Escalation of Labor Costs 179

Start Project Day 150 Day 310

570 Total Man-hours 860 Total Man-hours

at $34/hour rate at $36/hour rate

10-Day Scheduled
Owner Delay Pay Increase

Distribution of Carpenter Man-hours - Original Schedule

FIGURE 9.3

shifted into the period of the increased labor rate. The Contractor should calcu-
late $280 ($2/hour × 140 hours) for the escalated labor cost of the carpenters.

860 actual hours – 720 planned hours = 140 labor hours

140 hours × $2/hour wage increase = $280.00

In this example, the actual distribution of carpenter labor was caused solely by
the Owner’s delay. In a different situation, if the Owner can demonstrate that
this was not the case, then the delay damages would not include the escalated
labor calculation.
Of course, many projects do not have a resource-loaded CPM schedule
to allow a reasonably precise comparison between the planned and the actual
distribution of labor. Without the CPM schedule, the analyst can estimate the
planned labor distribution from the Project bar chart. The analyst can com-
pare the labor hours actually expended on the job (taken from the Project daily
reports) to the planned labor hour distribution. The following example illustrates
this procedure.

EXAMPLE 93
A Contractor plans to perform the work in accordance with the bar chart shown
in Figure 9.4. No labor hours are shown in the bar chart. Due to an Owner-
caused delay, the Contractor’s work is performed later than originally planned.
As a result, the Contractor experiences escalated labor cost on the Project, after
a rate increase (from $35 per hour to $36 per hour) went into effect on day 200
of the Project.
Figure 9.4 is the Contractor’s bar chart for the work as originally planned.
Figure 9.5 shows the actual bar chart for the Project, reflecting the delays. It
also shows the actual carpenter labor hours worked on each activity. These labor
hours were taken from the contemporaneously recorded Project daily reports.