Bulletin No. PD2 Revised (Replaces 2005 version) …

1 Bulletin No. PD2 Revised (Replaces 2005 version). File: Productivity Bulletin Factors Affecting Labor Productivity Instructions on the use of MCAA's Labor Factors are provided in the section of this Bulletin titled How to Use the MCAA Labor Factors.. Copyright, Mechanical Contractors Association of America, Inc., Revised 2011. 1. Copyright, Mechanical Contractors Association of America, Inc., Revised 2011. 2. Connecting the Cause and Effect . in Loss of Productivity Claims By gerson B. Kramer gerson B. Kramer began acquiring his vast experience in measuring differential productivity during his first post-college job at the Department of Labor's Bureau of Labor Statistics. After graduating from George Washington University School of Law, Mr. Kramer joined the Justice Department's Court of Claims Section and later the Commerce Department's Appeals Board. For ten years prior to his retirement, Mr. Kramer served as chairman and chief administrative judge of the Department of Transportation's Contract Appeals Board.

2 In that capacity, Mr. Kramer heard cases involving contractors' claims for loss of labor productivity and authored a reported decision on one of the government's largest inefficiency cases in the history of any major board of contract appeals. The construction industry is one of the quantum being sought. In my leading capital industries that drive the experience, productivity can be economy. As an industry, it summed up as the efficiency that depends to a great extent upon labor contractors achieve in converting inputs productivity to remain profitable. Yet, to outputs. In the construction industry, many construction firms do not maintain this usually means the conversion of the necessary records to supply the labor hours to a quantity of installed quantification of its labor productivity. materials, such as tons of steel erected, cubic yards of concrete poured or linear A contractor needs to maintain accurate feet of pipe installed.

3 However, where contemporaneous productivity records productivity is concerned, there is no to manage its labor forces and to serve general agreement and no black letter . as a foundation in the event of a law as to how this is to be quantified. productivity claim. While the courts and This is equally true of quantifying the boards have established the principle loss of productivity. Furthermore, that a contractor need not compute its standard cost accounting categories and loss of productivity with exactness, it standard monetary categories do not would appear that accurate recording of readily yield the necessary a contractor's productivity is simply a quantifications of labor productivity or management necessity to ensure loss of productivity. Neither the IRS nor profitability, irrespective of the portent of the vast majority of construction CFOs an inefficiency claim. arrange for, or demand, the reporting of the necessary elements to calculate or One of the fundamental issues that a quantify productivity or its loss.

4 Trier of fact considers in hearing a contractor's inefficiency claim is cause This lack of quantification on productivity and effect. Important in the or its loss becomes problematical when consideration is the question of whether disputes arise. The disputes process or not the contractor's claims as to that is presented to tribunals calls for productivity impacts comport with the magistrates to make findings of fact on Copyright, Mechanical Contractors Association of America, Inc., Revised 2011. 3. very specific matters. Although there is This process of matching the facts with currently no accepted empirical study the claimed loss of productivity is that delineates a specific methodology designed to provide the deciding or a particular means of record keeping tribunals with a degree of confidence to prove productivity or the loss of necessary to reach the ultimate productivity, one method of labor decisions. It is well recognized that a productivity quantification that has contractor does not have to prove its achieved a relatively high level of loss of productivity with mathematical acceptance is known as the measured exactitude; however this does not mile analysis.

5 This methodology is relieve the contractor from making a highly dependent upon the contractor's compelling case as to the specific books and records and also upon the causes of the impacts and to connect presence of an unimpacted and then with a logical effect. In this regard, impacted area or period by which a the MCAA factors have been found to production ratio can be computed. While be a reliable means of estimating a this methodology has been well contractor's loss of productivity caused received by the courts and boards, it is by individual categories of causation. also true that this methodology cannot For this reason, How to Use the MCAA. be applied on many construction Labor Factors, which outlines how to projects for a host of reasons, two being use the MCAA factors to arrive at a the lack of detailed productivity record reasonable estimate of productivity or keeping and the lack of suitable or loss of productivity, should furnish much comparable unimpacted areas or time needed and useful guidance to users frames.

6 The inability to prepare a who need to estimate productivity measured mile analysis does not, in and quantities and costs. of itself, bar a contractor's loss of productivity claim. In such cases, the MCAA thanks Judge Kramer for contractor must apply a different providing this introduction. methodology to connect the cause and effect. It is a fact that the MCAA factors have been in use for over 30 years in furnishing a means of estimating loss of productivity in construction matters. One of the most beneficial and advantageous facts is that the MCAA factors require users to consider carefully the narrative facts and project events or milestones with the trends shown by the numbers. How to Use the MCAA Labor Factors . repeatedly instructs users to assess carefully each and every element of fact along with the use of the percentage factors provided by Factors Affecting Labor Productivity. Direct and indirect impacts need to be quantified carefully in conjunction with the specific events of the project.

7 Copyright, Mechanical Contractors Association of America, Inc., Revised 2011. 4. How to Use the MCAA Labor Factors Introduction avoid the overly scientific and complex. Since 1971 the MCAA has offered It is understood that quantifying a loss of Factors Affecting Labor Productivity in labor productivity is oftentimes based on its Management Methods Manual. an estimate of losses. However, by the Known as the MCAA factors, they very complex nature of the issue of the have been used by contractors to quantification of labor productivity loss, forward price estimated losses of labor detailed explanations and qualifications productivity in change order proposals, of applications must be offered to the and to retroactively price estimated contractor. losses of labor productivity in the whole after the completion of a project. Since The MCAA factors have proven to be a their introduction in 1971, the factor reliable means of estimating the loss of titles, descriptions and the percentage of labor productivity on construction estimated impacts have remained projects for over 30 years.

8 The specific unchanged. values shown in the factor tables must be applied with careful consideration How to Use the MCAA Labor Factors and a review of the facts surrounding has been developed to provide detailed the events, which caused the loss of explanations suggesting the proper use productivity. The applications of the of the MCAA factors in estimating losses various MCAA factor percentages will of labor productivity for both forward and vary as project conditions dictate. This retroactively priced change requests chapter will provide specific guidelines and for performing labor productivity and examples of several methods of analyses. application for the proper use of the MCAA factors in calculating the loss of Also included are some points of labor productivity on construction consideration when assessing change projects. order conditions and contract language that may affect the contractor's ability to It is important to note that the MCAA.

9 Recover its damages. However, this factors have gained wide acceptance in chapter offers no legal opinions or the construction industry and before conclusions and the contractor should various courts, boards of contract review all project documents and appeals and tribunals of the American conditions with counsel. Arbitration Association. For example, reference the Appeal of Clark This chapter has been prepared to In this recent decision by the General assist the contractor with the Services Board of Contract Appeals, the quantification of the loss of labor board wrote, in part: productivity caused by occurrences described by the various MCAA factors. To assess the impact of Of all construction-related subjects, the unanticipated conditions on proof and quantification of the loss of productivity P&K used a manual labor productivity are recognized as published by the Mechanical among the most difficult and complex to Contractors Association of America describe.

10 An attempt has been made to (MCA). P&K has used it on other Copyright, Mechanical Contractors Association of America, Inc., Revised 2011. 5. projects to measure similar impacts, Direct impact is generally and the publication is generally characterized as the immediate and accepted in the mechanical industry direct disruption resulting from a for this purpose. We have change that lowers productivity in previously accepted the use of this the performance of the changed or manual for this purpose as well. unchanged work. Direct impact is Stroh Corp., 96-1 BCA at ; considered foreseeable and the also see Fire Securities Systems, disrupting relationship to unchanged Inc., VABCA 3086. 91-2 BCA 23,743 at work can be related in time and The manual lists various space to a specific change. types of impacts, and for each, a Cumulative impact is the foreseeable percent of labor costs which disruption of productivity resulting represents loss of labor productivity from the synergistic effect of an under each of minor, average, and undifferentiated group of changes.