Labor productivity impacts can be among the most difficult losses to demonstrate and prove. There are numerous causes for such impacts, ranging from trade stacking and crowding to sequence disruptions and site access restrictions. Though such impacts are commonplace on many jobsites, they can be easily ignored by site personnel and project managers. Moreover, quantifying these losses can be time consuming, expensive, and require careful planning and attention to detail.
Claims Identification and Preservation
Fortunately, there are relatively straightforward steps that you can take to help address these concerns. Foremost among them is to require detailed and regular daily reporting from site supervision. Comprehensive, informative, and well-written daily reports and logs are an essential jobsite record that can form the backbone of any effort to protect a contractor from experiencing unrecovered labor productivity losses. Coupled with regularly updated and digested photographs of jobsite progress and problems, these records are a critical building block in a contractor’s defense against absorbing labor productivity losses without recourse. Equally important, implementing strong, daily communications protocols between site supervision and project management personnel will ensure that jobsite intelligence reaches the right players in time for appropriate action. These protocols should include not only time for verbal communications, but also an opportunity for project managers to read daily reports and logs on the same dates when they are prepared. Likewise, timely communications between site supervision and project management fosters trust and provides opportunities for verification and added documentation of problems and issues, as well as timely compliance with contractual notice requirements.
Pricing Productivity Losses
Labor productivity losses are notoriously difficult to prove, and for that reason, are a consistent source of jobsite disagreement. Causation is often complicated, data can be uncertain, and quantification tools are limited. Nevertheless, there are several means of recovery beyond simply applying a “total cost” approach that are worthy of consideration. The “gold standard” for proving labor productivity losses is the measured mile analysis. This is the most accepted form of productivity loss calculation in which one compares the productivity of a labor force during impacted and non-impacted periods via the use of a common metric that measures labor or cost to perform a discrete quantity of work. These analyses require accurate and detailed project records that allow for the identification of labor or cost expended in relation to quantities of installed materials or other forms of objective jobsite progress. In order to be effective, the baseline for the measured mile must be substantial enough to be representative of the job as a whole, and the work during the baseline period must be similar to the work performed during periods of impact. Likewise, disruptions during the impacted periods must be attributable to causes for which the contractor is not responsible.
A second type of labor productivity analysis is the earned value analysis. This analytical framework uses the contractor’s estimate or schedule of values as a baseline measure of planned productivity. The approach multiplies physical units of work completed by the applicable budgeted unit labor rates and compares them to the actual hours expended for the same quantity of work. The difference between the actual labor expended and the projected or planned labor yields the productivity loss. This approach requires sound record keeping and a reasonable budget for the planned labor units.
A third form of labor productivity analysis is the work study/sampling method. This technique requires performing a sample analysis of work crews experiencing a particular jobsite disruption or site condition and compares their productivity to other non-impacted crews. It can be particularly useful and effective when implemented in conjunction with the party who is potentially responsible for the labor productivity loss, as it can substantially limit or even eliminate disagreement over the extent of losses attributable to the event or disruption. Once again, the sampling effort must be representative of the overall work in order for the outcome to be valid and accepted.
One final means of quantifying labor productivity losses is through the use of industry analyses such as the Mechanical Contractor’s Association of America (“MCAA”) studies for overtime (Bulletin OT1) and labor productivity (Bulletin PD2). These studies provide charts and tables that permit a contractor to estimate its losses based upon the conditions described. Although these studies have been accepted as proof of losses in certain venues, they are often met with healthy levels of skepticism because they can be easily abused and are susceptible to subjective and/or disparate outcomes. As with any of the other analytical tools discussed above, care must be taken to identify and remove from consideration any productivity losses attributable to the claimant.
Practical Considerations
For each of the above-noted analytical approaches, the ability of a claimant to be successful depends in large part upon the accuracy and detail of its project records and the ability of its project management team to identify, track, and document potential productivity impacts in a timely fashion. With the process of preparing these analyses challenging and their reception often contested, it is best for a contractor in such situations to seek out appropriate expertise to assist with any such effort. Expert analysis and guidance can make a huge difference between the ability to prepare and present a persuasive case for productivity losses, and the immediate rejection of such claims as unsupported or over-reaching. Moreover, having experienced help with the process of pursuing compensable labor losses can minimize wasted time and resources that would be better directed toward maximizing recoveries.
