When contractors seek additional compensation for changes, differing site conditions or delays they must convince the DOT or court of the amount they are entitled to be paid. In my experience on highway construction projects, whenever those events occur there is a substantial loss of productivity on the project. Yet, contractors are frequently unable to prove the appropriate amount.
I always suggest that contractors determine their lost productivity by a “measured mile,” comparing the cost of “impacted” work with the cost incurred to perform the same or similar “unimpacted” work. Courts far prefer the measured mile approach to total cost, modified total cost or published industry impact estimates because it is the difference between two actual productivities achieved by the contractor on the same project. In the total cost or modified total cost analysis, there may be bid estimate errors, contractor-caused inefficiencies or a variety of other things that are not the DOT’s responsibility. Published industry production rates are often challenged because each project is different. Because the measured-mile calculation is based on comparing the impacted productivity and unimpacted productivity on the same project, it is a more credible approach.
The rules of the measured
Applying the measured-mile method is straightforward if the contractor has kept productivity records by location, type of work and crews. First, identify and define impacted work, including the unit of measurement for the work. For example, years ago I handled a concrete paving inefficiency claim on I-80. Aggregates designated by the DOT to be suitable for use in the concrete were not suitable because of clay lumps.
Next, identify the impacted and unimpacted time periods and project locations for the analysis. Selecting the unimpacted (measured-mile) period and location for the project is crucial. Most common tasks on projects are constructed in different phases, at different times of the year and in different locations. On my I-80 project it was easy, the eastbound lanes were paved inefficiently because of the difficulty producing concrete for paving. After a different aggregate source was designated, the contractor paved the westbound lanes at about double the production.
On the more difficult measured miles, carefully evaluate the difference between the two periods and select a representative unimpacted period. Opponents will often challenge the unimpacted selection as not representing the project. This is because the measured-mile method assumes all work on the project would have been performed at the same rate as the unimpacted segment.
Locate and assemble job-cost records identifying man-hours, equipment and material used. Record keeping is critical to calculate and support any lost productivity claim. On highway construction projects contractors must break the work down by location, activity and event. Review records for all unimpacted work periods. Field personnel need to maintain the records in generally the same manner for the impacted and unimpacted sections. Determine whether you will base the analysis on hours or dollars. Then develop an unimpacted benchmark productivity measurement. An hourly approach is based on the total crew hours required to complete a work task, such as yards of concrete paved. A dollar approach is based on the total cost to complete a task, including labor costs, equipment rental, operating costs and consumables that vary with time.
Once you have developed the productivity factors and crew costs, simply apply these to the impacted work quantities. A measured mile analysis is generally acceptable if based on reasonably similar work to the impacted work. The impacted and unimpacted work activities should draw on labor from the same labor pool, and both activities should involve similar skill level and effort. Identify and evaluate possible other causes for the claimed impact. Be prepared to explain why these do not apply.
As highway contractors you will face lost productivity when there are changes, differing site conditions or delays. How well are you prepared to show the DOT or court the amount of your lost productivity?