TIME IMPACT ANALYSIS IN

ENGINEERING & CONTRACTING PROJECTS:

AN INDUSTRIAL CASE

Paolo Sanvito (P) Franco Caron (1) Simone Valentini (2)

PMP; IPMA B Certificate IPMA C Certificate Degree in Ing. Gest.
Subcontract Adm. Manager Dept. of Management, Quality Control Manager
Economics and Ind.
phone +39-02-520-33646 Engineering
SNAMPROGETTI S.p.A. Politecnico di Milano TECNO TERM
Viale De Gasperi, 15 Piazza L. Da Vinci, 32 S.P. 181 km. 1, n° 3
20097 S. Donato Milanese (MI) – I 20133 Milano – I 26839 Zelo Buon Persico (MI)
[email protected] [email protected] [email protected]

ABSTRACT
Complex projects in the engineering & contracting industry, particularly in the case of
lump sum turn key contracts, are often affected by claims, both on the side of the
client and of the contractor. In this context the management of the claim may
influence the financial performance of the project, since the overall value of
contractual penalties may exceed ten percent of the project budget. The paper
focuses on claims concerning possible delays in completing project activities; delays
stemming from disruption events. Time Impact Analysis represents an analytical
approach aiming not only at identifying causes and consequences of possible delays
occurred during the execution of a project but also at assigning the corresponding
responsibility to each party involved in the project. The paper describes the
application of TIA to an industrial case concerning the construction of a
petrochemical plant in the Middle East. The paper allows to compare a traditional
“static” approach, based on the comparison between the “as planned” schedule and
the current “as built” schedule, and the “dynamic” approach typical of TIA,
considering step by step the event chain which has determined the current status of
the project. The paper points out the different results achieved by the two different
approaches and the effectiveness of the latter approach in order to apportion in a
rigorous way both responsibility and corresponding penalties to each party involved
in project completion delay.

Introduction

The Time Impact Analysis (TIA) represents a methodology to analyze the delays
occurring in a project in order to determine and apportion between the parties
involved the responsibility of such delays or disruptions that brought them about.
The area of application of the TIA particularly concerns complex projects, like the
ones typical of the Engineering & Contracting sector, where there is a very high
number both of activities and of dependence links among them and where time
represents a determinant constraint for the success of the project. Situations of this
type lead to a high overlapping of the activities and to the presence of various
potential critical paths.

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The TIA requires a dynamic analysis of the project that takes into account what
actually happened to date. The status of the project in fact evolves in time and it is
possible that the critical path changes due to certain delays and affect activities that
at the beginning were not considered critical.
The objectives of a TIA are first to determine the delayed sub-activity that affected
the project execution and second to establish which are critical thus determining the
slippage of the project completion date. It is then necessary to quantify the effect of
each delay on the completion date apportioning the responsibility to the parties
involved.
Among all the sectors where the TIA can be utilized we selected the Engineering &
Contracting one because there the incidence of DLD’s (delay liquidated damages)
becomes particularly important when contractual obligations are not met.
The arising of claims among the parties may in fact lead to huge requests for
damages that bring about disputes to be settled only through civil suits or costly and
time consuming arbitration proceedings.

The Context

If we consider for instance the execution of a petrochemical plant or a power

generation unit worth from 50 to over 500 million euro, a very important item from the
contractual standpoint is represented by the DLD’s for delay that can reach up to
10% or more of the contract value.
The economic-financial outcome of the project can therefore be greatly influenced by
their possible enforcement and it is likewise foreseeable that each party involved tries
to charge the counterpart with the responsibility of the delays that took place to limit
the impact of the DLD’s.
The main parties involved in the project are fundamentally the Owner (including
Financing Institutions) and the Contractor, but it is worth to underline that behind the
Contractor there must be a network of other subjects such as suppliers,
subcontractors, etc. who asked to share the risks in proportion to their obligations.
These companies take part in the project under the direct supervision of the
Contractor, to whom they are bound by definite contracts that state the required
performances.
The relative weight of this network of suppliers and subcontractors is getting more
and more important both for the increasing variety of competencies required and for
the massive use of outsourcing and externalization of non-core activities. If this on
one side means a saving for the Contractor, on the other side it makes direction and
supervision of the project more and more complex and expensive.
During the execution of the project the party that deems to have been damaged can
find in the claim the formal instrument to try to recover time and / or cost resulting
from change to the contracted bargain.
Claims are far more frequent where lump sum contracts are stipulated because the
risk is entirely with the Contractor. There are many types of claims that can arise
during the execution of a project, and the delay claims are of particular interest. The
use of the TIA for a whole project or part of it becomes of paramount importance in
two cases:
in order to be able to lodge a claim as solid and sharp as possible that
objectively identifies the impact of the delays occurred in the project and
apportions the responsibilities to the parties involved;

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 in order to be able to reject a claim, highlighting through the TIA the possible
lack of objectivity and, in general, the lack of an accurate and fair allocation of
responsibility for the delays occurred.
From the above the practical in addition to theoretical importance of the TIA,
essential instrument to apportion rigorously the impact of the responsibilities (and by
extension, the cost of delay) originating from the delays caused by the parties
involved in the project.

Generals ( Delay Claims and the TIA )

Project scheduling can be achieved through different tools: the most common are
networks and bar-charts. The networks, and CPM in particular, have the advantage
of showing the precedence links among the various activities and identifying the
critical path of the project. On the other hand bar-charts are easy to prepare and can
be understood at a glance. Today there are softwares that combine the advantages
of the two methods, providing a diagram of the activities based on linked bar-charts.
Out of the various types of delay that can occur in a project, three main families can
be identified: excusable and compensable, excusable and non-compensable, non-
excusable. Particular attention must be paid when more delays, often caused by
different subjects, take place contemporaneously in the same time frame. In this case
the term “ concurrent delays “ should be used.
Concurrent delays are the most difficult to manage because it is always hard to find
the portion of responsibility to be attributed to each party involved, and this
undoubtedly strengthens the need to use the TIA under such circumstances
deepening the analysis as far as possible.
The starting point of a TIA is the identification of the delays occurred in the project in
order to establish at least the number and activities involved and the time when such
delays took place.
There are fundamentally two ways of representing the project time schedule: the “as
planned schedule” and the “as built schedule”.
- the former shows the programme originally prepared for the execution of the
project, attached to the contract and approved by the Owner
- the latter reflects the true execution of the works and encompasses all the
delays affecting the project and causing it to deviate from the planned track.
In order to identify the delays occurred it is not sufficient to compare the two
mentioned representations by simply superimposing one on the other, but it is
necessary to develop a series of snapshots of the project showing the evolution from
the “planned” situation to the “actual” one.

Step 1: To this purpose the concept of the “adjusted schedule” is employed: through
a series of subsequent representations of the project the portion already executed is
shown by the “as built” schedule while the remaining part is described by the “as
planned” schedule.
In order to get more consistency between the planned and the actual portion, there is
a variant of the “adjusted schedule” named “as projected schedule” where for the
portion of the project still to be executed the original data are not used as such but in
a revised version, depending on the substantial modifications induced on the project.
Step 2: The next step for the application of the TIA concerns the detailed analysis of
the network.

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From this standpoint the problem lying in traditional analyses is basically linked to
their “static” interpretation of the project, that is based on the comparison between as
planned and as built schedule, while the TIA develops a dynamic analysis going to
reconstruct the sequence of adjusted schedules describing the development of the
project.
The TIA first starts considering the portion of the network subject to delays and listing
for each of them amounts and relationships with the planned activities.
The occurred delays are then included into the original network like new project
activities e.g., thus causing a revision of the planned activities in terms of durations
and start-finish dates.
Step 3: In addition to this, in order to better understand the impact of a delay on a
certain activity, it is often necessary to decompose the activity subdividing it into
more elements, so as to isolate the portion actually affected by the delay. It is a
matter of increasing the level of detail of the portion of the project subject to the
delay. The portion of the network to be analysed to a greater level of detail is named
“fragnet” (fragment of network).
Step 4: Due to the delays and their mutual effects then the critical path identified in
the planning stage can change during the development of the project, shifting from
one path of the network to another one and making it difficult to understand, through
an exclusively static analysis, the actual impact of each delay on the total duration of
the project.

A delay apparently trifling based on a static analysis, that by its nature assumes the
constancy of the critical path, may instead influence the total duration if, due to
previous delays, the critical path has changed and the delayed activity in question
has become part of it.
The main risk of a static analysis is often to charge to one of the actors of the project
the whole delay occurred without understanding how it actually developed in time.
The TIA on the contrary appraises the evolution of the network in time with particular
reference to the critical path and to the dependencies among the activities.
The preparation of a successful TIA must be supported by a thorough understanding
of the contract and by a meticulous work of collection of all the project documentation
(e.g. project and site foreman logs) so as to be able to prepare an analysis based as
far as possible on factual elements.
The basic rules for the preparation of a correct TIA are summarized in the following:
identify all the contractual parties directly or indirectly affected by the delay;
determine what activities of the project plan are potentially influenced by the
delay based on their criticality to the project itself;
revise the project plan and determine start and finish dates for all the affected
activities;
identify and document the facts associated to change and/or delay events;
prepare a detailed analysis through the use of “fragnets” that places the delay
in the sequence of events and defines its relations with the logical scheme of
the project plan valid at date, verifying the impact on the total duration of the
project;
prepare a written report of the whole analysis and establish the responsibilities
of the parties involved for the occurred delays apportioning to each of them
the entity of the corresponding delay.

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Similarly, the advantages of the use of the TIA are reported below:
dynamic identification of critical activities and critical path;
estimate of the specific impact associated to each delay;
identification of concurrent delays;
forecast of the effect of the delays on the whole project;
apportioning of delays responsibility to the involved parties;
basic tool to support or reject a claim;
identification of the most effective corrective actions at a certain stage of the
project.

The Case Study

The project selected for the application of the TIA concerns the construction of a
plant for the separation of gas from oil located in a Middle East Country. From now
on the project will be named “ Taras Oil Project “.
The Main Contractor of the project, a major Engineering & Contracting Company,
were awarded a lump sum turn key contract for the execution of the works worth
approximately 220 MM$, with penalties peaking up to a max. ceiling of about 17
MM$.
The Main Contractor’s scope of work included all the EPC phases. Most of the
construction and erection works were then subcontracted to a series of specialized
subcontractors, while the Main Contractor kept in their scope only the supervision of
the works.
During the execution of the works a series of delays took place that postponed the
final handing over, notwithstanding the recovery actions undertaken. Our analysis will
focus on the delays occurred on a portion of the project relevant to the activity of a
subcontractor that in the specific case concerned piling and underground piping
erection.
The selection is due to the fact that both activities were critical for the execution of
the project. Because of the two delays the subcontractor lodged a claim against the
main contractor rejecting any responsibility and asking for time extension and
compensation for the additional expenses incurred. The claim prepared by the
subcontractor included as attachment both an analysis of the delays occurred on the
piling activity and of the ones affecting the underground piping erection. Fig. 1 in the
following shows the analysis of the delays carried out by the subcontractor for what
concerns the piling activity.

The analysis is based on the comparison between the “planned” situation of the piling
activities and the “actual” one as pointed out at site. The description of the actual
execution highlights the presence of a series of events that disrupted the piling
activity thus causing, against an original estimated duration of 60 days, a global delay
of 99 days, affecting all the downstream activities and, in conclusion, the whole
project.
The subcontractor analysis first shows how piling started in delay due to lack of
technical documentation for construction and delays ascribable to the main
contractor in releasing acceptance of the work procedure provided by the
subcontractor. Once piling started, there were slowing downs and stoppages of the
works due to the need not foreseen initially to proceed to the splicing and capping of
piles through welding, which implied the issue of new Work Method Statements and
the relevant approvals by the main contractor.

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 Fig. 1: Subcontractor Analysis

The subcontractor deemed they were not responsible for the above and estimated
the delay at 55 days. During the piling works there were other slowing downs that
brought about a global delay on the start of the construction of the piperack
foundations of 73 days.
Finally, due to a shortage of piles charged to the main contractor, piling and splicing
activities ended on 17/02/02 with a total actual delay of 99 days against the planned
date, i.e. 10/11/01.
The traditional analysis carried out by the subcontractor points out the following
disruptive events attributable to the main contractor:
delayed submission of drawings to start the piling activities;
delay in the approval of the procedures for pile thrusting;
additional requirement of pile splicing, not foreseen originally;
delay in the finalization of new procedures for pile splicing;
delay in the approval of the procedures provided to the main contractor.
The subcontractor, confident in their analysis, asked to the main contractor for a
time extension of 99 days with regard to the contractual terms and the
reimbursement of the extra-costs borne by them due to the activities that became
necessary in the execution phase and had not been accounted for. The main
contractor replied stating they were not responsible for the delays occurred and
submitted a series of counter-argumentations:
the delay in the submission of the technical documentation for erection did not
prevent the subcontractor from starting the activities of pile coating with FBE (
fusion bond epoxy ) to be carried out in a specialized workshop outside the
site area;
the subcontractor had to send the work procedures relevant to the piling
activity at least one month before the foreseen starting date of piling, so as to
allow the release of the subject acceptance in due time thus making it possible
to perform any modifications deemed necessary;

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 pile splicing and capping were included in the contract as subcontractor
scope, if necessary;
the subcontractor did not take enough care to guarantee the availability in due
time of qualified personnel and relevant procedures for pile splicing activity;
in practice the delay affecting the whole project is not made of by the 99 days
of delay recorded at the end of the piling activity, but by the delay occurring on
the start of the following activity of construction of the piperack foundation,
being such delay estimated by the subcontractor at 73 days since the above
mentioned activity is linked to piling by a “start – start” dependency laying on
the critical path.
The analysis carried out by the subcontractor is a static one because a series of
disruptive events attributed to the main contractor are just mentioned and only the
global delay caused to the project is estimated, calculated as the difference between
the actual and the planned date of piling completion.
Now let us see what happens if we implement the TIA on the portion of the project
considered by the subcontractor in their analysis and relevant to the piling activity.
Fig. 2 shows the impact of the first delay on the project calculated through the TIA.
The upper part of the figure shows the “as planned” situation where FBE coating of
piles, piling and piperack foundation preparation are displayed according to the initial
planning. In the central portion the actual execution of these three activities is shown
including the new activities relevant to the delays occurred at site.

Fig. 2: TIA – Impact of first delay (pile-coating)

Finally, in the lower portion of the figure the delays attributed to the subcontractor for
the activities that have been analysed are highlighted.
The upper part of Figure 2 points out how the piling activity was in practice preceded
and bound by the FBE coating of piles. In fact only after a certain amount of piles had
been coated and were shifted to site, the following activity of insertion in the ground
could start.

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The subcontractor did not meet the time foreseen for the submission of the FBE pile
coating documentation thus causing a delay on the subsequent approval of the main
contractor and preventing in that way the piling activity from starting.
The amount of the registered delay to be charged to the subcontractor equals 19
days and fully impacts on the downstream activities of piling and piperack foundation
construction.
Fig.3 shows the impact on the project of the second delay, concerning a slowing
down in the FBE pile coating activity, such as to put off the start of the piling activity
beyond the 10 days originally foreseen starting from the beginning of pile coating.
Only after 27 days from the beginning of pile coating the piles were handed over at
site in a sufficient quantity to start piling. It is to be accounted therefore a delay of 17
days due to unavailability at site of coated piles entirely attributable to the
subcontractor. Because of this second delay all downstream activities were shifted
and the start/finish dates had to be calculated again.
At that point the total delay affecting the start of the construction of the piperack
foundations is equal to 36 days.

Fig. 3: TIA – Impact of second delay (pile unavailability at site)

Then a third delay occurred on the project displayed in Fig. 4 which is related to the
delay in the start of pile driving for N/A of pile driving criteria.

Such delay, equal to 7 days, was due to the late submission by the subcontractor of
the method statement for pile insertion operations for main contractor approval. The
delay impacted the piling activity further postponing its start and the beginning of the
piperack foundation preparation, then in delay by 43 days with respect to the original
schedule.

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 Fig. 4: TIA – Impact of third delay (N/A of pile driving criteria)

Fig. 5: TIA – Impact of fourth delay (pile splicing and capping)

The fourth and final delay is shown in Fig.5. and relates to the fact that the
subcontractor was not able to face the need to proceed with pile splicing, providing
the required procedures foreseen as per the contract with great delay and revealing
serious lack of equipment and qualified personnel for the necessary welding
operations.

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Due to such delay the piperack construction activity could not meet the “start – start”
dependency with the piling activity, which foresaw a planned delay of 49 days,
bringing the actual gap between the start of the two activities to 91 days,
corresponding to an actual delay of 42 days chargeable to the subcontractor.
Based on the four delays occurred on piling activity, a global delay of 85 days could
be registered on the start of the piperack foundation construction:
19 days for the delay in pile coating;
17 days for pile unavailability at site;
7 days for lack of pile insertion procedures;
42 days for delay in piling execution.
The TIA adopted for the Taras Oil Project shows therefore the real responsibilities of
the subcontractor on the project activities analysed through the evaluation of the
actual impact on the project of each delay occurred, up to the global delay for which
the subcontractor bore full responsibility.

Bibliography

- Cushman R.F., Jacobsen C.M., Trimble P.J., 1996, “Proving and pricing
construction claims”, Wiley Law Publications, Cap 4, 17.
- Rubin R.A., 1992, “Construction claims prevention and resolution”, Van Nostrand
Reinhold, pp 69-79.
- Trauner T.J., 1990, “Construction Delays”, R.S. Means, Cap. 2,3,4,6.
- Rubin, R.A. et. al., 1983, “Construction claims: analysis, presentation, defense”,
Van Nostrand, New York
- Galloway, P.D. and Nielsen, K.R., 1990, “Concurrent schedule delay in international
contracts”, International Construction Law Review 7th October 1990.

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