because of the absence of the other prime contractors. Even if the multiprime cases are tried together, there is the likelihood that each contractor will make its case against the owner only, without regard to the other prime that might be involved. The issue a forensic delay analyst faces is the identification of each individual contractors as-built critical path through its work, and identification of the causes and responsibilities for each of those delays. In multi-prime projects, the as-built critical path will likely fall on several major prime contractors during the course of the project [11]. Therefore, each prime contractor often argues that it was on the project critical path for only a short time and any delays that occurred during that time were minimal. Schedules on multi-prime projects are usually developed by the CMa using input from each of the prime contractors. In some situations, the multiple prime contractors are required to jointly hire a scheduling consultant who effectively reports to the CMa. For any of these schedule delivery schemes, the actual iterative process involves the integration of various plans and needs of each of the primes into a single schedule. That schedule is released for review by the primes, and then comments and corrections are incorporated. Because the CMa often lacks the authority to force a particular sequence, the iterative process may take longer to complete and be more prone to gaps than might be expected on a project using a single prime with subcontractors. As complicated as the development of the initial baseline schedule is in such circumstances, it seldom improves as the updates are developed. While collection of progress data may be reasonable straightforward, the complicated dynamics of accommodating real-time events on the project and anticipated procurement issues makes the updating process a particular challenge for the CMa on a multi-prime contract.

Further, each of the multi-primes is likely to maintain a completely separate schedule on a large job, so as to better track its progress without relying on the complicated integrated schedule maintained by the CMa. These schedules can depict radically different approaches to future work resulting in an integrated project schedule that is not updated as timely as would be desirable, and contains significant logic problems. Identifying Multiple Critical Paths While the exact mechanics for identifying the critical paths for each of several multi-prime contractors will vary depending on the forensic methodology chosen, one of the most popular methodologies is MIP 3.3 in the AACE International Recommended Practice 29R-03 (2011), Forensic Schedule Analysis Practice Guide, [1]. This methodology is also known as a Contemporaneous Period Analysis (CPA) [18]. The descriptions in the paragraphs that follow assume this methodology is being used. Other methodologies are also possible, but any of the methodologies that require modeling of the CPM network, such as AACEs MIP 3.7 (Time Impact Analysis) may require so much remedial work on the underlying schedule as to make their use inadvisable [1]. Essentially, the CPA methodology compares the planned sequence on a period-by-period basis at the outset of the period with the actual performance at the end of the period, with delays measured in each individual period along the as-built critical path for that period, as follows: Step One: Identify the schedule activities for the multi-prime contractor being studied in the first schedule. First schedule is used here to mean the schedule at the start of the measurement period. At the outset of the project, this first schedule will be the baseline. As the analysis steps through the project, each successive update will be both a first schedule and a second schedule. In many CPM schedules, the developers code each activity according to the contractor performing the work. This coding is even more common in

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multi-prime situations because the As previously mentioned, there will activities were often first identified by the likely not be a continuous series of performing multi-prime. activities that form the as-built critical path because many of these activities will Step Two: Identify the schedule be associated with other prime activities for the multi-prime contractor contractors. For example, assume one of being studied in the second schedule. the prime contractors is the window-wall This can be a true challenge, particularly installer. Its critical sequence of activities in the beginning of a project, as schedules is likely to be more dependent on the are often refined repeatedly during the completion of the structural frame and first months. Each multi-prime contractor fireproofing in a particular area that any modifies its proposed performance in of its own activities. By using this method light of other prime contractors work. of comparing activities performance in Even after the project is underway, the beginning and end of the analysis experience shows CPM schedules period, it is possible to identify which undergo considerable change in the activity has the lowest float value at a identified activities on a month-to-month given moment during the analysis period. basis. Step Five: The process described Step Three: Match the activities in above is partly mathematical because it the first and second" schedules. In identifies the activities with the least float theory, this mapping should be easy, but at any given moment and partly expert as discussed in the paragraph above, judgment on the reasonableness of the there is often considerable change from identified sequence [17]. The critical path one month to the next in both the identified will likely NOT be a continuous description and the logic of a particular set of activities, since the analysis is prime contractors activities. reviewing only those activities for a single In addition, if the project undergoes prime contractor. a major re-baselining process because of This information, coupled with a a major event or as a result of a series of careful review of the actual events on the events, such mapping can be extremely project based on the daily reports and the complicated. The analyst is advised to analyst's experience, will enable a consult with project personnel if possible detailed identification of that months asto assist in this mapping process. built critical path, as well as when the Based on practical experience, this critical path shifted from one activity to step is often the hardest. Projects that another. run into delay problems often had It is important that the number of deficient schedules, and this can manifest days identified for delay during a period itself as whole-sale activity ID changes actually match the change in the month from one month to the next. being studied. It is also likely that the overall CPM changes WILL NOT MATCH Step Four: Compare the performance the calculation for a particular month of the identified activities between the since schedule updates usually contain first schedule at the outset of the modifications to future activity durations period and the second schedule at the or logic that changes the overall projects end of the period. By comparing the projected end date. change in float values, the analyst can identify the activities most likely to be on Step Six: A careful review of the file is the critical path [7]. necessary to identify the events that If the logic or duration of the activity caused delay, both to activities within the was changed as part of the updating control of the multi-prime contractor process, the analysts must adjust for this being analyzed, and the delays from change. In this situation the analyst other prime contractors, owners, or other should consider using MIP 3.4, a sources. Part of this evaluation will be a bifurcated CPA can be used that determination concerning excusable, separately identifies logic corrections and compensable and non-compensable actual progress [1]. time. Delays that are associated with other prime contractors or owners are

likely all to be portrayed as compensable to the multi-prime being analyzed. Step Seven: Repeat process for all prime contractors being evaluated. The analyst has the option of performing this work chronologically for a particular prime contractor and then proceeding to another prime contractor or proceeding chronologically looking at all prime contractors within a particular time period before moving to the next time period. Based on experience, it is better to analyze the performance of all the prime contractors during a particular period because it allows an evaluation of the causes and responsibilities for delay each month amongst the prime contractors before moving to the next month. Because each prime contractor has a separate critical path through the project, analysis of excusability and compensability in multi-prime situations can result in significant findings of compensability for a prime contractor. Essentially any delay to a particular prime contractor can be compensable since the owner has overall schedule responsibility. This is one of the main reasons that states, that use multi-prime contracting, seem to enforce non-damages-for-delay provisions rigorously [6,19]. Without such clauses, an owner could be liable for delays to several prime contractors because of the delay of a single prime. Delays that are typically excusable, such as weather or concurrency, remain non-compensable even in multi-prime situations. For example, suppose the excavation contractor (Contractor A) was delayed in performance of its work for differing site conditions and unusually severe weather for a total of two weeks on a multi-prime project. The follow-on prime contractor (Contractor B), responsible for placing foundations, footings and other concrete work, is therefore delayed for two weeks. Both Contractors A and B get excusable time extensions. Multi-prime delay analysis is more difficult than on single prime contractor projects. Since the analysis often occurs during a period of negotiation prior to the commencement of more formal mediation, arbitration, or litigation efforts, the amount of data available for review is greatly reduced.

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During more conventional negotiations, the owner and its agent (CMa) are negotiating with the general contractor who has access to most of the data from its subcontractors, even if they claim otherwise. This means that an analysis done during this period will have a better likelihood of having a sufficiently complete set of facts to ascertain the various responsibilities for delay. However, in a multi-prime situation, the prime contractor in the negotiation will only have access to a more limited set of data. Therefore, the owner may not be able to accurately evaluate the responsibility for delays that may be the responsibility of parties not part of the negotiations. This is true even though the owners agent, the CMa, is available to assist. Conclusion Multi-prime contracting is less popular today than it has been in the past. Some states, including Ohio and New York, have created more exceptions to the general requirement for the use of multi-prime contracting because of the rising level of claims on such projects. From the states perspective, they have had difficulty in delegating their overall coordination responsibility to CMas. The result has been more prime contractors successfully negotiating or litigating delay claims against a governmental owner. Nevertheless, as discussed here, modern forensic schedule analysis has the tools to provide effective analysis of the causes and responsibilities for delays that do not necessarily fall on the project critical path, but do fall on the individual prime contractors critical path. Finally, based on actual experience, convincing the prime contractors, and their experts that their delay will be measured on their own critical path, rather than the project critical path can be a significant challenge.

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The Duty to Coordinate and Direct Liability for Delay, Construction Lawyer, 18, 31 (1998). Allamon v. Mayor of Albany, 43 Barb.33, (N.Y. App. Div. 1864). Barth Electric Co. v. Traylor Brothers, Inc., 553 N.E.2d 504 (Ind. Ct. App. 1990); Evermans Electric Co. Inc. v. Evan Johnson and Sons et al, 955 So.2d 979 (Miss. Ct. App. 2007); but see, R.W. Granger & Sons, Inc. v. City School District of Albany, 744 N.Y.S.2d 567, 296 A.D.2d 636 (2002) Bulman, J., and J. DiNicola. The Owner's Implied Obligations As They Apply to Scheduling, Construction Lawyer 21, 5, (Summer 2001). Corinno Civetta Construction Corp v. City of N.Y., 67 N.Y.2d 297, 493 N.E.2d 905, (1986). Costa, G., Single-Line Critical Path Shift Analysis, AACE International, Annual Meeting Transactions Proceedings, 2008. General Railway Signal Co., ENGBCA No. 4250 et al, 85-2 BCA 17,959, (1985). Goldberg, E., The Owners Duty to Coordinate Multi-prime Construction Contractors, a Condition of Cooperation, 28 Emory LJ 382 (1979); Abdalla, H. and D. Hudock, Liability Issues in Multi-Prime Contracting: The Duty to Coordinate and Direct Liability for Delay, Construction Law, 18, 31 (1998). (These authors identify seven reasons). Illinois, New Jersey, New York, North Carolina, Pennsylvania, Ohio and Wisconsin. Livengood, J., Is There an As-Built Critical Path? PMI College of Scheduling, Annual Meeting, Chicago, (May, 2008). Livengood, J. An informal survey conducted by the author in 2010 and 2011. L.L. Hall Construction Co. v. U.S., 177 Ct.Cl. 870, 379 F.2d 599 (1968); Pierce Associates, Inc. GSBCA No. 4163, 77-2 BCA 12,746 (1977) Nuechterlein, M. and Stayton, B., An Owner's Implied Duty to Coordinate, 21 Construction Lawyer 22 (Summer 2001). Paccon v. U.S., 185 Ct.Cl. 24, 399 F.2d 162 (1968); but see, Broadway

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Maintenance Corp. v. Rutgers, 90 N.J. 253, 447 A.2d 906 (1982). Rojas, E., Single vs. Multiple Prime Contracting, The Foundation for Electrical. Construction International, Bethesda, Maryland (2007) Seals, R., Continuous Delay Measurement and the Role of Daily Delay Values, AACE International, Annual Meeting Transactions Proceedings (2004); Livengood, J., "Daily Delay Measure: A New Technique to Precisely Identify Delay, AACE International, Annual Meeting Transactions Proceedings (2002). Schumacher, L., Quantifying and Apportioning Delay on Construction Projects, Cost Engineering, Vol. 37, No. 2, (February, 1995). Smith, R. and A. Leaderman. Dobson v. Rutgers: A Roll of the Dice for Multi-prime Contractors, Construction Lawyer, 5, 3 (1985). Stephenson Associates, Inc. GSBCA Nos. 6573 and 6815 86-3- BCA 19,071 (1986). Tippetts-Abbett-McCarthy Stratton v. New York State Thruway Auth., 27 Misc.2d 522, 212 N.Y.S. 2d 263 (Ct.Cl. 1961); numerous states, including Pennsylvania and Ohio used one of the prime contractors as the General Contractor and require that firm to provide overall schedule and coordination control.

ABOUT THE AUTHOR

John C. Livengood, AIA CFCC PSP, is with Arcadis. He can be contacted by sending e-mail to: John.livengood@arcadis-us.com

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