The construction industry is one of the labor-intensive industries with a significant contribution to the economy. As such, labor productivity plays an important role in successful implementation of construction projects to ensure construction activities can be implemented in an efficient manner.
Productivity or efficiency is a relative measure of output relative to inputs. In construction projects, inputs are typically labor and equipment whose work result in certain outputs, which are typically represented by quantities of installed equipment and material onsite.
In the event of a loss of productivity claim, one of the key pieces of missing information is typically accurate and well-maintained contemporaneous productivity records to show how the contractor managed its labor force over the life of the construction project. Construction contractors also need to be able to provide adequate productivity information to properly demonstrate their original plans to ensure they are able to perform a comparative analysis to measure differential productivity over the course of the project and identify loss of productivity issues when they occur.
A myriad of factors with potential adverse effects on labor productivity have been identified in the literature. Examples include frequent change orders, stacking of trades, lack of proper site access, crew size inefficiency, and excessive overtime. Many loss of labor productivity claims suffer because they do not contain a well-established cause-and-effect analysis to properly show how productivity factors resulted in loss of productivity in a particular case.
As part of a cause and effect analysis, a written narrative that describes the chain of events is essential. The narrative should properly establish the relationship between causes and the resultant impacts. Preparing such written description of the events, causes, and their effects is a minimum requirement for parties involved in a claim to demonstrate the cause-and-effect relationships between various events and resultant damages. Adequate supporting documents such as excerpts from the contract, change directives, meeting minutes, relevant correspondence, and filed reports can play an important role in substantiating the arguments and supporting the statements contained in the claim.
One of the methods that sometimes is used to assess causal relationships between causes and effects in complex construction claims is the system dynamics method. Complex cases of claim involve multiple claim components that are typically intertwined and interrelated; and as such, assessing these cases may require advanced methods such as system dynamics. This method is an approach within the system thinking domain which considers complex systems as a holistic set of interrelated components to provide better understanding of the system.
Four important questions that are asked in the process of developing a system dynamics model include what is the issue at hand, what is flowing into and gets accumulated in the system representing the problem, where and how does it accumulate, and what factors causes it to flow.
In system dynamics, stocks are like storage reservoirs which represent values that accumulate or decay over time. For instance, in a construction project, the project may accumulate the amount of work performed (i.e., cumulative progress) or may incur damages (i.e., cumulative damages incurred). Storage levels are increased or decreased by inflows or outflows respectively causing Units to accumulate or decay. Units can be units of measurement for monetary damages in case of a construction claim. Inflows and outflows are controlled by Rates. Examples of Rate in a construction projects include productivity or defect rates. All these elements are illustrated in a graphical representation, which is considered a insightful tool for understanding and assessing complex problems.
System dynamics has matured over the last few decades, and many software packages such as Stella, Vensim, and iThink have been developed for practitioners operating in this field. A famous case that was settled using the above-referenced approach was a $500 million shipbuilder claim against the US Navy (Cooper, 1981). For more information about system dynamics or to learn more how system dynamics may be used to assess a construction claim, please contact Adroit.
Reference: Cooper, K. G. (1980). Naval ship production: A claim settled and a framework built. Interfaces, 10(6), 20-36.
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