Labor Productivity: Lost & Too Often Forgotten
At a given construction project, there are a number of entitlements for Contractors and Subcontractors – payment for work performed being an obvious one. Another less-appreciated entitlement is labor productivity.
Every Contractor and Subcontractor who bids on and enters into a contract for work has a right to be productive and efficient based on the Project information made available to them before the bid. (…unless they sign those rights away in the Contract they sign, which happens way more often than it should…)
Delays and disruptions happen in construction. They’re inevitable. And damages from delays come in many forms. But lost labor productivity is one of the most misunderstood and least appreciated forms of delay damages. Owner-, designer- or other Contractor-delays impact a given work scope by preventing crews from advancing through the Project per the bid schedule or sequence. And that causes labor to be significantly less efficient and productive than without those “predecessor delays”.
By the end of the job, delays caused by others can nearly double labor costs over what were originally estimated.
Before law school, working as a laborer on commercial projects, I ran a labor crew on the Peter B. Lewis Business School project at Case Western Reserve University. That project was designed with a unique, curved stainless steel roof and curling sections of brick and glass. It’s “something else…” as they say. As a result of the design and multiple design changes, the Project cost grew from a $40 million initial estimate to $61.7 million – yes, a +50% cost increase! Labor was a huge component of that overrun, and because of that building’s design issues, it’s difficult to imagine a lesser efficient project in the field. Lulls had to angle bundles of metal studs into existing second and third floor window openings, huge interior studs had to be fabricated on site from T’s and sheet metal and then handed one-at-a-time up scaffolding in the atrium from one crew up to the other on the next floor. The laborers and carpenters, typically rivals at each other’s throats on union jobs, routinely joked at how much tuition would have to go up after this Project was done.
As a side note, that design would later play a role in more problems. A few years later -an hour after my last law school final exam in the building immediately to the south- that same Business School was taken hostage by an armed man, who would kill 1 person and wound 2 others before being captured.
In expressing frustration with the SWAT team’s difficulty in getting to the gunman, Cleveland Police Chief Edward Lohn complained, “they were constantly under fire… and they couldn’t return fire because of the design of the building. They didn’t have a clear shot.”
I don’t know for sure whether the general contractor or the general trades sub at the Peter B. Lewis project recovered an amount for lost productivity – that was a bit “above my pay grade” at that time. They certainly should have!
But I say that with some skepticism because many contractors don’t pursue lost productivity claims. That could be because they don’t know they can, or they don’t maintain proper project records, or timely notify their customer of the impact, or properly track their labor cost increases, or include their lost efficiency as part of change order pricing. Or all of the above.
Contractors and subcontractors do not deserve to be led around a job aimlessly, directed unilaterally to serve the owner’s or designer’s needs, or misled into signing away rights to be made whole through the contract, lien waivers, or change orders. In fact, the law says that they are entitled to additional compensation for their increased labor costs and lost efficiency when they are disrupted, interfered with, or forced to modify or move their crews around in ways they did not anticipate.
The more aware contractors are of their rights and of the possible impacts they’ll face at a given project, the more able they’ll be to protect themselves in the heat of the moment, and keep their project numbers in the black.
