Often, productivity losses are associated with changed work or variations. Dealing with the calculation of proper compensation for this loss can be particularly challenging. Key industry resources or authorities may be helpful as a starting point. Beyond the industry resources, skilled analytical work may be needed.
My discussion is bifurcated / divided into situations using United States law and situations using English law. The English law discussion will follow in a subsequent post. It is important to note that McLaughlin & 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. For further information on M&M services, please see www.McLaughlinandMcLaughlin.com.
In the United States (and Canada, I believe), a commonly used resource is Calculating Lost Labor Productivity in Construction Claims, by William Schwartzkopf. In Chapter 4 – The Effect of Change Orders on Productivity, Schwartzkopf deals with key features of this subject. While his discussion relies heavily on published studies and literature, he weaves authoritative sources together into a compendium of useful resources. His discussion of the Leonard Study, which addresses the effects of changed work on the unchanged work, is useful and thus commonly cited. The impact factors are presented separately for Electrical/Mechanical and Civil/Architectural. The impact is expressed in percentage (%) of loss of productivity which is then applied to hours (man-hours) by the analyst.
Schwartzkopf concludes his discussion with §4.07 Case Law Support. All of the cited cases seem to be United States, causing a reader to conclude that the preceding discussions are relevant (at least) in U.S. situations.
In Schwartzkopf’s 2010 Cumulative Supplement (to the above original work), he expands his discussion to issues regarding the timing of the changed work / variations by William Ibbs. The results of work by Ibbs are presented in useful equation and curve formats. Further, Schwartzkopf discusses work by Ibbs, Nguyen and Lee regarding theory of cumulative impact. The case law support in the original work has been augmented. Again, the citations are U.S.
Another useful resource is published by AACE International. This AACEI document is the Practice Guide, Estimating Lost Labor Productivity in Construction Claims, AACE International Recommended Practice No 25R-03. This resource is particularly useful in selecting methodologies as well as other references and terminologies.
The references and resources I discussed previously represent a starting point for understanding and analyzing impacts associated with changed work. Actual analyses are complicated and require consideration of many factors. In subsequent posts, I will discuss some of these considerations and factors. Careful and thoughtful analyses are required in order to achieve fair and equitable compensation (money, time and other considerations) to the contractor(s) in situations where changed work / variations are significant.