WHAT IS THE "RIPPLE EFFECT"?

Following up on our discussion of the effect of the change on the changed work ("whether or not changed" in the changes clause), it is appropriate to examine what is commonly called the "ripple effect". In many cases, the cumulative effect of a number of changes when viewed collectively can produce an unforeseeable impact on the unchanged work.  The changes create a synergistic disruptive result. The contractor no longer can proceed with the original work as planned.

The ripple effect, however, can result from a single major change or government caused delay.  It is not limited to cases involving numerous changes.  A single change can produce the same causal chain leading to loss of productivity, diminished efficiency and even further delay.

Here is where proof of causation and effective price and schedule impact come into play.  Proof of causation is essential.  The contractor must draw a straight line connection between the government acts or omissions and the price and schedule impact.  In our experience, it is essential to engage a forensic experts to conduct the analysis.  We most often rely on McGovern & Greene (see a link on www.spriggsconsultingservices.com) for assistance.  Jim McGovern has been able to assist contractors in the calculation of lost productivity, reduced efficiency and under absorbed overhead calculations.

One Board case summarizes impact costs as follows:

Impact costs are additional costs occurring as a result of the loss of productivity; loss of productivity is also termed inefficiency.  Thus, impact costs are simply increased labor costs that stem from the disruption to labor productivity resulting from a change in working conditions cause by a contract change.  Productivity is inversely proportional to the man-hours necessary to produce a given unit of product. As is self-evident, if productivity declines, the number of man-hours of labor to produce a given task will increase.

Identifying the increased costs is not the difficult task.  Explaining why and how they are caused by the change is the challenge.

bill@spriggslawgroup.com               www.spriggslawgroup.com