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Quantifying Inefficiency: Comparing Comparisons Part II

June 06, 2019

In Part I of our blog series on “Quantifying Inefficiency: Comparing Comparisons,” we introduced the fundamentals of inefficiency and detailed the most reliable way of analyzing and quantifying the impact that work performed inefficiently can have on a construction project: the measured mile analysis. As discussed in Part I, the measured mile analysis compares the productivity in an unimpacted period of performance and an impacted period of performance of the same operation to quantify the contractor’s inefficiency using the simple formula below:

Formula for calculating inefficiency

However, when an impacted project has no period of performance that can be classified as unimpacted or nearly unimpacted, then there is no reliable and easily identifiable “unimpacted” period of performance on that project to use as the baseline period of productivity. Thus, the version of the measured mile analysis described above that uses the “impacted” and “unimpacted” periods of performance from the same project cannot be used to accurately quantify the contractor’s inefficiency. This is because the formula in this scenario, by relying on the achieved productivity of the same operation on the same project, in most cases will underestimate the contractor’s lost productivity.

Consider the following example. Project A, originally planned to begin in late summer with site excavation work, has its notice-to-proceed (NTP) delayed by circumstances outside the Contractor’s control. The Contractor on Project A doesn’t actually receive its NTP until late December and must perform its

Quantifying Inefficiency: Comparing Comparisons Part I

May 08, 2019

As discussed in the introductory post to this series on inefficiency, when a contractor’s operation experiences a reduction in productivity the result is usually the expenditure of more labor and/or equipment hours than it originally estimated. These additional labor and/or equipment hours, in turn, can result in significant losses that will negatively affect a contractor’s profitability. Often, the impacts responsible for contractor’s inefficiency were not within its control and, as such, the contractor may be entitled to recover its additional costs resulting from the inefficient operation.

The contractor’s ability to recover its additional costs resulting from the inefficient operation can be determined by the contract. If the contract is silent, then typically the contractor would have to determine who or what was responsible for the impact that caused its operation to be inefficient. Typically, if the impact was a force majeure event, then the contractor may not be able to recover additional costs from the owner. However, if the contractor can demonstrate that the impact and its expenditure of additional labor and/or equipment costs was caused by the owner or could be attributable to the owner, then the contractor should be able to recover its additional costs.

However, in order to determine the extent to which its operation was inefficient and to calculate the additional costs that it may be entitled to recover, it is crucial to understand how to measure inefficiency. Again, to measure inefficiency, we use a simple formula which serves as a comparison of achieved productivities between unimpacted and

Understanding Lost Productivity or Inefficiency in Construction

April 16, 2019

For contractors, profitability is the utmost concern on most, if not all, projects. Whether or not a contractor is profitable, and just how profitable they are, depends on how they perform in comparison to their bid. One of the most significant portions of a contractor’s bid involves the amount of manhours and, if applicable, equipment hours necessary to complete its scope of work for the project.

To estimate the number of manhours and/or equipment hours that are necessary to complete its scope of work, a contractor must first determine the planned rate of production it believes it is able to achieve. This requires the contractor to calculate how many manhours and/or equipment hours that it needs to expend to complete a specific quantity of work. The contractor will then multiply its planned rate of production across the quantity of work in its scope for the particular project, in order to calculate its budgeted manhours and/or equipment hours to complete said scope of work.

For example, a contractor is building a 200’ long, 4’ high CMU retaining wall. Assuming standard 8”x16” block is being used, the contractor knows that they need at least 900 blocks to construct the wall. The project also requires that the wall be built in 3 workdays. Therefore, the contractor knows it must lay at least 300 blocks per day to accomplish the scope within the project time period. Using this information, the contractor knows the project will require two masons each laying 150 blocks per day for the

How to Identify a Concurrent Delay, Part 2

March 25, 2019

In our previous Concurrent Delay posts, we defined concurrent delays and described how the identification of concurrent delays depended on the definition of the “critical path.” In this second part of our “How to Identify a Concurrent Delay” series, we will discuss the two different concurrent delay theories.

AACE International’s Recommended Practice No. 29R-03, Forensic Schedule Analysis, identifies these two types of concurrent delay theories as literal concurrency and functional concurrency. The basic difference between the two is the “timing” of the alleged delays. Under the literal concurrency theory, for two delays to be considered concurrent, the alleged delays must delay the project’s critical path and the forecast completion date at “the same time.” Said another way, the two delays must occur simultaneously.

Under the functional concurrency theory, the alleged delays must only delay the project’s critical path within the same analysis time period, which is typically between consecutive schedule updates, and are not required to have actually occurred on the same days.

In terms of quantifying the concurrency of two alleged concurrent delays, a literal concurrency adherent would argue that the project schedule enables the parties to identify the initial critical path work activity on a daily basis, thus enabling the parties to likewise identify the days during the schedule update period when the alleged concurrent delays were literally concurrent. A functional concurrency adherent would argue that the project schedule can only identify the initial critical path work activity on the data date of an update. Because of this perceived

How to Identify a Concurrent Delay, Part 1

March 06, 2019

In previous posts, we discussed why owners and contractors often argue for the existence of concurrent delay and how concurrent delay is defined. This post will be the first of two posts that will tackle how to identify a concurrent delay. As detailed in the previous post, in order for two delays to be concurrent and for one delay to offset one party’s responsibility against another’s, the delays must be concurrently critical. This means that both delays must be capable of delaying the project’s completion date.

As such, the first piece to the puzzle of identifying concurrent delays is related to how the “critical path” or “criticality” is defined. It is generally uncommon for construction contracts to define the term “critical path,” and this lack of a contractual definition means that we’re left to industry standard definitions to fill the void. Arguably, there are two industry standard definitions of the critical path: (1) the longest path, and (2) all activities with total float values of zero or less. However, there’s a clear trend that the longest path definition is the more readily accepted definition of the critical path, as the total float value-based definition can sometimes produce unreliable results.

These two definitions of the critical path also provide drastically different opportunities to make concurrent delay arguments. To compare how these definitions of the critical path result in significant different concurrent delay results, consider the following example:

Assume a project is forecast to finish 60 workdays late. When the critical path is defined as

Concurrent Delay: What Is A Concurrent Delay?

January 28, 2019

As discussed in the previous posting introducing the concept of concurrent delay, owners and contractors often argue for the existence of concurrent delay on their construction projects.  Sometimes these arguments make sense; sometimes they don’t. Most times there is a lot of money at stake in the form of delay damages.    These delay damages include the contractor’s extended general conditions and unabsorbed home office overhead costs that might result from an owner-caused delay that delayed the project’s completion or an owner’s assessment of liquidated damages that might result from a contractor-caused delay that delayed the project’s completion.

One common mistake is to conclude that concurrent delays need only be “concurrent” to be significant.  In other words, some assume that simply because the other party’s delay happened as the same time as the delay you caused, that the other party’s delay negates yours in some way.  To be truly concurrent, however, and to bar on the recovery of delay damages or the assessment of liquidated damages, the delays have to be more than just concurrent.  Unless the contract provides otherwise (the topic for another post), the delays also have to be critical. 

These days, a well-written construction contract provides clear and complete definition of the critical path.  However, even in this day and age, too many construction contracts do not define the critical path.  One of the many negative consequences of failing to define that term is that it may enable the parties to make questionable concurrent delay arguments.  In essence, it may allow a party to make an argument that a delay that was not critical is