Schedule Risk Management - Construction Project Scheduling and Control - page 379

one update period or less. The estimated durations, whether they are single estimates
or three-point estimates, should be calculated by accurate quantities and appropriate
production rates. This means that the durations will be based on reasonable resource
planning that reflects the contractor's ability to staff the project. Unusually large dura-
tions might artificially skew the results in either Monte Carlo or what-if scenarios. In
addition to best practices in duration estimating, logic must be depicted accurately to
eliminate any unnecessary or redundant relationships.
Careful examination of the critical path and near-critical paths is vital in develop-
ing a CPM schedule for a risk analysis effort. Activities that drive the completion of
the project and those that appear critical during updates must be logical and make
sense. At this time, a re-examination of all assumptions that were used in the schedule
development is important and includes verification that there is no logic missing that
might allow activities to inappropriately carry a high float. The validity of the critical
path is an essential basis of good CPM scheduling practices, which is reinforced by the
needs of risk assessment of the schedule.
RISK SHIFTING IN CONTRACTS
Contract language may have a significant impact on how much of the risk each party
carries. Sometimes called exculpatory clauses, this language attempts to shift or appor-
tion undetermined risk. Contracts are often used to control or assign risk to various
parties, or to assign it to a party other than the owner. Many owners, developers,
and contractors prefer using standard contract forms, such as those developed by
organizations such as the American Institute of Architects (AIA), the Construction
Management Association of America (CMAA), and the Associated General Con-
tractors (AGC) in the United States and the International Federation of Consulting
Engineers (FIDIC) or New Engineering Contract (NEC) in Europe and the Middle
East, because such contract forms were written and updated by professionals and are
widely known and used. However, many others insist on writing their own contracts
or making amendments to the standard forms so that they can change certain
conditions, which may—and usually does—affect the risk of the contracting parties.
One example of this risk shifting is the use of clauses stating that geotechnical
reports and information are provided to bidders for information only, and the owner
is not responsible for any usage or interpretation of the geotechnical information.
This is an attempt to limit the owner's exposure to delays because of differing site
conditions.
Another example is that of the typical “no damages for delay” language that some-
times shows up in contracts, which does not typically shift the time performance risk
but only the costs for the delay. This language attempts to move the risk of the costs of
delays from the responsibility of the owner to the contractor so that the sole remedy
is a time extension.
Construction manager and contractor insurances are means to handle the shifted
risk of contracts and to limit the liability of those parties. These types of insurance