Quantifying Lost Labor Productivity

When a contractor is forced to work out of sequence, in a stop-and start fashion, or in a congested work area, labor costs can skyrocket. Known as “lost productivity” or “labor inefficiency,” this can be a major element in many delay claims. But it is a cost which is difficult to quantify and prove.

A recent case involved a multiple prime contract project in Tennessee. The public project owner and its construction manager did not properly schedule and coordinate the work of the various trades. Two contractors sought to recover lost labor productivity, one using the “measured mile” method and the other using the “modified total cost” method. The project owner contended that these quantifications were not sufficiently precise and were impermissible.

A court rejected the owner’s argument. The contractor using the measured mile method had segregated major construction activities. For each activity, the contractor had compared production rates for impacted periods to production rates for unimpacted periods. The comparison was comprehensive. The contractor had not cherry picked the best and worst days in order to exaggerate the outcome.

The contractor using the modified total cost method had shown that the pervasive nature of the disruptive conditions made it impractical to itemize or document the increased labor costs. The contractor established the reasonableness of its original bid, the reasonableness of its actual costs, and made deductions to reflect costs which were the responsibility of the contractor. The court found both methods appropriate for measuring lost labor productivity.

I invite your comments. Do you think lost labor productivity can be measured with sufficient accuracy to allow for recovery? If so, which methods do you favor for quantifying these increased costs?

Featured in next week's Construction Claims Advisor:

• Recovery on One Claim Barred Further Claims under Same Contract

• Finish Schedule Was Not a Material Term of Bid Solicitation

• Significant Overstatement of Lien Was Not Intentional

Bruce Jervis, Editor

Construction Claims Advisor

Comments

[Michael Ebeling]

a detailed measured mile analysis can be appropriate to measure lost productivity and recover costs.

a modified total cost however is much less relevant in my opinion unless combined with project measured productivity or other relevant and specific industry productivity profiles.

[Josh Land]

It is especially tricky to quantify productivity when time sheets are submitted and you know the work took less time than the time sheets state. Sure peopel are working, but how efficiently? At the heart of the issue is, how do you measure productivity and inefficiencies?

[jonathan dunn]

what is the name of the case?

[Steven Striffler, Esq.]

Generally, lost labor productivity can be measured with enough precision to substantiate your claim. However, contractors need to track their costs immediately upon realization that a claim has arisen - easier said than done.

Lost productivity can be difficult to quantify, especially when you only have estimates to compare actual-impacted costs.

It does not matter what approach you take or what name you give it, your calculations need to be with a reasonable certainty, although not exactly precise, to recover the damages suffered.

[Francesco]

Sir,

I am a law student currently working on damage quantification in contruction litigation, and would be very interested to know the name of this case in order to further research it.

Thank you very much!

[George Wolff]

what is the citation to the "recent case" re lost labor productivity you are referring to in your article?

This comes up a lot and it would be helpful to know the case

[Pedro Bambo]

Dear Bruce Jervis

Your issues regarding the construction law are very interesting. I recently open a bank account in US dollars so that i can purchase the information on sell through this webpage. For this specific issue will deeply appreciate if you do me a favor to send me this claims for research propuse.

Pedro Bambo

Maputo, Mozambique

[Melissa Brumback]

I agree with Steven Striffler-- it doesn't really matter which method you use (unless your jurisdiction has specifically rejected one of them)-- what matters is that the claim can be documented sufficiently to be reasonable and not speculative.