Tag: labor productivity

Loss of Productivity in Construction – Some Considerations  

Loss of Productivity in Construction – Some Considerations  

Posted on by Adroit

During construction projects, a contractor’s scope of work may be influenced by a wide range of factors with an adverse effect on the contractor’s labor or equipment productivity. In these cases, it is said that the contractor is facing a loss of productivity in performing its scope of work. The loss of productivity is considered a type of disruption. According to the Society of Construction Law (2017), disruption is “a disturbance, hindrance or interruption to a Contractor’s normal working methods, resulting in lower efficiency. Disruption claims relate to a loss of productivity in the execution of particular activities. Because of the disruption, these work activities are not able to be carried out as efficiently as reasonably planned (or as possible).” (p.44)

Some Considerations 

It is important to note that a loss in productivity may or may not result in project delays. For example, if a contractor has not been able to achieve its intended productivity rate due to productivity factors that are in a client’s control, the loss of productivity may result in delays if some activities end up taking more than expected due to decreased levels of labor productivity. However, delays may not be caused in some cases of disruption. An example is the case of acceleration, which has a possible disruptive effect on a contractor’s work. If instructed, a contractor may accelerate its work using a wide range of methods such as by increasing project resources (e.g., labor) that are allocated to activities or by elongating working hours. For instance, an owner-issued acceleration order does not cause delays but instead, the contractor incurs additional costs to accelerate the work. Therefore, an owner instruction for acceleration may give rise to a claim for requesting additional compensation and seeking productivity-related damages if the contractor believes it has not been fairly compensated for the damages incurred as a result of an acceleration.

Assessment Methods

To properly analyze cases of disruption from the contractors’ perspective, the main causes of disruption need to be closely analyzed. In addition, the time periods in which disruptions have occurred and the activities that are influenced should be identified. For this type of analysis, a cause-and-effect analysis will provide proper insight into the underlying causes of disruption. However, further investigation will be required to identify the extent productivity factors have impacted the work or resulted in additional costs. Some of the common methods of disruption analysis that may help in identifying the extent of impacts include the following (Society of Construction Law, 2017):

  • Measured mile
  • Earned Value
  • Program analysis
  • Work or trade sampling
  • System dynamic modeling
  • Estimated vs. incurred labor
  • Estimated vs.  used cost

Keeping detailed project records over the course of a project plays an important role in properly evaluating disruption claims. Some of the documents that need to be recorded include daily job-site reports, detailed performance reports, daily logs containing actual man-hours spent, details of change orders and the basis of calculating proposed time and cost proposals for executing change orders, and correspondences between the contracting parties.

Conclusion 

In sum, the main causes of disruption need to closely be analyzed in disruption cases. For this type of analysis, cause-and-effect analyses provide proper insight into the underlying causes of disruptions. Further investigations that make use of loss of productivity assessment methods will identify the extent productivity factors have impacted the work or resulted in additional costs.

Reference:

Society of Construction Law. (2017). Delay and disruption protocol. Society of Construction Law.

 

Author: Dr. Maryam Mirhadi, PMP, PSP | CEO and Principal Consultant

If your project has been affected by disruptions and if changes have adversely affected labor or equipment productivity on-site, or if you are interested to find out more about productivity in construction projects, please contact us. Adroit’s consultants have demonstrated their expertise in the use of the loss of productivity assessment methods and will be able to assist. You may also be interested to read the following articles:

Cumulative Impact Claims

https://www.adroitprojectconsultants.com/2018/10/29/cumulative-impact-claims/

Adverse effects of shiftwork on labor productivity

https://www.adroitprojectconsultants.com/2018/03/24/adverse-effects-shiftwork-labor-productivity/

MCAA Labor Productivity Factors

https://www.adroitprojectconsultants.com/2018/11/24/mcaa-labor-productivity-factors/

MCAA Labor Productivity Factors

MCAA Labor Productivity Factors

Posted on by Adroit

Changes that are made to a contract scope of work and modifications of work conditions are among the key causes of conflict in construction projects. When a contractor is faced with changed conditions or needs to work under circumstances that force the contractor to work while its productivity is less than what it expected, the contractor is, in fact, working in the state of inefficiency. The loss of productivity results in monetary damages because working inefficiently forces contractors to incur labor or equipment costs more than what they originally expected. One of the references that claim administration professionals use for quantifying the adverse impact of change on labor productivity is the MCAA labor productivity factors.

The phrases inefficiency and loss of productivity can be used interchangeably. Proving and quantifying the adverse impact of change on the labor productivity of a contractor is, in fact, one of the most challenging topics in construction claims. One of the references that is often used to quantify the adverse impact of change on labor productivity percentages of contractors is a reference published by the Mechanical Contractors Association of America (MCAA) within which labor productivity factors are identified.

MCAA focuses on the special needs of the firms that are involved in heating, air conditioning, refrigeration, plumbing, piping, and mechanical service. In 1971, MCAA published a reference entitled Management Methods Manual, in which it identified factors affecting productivity. The latest MCAA publications, including the 2018 edition of MCAA’s guideline, entitled, Change Orders, Productivity, Overtime—A Primer for the Construction Industry, still contains these labor productivity factors [1]. These productivity factors have also been endorsed by other professional associations including the Sheet Metal & Air Conditioning Contractors’ National Association’s (SMACNA).

The MCAA factors are also known as MCAA labor productivity factors. These factors identify the major causes of labor productivity loss experienced by mechanical contractors. As such, they can be used not only to estimate the adverse effects of particular productivity factors on labor productivity levels but also to measure the extent a contractor has incurred damages as a result of estimated losses of labor productivities encountered over the course of a project.

The MCAA labor productivity factors include factors such as the following:

  • Stacking of trades
  • Crew size inefficiencies
  • Site access issues
  • The ripple effect, and
  • Overtime and shift work

Some critiques indicate that the MCAA factors are not based on the outcome of empirical studies to determine the percentages of loss of labor productivity arisen from specific productivity factors. However, the MCAA factors have successfully been used in many cases brought to courts or reviewed by boards of contract appeals. An example of these cases is the case of CLARK CONCRETE CONTRACTORS, INC., v.  GENERAL SERVICES ADMINISTRATION, in which, the use of the MCAA factors is described as follows:

To assess the impact of unanticipated conditions on productivity …, P&K used a manual published by the Mechanical Contractors Association of America (MCA). This manual was the same one P&K used, with reference to labor rates, in constructing its bid for the project. P&K has used it on other projects to measure similar impacts, and the publication is generally accepted in the mechanical industry for this purpose… We have previously accepted the use of this manual for this purpose as well. Stroh Corp., 96-1 BCA at 141,132; see also Fire Securities Systems, Inc., VABCA 3086, 91-2 BCA 23,743, at 118,902.  The manual lists various types of impacts and, for each, a percentage of labor costs which represents loss of labor productivity under each of minor, average, and severe impacts. [2]

It is important to note that MCAA factors can be used both prospectively and retrospectively. In using the MCAA factors prospectively, a contractor may use the MCAA guideline to price a lost productivity element of a change order proposal to quantify the extent that the labor productivity of the contractor may be impacted as a result of a change. In using the MCAA factors retrospectively, a contractor, however, may use the MCAA guideline to retrospectively quantify the impacts of change on the labor productivity as experienced by a contractor. A retrospective quantification of the impacts of change on a contractor’s labor productivity may become necessary because no other method might be available to measure labor productivity of the contractor over the course of the project due to the lack of detailed records of labor hour tracking.

It is important to use the MCAA productivity factors properly. The method is relevant to the work of mechanical contractors but the use of this method for contractors that work in other disciplines may not be appropriate. In addition, if a contractor has maintained proper, detailed records of labor hour tracking over the course of a project, the use of the MCAA labor productivity factors may not be the best choice of the loss of labor productivity assessment method. That is because the presence of detailed records of labor hour tracking over the course of a project may enable a contractor to use a method such as the measured mile method which may be identified to be a more appropriate method depending on the specifics of a case. The measured mile method measures labor productivity levels during a relatively un-impacted reference period with performance on the same or similar work (similar in type, nature, and complexity) during an impacted period. This method then calculates the productivity for both periods of time and identifies the difference between the two as the productivity loss attributed to the impact.

It is important that claims administration professionals assess the circumstances that have given rise to a claim for loss of labor productivity and decide whether the use of the MCAA labor productivity factors is appropriate. Although the MCAA guideline is not based on the outcome of an empirical study to determine the percentages of loss of labor productivity arisen from specific productivity factors, it has successfully been used in many cases brought to courts or reviewed by boards of contract appeals. However, claims administration professionals and experts need to apply the MCAA guideline with careful consideration once the facts surrounding the claim have closely be examined.

References:

[1] Mechanical Contractors Association of America [MCAA] (2018) Change Orders, Productivity, Overtime—A Primer for the Construction Industry, MCAA. Retrieved 24 November 2018, from https://www.mcaa.org/resource/change-orders-productivity-overtime-a-primer-for-the-construction-industry-2/

[2] CLARK CONCRETE CONTRACTORS, INC., v.  GENERAL SERVICES ADMINISTRATION. Retrieved from https://www.gsbca.gsa.gov/appeals/w1434015.txt

 

Author: Dr. Amin Terouhid, P.E., PMP | Principal Consultant

 

If your project has been affected by change orders and if changes have adversely affected labor or equipment productivity on-site, or if you are interested to find out more about labor productivity factors, please contact us. Adroit’s consultants have demonstrated their expertise in the use of this method and will be able to assist. You may also be interested to read the following articles:

Cumulative Impact Claims

Types of Change in Projects

Cumulative Impact Claims

Cumulative Impact Claims

Posted on by Adroit

Dr.  Amin Terouhid, PE, PMP

This article describes the nature and causes of cumulative impact claims and explores the underlying factors that give rise to cumulative impacts in construction projects.

Changes that are made to a contract scope of work and modifications of work conditions are among the key causes of conflict in construction projects. The net cumulative effect of changes is often greater than the sum of the effect of individual changes.  This condition may occur when a contractor realizes that the work has been affected by unforeseeable synergistic effects of multiple changes. This condition is typically the case where the collective cost, time, and productivity impacts of the changes have been impossible for the contractor to foresee while considering each of the effects individually. The collective impacts of these types of changes are typically identified as the cumulative impact. The Construction Industry Institute (CII) describes cumulative impact as follows:

When there are multiple changes on a project and they act in sequence or concurrently, there is a compounding effect – this is the most damaging consequence for a project and the most difficult to understand and manage. The net effect of the individual changes is much greater than a sum of the individual parts. [1]

A cumulative impact claim typically arises when the changes to a contractor’s scope of work are so numerous and overlapping that the contractor had no reason to know that it was not fully pricing each of the change orders at the time it negotiated the changes one at the time.

Cumulative impacts have unique characteristics that differentiate them from other types of impacts. In the case of cumulative impacts, multiple changes occur whose cumulative effect is greater than the sum of the effect of individual changes. It is important to note, however, that the multiple changes that have a cumulative impact on a scope of work should typically be labor-related changes. Therefore, in assessing cumulative impacts, the dollar value of the changes that have occurred is not as important as their intensity in terms of the number of labor hours required to execute the changed work. The number of labor hours needed to perform the change is critical in evaluating cumulative impacts because the ultimate objective of a cumulative impact claim is to demonstrate the extent of loss of labor productivity arisen from the synergistic effects of multiple changes. It is typically expected that the more labor-intensive the changes are, the greater their individual and cumulative impacts will turn out to be.

To quantify the damages resulted from the cumulative impact of multiple changes, a variety of methods can be used some of which include actual cost method, estimated cost method, total cost method, modified total cost method, should have spent method, measured mile, and jury verdict [2]. What is important, however, is to be able to demonstrate that the damages have resulted from the causes in reference. The success of a cumulative impact claim depends primarily on the ability to establish the cause and effect relationships between the causes in dispute and the resultant cumulative impact. No definitive standard has been established or accepted by courts or dispute boards to quantify the loss of productivity claims that contain a cumulative impact component; therefore, it is typically challenging to prove that damage calculations accurately represent the damages incurred as the sole result of cumulative impacts.

As part of a cause and effect analysis, a written narrative that describes the chain of events is essential. The narrative should properly establish the relationship between causes and resultant impacts. Preparing such a written description of the events, causes, and their effects is a minimum requirement for parties involved in a claim to demonstrate the cause-and-effect relationships between various events and resultant damages. Adequate supporting documents such as excerpts from the contract, change directives, meeting minutes, relevant correspondence, and filed reports can play an important role in substantiating the arguments and supporting the statements contained in the claim.

One of the methods that are often used to assess causal relationships between causes and effects in complex construction claims is the system dynamics method. Complex cases of claim involve multiple claim components that are typically intertwined and interrelated; and as such, assessing these cases may require advanced methods such as system dynamics. This method is an approach within the system thinking domain which considers complex systems as a holistic set of interrelated components to provide a better understanding of the system. Four important questions that are asked in the process of developing a system dynamics model include what is the issue at hand, what is flowing into and gets accumulated in the system representing the problem, where and how does it accumulate, and what factors cause it to flow.

Cumulative impacts should not typically be measured right after a change or during the course of the project while the impact of changes has not fully been materialized. Instead, cumulative impacts are typically measured towards the end of the project to ensure the full adverse, synergistic effect of multiple changes can properly be identified and qualified. Untimely evaluations may partly represent the adverse cumulative impacts that take shape over time.

References:

[1]. T. Hester, John A. Kuprenas. & T. C. Chang (1991). Construction Changes and Change Orders: Their Magnitude and Impact. CII Source Document 66.

[2]. Jones, R. M. (2001). Lost productivity: Claims for the cumulative impact of multiple change orders. Pub. Cont. LJ, 31, 1.

 

If your project has been affected by multiple change orders and they have adversely affected labor or equipment productivity on-site, or if you are interested to investigate the adverse effects of cumulative impacts on your project, Adroit will be able to assist in assessing these impacts. For more information, please contact us.

 

 

Adverse effects of shiftwork on labor productivity

Adverse effects of shiftwork on labor productivity

Posted on by Adroit

Dr. Maryam Mirhadi, PMP, PSP

One of the factors with adverse effects on labor productivity is shiftwork. Shiftwork is defined as working other than regular daytime hours. Shiftwork is the most commonly utilized alternative to overtime; however, these two methods may be used together so that segregating the two may not be straightforward. It is also important to note that overtime and shiftwork adversely influence productivity in a generally similar way.

When work is performed on a shiftwork basis, labor productivity is adversely affected because of reasons such as stress on circadian rhythms, additional resource or preparation needs, or other factors such as additional coordination, labor, and supervision. These factors need to be considered when work on a shiftwork is scheduled to ensure informed decisions are made.

One of the key issues with shiftwork is its adverse effect on circadian rhythms. Circadian rhythms are the approximate 24-hour variations in bodily functions in individuals. The key cyclic changes that occur in bodily functions in individuals include sleep patterns, blood pressure, heart rate, and core body temperature. Bodily functions tend to increase right after awakening, increase in midafternoon, and then steadily decrease in the middle of the night. As such, those who need to perform on a shiftwork basis typically experience a degradation in performance.

Although the body of those individuals who perform on a shiftwork basis tend to adapt to night work, the circadian rhythm does not in fact completely shift and bodily adjustment periods tend to be long. Some indications that may suggest shiftwork has adversely affected an individual’s body include higher rates of accidents and error in performing tasks, fatigue, appetite loss, increased sickness rates, digestive problems, and other health problems.

Consequences of shiftwork are not limited to those effects that adversely affect the circadian rhythms of individuals who perform on a shiftwork basis. Other issues with shiftwork include the following:

1- The adverse effects of shiftwork on social interactions and negative effects on family life of those who perform on a shiftwork basis.

2- Dilution of supervision typically occur as a result of shiftwork because the supervising team may not use the same working pattern than the working pattern used by shift-working individuals.

3- Challenges in exchanging performance information among individuals who work in different shifts.

4- Higher work setup times. Different shift-working teams tend to work with the same set of tools, machinery, and equipment; therefore, work setup times are typically higher when multiple teams (instead of one team) use the same set of tools, machinery, and equipment. In addition, extra time is needed in shiftwork for the process of hand-over and transition from one shift to another.

5- Work environment considerations: Since shiftwork is performed in hours other than daytime hours, work environment considerations need to be identified. Examples include natural lighting vs. artificial lighting and additional demands for air conditioning.

All of the above-mentioned factors adversely influence work performance in performing tasks that are implemented on a shiftwork basis. Moreover, successful implementation of the work that needs to be performed on a shiftwork basis typically requires additional resources to accommodate the shift project. Additional resources that are generally needed to support shiftwork can be categorized into the three main categories of labor, supervision and job-specific costs. Each of these categories are further discussed in the following:

1- Labor needs

Shiftwork typically requires hiring of additional personnel; however, it is important to note that, because of the learning curve effect, the efficiency level of new hires are typically lower than the efficiency of the current team members. In addition, employers need to pay for shift premium differentials, as needed. Other labor-related considerations that need to be given to shift-working include long bodily adjustment periods, especially for those individuals who are not used to shift-working, higher accident and error rates in performing shiftwork, higher likelihood of improper alcohol consumption before or during shiftwork, and poor attitude towards shiftwork.

2- Supervision needs

Adequate supporting and supervisory personnel are needed when a work is performed on a shiftwork basis. Establishing relationship between work shifts and proper hand-over process between shifts are also important to ensure the work smoothly progresses across different work shifts.

3- Job-specific needs

Examples job-specific needs that have to be evaluated include safety requirements, higher demands for air conditioning or heat equipment to perform shiftwork, and adequacy of equipment, tool, machinery, and material to ensure enough resources are available on-site to make progress as expected.

A number of studies address the adverse effects of shiftwork on productivity. Some of the key studies include the Bureau of Labor Statistics, the Business Roundtable, NECA 1969 study, and the Construction Industry Institute (CII). The American Association for Cost Engineering (AACE) has identified some of the recommended specialized studies that can be used to evaluate the adverse effects of shiftwork on productivity (AACE, 2004). AACE categorizes the specialized studies related to overtime and shiftwork into the same category because these two areas overlap and the adverse effects of overtime and shiftwork on productivity are similar

One set of models that are often used to assess the adverse impact of shiftwork and/or working overtime on labor productivity is the work of Hanna and Haddad (2009), which is a modified version of the NECA study.  The work of Hanna and Haddad (2009) proposes using macro and micro approaches. The macro approach is used for projects in which no specific overtime schedule is used whereas the micro approach is used in projects in which a fixed overtime schedule (e.g., such as six 10 hour days per week throughout a certain number of weeks) is utilized. Both models indicate that as the number of weekly hours worked increase, the labor productivity declines. The following two figures illustrate these two models:

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(Adapted from the work of Hanna and Haddad (2009))

In Figure 1 a regression line is fitted to the data which plots the performance factor index (i.e., earned hours / actual hours) against the total hours worked per week. Figure 2 plots productivity against the number of weeks in which a fixed overtime schedule (e.g., such as six 10 hour days per week throughout a certain number of weeks) is utilized. Since this model uses Measured Mile Method (MMM) to calculate productivity loss in periods with and without overtime, the outcomes of the model are shown as MMM. These outcomes are compared against the NECA 1969 study.

In sum, shiftwork is one of the methods that are used to accelerate projects. It is important to note, however, that, similar to working overtime, shiftwork has adverse effects on labor productivity. Some of the key issues with shiftwork include its adverse effect on circadian rhythms, dilution of supervision, challenges in exchanging performance information among individuals who work in different shifts, the adverse effects of shiftwork on social interactions, and higher work setup times. The methods used to assess the adverse effects of shiftwork on productivity overlap with the methods used to evaluate the loss of labor productivity due to overtime because the adverse effects of overtime and shiftwork on productivity are similar.

References:

AACE International (2004), Recommended Practice 25R-03 Estimating Lost Labor Productivity in Construction Claims, AACE International, Morgantown, WV.

Hanna, A. S., & Haddad, G. (2009). Overtime and productivity in electrical construction. In Construction Research Congress 2009: Building a Sustainable Future (pp. 171-180).

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