New RP - 130R-23: Demonstrating Entitlement to Cumulative Impact Claims in Construction
130R-23: Demonstrating Entitlement to Cumulative Impact Claims in Construction
This recommended practice (RP) of AACE International provides guidance on the process to demonstrate entitlement to cumulative impact claims on a construction project when a process for addressing cumulative impact claims is not addressed in the contract terms. This process applies across all common construction contracting strategies or delivery methods if the contract terms do not address any or some aspects of the procedure to address cumulative impact claims.
This RP is intended to provide guidelines (i.e., not be a mandated standard) for a suggested process to use when submitting a contract change order request (COR) or claim associated with cumulative impact and what to look for when defending or analyzing such claims on construction projects. This recommended practice represents the concepts most practitioners consider a good industry practice to use and recommend. This recommended practice is relevant to stakeholders on a construction project, whether owner, designer, contractor, subcontractor, construction manager, or others. Although this recommended practice is written in the context of a contract between an owner and prime contractor, it is applicable to any party contracted to perform work on a project, including contracts between prime contractors and their subcontractors and their suppliers.
The concept of cumulative impact has been recognized within the construction industry internationally for many years. It has also been referred to as ripple effect or knock-on effect and as a global claim in English literature and case law. Cumulative impact is defined as the net impact of two or more undifferentiated changes, as each is measured or measurable at a certain point in time, being much greater than the sum of the effect of the individual parts. This effect results in the reduced productivity of unchanged work. Due to the complicated nature of construction work, it is not usually well understood by contracting parties and even legal professionals. Cumulative impact, when it occurs on a construction project, is often referred to as an indirect disruption or loss of productivity claim. There is no specific number or total value of changes on a project that, once reached, create the circumstance for a cumulative impact. The terms of most construction contracts allow for changes, but they do not typically define any maximum limit for changes. This lack of a contractual limit can lead to disputes regarding whether the number or value of changes was reasonable or foreseeable.
This RP provides a basic understanding of cumulative impact and outlines the steps necessary to demonstrate or refute a contractor’s entitlement to the potential damages that may result. Cumulative impact is defined as:
- The unforeseeable disruption of productivity resulting from the synergistic effect of an undifferentiated group of changes. Cumulative impact is referred to 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; and
- The impact on unchanged work, which is not attributable to any one change but flows from the synergy of the number and scope of changes issued on a project.
In a cumulative impact claim, the aggrieved contractor seeks compensation for the collective damage caused by all of the changes in addition to particularizing the damages arising from each change. Cumulative impact claims are often erroneously called total cost claims. Total cost describes a method for quantifying cumulative impact claims not the actual condition per se.
Contributors:
Dr. Stephen P. Warhoe, PE CCP CFCC FAACE Hon. Life (Primary Contributor)
Richard J. Long, PE P.Eng. (Primary Contributor)
Christopher W. Carson, CEP DRMP PSP FAACE
John J. Ciccarelli, PE CCP PSP FAACE
Brian J. Furniss, PE CCP CFCC PSP
Greg Holness, PE
Dr. William Ibbs
Donald F. McDonald, Jr. CCP PSP FAACE Hon. Life
Mark F. Nagata, PSP
Mark C. Sanders, PE CCP CFCC PSP
William C. Schwartzkopf
Nurullah Sonmez, CCP
Dr. Amin Terouhid, DRMP PSP
Dr. Tong Zhao, PE CCP CFCC PSP
About Steve:
Stephen P. Warhoe, Ph.D., P.E., CCP, CFCC, has over 35 years of experience in project controls, risk management, project management, construction management, and dispute resolution as a testifying expert on delay, productivity loss, cost damages, project audit, and construction and project management. His background is rooted in years of practical experience planning, controlling, and managing major designs on construction projects well over US$4 billion in value. He is a recognized expert in schedule delay analysis, productivity loss, project controls, and construction dispute avoidance and resolution. Dr. Warhoe is also a recognized construction expert on disputed projects valued well over US$6 billion and individual disputes well over US$3 billion. Dr. Warhoe also specializes in productivity loss analysis and quantification determination. He has modeled productivity loss, including the use of system dynamics modeling, on which he wrote his Ph.D. dissertation. As recognition for his expertise and respect in the project controls field, he was elected president of AACE International from 2008 to 2009 and was made an Honorary Life member in 2019. In addition to RP 130R-23, he was the primary author of two of AACE’s recommended practices related to the change management process and the elements necessary for practitioners to demonstrate entitlement to a change order request or claim. He has also contributed to several other recommended practices published by AACE International. He is currently a member of the Technical Board and serves as Director – Technical on AACE’s Board of Directors. Dr. Warhoe is based in Seattle, WA, and can be contacted at spwarhoe@comcast.net.
About Richard:
Richard J. Long, P.E., P.Eng., is the Founder of Long International, Inc. Mr. Long has over 50 years of U.S. and international engineering, construction, and management consulting experience involving construction contract disputes analysis and resolution, arbitration and litigation support and expert testimony, project management, engineering and construction management, cost and schedule control, and process engineering. As an internationally recognized expert in the analysis and resolution of complex construction disputes for over 35 years, Mr. Long has served as the lead expert on over 300 projects having claims ranging in size from US$100,000 to over US$2 billion. He has presented and published numerous articles on the subjects of claims analysis, entitlement issues, CPM schedule and damages analyses, and claims prevention. Mr. Long earned a B.S. in Chemical Engineering from the University of Pittsburgh in 1970 and an M.S. in Chemical and Petroleum Refining Engineering from the Colorado School of Mines in 1974. Mr. Long is based in Littleton, Colorado, and can be contacted at rlong@long-intl.com and (303) 972-2443.
You can find the new RP here: 130R-23: Demonstrating Entitlement to Cumulative Impact Claims in Construction