Buffer in Schedules – Everything you wanted to know and (perhaps) were afraid to ask – Part 2

Buffer in Schedules – Everything you wanted to know and (perhaps) were afraid to ask – Part 2

This post has been written by three schedule experts (alphabetically):

Levanon, Tal – CTO and co-owner of Tal Levanon – HCP Ltd., https://www.hcp-consulting.com 

Lupu, Toni – Founder-Owner, PBM, toni@pbm.co.il

Morag, Assaf – CEO, Rakia, https://www.rakia-eng.co.il/

In projects, specifically construction and infrastructure projects, the “buffer” issue is the center of multiple disputes relating to its economic value. In recent years, scheduling specifications have been addressing the issue on an engineering level and discussing its ownership as well. Everyone wants a buffer; everyone wants to own it and there is a great deal of ignorance in the matter.

Buffers are also known as schedule contingencies and floats.

In Part A : The Buffer in Schedules – Everything you Wanted to Know and (Perhaps) were Afraid to Ask… Part 1 we put some matters in order and answered basic questions.

Here, we will try to answer the main question: Who owns the buffer, or, Who owns the float?           

Let’s examine the issue through additional questions:

Buffer in Schedules - Everything you wanted to know and (perhaps) were afraid to ask – Part 2

WHAT IS THE MEANING OF A BUFFER WHEN IT IS OWNED BY THE CONTRACTOR/PROJECT OWNER/PROJECT?

  1. Contractor owned buffer – The buffer will protect against contractor errors or issues in its relevant field. For example, problems with material supply to the field, equipment or personnel shortages, execution issues, equipment failures (i.e., a stuck drill or broken drill bit), and more.

 

  1. Project-owner owned buffer – The buffer will protect against errors or issues related to the project owner or force majeure, such as plans not reaching execution, lands that were not expropriated, planning errors, snow, pandemic and more.

 

  1. Project owned buffer – Protection against any error or issue in order of appearance – regardless of the entity that caused it (contractor or customer).

Tal’s experience shows that in order for a project to reach successful conclusion as it happened in these projects, the issue of buffers is essential but not sufficient. To achieve this, it is imperative that all forces work together, rather than separately, and also that a HCP-Go analysis be conducted on the basic schedule and then again every month.

WHO OWNS THE BUFFER?

Buffers were contrived as a statistical engineering tool to enable on-time project completion despite issues that arise during execution. As such, it can be deemed a tool that is intended to provide protection against all possible project issues (in which case it is owned by the project), a tool providing protection against execution issues (in which case it is owned by the contractor) or a tool intended to protect issues derived of the project owner only. Although all options are legitimate as related to engineering, this is not the case in terms of the contract binding the parties.

Actually, the definition of the buffer being owned by the project owner or project, is that: In case of delays in matters subject to project owner responsibility, the project owner may exercise the buffer without compensating the contractor for the related extension in the project schedule. In other words, the contractor will be required to bear the cost of such delays caused by the project owner.
That’s a terrible idea, for two reasons:

  • First – The contractor has no way of preventing delays caused by items for which the project owner is responsible. Furthermore, the contractor has no way of predicting how many such delays will actually occur and, respectively – how to price them.
  • Second – When the cost of project owner delays is imposed on the contractor, the project owner no longer has an incentive to invest maximum efforts to prevent them. The “buffer owned by the project owner” actually gives the project owner (and those acting on its behalf) a license to waste project time. And indeed, we know from experience that projects are often prolonged because the project owner and those on its behalf had no reason to prevent the said delays. In an atmosphere of reduced competition, the demand for minimizing project owner waste should have led to an immediate increase in the contractor’s bid price. In an atmosphere of strong bidding competition and “Persian Market” business practices, as is the case in the infrastructures industry in Israel, contractors tend to hope for the best and wager that the project owner will not delay them because, if they don’t – they will be unable to win the tender. The result is that, in cases where the risk becomes a reality, the contractor loses a great deal of money, followed by legal claims and settlement agreements. 

The “project-owner owned buffer” method is actually based on mix-up between the buffer’s engineering objective (to enable completion on time) and the business objective (preventing payment to the contractor in case the project is protracted for reasons under the project owner’s control). While the engineering objective is worthy and legitimate, the business objective is not and it also severely impairs the engineering objective and increases project delays.

Conclusions:

  • The buffer, intended to provide protection against delays for which the contractor is responsible, must be unequivocally owned by the contractor only.
  • Where the project owner wishes a buffer of its own to protect it against delays embedded in project owner risks, such a buffer must be extrinsic to the contract. This buffer will serve the project when dealing with its provider.
  • A “project owned buffer” cannot exist in a contract between the contractor and project owner, as the project is not a party to the contract.

A further elaboration on the inability to impose liability for project owner delays on the contractor appears in Asaf Morag’s book, The Manager’s Dilemma, available on Amazon and as an audio book.

OTHER SLACK TYPES...

Following are other slack times defined in schedules:

  • Total slack/float – Source: CPM. This parameter defines the number of days by which a task can be delayed until it causes a delay to the project.

 

  • Free slack/float – Source: CPM. This parameter defines the number of days by which a task can be delayed until it causes a delay in the successor.

 

  • Feeding buffer – Source: TOC. A buffer that protects a non-critical path and precedes a task on the critical path.

 

Conclusion: These slacks/floats/buffers are part of the project network and they are unrelated to and must not be confused with the buffer.

With HCP-Go, project managers complete the project successfully. Want to talk to Tal Levanon about it?

WHAT DOES THE LAW AND OTHER ENTITIES IN ISRAEL AND ABROAD SAY?

  1. In England – The SCL (Society Construction Law) Delay and Disruption Protocol of February 2017 does not address the buffer issue at all. The protocol relates only to the total slack/float and free slack/float of a task.
  1. In the U.S.

The largest organization in the western world to set rules and norms on buffer issues is the AACE (American Association for Cost Estimate).

The AACE defined buffer (float) ownership simply and decisively – the buffer is owned by the contractor. In this regard, see:

AACE® International Recommended Practice No. 29R-03

Ownership of Float

Project float is the time between the last schedule activity on the baseline schedule and the contractual completion date where the contractual completion date is later than the scheduled completion date. In this case, in the absence of contrary contractual language, project float is owned solely by the contractor.

 

AACE® International Recommended Practice No. 10S-90, Rev. May 27, 2021:

In addition, the AACE (in publication RP 10S-90) defines another term: Management Schedule Reserve, which is the project owner buffer.

The two definitions must not be confused.

The float is the buffer owned by the contractor and it is not intended to absorb project owner delays, while the Management Schedule Reserve is the buffer owned by the project owner, which is extrinsic to the contract with the contractor.

For the appendix describing the different definitions in the U.S., press here.

  1. Singapore – In their article, Wong and Loh* relate to the buffer issue, which they call “Float”. In concluding their article, they note that Singapore courts have ruled that the contractor owns the buffer.
    The authors note that rare are the cases in which contracts define who owns the buffer. On the other hand, in Israel, in absolute contrast to the situation in Singapore and around the world, the issue is addressed and defined in many contracts, usually in a manner that does not benefit the contractor and the project.

 

* “Sink or swim? Who owns the float in a construction project in Singapore?”, Derek Loh and Natalie Wong, Singapore Academy of Law Journal 15/10/2019

 

  1. In Israel
    • Article 2 of the Contracts Law states that a contract must be sufficiently specific to enable the parties’ finality regarding their desire to engage through it. This specificity is impaired when the contractor is unable to know how long the project will go on and its own management costs due to such prolongation.
    • The seminal rulings set forth by Hon. Judge Winograd in an arbitration proceeding relating to the Krayot bypass road, present several important points. According to such rulings, the project owner may not transfer liability for its own uncertainty, such as a sudden demand set forth by a local authority, requiring changes to the road. In other words – the project owner cannot ask the contractor to take responsibility for risks that the project owner itself cannot define in advance.
    • Winograd repeatedly mentioned the importance of specificity as the key without which parties cannot engage in contracts and wherever contractors argued the absence of contractual specificity, the judge ruled in its favor and against the project owner.
    • The bottom line is that, although the buffer issue was not explicitly mentioned in Winograd’s rulings, the rule of specificity – which was mentioned – can be applied in order to infer a conclusion relating to the buffer. Since the “project owner owned buffer” method impairs specificity and prevents the contractor from accurately estimating the project costs, it must be ruled out.

Summary:

  • The buffer, intended to provide protection against delays for which the contractor is responsible, is therefore unequivocally owned by the contractor only. The same ruling was reached in a court in Singapore and by the AACE in the U.S.
  • Where the project owner wishes a buffer of its own to protect it against delays embedded in project owner risks, such a buffer must be extrinsic to the contract. This buffer will serve the project when dealing with its provider. This matter was also defined by the AACE in the U.S.
  • A “project owned buffercannot exist in a contract between the contractor and project owner, as the project is not a party to the contract.
  • Parameters like Total Slack/Float, Free Slack/Float or Feeding Buffer are part of the project network and they are unrelated to and must not be confused with the buffer.
  • There has not yet been a decisive ruling on the buffer and who owns it in Israel, but Winograd’s rulings enable an inference regarding the buffer.
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