This is the seventh posting regarding labor productivity and disruption. The Subject Series can be viewed here. In large and complex projects, a prime contractor may or may not direct hire the field labor. Often, the field labor is hired by major subcontractors (contractors hired by prime contractor). Examples are civil, structural steel, mechanical, piping, electrical and controls.
For the prime contractor [or similarly for Owner/Employer], subcontractor productivity is seemingly not important or relevant. This is particularly true if the subcontractor in question is on a fixed price or fixed unit price contract. However, events that are created by Owner/Employer or Contractor that impact the subcontractor’s productivity create potential liabilities. Further, once the subcontractor discovers the loss, a claim is likely to emerge.
Consequently, positive action is needed. There is a legitimate need for the Owner/Employer and Contractor to be informed. Managerial overlay, visibility and attention are components in the overall project management challenge.
Case Studies
The following case study is in another post; but, is repeated as a relevant example. The first real project that I managed (after leaving military service) was (oddly enough) in a shipyard. Our company was a subcontractor in a multiple ship build. Prior to my arrival, the crews had completed 17 installations. The man-hour consumption was approximately 17 thousand per ship. I spent many hours in the work spaces (hot, humid and dirty) looking at the work and talking to the workers. Changes were implemented. The managerial considerations included both internal changes as well as changes at the interface between the prime contractor and the subcontractor. The last unit consumed six thousand man-hours (compared to the 17 thousand prior) for the same work.
In another case, on a large piping and mechanical erection contract, the subcontractor was to receive equipment and materials as free issue. Major delays in deliveries and subsequent issue impacted the subcontractor’s ability to plan and manage the work. Productivity issues were identified; but, not resolved contemporaneously. This led to a major dispute.
In yet another case, both mechanical work and electrical work were subcontracted. Major variances to plan occurred in material deliveries (prime contractor) and free issue services (Owner/Employer). Productivity tracking was not performed. Ultimately, both subcontractors recognized the impact and submitted (untimely) claims. Contemporaneous recognition and corrective action opportunities were missed. This led to major disputes.
Take Away
Regardless whether it is owner/employer, prime contractor, subcontractor or vendor/supplier, a thoughtful Project Execution Plan (PEP) is an essential part of the planning function. An element of the PEP should address labor productivity considerations including managerial considerations. Key Performance Indicators (KPI’s) that are aligned with the stakeholder and the objectives should be selected and implementation means and methods identified.
Sources of guidance are linked through the Resource Center Link page. Some of the key sources are:
- Construction Industry Institute [CII]
- Chartered Institute of Building [CIOB]
- Association for Advancement of Cost Engineers International [AACE]
- Project Management Institute [PMI] – Scheduling Community of Practice
- Project Management Institute [PMI] – Earned Value Management [EVM] Community of Practice
- US Army Corps of Engineers [USACE]
- Mechanical Contractors Association of America [MCAA]
- National Electrical Contractors Association [NECA]
Taking a few concepts and recommendations from the above sources, a partial list follows:
- Select baseline progress or earned value parameters that serve the intended purpose. Several may be required.
- Have a well established method for capturing labor man-hour expenditures and assigning the man-hours to tasks, activities or work packages.
- Contractors that direct hire labor should post and reconcile the man-hours to the payroll every week.
- Measure and record progress in a very disciplined and structured methodology.
- Calculate productivity in very frequent intervals or reporting periods (such as weekly).
- Analyze results and act promptly to evaluate and resolve variances quickly.
- Provide timely notice of potential influences or variances on productivity.
It is important to note that McLaughlin and McLaughlin [M&M] is not a law firm and is not intending to provide legal advice. M&M is a consulting firm providing (among other services) non-legal expertise in dispute resolution and litigation support. The Resource Center is for the convenience of blog visitors and M&M does not offer this for commercial purposes. For further information on M&M services, please see www.McLaughlinandMcLaughlin.com.