Skip to main content
Construction Insurance Bulletin


By March 1, 2011No Comments

The contractor managing the construction of a new 20-story hotel had a well-planned schedule for the project. The schedule contemplated every scenario the contractor could think of that might sidetrack the project — natural disasters, material shortages, workplace accidents, even strikes. Unfortunately, he didn’t think of everything: Vandals hopped the fence at the excavation contractor’s storage yard and disabled four $200,000 excavators. This delayed digging by three weeks. Shortly after work began, the general contractor had to suspend the project because the municipal employee responsible for approving the plans and issuing work permits became ill and checked into a hospital. Due to severe budget cutbacks, the municipality had no one on staff to perform her work while she was out.

All these events threw the contractor’s schedule out the window and caused delays that cost the owner thousands of dollars in lost revenue. Had the contractor been able to accurately factor these risks into the plan and cost estimate, dealing with them would have been easier and less costly. Some contractors are using Event Chain Methodology to do just that. Event Chain Methodology is a way of creating models of uncertainties in time-related business processes so that businesses can accurately measure them. This method is based on six principles.

  1. External events affect work tasks during the performance of the tasks. These effects can be both positive (14 straight days of sunny weather, allowing for the completion of exterior work ahead of schedule) or negative (an unexpected downpour occurs before the roofing contractor can cover roof openings, flooding the top floor).
  2. Events can cause other events, creating chains that affect the project. Municipal authorities question something in the architect’s plans. The architect answers, but the authorities question the answers. Construction halts while the questions are being settled; when it finally resumes, subcontractors accelerate the work to make up for lost time. As a result, three employees suffer injuries on the job.
  3. If a contractor can define events and event chains, he can analyze them to measure how uncertain they are and calculate how event chains will impact the project.
  4. Critical chains of events are those that have the greatest potential to affect a project. If contractors can identify these critical chains in advance, they can plan for them and keep their impact to a minimum. They do this by analyzing each chain and determining its potential to affect a major project parameter, such as its length or total cost. If a contractor knows that a squabble with the authorities over plans can set a project back two months, he can build that into the schedule and budget.
  5. Contractors can use data from similar past projects to determine how likely a chain of events is and what its impact will be on the project.
  6. To aid in the analysis of risks, contractors can create Event Chain Diagrams. These display the relationships between events and tasks and how one affects the other.

Using event chain methodology can lead a contractor to alter the original plan in a number of ways. Certain events (fires, flooding, vandalism) can make unplanned activities (clean-up, repair, replacement) necessary. Other events (contractor or designer errors) can force subcontractors to repeat already completed tasks (wiring, plumbing, installation of air quality systems). As deadlines approach, a task might require additional resources (personnel, materials, tools,) requiring the contractor to re-allocate these from other planned activities.

Event chain methodology allows project managers to assign mathematical values to risks, helping them decide how to prioritize loss prevention efforts. Ideally, this will enable the project to come off with few surprises, resulting in a safe, on-time and profitable project.