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The following is an excerpt from an Interface Consulting work product issued for use in litigation, arbitration, or mediation (dispute resolution). Names, dates, and other information has been modified for client confidentiality purposes.
Resort-Casino Change Order and Cost Overrun Dispute
Bradford Mechanical v. Landmark Development Litigation
I. Introduction
I.A. Project Background
On June 4, 2002, Landmark entered into a contract agreement (hereafter Prime Contract) with Liberty Casino Las Vegas, LLC (the Owner or Liberty Casino), to perform construction services for a resort-casino project in Las Vegas, Nevada, known as the Liberty Casino Las Vegas (the Project)....
Landmark subcontracted the mechanical portion of the construction work to Bradford Mechanical Contractors, a subsidiary of….
Bradford’s scope of work was apportioned into 13 individual subcontracts, organized primarily by area of the Project....
The scope of the relevant subcontracts is shown in the following illustration of the Liberty Casino Las Vegas property.
Liberty Casino Las Vegas Property
Source: …
...
I.B. The Dispute
Bradford submitted numerous change order requests throughout the project, including those for premium time, all of which Landmark paid or otherwise settled. Despite this, near the end of the project, Bradford indicated that it had sustained cost overruns. However, Bradford never issued Landmark proper notice that it believed it was owed additional money under the terms of the subcontracts.
On May 8, 2006, Bradford filed a lawsuit....
II. Summary of Opinions
The following is an estimate of the cost of damages incurred by ABC as a direct result of the defective work by Berkman. This cost includes estimates to repair known, remaining damaged, and defective work. Additional costs relating to the punch list items and additional fees suffered by ABC are not included in this total. In addition, this quantification does not address lost revenues or....
Based on my review of certain project documents listed in Exhibit C, discussions with Landmark’s personnel, my education and training, and my extensive experience in contracting for construction services and executing and administering construction projects, I conclude the following:
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No additional amount is due Bradford....
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Bradford has not shown evidence of significant disruption that would have led to productivity losses.
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Bradford had ample opportunity to request additional compensation if it had been experiencing impacts on the project.
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Bradford submitted many change order requests throughout the project, including premium time requests related to extra work and acceleration, all of which were paid or settled.
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At the conclusion of the Project, there were no outstanding change order requests from Bradford to Landmark.
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Relative to the schedule, this project did not proceed markedly different from other Liberty Casino-owned and Landmark-contracted projects, and Bradford has previously worked on several such projects. As such, Bradford was aware of how these projects are performed.
....
III. Subcontract Provisions
...
III.A. Change Orders
…
III.A.1. “No Damages for Delay”
The subcontracts executed between Landmark and Bradford all contain a provision that is referred to in the industry as a “No Damages for Delay” provision. This means….
III.B. Claims for Extra Costs
The subcontracts specifically discuss the process for Bradford to claim for extra costs in Section 18 of the General Conditions. Bradford’s recent lawsuit violates the requirements specified by Section 18, specifically....
III.C. Applications for Payment, Waiver and Releases, Subcontractor’s Certificates
As is typical in the industry and required by the subcontracts, Bradford invoiced Landmark for work performed to date through Applications for Payment. Bradford was required to submit Applications for Payment under Section 3 of the General Conditions of the subcontracts. With the Applications for Payment, Bradford was required to provide a completed Conditional Waiver and Release Upon Progress Payment and an Affidavit as to Payment of Claim….
IV. Position of the Parties
...IV.A. Bradford’s Position
IV.A.1. Initial Complaint
In its initial Complaint filed on May 8, 2006, Bradford alleged the following against Landmark:
1. Breach of Contract - Extra Work and Acceleration
2. Breach of Contract - Payment of Contract Balances
3. Cardinal Change/Abandonment
4. Breach of the Duty of Good Faith and Fair Dealing
5. Bad Faith
6. Unjust Enrichment
…
IV.A.2. Supplemental Response
In Bradford’s Supplemental Response dated February 26, 2008, Bradford alleged that it is due....
The sources of the additional costs are shown in the following table:
Summary of Bradford’s Alleged Sources of Extra Costs
Source: …
...
IV.B. Landmark’s Position
...
IV.B.1. Landmark’s Answer to Bradford’s Complaint, dated July 13, 2006
...
IV.B.2. Landmark’s Motion for Summary Judgment, dated November 9, 2007
...
IV.B.3. Landmark’s Reply Brief in Support of Motion for Summary Judgment
...
V. Issues in Dispute
Bradford has alleged that Landmark:
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Failed to pay Bradford for extra work, acceleration costs, and contract balances;
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Fundamentally and radically changed the subcontract, thereby abandoning it;
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Provided plans and specifications that were defective, misleading, incomplete, and unfit for their intended purpose;
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Failed in its fiduciary duty to Bradford to act and negotiate in Bradford’s best interest;
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Was unjustly enriched for failing to pay Bradford for its expenditures for acceleration and compression of its performance.
V.A. Damages for Delays and Disruptions
...
V.B. Cardinal Change and Abandonment of the Subcontracts
Bradford alleges that Landmark caused or directed fundamental and radical changes, which occurred through no fault of Bradford. Additionally, Bradford alleges that Landmark’s extensive, radical, and fundamental altering of the subcontracts constitutes a constructive abandonment of the original subcontracts that caused Bradford’s performance to be materially and substantially different than contemplated at the time Bradford entered into each subcontract.
These allegations are flawed and without basis. The original scope of....
V.C. Defective, Misleading, and Incomplete Plans and Specifications
...
V.D. Change Orders
...
V.E. Premium Time
...
V.F. Revised Drawings
...
V.G. Bradford’s Subcontract Expectations
Bradford entered into its subcontracts knowing that its ultimate scope of work would include scope that was not yet reflected in drawings prepared to date. Some of the subcontracts were put in place with small amounts with the full knowledge and understanding that the scope was not yet fully set forth in the drawings. This was a condition Bradford was fully familiar with and had experienced, having previously worked on similar fast-track casino hotel projects in....
V.G.1. Subcontract Nature
...
V.G.2. Bids
...
V.G.3. Tenant Spaces
...
V.H. Subcontracts Require Timely Notice of Alleged Claims
Bradford did not properly provide notice of its alleged additional costs. The first quantification of its alleged additional costs was in its expert report dated...
V.H.1. Letter Dated February 22, 2005
...
V.H.2. Letter Agreement Dated July 27, 2005
...
V.H.3. Correspondence Dated April 12 and 20, 2006
...
V.I. Bradford Has Been Paid For All Work Performed
V.I.1. Applications for Payment
...
V.I.2. Change Orders
Bradford priced the change order requests, which Landmark approved and paid as change orders. Bradford’s pricing was based on....
V.J. Project Management and Coordination
Bradford alleges that Landmark mismanaged this project. Bradford has itemized....
V.J.1. Other Landmark Subcontractors
...
V.J.2. Progress and Schedule
...
V.J.3. Project Coordination
As previously discussed, this $1 billion Las Vegas hotel and casino project was completed on time, and no other subcontractor or supplier other than Bradford has made any similar allegations. The Landmark project team was instrumental in accomplishing this task, and….
V.J.4. Supply of Materials and Equipment
Bradford has failed to establish any of the following alleged issues relative to the supply of materials and equipment to the project....
V.J.5. Interviews with Landmark Superintendents
According to Landmark’s superintendent for the Highrise, Mr. Brad Holland, no one from Bradford ever complained that they could not do their job because of floor sequencing. In fact, in interviews with Landmark’s superintendents for the subcontracts at issue, both....
V.J.6. Other Bradford Issues
Bradford was contractually required to provide appropriate manpower to complete the work in the required timeframe....
VI. Analysis of Bradford's Allegations
Bradford alleges that many sources and categories, as discussed in Section IV., Positions of the Parties, contributed to increase its costs due to negatively impacted labor productivity. In essence, Bradford alleges that due to various impacts caused by factors outlined in its pleadings and in Walton’s report, Bradford accomplished less progress from the labor hours it spent than it otherwise would have; therefore, it required more labor hours to accomplish the work than anticipated at the time it priced the work.
Unique to Bradford’s allegations is the fact that Bradford never described or acknowledged any of these issues at the alleged time of their occurrence. As described earlier in this report....
The following are summary responses to Bradford’s allegations:
Interface Consulting Summary Responses to Bradford’s Allegations
Source: …
VII. Analysis of Walton Consulting Report
...
VII.A. Walton’s Alleged Issues
...
VII.A.1. Landmark Recognized the Magnitude of the Ongoing Changes and Increases to Bradford’s Scope
Walton alleges that Landmark knew as early as January 2004 that the project drawings were complete. This statement is incorrect. In fact, the Lowrise Area 3 and 4 drawings were not even produced until February 2004 after....
VII.A.2. The Magnitude of the Changes to Bradford’s Scope that were Issued by Landmark, Combined with Landmark’s Failure to Extend the Date for Project Completion, Required Bradford to Accelerate its Work and Spend Premium Time Hours
...
VII.A.3. According to Its Own Project Records, Landmark Was Not Only Aware of the Overtime Expended by Bradford, but Also the Negative Impact on Productivity as a Result of the Overtime
...
VII.A.4. Landmark Failed to Schedule and Coordinate the Work on the Project in a Manner Consistent with what Bradford Reasonably Anticipated
VII.B. Summary of Walton’s Sources of Impact
...
VII.C. Walton’s Failure to Provide Support for Alleged Damages
...
VII.C.1. Delivery of Tubs
...
VII.C.2. Delivery of Finishes
...
VII.D. Walton’s Arbitrary Choice of Impacted Subcontracts
...
VII.E. Walton Report - Completion Date
...
VII.F. Walton’s Damage Calculation
VII.F.1. Measured Mile
Bradford’s damage calculation is not based on actual costs it sustained, but rather on an estimate of its loss of productivity using its unique interpretation of the measured mile concept. The measured mile concept involves a comparison of actual labor performance between two time periods, a normal one called the measured mile and an impacted period. The measured mile is defined as a continuous period of time when the labor productivity is unimpacted by outside sources. The impacted period is the period of time during which outside sources impact the normal labor performance.
The difficulty in quantifying damages arising from loss of labor inefficiencies is that the measured mile concept is a concept, not a procedure. No rules exist regarding the proper procedures to be utilized, as use of the concept relies on the analyst performing the study as he/she pleases. There have been numerous papers and articles describing the measured mile concept relative to demonstrating labor productivity losses, but....
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These studies establish that the work performed in the measured mile time period and the alleged impacted period should:
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Be substantially similar work in both periods of time;
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Have comparable skill levels involving work in both periods of time;
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Represent reasonably attainable levels of productivity;
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Be demonstrated based on a productivity definition of labor hours per unit (unit rate) or quantities of units installed;
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Maintain the same productivity level during the measured mile period; and
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Be performed in a similar environment compared to the environment when the affected (impact period) work was performed.
On the last point, the work environment of a project changes drastically as a project evolves. The early periods of a project are substantially different than....
VII.F.2. Walton Consulting’s Damage Model
...
VII.F.3. Review of Walton Consulting’s Measured Mile Calculation
As discussed, the most critical action in analyzing any labor productivity impact by the measured mile criteria is to develop an....
In summary, an appropriate measured mile approach for evaluating labor productivity is to compare the productivity during an unimpacted period of time to the labor productivity during an impacted period of time. However, the periods of time must be comparable. The unimpacted work must be....The following graphic shows the impacted and unimpacted periods alleged by Walton.
Walton Consulting’s Alleged Impact Periods
Sources: …
...
VII.F.3.a. Highrise - 701-02
Walton cites the following as causes of labor productivity loss in the Highrise:
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Out-of-sequence work
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Come-back work
Walton alleges that....
VII.F.3.b. Lowrise Area 2 - 712-02
Walton alleges Bradford....
VII.F.3.c. Lowrise Area 3 - 713-02
...
VII.F.3.d. Lowrise Area 4 - 714-02
...
VII.F.3.e. Lowrise Villas Area 2 - 708-02
...
VII.F.3.f. Fairway Villas Expansion Area 7 - 710-02
...
VII.F.3.g. Assessment of Walton’s Measured Mile Methodology
...
VII.F.4. ICI Assessment of Payment Due Bradford
VII.F.4.a. Entitlement
...
VII.F.4.b. Damages
...
VII. Conclusion
Bradford has been paid for all changes on the project....
IX. Signature
...
X. Exhibits
X.A. Exhibit A - Summary of Daily Reports Relative to Highrise
X.A.1. Delivery of Tubs
…
X.A.2. Inconvenience of Tile Setters
…
X.B. Exhibit B - Walton’s Analysis of Highrise Work Activities is Unreliable
The charts on pages...allege that Bradford only performed work on certain floors of the Highrise, thus resulting in “out-of-sequence” work. These charts are inaccurate. This information was apparently based on....
…However, the following Bradford Daily Job Reports show that Bradford was indeed performing work on floors 27-33 in February 2004. There also appears to have been work performed on other floors in February that is not reflected in Walton’s charts.
Walton Consulting Report
Pages 33-34
X.C. Exhibit C - Documents Considered by Interface Consulting
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