Part Two – Claims – By Ron Pestone
Third: Identifying and reporting all impact costs. Once the narrative is complete the compilation of the impact costs takes place. If it’s a general conditions cost all factors that are involved in general conditions come into play. At the base of all general conditions costs is the inescapable fact that, regardless of the size of the project, if the duration is increased and the contractor receives no compensation for his addition, costs the project will go into the red. If the project takes a large section of his actual work load and the duration is ongoing and no compensation is forth coming sooner or later the contractor will go broke. The old adage is true, “Extended general conditions will kill you.”
So it is important to report additional general conditions costs accurately. For field supervision, foremen, stewards, engineers, cad operators and the adm who are assigned to the project their weekly, monthly and yearly cost must be accurately reported. Not just their salaries, all their insurance costs, benefits, etc., must be included in each of their line items.
A figure for home office must be included. Owners hate to pay extended home office costs because in their hearts they know it is a big cost and they hate the extensive audit process to justify the costs. So they either deny them or want to pay pennies on the dollars for them. But they are a true cost and you must find a formula that clearly shows what it costs to open your doors every day. In my book, COMMON SENSE SUBCONTRACTING WITH ELM JOB COSTING & MORE which is due out this fall I include a formula for extended home office expense that lessens the audit burden on the owner and shows real promise. It will remain to be seen if it is successful but it is certainly worth a look.
Extended warranty costs must be taken into account. If anyone has ever asked a manufacturer for an extended warranty they have found out just how expensive this can be. Ask you supplier to get a written quote from the manufacture and includ it in your claim.
Tools, equipment and vehicle costs must be factored in. Additional insurance and bonds costs must be added.
Escalation for material must be taken into account if they occurred as well as additional labor costs if work was performed in a time period different than the baseline CPM showed where there was a wage increase.
When addressing inefficacies and the true costs of acceleration the selection of the proper accepted studies must be submitted in the claim. These are studies that have been accepted by the courts and carry real weight. They are not something you pulled out of your hat, they are real studies backed by empirical evidence. Any good claim consultant will have them in his arsenal.
While some owners might slough off inefficacies when it comes to extended overtime common sense in addition to some of the most trusted professional studies tell us any human being working overtime for a prolonged period of time will become less productive. They just get tired; it’s as simple as that. They become less productive not only working the overtime hours but just as importantly during the regular working hours. These studies must be part of your claim and you need to ask for the compensation they tell you that you are entitled to.
Extended change order hours breed inefficacies as well as hopscotching, piling on of the trades and weather need to be added to the claim if they apply. And finally the contractors profit must be added to his claim.
The list is extensive so it is extremely important to only utilize what actually applies to the narrative and are directly related to the project. With a complete package you are ready to sit with the owner or his representatives and negotiate a settlement that is good for both sides.
Owners in addition to their fiduciary responsibilities have their own rules and hierarchy to deal with and if you work within their constraints at the very least you will receive a fair hearing. It is in nobody’s best interest to go to court. Owners, agencies and contractors have all suffered major unexpended losses in the courts so it’s in everyone’s best interest to settle. Fair and reasonable is the goal.
When you negotiate remember whoever you are meeting with is a real person or a group of real people and no matter how much they disagree with you they all have feeling. In short, no yelling or insults, just a calm orderly presentation of your claim. , One final tip, if all fails after extensive negotiations try a little crying. Sometimes it really helps.