Project-specific Loss of Productivity (LoP) analysis methods are necessary for MEP contractors to quantify the loss of productivity impacts, irrespective of the cause.
Expert researchers and the MCAA, NECA, and SMACNA have aligned MEP trades to fully support the methods described in this article as industry-accepted approaches to quantifying impacts when making requests for equitable adjustment (REA) and delay claims.
All trades on a construction project can feel impacts from the loss of productivity when:
— The project schedule is accelerated or delayed.
— Improperly stacked trades upon one another.
— Disrupted continuity/flow of the work activities.
— A substantial amount of change is introduced.
This article highlights industry experts’ research about the approved methods for quantifying LoP due to COVID-19 or other unforeseen disruptions.
Once an MEP Contractor is confident, they have a contractual and legal right and an avenue to recover Loss of Productivity (LoP) or delay damages. The contractor preparing the claim must choose the method of quantification.
Many national, state, and local government directives and guidelines also bring complexity to LoP triggered by claims such as COVID-19 issues, governmental orders, specific mandated work protocols, civil unrest, or wildfire events to be handled.
Experts highly recommend MEP Contractors planning to file an REA for COVID-19 LoP and delay claims have experienced legal counsel, consultants, and construction personnel, perform a thorough review of the contract documents, correspondence, pertinent change orders, pay applications, and governmental directives before pursuing a delay REA or COVID-19 LoP.
MEP Contractors preparing must persuasively demonstrate the “triad of proof”:
— Causation of the harm.
— Liability for the harm.
— Identification & quantification of the resulted injury.
Once a contractor is satisfied that they have a contractual and legal right and an avenue for recovery of LoP and delay damages, then the contractor preparing the REA or claim must choose the method of quantification. The claimant may be faced with a prime contractor or owner’s requirement to prepare a project-specific LoP and delay analysis.
There are several recommended methods of performing a project-specific LoP quantification analysis. In order of preference and acceptance by research experts, courts, boards of contract appeals, and arbitration panels, the methods are:
1.) Measured Mile Method.
2.) MCAA Factors Table.
3.) Ibbs Study Cumulative Impact Study.
4.) Modified Total Cost (Labor Hour) approach.
The Measured Mile method of LoP quantification is the most preferred method available to an MEP contractor attempting to quantify labor inefficiencies.
The Measured Mile method compares the claimant’s labor productivity in an unimpacted/less impacted area or period of time to an impacted area or period of time on the same project. The two periods or project areas should be reasonably similar in terms of factors such as work type, means-and-methods, crew type and size, and supervision.
MEP Contractors must access labor productivity records that document the fieldcraft labor hours required to install a measurable work unit in both the less impacted and the impacted project area or time frame.
The difference in productivity rates produces an impact percentage necessary to compute the unimpacted or less impacted labor hours on the project. Using the Measured Mile method, the contractor’s labor tracking system needs to be sufficiently detailed and accurate to assess the actual labor hours expended on the work activity by way of an “after the fact” material take-off.
The Measured Mile comparisons between the less and more impacted project areas or time frames determine how long tasks should have taken. Measured Mile analysis can be performed on previously completed projects.
The Measured Mile method has the advantage of avoiding reliance upon the claimant’s bid estimate or labor plan. Only the actual labor expended on the project is used in the quantification of LoP.
In 1971, the MCAA published “Factors Affecting Labor Productivity.” The factors listed in this study have been used in many claims to quantify a contractor’s LoP. Moreover, the MCAA Factors have been broadly accepted by courts, boards of contract appeals, and arbitration panels as a reasonable means for a contractor to quantify (estimate) a project’s LoP.
The MCAA LoP Factors apply to mechanical, electrical, and plumbing contractors and industry-wide accepted. The MCAA Factors contain many categories of LoP impacts that can occur on construction projects. Within the 16 MCAA Factors, the following list (as numbered by MCAA) may apply to many COVID-19 impacted construction projects:
#1. Stacking of Trades.
#3. Reassignment of Manpower (Disruption).
#4. Crew Size Inefficiency.
#5. Concurrent Operations.
#6. Dilution of Supervision.
#7. Learn Curve.
#11. Site Access.
#12. Logistics (Material Supply Chain).
#14. Ripple Effect.
#16. Unanticipated Weather Impacts.
Each MCAA factor description is associated with a degree of intensity: minor, average, and severe.
The factor descriptions and related intensity levels must be assigned to the specific project by those knowledgeable (e.g., forepersons, superintendents, project managers, etc.) about the project’s conditions. Once the MCAA Factor categories and intensity levels are selected for studying the specific project, the impacts’ timing must be identified. Because the impacts in the LoP are seldom linear for a project, MCAA recommends the Factors be applied in a temporal manner (e.g., LoP impacts measured over time).
Regarding COVID-19, LoP impacts (e.g., hours) may fluctuate over time. These fluctuations may arise from changing governmental regulations, new protocols to prevent the virus’s spread or changes in the outbreak’s severity. COVID-19 LoP claims may range from a historical period to the present to sometime in the future, depending on the REA’s nature and structure.
The actual labor hours expended in a historical period will have the inefficient LoP hours embedded in them when recorded by the claimant. Thus, the actual hours in a COVID-19 LoP analysis will have to be factored differently from the prospective study’s LoP hours.
Experts strongly recommend that MEP Contractors thoroughly review MCAA’s guidelines and consider the delay implications of Project-Specific LoP.
Another approach that can help contractors and owners assess the impact of virus-related delays is the Ibbs Study method developed by Ibbs Consulting Group.
This model can be used to assess the impact consequences of COVID-related changes. For example, a project that originally had 10,000 labor-hours of work plus 1,500 labor-hours of changes identified as directly related to the virus (e.g., cleaning time, rework time, extra travel time, etc.). Then, the delays caused by COVID would amount to 15% (10,000/1,500). For a median timing project, the PI would be 0.80, or a 20% loss of productivity. That 20% factor would then be multiplied by the number of labor-hours expended during the time of the virus’s influence on the project. source: Ibbs
When planning to use the Ibbs study method statistical analysis, both the contractor and its expert analyst need to understand how the data were collected, the types of projects included, and changes in each project.
The expert analyst should be able to describe how:
— Change-related labor hours were collected.
— Timing of the changed work was established.
— Actual contract labor hours were computed.
The formula for calculating the loss of labor productivity requires potential adjustments to the labor hour data. For instance, the MEP contractor’s estimate needs thorough evaluation to determine its accuracy. If errors are found, those hours must be adjusted in the calculation. Similarly, adjustments to the actual hours must be made if any self-inflicted errors are identified, such as field execution or bid errors by the contractor.
While the modified total cost (labor hour) method (MTC) of quantifying labor inefficiency is one of the least popular methods, it does have a value in virtually any LoP REA. One advantage of this approach is demonstrating the actual labor hour loss on the project to the owner, prime contractor, or stakeholder who will review the REA or claim. The MTC is more of an “approach” than a “quantification method” because it identifies adjustments that the claimant has taken to reduce the final unallocated labor loss amount.
Claimants frequently use this approach in conjunction with a more definitive methodology, such as Measured Mile analysis or the MCAA Factors method. The MTC method shows the claimant’s maximum recovery and compares that amount of labor hours with the hours derived from the other method used.
Be aware that when including an MTC component in an REA, you may be faced with the four-part test:
The nature of the claimed losses makes it near impossible to determine damages in any other, more particular manner.
Your bid estimate was reasonable and free from measurable errors.
Your actual costs were reasonable, and that the claimant attempted to, or did, mitigate a portion of the damages.
You were not responsible for the events leading to the damages.
The COVID-19 pandemic has had a significant effect on contractors’ labor productivity, increasing project delays. MEP contractors pursuing a REA or claim should carefully follow all correspondence and quantification requirements contained in the contract.
Once an MEP Contractor determines that:
(1) There has been harm not of the contractor’s own making,
(2) Entitlement to recovery exists, and
(3) The harm can be identified and quantified; they should then undertake a careful review of the potential recovery methods.
The approved methods discussed in this article are designed to help MEP Contractors understand at the high-level the best options available to enhance the potential of recovery or relief.
Disclaimer Notice: As noted above, MEP contractors should have their experienced legal counsel, consultants, and construction personnel, perform a thorough review of the contract documents, correspondence, pertinent change orders, pay applications, and governmental directives before pursuing a delay REA or COVID-19 LoP.