In construction projects, productivity is the amount or unit of work completed from a certain amount of time and/or dollar. The profit at the end of project would largely depend upon how productive the contractor was during the project.
At the time of bidding, the contractors presume certain productivity influencing factors such as weather conditions, skilled labour availability, submittal review & approval timelines and the adequacy of bid plans and specifications etc. To land a job in today’s fierce competition, it becomes essential to be cost competitive for the contractors. More than often, the contractors are left with no choice but to assume the (close to) best-case scenarios to be cost competitive.
As we know, things generally don’t go as planned in construction projects. It is common to see a few events or interferences in the course of the project, which were not foreseeable at the onset. Sometimes, such interferences are not the responsibility of the contractor; yet, they reduce the anticipated productivity of the contractor. For instance, when the design is incomplete and numerous changes are made in the original plans and specifications, it could severely impact the original estimate. Originally, the contractor might have planned for partial execution in cold weather and other inefficiencies; however, the changes could constitute additional impacts and inefficiencies. Similarly, when owners will demand the same completion date, despite the added work scope. This may require overtime, second shift work, rework, additional crafts, and many other impacts to the original plan and estimate. This increase in man-hours, constraints, and other resources would impact the cost and schedule. Such changes may cause a drop in the productivity. At the end, less than anticipated productivity can cause significant financial loss. These losses are called loss of productivity.
In most cases, it is possible to recover those losses under the contract as long as the claimant can establish both causation and entitlement. It is quite technical to accurately quantify the losses associated with the lost productivity. There are several methodologies, which are widely used in the industry and are accepted by the courts and tribunals.
There is no hard and fast rule to pick which methodology to use to quantify the losses; however, it largely depends on the circumstances, which led to the productivity loss and the availability of project’s contemporaneous information. In some cases, the productivity of an unimpacted time period is referenced as benchmark productivity. The measured mile approach compares the productivities of impacted and unimpacted period.
Similarly, there are some published industry studies such as Mechanical Contractors Association of America (MCAA) model and the Leonard’s curve etc. Measured mile is preferred over the MCAA model and other industry studies as long as it is applicable. Generally the MCAA model is used when the measured mile method and other better methods are not applicable, or to verify the quantum for lost productivity that is prepared using some other method.
One needs to be extremely careful when using the MCAA model because of its subjective nature. The improper use of this model could unrealistically inflate the amount of lost productivity. For instance, In Interborough Electric Incorporated v. Maple Reinders Constructors Ltd., 2015 ONSC 5591, the court rejected the approach of Interborough’s expert that certain productivity factors established by the MCAA could be applied to place a value on the delay and disruption suffered on the project. The court found such an approach was not suitable for retrospective delay analysis and inappropriately introduced a significant subjective component to the analysis.
At JTE Claims Consultants Ltd., we understand that the analysis, preparation and presentation of lost productivity a claim is a highly technical and specialized area of construction management, cost engineering and the law. Our highly qualified professionals are well equipped with all relevant knowledge, tools and expertise that one would need to prepare and present a lost productivity claim. With professionally prepared claim documents, our focus is to negotiate the most reasonable settlement for our clients in the early stages of the dispute resolution process to avoid expensive legal process.
295 Robinson Street, Suite 100,
