Why Sharing the Float is No Utopia, But Should Be
We live in a new era of construction cooperation. When it comes to project float, sharing it between the contractor and owner is in, while exclusive float ownership by either party is out.
Although float is generally understood in the industry as extra time or leeway for completing a project schedule, its use remains controversial. At stake in the float debate are hundreds of millions of dollars lost or won in timely completions or delays. Some fervently support float sharing, believing it epitomizes fairness and harmony.
Others say float calculations are fraught with deception. Even if calculated honestly, float rightfully belongs to the owner or contractor for their exclusive benefit.
No wonder some contractors seem to be of two minds about the situation. "In the best of all possible worlds, if we were only looking out for ourselves, we would want to own the float," says Ronald Cortes, a vice president of Pittsburgh-based Mascaro Construction Co., a general contractor. "But we have to look out for our clients."
With some notable exceptions, contracts and U.S. courts that take up the issue of float are most likely to treat it as a shared resource. Federal contracting boards of appeal support shared float, and standard contract agreements used by the California Dept. of Transportation use a version of sharing. While courts in England haven't dealt directly with float ownership, the delay protocol used by England's Society of Construction Law suggests that, generally, the project owns the float.
And as one consultant put it, judges have shown a tendency to support sharing for the good of the project, probably because it emphasizes the civic, public character of construction.
Even James J. O'Brien, a pioneer in the critical-path method, blessed the shared-resource approach in his 1993 book, "CPM in Construction Management."
But 18 years later, not everybody thinks the shared approach is a Shangri-La for construction.
Stephen A. Hess, an attorney with Sherman & Howard LLC in Colorado, subjected the shared-resource rule to a withering critique last year in the winter issue of the Journal of the American College of Construction Lawyers.
Sharing of float is rarely clear in case law regarding contracts, Hess argues, and it harms contractors in significant ways. By depriving contractors of use and control of the schedule they create and execute in carrying out the work, float-sharing cuts the connection between risk, responsibility and control. If timely completion resides in the contractor's domain, Hess claims, control of time belongs there, too.
Float can lead to other problems. Under most shared-resource contract clauses, the first party to need the extra time is permitted to use it. But to Hess, "first come, first served" doesn't seem like a good idea. With much of the owner's design work and preparation taking up time at the start of a project, sharing disproportionately helps the owner; if contractors run into problems later in the work, all or some of the float may have been burned already.
"I never liked the [shared-resource rule] because it assigns pretty important economic ramifications to chance," Hess said in an interview with ENR. It's like using "a chainsaw to do surgery."
The controversy comes at an opportune time. An associate professor of civil engineering at the Catholic University of America in Washington, D.C., Gunnar Lucko is launching a study of risk management as applied to critical-path method (CPM) scheduling. Contractors and CPM experts tell ENR that despite the predominance of the shared-resource rule, contracts and state courts are all over the map on the issue and that float treatment is far from a settled matter.
Presumably Lucko will try to sort out the existential problem that Hess sees: Does float exist if there is no CPM schedule? And if it does, who should use it?
Little is simple when it comes to CPM, and a lot depends on the questions you ask.
Harmony vs. Property Rights
One question is whether Hess' critique really represents the death rattle of an older, more-contentious world of construction. Instead of emphasizing the potential for cooperation afforded by mutually agreed upon CPM schedules, Hess' view considers float, which is time or days, as a kind of property. But some CPM experts think the notion of float ownership is absurd.
To an outsider, CPM's processes may seem opaque—forward passes, backward passes, lags, constraints. Even the definitions are puzzling
Float, for example, has been described as the period between the earliest possible start time for an activity not on the critical path and the latest time the activity can possibly finish, minus the actual number of days to do the work.
According to CPM expert and author Murray Woolf, terms such as "total float," "free float," "activity float" and "project float" are confusing because they carry different meanings.
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| HESS |
Craig Hogan, senior vice president in the Austin, Texas office of construction manager Atkins, says the definition may put a contractor on the hook. "The contractor could submit an early completion schedule," he explains. "If this schedule is delayed, it may not be delayed beyond the overall contract time. [But] the contractor may be eligible for delay-claim payments, unless there is a contract clause providing the owner equal use of the project float."
So although shared resources is the most common contractual approach for float, contract terms vary.
"In our experience, almost every entity has a different approach to using float," says Frank Martin, chief executive of Martin-Harris Construction Co., Las Vegas. For example, Clark County, Nevada, says it owns the float, while the Clark County School District believes the contractor owns it, Martin says.
There is a tendency among owners, especially more sophisticated private-sector owners that produce their own CPM schedules, to want to own the float. "The reason being, if a delay doesn't eat up the float on a particular activity or group of activities, it doesn't delay the project, therefore no harm to the CM, in their eyes," says Kevin P. Bowen, president of Peter R. Brown Construction Inc., Clearwater, Fla.
Gaming and manipulating float totals is a common worry. Randy Nye, senior vice president and general counsel for Sundt Construction, Tempe, Ariz., says his company sees "contracts that prohibit the contractor from disguising the float by artificially extending durations of time for activities."
When contracts are silent on float, they may simply state that, "should the contractor fall behind schedule through no fault of others, he shall put together a recovery schedule indicating how an on-time completion will be achieved" and bear all the costs. Under other contracts, owners protect themselves by imposing either liquidated damages or consequential damage clauses.
The Origins of Shared Float
Hess, who mostly represents general contractors and large subs, portrays shared resources as a developing trend. The concept grew, in Hess' view, by the mid-1970s, when federal boards of contract appeals began adopting the shared-resource rule. The rule denies relief to contractors and favors the owners when the owner consumes all the available float, leaving the contractor no cushion later in the project, Hess writes.
"In other words, the shared-resource rule may allow a party's delays early in the project to be excused, while later delays generate liability after available float time has been consumed," Hess writes in the article.
As a critic of sharing, Hess understood that he would provoke criticism. He has. Numerous CPM and contracting experts pronounced his critique of shared resources as misguided, lawyerly posturing. ">Fredric L. Plotnick, a Philadelphia-based CPM consultant, compares the idea of single-party float ownership to saying someone owns "the light that's in the air."
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| MANGINELLI |
"There's a premise [in Hess' article] that float is put into the schedule purposely for a reason, and I believe that was a false premise and that that misunderstanding of float allows for the entire discussion to take a wrong turn when critiquing who should own it," according to Manginelli.
Manginelli, who defines float as the difference in workdays between the early and late dates of an activity, made his arguments in an article in the summer 2011 issue of the American College of Construction Lawyers' Journal. Manginelli and his colleagues Theodore J. Trauner Jr. and Brian Furniss wrote that float is nothing more or less than "a dynamic arithmetic calculation" that is "based on the forward and backward pass of the CPM algorithm."
"The schedule logic and durations dictate what float exists for a specific activity," they write, and it varies at different times during the project.
The result of the interrelationships among activity durations, logic and constraints, float isn't built into schedules or allocated to certain activities as a cushion against unexpected delays. The idea that float can be sequestered for a particular use—hidden or squirreled away so that the owner can't see it or find out about it—can be done only by expanding the time designated for an activity.
"Any gamesmanship up front, if even possible, will likely yield unintended consequences," wrote Manginelli and his co-authors. "This game has a large downside for the contractor; it essentially makes delays caused by the owner" hard or impossible to see and document, they write.
Float may no longer be as relevant as it once was. With the advances in CPM software and its enhanced scheduling features, the critical path may comprise activities with many different float values, say Manginelli and his co-writers.
"In the past, most project managers were conditioned to look at the float values and draw conclusions based solely on those." That approach now may be meaningless because float may have no relationship at all to what is critical or to what may cause a delay to a project.
On projects for the California Dept. of Transportation, the department and the contractor own any float either party creates if it completes a task ahead of schedule. This isn't quite the same type of sharing that some who call for float-sharing have in mind. Nevertheless, "This has been a good thing for our members and has minimized disputes," says a spokeswoman for the Associated General Contractors of California.
The agency's rules and contracts designate that Caltrans may accumulate department-owned float by early review of a submittal that saves time. Overall, the agency is fair on delay issues and float, says a construction manager who is familiar with Caltrans' schedule specification revision committee.
Too Much Complexity by Caltrans?
But, over the years, Caltrans has modified its specifications related to contract time as the complexity and constraints placed on projects have increased. For example, Caltrans specifies that contractors must use [Oracle's] Primavera P-6 chart for a $3-million paving job that could involve only three or four activities. "You could do the whole thing with an Excel Spreadsheet bar chart" for less, says the construction manager.
One sticking point is the delays related to utilities. Under a special provision that has been introduced into Caltrans contracts in the last 12 months, an excusable delay could be caused by a third party who has right-of-way agreements with Caltrans, even though the contractor has no control over the third party. "It shouldn't be the contractor's burden," says the construction manager.
"Say, for example, we're building a bridge and draft falsework drawings," he explains. "They could start nit-picking at it, and even if they give us added time, they can also claim the utilities weren't moved in time."
Still another issue is Caltrans' requirement that no more than 50% of the contractors' activities be on the critical path, where there is no float. But schedules can't be built like that, says the construction manager, especially for road jobs where most of the work is sequential.
Such issues may be why some construction managers continue to see float in terms of legal exposure, not as the objective creation of honestly made arithmetic calculation.
"In my opinion, schedule float belongs to whomever [owner or contractor] owns the schedule risk," says Daniel P. McQuade, president of Tishman Construction Corp. of the West, Midwest and New England.
"The benefit and ability to manage float should always follow the responsibility of managing and meeting the schedule," says McQuade. He says float is one of the most important and least understood aspects of project management.
But where does that leave the notion that float belongs to the project? That's an idea that still seems idealistic and far away.
