vertex - aace northeast total cost management symposium 2016

Key Challenges in Demonstrating Loss of Productivity Claims Based

on Specialty Industry StudiesAndrew Sargent, Amin Terouhid

Andrew Sargent, EIT Amin Terouhid, PhD, PMP

Goal

Identify challenges when using Specialty Industry Studies to calculate productivity loss and how to address them

Agenda

• Overview of productivity loss and quantification methods

• What is a Specialty Industry Study and when should you use them?

• Challenges when using these studies and how to overcome them

What is Productivity?

𝑃𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑣𝑖𝑡𝑦=𝑂𝑢𝑡𝑝𝑢𝑡𝐼𝑛𝑝𝑢𝑡

𝑂𝑢𝑡𝑝𝑢𝑡=1000 𝐿𝐹𝐼𝑛𝑝𝑢𝑡=50h𝑟𝑠

𝑃𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑣𝑖𝑡𝑦=𝑂𝑢𝑡𝑝𝑢𝑡𝐼𝑛𝑝𝑢𝑡 =

1000 𝐿𝐹50 h𝑟𝑠 =20𝐿𝐹 𝑝𝑒𝑟 h𝑜𝑢𝑟

What is Productivity?

𝑂𝑢𝑡𝑝𝑢𝑡𝐼𝑛𝑝𝑢𝑡 =𝑃𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑣𝑖𝑡𝑦

𝑂𝑢𝑡𝑝𝑢𝑡=𝑃𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑣𝑖𝑡𝑦 𝑥 𝐼𝑛𝑝𝑢𝑡𝑦=𝑚𝑥

Key Factors Affecting Productivity

• Acceleration• Weather• Scope Changes• Trade Stacking• Overtime

Estimating Lost Productivity

• AACE 25R-03 [1]– Option A: Project Specific Studies– Option B: Project Comparison Studies– Option C: Specialty Industry Studies– Option D: General Industry Studies– Option E: Cost Basis

Option A – Project Specific Studies

• Project Specific• Require contemporaneous documentation

Option A – Project Specific Studies

• Measured Mile • EV Analysis • Work Sampling Method • Craftsmen Questionnaire Sampling Method

Option B – Project Comparison Studies

• Comparable Work Study• Comparable Project Study

Option C – Specialty Industry Studies

• Studies of specific types of problems– Acceleration– Changes/Cumulative Impact– Learning Curve– Overtime– Weather

Specialty Industry Studies – Key Challenges

• Entitlement1. Liability 2. Causation

• Justification of Method• Applicability• Reasonableness of Results• Other Considerations

Liability

- First step in demonstrating entitlement- Usually established by a contract provision or

the accused party’s breach of contract- Key is to use the contract language to your

advantage

Causation

1. Demonstrate the accused party caused the loss

2. Provide evidence that claimant did not contribute to the loss

Keys to Entitlement- Adherence to notice requirements- Impact was unforeseeable- Impact was beyond claimant’s control- Claimant is not responsible - Damages are recoverable under the contract- Disruption resulted in changed performance or

increased cost

Justify Calculation Method

- Why couldn’t you use one of the more preferred methods?

- Opposition may attempt to use a superior method to demonstrate claimant’s damages are overvalued

Applicability- The data used in an industry study applies to a very

specific project environment- Critical to document the surrounding circumstances of the

claim situation

- When choosing a study ask yourself:- Why/Where/When was the study performed?- How closely does the study tie to my scenario?- In what way does the study differ from the case at hand?[2]

Applicability

- Project Size- Project Type- Similar Trade- Scope of work- Circumstances- Experience of labor force

Applicability - Example

- Leonard Study is only applicable to projects experiencing greater than 10-15% change orders (measured by labor hours) and only until a certain point. [3]

Credibility

• Is the study of objective?• Does it provide representative value?• Does the study use recent data?• Are intervening variables considered?

Credibility

Credibility

• Did not rely on original data– Relied on flawed data from an earlier study by The Business

Roundtable• The nature of the work or the trades involved was not

disclosed in the original study

Reasonability

- Demonstrating another quantification yields similar results will bolster your position

Reasonability - Example

- Specialty Industry Study Analysis $500,000

- Modified Total Cost “Sanity Check”- $100,000 BAD- $525,000 GOOD

Other Considerations

- Contemporaneous Documentation- Expert Testimony

Summary of Key Challenges

- Demonstrating Entitlement- Justify Quantification Method- Applicability of Study- Credibility - Reasonableness of Results

Questions?

References1. Recommended Practice No. 25R-03 “Estimating Lost Labor Productivity in

Construction Claims”, AACE International, 20042. Nuhu Braimah, Issaka Ndekugri & Rod Gameson, A Review of Industry Standards

and Publications/Charts for Adjusting Productivity Losses in Construction Contracts, Presentation at the 22nd Annual ARCOM Conference, Birmingham, UK at 49, 54 (September 2006).

3. Leonard, Charles A., The Effects of Change Orders on Productivity, Concordia University, Montreal, Quebec, April 14, 1987.

4. Mosely, W. Alexander, Challenges to Admission of – Or Belief In – Lost Productivity Claims Based on Industry Studies, American Bar Association, 2013.

5. Brunies, R. and Emir, Z. (2001) Calculating Loss of Productivity Due to Overtime Using Published Charts – Facts or Fiction. The Revay Report, Vol. 20, No. 3.

6. Mechanical Contractors Association of America, Change Orders Productivity Overtime – A Primer for the Construction Industry (MCAA 2012).