Construction labor remains one of the largest hurdles in conquering a construction project. It is always at the forefront of industry news and it’s a legal problem, too, with new overtime regulations coming into play. When dealing with construction claims, one of the largest components of any request for additional compensation is labor costs.
In general, labor productivity refers to the measurement or unit of work that is accomplished for a designated period of time. A contractor traditionally bids a scope of work based on certain assumptions regarding labor costs and labor productivity. A compensable loss in terms of labor productivity happens when the contractor uses more hours to complete a given unit of work than it would have used absent the intervening cause.
According to construction industry expert Dr. Kathleen Harmon, a consultant who provides project management guidance, factors that impact labor productivity losses on construction projects include weather, out-of-sequence work, crowding and stacking of trades, overtime, restricted site access, unavailability of manpower and cumulative impact.
Contractors with the right project management team in place can have the benefit of monitoring the events and circumstances leading up to a loss of productivity. Document both the cause and the impact in daily reports and other key project documents.
To avoid a dispute on a project, or at least minimize the impact of an event on the overall contract price or time of completion, construction companies need to institute some best practices related to document management and preservation. Documentation is necessary to prove the occurrence of a condition for which compensation is due and, more critically, the damage resulting from such a condition. Ironically, when claims are not settled, it is usually the result of one party or both not having sufficiently prepared job progress and cost records.
Inadequate recordkeeping may occur for three reasons.
- Even if there is a robust documentation system in place, field management and other personnel fail to complete the necessary daily reports and other job status forms. Train (and re-train) field employees about the importance of document management and status reporting.
- The actual document management system in place may be outdated or insufficient. For example, there may be too many forms for specialized purposes. Supervisors might be required to fill out separate forms for employee payroll, job progress, equipment usage or downtime, extra work, materials received on the job, fuel and lubrication on equipment, unforeseen conditions, equipment rental, etc. In these scenarios, having the right technology in place will assist in documenting this critical information.
- The actual design of any field reports or forms may foster insufficient and/or inefficient reporting. The forms should be formatted to take supervisors through logical and sequential thought processes to ensure maximum information is provided. Spaces for narratives or description should be adequate. Forms that limit comment spaces to two or three lines encourage half-hearted efforts resulting in brief and meaningless reports.
The design of a project documentation system starts with an examination of company operations in the field and office. A documentation system requires effort from the personnel and must be in harmony with the way they carry on their primary responsibilities.
In addition, expectations should not exceed the ability of the employees who are providing such information. For example, when designing a job cost system, the level of detail for which costs will be tracked should not exceed the ability of field supervisors to accurately record during the day.
The “labor giant” can be managed by taking a few of these steps. It is very important to spot causes of delay on a project and properly prepare a claim to recapture any additional costs or to mitigate any damages.