VERTEX Presentation at 2016 AACE Northeast Total Cost Management Symposium - Key Challenges in Demonstrating Loss of Productivity Claims Based on Specialty Industry Studies

1. Key Challenges in Demonstrating Loss
of Productivity Claims Based on
Specialty Industry Studies
Andrew Sargent, Amin Terouhid

2. Andrew Sargent, EIT Amin Terouhid, PhD, PMP

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

4. 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

5. What is Productivity?
𝑃𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑣𝑖𝑡𝑦 =
𝑂𝑢𝑡𝑝𝑢𝑡
𝐼𝑛𝑝𝑢𝑡
𝑂𝑢𝑡𝑝𝑢𝑡 = 1000 𝐿𝐹
𝐼𝑛𝑝𝑢𝑡 = 50 ℎ𝑟𝑠
𝑃𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑣𝑖𝑡𝑦 =
𝑂𝑢𝑡𝑝𝑢𝑡
𝐼𝑛𝑝𝑢𝑡
=
1000𝐿𝐹
50ℎ𝑟𝑠
= 20 𝐿𝐹 𝑝𝑒𝑟 ℎ𝑜𝑢𝑟

6. What is Productivity?
𝑂𝑢𝑡𝑝𝑢𝑡
𝐼𝑛𝑝𝑢𝑡
= 𝑃𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑣𝑖𝑡𝑦
𝑂𝑢𝑡𝑝𝑢𝑡 = 𝑃𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑣𝑖𝑡𝑦 𝑥 𝐼𝑛𝑝𝑢𝑡
𝑦 = 𝑚𝑥

8. Key Factors Affecting Productivity
• Acceleration
• Weather
• Scope Changes
• Trade Stacking
• Overtime

9. 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

10. Option A – Project Specific Studies
• Project Specific
• Require contemporaneous documentation

11. Option A – Project Specific Studies
• Measured Mile
• EV Analysis
• Work Sampling Method
• Craftsmen Questionnaire Sampling Method

12. Option B – Project Comparison Studies
• Comparable Work Study
• Comparable Project Study

13. Option C – Specialty Industry Studies
• Studies of specific types of problems
– Acceleration
– Changes/Cumulative Impact
– Learning Curve
– Overtime
– Weather

14. Specialty Industry Studies –
Key Challenges
• Entitlement
1. Liability
2. Causation
• Justification of Method
• Applicability
• Reasonableness of Results
• Other Considerations

15. 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

16. Causation
1. Demonstrate the accused party caused the
loss
2. Provide evidence that claimant did not
contribute to the loss

17. 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

18. 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

19. 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]

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

21. 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]

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

23. Credibility

24. 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

25. Reasonability
- Demonstrating another quantification yields
similar results will bolster your position

26. Reasonability - Example
- Specialty Industry Study Analysis  $500,000
- Modified Total Cost “Sanity Check”
- $100,000  BAD
- $525,000  GOOD

27. Other Considerations
- Contemporaneous Documentation
- Expert Testimony

28. Summary of Key Challenges
- Demonstrating Entitlement
- Justify Quantification Method
- Applicability of Study
- Credibility
- Reasonableness of Results

29. Questions?

30. References
1. Recommended Practice No. 25R-03 “Estimating Lost Labor Productivity in
Construction Claims”, AACE International, 2004
2. 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).