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A systematic methodology for analysing disruption claims

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A SYSTEMATIC METHODOLOGY FOR ANALYSING
DISRUPTION CLAIMS
Nuhu Braimah1, Issaka Ndekugri and Rod Gameson
School of Engineering and the Built Environment, University of Wolverhampton, WV1 1SB, UK

Disruptions to contractor’s progress are commonly encountered in most construction

projects and often result in productivity loss (or disruption) claims. The standard of
proof set by the courts and other dispute resolution mechanisms for the recovery of
such claims is onerous. This demand, coupled with the extreme difficulty associated
with proving disruption pose a major challenge to practitioners in their resolution.
Whilst methodologies for analysing disruptions abound in the literature, their use is
found to be unsatisfactory from a number of different aspects, particularly in proving
causation. As a contribution to aid practitioners overcome this problem, this paper
reports on an on-going research aimed at developing a framework for improving
disruption claims analysis. Based on review of the literature, a systematic
methodology is proposed for performing the analysis in detailed, clear and equitable
manner. Further studies have been designed to validate it and address issues that may
affect its acceptability and usability in practice.

Keywords: claims, delay and disruption, extension of time, productivity loss,

programming.

INTRODUCTION
The uncertainty, complexity, multiparty and dynamic environment that typify modern
construction have led to many projects encountering various problems. The Egan
report (Egan 1998) bears testimony to this, stating that recent studies in UK, US and
Scandinavian countries suggest that up to 30% of construction is rework, labour is
used at only 40-60 % of potential efficiency, accidents can account for 3-6 % of total
project costs and at least 10% of materials are wasted. One of the most frequently
encountered problems is disruption to contractors’ progress, which causes
inefficiencies or loss in productivity. Various studies have decried the high incidence
of this problem in recent times (Horner et al. 1987; Semple et al. 1994; Thomas and
Oloufa 1995).
The UK’s Society of Construction Law protocol on delay and disruption has defined
disruption (as distinct from delay) as disturbance or interruption to a contractor’s
normal working methods resulting in lower efficiency or lost productivity (SCL 2002:
31). A common cause of disruption is therefore changes (or variations), which are
often ordered by employers. The negative impacts of changes on labour productivity
are well documented in many studies (e.g. Thomas and Napolitan 1995; Ibbs 1997;
Hanna et al. 1999a; Hanna et al. 1999b). The impacts include stop-and-go operations,
out-of-sequence work, loss in productive rhythm, demotivation of work force, loss in
learning curve, unbalanced crews, excessive labour fluctuations, overtime, and
working in adverse weather conditions (Hanna and Heale 1994; Schwartzkopf 1995).

1
n.braimah@wlv.ac.uk
Braimah, N, Ndekugri, I and Gameson, R (2007) A systematic methodology for analysing disruption
claims. In: Boyd, D (Ed) Procs 23rd Annual ARCOM Conference, 3-5 September 2007, Belfast, UK,
Association of Researchers in Construction Management, 137-146.
Braimah, Ndekugri and Gameson

The occurrence of these events, if caused by the employer, may give rise to a right to
compensation under either an express term of the contract or as a breach of contract.
Analysing project disruptions to ensure that the responsible party compensates the
claimant for the damages done, is however often recognized as a difficult undertaking
at its best (Schwartzkopf 1995; Ibbs 1997). A major cause of the difficulty is the fact
that productivity losses are often attributable to multiple events and project
participants (Leonard et al. 1988; Hanna and Heale 1994), where the events may
occur simultaneously. This makes it difficult to unravel and sort out clearly what is
often a tangled web or ‘spaghetti’ of interrelated issues and problems into their
individual causes and effects. The situation is further exacerbated when the
contractor’s claim includes the unforeseeable impacts or ‘ripple’ effects of multiple
change orders on work not covered by the change instruction. The cumulative
(synergistic) impacts of these changes are particularly troublesome to resolve as
described by a Construction Industry Institute report (Hester et al. 1991) - “when
there are multiple changes on a project and they act in sequence or concurrently there
is a compounding effect – this is the most damaging consequence for a project and the
most difficult to understand and manage. The net effect of the individual effect of the
individual changes is much greater than a sum of the individual parts”.
Yet the standard of proof required for contractors to succeed with disruption claims
must meet demanding objectives (Shea 1989; Klanac and Nelson 2004). These include
presenting the claims using the best evidence available to prove cause and effect
relationships of actions or inactions of the parties and making it clear and simple
enough for the understanding of all parties involved (Gavin et al. 2001: 82). Sadly,
each of the existing methodologies for analysing disruption is found to be
unsatisfactory from a number of different aspects, particularly in proving cause and
effect relationships (Schwartzkopf 1995; Klanac and Nelson 2004). As a contribution
to aid practitioners overcome this problem, this paper reports on an on-going research
aimed at developing a framework for improving the analysis of disruption claims.
Based on review of the literature a systematic methodology is proposed for
performing the analysis in detailed, clear and equitable manner. The next stage of the
study will focus on its validation and issues of its acceptability and usability in
practice.

A SYSTEMATIC METHODOLOGY FOR ANALYSING

DISRUPTION CLAIMS
The common thread running through various texts, research documents and court
decisions on construction claims is that for a contractor to satisfactorily recover its
productivity losses three main elements must be proved (Lee 1983; Klanac and Nelson
2004):
(i) Liability - the employer was legally responsible for compensable
disruption/impacts. These are events, which according to the contract
entitle the contractor to compensation for any resulting additional costs.
(ii) Causation - establishing causal link between the impacts and the cost
overruns incurred.
(iii) Resultant injury (or quantum) - the cost of the impacts as attributable to the
employer’s action or lack of it.

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 Disruption claims

The first element is relatively easy to prove than the last two (Klanac and Nelson
2004). The proposed methodology thus focuses on these two challenging elements and
does not address the legal aspects required to prove liability. To clearly satisfy the
required proofs, the methodology considers two somewhat separate phases - causation
and quantum phases. Figure 1 shows a flow chart representing the content of these
phases.

Figure 1: Flow chart of the proposed methodology

The causation phase mainly involves the use of detailed project records and
cause/effect matrix to establish the causal link between all disruption events and
impacts giving rise to extra cost. The quantum phase, however, involve the use of
critical path method (CPM) software with the capability of linking activities defined in
the programme with their cost. This requires the use of activity-based approach to job
costing in order to facilitate cost recordings against activities defined in the
programme. The project cost codes should therefore cover all elements of the work in
appropriate detail with distinction between operations that exhibit different
productivities. Detail discussions of the procedures involved are provided below.

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Braimah, Ndekugri and Gameson

Phase 1- Proving causation

This phase involves two main steps: Review of project documentation and
establishing causal link.
Step 1-Review of project documentation
A number of researchers and expert commentators (Bubshait and Manzanera 1990;
Cox 1997; Al-Saggaf 1998; Baki 1999) suggest that the first port of call in the
analysis of claims is for the analyst to gather and examine all available project
information pertinent to the claim. Since disruption claims are more often about
information on productivity impacts, the key information that require important
examinations include:
• actual project resources utilization (labour, equipment/tools) with their status in the
execution of relevant activities, i.e., working or not working-idle or broken down;
• the reasonableness of the baseline programme as to its completeness, level of
detail, logic, resource loading and planned productivity rate; and
• change order account and change conditions experienced on the project as a result
of employer risk events.
Other important documents that need review include: labour time sheets, manpower
histograms, physical progress curves, programme updates, requests for instructions,
daily reports, correspondence and payment certificates (Cox 1997). The essence of the
review include to confirm the accuracy of the records and also to familiarize with the
project’s progress at any point in time (Bubshait and Manzanera 1990). Checking for
their accurateness is central to proving compensable loss since it is from the records
that one can establish the reasons for inefficiencies other than that for which the
contractor is responsible. Therefore the records should as far as possible be
documented contemporaneously throughout the project life in an accurate and
organized manner (SCL 2002).
Step 2- Establishing causal link
The next key step is to establish the causal link between the actions or inactions of the
parties and their corresponding effects that allegedly have resulted in additional cost.
Three main steps involved in achieving this are as follows:
Step 2.1- Identify all changes in work conditions
Productivity losses are mainly caused by changes in the contractor’s anticipated or
planned working conditions, resources or manner of performing its work (Finke
1997). Thus to establish causal link, it is important for the analyst to first identify all
changed conditions the project experienced by tracking all variances from the contract
such as design interference, out of sequence work and overmanning using project
records.

Step 2.2 - Develop cause/effect matrix

Cause/effect matrix is a useful analytical tool for demonstrating graphically, a
hierarchical analysis of the multiple cause/effect relationships between primary causes
and final results in a number of different scenarios (Pickavance 2005: 497). To clearly
trace the impact of employer-caused disruptions, the analyst should develop such
matrix to illustrate all the causes of the productivity loss including contractor-caused
problems. An example of a simple cause/effect matrix is shown in Figure 2. The form
of the matrix depends upon the extent of impact experienced, which can be very
complex as series of multiple and duplicating effects may have to be shown.

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 Disruption claims

Productivity loss cost

overuns
Increased cost of rework A
Cost of unproductive time B
Cost of accelereation C
Total cost D
overun

Secondary
causes

Primary causes
Late informations/instruction
Underestimating of labour
Differing site conditions
Defective plans and specifications

Parties causing
the problems

Figure 2: Typical cause/effect matrix

Step 2.3 - Prove activities impacts using as-built programme

An as-built CPM programme reflecting the actual duration and sequence of activities
should be developed either through regular programme updates or retrospectively
using project records. This programme should be detailed enough to show the
transpositions of the various stages of individual activities as a result of the
disruptions encountered. The various impacts in the cause/effect matrix should then be
linked to the various as-built activities. Starting with the first disruption event (a
primary cause) the immediate and ‘ripple’ effects can be tracked through the as-built
programme by taking note of resequencing of activities, their logical successors and
concurrent activities. Chronologically, the impacts of remaining disruptions are also
tracked. The start dates, finish dates and durations of each impact should be identified
from the programme and verified using the as-planned programme, programme
updates and other project records. This provides credence to disruption claims in
which the impacts consumed significant time though the contract did not extent
beyond the original completion date (i.e. they consumed available float).

Phase 2 - Proving quantum

The method proposed here for estimating the cost of disruption is based on window
analysis principles. This involves the use of ‘statused’ and updated programmes to
analyse the impacts of disruptions by breaking the project up into series of time
periods or ‘windows’. The disruption events identified as causing the productivity loss
are considered in succession as they actually occurred and simulated on a
cost/resource loaded CPM programme to determine their cost. The following gives
detail description of the procedure involved.

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Braimah, Ndekugri and Gameson

Step 3- Development of updated cost/resource loaded programmes

Project planning software with capability of aggregating total actual costs from
resources incurred by activities should be used to develop an updated fully
cost/resource loaded CPM model. This would represent the actual cost and time
incurred in carrying out the contract at various stages. Development of the first model
entails going through the following:
a) The total project duration is divided into a number of time periods or
‘windows’ based on major changes in planning or major project milestones.
b) The first ‘window’, defined as the period between the baseline programme
and the first update, is updated to reflect the actual start and finish dates,
durations and sequence of all project activities including delays and
disruptions encountered.
c) Labour and plant/equipment used by each of the activities within this
window are identified. Based on resources utilized the analyst allocates the
actual costs incurred to each activity including all disruptions encountered.
d) To accurately capture the actual cost of disrupted activities, actual cost
corresponding to disruption and no disruption components of such activities
should be determined separately. This can be achieved by:
- determining the scope of the impacted activity by reference to cost
records and productivity data;
- from this data, determine the likely measured mile period and the
impacted period;
- using the measured mile productivity, calculate the actual cost of the no
disruption component of the activity and the impacted productivity
values for the cost of the disrupted component;
- where it is impossible to use measured mile approach, industry
standards and publications/guidelines could be relied upon.
e) With actual cost of all activities determined, the model is run to determine
the ‘actual cost of the project at the end of the first window’ (TCPW). A
copy of this model is saved and reserved for the development of a ‘but for’
model.
Step 4 - Development of a ‘but-for’ updated cost /resources programme
The ‘but for’ model represents the actual cost of the project at the end of a period but
for the employer-caused disruptions. That of the first window is developed as follows:
a) Using the cause/effect matrix developed, identify all compensable disruption
events that occurred within the first window.
b) These events are then removed from the model developed in step 3 above to
derive a ‘but for’ model that gives the cost of the project at the end of the
first window but for the disruption of the employer.
c) The cost of compensable disruptions is thus given by the difference between
the total cost as represented in the ‘but for’ programme and that prior to the
removal as illustrated in fig 3.

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 Disruption claims

Figure 3: Comparing cost loaded CPM models of a ‘window’

Step 5- Quantifying disruption cost for the remaining windows

If the disruptions occurring in the first window are the only disruptions the project
encountered, then the analysis ends, otherwise the analyst proceeds to examine
subsequent windows as follows.
a) The period of the second window is determined and updated as in the first
window using the first update as the beginning time period for the second
window.
b) Repeat the procedures under steps 3 and 4 as described for the first window.
c) Do the same for the remaining windows as appropriate.
d) The total cost of disruption for which the contractor is to be compensated is
given by the sum of all the disruption costs obtained for each of the windows.
Step 6 – Prepare claims report for settlement
Presenting the disruption claims results in an effective manner is vital to its smooth
settlement through negotiation, arbitration, litigation or other forms of dispute
resolution settings (Baki 1999). A claims report should thus be prepared to present the
results clearly and concisely as possible. The report should focus on the main
disruptions that were identified as impacting the project. Its content should include but
not limited to:
• a narrative on the baseline programme, productivity data, cost records and other
vital project records that were used with regards to their reasonableness and any
correction that were made;
• a factual story on how each of the employer caused disruptions resulted in
increased costs by tracing paths in the caused/effect matrix with support or
evidence from the project records; and
• a discussion on how costs attributed to employer-caused disruptions were
arrived at and how any inefficiencies due to the contractor’s own
mismanagement have been accounted for in each of the period analysed.
In addition, modern communication mediums like graphic charts, photographs and
CPM models are available to help present the results appropriately. Effective use of

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Braimah, Ndekugri and Gameson

the graphics can simplify complicated issues and grabs the reader’s attention or focus
to the claimant’s argument.

Limitations and further studies

The proposed methodology has the potential of enhancing the settlement of disruption
claims because it performs the analysis in a detailed, clear and equitable manner. In
spite of this advantage, there are a number of potential limitations. Firstly, the method
requires the use of software that has the facility to link CPM programmed activities
with their actual cost and allows for the cost of the project to be determined at any
given stage. Planning software packages with such capability are likely to be
expensive for the affordability of smaller firms. Secondly, implementation of the
method requires that actual cost be measured at activity level. This approach to job
costing makes it inappropriate to apply the method for projects in which cost codes
were not defined to represent actual activities that occurred on site at the appropriate
level of detail. For instance, if cost codes were defined at work package levels, actual
cost associated with activities of the work package may be lumped together making it
difficult to attribute the cost effect of disruptions impact on the individual activities.
Finally, the methodology relies very much on the availability of accurate progress and
cost information of all activities, which may be lacking. However, this latter drawback
equally applies to most existing methods for analysing disruption claims.
As a result of these possible limitations, further studies have been designed by the
authors to ensure the usability and/or applicability of the methodology in practice. The
subsequent stages of the research will focus on issues including:
• validation of the methodology using actual disruption claims to demonstrate its
practicality;
• an investigation of the issues that are likely to impede its usability and
acceptance. Addressing these issues could ensure the realization of the full
potential of the methodology;
• investigating the application of IT for the automation of the methodology since
the process involved is systematic in nature. This could speed up the analysis
task and lead to savings in time.

CONCLUSION
The construction industry is generally aware of the significant cost associated with
disruptions and/or delays to contractor’s progress. However, it is often recognized that
proving these cost by contractors for their recovery in claims is an extremely difficult
undertaking at its best. Whilst a number of methodologies are available for analysing
disruptions claims, each method is found to be unsatisfactory from a number of
different aspects. As a contribution to address this problem, this paper reports on an
on-going research aimed at developing a framework for improving the analysis of
disruption claims. Based on review of the literature, a systematic methodology is
proposed which seeks to perform the analysis in fair and objective manner. The
strengths of this methodology are:
• It performs the analysis in a detailed, clear and equitable manner. It is not biased
in favour of either the employer or the contractor as all impacts caused by these
parties are considered.

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 Disruption claims

• It attempts to recreate the status of the project at the time of the disruptions and
uses that to analyse their effects. This enables impacts to be directly related to
changes experienced in working conditions.
• In addition to proving disruption, the methodology can be used to analyse delays
at the same time. Existing methods lack such power because they tend to
generally analyse delays and/or disruptions in isolation.
• The method can be used to determine the likely impacts of delay and/or
disruption events in both time and money when negotiating a variation order.
This is also useful in providing early warning indicators, which is necessary for
the implementation of corrective actions in mitigating damages.
In spite of these advantages, there are a number of potential limitations, which should
be addressed, to ensure that the proposed methodology realizes its full potential in
practice. Subsequent stages of the research have therefore been earmarked to focus on
addressing these limitations.

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