CumulativeImpactClaim AACE2007 Paper Final

How to Prove/Disprove Cumulative Impact Claims Palmer, Ottesen, Popescu Accepted for Publication by AACEI June 2007 AACEI
2007 Annual Conference July 15-18, 2007 Nashville, TN
How To Prove / Disprove Cumulative Impact Claims

Co-authored by; Glen R. Palmer, PSP, Jeffery L. Ottesen, PE, PSP and Dr. Anamaria Popescu, PE, PMP
1. Introduction
Cumulative Impact (CI) claims are one of the most misunderstood and inconsistently utilized theories in the construction industry today. This inconsistent utilization is allowing the CI claim to virtually become the fallback or when all else fails claim for contractors trying to recover monies on unsuccessful projects. This paper will attempt to accurately define cumulative impact by reviewing CI case law as well as put some perspective as to how to prove or disprove entitlement to CI damages. The authors will provide a history of CI principles and investigate the cost and schedule aspect of cumulative impact claims to accurately depict a CI disruption.
2. History of Cumulative Impact Principles

The fundamental basis for cumulative impact claims stems from principles established with the origin of law. Present day CI claims thus represent the evolved result of legal principles established over thousands of years. In this subsection, the origins of CI principles are first presented. The authors then weave these principles together to establish a definition of Cumulative Impact, and then compare that definition with present day case law.1 Historical Principles of Cumulative Impact Claims
The authors of this paper are engineers and construction managers. For an attorney perspective, refer to Reginald M. Jones paper entitled Lost Productivity: Claims for the Cumulative Impact of Multiple Change Orders, Public Contract Law Journal, Vol. 31, No. 1, Fall 2001.
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How to Prove/Disprove Cumulative Impact Claims Palmer, Ottesen, Popescu Accepted for Publication by AACEI June 2007
In its most primitive form, law rests on the ability of one individual to control another through brute strength2 and was based on forms of lex talionis, or rather "the law of retaliation." Lex talionis is a law of equal and direct retribution as found in Hebrew scripture, And if any mischief follow, then thou shalt give life for life, eye for eye, tooth for tooth, hand for hand, foot for foot.3 Scholars attribute the earliest written code to Hammurabi (1795-1750 BC), ruler of Babylon, the world's first metropolis, whose principles were likewise based on lex talionis. Under the Code of Hammurabi, the most common penalties were fines for damages done to property or for breach of contract. Multiple restoration, up to thirty-fold depending on the offence, was issued where illegal activity or damages caused by neglect were proven. The Code also recognized the importance of intention. In ordinary cases, responsibility for retribution extended only as far as culpability was proven. However, carelessness and neglect were severely punished.4 Thus, from the Code of Hammurabi, the following principles are established and have carried forward even to present day for cumulative impacts: Principle 1: Principle 2: Principle 3: Principle 4: Penalties are warranted for damages done to property or for breach of contract Monetary means commonly serve as a remedy for damage or breach Proof is required to establish responsibility for damages (addresses cause and effect arguments) Retribution extends only so far as culpability was proven (akin to the eye for an eye lex talionis mentality)
Circa 594 BC, an Athenian sage and lawgiver named Solon reformed the harsh penalties of Draconian laws (which are thought to have prescribed death as the penalty for even trivial offences) and balanced the rights of citizens. For example, Solon defined a well-governed city as, That city where those who have not been
Robert W. Emerson, JD and John W. Hardwicke LLB, Business Law, Third Edition, Barrons Educational Series, Inc., Hauppauge, NY, 1997 3 Authorized King James Version of The Holy Bible, Second Book of Moses (Exodus 21: 23-24) 4 Claude Hermann Walter Johns, BABYLONIAN LAW--The Code of Hammurabi. from the Eleventh Edition of the Encyclopedia Britannica, 1910-1911 (http://www.fordham.edu/halsall/ancient/hamcode.html)
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injured take up the cause of one who has, and prosecute the case as earnestly as if the wrong had been done to themselves." Thus, Solon allowed anyone to take up the cause of a poor person who had been injured and made the law an available remedy for many more wrongs than at any time in Athens past.5 Cumulative impact claims likewise share the principle that the claimant has rights equal to the defendant in seeking remedy for damage: Principle 5: An injured party has the right to seek remedy from the responsible party
About 533 AD, civil law was established in the Roman Empire by Emperor Justinian. Civil law establishes a body of legal rules in one systemized, comprehensive code.6 Over time, however, England adopted a different approach where disputes were resolved by common law, or rather on a case-bycase basis. According to his year 1765 Commentaries on the Laws of England, William Blackstone indicated that common law was often called an unwritten law because the common law principles could not be found in any one place, but rather in the decisions of judges in thousands of individual cases. Those decisions, built up over the generations by judicial decisions and cataloged by scholars, were intended to represent the wisdom of the ages.7 Influenced directly by the English common law practice, America likewise followed the common law approach with one variation. About the time of the American Revolution, American judges began to think of the common law as an evolving, rather than a static, body of principles and, subsequently, over the years common law has been revised to bring it into line with American values. Still, many of the old English common law principles have survived and except for the State of Louisiana, which is based on French Napoleonic Code and has a
SOLON OF ATHENS by Heraklia Aelius, March 27, 2002; http://www.ancientworlds.net/5367 Robert W. Emerson, JD and John W. Hardwicke LLB, Business Law, Third Edition, Barrons Educational Series, Inc., Hauppauge, NY, 1997; also see definition of Civil Law at http://dictionary.law.com/ 7 Encyclopedia of American History
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legal structure based on civil law, common law (or case law) is followed throughout the United States in present day. Principle 6: U.S. case law establishes the principles which govern legal matters and disputes.
Pursuant to the common law system in place throughout most of the US, a review of case law ensued to find the earliest recorded example where Cumulative Impact was claimed and documented. Whereas case law evolves with time, interest also lies with the latest case involving Cumulative Impact. A comparison of the principles between these two reference points reveals key elements and proofs that must be met to either establish or defeat such a claim. Electronic key word searches of case law databases ensued on various forms and combinations of the words cumulative impact/effect, change order, ripple effect, excessive changes, unforeseeable, unanticipated, etc. More than 70 different cases were identified as potentially contributing to the genesis of a cumulative impact claim. Review of these cases revealed that cumulative impact claims stemmed from owner-initiated changes and the theory of equitable adjustment as was typically included in government contracts. For example, in a 1942 U.S. Supreme Court case, United States v. Callahan Walker Construction Co., the government had included the following article in its contract with Callahan Walker: "Article 3. Changes. The contracting officer may at any time, by a written order, and without notice to the sureties, make changes in the drawings and (or) specifications of this contract and within the general scope thereof. If such changes cause an increase or decrease in the amount due under this contract, or in the time required for its performance, an equitable adjustment shall be made and the contract shall be modified in writing accordingly. . .
Similar provisions were found in many of the cases reviewed including private party disputes. Generally speaking, where the contractor followed the conditions of the contract provisions, but disputed the owners agreed quantum for equitable
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adjustment, the judging authorities awarded in favor of the contractor, but only to the extent that the contractor could prove expenditures directly related to the changes. In this example, the equitable adjustment provision served as a hindsight approach to actual documented costs incurred by the contractor because mutual agreement to the amount for equitable adjustment was established at trial, well after completion of the work. In 1954 a significant court ruling established standards by which cumulative impact claims are judged even today. These standards resulted from a dispute between Wunderlich, Curlett & Tompkins, a joint venture general contractor (referred to simply as Wunderlich herein), and the U.S. government. Wunderlich entered into a contract with the U.S. government to erect a 500-bed hospital complex in Salt Lake City, Utah, in March 1950. For various reasons, costs escalated, work completed 318 days late, and a claim was filed against the government. Wunderlichs claims for relief were predicated upon three alternative theories: 8 (1) damages for breach of contract based upon the allegation that defendant knowingly furnished plaintiffs with defective plans and specifications which were substantially incomplete, ambiguous, and impossible of performance; (2) quantum meruit,9 to reimburse plaintiffs for their reasonable costs incurred in performing the work based upon the contention that defendant ordered an unreasonable number of changes and modifications in the plans and specifications after the work had begun, the cumulative effect of which resulted in a fundamental alteration of the scope of the contract and the construction of a hospital substantially different from that originally contemplated by the parties, and (3) equitable adjustment under the Suspension of Work article of the contract, to compensate plaintiffs for the costs of actual delays incurred based upon the assertion that the plans and specifications were allegedly so inherently
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WUNDERLICH CONTRACTING CO. v. UNITED STATES, 351 F.2d 956 (Ct.Cl. 1965) Quantum meruit is a Latin term meaning "as much as he deserved," or rather the actual value of services performed. Quantum meruit determines the amount to be paid for services when no contract exists or when there is doubt as to the amount due for the work performed but done under circumstances when payment could be expected. (Note the parallel in quantum meruit to Principles 1 - 4 cited earlier.) http://dictionary.law.com
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ambiguous and inadequate, and the changes ordered so extensive, that the defendant should in all fairness have stopped the work in order to make corrections and prevent unnecessary delay and expense in the contractor's performance. Note that Wunderlich used the cumulative effect of changes as its basis for quantum meruit for its construction cost overruns (direct costs) and also for equitable adjustment due to delay (to cover indirect costs). While earlier cases reviewed revealed arguments of excessive changes as a cause for cost overruns, the Wunderlich case is the most direct and earliest case reviewed wherein the cumulative effect of multiple changes was offered as proof and entitlement for relief.10 Ultimately, Wunderlich lost the case, and again lost on appeal in 1965 for reasons explained below. Several important principles were established in the Wunderlich case. Foremost is what became known as the Wunderlich Act. The Wunderlich Act of May 11, 1954, provides that a departmental decision on a question of fact pursuant to a "disputes" clause in a government contract shall be final and conclusive in accordance with the provisions of the contract, "unless the same is fraudulent or capricious or arbitrary or so grossly erroneous as necessarily to imply bad faith, or is not supported by substantial evidence." Further, in a suit on a government contract, apart from questions of fraud, determination of the finality to be attached to a departmental decision on a question arising under a "disputes" clause must rest solely on consideration of the record before the department, and no new evidence may be received or considered. This decision establishes an important principle that permeates cumulative impact claims to date: Principle 7: Absent fraud, capriciousness or grossly erroneous bad faith, the contract is the basis for final resolution and remedies for relief of disputes between contracting parties.
Note that according to Reginald M. Jones paper entitled Lost Productivity: Claims for the Cumulative Impact of Multiple Change Orders, Public Contract Law Journal, Vol. 31, No. 1, Fall 2001, The first case to provide a thorough examination of cumulative impact or disruption was the GSBCA Pittman Construction Co. GSBCA 4897, 81-1 BCA 14,847 (1980), aff'd, 2 Cl. Ct. 211 (1983)
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The importance of this ruling is evident in Banks Construction Company v. United States, 364 F.2d 357, 1965). In this example, the contractor failed to follow the remedies specified in its contract and, consequently, its claim was denied. Similar denials were commonly observed for contractor claims of equitable adjustment for either time or monies where the contract was not followed. Because common law evolves on a case-by-case basis, by the time the appeal decision to Wunderlich was issued in 1965, additional case law was also cited to uphold the original decision. From the appeal Wunderlich Contracting Co.. v. United States, 351 F.2d 956, many important principles were cited relative to how Wunderlich failed to establish entitlement to its cumulative impact claim. These principles are presented below and supported by direct quotes from the case: Principle 8: Foreseeability of changes limits recovery for performing changed work later.
The existence of many errors, omissions, and discrepancies in the plans and drawings for the project would have been obvious to any competent person who examined them, and in the course of the proceedings several mistakes were brought to the attention of defendant and were later corrected by addenda. Although plaintiffs were present at this meeting, they did not comment at the time on any of the apparent deficiencies and errors in the documents. Thus, because errors were known, or should have been known at the contract onset, Wunderlich was not able to recover solely on argument of the large number of changes. This ruling was consistent with an earlier case in 1922 (Freund v. United States, 260 U.S. 60) where the court held that the changed work is considered to be within the general scope if it "should be regarded as having been fairly and reasonably within the contemplation of the parties when the contract was entered into." Principle 9: There is no exact formula for determining the point at which a single change or a series of changes must be considered to be beyond the scope of the contract and necessarily in breach of it.
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This principle is a direct quote taken from the Wunderlich appeal case. Emphasis is first made on the plural nature of changes. Cumulative impacts result from more than one change. It was further stated that, [e]ach case must be analyzed on its own facts and in light of its own circumstances, giving just consideration to the magnitude and quality of the changes ordered and their cumulative effect upon the project as a whole. Saddler v. United States, 287 F.2d 411, 152 Ct.Cl. 557, 561 (1961). The contractor cannot claim a breach of the contract if the project it ultimately constructed is essentially the same as the one it agreed in the contract to erect. Aragona Construction Co., Inc. v. United States, No. 435-59, Ct.Cl., April 17, 1964. Principle 10: Changes and costs imposed on the contractor by the owner must be differentiated from changes and costs incurred from other factors unrelated to the owner.
The case states that, plaintiffs have failed to allocate between costs of performing extra work in accordance with the changes and costs unavoidably incurred as a result of alien factors. . . [Plaintiffs] stand on the basic unproved assertion that defendant was responsible for all losses on the contract. . . Plaintiffs have been compensated by price adjustments for the verified costs of carrying out these alterations, and have not shown by a preponderance of the evidence that they are entitled to any additional sum. Basically, Principle 10 repeats Principle 4 mentioned supra from the time of Hammurabi. Because Wunderlich failed to provide evidence that separated cause and effect responsibility between the government and other factors (including itself), the costs paid for the change orders themselves were all it could recover. Principle 11: Mathematical exactitude in quantifying damages is not required for recovery.
The case further states, [a] claimant need not prove his damages with absolute certainty or mathematical exactitude. Dale Construction Co. v. United States, No. 134-57, Ct.Cl., December 11, 1964; Houston Ready-Cut House Co. v. United States, 96 F. Supp. 629, 119 Ct.Cl. 120 (1951). It is sufficient if he furnishes the
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court with a reasonable basis for computation, even though the result is only approximate. F.H. McGraw & Co. v. United States, supra; Locke v. United States, 283 F.2d 521, 151 Ct.Cl. 262 (1960). Yet this leniency as to the actual mechanics of computation does not relieve the contractor of his essential burden of establishing the fundamental facts of liability, causation, and resultant injury. River Construction Corp. v. United States, 159 Ct.Cl. 254 (1962); Addison Miller, Inc. v. United States, 70 F. Supp. 893, 108 Ct.Cl. 513 (1947), cert. denied, 332 U.S. 836, 68 S.Ct. 217, 92 L.Ed. 408 (1947); J.D. Hedin Construction Co., Inc. v. United States, Ct.Cl., 347 F.2d 235, 246-247 (1965). As many contractors can attest, it is difficult if not impossible to track and record each and every dollar spent in performing and completing changed work, but they must do something to capture those costs in documentation if they plan to seek compensation. In 1960, the condition arose in another construction claim where no such equitable adjustment provision was included in an executed contract, but where changes occurred that caused a contractor to overrun its budget. Such was the case in the Missouri State Supreme Court case Schwartz [subcontractor] v. Shelby Construction Company [prime contractor], where the plaintiff sought remedy in common law quantum meruit arguing that the changes required by the owner were so extensive as to warrant a time and materials contract (vs. lump sum) and constitute a cardinal change. In this case, the plaintiff prevailed for additional compensation, but only insofar as the documented costs could be linked to the actions (e.g., mandated changes whether written or oral) by the prime contractor. Similar to the Banks case cited supra, plaintiff Schwartz also had the benefit of hindsight to know the actual costs incurred for additional work performed. The principles set forth in Wunderlich have been cited repeatedly in similar related cases through present day (for example, see J.L. Simmons Company, Inc. v. U.S., Fed.Cl., 2004) and even carried over to different jurisdictions (into Maritime law, for example). Other cases also have contributed to present day
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cumulative impact claims. One final case is mentioned to establish another principle. Principle 12: Recovery via cumulative impact claim is possible only if not precluded by contract.
In Atlantic Dry Dock Corp. v. U.S., (M.D.Fla. 1991) 773 F. Supp. 335, the government prevailed based on specific contract language between the parties that indicated, Examining the language of the release provision, the Court first notes that its terms are couched in the plural; the release is applicable to "delays and disruptions resulting from, caused by, or incident to such modifications or change orders." This multiple use of the plural demonstrates that the provision bars not only claims for delay and disruption "internal" to that particular modification, but any claim for delay and disruption "resulting from, caused by, or incident to" that modification and others including claims for cumulative delay and disruption. The courts ruling is consistent with the Wunderlich case, which requires the contract between the parties be used for final remedy. In recent case law, the contract language became the primary defense against cumulative impact claims filed by a contractor as depicted in Jackson Construction Co., Inc. v. U.S., (Fed.Cl. 2004), and Magnolia Constr.. v. Parish of St. Charles, 06-543 (La.App. 5 Cir. November, 28, 2006). Contract language for executed change orders in Jackson states, It is further understood and agreed that this adjustment constitutes compensation in full on behalf of the contractor and his subcontractors and suppliers for all costs and markup directly or indirectly, including extended overhead, attributable to the change order, for all delays related thereto, and for performance of the change within the time frame stated. The Magnolia contract language for executed change orders speaks directly to cumulative impact: The adjustment in Contract Price and/or Contract Time stated in a Change Order shall comprise the total price and/or time adjustment due or owed the CONTRACTOR for the Work or changes defined in the Change Order. By executing the Change Order, the CONTRACTOR acknowledges and agrees that
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the stipulated price and/or time adjustments include the cost and time adjustments for all work contained in the Change Order, including costs and time adjustments associated with extended overheads, and cumulative impacts or ripple effect on all other non-affected Work under this contract. Signing of the Change Order constitutes full and mutual accord and satisfaction for the adjustment in contract price and/or time as a result of increases or decreases in costs and time of performance caused directly and indirectly from the change, subject to the current scope of the entire Work as set forth in the Contract Documents. Acceptance of this waiver constitutes an agreement between OWNER and CONTRACTOR that the Change Order represents an equitable adjustment to the Contract and that CONTRACTOR waives all rights to file a claim on this Change Order after it is properly executed. Consequently, the contract language need not necessarily include the term cumulative impact to have such a claim barred by ruling. In both cases, the contract language itself precluded the plaintiffs award of averred cumulative impact damages. In summary, the basic principles that define cumulative impact claims stem from code established at the time of Hammurabi. Although modified specifically to our present day culture and value system, the principles followed in 1750 AD are essentially the same in effect today. Case law in the U.S. establishes the standard of proof and principles to recover from cumulative impacts. Having tracked an historical chronology of these principles, a definition of cumulative impact can now be made.
Definition of Cumulative Impact
From the historical chronology above, a simple laymans term for Cumulative Impact might indicate that it is a term commonly used in the construction industry to describe the adverse financial affect of two or more unforeseeable changes on a project, the effect and quantum of such to be proven by the projects contemporaneous documents. More specifically as defined in Coates Industrial Piping, Inc. vs. The Department of Veterans Affairs (Contract No. V660C-597 VABCA-5412, 1992), Cumulative
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impact is the unforeseeable disruption of productivity resulting from the "synergistic" effect of an undifferentiated group of changes. Cumulative impact is also known as the "ripple effect" of changes on unchanged work that causes a decrease in productivity and is not analyzed in terms of spatial or temporal relationships. This effect is unforeseeable and indirect. For the Government to be liable for cumulative impact, a contractor must show that the Government exceeded the permissible limits of its discretion under the Contract changes provisions serving to "materially alter the nature of the bargain" originally agreed upon. Wunderlich Contracting Co., 351 F.2d 956, 965-966; Aragona Construction Co., Inc. v. United States, 165 Ct. Cl. 382, 394 (1964); Dyson & Co., ASBCA No. 21,673, 78-2 BCA 13,482 at 65,970. Consequently, by definition, cumulative impacts manifest themselves in two ways. First, as productivity disruption from the synergistic effect of an undifferentiated group of changes, which addresses direct costs whose spatial and temporal relationships to the changed work matter. Second, but conversely, reduced productivity due to ripple effect of changed work on the unchanged work, which is unrelated to the physical location (spatial) or the timing (temporal) attributes of the changes. Application of this definition is presented in subsequent sections of this paper.
3. Proving and Disproving Cumulative Impact Cost Damages

Unforeseeability As indicated above, Cumulative Impacts are defined as the unforeseeable disruption that happens between two or more change orders and a projects base contractual work scope. The key point in this definition is unforeseeable. There is a fundamental difference between unanticipated disruption and unforeseeable disruption and this difference serves as a huge hurdle in the proving of damage entitlement in CI claims. Accordingly, the initial step in either proving or disproving any CI cost claim is showing that the contractor involved, either did or did not take the proper steps in analyzing the added scope to ensure
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that all disruptive issues associated with this revised scope were at least attempted to be anticipated. If the project contemporaneous records show no analysis or meeting notes describing an attempt on the part of a contractor to anticipate disruption due to added scope, then how can that contractor prove that the disruption was unforeseeable? It is much more difficult to convince an arbitration panel or a jury that something was unforeseeable if the contractor never made an attempt to do so. Next, any attempt to evaluate the possible disruption due to added scope of work needs to compare the ongoing work on previous change orders that coincide in time and space with the work to be performed on the new added scope. By definition, CI is caused by the synergistic effect of two or more change orders on the base contractual work scope. Therefore, if a contractor makes no attempt to evaluate all change orders for this synergistic effect, then it will be impossible to anticipate any disruptions that could result from all of the changes. Even if a contractor goes through these evaluations, that still does not mean that any arising disruptions were unforeseeable and result in true cumulative impacts. It simply means that the contractor did the proper due diligence and attempted to anticipate the disruption of multiple change orders. The burden of proof that the disruption was unforeseeable is on the contractor. Let us suppose that a contractor has so much work in house that it is impossible to staff all projects with highly qualified personnel and some projects suffer with C Team management. Should an owner be responsible for paying CI damages because the contractor could not adequately staff the project with experienced people that could foresee project disruption due to added scope of work? No, and therefore part of the process of proving or disproving a CI claim has to deal with project management capabilities and the procedures utilized by a project management team in the execution of a project. Project Management Team Expertise
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Successful execution of any major construction project requires a competent and experienced project management team. Competency in project management means that the project team is made up of smart people with the proper training required to perform their duties within that project team. Adequate project experience within the project team is what contributes to the planning and the step-by-step decision making that ultimately results in a successful project. It is high competency level and broad project experience that define the qualities within an A Team project management group. The level of team competency and experience also determines the ability to evaluate foreseeable disruption, which can be caused by the synergistic effect of multiple change orders. Consequently, the teams level of expertise has to be evaluated when attempting to either prove or disprove entitlement to CI damages. At a minimum, the following project management team personnel should be evaluated: Project Manager Project Engineering Manager Construction Manager Project Controls Manager Project Procurement Manager
Project Management Procedures A contractors project management procedures also play a role in the ability to foresee potential project disruption caused by the synergistic effect of multiple change orders. For example if the contractors Change Order Procedure does not require the contractor to even attempt to evaluate the possibility of a synergistic effect of multiple change orders, then it is unlikely that such an evaluation will be made unless the project management team has a project specific approach that is different. Without this evaluation, how would a contractor know whether the added scope of a specific change order required different productivity factors than the base scope of similar work? How would a contractor know whether the added scope of a specific change order was to be
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performed simultaneously with other change order work? If a contractors Cost Control Procedure does not require the contractor to collect expended hours by change order, then how can the contractor prove that change order work was being performed concurrently so as to have even the possibility of a synergistic effect? The contractors procedures must be reviewed to determine if a typical project management team is supposed to proactively manage the project in a manner, which would allow the team to foresee the synergistic effect of multiple change orders when attempting to either prove or disprove entitlement to CI damages. Time and Space Theory There are really only two ways that multiple change orders can have an unforeseeable impact on the productivity and cost of a projects base contractual scope of work. The added scope of work of multiple change orders has to be performed in the same time period or in time and it has to be performed in the same physical area or space. Let us examine this time and space theory by using the construction of a new kitchen in an existing house as an example. Assume that the base contract is to tear out and replace all kitchen cabinets and appliances in the existing kitchen except the refrigerator, which is only six months old. Assume the contract also includes new lighting, new plumbing and fixtures, and the entire room is to be repainted. The existing Italian marble tile floor is to remain. The construction has to be complete in 8 weeks with Liquidated Damages of $5000 per day for every day the project is late. Just prior to construction, Change Orders 1 & 2 are issued to the contractor, adding the following work scope: Change Order # 1 The final kitchen design calls for wood paneled appliances and not stainless steel, so the existing refrigerator needs to be replaced. Change Order # 2 The architect decides to have the Italian marble tile floor replaced with an oak hardwood floor.
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The contractor immediately provides a proposal of $8000 for both changes and a schedule extension of 2 weeks (one week to demo the tile floor plus another week to install the wood floor), which is accepted by the architect. The construction now has to be complete in 10 weeks with the same Liquidated Damages of $5000 per day for every day the project is late. These change orders, if completed prior to the start of the original base contract work scope would likely have an impact on the productivity of the base work because the new hardwood floor would have to be protected during the demolition, rough-in, and cabinet installation of the base construction effort and the same would be true for the new refrigerator. However, this cost impact would be absolutely foreseeable and could be estimated within the change order value. If Change Orders 1 & 2 were performed after the base contractual work scope was complete, then by definition there would be no negative impacts on the productivity of the original base contract work scope because that base contract work would be already complete. In fact, the productivity of that work would likely increase without the need to protect the original tile floor because the floor was scheduled to be ripped out at a later date. Obviously, the proper approach for this change order work would be to take out the tile floor prior to the base construction work and then construct the hardwood floor after the new appliances have been installed to avoid damage to the new floor. This is where the problems can occur. The change order work is now occurring during the same time and in the same space as the base contract work. For example, assume that during the demolition of the tile floor it is discovered that the there was a previous water leak, which rotted the sub-floor in the location of where the new refrigerator will be placed. This is clearly an unforeseeable condition which must be corrected (i.e., replace the rotted sub-floor sections), which can impact the productivity of the base scope of work by compressing the project schedule. The time required to repair the sub-floor compresses the project schedule by that same amount of time, with respect to completing the project in 10 weeks to avoid Liquidated Damages. If the architect is unwilling to
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give an additional change order for the time and cost to repair the damaged subfloor, the contractor has no choice but to accelerate the project to meet the 10 week schedule and argue with the architect later. This acceleration effort will most likely result in lost productivity in the performance of the base scope of work. This example shows that the unforeseeable productivity disruption to the base scope of work can only occur when the work is going at the same time. The work is also ongoing in the same physical space. If the Change Orders 1 & 2 work scope were for the owners family room and not the kitchen (a different space), it would be difficult for that change order work to have any disruptive impact to the base scope of works (the kitchen) productivity. Even the unforeseeable disruption caused by the sub-floor issue would have no productivity impact on the base scope of work if it were in a different room. Any minor productivity impacts caused by loss of laydown area for the base scope of work materials would be foreseeable and could be estimated as part of the change order costs. Again, in this example, the unforeseeable productivity disruption to the base scope of work can only occur when the work is going on in the same space. Therefore, there has to be some thought given to the time and space relationship between existing base scope of work and the added scope of change orders in proving or disproving CI entitlement of damages. Does this mean that the unforeseeable sub-floor disruption in the example above is a cumulative impact of Change Orders 1& 2? No, this sub-floor issue is an existing condition unrelated to Change Orders 1& 2. There was no synergistic impact from Change Orders 1 & 2 that caused this disruption. It is simply an unforeseeable existing condition that was exposed by the work associated with Change Order 2. Cost and Progress Records It is extremely important that a projects cost control and progress reporting systems are set up in a manner that supports this time and space theory of change order impacts in order to prove or disprove CI claims. Typically, most
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contractors only track expended manhours on change orders that are time and material (reimbursable) changes where the timesheets have to be approved on a regular basis by a client representative. The change orders that are agreed to on a fixed price arrangement are typically not tracked separately for either expended manhours or progress installed, but instead are rolled into the base contracts quantities and manhours, and tracked with the base scope of work. Once this happens, however, those change orders no longer have a unique and discreet scope of work, but become part of the revised base scope of work. When that is true, how can the specific work scope of change orders that are now part of the revised base scope of work, be shown to have a negative impact on the original base scope of works productivity? The answer is: They cannot!! Figure 3.1 shows work performed in a steam turbine generator installation that had four change orders, where each added scope to the base contract work. If these change order expended manhours are tracked independently of the base scope of work, it is then possible to easily review the timing of all work performed in that turbine area and evaluate, based on the specific work performed, if a cumulative impact could have occurred on the base contract work. Figure 3.1 shows that the four change orders scope of work were performed mostly during the time that the base contract work was performed and in the same area. So, from a time and space perspective, these changes could have had a synergistic effect and caused a CI on the base scope of work. This information shows the person analyzing the impacts that they need to go to the next step in the analysis and evaluate the productivity of both the base work and the individual change orders to see if there is an obvious concurrent disruption. This evaluation can only happen if the project cost and progress records were properly set up to do so. This will be discussed in more detail in a later part of this section. Figure 3.1
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Steam Turbine Generator Installation (Change Order Work Overlaps with Base Contract Work Performance Timeframe)
Turbine Installation Base Contract Work Change Order # 19
Change Order # 18
Expended Manhours
Change Order # 16
Change Order # 17
Time
Figure 3.2 shows an example of what one might find when the same analysis is made as in Figure 3.1, except that the work of the four change orders was performed outside of the time when the base scope of work was performed.
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Figure 3.2
Steam Turbine Generator Installation (Change Order Work Performed Outside of Base Work Performance Timeframe)
Turbine Installation Base Contract Work Change Order # 19 Change Order # 18
Expended Manhours
Change Order # 16 Change Order # 17
Time
In Figure 3.2, it is much more difficult to rationalize that a CI due to the synergistic effect of multiple change orders could have disrupted the base scope of work. Change Orders 16 & 17 are representing work that was performed when the base scope of work was essentially complete and therefore could not impact the productivity for that original scope of work. Change Orders 18 & 19 were performed prior to the performance of the base scope of work and therefore could have only had a CI on the base scope of work if this completed additional work scope made it more difficult to perform the base scope of work and this impact was unforeseeable. As mention previously, most contractors add the change order work scope into the original base contract scope and track manhour expenditures and progress in total against that revised base scope. Figure 3.3 shows how tracking change orders this way hinders the ability of anyone trying to make a time and space comparison.
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Figure 3.3
Steam Turbine Generator Installation (Overlapping Change Order Work Added to Base Contract Scope}
Turbine Installation Base Contract Scope + Change Orders
Expended Manhours
Time
Figure 3.3 simply shows the summation of all of the expended manhours (base work and change orders) from Figure 3.1, as is the practice of most contractors. It gives no transparency to the interrelationships between the performance of the base work scope and the performance of the added scope of the change orders. With this approach, it is almost impossible to highlight any synergistic effect of multiple change orders, which could have had an impact on the original scope of work.
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The next step in the CI analysis is to analyze productivity of the base scope of work in comparison to the productivity of the change orders. This analysis can only happen if the manhour and progress tracking information is available to do so. Figure 3.4 shows the productivity of the steam turbine generator installation on the basis of manhours required to achieve one percent of the work scope. Figure 3.4
Steam Turbine Generator Productivity
700.0
600.0
Manhours Per Percent Complete
500.0
400.0
300.0
200.0
100.0
0.0
Time
Figure 3.4 shows that the productivity of the steam turbine generator installation was worst in the first ten percent of the installation process and became much more efficient thereafter, as is quite typical in analyzing productivity. When change orders are tracked separately and the productivity information is available
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through a projects records, the productivity curves can be plotted together for a time and space evaluation, as is shown in Figure 3.5. Figure 3.5
700.0
Turbine Installation Base Contract Scope Change Order # 16
600.0
Change Order # 17 500.0 Change Order # 18 Change Order # 19 400.0
300.0
200.0
100.0
0.0
Time
Figure 3.5 shows that the productivity of the four change orders was very consistent and there does not appear to be an obvious correlation between the performance of those change orders and any disruption occurring on the original base scope of work. Figure 3.6 highlights what might occur if there were such a correlation.
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Figure 3.6
700.0 Turbine Installation 600.0 Change Order # 16 Change Order # 17 500.0 Change Order # 18 Change Order # 19 400.0
300.0
200.0
100.0
0.0
Fe
b-
05
J Ap A O De F De Ju A Fe O Au Ju Ap Au ct c nnb r-0 un-0 ugc- eb- pr-0 06 g-06 t-06 c-06 -07 r-07 07 g-07 06 05 -05 05 5 6 5
Time
Figure 3.6 shows that the base scope of work had a less productive period of performance during June August 2006 timeframe. During that same timeframe, Change Orders 16 & 17 had a similar period of less production. This figure highlights the possibility of a CI disruption because there are two change orders that appear to be impacting the productivity of the base contractual scope of work. The final step in the CI damage entitlement analysis would be to determine what was actually happening in this time and space through a review of the contemporaneous project documentation and then determine if the root cause was unforeseeable. This approach provides the cause and effect relationship required by courts and arbitration boards when evaluating CI claims.
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Key Findings Cumulative impacts have to be caused by two or more change orders and they must be unforeseeable Contractors need to make an attempt to anticipate cumulative impacts in the change order preparation phase in order to convincingly argue unforeseeable disruption Project team expertise must be examined in the cumulative impact evaluation process Contractor procedures must be examined in the cumulative impact evaluation process Cumulative impacts can only occur if the added scope occurs in the same time and space as the base contract scope of work Change orders must be tracked separately from the base contract work to truly evaluate if two or more change orders had an impact on the base contract scope of work
4. Proving and Disproving Cumulative Impact Schedule Damages

Cumulative impacts disruptions can be demonstrated in a schedule delay analysis if the correct protocol is followed. The protocol revolves around three basic premises being met. 1. Application of the correct schedule analysis methodology. 2. Co-location of multiple change orders. 3. The three ingredients of the actual duration.
Each of these three premises will be discussed in detail in the following paragraphs. Screenshots from Primavera Project Planner (P3), graphics, and tables will help demonstrate how a project schedule should be prepared retrospectively to demonstrate that a cumulative impact disruption occurred.
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Premise #1: Schedule Analysis Methodology One convincing schedule analysis methodology to prove cumulative impact claims is the collapsed as-built analysis (CAB), which is also known as the butfor methodology. According to the AACEI recommended practice for forensic schedule analysis, the CAB is a modeled technique relying on a simulation of a scenario based on a CPM model. The CAB simulation is a subtractive model consisting of the extraction of activities representing delays or changes from an as-built schedule to determine the impact of those subtracted activities to the resultant CPM network. This technique is effective in proving cumulative impact claims for two reasons. First, it relies on a CPM schedule analysis. According to Robert McCullough11 the vast majority of the [legal] cases indicate a preference for CPM analysis. CPM analysis uses the concept of a critical path that can more clearly show the cause-and-effect relationship between impacts and delays to the project. CPM can show complex relationships of the various parties (including concurrent delays). Second, the technique relies on as-built data in the form of as-built dates, durations and logic instead of planned durations and logic that may not reflect the reality of the project. McCullough also states the use of accurate as-built data is the key to a successful analysis. The validation of the as-built schedule durations, dates and logic is performed by use of contemporaneous project documentation such as meeting minutes, daily reports or logs, signed RFIs or change orders, acceptance certificates, and various other forms of documents collected during the project.
McCullough, Robert B. CPM Schedules in Construction Claims From the Contractors Perspective. AACE International Transactions, 1999
11
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Premise #2: Collocation of Multiple Change Orders As indicated earlier, for a cumulative impact claim to be defendable, it is vitally important to demonstrate that the change orders: 1. Clustered around the same time period 2. Affected the same activity or groups of activities, or 3. Affected activities that were required to be performed by the same contractor or in some cases, by the same crew.
Therefore, the changes need to occur in the same time frame as well as affect the same activities or different activities but with the same resource performing the work. This paper is not advocating that if the three corollaries are not met, there is no cumulative impact, but it does recognize that it is more difficult to prove and win a cumulative impact claim if they do not all exist. For example, take Case A in Figure 4.1 where Activity 10 Installation of Panels East Half was affected by five change orders occurring in different time periods. As the graphic depicts, There is no time overlap between these five change orders. In fact, Change Order #5 occurs after the activity is completed and therefore has no effect on Activity 10.
Figure 4.1: Case A: Change Orders Spread Over Time
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Next, take a look at Case B in Figure 4.2 below where Activity 10 is affected by the same change orders but now they are clustered around one time period.
Figure 4.2: Case B: Clustered Change Orders
If an authoritative party such as an arbitration panel were instructed to make a determination if the project experienced cumulative impacts, Case B would be far more convincing than Case A just by applying visual intuition and seeing that the five change orders are clustered together in a relatively short time frame of a couple of months as Figure 4.2 shows. Case B also substantiates a cumulative impact claim due to its underlying effect on the workforce. One reason cumulative impacts are so disruptive to the project is due to the major productivity losses that these types of delays create. Productivity loss is more justifiable when the change orders overlap or are crowded together as shown in Case B.
Premise #3: Actual Duration Ingredients
Because the collapsed as-built methodology is preferred when quantifying CI claims, actual durations instead of planned durations are used and delays are deducted from the actual duration to determine the time impact to the project.
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Accurate data is crucial to the analysis, particularly actual durations and actual lags. According to McCullough, it is extremely important for the contractor to have good documentation and record-keeping. Record the actual progress of the work including the start and finish dates of each activity.including when disruptions occurred to a particular activity and what caused those disruptionsthis is probably the best form of evidence to show that a disruption occurred and exactly what impact it had. Once the as-built schedule reflects correct actual durations for each of the activities in question, the actual duration can be segregated into four discrete components: 1. 2. 3. 4. Should have been duration Excusable impact duration Non-excusable impact duration Productivity loss duration
The should have been duration is either the original planned duration (in most cases) to perform the activity or the duration of the activity without any impacts, productivity loss or changes. The excusable and non-excusable impact durations are added to the should have been duration for change orders, weather delays, subcontractor problems, equipment or material delays, or the like. Excusable delays are delays outside of the contractors control like weather and owner-caused problems. Nonexcusable delays are delays caused by or the responsibility of the contractor such as subcontractor issues or equipment problems. Excusable and nonexcusable impacts may also occur concurrently. The CAB methodology allows for analysis of concurrent delays. If non-excusable delay A is concurrent with excusable delay B and delay A is extracted, the schedule will still not collapse because delay B still exists.
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Using time (i.e., activity duration) as an indicator of productivity, the time productivity loss is the left over actual duration that is neither explained by should have been or impact duration. If the should have been duration is equal to the planned duration in one of the previous schedule updates before the asbuilt schedule (not necessarily the original baseline schedule), then a variance analysis between the as-built schedule and the update used as the planned schedule can be performed. This variance can be done in a spreadsheet to show the difference between the planned duration and the actual duration. Again, the accuracy of the data is crucial for both planned durations (e.g., the planned duration was verified to be realistic and achievable) and actual durations (e.g., the actual completion dates corroborate with the contemporaneous project records). Where data is available, the time productivity loss measure can be converted to a true productivity metric. After the measured time productivity loss is quantified, an analysis of the resources (e.g., equipment, labor hours, etc.) that are specifically related to that activity follows. This task is simplified for resource-loaded schedules, but unfortunately such information is frequently not included in the schedule. In this latter case, an evaluation of actual resources spent per unit quantities installed, for example, can be compared for the impacted activities versus non-impacted activities. The time productivity loss values are then used as benchmarks to validate the observed differences in productivity. As an example, if a two-day time productivity loss were calculated on an activity with a 2-person crew working 10-hours per day, a measured productivity impact of 100 hours would seem impractical. Because only a two-day time productivity loss was measured, we would expect about 40 hours impact (2 days x 2 workers x 10 hours per day = 40 hours) unless the projects contemporaneous records identified reasons otherwise. In this example, the measured productivity losses are linked to the project records, satisfying the case law requirements for demonstrating cause and effect.
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The next task is to segregate the impact and productivity loss durations. According to Bob McCally,12 when post-mortem examination of the potential impact of changes is called for, great care must be taken to segregate the changes with foreseeable impact from those where potential impacts were not foreseeable. Impact durations are typically considered foreseeable consequences. Once delays and work suspensions become known, their direct consequences are generally foreseeable and calculable. Their indirect effects [productivity loss] may not be foreseeable until sometime later. Once identified, the effects are generally calculable. Productivity losses are considered unforeseeable consequences in a cumulative impact analysis, but using this method, they are calculable because they are what remains after the should have been duration and the impact duration are known. This segregation of actual duration into three parts is done for all actual activities that have documented change orders associated with them. Before the collapse is performed, a variance table showing the segregation of actual duration into the 4 categories is needed as a roadmap for the as-built collapse analysis. Table 1 below shows the four duration types: Columns A, D, E, and F. Columns D,E, and F can not add up to more than the variance between the planned duration and the actual duration (Column C). Once the excusable delays are documented as well as the non-excusable delays and a delay amount can be attributed to both areas, the remainder of the actual duration is the productivity loss (Column F).
Table 1: CAB Variance Table with 3 Duration Types

Act ID Activity Description (A) Planned Duration (Should Have Been) 15 (B) Actual Duration (As-Built) (C) (B-A) Duration Variance (Total Delay) 79 (D) Excusabl e Delay (E) NonExcusable Delay (Concurrent ) 27 (F) (C-D-E) Productivity Loss
10
Installation of Panels East Half
94
43
12
McCally, Bob M. The Cumulative Effect of Change. AACE International Transactions, 2006
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The next step is to allocate the productivity loss (Column F) between the excusable delay and the non-excusable delay columns before the collapse can be performed. If it is clearly documented that the productivity loss is attributed to a certain change order, then that amount of the productivity loss can then be apportioned to Column D or E. However, in most cases on a cumulative impact claim, it is not apparent where to attribute the productivity loss. Therefore another, more objective method must be applied. The productivity loss needs to be evenly weighted among Columns D and E. The total impact duration is therefore Column E plus Column D, totaling 70 days. In this case, Column D Excusable Delay is 61% (43/70) of the impact duration and Column E is 39% (27/70) of the total. Therefore the amount of productivity loss attributed to Excusable Delay is calculated by multiplying 9 days (Column F) by 61% for a total of 6 days (rounded up). The remaining 3 days is therefore attributed to Non-excusable delays. Now these durations can be added back to the excusable and non-excusable columns to get the aggregate delay including productivity loss (see Columns H and I). Table 2 below shows the new allocation of delay based on distributing the Productivity Loss.
Table 2: CAB Impact Duration with Productivity Loss Included

Act ID Activity Description (D) Excusabl e Delay (E) NonExcusable Delay (Concurrent ) (F) (C-D-E) Productivity Loss (G) (D+E) Total Impact Duration (H) (D+6) Excusable w/ Productivity Loss (I) (E+3) NonExcusable w/ Productivity Loss 30
10
Installation of Panels East Half
43
27
70
49
Now the schedule can be collapsed for each activity that has these change orders quantified and segregated in the form of the variance table above. If the owner is performing the analysis, then he would only collapse out Column I to
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determine how much delay could have been avoided had the contractor not caused any impacts, and back charge the contractor for this collapsed amount of extended and field overhead costs. One might think that since the impacts focused on for the CAB analysis are change orders, they are all excusable delays. This is not necessarily true. In reality, all, some or none of a change orders impact may be excusable. First, the contractor may have waived any time extension when signing the approved change orders. Second, the change orders may still be in the process of negotiation over their impact. Third, the owner categorically rejected a contractor initiated change order. Finally, even though the contractor and owner have come up with an agreed duration for each change order, the contractor may have exceed this duration by his own doing. Cumulative impact claims can be substantiated with a proper schedule analysis, having change orders that overlap and cluster in time, and having adequate project documentation that will substantiate the actual duration components. When in doubt, the most objective and conservative method for allocating productivity loss should be applied in order to avoid criticism and invalidation of the analysis by the opposing party.
5. Conclusion
The examples utilized to prove and disprove CI claims are based on the definition of CI resulting from two or more change orders. There are many people in the construction industry today that believe that the definition of CI is evolving to include other disruptions, such as weather, RFIs and etc. To the extent that the legal definition does evolve, the authors believe that their tools will work to prove or disprove CI claims under that expanded definition.
Contact Information Anamaria Popescu, Ph.D., PE, PMP CPM Consulting, Inc.
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11445 Conifer Ridge Drive Conifer, CO 80433 Tel.: 303-816-4098 Fax: 303-816-4098 E-mail: apopescu@cpmconsulting.net
Glen R. Palmer, PSP GR Palmer Consulting Services, LLC 7 Caswell Drive Greenland, NH 03840 Tel.: 603-436-6604 Fax: 603-436-6604 E-mail: grpalmer@comcast.net Jeffery L. Ottesen, PE, PSP Alta Cascade, Inc. 310 N. Meridian, Suite 200 Puyallup, WA 98371 Tel. (253) 864-6800 Fax (253) 864-6864 E-mail: jottesen@altacascade.com
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CumulativeImpactClaim AACE2007 Paper Final

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How to Prove/Disprove Cumulative Impact Claims Palmer, Ottesen, Popescu Accepted for Publication by AACEI June 2007 AACEI

2007 Annual Conference July 15-18, 2007 Nashville, TN

How To Prove / Disprove Cumulative Impact Claims

2. History of Cumulative Impact Principles

Definition of Cumulative Impact

3. Proving and Disproving Cumulative Impact Cost Damages

Turbine Installation Base Contract Work Change Order # 19

Change Order # 16 Change Order # 17

Turbine Installation Base Contract Scope + Change Orders

Steam Turbine Generator Productivity

Manhours Per Percent Complete

Steam Turbine Generator Productivity

Turbine Installation Base Contract Scope Change Order # 16

Manhours Per Percent Complete

Change Order # 17 500.0 Change Order # 18 Change Order # 19 400.0

Steam Turbine Generator Productivity

Manhours Per Percent Complete

4. Proving and Disproving Cumulative Impact Schedule Damages

Figure 4.1: Case A: Change Orders Spread Over Time

Figure 4.2: Case B: Clustered Change Orders

Premise #3: Actual Duration Ingredients

Table 1: CAB Variance Table with 3 Duration Types

Installation of Panels East Half

Table 2: CAB Impact Duration with Productivity Loss Included

Installation of Panels East Half

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