Cumulative Impact Disputes: What You Don't Know can Hurt You

Association of Construction and Development
November 5, 2012 — 1,224 views  

Cumulative Impact Disputes: What You Don't Know can Hurt You

Contractors face changes in any project. If there are multiple changes, the schedule and cost of the project can deteriorate because the changes affect other parts of the project. The total impact may not be noticed until the project is complete. In such cases, the contractor will ask for compensation based on the total cost to the project created by all of the changes together. Often the client will dispute the claim, saying that each change was too small to have done such damage. A cumulative impact situation occurs when the contractor is unable to foresee all of the costs of a change when it is requested and can't inform the client.

For example, the contractor finds that the contract doesn't include all of the requirements for earthquake protection. He informs the client who makes a series of changes to bring it into compliance. The client keeps track of the cost of each change. After the project is complete, the contractor asks for compensation for the impact of all of the changes as they rippled outward. The client has no desire to pay, pointing out that each change was small and couldn't have had the large impact on the project the contractor says it did. The contractor points out that each change affected the work around it, even though the change order didn't mention that work. He was required to install additional support beams which delayed the concrete work which caused the carpenters to delay installing the floor, which made the company laying the carpet miss their deadline. The client knew nothing about the effect of each change on the work around it.

It isn't sufficient to simply claim that many small changes resulted in a cumulative impact greater than the cost of each change alone. The contractor must show a causal relationship between the changes and the increased cost and loss of productivity. Also, the cumulative impact must be shown to be unforeseeable when each change order came through.

One answer is to go against the natural tendencies of the contractor to please the client and the client to underestimate the cost of any changes. When the client makes a change, the contractor is tempted to downplay the cost of the change. That cost won't go away, just because the contractor failed to inform the client, and it will surface after the project is over.
The contractor can also increase the ability of his support team so that the total cost of each change can be predicted and information about that cost can be given to the client.

 

Association of Construction and Development