Undoubtedly, in the midst of a pandemic, which is now moving into it seventh month in Ontario, I would be shocked if any contractor did not experience some degree of delay, disruption and/or loss of productivity. But what is loss of productivity? This article will attempt to provide an introduction to loss of productivity. As opposed to entitlement and the grounds for such a claim, this article will focus on how it can be calculated.

Even if you have no intention of advancing a claim for loss of productivity, understanding how the loss materializes and how you can deal with it internally will always be a common key goal.

Delay and disruption claims are similar, but distinct, concepts. Contractors have the burden of proving the same elements for both of these claims: liability, causation, and damages. They can usually establish the requisite liability by pointing to:

• impacts due to errors and omissions in design documents (though not design-build contracts if caused by the contractor’s design team);
• impacts caused by having to perform work out-of-sequence;
• delays which push the project into periods of adverse weather conditions; and/or,
• effects of excessive overtime due to acceleration.

Causation can usually be shown if the events were:

• unforeseeable at the time of contract or change order execution (i.e., a pandemic);
• beyond the contractor’s control (i.e., a pandemic);
• caused by the owner or design professional (though not design-build contracts if caused by the contractor’s design team); and/or,
• caused by situations for which the owner assumed contractual liability (i.e., force majeure or differing site conditions - (i.e., a pandemic)).

The damages element is distinct for the two claims. Proving a delay claim requires the contractor to show it was delayed on one of its critical path activities because of someone else’s actions or some other event, and how that delay cost it additional dollars in general conditions, standby costs, labour or otherwise. Typically, to obtain a time extension or additional compensation for extended performance based on the terms in the contract, the delay must affect overall project completion, meaning the delay must be critical. Additionally, recovery may be barred to the extent the contractor was responsible for any concurrent delay.

On the other hand, loss-of-productivity claims are concerned with unanticipated increases in the costs incurred to perform any given work activity. In other words, the contractor incurred more labour costs to get the job done because it had to work overtime, it had to use more employees than planned, or there was stacking of trades or other causes making it less efficient. It is irrelevant for loss-of-productivity claims whether the impacted activities lie on the critical path, although loss of productivity is often a consequence of a prior delay. While it may not necessarily require a precise calculation, proving how the contractor was less productive typically requires utilizing a methodology/formula. Sample methodologies include: measured mile, similar work comparison, specialty and/or general industry studies, and modified total cost method (some or all of which may require expert testimony).

In recent years, one had to rely on a large variety of papers and studies each having different formulae in calculating your loss of productivity. Timing being everything, there are three new studies or standards that will assist you or your claims consultant in calculating your loss of productivity claim depending specifically on your trade.

The first is the American Society of Civil Engineers (ASCE) standard titled Identifying, Quantifying, and Proving Loss of Productivity which is due to be released shortly in its final form. ASCE is a professional body which undertakes studies and analysis in a wide range of engineering and construction domains. Many claims consultants or members of the ASCE and employ many of the standards published by it.

ASCE’s current draft appears to be a consolidation of a series of studies and papers undertaken over the years. The draft is divided into five chapters: (1) Introduction, (2) Productivity Basics, (3) Identifying Productivity Loss, (4) Establishing Recoverable Loss of Productivity and (5) Quantifying Productivity Loss. Of note, the last chapter dealing with quantification outlines a preferred order of methods for quantifying productivity laws:

• Tier 1: Actual Direct Costs – this would require your internal project cost controls to be vigourous and well-maintained;
• Tier 2: Measured Mile – which is essentially comparing one area or timeframe of impacted lost productivity against another that is not impacted; for example: roughing in productivity for the months of January and February, 2020 on typical floors against roughing in productivity for the months of March and April, 2020;
• Tier 3: Academic and Industry Productivity Factors Studies and Modified Total Cost – which would have you using studies undertaking by such noted professionals as Dr. Awad Hanna; and
• Tier 4: Total Cost Method – this method is a last resort when other methods of collecting lost productivity are not available.

Although not specific to a pandemic impact claim, it will certainly give you the framework and guide for how such damages can be calculated.

The second document is the 2020 version of the Mechanical Contractors Association of America (MCAA) Change Orders Productivity Overtime: A Primer for the Construction Industry. As the MCAA itself notes, this 248-page guide should help mechanical contractors determine the costs associated with unplanned events, circumstances and factors that may impact the outcome, productivity and schedule of construction projects. New for 2020: a chapter highlighting the benefits of sharing native critical path method schedule files. Now although it is geared towards mechanical contractors, many of its basic tenets have been endorsed and used by the National Electrical Contractors Association (NECA).

Although the words pandemic and COVID-19 do not appear in the MCAA document, there is extensive analysis relating to what have become known since 1971 as the MCAA Factors for Impact and measured mile productivity analysis which will clearly assist in how you calculate your productivity loss damages.

The last publication is a May 2020 document titled Pandemics and Construction Productivity: Quantifying the Impact produced by Electri International which was established in 1989 by NECA with the goal of focusing on research and converting that research into educational consulting programs for the electrical contracting industry.

This publication is obviously focused on of the COVID-19 pandemic on electrical construction and employees data obtained from contractors throughout North America including Ontario. The analysis is threefold focus on (1) jobsite impacts, (2) project management impacts and (3) business impacts. The jobsite impact analysis is broken down by segment including underground, in slab, overhead roughen, in wall roughing, wire pulling, etc. as the document notes, based on a random sampling of over 75,000 labour hours and data collected, the impact of COVID-19 on labour hours resulted in a 7 percent loss of available productive time which was spent on pandemic mitigation and a 12.4 percent overall average impact on vertical construction productivity which is additive to the 7 percent loss experience as a result of mitigation tracking.

Contractors finding themselves either in a claim position or trying to manage lost productivity internally can clearly have resort to the three above documents to assist them in the calculation of that particular loss.

Dan Leduc is a law partner at the law from Norton Rose Fulbright LLP and may be reached at dan.leduc@nortonrosefulbright.com or 613-867-7171.