PRODUCTIVITY CLAIMS

Contracts and Claims Department

Introduction

• Essentially every construction contract contains a ‘changes clause’ that

defines the process for identifying and documenting changes.

• Change order damages encountered are:

– Delay Damages.
– Inefficiency (loss of productivity) Damages .

• A schedule delay analysis and a loss of labor efficiency analysis are not
the same:
– With a loss of labor efficiency it means that it takes longer to perform
a certain task. There need not to be a work stoppage or delay.
– Although loss of labor productivity may result in delayed completion,
loss of efficiency is not included as an element of delay damages.
– When permitted by the contract, both the delay damages and losses
of labor efficiency can be recovered (Thomas & Oloufa, 2001).
Introduction Cont’d

Proving Causation:

• Causation is the linkage from the initiating event or condition

through a chain of intermediate cause/effects to the ultimate
impact on the project.

• Proving causation is important for proving entitlement.

1. Link entitlement to damage: prove that the owner is responsible for

the initiating event that increased cost.
2. Graphically correlate impact over time.
Introduction

• Construction Productivity or efficiency differs from manufacturing

productivity. Some of the variables that distinguish construction
productivity from productivity in the factory setting.

For example:
A construction contractor is excavating soil from an area. The quantity of
soil that can be excavated during any unit of time is dependent on many
different elements. The soil may vary in hardness or degree of
compaction. Some areas within the excavation may be wet, while others
are dry. The operation may be in an open area for some portion of the
work and far more restricted in other areas of the excavation. As a
consequence, the speed that the material can be excavated may vary
over the course of the day.

• The problem in analyzing construction productivity is that, in contrast to

the manufacturing facility, the work cannot be isolated and maintained in
a controlled environment. This does not mean that construction
productivity cannot be managed or controlled.
Non controllable factors that affect productivity

• Weather (snow, extreme heat and cold, high winds, rain) it can be
controlled by estimating the weather condition in the construction area
during the planning phase. A loss of productivity would occur only if the
weather differed from what was normal and should have been
anticipated.

• Availability and skill level of workforce (various trades are in high

demand with limited availability). Planned levels of productivity should
account for any variations in the anticipated availability of trades.

• Available access to the work site (an excavation project may have
limited access. It may require the contractor to enter the site from one
point, excavate material, and exit the site through the same route).
• Complex design and construction (Electrical work on a process plant
may be much more difficult than in a warehouse facility because of the
complexity of the design or because of the physical configuration of the
electrical installation compared to electrical work).
Controllable factors that affect productivity
• Created schedule (sequence of work and allowed duration). Example: if
the project manager plans to drive underwater piles for a pier and
excavate or dredge the material from between the piles after they are
driven, this may be less efficient than first dredging the material and then
driving the piles. While there may be good reasons for choosing this
sequence, the project manager must accept the reduced level of
productivity.

• Resources assigned for tasks (equipment with limited production).

Example: contractor chooses to perform excavation with a small backhoe
when a larger piece of equipment would yield better rates of production,
that should be factored into the plan.
– Problems arise when an estimate is based on optimal production with
equipment that is never utilized. Similarly, if the crews assigned are either
too large or too small, the efficiency of the operation can be adversely
affected.
Controllable factors that affect productivity cont’d
• Site organization (storage area, deliveries procedures, materials
distribution, tools availability). Example: on a large process plant project,
a contractor might set up its parts trailer on a remote corner of the site in
order to allow easy access for deliveries.
– Unfortunately, that contractor may later discover that as the workers require
parts for construction, the remote location may require them to walk a long
distance to acquire these parts. This might result in a reduced productivity
due to the time spent acquiring the necessary components for the
construction.

• Supervision quality (More experienced foreman and superintendents

can often recognize better and more efficient work methods for their
crews to utilize).
Introduction Cont’d

Measuring Delay:
• Courts have recognized critical path method (CPM) schedule
analysis as the preferred method of identifying and quantifying
critical delays (Singh, 2002; Crowley and Livengood, 2002).

Measuring Inefficiency:
• There is no way of directly measuring inefficiency.
• The courts and most owners recognize this and accept a lesser
degree of proof for inefficiency damages.
• The presence of labor cost overrun is not a proof of damage
entitlement.
• It is difficult to link the causation to the damages.
What is Labor Productivity?

The U.S. Department of Commerce defines productivity as :

Dollars of output per person-hour of labor input

• Such definition does not infer that improving productivity is

achieved through greater labor effort,
– yet there are many ways to improve productivity such as better
combination of equipment and labor, more efficient equipment and
tools, improve production management, control in adverse weather
environments, and improving the training of the labor
(Adrian, 1987)
What is Labor Productivity?

Productivity = Output / Input

(e.g. Earned hours / Worked hours)

The planner can then compare the actual productive man-hours

(from the time cards or time sheet summary) against the
"earned man-hours" calculated on the daily progress report (%
complete X planned man-hours). If more man-hours are used
than earned, it could indicate poor productivity.

Or the reciprocal:

Productivity = Input / Output

(e.g. Manhours per unit produced)
Loss of Productivity
(Inefficiency)
• As defined by Meyers (1994), “disruption is a material alteration in
the performance condition that was expected at the time of the bid
from those actually encountered; resulting in increased difficulty
and cost of performance…Lost productivity is a classic result of
disruption, because in the end more labor and equipment will be
required to do the same job”.

• Inefficiency occurs when more (man-hours for instance) are used to

achieve the same amount of work, or less work is performed rather
than planned with no change in the planned resources.
General Principles of Disruption
1. Performance must be scheduled in a series of efficient and economical
operations

2. A contractor plans to perform the work in a manner and sequence where

the employer has a duty not to hinder performance.

3. A contractor may not make unrealistic assumptions about contract

performance ( i.e. assuming sole contractor on site).
Types of Disruption
A. Non compensable Disruption:
1. Foreseeable events where the contractor should have anticipated them
based on the contract documents
– (for example, when the contract documents indicate the presence of certain adverse
soil conditions or that the contractor will have to work in conjunction with another
contractor).
2. Contractor's own actions, such as
• improper scheduling,
• inefficient material expediting, or
• the failure of a subcontractor or supplier to perform.
A. Non Compensable Disruption Cont’d
• Events which has been specifically excluded by the contract. The contract
may grant the contractor a time extension equivalent to the time impact
of the disruption but place the burden of the costs of disruption on the
contractor. Examples:
– Caused by acts of God, unusually severe weather, strikes.

• Even though a disruption may not be compensable monetarily, it may

entitle the contractor to a time extension when the disruption has
lengthened the time necessary to perform a particular portion of the
contract (liquidated damages under the contract may be eliminated).
B. Compensable Disruption
• Recovery under a specific contract provision:
– ( 1) the "Changes" clause, (2) the "Differing Site
Conditions" clause, and (3) the "Suspension Of Work“.
• Hudson Contracting, Inc.,19 the contractor was entitled to
compensation because a navy ceremonial event disrupted the
contractor's work, causing increased costs of performance.
• Although the disruption caused no additional work, the
disruption amounted to a constructive change to the
contract's performance terms. Therefore, the board awarded
the contractor its unanticipated costs attributed to the
rescheduling and relocation of its work force.
B. Compensable Disruption
• When the owner refuses to compensate the contractor for such
disruptions in accordance with a changes clause or similar contractual
stipulation:

The contractor may be able to recover its increased costs by asserting that
the owner breached either an express or implied obligation of the
contract upon which the contractor's performance depended.
B. Compensable Disruption
• An example of an express obligation would be:

– A specific clause stating that it is the owner's duty to make the site
available to the contractor at a certain date.

– Similarly, a clause that requires a contractor to perform on a specific date

may act as a warranty that the jobsite will be available on that date. If the
owner subsequently fails to provide timely site access to the contractor, the
contractor would have a breach of contract action against the owner for failing
to make the site available by the contractually required date.
B. Compensable Disruption
An implied obligation is the duty not to interfere with the contractual performance of
another:" .. [There is] an implied provision of every contract ... that neither party to the
contract will do anything to prevent performance thereof by the other party or commit any
act that will hinder or delay performance."
 The following acts have been held to constitute interference with the contractor's work:
 an owner's failure to make the work site available when this was within its
control;»
 the owner's failure to furnish materials, labor, or information in a timely manner;»
 and failure to permit a contractor access to the site.» In addition, an owner may be
liable for conditions that restrict but do not deny access to the jobsite.»

 Another implied duty that may form the basis for a disruption claim is the duty to
schedule and coordinate work.»
 For example, if an owner favors one contractor over another>
 or permits one contractor to work in an area where another contractor was
supposed to be working, as it may find itself faced with a claim for additional
compensation as a result of the disruption caused by the owner's failure to
coordinate work.
 Contractually, however, the duty to coordinate work among subcontractors may be
shifted to the contractor.»
Entitlement to Claim ?
Procedures for Claims (FIDIC 4th)

Detailed
Event giving rise
Notice Particulars of the
to the claim
Claim

28 days 28 days
( Clause 53.1) Or reasonable time
as agreed with the
Engineer
( Clause 53.3)

20
 Procedures for Claims (FIDIC 4th): Events with Continuing
Effect

Event giving
Interim Interim
rise to the Notice
Particulars Particulars
claim

Intervals: not
28 days 28 days more than 28
days

End of Final
Effects Particulars

28
days 21
Question

Do I lose my right if I fail to provide

Notice under FIDC 4th ?
Where a contractor fails to serve a proper delay notice this will not
result in the loss of rights to an extension of time unless the contract
expressly states that the service of a notice is a condition precedent to
such rights.

HOW?
Answer
53.4If the Contractor fails to comply with any of the provisions of this
Clause in respect of any claim which he seeks to make, his entitlement to
payment in respect thereof shall not exceed such amount as the Engineer
or any arbitrator or arbitrators appointed pursuant to Sub-Clause 67.3
( Arbitration) assessing the claim considers to be verified by contemporary
records (whether or not such records were brought to the Engineer's notice
as required under Sub-Clauses 53.2 and 53.3).

Failure will limit his entitlement but should not bar the Contractor from
remuneration for work done.

The Contractor retains his money for additional payment regardless of

non-compliance with the claims procedure, but such entitlement is
dependent on the extent to which the Engineer considers the claim
verified by contemporary records.
Payment of Claims
• The Engineer shall notify the Contractor of any determination made under
this Sub-Clause, with a copy to the Employer.

• Payment to the contractor for claims having a continuing effect does not
have to await the settlement of the whole claim.

• Make sure to include your claims values in the final statement under
60.9 –employer is not liable to the contractor for matters not mentioned
in the final statement.
 Procedures for Claims (FIDIC 4th): Events with
Continuing Effect Cont.

• Engineer’s Determination:
– No period is set for determination, just "undue delay"
– The engineer is not permitted to decrease any extension of time already granted.

25
Procedures for Claim (FIDIC 99)

Event Detailed
giving rise Particulars
Notice
to the of the
claim Claim

28 days
(Clause 20.1)

42 days or
as agreed

26
Question

Do I lose my right if I fail to provide

Notice under FIDC 99 ?
YES

HOW?
Failure of Contractor to follow Procedures in: 20.1 (FIDIC 99)

• Failure to give notice in accordance with the Contract

deprives the Contractor of his entitlement to an extension
of time and compensation.

• Sub-Clause 20.1: “If the Contractor fails to give notice of a claim

within such period of 28 days, the Time for Completion shall not
be extended, the Contractor shall not be entitled to additional
payment, and the Employer shall be discharged from all liability in
connection with the claim. ”

28
 Procedures for Claims (FIDIC 99)
Events having Continuing Effect

Event
Interim Interim
Giving rise Notice
Particulars Particulars
to a claim

at
28 monthly
days intervals

42 days End of Final

Effects Particulars

28 days or as
29
agreed
 Procedures for Claim (FIDIC 99) Engineer’s Determination

• Duration for Determination: within 42 days after receiving

a claim or any further particulars.
• the Engineer shall respond with approval, or with
disapproval and detailed comments.
• He may also request any necessary further particulars,
but shall nevertheless give his response on the principles
of the claim within such time.

• The Engineer shall proceed in accordance with Sub-Clause 3.5

[Determinations] to agree or determine (i) the extension (if any)
of the Time for Completion (before or after its expiry) in
accordance with Sub-Clause 8.4" [Extension of Time for
Completion], and/or (ii) the additional payment (if any) to which
the Contractor is entitled under the Contract.
30
Nature of Disruption Damages
• The activity-related costs that may be attributable to a
disruption often consist of two categories:
– (1) the incremental direct costs associated with an
additional scope of work or tasks required by the disrupted
activity, and
– (2) the less easily determined loss of efficiency in
performing the original scope of work in a disrupted
manner.
Common Factors Impacting Labour Productivity
Main Causes of Labor Overruns

• Restricted site access , work space and site conditions:

1. excessive travel time from an assembly area to the work area

2. Crowding
3. limited access that results in delays and excessive use of labor instead of
equipment
4. inadequate work areas for storage

• Delay:

1. idle labor
2. ineffective work
3. working at a reduced pace due to smaller crews, worker slowdown,
insufficient equipment
4. equipment standby
5. performing work in different conditions than would have occurred
Main Causes of Labor Overruns Cont’d

• Acceleration:

1. overtime 2. fatigue 3. boredom

4. Absenteeism and poor moral 5. multiple-shift operation
6. mobilization and demobilization of additional labor and equipment
7. overworked supervisors who are unable to handle the faster pace or
larger workforce.

• Change Orders (“Contract Modifications which increase contract

value between 5-10% would be reasonably expected on most
construction projects” (Schwarzkopf,W. 1995).
Common Methods Used for Measuring Labor
Inefficiency
1. Total Cost Method:

• Inefficiency cost= (Actual cost- Estimated cost) plus a markup.

• This method applied when:

[Link] contractor’s actual losses are impractical to prove
2. the contractor’s bid estimate was reasonable
3. the contractor’s actual costs were reasonable
4. the contractor was not responsible for any of the cost increases

• Disadvantages:
– Imprecise: is a quantification of damages rather than a measurement
of inefficiency.
– In case there are multiple causes of inefficacy, using this method the
contractor won’t be able to segregate the impact of changes of each
cause.

• This method is not usually accepted in the courts and is not

recommended for claims (Pinnel, 1998).
Total Cost Method
2. Modified Total Cost Method:
• If the impacts are so numerous that the determination of the
productivity loss from each is impossible, total cost method can
be modified.

• Applied to individual cost codes instead of the entire project &

only if no other method is applicable

• Advantages:
– This method allows the contractor’s estimated costs to be corrected
for errors in the bid and/or for those portions of the cost overruns
attributed to the contractor to be broken out of the calculations.
Modified Total Cost
3. Industry Standards
A. Mechanical Contractors Association of America (MCAA)

• 16 factors, characterized as being beyond the direct control of the

contractor, that may affect productivity. Each factor has a
percentage loss which could occur for minor, average, and severe
conditions.

• They are qualitatively derived from opinions of experts on the

field who agreed on these factors in 1971 (Hanna, 2004).
MCAA Factors
Factor Percent of Loss If
Condition
Minor Average Sever
e
1. Stacking of Trades: Operations take place with physically 10% 20% 30%
limited space. Results in congestions of personnel, inability to
locate tools conveniently, increased loss of tools, additional
safety hazards. Optimum crew sized cannot be utilized

2. Morale and Attitude: excessive hazard, competition for 5% 15% 39%

overtime, over-inspection, multiple contract changes and
rework, disruption of labor rhythm and scheduling, poor site
conditions, etc..
3. Reassignment of Manpower: loss occurs with move-on, 5% 10% 15%
move off because of unexpected changes, excessive changes, or
demand made to expedite or reschedule completion of certain
work phases. Preparation not possible for orderly change
4. Crew Size Inefficiency: additional men to existing crews 10% 20% 30%
“breaks up” original team effort, affect labor rhythm. Applies to
basic contract hours also
MCAA Factors
Factor Percent of Loss If
Condition
Minor Average Sever
e
5. Concurrent Operations: stacking of the contractor’s own 5% 15% 25%
forces. Effect of adding operation to already planned sequence
of operations. Unless gradual and controlled implementation of
additional operations made, factor will apply to all remaining
and proposed contract hours

6. Dilution of Supervision: Applies to both basic contract and 10% 15% 25%
proposed change. Supervision must be diverted to a) analyze
and plan change b )stop and re-plan affected work c) take off,
order and expedite material and equipment. d) incorporate
changes into schedule. e) instruct foreman and journeyman f)
supervise work in progress, and g) revise punch lists, testing
and start up requirements.

7. Learning Curve: Period of Orientation in order to become 5% 15% 30%

familiar with changed condition. If new men are added to
projects, effects more sever as they learn tool location, work
procedures, etc. Turn over of crew
MCAA Factors
Factor Percent of Loss If
Condition

Minor Average Sever

e
8. Errors and omissions: increase in errors and omissions 1% 3% 6%
because changes usually performed on crash basis, out of
sequence or cause dilution of supervision or any other negative
factor.

9. Beneficial Occupancy: working over, around or in close 15% 25% 40%

proximity to owner’s personnel or production equipment. Also,
badging noise limitations, dust and special safety requirements
and access restriction because of owner. Using premises by
owner prior to contract completion.

10. Joint Occupancy: change causes work to be performed 5% 12% 20%

while facility occupied by other trades and not anticipated
under original bid
11. Site Access: Interference with convenient access to work 5% 12% 30%
areas, poor man-lift management or large and congested
worksites.
MCAA Factors
Factor Percent of Loss If Condition

Minor Average Severe

12. Logistics: owner-furnished materials and problems of 15% 25% 40%
dealing his storehouse people, no control over material
flow of work areas. Also, contract changes causing
problems of procurement and delivery of materials and
re-handling of substituted materials at site

13. Fatigue: unusual physical exertion. If on change order 8% 10% 12%

work and men return to base contract work, effects also
affect performance on base contract.
14. Ripple: changes in other trades’ work affecting our 10% 15% 20%
work such as alteration of our schedule. A solution id to
request at first job meeting that all change
notices/bulletins be sent to our Contract Manager
15. Overtime: lower worker output and efficiency 10% 15% 20%
through physical fatigue and poor mental attitude.
16. Season and Weather Change: either very hot or very 10% 20% 30%
cold
3. Industry Standards
A. MCAA

Advantages: Ease of calculation/ Advance pricing of the changes

Disadvantages:
– There are no guidelines as to how to handle multiple or overlapping
factors affecting labor productivity.

– Qualitative definition of the impact i.e minor, average and severe.

3. Industry Standards cont’d
A. MCAA
The use of their factors in the support of a claim seems very questionable. There is no
scientific or empirical basis for the factors but rather the assessment or estimate of members
of a committee.

Statement 1:
Because MCAA and its membership recognize that the loss of labor productivity is difficult to
quantify with specificity, the MCAA Factors are expressly intended to serve only as a point of
reference for mechanical contractors and other parties. The specific percentage values set
forth in the MCAA Factors must be applied with careful consideration and a review of the facts
surrounding the loss of productivity. The MCAA Factors are intended to be used in conjunction
with the experience of the particular contractor seeking to use them, because the percentage
of increased costs could well vary from contractor to contractor, crew to crew, and job to job.

Statement 2:
To the best of the MCAA’s current knowledge, the information contained in the MCAA Factors
was gathered anecdotally from a number of highly experienced members of the MCAAs
Management Methods Committee. MCAA does not have in its possession any records
indicating that a statistical or other type of empirical study was undertaken in order to
determine the specific factors or the percentages of loss associated with the individual factors
3. Industry Standards cont’d
A. MCAA
Below are 3 cases which prove that the MCAA standards are unreliable.

Case 1:
• In Stroh Corporation v. General Services Administration, 96-1 B.C.A. (CCH) P28,265;
1996 GSBCA LEXIS 82, March 12, 1996, the contractor claimed entitlement to an
equitable adjustment when the government ordered it perform certain of its work
on the roof of the Federal Building in Des Moines, Iowa during the winter months
despite the fact that the contract did not expressly prohibit removal of the
equipment during the summer months. The Board first held that the contractor had
clearly met its burden of establishing entitlement. It stated:
 
In this case, Stroh has met its burden to show that the Government’s actions
reduced efficiency of its labor force in two ways: 1) the work was shifted into
adverse winter weather conditions, and 2) the reduced amount of time left for
accomplishing demolition of the existing chillers and installation of the new
equipment forced Stroh, at least for some of the work, to use a less than
optimum crew size to perform the work. 
3. Industry Standards cont’d
Case 1:
The Board was convinced that Stroh had planned to use a two-man crew for much of the affected
work, but had changed to a four-man crew due to the compressed timeframe for performing the
work and accepted the expert’s opinion that loss of efficiency due to working under a compressed
schedule is well-recognized in the construction industry. It also held that Stroh’s expert had
credibly testified as to the loss of labor efficiency when work is done in severe winter weather.

* The factors themselves do not prove entitlement. Entitlement must be established by independent
means.
 
In calculating inefficiency damages, Stroh’s expert had relied on the MCAA Manual to obtain
inefficiency factors he used to calculate damages. These factors were applied to Stroh’s actual
costs from its cost records.
 
* Testimony by qualified experts as to well-recognized principles in the construction industry has been
recognized as one way to establish entitlement. 

Although the Board made some adjustments to the calculations presented by the contractor’s
expert, it relied heavily on the MCAA factors in arriving at its award to the contractor.

* Even when found to be relevant, the factors are not to be automatically applied; adjustments based
upon analysis and expert opinion are required.
3. Industry Standards cont’d
A. MCAA

Case 2:
• In Appeal of the Clark Construction Group, Inc. 2001-1 B.C.A. (CCH) P30,870; 2000
VA BCA LEXIS 4, April 5, 2000, the Appeal Board was reviewing a decision that
permitted the use of the MCAA factors in quantifying loss of efficiency claimed by
Poole and Kent Company (PKC), a subcontractor to Clark on the project. The Board
started by finding that entitlement had been clearly established. The Board also
found that it would rely upon the MCAA factors only after determining that there
was no better basis calculating inefficiency damages. The Board stated:
 
We will utilize the productivity factors from the MCAA Manual as the best
method to arrive at the percentage estimates of PKC’s and USM’s undeniable
productivity losses. We find no other basis in the record on which we could
better calculate the amount of PKC’s productivity in this appeal and, as we
previously recognized in Fire Security, the MCAA productivity factors are a
reasonable starting point to estimate efficiency losses.
3. Industry Standards cont’d
Case 2:

* MCAA factors may be considered for use only if it is established that there is no better basis
available for calculating damages.
 
We will utilize the MCAA Manual’s direction and descriptions of the percentage inefficiency factor
to be applied to the inefficiency element for which entitlement has been proven. As contemplated
by the MCAA Manual, we will use our reasonable judgment of how the factors apply to this
Contract and the two contractors.
 
* As contemplated by the MCAA Manual itself, testimony concerning the reasonableness of applying
the factors to this specific job and this specific contractor must be convincing.
 
We have clear evidence of PKC’s entitlement to an equitable adjustment. In light of this and the
recognition of the impossibility of the precise quantification of impact or inefficiency costs, our
determination of quantum for labor productivity losses in this appeal by making estimates based
on the MCAA factors will properly be in the nature of a jury verdict.
3. Industry Standards cont’d
A. MCAA

Case 3:
• In Appeal of Fire Security Systems, Inc., 2002 –2 B.C.A. (CCH) P31, 977; VA BCA
LEXIS 8, August 16, 2002, the contractor for the renovation of the VA Medical
Center in Columbia, Missouri sought to recover for costs incurred due to loss of
efficiency of its workers allegedly caused by the discovery of asbestos in various
areas of the building. The findings of fact in this case note that the VA had
performed an asbestos assessment study prior to the bid, but the multi-volume
Abatement Assessment was not included in the solicitation, nor was its existence
mentioned prior to the bid. The Board gave great weight to this finding and held:

Where significant information that could have a bearing on how a contractor

will bid and perform a project is not included within the bidding documents,
the contractor cannot be bound by the information contained in such
excluded materials.
 
3. Industry Standards cont’d
Case 3:
The Board also stated:
Since FSS reported suspected asbestos almost as soon as the pipe installation began, there is no
“normal” work period by which to measure the impact, thus no useful “measured mile” analysis
would be possible for this particular claim.
 
The contractor’s expert had applied three of the factors found in the MCAA Manual to calculate
damages – (1) stacking of trades, (2) suspension, and (3) morale and attitude. The board disagreed
with the application of two of these factors and reduced the percentage factor applied in the third.
The Board disallowed the first two because it found very little support in the Daily Reports to justify
application of the “stacking of trades” and “suspension” factors.
 
* Contemporaneous project records must support the expert’s selection of the factors to be applied.
 
In reducing the factor applied to the third category, “morale and attitude”, the Board took note of
the fact that although the discovery of some asbestos containing materials had some impact on the
workers, the VA had, during the course of the work, regularly performed ambient air testing, and
the results were uniformly favorable.
Crew Overmanning
U.S Army Corps of Engineers, Modification Impact Evaluation Guide, 1979

100
% Total Crew Efficiency

80

60

40

20

0
0 20 40 60 80 100
% Crew Size Increase Above Optimum
Effect of Congestion (Crowding) on Labour Efficiency
U.S. Army Corp of Engineers "Modification Impact Evaluation Guide" - July 1979

20%
% Labour Loss to Inefficiency

15%

10%

5%

0%
0% 5% 10% 15% 20% 25% 30% 35%
% Crowding
Effects of Overtime
US Army Corps of Engineers - 1979
3. Industry Standards cont’d
B. U.S. Army Corp of Engineers

The Guide notes multiple shifts as an increase in cost but does not
address how one approaches the quantification of these costs. It
does point out that lighting, cold weather, etc. are factors which
come into play when multiple shifts are worked.

• When the Guide addresses the area of morale, it notes that work
force motivation is the responsibility of the contractor. While it
recognizes that morale has an influence on productivity, it
postulates that “the degree to which this may affect productivity,
and consequently the cost of performing the work, would normally
be very minor when compared to the other causes of productivity
losses”.
3. Industry Standards Cont’d
B. Bureau of Labor Statistics Bulletin No. 917 [1947]; Department of
the Army “Construction Modification Impact Evaluation Guide”
[1979]; The Business Roundtable Report C-2 [1989]; and National
Electrical Contractors Association (NECA) “Overtime and
Productivity in Electrical Construction” (1989)
Loss of Productivity

Foster Wheeler
• The research was conducted from
1963-1968.
• The Figure shows Foster Wheeler’s
overtime inefficiency curves derived
from its own data.
• It was not disclosed how and under
what circumstances the data were
obtained.
• Although not explicitly stated, it is
presumed that the findings are based
on the boilermaker trade.
• Average productivity for 5-10 hour
days and 6-10 hour days were 87% and
73% respectively.
 Loss of Productivity

• Proctor & Gamble

The Figure depicts the cumulative
effect of overtime on productivity
for 50- and 60-hour work weeks as
per the BRT Study.
• The measure of productivity is a
comparison of actual work hours
expended for preplanned
operations with a fixed standard
base of calculated work hour
requirements called a “bogey”.
Loss of Productivity

Construction Industry Institute

• In 1988, the Construction Industry
Institute (CII) published Source
Document on “The Effects of Scheduled
Overtime and Shift Schedule on
Construction Craft Productivity.”
• The focus of the data is on crew
performance from seven different U.S.
heavy industrial projects at various
stages of completion.
• On the chemical processing unit all
tradesmen worked on a rolling 4-10 hour
day schedule (two days off); three crews
were shifted such that at least two crews
were on site every day.
• Figures 4a to 4d depict the results for
selected crews.
 Loss of Productivity

Construction Industry Institute

• Figures 5a and 5b show the curves
produced for average normalized
productivity against time for various
combinations of overtime
schedules.
• They were generated to illustrate
overall results of the study.
• Based on the inconsistent patterns,
no defensible conclusions could be
developed with respect to overtime
inefficiency.
 Loss of Productivity

Construction Industry Institute

• Figure 8 shows the average
overtime efficiency of all crews
working a 50-hour work week, the
BRT curve and other references.
• The study concluded that the data
are consistent with the BRT curve
and that the BRT curve is probably a
good representation of the industry
average but individual work may
vary appreciably.
• The study showed that it was
possible to work overtime for three
to four weeks without losses of
productivity which would be
consistent with the 1988 CII study.
Loss of Productivity

National Electrical Contractors

Association
• Figure 9 shows the decline of
productivity over periods of one
to four successive weeks. What
happens beyond is, as indicated,
a question mark.
• What is striking about the four
weeks of data is that weeks 2, 3
and 4 are multipliers of 1.5, 2.0
and 2.5 respectively of the first
week data.
• This raises some serious concerns
with respect to the originality of
the data.
 Loss of Productivity

National Electrical Contractors

• Association
The findings for the number of
work hours per day and the
number
• of work days per week are
depicted in Figures 10a and 10b.
• They are consistent with
expectations.
Loss of Productivity

National Electrical Contractors

• The study provides information
Association
on low, average and high
productivity loss for 5-, 6- and 7-
day work weeks and 9, 10 and 12
hours per day for sixteen
successive work weeks, based on
data gathered by NECA since
1969 for journeymen electricians.
• The origin of the data and the
work environment are unknown.
• Figure 11 summarizes the data
for average productivity for
successive weeks of overtime.
3. Industry Standards cont’d
C. Bureau of Labor Statistics
The conclusion that one may draw from this study is that it indicates
that productivity may be adversely affected if the work week is
increased either in hours or days such that the total exceeds the 40
hour norm.

It does not allow one to deduce or quantify the exact amount that
productivity will decrease.

To rely solely on this study to support any mathematical computation

as a measure of lost efficiency because of overtime would not be a
prudent course of action.

This particular study does not offer formulas to quantify losses of

productivity because of overtime
Loss of Productivity
In the final conclusion, the study states:

• “The use of short-term overtime can cause a loss of labour efficiency. The average loss was in the range of 15%.

• When losses were analyzed as a function of time, the averages were consistent with the Business Roundtable
curve.

• overtime losses are not automatic but can range from none to 25% for crews (projects) where there are no
other factors affecting productivity.

• Examples of factors that can cause losses greater than 15% are incomplete design, numerous changes, work in
an operating environment or labor unrest.

• As overtime efficiency decreases, the research found that there was an increase in disruptions. The most
consistent increase occurred in the category of resource availability.
• It is concluded that this increased difficulty in providing resources is the root cause of losses of efficiency.

• The data collection and analysis methodologies are a sound, reliable way to measure the effects of scheduled
overtime.

• The basis for this conclusion is that the results of the analysis are consistent and in line with what would be
reasonable.”
Use of Industry publications
• Using industry publications solely to support your case in Productivity Loss
quantification is incorrect:

• They are used to as project data for a measured mile analysis.

• They can be, also, used for expert analysis

Zamalek Residence Case Study
4. Measured Mile Analysis

• Is a quantitative tool to determine losses of efficiency on a

construction project.

• To utilize a measured mile, and the manner that it is applied are

directly dependent on the amount and quality of the
documentation available concerning the actual progress of the
work.
4. Measured Mile Analysis

• Compares the productivity of impacted period with that of the un-impacted

period, the difference is the amount of inefficiency component of the claim.

• The most important factor preparing a production inefficiency claim, is to

identify the un-impacted and impacted work activities, which must be
identical.
Productivity ratios=
the actual amount of hours /the actual quantities of work performed .

• The productivity ratio during the un-impacted period is the standard, or the
performance mile, by which productivity is measured.

• When the un-impacted data specific for the project are not available,
historical productivity data is acceptable, in case the contractor can prove
that they are of the same nature as the impacted ones. (Thomas W.
Presnell,2003)
Why do we use Measured Mile Analysis

1. Show what production was actually achieved with the actual

equipment, manpower, and supervision that existed on the
project.

2. The impacted period or the time when the external factors or

changes occurred is also based on a measured production rate
with the actual resources applied on the project (avoid theoretical
measures).

3. Show what we actually could do irrespective of estimates,

standards, and production rates from manuals. But you must
carefully and accurately construct the model in order to fairly
portray any impacts that might have occurred to the productivity
on the project
Measured Mile Process

• The categories of production information needed to effectively

track production efficiencies and support the measured mile
method include the following:

– defining the work activity or cost

– account for work performed;
– logging accurate worker-hours used to perform the work;
– logging accurate quantities of work completed for the period
– briefly defining any condition or event that prevented optimum
production such as material deliveries, insufficient design
information, field directives, or changes to the original work scope.

• The setting up of the measured mile must be accounted during the

project estimate and continue with the schedule development
stage. (Thomas W. Presnell,2003)
4. Measured Mile Cont’d

• The basic concept of it is to determine an un-

impacted period and linearly extrapolates the
cumulative un-impacted hours to the end of an
impacted period and the difference between the un-
impacted and impacted is the amount of damage
(Gulezian, 2003)
Measured mile=first 30
days
Projection at
100%completion
=3,745 hrs
Actual hours=4,810hrs
Lost hours=4,810-
3,745=1,605 hrs.
4. Measured Mile Cont’d
Measured Mile Advantages

• Relies on data obtained during actual contract performance.

• Labor productivity levels for both affected and normal periods are
derived from project records as job cost reports, payroll records,
daily logs, and inspection reports.

• Avoids the shortcomings of industry studies and estimating

guidelines. (Loulakis, Michael [Link], Simon J., Nov 99)
4. Measured Mile Cont’d
Measured Mile Limitations

1. The required data for a detailed productivity analysis are not

available.

2. Even when the information is contained in the project records it

can be difficult and time consuming to obtain the data in the
format necessary to perform the calculations. As a result, it can
be expensive.
4. Measured Mile Cont’d
Measured Mile Limitations

3. The choice of the time at which the base measured mile is very
subjective and can differ from one person to another.
4. Measured Mile Cont’d
Measured Mile Limitations
3. The choice of the time at which the base measured mile is very
subjective and can differ from one person to another.

Decision (1)
Measured mile=first 30
days
Projection at
100%completion
=3,745 hrs
Actual
Decisionhours=4,810hrs
(2)
Lost hours=4,810-
Measured mile=first
3,745=1,605
17days hrs.
Lost hours=1,420
Decision (3) hrs
Measured mile=days 18-
30
Lost hours=895 hrs
4. Measured Mile Cont’d

Measured Mile Limitations

[Link] that all the loss in inefficiency is due to the owner.

Contractor might have some drawback in the schedule like
underestimating, or mismanagement.

5. Doesn’t provide any causal logic to explain why the impact of

changes would lead to additional work

6. Can’t separate the effect of changes on the productivity.

 “The
measured mile is certainly a
preferred approach, but the baseline for
demonstrating what the contractor
could have done needs to be
unimpeachable( clean from any
changes)”
(Michael C. Loulakis, Carmody Gaba, Attorneys Jared Rodrigues, Legal Intern
Wickwire Gavin, P.C.,Vienna, Virginia,Nov. 03)
Common Methods Used for
Measuring Labor Inefficiency
4. Measured Mile Analysis
Cont’d
• Compares the man hours of impacted period with that
of the un-impacted period, the difference is the
amount of inefficiency component of the claim.
• Identify the un-impacted and impacted work
activities.
– must be identical and must be consequent.
– Only the working condition will differ and only due to
changes because of the owner.
• Historical productivity data is sometimes acceptable.
 4. Measured Mile Cont’d
Case 1

There was a claim on a project that concerned loss of efficiency. The project was the construction of a 500KV transmission
line.

1. The work was located in the northwestern United States in an extremely mountainous area.
 
2. Because of the location of the project, access was very limited. Most material equipment and manpower had to be flown
in by helicopter.
 
3. The work involved the construction/erection of transmission line towers. There were seven different types of towers
including both guyed and self-supporting towers.
 
4. The owner supplied the materials for the project. The most significant material was the steel that comprised the structural
members for all of the towers. The owner contracted a supplier/materialman to provide the steel based on specifications
drawn up by the Owner’s designer.
 
5. The tower steel sections were bolted together in the field with high strength steel bolts and, where necessary, gusset
plates.
 
6. During the course of erection, the erection contractor complained vigorously of misfabricated steel pieces. This
misfabrication necessitated that the erection contractor redrill thousands of bolt holes in order to make the towers fit
together. In fact, the claim asserted that approximately 50,000 bolt holes were misfabricated.

7. As a consequence of the misfabricated steel, the erection contractor claimed that its crews suffered tremendous losses in
productivity. The claim that was submitted totaled several million dollars.
 4. Measured Mile Cont’d
Case 1

• First you must investigated if the steel was, in fact misfabricated as claimed by the erection contractor.
The results of that review verified that the steel did have significant misfabrication problems that
necessitated that the erection contractor redrill bolt holes.

• The count of the number of misfabricated bolt holes overstated what really was happening. For
example, if three steel pieces came together at a connection and one hole was misaligned, the redrilling
was done on that one hole in a single operation.

• The erection contractor counted this as three misfabrications. Obviously, this was somewhat misleading.
 
• This project records were well kept. The engineering firm that inspected the work kept detailed records
for every tower that was constructed. These records included the following information:
– Tower type
– Number of pieces
– Shake out hours
– Assembly hours
– Crew size
– Crew chief/foreman and crew members by name
– Time spent for reaming, bolting, etc.
– Travel time to assembly sites
 4. Measured Mile Cont’d
Case 1

• First you must investigated if the steel was, in fact misfabricated as claimed by the erection contractor.
The results of that review verified that the steel did have significant misfabrication problems that
necessitated that the erection contractor ream or redrill bolt holes.

• The count of the number of misfabricated bolt holes overstated what really was happening. For
example, if three steel pieces came together at a connection and one hole was misaligned, the reaming
was done on that one hole in a single operation.

• The erection contractor counted this as three misfabrications. Obviously, this was somewhat misleading.
 
• This project records were well kept. The engineering firm that inspected the work kept detailed records
for every tower that was constructed. These records included the following information:
– Tower type
– Number of pieces
– Shake out hours
– Assembly hours
– Crew size
– Crew chief/foreman and crew members by name
– Time spent for reaming, bolting, etc.
– Travel time to assembly sites
 4. Measured Mile Cont’d
Case 1

• One could identify the direct time spent for the redrilling since the records
contained that details.

• An amount of compensation for this extra work was directly calculated. This
amount did not even approach the sums claimed by the erection contractor.

• An analysis was required to determine what potential productivity losses

might have been experienced because of the extra work that resulted from
the misfabrications.

• The overall productivity in manhours per tower was calculated and plotted
over the life of the project. The actual number of holes that had to be
reworked was indicated on each individual tower. One would expect that
productivity would decrease as the number of misfabrications increased on
any given tower type.
 4. Measured Mile Cont’d
Case 1

• The first factor that was recognized was that the productivity increased significantly about a third of the
way into the project. This increase in productivity corresponded directly with a change by the erection
contractor in the overall project management team.

• With the various factors identified, a computer model was constructed to analyze the data to determine
the correlation of each possible variable with the productivity demonstrated. The results of the regression
analysis were far different than what was surmised when the analysis began.

• When compared on a tower type basis, the most dominant factor effecting productivity was the crew
chief/foreman. Also, the variation in productivity among crew chiefs was dramatic. The good foreman
always had good productivity regardless of the tower type and regardless of the number of misfabrications
on a tower. There was little difference in the productivity by tower type for a good foreman even if one
tower had two or three times more misfabrications than other towers in the group.

• The ultimate result of the analysis was that it could be shown with a reasonable level of confidence that the
bulk of the productivity variations were not due to the steel problems. Instead they were directly related to
the management of the crew by the crew chief.

• An analysis of this type was possible only because of the nature of the work, the simplicity of the alleged
problem that was claimed, and the large volume of specific detailed information for the entire tower
population. This volume of data allowed for an analysis of the entire population and did not require that a
model be based on a limited population and extrapolated or inferred to the rest of the population.
 4. Measured Mile Cont’d
Case 2: THE PHARMACEUTICAL FACILITY

• The project involved the construction of a pharmaceutical facility in the approximate

amount of $100,000,000. During the project, changes were made by the owner
through formal change orders, drawing revisions, sketches, etc. Overall, the project
had 2,000 changes at a minimum. The project ended in a dispute that was ultimately
resolved during mediation. The specific problems identified included extra work,
delays, and loss of productivity. This case study highlights one small portion of the
project, focusing on the lost productivity for the mechanical contractor.

• In order to measure the lost productivity, an analysis was made on the ductwork
installed by the Mechanical contractor. The project had nine buildings broken down
into three areas. Area 1 included buildings 1, 2, and 3. Area 2 included buildings 4
through 7, and area 3 included buildings 8 and 9. Area 2 had the best available
information for analytical purposes. In that area, building 5 had the fewest changes
and disruptions. This does not mean that building 5 did not have problems but that
it had the least amount of problems. As a consequence, Building 5 was used as the
least impacted building for the analysis.
 4. Measured Mile Cont’d
Case 2: THE PHARMACEUTICAL FACILITY

• Based on the project records, Building 5 had 201,736 pounds of duct

installed. The labor hours for this installation totaled 14,228 man-
hours (MH). This resulted in a demonstrated productivity of 14.18
3/MH (201,736# divided by 14,228 MH). Based on similar
calculations the other buildings in area 2 had the following levels of
productivity:

Building 4 - 10.06#/MH
Building 6 - 10.61#/MH
Building 7 - 11.82#/MH
 
 4. Measured Mile Cont’d
Case 2: THE PHARMACEUTICAL FACILITY

• Based on the demonstrated productivity in the least impacted building,

the losses for the other buildings in Area 2 were calculated as follows:
 
Building 6:
 
Total pounds of duct = 312,577#
 
  312,577# = 22,044 MH
14.18/MH
 
  Actual Man-hours expended = 29,461MH
 
Extra Man-hours: 29,461MH - 22,044MH = 7,417MH
 4. Measured Mile Cont’d
Case 2: THE PHARMACEUTICAL FACILITY

• Based on the demonstrated productivity in the least impacted building, the losses for the other
buildings in Area 2 were calculated as follows:
 
Building 6:
  Total pounds of duct = 312,577#
 
  312,577# = 22,044 MH
14.18/MH
 
  Actual Man-hours expended = 29,461MH
 
Extra Man-hours: 29,461MH - 22,044MH = 7,417MH

• Similar calculations were performed for Buildings 4 and 7 and resulted in a total loss of man-hours of
17,735MH. The total man-hours expended for these three buildings was 70,268MH. Therefore, the
percentage loss of efficiency is calculated as:
 
17,735MH = 25.24%
70,268MH
 4. Measured Mile Cont’d
Case 2: THE PHARMACEUTICAL FACILITY

• A second analysis was performed adjusting for any approved change orders.
The approach was the same but the pounds of duct and man-hours were
decreased for any changes that could be documented. This resulted in a loss
of efficiency of 23.83%. To be conservative, the smaller percentage was used
for the calculation of damages.

• Based on the analysis for Area 2, the 23.83% loss of efficiency was also
applied to Area 1, buildings 2 and 3.
 
• The ductwork in Area 3, however, was performed by another contractor.
While the problems was the same and at least as significant as area 2, the
contractor for Area 3 calculated its loss of efficiency based on its estimated
ductwork productivity versus its actual productivity. This approach yielded a
loss of approximately 20%. To be conservative, the lesser figure of 20% was
used for the loss of efficiency in area 3.
 4. Measured Mile Cont’d
Case 2: THE PHARMACEUTICAL FACILITY

• Other approaches were also used in order to verify the reliability of the loss
calculated for the ductwork. An analysis of the piping resulted in a
calculated loss of 21.19% and this figure was used for the applicable man-
hours. Similarly, several other analyses were run on the different areas and
buildings. The end result was that all approaches resulted in very close
agreement with the initial calculations.
 
• In the presentation of the costs associated with the loss of productivity, all
calculations were shown so that all parties could make a reasoned decision
as to the most acceptable method and number to resolve the dispute.
 
• In this instance, the availability of good records was essential to the analysis.
It must be noted, however, that a significant amount of work was required to
determine pounds of duct, feet of pipe, etc. in order to perform the analysis.
 4. Measured Mile Cont’d
Case 3: THE PSYCHIATRIC HOSPITAL

• This project involved the construction of a County Psychiatric Hospital.

This included the construction of a new Pavilion and renovation of two
existing structures. The electrical contract was in the approximate
amount of $5,000,000.

• During the course of the project there were numerous design changes
made, multiple errors and omissions in the plans, problems with the
work of other subcontractors, and a constant array of clarifications and
modifications. As a result of this, the project was delayed and was not
performed in the orderly sequence originally planned. As a result a
dispute arose and required an analysis of losses in productivity along
with several other issues. The following presents an overview of the
analysis utilized to measure the loss of productivity by the electrical
contractor during the construction.
 4. Measured Mile Cont’d
Case 3: THE PSYCHIATRIC HOSPITAL

• The project information indicated that the first few months of branch
conduit installation were performed with minimal problems. To verify
this, branch conduit work was plotted on a daily basis to determine if
the work proceeded logically and methodically in accordance with the
project schedule and plan.

• The as-built information/plot verified that this work did proceed in a

reasonable fashion for the first few months. The work was performed
in a disrupted and sporadic manner corresponding to the problems
that were occurring on the project. The first six months allowed a
representative period to establish a demonstrated level of
productivity of the electrical contractor’s crews.
 4. Measured Mile Cont’d
Case 3: THE PSYCHIATRIC HOSPITAL
• The project documents supported that the Electrical Contractor was able to install 45% of the branch
conduit during the first six months on the project. This totaled 107,525.25 feet of conduit with a total
of 6,957 man-hours (MH) expended for the installation. This calculates to a productivity rate of 15.45
feet /MH.
 For the remainder of the project, the Electrical Contractor installed 59,736.25 feet of branch conduit with
a total of 15,048.75 man-hours expended for the installation. This calculates to a productivity rate of
3.97 feet/MH.
 Based on a comparison of the unimpacted period with the impacted period of work, the Electrical
Contractor expended 10,823 MH in excess of what it should have because of the lost productivity. This
is calculated as follows:

Demonstrated rate of productivity = 15.45feet/MH

 Actual quantity installed during impacted period = 59,736.25 feet
 Man-hours expected: 59,736.25 feet/15.45feet/MH = 3,866.42MH
 Actual MH expended = 15,048.75
 Overrun due to loss of productivity = 11,182.33MH
Similar calculations were performed for fixture installation work.
5. Statistical Analysis
• Serag, 2008
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