A Legal Perspective on the Use and Abuse of Schedules

The direction from courts considering claims of insufficient or abusive scheduling is clear: Don't cook the books (or more appropriately, the software) or you will suffer the consequences.

By Philip R. White

My young son likes to remind me of the advice given to his favorite superhero, Spiderman: "with great power comes great responsibility." The same is true for construction schedulers.

In the era of the personal computer, great advances in scheduling capability have made the schedule a major element of any significant construction project. Unfortunately, this increased capability is sometimes abused by owners and contractors when a project becomes troubled. Although "creative" scheduling is only beginning to receive the attention of the courts, courts that have spoken on the subject have reminded the party with scheduling responsibility that the power of computers and the latest scheduling software comes with the requirement that it be used responsibly and in accordance with the contract.

Recent cases have awarded damages to a contractor for poor scheduling by a public owner and have affirmed the termination of a contractor for poor scheduling practices.

For example, in R.W. Granger & Sons, Inc. v. City School District of Albany, the court held an owner responsible for failing to fully discharge its scheduling responsibilities. In that case, the owner terminated the contractor on a multiple prime school project for failure to progress the work in a timely manner. The contractor defended on the basis that the owner's termination was wrongful because of its failure to prepare adequate construction schedules and to coordinate the work of the prime contractors. The court agreed with the contractor and awarded $1.4 million in damages to the contractor for the wrongful termination. Unfortunately, the court did not elaborate on the deficiencies in the owner's scheduling effort.

While this is only one example of how courts have dealt with scheduling deficiencies, it reflects a willingness to authorize the ultimate sanction: Termination for cause. Given the usefulness of good schedule practices and the potentially draconian consequences of not using them, all participants in the construction process are well advised to allocate enough resources to make the most out of this tool and to avoid manipulation of the schedule to achieve a predetermined outcome.

The contract documents for many sophisticated projects require a baseline CPM schedule and periodic updates. Owners and their financial backers are concerned to see that the project is going to be built in a reasonable period of time and to have a tool to reliably monitor progress. Contractors are planning their work efficiently and creating one of several project controls needed to manage the construction process. However, the schedule has come to serve as a legal record of project progress, the timeliness of progress payments and disruptions to the planned sequence and durations of specific tasks. As a result, an adversarial approach to scheduling often evolves and the players turn to "creative" scheduling techniques.

Although an exhaustive list of scheduling abuses would fill more space than this column permits, here are a few common examples. With baseline schedules, some abuses are use of leads and lags, failure to resource load and use of multiple calendars. With update schedules, some abuses are use of logic overrides, disguising of logic changes, addition and/or subtraction of physical or preferential restraints and colorful presentations not linked to underlying scheduling data.

The difficulties presented by the use of these techniques are compounded by the problems involved in uncovering their use. Evidence that a scheduler has used one or more of these techniques is often buried deep in the electronic scheduling files. It seldom appears on printouts of the schedule. Items that involve change - like those used in the update schedules - often can only be found by running time consuming comparisons between the update and baseline schedules or a previous update. This involves a level of scheduling sophistication that participants without schedule responsibility generally lack. Finally, the more subtle abuses require the attention of a scheduler experienced in the kind of project involved - also an expense most projects cannot afford.

Unfortunately, there is no silver bullet for the problem of scheduling abuse. The decisions noted above ought to serve as a deterrent to those considering abusive tactics. However, there are a few basic things that should limit the spread and efficacy of these techniques:

1. Even parties without scheduling responsibility should allocate resources to scheduling to permit adequate evaluation of baseline schedules and to carefully review updates.
2. Schedule specifications should prohibit the electronic writing over (destruction) of official schedules communicated among the parties.
3. Schedule information should be exchanged in "read only" format.

The main thing to remember is that forewarned is forearmed and to keep abreast of developments in the scheduling world. A problem that is avoided early in the project is less likely to lead to costly claims at the end.

Philip R. White is chairman of the construction practice group of Sills Cummis Epstein & Gross P.C. in Newark, N.J.