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From construction projects to aerospace and defense programs, contractors develop their bids by determining the labor and equipment production levels they expect to achieve. Claims for “lost” productivity (disruption and inefficiency) occur when contractors do not achieve those production levels and the cause of the lost production are understood to be unforeseeable and beyond the contractor’s control. Evaluation and resolution of these “lost” productivity claims can be contentious and very costly for owners and contractors.
Productivity is a measure of the rate at which a work operation is performed. This rate is expressed as work output divided by resource input. For example, 24 cubic yards (cy) of concrete formwork placed by a 3-person work crew in 2 hours is expressed either as 4 cy per labor hour, or 12 cy per crew hour, depending upon the resource definition. In this example, labor productivity is being measured, but equipment productivity is calculated in the same manner.
Productivity is “lost” on the project when the contractor’s actual amount of labor or equipment hours is greater than the hours planned in its bid. Another way of encountering “lost” productivity is when the contractor accomplishes less work than planned using the same amount of labor or equipment resources within the same planned time frame. In either case, the contractor is expending more labor or equipment resources per unit for work actually accomplished. The terms “lost” productivity, disruption, and inefficiency are often used interchangeably, without distinction.
Lost Productivity Claims
Because contractors are usually paid a set amount for work installed, any excess resources they expend to accomplish this work will come out of the contractor’s project fee or profit, unless they can recover these amounts from the owner or others. In preparing a lost productivity change order request or claim, the burden of proof is on the contractor to establish causation by demonstrating a causal link between specific factors (such as crowding of labor, stacking of multiple trades, or extended work hours or days) and its “lost” productivity. Further, the contractor must establish that these conditions or impacts were outside of its control and that they were not foreseeable as original project requirements.
In quantifying its productivity claim, the contractor must establish it had a reasonable and achievable baseline productivity level for the work, and it must employ a sound method of calculating the “lost” productivity. The adverse parties often vigorously contest all of these aspects of a contractor’s lost productivity claim, generally because of the difficulty of isolating impacts outside of the contractors control and inefficiencies attributable to the contractor.
In order to establish entitlement on a “lost” productivity claim, quantify the impacts, and calculate damages, a contractor will need to maintain very good contemporaneous records related to its labor and equipment productivity. It is important to regularly compare actual productivity of labor and equipment resources with the planned levels. As deviations occur and negative trends are established, the contractor’s written, calculated, and visual project recordkeeping should document the causal link between issues and events and the adverse impacts to its productivity. A widely accepted method of “lost” productivity calculation is a measured mile analysis. This approach makes use of contemporaneous project records to establish a baseline ‘un-impacted’ productivity period to which the “impacted” productivity period is compared and the “lost” productivity is established.
Exponent’s Construction Consulting professionals have extensive experience working with both owners and contractors in preparing, evaluating, and resolving complex “lost” productivity claims. Exponent’s independent, objective, fact-based approach to “lost” productivity claim preparation and analysis has proven successful with all types of subcontractor trade work. Exponent’s Construction Consulting professionals are seasoned contractors, engineers, and project managers. Our senior construction consultants have been qualified as experts on the topics of “lost” productivity, disruption, and inefficiency entitlement analysis; quantification of impacts; and calculation of damages by state, district, and federal courts, and various government boards.
Our services, encompassing entitlement, quantification of impacts, and damages, include: