ANALYSIS OF PRODUCTIVITY LOSSES IN PROJECTS UNDER NEC 03 CONTRACTS CHALLENGES AND RECOMMENDED METHODOLOGIES

Introduction

In construction projects managed under the NEC 03 contract, productivity losses that affect cost and execution time are common. Demonstrating the impact of these productivity losses is essential for submitting claims and obtaining fair compensation. However, this process presents multiple complications that require rigorous analysis and the use of recognized methodologies.

This analysis aims to:

• Identify the complications in demonstrating the impact of productivity losses in NEC 03 projects.
• Describe applicable methodologies for analyzing these productivity losses, even when there are limitations in using the accepted schedule.
• Detail the criteria and procedures recommended by organizations like AACE International and the Society of Construction Law (SCL) to conduct an effective analysis in line with best practices.

?

1. Complications in Demonstrating the Impact of Productivity Losses

1.1. Lack of Detailed Records

The absence of precise and complete documentation makes it difficult to quantify productivity losses and link them to specific events. Without contemporaneous records, establishing a solid baseline for analysis is challenging.

1.2. Demonstrating Causality

It is crucial to establish a direct connection between productivity losses and compensable events under the contract. The presence of multiple external factors, such as adverse weather conditions or third-party interferences, complicates this process.

1.3. Limitations of the Accepted Schedule

The accepted schedule in NEC contracts may not accurately reflect the project's actual conditions, distorting the analysis of productivity losses. This necessitates seeking alternative or complementary methodologies.

1.4. Contractual Interpretation

Specific clauses in NEC 03 regarding compensation events and the evaluation of additional costs can be interpreted in various ways, leading to disagreements between the parties.

1.5. Notification and Communication Requirements

Failure to meet the notification deadlines and procedures established in the contract can invalidate legitimate claims, regardless of their merit.

1.6. Complexity in Technical Analysis

Programming and productivity analyses can be technically complex and costly, requiring specialized expertise and significant resources.

?

2. Applicable Methodologies for Analyzing Productivity Losses

Despite the limitations of the accepted schedule, various methodologies allow for analyzing and demonstrating the impact of productivity losses:

2.1. Measured Mile Analysis

Description: Compares productivity in an unaffected period or area with productivity in an affected period or area to isolate the impact of specific events.

Advantages:

• Based on actual project data.
• Minimizes the influence of external factors.
• Highly recommended by AACE and SCL.

2.2. Baseline Productivity Analysis

Description: Compares actual productivity with planned productivity according to the project's original schedule or budget.

Advantages:

• Utilizes the baseline established at the project's outset.
• Useful when there are no unaffected periods for comparison.

2.3. Use of Industry Productivity Standards

Description: Employs recognized industry indices and standards to estimate expected productivity and compare it with actual productivity.

Advantages:

• Provides an objective reference when proprietary data is unavailable.
• Useful for common activities with well-established standards.

2.4. Time Impact Analysis

Description: Evaluates how specific events affect the project schedule by incorporating these events into the program to determine their impact on time and costs.

Advantages:

• Allows modeling the effect of productivity losses over time.
• Helps quantify indirect costs associated with delays.

2.5. Window Analysis

Description: Divides the schedule into specific periods (windows) and analyzes variations in each to identify when and how productivity losses occurred.

Advantages:

• Facilitates the isolation of causal events.
• Provides a detailed view of productivity fluctuations.

2.6. Work Sampling Studies

Description: Conducts detailed observations and records of specific activities to measure productivity and how it is affected by certain conditions.

Advantages:

• Provides accurate real-time data.
• Allows identification of specific inefficiencies in processes.

2.7. Statistical and Econometric Models

Description: Uses statistical techniques to analyze the relationship between variables and quantify the impact of specific factors on productivity.

Advantages:

• Handles large data sets.
• Isolates the effect of particular variables.

2.8. Cause-and-Effect Analysis

Description: Establishes a direct relationship between specific events and productivity losses.

Advantages:

• Focused on specific events.
• Requires detailed documentation to support conclusions.

?

3. Criteria for Analyzing Productivity Losses According to AACE and SCL

To ensure that the productivity loss analysis is rigorous and acceptable, it is essential to follow the criteria and methodologies recommended by AACE International and the Society of Construction Law (SCL).

3.1. Thorough and Accurate Documentation

• Contemporaneous Records: Maintain detailed daily records of activities, labor, equipment, and site conditions.
• Supporting Evidence: Gather photographs, videos, communications, and change orders that support the analysis.

3.2. Clear Establishment of Causality

• Identification of Specific Events: Determine the events that caused the productivity loss.
• Cause-and-Effect Analysis: Demonstrate how these events directly led to productivity losses.

3.3. Selection of the Appropriate Methodology

• Project Suitability: Choose the methodology that best fits the project's specific circumstances.
• Recommended Methods: Prioritize the use of the Measured Mile Analysis when applicable.

3.4. Consistency with Recommended Practices

• AACE International Recommended Practice No. 25R-03: Follow recommended practices for quantifying productivity losses.
• SCL Delay and Disruption Protocol: Apply principles for evaluating delays and disruptions.

3.5. Rigorous Quantitative Analysis

• Verifiable Data: Use data that is auditable and independently verifiable.
• Transparent Calculations: Clearly present the formulas and assumptions used.

3.6. Consideration of Concurrent Factors and Mitigation

• Concurrent Factors: Identify other causes that may have contributed to the productivity loss.
• Mitigation Efforts: Document actions taken to minimize losses.

3.7. Compliance with Contractual Terms

• Notification Procedures: Comply with the notification and claim submission requirements established in the NEC 03 contract.
• Correct Contract Interpretation: Properly apply relevant contractual clauses.

3.8. Involvement of Independent Experts

• Specialized Analysis: Involve experts in productivity analysis.
• Expert Testimony: Provide independent opinions that support the methodology and findings.

3.9. Clear and Structured Claim Presentation

• Coherent Narrative: Structure the claim logically, explaining the sequence of events and their impact.
• Executive Summary: Include a summary highlighting key points.

3.10. Ethics and Professionalism

• Transparency and Honesty: Present accurate information and avoid exaggerations.
• Compliance with Ethical Standards: Follow the professional codes of ethics of AACE and SCL.

?

4. Detailed Calculation Methodologies for Each Analysis Method

Below is a detailed methodology for calculating each of the mentioned methods.

4.1. Measured Mile Analysis

Steps:

1. Identify Unaffected and Affected Periods.
2. Collect Production Data: Units completed and labor hours expended.
3. Calculate Productivity in Both Periods: Unaffected Productivity (UP) = Units ÷ Labor hours (unaffected). Affected Productivity (AP) = Units ÷ Labor hours (affected).
4. Determine Productivity Loss: PL = UP ? AP.
5. Quantify Losses: Lost Labor Hours (LLH) = (Units ÷ UP) ? Labor hours (affected). Total Cost = LLH × Labor cost per hour.

Example:

• UP = 2 m3/hour.
• AP = 1.33 m3/hour.
• PL = 0.67 m3/hour.
• LLH = ?200 hours (200 additional hours expended).
• Total Cost = 200 hours × $20/hour = $4,000.

4.2. Baseline Productivity Analysis

Steps:

1. Establish Planned Productivity.
2. Record Actual Productivity.
3. Calculate Productivities: Planned Productivity (PP) = Planned units ÷ Planned labor hours. Actual Productivity (AP) = Actual units ÷ Actual labor hours.
4. Determine Productivity Loss: PL = PP ? AP.
5. Quantify Losses: LLH = (Actual units ÷ PP) ? Actual labor hours. Total Cost = LLH × Labor cost per hour.

Example:

• PP = 2.5 m3/hour.
• AP = 2 m3/hour.
• PL = 0.5 m3/hour.
• LLH = ?100 hours.
• Total Cost = 100 hours × $20/hour = $2,000.

4.3. Use of Industry Productivity Standards

Steps:

1. Obtain Productivity Standards.
2. Record Actual Productivity.
3. Calculate Productivities: Standard Productivity (SP). Actual Productivity (AP).
4. Determine Productivity Loss: PL = SP ? AP.
5. Quantify Losses: LLH = (Actual units ÷ SP) ? Actual labor hours. Total Cost = LLH × Labor cost per hour.

Example:

• SP = 2.2 m3/hour.
• AP = 2 m3/hour.
• PL = 0.2 m3/hour.
• LLH = ?40.91 hours.
• Total Cost = 40.91 hours × $20/hour = $818.20.

4.4. Time Impact Analysis

Steps:

1. Establish the Baseline Schedule.
2. Identify Impactful Events.
3. Modify the Schedule.
4. Analyze the Impact.
5. Quantify the Cost Impact.

Example:

• Delay of 2 weeks.
• Weekly Indirect Costs = $5,000/week.
• Total Cost = 2 weeks × $5,000/week = $10,000.

4.5. Window Analysis

Steps:

1. Divide the Schedule into Windows.
2. Collect Data per Window.
3. Analyze Deviations.
4. Identify Causes of Productivity Loss.
5. Quantify Losses per Window.

Example:

• Window 2: Productivity loss of 0.56 m3/hour.
• LLH = ?40 hours.
• Total Cost = 40 hours × $20/hour = $800.

4.6. Work Sampling Studies

Steps:

1. Plan the Sampling.
2. Collect Data.
3. Calculate the Efficiency Percentage.
4. Compare with Standards.
5. Quantify Losses.

Example:

• Productive Efficiency = 70%.
• Efficiency Loss = 15%.
• LLH = 15 hours.
• Total Cost = 15 hours × $20/hour = $300.

4.7. Statistical and Econometric Models

Steps:

1. Collect Data.
2. Select the Model.
3. Analyze the Relationship Between Variables.
4. Quantify the Impact.
5. Calculate Associated Losses.

Example:

• Impact of interference: reduction of 0.5 m3/hour.
• LLH = ?80 hours.
• Total Cost = 80 hours × $20/hour = $1,600.

4.8. Cause-and-Effect Analysis

Steps:

1. Identify Causal Events.
2. Collect Evidence.
3. Analyze the Impact.
4. Quantify Losses.
5. Assign Costs.

Example:

• Productivity loss during material delay.
• LLH = ?133.33 hours.
• Total Cost = 133.33 hours × $20/hour = $2,666.60.

?

Conclusions

Demonstrating the impact of productivity losses in projects under NEC 03 contracts is a complex process that requires:

• Rigorous Documentation: Maintaining detailed records is fundamental.
• Selection of Appropriate Methodologies: Applying recognized methods adapted to the project.
• Compliance with Best Practices: Following recommendations from AACE and SCL ensures the analysis's robustness.
• Transparent and Ethical Analysis: Presenting clear and honest information strengthens the claim's credibility.

By addressing the complications and applying the detailed methodologies, it is possible to effectively quantify productivity losses and support legitimate claims in construction projects.

?

References

• AACE International Recommended Practices: Detailed guides on productivity analysis and claim management.
• SCL Delay and Disruption Protocol: Principles for preparing and evaluating claims for delays and disruptions.
• NEC03 Contracts