Term Project Claims for Productivity Losses

CE-5014 Construction Claims Preparation and Analysis

CE-5014 Construction Claims Preparation and Analysis

TOPIC 3 CLAIMS FOR PRODUCTIVITY LOSSES
Introduction:
Construction resources constitute very imperative aspect of construction industry. Productivity of
resources which may be defined as quantity of work produced (or output yield) for every input (or
effort) made to achieve the said output, is thus of a very crucial consideration within any
construction endeavor. Similarly, like every other consideration within a construction context
where project stake holders are knitted in a contractual framework of rights, duties and liabilities
they owe or to each other or are entitled to thereof, any factor which may or have tendency to
adversely affect the construction productivities on account of reasons or causes which are
attributable to a one party to the contract, give rise to contractual liabilities and thus claims on part
of the other (aggrieved) party seeking relief against the losses incurred due to same.
Loss of productivity claims, where critical, poses unique challenges in matters of entitlement and
valuation both. Where, former deals with establishment of such assertion within a contractual
framework and applicable system of governing law thereby justifying actionability of such claim
within the said parameters, latter deals with the quantification of the same in manner, mode and
method acceptable and recognized in context of prevailing industry practices, project-specific
considerations and established judicial evaluations concerning the same.
The averment as to why it is difficult to establish legitimacy/entitlement of the productivity losses
claim and assess the quantifiable losses sustained thereat from perspective of both the Contractor
who asserts them in first place and client/employer who defends it subsequently, is due to fact that
multiple factors(causes) independently eventuates in their respective times or works in
combination to manifest a collective effect which overall influence project performance to a
minimum and cause variance between actual compared to planned expenditure of resources and
thus losses.
Literature Review:
The following highlights some of the prominent causes of productivity losses along with published
literature which was perused and studied to substantiate and streamline the causes so-described:
 Acceleration [1][2][3]: It is defined as consensual (in case of directed) or impliedly not
directed (in case of constructive) pacing up of a works to complete the works within
stipulated project duration. Acceleration results in augmented working hours with
obligatory overtimes, compulsory second shifts and/or the employment of labor exceeding
a manageable threshold that can be effectively managed or coordinated.
 Variations to Work (changes, rework, cumulative impact) [4][5][6]: Construction projects
are susceptible to changes and variations inevitably and almost all of the standard
conditions of contract (Fiddic, AIA, JTC etc.) allow for the said provision and set forth
complete procedure for authorization and incorporation of varied work within scope of
contract. It is noteworthy that major changes (cardinal changes), multiple changes and their
impact on unchanged work may impact productivity. Since it will generally and typically

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require contractor to remove/dismantled (old) work already in place, and will require him
to replan and re-sequence work the entire work.
 Learning Curve Consideration [7]: Learning curve corresponds to learning pattern of the
labor crews involved with the construction work as they tend to become familiar with the
project, its requirements, its pace, the applicable standards quality, locations, etc. initially
at the start of works. Generally, as the time progresses, they attain increased level of
productivities in respective trades. This incongruity between productivities on account of
learning curve formation is deemed to be included in bid costs and forms part of
contractor’s risk in pure form. However, for a project which is subject to suspension and
work stoppages for reasons not forming contractor’s risks, labor crew may be laid off and
then re-brought to site upon resumption. Such circumstances results in dual or multiple
learning curves which are unanticipated impact to labor productivities and affect them in
adverse manner.

 Project Characteristics [8][9]: Project characteristics includes but are not limited to
project’s magnitude, its complex nature, the construction schedule, the delivery method,
the payment schemes the local labor availability, the location, and other contemporary
opportunities available to labor/other resources in shape of other ongoing projects. It is
again worth mentioning that most of these are apparent at the time of bidding and are
deemed to be reflected in project estimates thereby forming contractor’s risk. However, if
these characteristics are altered and varied substantially during performance there is a
likelihood of planned scheme of things falling apart and due to altered working conditions
shortage or redundancy of construction equipment or labor is experienced, thereby
effecting productivities as different mix and matches of labor crews may fell prey to
decreased productivity because crews may not be able to work as efficiently as they would
otherwise do.

 Weather Issues [10]: Weather conditions inherently have adverse impact on labor
productivity. The severity of an exceptional weather condition or high frequency of
relatively mild weather condition both when experienced expectedly or unexpectedly can
hamper the rate of progress. Extreme heat, thwarting cold, inclement weather, heavy winds
and snowfall are typically considered as extreme weather situations. Provision of force
majeure typically present in standard contract forms can preempt productivity losses under
such circumstances thereby compensating contractor on other basis other than the same but
where owner changes work or compels Contractor to perform, the productivity losses occur
as a consequence.

Apart from the aforementioned causes which may be referred to as primary or prominent causes
of productivity losses, literature available and perused for this study substantiated several
secondary causes which have tendency to culminate in such losses as consequence upon their
manifestation. These included [11]:

 Absenteeism and missing man syndrome

 Availability of Skilled labor/craftsman
 Crowding of labor or Over-manning
 Disruption or out of sequence work

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 Untimely approvals or responses

 Excessive overtimes and Fatigue
 Dilution of supervision

Measuring Productivity:
Measuring construction productivities in first place can be equally complicated as establishing
entitlement and consequent losses since all factors effecting the same as discussed in previous
sections are all of due consideration while theoretically calculating the same. However, collecting
and analyzing physical data in real time during course of performance is an established best
practice. It is noteworthy that productivity inherently is dynamic in nature in perspective of
discussion pertaining evolving learning curve that a deployed resource have to go through, also
covered in detail in previous section. The three phases as identified by Gerald [10] are relatable in
this context, it comprises of learning, production, and closing. According to him, the initial
subphase of learning, during the first 10 to 20% of an activity, corresponds to low productivity but
steady growth. The production subphase is subsequently is the period of highest output
corresponding to a minimum of 20 to 80% of physical progress, depending on the degree of
learning potential and complexity of work. The closing subphase, contributes merely to 10 to 20%
of physical progress of an activity, reflects the usual slowdown in production accounting for
corrective work and remedial works.

This section shall now elaborate on the use of calibration curves and a standard manual namely:
Manual of Construction Productivity Measurement and Performance Evaluation, a May 1988
report to the Construction Industry Institute [12] which provides basic guidelines for analyzing and
evaluating the productivities.
Calibration Curves:
Calibration curve may be developed from well-documented and logged records of actual data of
work of similar nature. This statistical exercise requires actual data from projects historically
performed by the contractor organization sorted in sufficient details of their respective trades and
categories. The efficacy of the developed curves is heavily dependent on quantum of actual data
feed in for the development of same and conditions applicable with reasonable degree of
consistency. The developed curves can then be used to evaluate productivity performance. An
example of a developed Calibration curve is illustrated in figure1 below:

Figure 1 Calibration Curve of Productivity Performance (source Gerald and

Eric [10]

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Illustrated in the figure, an allocated budget for particular work is 114,000 work hours. Thus every
1% of work equates to 1140 work hours. The dotted line represents an average or pro-rata of
budgeted work hour equally divided from 0% to 100% (the idealist theoretical assumption).
The solid line calibration curve shows a trend of increase work-hour in the start, optimal at the mid
and ending on the higher side as discussed before. The actual workhour plotted till 50% physical
progress shows how the cumulative performance would differ during the execution of the work.
The calibration curve at 100% physical completion must equate to the budgeted work hours. Thus
a comparison could be posed while evaluating planned vs. actual budgeted hours. The trend of
actual cumulative productivity performance can be calculated as actual work hours divided by
actual physical progress (physical progress percent complete multiplied by actual total quantity of
work). This enables a comparison between planned and actual productivity at any half way mark
between 0 to 100 % and can be very imperative when attempting to recover productivity losses
costs or defend against such claims.

Manual of Construction Productivity Measurement and Performance Evaluation (1998)

Manual of Construction Productivity Measurement and Performance Evaluation (1998) sets forth
following steps which a performance evaluator must take in order to efficiently measure and keep
track of productivities:
 Establish control accounts to group related activities each of which has a distinct level of
effort requirement or degree of difficulty associated with them. These accounts may be
classified on basis of disciplines or further divided further to cater further control needs as
may be required.
 Acquire budgeted work hours and quantities for each established control account.
 Set up an earned value analysis, which assesses the progress of control account. The weight
assigned to each individual account in the control account maybe based on the initial work-
hour estimate for the account compared to the sum of the initial estimated work hours for
all accounts in the control account. As part of the earned value analysis, ‘‘rules of credit’’
may be established which may be further allocate weightage or credit for individual work
steps within an account. e.g., in case of Construction work of drainage cells, 20% credit to
excavation and lean, 30% credit to bed reinforcement and concrete, 30% credit to wall
reinforcement and concrete and 20% credit to reinforcement and concreting of top slab.
 Monitor and assess actual quantity and work-hour information once work starts on a
project, the performance evaluator collects and reports. Quantity reporting provides
periodic reporting of actual quantities installed for a control account.
 Finally, compares actual progress from the earned value analysis and productivity to the
control budget. This includes a comparison of the quantity installation rates and work hour
consumption rates.

Claims for Productivity Loses under Standard Forms of Contracts:

In this section Standard form of construction contracts are studied and clauses which pertains to
claims under productivity losses are documented hereunder. For the purpose of this paper, the
discussion shall be restricted to three standard form of contract including FIDIC (The International
Federation of Consulting Engineers) Red Book 1987(reprinted 1992), American Institute of
Architects (AIA) Document A201 General Conditions of Contract for Construction 2017 and JTC
Standard form of Building Contract 1998.

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FIDIC (The International Federation of Consulting Engineers) Red Book 1987:

FIDIC (Fédération Internationale Des Ingénieurs-Conseils) Red Book 1987 is a widely accepted standard contract form for Civil
engineering construction works. First published in year 1957, it was aimed at the Civil Engineering sector and became known for the
color of its cover, and thus, The Red Book as one of the most prominent documents in international construction contracts. On the matter
of productivity losses and thus claims however, FIDIC subject publication does not entail or include an expressed provision for the
productivity losses. Nevertheless, it does entail clauses and provisions for contractor to claim for compensations against losses incurred
due to events or consequences that may eventuate and/or experienced in performance of construction contracts and are attributable to
employer of the contract. The table below summarizes the clauses within Fiddic said publication:
S No. Clause Actual Excerpt of Clause(s) Description/Interpretation
1 6.4 Delay and In matter of delays attributable to non-timely or late issuance of
Cost of Delay of drawing or instruction by the Engineer, Contractor may be
Drawings entitled to time extension and additional costs after
determination by the engineer and subject to fulfillment of other
procedural requirements under relevant clauses. Here scope of
‘additional costs’ so-referred can be extended to entail cost
incurrence due to productivity losses.

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2 12.2 Not In matter of delay experienced due to occurrence or

Foreseeable manifestation of unforeseeable physical obstruction or physical
Physical condition which could not have been otherwise reasonably
Obstruction or anticipated by an experienced contractor then on close scrutiny
Conditions of the same by the engineer, Contractor may be entitled to time
extension and additional costs subject to fulfillment of other
procedural requirements under relevant clauses. Here scope of
‘additional costs’ so-referred can be extended to entail cost
incurrence due to productivity losses.

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3 40.2 Engineer’s In matter of delay experienced due to Engineer directions to

Determination suspend works and progress thereof, pursuant to clause
following 40.1[Suspension of Works], Contractor may be entitled to time
suspension extension and additional costs after determination by the
engineer and subject to fulfillment of other procedural
requirements under relevant clauses. Here scope of ‘additional
costs’ so-referred can be extended to entail cost incurrence due
to productivity losses

4 42.2 Failure to In matter of delays attributable to failure of employer to give

give possession contractor possession of site, Contractor may be entitled to time
extension and additional costs after determination by the
engineer and subject to fulfillment of other procedural
requirements under relevant clauses. Here scope of ‘additional
costs’ so-referred can be extended to entail cost incurrence due
to productivity losses.

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5 53. Contractor’s The procedural clauses provide complete process to Contractor

Claims to contractually assert for claims including serving of notices
within stipulated fixed timelines, maintaining and keeping
temporary records and procedure to substantiate claims within
stipulated fix timelines. The scope of procedure set forth for
claims can be extended to cover productivity losses claims.

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8 20.4 Pursuant to Clause 65.3 of these conditions Contractor is entitled

Employer’s to payments as additional cost within contractual sum for any
Risks materials or Plant so destroyed or damaged and any rework
required thereof if such damage is sustained destruction or
damage by reason of any of the said Employer’s risks including
war, hostilities, ionizing radiations, nuclear radiations, pressure
waves, riot, commotion, disorder, operation of natural forces,
loss due to occupation by land under employer’s use. The scope
of such additional sum may be extended to incorporate cost
incurrence due to productivity losses in event of the same arising
out of such events

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9 65.5 Increased Incurrence of any cost as a consequence of any event which may
Cost arising be attributable to special risks as set forth in the previous
from Special subclause, Contractor may be entitled to time extension and
risks additional costs after determination by the engineer and subject
to fulfillment of other procedural requirements under relevant
clauses. Here scope of ‘additional costs’ so-referred can be
extended to entail cost incurrence due to productivity losses

American Institute of Architects AIA Document 2701 -2017 General Conditions of Contract for Construction:
AIA Document A201–2017, General Conditions of the Contract for Construction, is considered a prominent standard document within
United States for construction contracts under which the Owner, Contractor, and Architect works in collaboration for building
construction process. Through its terms and drafted clauses, it streamlines stakeholder’s relationships within context of medium to large
size or complex construction project. Regarding claims pertaining to productivity losses, AIA standard form like Fidic standard
conditions does not entail express provision on the said matter. Nevertheless, it incorporates scenarios and circumstances on account of
which contractor can assert claims to owner for risk events attributable to owner. The following table summarizes relevant clauses from
the general conditions:

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SN Clause Actual Excerpt of Clause(s) Description/Interpretation

O.
1 3.2.4 In matter of delays experienced due to non-timely or late
responses against requests for information, clarification of
drawing or instruction by the Architect, Contractor may be
entitled to time extension and additional costs subject to
fulfillment of other procedural requirements under relevant
clauses. Here scope of ‘additional costs’ so-referred can be
extended to entail cost incurrence due to productivity
losses.
2 3.7.4 In matter of delay or disruption due to concealed or
unknown conditions experienced at site then subject to
fulfillment of other procedural requirements under relevant
clauses, Architect is under obligation to evaluate such
conditions, recommend equitable increase to Contract sum
giving notice to other party as well. Failing which
Contractor may claim for the same. Here scope of
‘equitable increase to Contract sum’ so-referred can be
extended to entail cost incurrence due to productivity
losses.
3 7.3.9 In matter of nature, quality or quantum of work scope
added, varied, changed or altered through Change
Directive, Architect is under obligation to determine cost,
adjust contract sum and certify payments to Contractor
thereof. Failing which Contractor may claim for the same.
Here scope of ‘adjustment to Contract sum’ so-referred can
be extended to entail cost incurrence due to productivity
losses.
8 15.1.5 A general procedural clause relating to contractor claims
for additional costs. Puts Contractor’s under responsibility
to intimate his intend to claim for additional cost against
works before executing them.

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JTC Standard Forms of Building Construction Contract:

The Joint Contracts Tribunal (JTC) standard forms of contract are produced and employed for construction guidance notes and other standard
documentation within context of United Kingdom Construction industry. JTC Standard Forms of Building Construction Contract 1998 is a prominent
contract document suitable for major works which are partly or wholly building and/or engineering whereby the contractor is the constructor or
executor of the work whereas design falls within domain of professional consultants engaged by the employer. A major distinction within JCT
subject condition compared to formerly discussed AIA and Fidic conditions is that it entails an expressed provision to claim from losses arising out
of circumstances of which employer is responsible thereof.

SN Clause Actual Excerpt of Clause(s) Description/Interpretation

O.
1 4.20 Pursuant to provision of the subject clause, contractor
is entitled reimbursement against loss incurred and/or
additional expense as a consequence of either of the
two circumstances i.e., Deferment of giving
possession of site and where works are materially
affected by any ‘Relevant Matter’ (Description of
Relevant Matter is detailed under subsequent clause)
4 4.22(i) The ‘Relevant Matter’ under which Contractor is
entitled to compensation are:
 Variations which include alteration,
modification, addition and/or deletion to
5 4.22(ii) added scope of works.
 Disruption to Contractor progress of works
caused by Architect by means of instruction to
Postponement work or part of works
 Opening any part of works for inspection and
testing which is unscheduled and not provided
for within original work scope of works
 Delay/Disruptions due to Discrepancies
within or Defective documents, instructions,
drawings or contractual design documents of
which contractor is not liable or share onus of
 Instructions by Architect to suspend progress
in case of discovery of fossil, antiquity and/or
relevant objects

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5 4.22(iii)  Any work impediment, prevention or default

attributable to any other entity besides
contractor
 Any risk scenario, circumstance of event
incorporated within contract my means of a
supplemental provisions to the contract

2 4.21(i) The procedural clauses provide complete process to

Contractor to contractually assert for claims including
serving of notices within stipulated fixed timelines,
maintaining and keeping temporary records and
procedure to substantiate claims within stipulated fix
timelines. The scope of procedure set forth for claims
can be extended to cover productivity losses claims

3 4.21(ii)

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Proving Entitlement for Productivity Losses:

The challenge while establishing a productivity loss claim is to substantiate the root cause
manifesting into the same, its attributability to the responsible party and ascertaining the
quantum/magnitude or financial translation of such lost. Since productivity losses can result from
different events, their proximate consequences and/or parties having different stakes and also
because evaluation and quantification of such losses are not standardized.

According to Geralds [10], in order to recover additional compensation for project inefficiencies
due to productivity losses, the contractor must prove:
a) liability, i.e., the owner was contractually responsible for the impact;
b) causation, i.e., the impact caused the contractor resources overruns; and
c) Resultant cost increase, i.e., the impact actually caused a compensable loss

It could simplistically be inferred that in order to be compensated for lost productivity, the
contractor has an onus to prove that a work activity was subjected to impairment or containment
due to actions or omissions of owner who bears responsibility of the same within a contractual
arrangement. This would be tantamount to demonstrating that for typical sequence carrying out
work and/or construction activities, owner actions or omission disturbed, impaired or effected the
expected level of performance of Contractor resources calculated/estimated in view of known
circumstances and/or consideration at time of bidding or procurement of Contractor entity.

It is noteworthy, that productivity losses costs are not limited to labor inefficiencies, the
phenomena could also be extended to account for equipment and even material inefficiencies. In
matter relevant to manner of claiming for equipment and material, however, very much in lines of
the formerly discussed, is the same where the contractor has to demonstrate that its use of
equipment was impacted by owner-caused disruptions to be able to recover the resulting
inefficiency costs.

The section shall now bring into light caselaw pertaining to subject matter wherein, decisions from
U.S. federal boards of contract of appeals, which gave guidance into the proof required to recover
construction inefficiency costs, shall be discussed as follow:

Veterans Administration Board which is an administrative appeals board of the U.S. Department
of Veterans' Affairs in United State gave detailed opinions on the subject with respect to lost
productivity arising from the cumulative impact of multiple changes.

In matter of Centex Bateson [14] for contractual claims arising out of contract for hospital
construction project by contractor who claimed compensation for direct and indirect costs against
constant works suspensions, construction changes, rework etc., the Board, inter alia other claims
upheld the inefficiency claim by the Contractor. It formulated a ‘fundamental traid of Proof’ that
are necessary to recover productivity losses cost. These included Liability, Causation and resultant
injury.

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The board while applying the triad of proof held that the contractor fulfilled the first ingredient of
liability since on assessment of cumulative of events attributable to owner, government(owner)
was responsible of changes. This was well-substantiated through record of relevant notices,
instructions and letter correspondences addressed to contractor by government. While applying
second element of causation, contractor had burden of proof that government directed changes
were ‘unreasonable’ in purview of a defined or prescribed limit as inferred from or allowed within
the contractual framework and such changes have a proximate relation or a causal linkage to labor
(or resources) overruns and hence to productivity losses. The board contemplated that Contractor
could carry the burden by proving that the resources’ inefficiencies would not have been
experienced otherwise, had the government not instructed changes. But in absence of
contemporaneous, detailed, objective logs and other records relating to the performance of
labor(resources) in as-bid conditions compared to impacted conditions in ascertaining productivity
lost, Board held that the contractor has failed to show that the directed changes in their entirety
and consequent events (attributable to government) actually caused the disruption in labor
productivity and thus failed to establish its entitlement.

In Clark Construction Group, Inc [15], the Veterans Administration Board applied the established
‘triad of proof’ established in previous case and evaluated a matter of claim by subcontractor in
another large hospital project for compensation against productivity losses on merits of the
established rule. The subcontractor’s contentions in advancing his said claim included:
1) temporary suspension by client which caused disruption in work sequence and
subcontractor was compelled to work only after preparation of coordination drawings
2) changed site conditions on account of wet conditions which materially differs from As-bid
conditions and was due to actions by owner and his representatives
3) late responses to contractor queries and requests for information resulting in slow progress
of works and hence losses due to productivity

Applying the established rule, on matter of proving liability, the Board evaluated each assertion
sequentially. As such, pertaining to the alleged out-of-sequence work, Board found that it was
inevitable to work otherwise had the work sequence not been re-sequence in view of the
circumstances all of which could not be attributable to government therefore the government could
not be solely held liable for productivity loss in its entirely.

With respect to the subcontractor’s lost productivity claim on account of untimely responses to
RFIs, Board analyzed that since the contract did not expressly stipulates a particular timeline for
the government to response to RFIs, the government was merely under compulsion to respond it
within reasonable time and since subcontractor could not show that the response time was
unreasonable, the assertion was hence inadmissible.

Applying rule to establish causation, Board found that the subcontractor could not substantiate late
responses to RFIs caused or accounted for labor disruption merely by presenting expert testimony
on subject matter. Conversely the Board urged to the review and perusal of daily logs, CPM
fragments, correspondence and other contemporaneous documents to proof that working
conditions were change and varied and those changed working conditions disrupted the

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subcontractors labor and manifested into productivity loses. It is pertinent to note here that Board
held, that although late RFI responses did not disrupt installation nevertheless the same did disrupt
and delay the preparation of coordination drawing for which the government was found partially
responsible of.

Another resolution Boards namely: Engineering Board of Contract Appeals, in matter of Lamb
Eng. & Constr. Co [16]. have allowed the contractor to recover for lost productivity due to
additional site work since actual site conditions differed from As-Bid conditions. The contention
by the Contractor was based and built upon on solid footings of relevant contemporaneous record
in form of video recordings and documented evidences supported by neutral expert opinion which
was made available on record. Video records as well as other documents used by the contractor
proved imperative while establishing the causation or causal linkage between the differing site
condition and the alleged lost productivity. The decision by the Board in favor of the contractor
who having demonstrated the detailed analysis of his claim and establishing causation of his
experienced inefficiencies for reasons within owner’s control, claimed and was subsequently
entitled to compensation.

Quantifying Quantum of Productivity Losses:

Typically, upon establishment of liability and causation in subsequence, quantification and thus
determination of cost incurred as result of productivity loss is challenging. The process may call
for a through evaluation by contractor of its planned and actual man-hours after a detailed and
thorough estimation of productivities for different trade of works, the learning curve requirements,
the nature of project and within other considerations which have been dealt with in detail in earlier
sections of this paper. The irony, however is, given the subjectiveness and apparent remoteness to
direct costs of projects, such working in short term vision given low efficiency input to output
ratio), is overlooked and real-time data documents/records are not prepared or maintained. Thus,
rational estimations of actual work-hours particular to activities and individual project needs are
of scarcity. Although such data and records are crucial and key requirements for absolute
quantification of lost inefficiency costs caused by the owner.
Two standard documents namely “AACE International Recommended Practice No.25R-03
ESTIMATING LOST LABOR PRODUCTIVITY CONSTRUCTION CLAIMS [11]” and Society
of Construction Law Delay and Disruption protocol 2nd Edition [13] are perused for this paper and
standard methods for quantification of productivity losses are studied. The methods are typically
categorized on the basis of their applicability in project specific and industry specific context. The
methods within their respective categories and order of preference according to AACE
International Recommended Practice are enlisted as follow:
 Project Specific Studies
 Measured Mile Analysis
 Earned Value Analysis
 Work Sampling Method
 Craftsmen Questionnaire Sampling Method

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 Project Comparison Studies

 Comparable Work Study
 Comparable Project Study

 Specialty Industry Studies

 Acceleration
 Changes, Cumulative Impact and Rework
 Learning Curve
 Overtime and Shift Work
 Project Characteristics
 Project Management
 Weather

 General Industry Studies

 U.S. Army Corps of Engineers Modification Impact Evaluation Guide
 Mechanical Contractors Association of America
 National Electrical Contractors Association
 Estimating Guides
 Cost Basis
 Total Unit Cost Method
 Modified Total Labor Cost Method
 Total Labor Cost Method
For this paper, discussion will be limited to Measured Mile Analysis and Earned value Analysis
which are commonly employed methods for quantification of productivity losses and therefore
have prevalence in available case law pertaining to matters of productivity loss claims. In this
section both methods are described and subsequently relevant caselaw is made part of this paper.
Measured Mile Analysis
The Measured Mile Analysis involves a comparison of fraction/percentage of productivity
acquired/attained for activities or periods which were subjected to identified disruption events with
percent productivity achieved/attained on similar or like activities or periods of the works which
were not impacted by those identified disruption events. Where significant quantum of work is
completed on the project unimpacted or least impacted by the identified disruption/delay events,
such period and quantity of work can be benchmarked, subsequently for determination of
‘baseline’ productivity level for that part of the work. Physical work units completed divided by
hours expended to complete these work items determines productivity during the unimpacted
period. The calculation is then repeated for similar activities during period of the impact.
Resultantly, productivity loss can then be computed by subtracting the unit productivity rate during
the impacted period from the unit productivity during the unimpacted period.

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While the method is widely accepted, the measured mile analysis can be complicated and have
certain limitation to its use. These are documented in AACE International Recommended Practice
and summarized as follow:
1) Possible inconsistencies in comparison between impacted vs un-impacted period of works
in consideration of learning curve requirements. For example, it would erroneous to
compare work carried out in initial lower productivity part of learning curve of a project
with work executed after that period.
2) The benchmark period for establishment of baseline productivity period selected must be
sufficiently long to serve as a representative and credible sample of non-impacted
performance.
3) Where there is no completely unimpacted period or area of the same or a similar work
activity to act as the baseline with which to compare the impacted work activity, the
analysis is ineffective;
4) In case when the impacted work activity in respect of which the loss of productivity is
being measured was also impacted by matters not giving rise to entitlement to
compensation, this requires the need to calculate productivity adjustments during analysis

Nevertheless, several federal court cases in context of US Construction industry have upheld use
of the measured mile technique. The subsequent section will briefly discuss prominent one of them
with key facts, findings and court’s decision.

E.C. Ernst, Inc. v. Koopers Company,

Natkin & Company v. George A. Fuller Company

United States Industries, Inc. v. Blake Construction Company, Inc.,

Appeal of Batteast Company,

Clark Concrete Contractors, Inc. v. General Services Administration.

Lamb Eng. & Construction Co.

P.W Construction Inc vs United States

Earned Value Analysis

The Earned Value Analysis employs utilizing a fixed number of man-hours reasonably for
completing certain work activities based on his budgeted man-hours or equipment units for those
activities approximated and intimated to client/employer at the time of bid submission. Such
estimated man-hours for different activities or trade of work may be referred to as tender allowance
for a particular activity. Analysis requires comparison of tender allowance with the actual man-
hours expended as the work progresses. The man-hours are ‘earned’, every actual utilization of a
resource. For instance, according to Contractor’s tender allowance that it would take 14 man-hours
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of steel fixing labor to execute 25 Tons of reinforcement at site, when 7 man-hours have been
expended, those man-hours have been ‘earned’ and, notwithstanding any flawed or over-optimistic
Contractor’s bid assumptions and disruption events, the Contractor must have achieved 50% of
the steel fixing work activities.
However, if in actual execution the Contractor utilized 24 man-hours to execute 25 Tons of steel
reinforcement, again, notwithstanding any flawed or over-optimistic Contractor’s Bid assumptions
and disruption events which are the Contractor’s responsibility, the additional 10 man-hours
beyond the assumed 14 man-hours is the consequence of the productivity loss.

The analysis can also assess the man-hours expended in particular periods of time. Where details
of planned and actual manhours are not available, an earned value analysis might focus upon cost.
See paragraph 18.9 above against automatically applying original tender assumptions.Productivity
measurement is sometimes difficult when there is insufficient information concerning the physical
units of work installed on the project. In these situations, a simplistic form31 of the earned value
analysis method can be utilized to calculate estimated labor hours.32 The contractor’s estimate or
alternatively the dollar value of payment applications, contract amounts or unit prices can be used
to determine labor hours, when they were expended and, possibly, on what activities.33 Physical
units of work completed multiplied by budget unit rates can be used to determine earned hours.
The earned hours are then compared to the actual hours expended for the period of the impact and
the difference between the two may be used to calculate the productivity loss experienced. Earned
value measurement of contemporaneous project documentation, such as percentages complete
from schedule updates or payment applications can assist with calculating labor productivity.34
Additionally, the claimant may calculate the actual revenue per hour of labor versus the planned
revenue per hour, as an alternative.35 Earned value analysis may also be utilized to calculate
estimated labor hours.36 When using the earned value analysis technique, it is cautioned that the
budget used to generate the earned value metrics be carefully reviewed and verified for
reasonableness. Any earned value analysis based upon an unreasonable budget is highly suspect.
Finally, it is noted that a fully resource loaded (labor and quantities) CPM schedule is a good
source for obtaining earned value metrics and allows for like-time causation analysis.

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Where the Contractor is considering implementing acceleration measures to avoid the risk of
liquidated damages as a result of not receiving an EOT that it considers is due to it, and then
pursuing a constructive acceleration claim, the Contractor should first take steps to have the
dispute or difference about entitlement to EOT resolved in accordance with the contract dispute
resolution provisions. Otherwise, there is the risk that it will not be entitled to compensation for
those acceleration measures. In any event, before pursuing any such acceleration measures, the
Contractor should provide notice with particulars of the intended acceleration measures to the CA.
The Contractor should then include such measures in a revised programme. Just because the
Contractor implements measures to recover Employer Delay does not necessarily mean that the
full costs of those measures were caused by the Employer Delay. For example, the addition of a
second labour gang may permit the relevant work activities to be completed in a shorter period of
time but, overall, the Contractor may have incurred the costs of the same number of man-hours
as it planned to do. Of course, the Contractor may incur higher rates in engaging the two labour
gangs later in time because of the Employer Delay. Any such incremental costs therefore should
be compared with prolongation costs that would otherwise have arisen to identify whether those
incremental costs are reasonable. Further, any resulting crowding of labour may lead to loss of
productivity which could then form the basis of a disruption claim
Among myriad other factors which can culminate in productivity losses, some notable of them
includes: Project environment, working conditions at site, project execution management, labor
availability and market conditions, time management and weather issues.
For the term paper, therefore, available literature on construction productivity losses is reviewed
and shall be documented as part of the final report. The established factors for productivity losses
discussed hereinabove are studied and standard methods for calculations of productivity losses are
perused including “Manual of Construction Productivity Measurement and Performance
Evaluation, a May 1988 report to Construction Industry” and “AACE International Recommended
Practice No.25R-03 ESTIMATING LOST LABOR PRODUCTIVITY CONSTRUCTION CLAIMS”.
In parallel, Society of Construction Law Delay and Disruption protocol 2 nd Edition is also reviewed
and its alignment with the aforementioned methods is studied subsequently.
In continuation thereof, literature relating to established, tried and tested mechanisms or
approaches of productivity loss estimations are examined. These shall include:
 total cost/modified total cost approach;
 measured mile approach (differential studies);
 established industry studies
 jury verdict

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In subsequent manner, Standard form of Contracts including FIDIC, AIA and JCT standard forms
of Building Contracts are studied in prevalence of productivity losses with extra focus given on
expressed or implied rights to claim under contract and procedure describe therein to claim
pursuant to the relevant clauses.
Additionally few judicial decisions in international context pertaining to subject matter shall be
made part of the final report with all necessary findings of Veterans Administration Board which
is an administrative appeals board of the U.S. Department of Veterans' Affairs in United State.
Finally the term report shall conclude its findings in a conclusion and contemplate on possibility
of applicability of the loss of productivity claim entitlement and its resultant valuation in local
context with future recommendations.

References:
[1] Construction Industry Institute, CII Research Summary RS 6-7, Concepts and Methods of
Schedule Compression, Austin, Texas, November 1988
[2] Jensen, Donald A. and Albert Pedulla, Construction Acceleration: Recognizing the Necessary
Legal Elements for a successful Claim by the Contractor, ASC Proceedings of the 31st Annual
Conference, Arizona State University, April, 1995
[3] Singh, Amarjit, Claim Evaluation for Combined Effect of Multiple Claim Factors, Cost
Engineering, Vol. 43, No. 12, pp 19 – 31, December 2001.
[4] Borcherding, John D. and L.F. Alarcon, Quantitative Effects on Productivity, The Construction
Lawyer, Vol. 11, No. 1, 1991.
[5] Committee on Construction Change Orders, Construction Contract Modifications: Comparing
the Experience of Federal Agencies with Other Owners, Building Research Board National
Research Council, Washington, D.C., 1986.
[6] Hanna, Awad S., Jeffrey S. Russell, Joel Detwiler and Pehr Peterson, Quantifying the
Cumulative Impact of Change Orders, Preliminary Report, July 6, 1999.
[7] Emir, Zey, Learning Curve in Construction, Revay Reports, Vol. 18, No. 3, October 1999.
[8] Construction Industry Institute, Engineering Productivity Measurement, CII Research
Summary
RS156-11, Austin, Texas, December 2001.

[9] Daytner, A.D. and H. Randolph Thomas, Jr., An Analysis of the Interaction Between the Effect
of
Learning and Efficiency Losses Caused by Weather, Construction Management Research Series,
Report No. 21, 1985.

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[10] Gerald P. Klanac and Eric L. Nelson, Trends in Construction Lost Productivity Claims, J.
Prof. Issues Eng. Educ. Pract., 2004, 130(3): 226-236
[11] AACE International Recommended Practice No. 25R-03 ESTIMATING LOST LABOR
PRODUCTIVITY IN CONSTRUCTION CLAIMS TCM Framework: 6.4 – Forensic Performance
Assessment
[12] Thomas H. R., and Kramer, D. F., ‘‘The Manual of Construction Productivity Measurement
and Performance Evaluation, a Report to the Construction Industry Institute,’’ Univ. of Texas at
Austin, May 1988.
[13] Society of Construction Law Delay and Disruption Protocol 2 nd Edition February 2017
[14] Centex-Bateson Construction Co., Inc., VABCA Nos. 4,613, 5,162 through 5,165, 99-1
[15] Clark Construction Group, VABCA No. 5674, 00-1 BCA
[16] Lamb Engineering & Construction Co. Eng. BCA No. C-9304172, 97-2 BCA

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