This is the tenth posting regarding labor/labour productivity and disruption. This contribution provides managerial considerations or issues regarding the impact of overtime on labor productivity. The Subject Series can be viewed here.
The impact of overtime on labor productivity is a relevant and serious consideration in many aspects of program and project management. In general, some of the points of concern include:
- “Project Management Plan – basis for the plan and related resource requirements”
- “Changed Work – both prospective and retrospective planning and pricing”
- “Delay Mitigation – planning and analyzing the options and related viability”
- “Schedule Recovery – methods, options and viability”
- “Forensic Analysis – claims for delay, acceleration and related impacts.”
Understanding the impact on labor/labour productivity and cost due to overtime is an essential skill related to both planning and forensic analyses. Remember, the impact on productivity applies to all hours worked, not just the hours associated with premium time costs. Hence, often the productivity impact is more costly than the premium time compensation component of the payroll costs.
The impact of overtime on labor/labour productivity is not limited to construction field labor. It presents in engineering, programming, consulting and other professional man-hours.
The following key references are provided and most are linked in the Resource Center.
- CALCULATING LOST LABOR PRODUCTIVITY IN CONSTRUCTION CLAIMS, William Schwartzkopf
- CALCULATING LOST LABOR PRODUCTIVITY IN CONSTRUCTION CLAIMS, 2010 Cumulative Supplement, William Schwartzkopf
- Overtime and Productivity in Electrical Construction, National Electrical Contractors Association (NECA)
- Modification Impact Evaluation Guide, U.S. Army Corps of Engineers
- Change Orders, Productivity, Overtime, Mechanical Contractors Association of America (MCAA)
- The Effects of Scheduled Overtime and Shift Schedule on Construction Craft Productivity, Construction Industry Institute (CII)
In order to level set the topic a definition is in order. Schwartzkopf defines overtime as follows:
“Overtime is the use of labor in excess of 40 hours per man week. (Union or project agreements may require payment of premium time for work in excess of certain hours per day for work outside certain times or on certain days.) Because overtime is paid at a premium wage rate, such as time and a half or double time, it is inherently more expensive because the cost per hour for the overtime hours worked is greater. It is generally acknowledged that working prolonged programs of overtime can cause reduced productivity; that is, the units of work produced (output) are less per hour. Reduced productivity is a hidden cost of overtime. (p 21)”
Schwartzkopf cites various reasons for managers choosing to work overtime:
“Overtime is worked on projects for several reasons. It can be worked on a sporadic or spot basis to handle unexpected problems or the finish time-critical work (such as concrete pours, getting ready for a concrete pour, and testing). It can also be used to produce more work in a given number of days through working more hours per day or more days per week. This may be necessary to overcome delays or because a project needs to be done in a less than optimum length of time for external reasons. Overtime is also worked on some projects as a way to attract additional workers because working overtime results in greater pay per week for the workers.”
Regardless of the reason for using overtime (less than the optimum productivity work schedule or work week), the impact on planning is very important. For example, a large greenfield or grassroots project will often have infrastructure (including construction support such as camps or lodging and local transportation) in the project scope of work. The design (including capacity) of this infrastructure may be influenced by the size of the field labor force. Since the size of the field labor force is influenced by the baseline productivity and planned project duration, the planned work schedule or work week is an important consideration.
Once the planned work schedule or work week is established and reflected in the Project Management Plan, departures from this baseline can have widespread impacts. For example, negative productivity impacts due to working additional hours per week may require added field labor workers. The additional staff may strain the limits of the project’s infrastructure.
Let us all attempt to approach the issue of labor/labour productivity with all the factors in an integrated manner. Labor productivity must be integrated with other related aspects of program and project execution planning or forensic analysis. In planning for these practices, consideration must be given to progress planning, labor/labour crew requirements, progress impacts and professional forecasts.
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.