What is Delay Analysis?
Time is an important aspect of any project.
By their nature, construction projects are in a constant state of flux and change. Factors such as unforeseen ground conditions, weather, material shortages, labour problems, design variations, accidents and interruptions by others (e.g. prevention of access by authorities) can cause delays, disruptions and sequence changes.
There is almost always a cost involved if a project runs overtime, whether it be liquidated damages, penalties, loss of rental income or potential earnings. Hence, there may be a consequence to the party responsible for causing the completion date to be delayed. Some of these costs may be the subject of insurance claims.
Delay analysis is the process of investigating a specific delay or disruption event(s) and quantifying the impact – usually on the completion date.
It is all about the Critical Path
All projects can be broken down into a series of individual work activities or tasks. Some of these tasks must be completed in a specific order and others have more flexibility in the sequencing and timing.
Depending on the resources available for a project, some tasks may be undertaken at the same time (concurrently). Take the example of a simple house construction; in order to install the roof, the supporting walls and foundations must be built. Once this core structure is in place, the plumbing, electricity, windows and doors could be installed in any order – or at the same time.
A critical path is determined by linking a sequence of project activities from commencement to completion, to calculate the shortest theoretical time to complete a project (represented by the connected red bars in the graphic shown here). A critical activity is a task that falls on the critical path and if delayed, will result in a delay to the completion date of the project.
It is usual for the critical path to change regularly during the course of large and complex projects.
Delay and Time Element Challenges In Insurance
There are a variety of commercial insurance products that provide some form of time element cover. Such as Business Interruption (BI), Construction and Marine Delay in Start-Up (DSU) and Professional Indemnity. There are many instances when not all the delays and time related costs are covered by the insurance policy. This can be further complicated by exclusions, waiting periods, sub-limits, concurrent delays, acceleration and expediting options and jurisdictional differences.
A typical time element claim is calculated by multiplying the daily BI value by the interruption period. It is not uncommon to see a disputed period ranging from a number of days to several months. With the increasingly high sums insured on many policies, the amounts at stake can quickly add up.
If there is a time element disputed claim, then the core of the discussion invariably focuses on the critical path. This is made all the more difficult when the BI reinstatement or new build project comprises of thousands of activities, and not all of the activities are indemnified – or even worse, they are partially indemnified.
Where can Mirabelle Assist?
A time element claim submission may contain hundreds of pages of seemingly incomprehensible data, generated from planning software, such as Primavera, MS Project and Asta. As expert users of these programs, we can quickly verify the accuracy of the critical path presented and the assumptions made to form the model.
Our experience in construction engineering and knowledge of insurance covers, means that we can identify construction and insurance shortcomings in the critical path model, and advise the adjustment team on time related matters such as acceleration.
Where information is not complete, we will use proven prospective and retrospective delay analysis techniques to quantify and/or reconstruct a sequence of events.
Once a critical path is agreed, we can monitor the actual progress and ensure that work is advancing as forecast and advise the adjustment team of changes that have an implication on coverage (this can be done remotely).
What to look out for
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