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