ABA FORUM ON CONSTRUCTION INDUSTRY
DIVISION 9
February 17, 2016
Lost Productivity Claims and the
importance of project documentation
and experts
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Today’s Agenda
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Loss of efficiency/Lost Productivity claims
Methodologies for calculating loss of efficiency claims
Exemplar project
Best practices for project documentation and job cost
reporting
 What if best practices weren’t employed, what’s next?
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PRESENTER
Edward "Ted" J. Laperouse, Esq.
ted.laperouse@taylorporter.com
(225) 381-0210
www.taylorporter.com
www.linkedin.com
Taylor Porter Brooks & Phillips
Baton Rouge, LA
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Delay Versus Inefficiency Claims
 Delay Claims
– Time extension due to delays and disruptions
– Costs of delay, including extended overhead, etc.
 Inefficiency Claims
– Adjust contract price due to loss of productivity
– Breach of contract for denying time extension for excusable
delays (acceleration), interference, etc.
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Causes of Inefficiency
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Defective plans and specifications
Owner interference
Changes in design or increased scope
Differing site conditions
Acceleration/schedule compression
Site constraints/logistics
Overtime/extended work week
Other factors
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Loss of Efficiency Claims
 What are they?
Actual Labor Hours
10,000
Planned Labor Hours
8,000
Hours
6,000
4,000
2,000
0
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Definition of Productivity
Productivity = Units of Work Output
Hours of Effort
 Examples
– Linear feet of pipe installed/hour
– Cubic yards of concrete placed/hour
– Number of electrical switches/outlets installed/hour
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Methodology Selection
 Dependent upon as-built data and information available
 Look for and identify data that includes
– Labor (and/or equipment) hours by specific tasks (daily, if
available)
– Quantity of work performed for recorded hours
– Activity description (including location(s))
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Methodologies for Calculating Impact
 Total Cost
 Modified Total Cost
 Published Studies (or Factor Analyses)
 Time and Motion Studies
 Measured Mile
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Case Decisions
 Different methodologies have been recognized over time,
not definitive or uniform
 Common themes
– Factor analyses prove challenging to gain acceptance
– Cause and effect is always a hurdle for the claimant
– Measured mile is a preferred methodology given the
opportunity to choose, however, other methodologies are
accepted on a case-by-case basis
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Factor Analysis Method
 An inefficiency factor is applied to the work because of
impacts resulting from the interferences
 Example:
– Expected productivity of 500 cubic yards/day
– Actual productivity of 300 cubic yards/day
– Efficiency factor
= 60%
– Inefficiency factor = 40%
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Factor Analysis Method (cont’d)
 The inefficiency factor is the difference between the
baseline and the actual productivity
 The inefficiency factor can then be multiplied by the labor
costs for the period to calculate damages
In re Electric Machinery Enterprises, Inc., 416 B.R. 801 (M.D. Fla.
2009)(emphasis added)
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Factor Analysis Method - Pitfall
 This method is seldom used
– Multiple concurrent impacts can cause this method to
be too speculative to provide a reasonable
inefficiency rate
In re Electric Machinery Enterprises, Inc., 416 B.R. 801 (M.D.
Fla. 2009)(emphasis added)
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Measured Mile Method
 Definition: “…compares the productivity on identical activities during impacted
and unimpacted periods of the project to determine loss of productivity…”
– WILLIAM J. SCHWARTZKOPF, CALCULATING CONTRACT DAMAGES 26-27 (Wiley Law
Publications 1992)
 Strengths of the measured mile method:
– Actual events on-site are linked to productivity realized
– Avoids reliance on bid productivity data
– Performance analyzed on a daily basis
 Works best when activities are generally similar and repetitive
– Clark Concrete Contractors, Inc. v. General Services Administration, GSBCA No. 14340
99-1 BCA 6 30,280
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Total Cost Method
 Normally consists of subtracting bid price from actual
cost of performance and adding profit to the resulting
amount
 Heavily disfavored by boards and courts. Wunderlich
Contracting Co. v. United States, 351 F. 2d 956 (1965)
 Disfavored because it assumes the reasonableness of
the contractor’s costs, the accuracy of its bid
computations, and its lack of responsibility for increases
in costs
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Total Cost Method (Cont’d)
 Requires contractor to establish all four following
elements by a preponderance of proof:
– (1) nature of the particular losses makes it impossible or
highly impracticable to determine them with a reasonable
degree of accuracy;
– (2) the bid or estimate was realistic;
– (3) actual costs were reasonable; and
– (4) the contractor was not responsible for the added
expenses
Urban Plumbing & Heating Co. v. United States, 408 F.2d 382, 394
(1969)
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Modified Total Cost Method
 Adjusts the Total Cost Method for a contractor’s lack of proof
in the requirements of the total cost method
Sunshine Const. & Eng'g, Inc. v. United States, 64 Fed. Cl. 346, 371 (2005)
 Differs from the Total Cost Method in that it allows for the
adjustment of the amount calculated under total cost approach
to compensate for:
– bid errors;
– specific costs arising from the subcontractor’s actions; and
– specific costs arising from actions of parties other than party against
whom damages are sought
Hill York Service Corp. v. Critchfield Mechanical, Inc., 2015 WL 410009 (S.D. Fla. 2015)
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Total Cost Method – Failure to Keep Adequate
Records
 Where it is impractical for contractor to prove actual
costs because it failed to keep accurate records, when
such records could have been kept, and where
contractor does not provide legitimate reason for its
failure to keep the records, the total cost method of
recovery is not available to the contractor
Propellex Corp. v. Brownlee, 342 F.3d 1335, 1342 (Fed. Cir.
2003)(emphasis added)
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Cause and Effect Analysis
 Cause and effect relationship must be demonstrated to establish
entitlement
– Wunderlich Contracting Co. v. United States, 351 F.2d 956 (1965):
“marshalling the testimony of the fact witnesses and supporting
documentation is critical in establishing the cause and effect
relationship in construction.”
 Causal factor(s) leading to alleged impacts must be identified
 Project record and data is typical source for identifying factors leading
to inefficiencies
 Not always a precise science
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Why do you need good project documentation?
Liability
Contract Requirements
Causation
Proof
of
Claim
Contract Requirements
Damages
Project Documentation
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Importance of experts
 You should carefully screen and choose your expert
witnesses wisely.
 Be able to address key concerns about the client’s
documentation and claim with your expert early on.
 Make sure your expert is familiar with the applicable
state of the law regarding those methodologies.
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Exemplar Project and Case
 Project scope
– 1,400-acre wooded site on Camp Shelby in
southern Mississippi
– Excavate material from designated borrow
areas and construct approximately 28
miles of earth embankments for military
tank mobility, defilades, and active targets
~ 3 miles
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Exemplar Project
Borrow “A”
Borrow “B”
Borrow “F”
Borrow “E”
Tortoise Fence
Clearing/Grubbing
Limits
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Inefficiencies
Inefficiencies resulted from:
 Only one borrow pit open at a time
 Unforeseen groundwater in borrow pits
 Need to make deeper cuts in borrow areas
 Need to add clay to excessive quantities of clean sand to
maintain slopes
 Need to blend soil in order to reach the required
compaction levels
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Inefficiencies
Inefficiencies resulted from (cont’d):
 Stop work orders that dictated when and how the work
was performed on the project
 Incorrect designation of unexploded ordnance sites in
Contract Documents
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Exemplar Project
 Primer on earthwork volumes
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Best practices weren’t utilized contemporaneously
 What happens when you don’t have good documentation
and records – you have to get creative
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Exemplar Project – Inefficiency Claim
 Challenges encountered
– No job cost accounting system (e.g. job cost report)
– Source data was fractured in the project record
 Labor
 Equipment
 Daily quantities of work performed
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Exemplar Project – Utilized Multiple Sources
 Work quantities – Daily reports
– General Contractor
– Engineer’s Inspection reports
 Labor – Timecards
– General Contractor payroll
– Subcontractor payroll
 Equipment
– Rental invoices
– Daily truck logs
 Correspondence
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Exemplar Project – Process to Quantify Loss of Efficiency
GC’s
Certified
Payroll
Sub’s
Certified
Payroll
Dump Truck
Operator
Logs
Rental
Invoices
Hauled
Quantities &
Daily
Activities
GC’s Daily
Reports
Labor
Hours
Equipment &
Operator
Hours
NOAA
Rainfall &
Weather
Data
Measured
Mile Analysis
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Loss of Efficiency Claims
 What documents or data should be utilized to prepare a
loss of productivity claim?
– Daily production quantities
– Associated labor hours and equipment used to produce
quantities recorded
– Geographic location
 For example, building/floor/area, or specific borrow pits, or
crane(s) utilized, etc.
 Preference is to utilize hours, not dollars in analyzing
inefficiency
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Typical Documentation and Data Sources
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Contract documents
Bid documents
Daily reports
Production reports
Extra work orders
Time cards and records
Load/haul tickets or logs
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Exemplar Daily Report
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Location
Cost code
Quantity
Crew size
Hours
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Exemplar Daily Report
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Reporting (Production, Labor, Equipment)
 Ability to quantify impacts is key
 Capture data at a reasonable level of detail
– Period (preferably daily)
– Activity and location (project specific)
 Report consistently through duration
 Utilize job cost codes to identify specific scopes of work
and quantify resources expended
 Document impacts
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Job Cost Reporting
 Track actual production and estimates/budgets at the
same level of detail
– Be consistent and accurate
 Prepare and periodically maintain variance reports
– Allows identification of impacted activities and time
periods
 Tie costs to supporting documents
– Invoices
– Labor, equipment, material
– Transferred costs and back charges
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Exemplar Project – Sample Productivity Window
Day Type
Compensable
Contractor
Non-Compensable
1,363
Impact Day
2,289
Non-Compensable Weather
697
Third Party Impact
440
Measured Mile
1,031
Totals:
2,729
3,091
Measured Mile Period
Borrow Area “B”
Borrow Area “A”
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What do you do when you’re aware of this situation?
 Consider performing time and motion studies
 Review record keeping to determine whether its sufficient
to properly document the impact, both quantitatively and
for causation
 Enhanced daily reporting through use of
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Job cost accounting system
Spreadsheets
Data bases
Photos
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