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CONSTRUCTION CLAIMS CONSULTING LABOR PRODUCTIVITY DAMAGES

CONSTRUCTION INDUSTRY INSTITUTE (“CII”)

CONSTRUCTION CLAIMS CONSULTING | LABOR PRODUCTIVITY

1. QUANTIFYING THE CUMULATIVE IMPACT OF CHANGE ORDERS ON THE LABOR EFFICIENCY OF ELECTRICAL AND MECHANICAL CONTRACTORS

The reported purpose of this study by the Construction Industry Institute (“CII”) Cumulative Change Order Impact Research Team was to quantify the cumulative impact of change orders on the labor productivity of electrical and mechanical contractors. The research team consisted of representatives from the electrical and mechanical contracting community and other members of CII. Contractors submitted survey data from projects that were “perceived” to be over budget as a result of change orders, rather than from factors such as low estimates, unforeseen weather conditions, or poor field planning.

Unfortunately, Holloway’s analysis found this CII document was prepared in such a way as to produce biased and unreasonable results, and to encourage the document’s misuse. In addition, industry experts agree that asking contractors to participate in the preparation of a document to be used in the future by those same contractors in an effort to “validate” their claims against owners is patently unreasonable.

One of the fundamental bases of this document is that the respondent contractors submitted survey data to CII from selected projects that were “perceived” by the contractors to have experienced man-hour and cost growth as a result of changes and change orders, without due regard for the other potential causes of labor overruns and productivity loss such as bid error, mismanagement, etc. Therefore, this document appears to be based much more on subjective perception than objective scientific analysis.

2. CII SOURCE DOCUMENT 43

In 1988, CII published Source Document 43 on, “The Effects of Scheduled Overtime and Shift Schedule on Construction Craft Productivity.” This study contains original data collected between 1984 and 1988 from seven different U.S. heavy industry projects at various stages of completion, including oil refineries, natural gas recovery, fossil power plant and a chemical processing unit. The focus of the data is on crew performance. Trades involved are primarily electricians, pipe-fitters and insulators. Two projects include data for concrete crews and one project includes formwork and rebar crews (carpenters and ironworkers). Only two projects include data on straight-time as well as on overtime schedules. 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.

Based on inconsistent patterns of data measurement and collection, no defensible conclusions could be developed with respect to overtime inefficiency. Thus, it is not surprising that the study concludes with the following statements:

a)    Previous studies by BLS, the Business Round Table and others are not consistent predictors of productivity loss during overtime schedules for construction projects in this study.
b)    Even on the same project working an overtime schedule, productivity trends of individual crews are not consistent.
c)    Productivity does not necessarily decrease with an overtime schedule.
d)    Absenteeism and accidents do not necessarily increase under overtime conditions.

3. CII SOURCE DOCUMENT 98: EFFECTS OF SCHEDULED OVERTIME ON LABOR PRODUCTIVITY; A QUANTITATIVE ANALYSIS

This document is based on 151 weeks of data collected from 1989 to 1992 from four active industrial construction projects (paper mill, manufacturing, process plant, refinery) without major contract disputes. Each was constructed in a peaceful environment and was well managed. The overtime schedule was used to maintain the schedule, rather than to attract labor. The manufacturing and paper mill projects were existing facilities where old systems and equipment were removed and replaced with new ones. Congestion was a major concern. The refinery involved the rebuilding of an existing facility. The process plant was a spacious, outdoor grass-roots facility.

The focus of the study was on detailed observation of piping and electrical crews, rather than on various trades. The rationale that only piping and electrical trades were studied is that these trades represented the majority of the work and were most likely to be affected by scheduled overtime. For electricians, the work involved the installation of conduit, cable and wire, terminations and splices and junction boxes. For piping, work included pipe erection and the installation of supports and valves. The performance of a crew on an overtime schedule was compared to the same crew on a straight-time schedule. There were not data for 5-8 hour days. Therefore, a 4-10 hour day schedule was used as the baseline. Work weeks shorter than four days usually were shortened because of weather. There was one 7-day work week which was discarded. Over 90% of the work days were 10-hour days. The study specifically excluded the early phase of the work and the start-up phase.

The study concluded that the data are consistent with the BRT study and that the BRT is probably a good representation of the industry average, but individual work may vary appreciably. Moreover, the study showed that it was possible to work over-time for three to four weeks without losses of productivity, which would be consistent with CII’s 1988 study. In the final conclusion, the study states:

1. The use of short-term overtime can cause a loss of labor efficiency in the range of 15%. When losses were analyzed as a function of time, the averages were consistent with the Business Roundtable curve. However, overtime losses are not automatic but can range from zero to 25% for crews 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.
2. 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 concluded that the increased difficulty in providing resources was the root cause of losses of efficiency.
3. 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.

CONCLUSION

In the hands of capable defense counsel, these conclusions seem likely to eliminate their use in a loss of labor productivity calculation and claim.

Holloway Consulting
Construction Claims Consultants
12081 W. Alameda Pkwy., #450
Lakewood, CO 80228-2701
Denver Phone: (303) 984-1941
International : (888) 545-0666
Fax: (303) 716-0432

Email: steve.holloway@disputesinconstruction.com
Blog: disputesinconstruction.com
Web: hcgexperts.com

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