Loss of Productivity in Construction Contracts
Measured Mile – Just Another Global Claim?
Productivity loss claims are one of the biggest issues in construction arbitration and litigation. Whilst there are many factors that cause lost productivity, and the subsequent complaints and additional costs routinely made during the course of a construction project, they remain notoriously difficult to prove.
The generally preferred method for valuing loss in labour productivity due to disruption is by use of the “measured mile” technique. However, without proper cause and effect analysis to establish a correlation between the loss of productivity and the alleged cause, the measured mile will just be another global claim and will fail to demonstrate the actual cause of the loss of productivity.
Greater levels of productivity are achieved when the output is increased for the same level of input. Conversely, lost productivity is when greater input is required for the same or less output. As such, an operation may be considered inefficient when the performance of a unit of work consumes more units of resources than planned.
This article examines the loss of labour productivity caused by project changes and disruptive events and looks at the key requirements to quantify these losses.
In the construction industry productivity is generally expressed in manhours per unit of work; therefore, greater productivity means fewer manhours expended per unit of work. As construction contractors estimate work and enter into fixed priced contracts, contractors are extremely interested in labour productivity.
Potential impacts to productivity
There are a variety of project changes that can impact labour productivity on a project. These may include differing site conditions, delays, availability of resources, suspensions, acceleration and change in scope. Many of these changes may occur on any project, the consequences of which are often underestimated, and construction work is seriously disrupted.