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Howrey LLP
The
General Services Administration Board of Contract Appeals
heartily endorsed use of the "standard factors affecting
labor productivity" promulgated by the Mechanical Contractors
Association of America ("MCAA") to quantify losses
incurred on a construction project in a recent case. Hensel
Phelps Construction Co., 2001 GSBCA Lexis 10.
An
expert witness for the mechanical contractor on the project
utilized six of the factors to substantiate a claim for
lost productivity. His testimony, utilizing the MCAA factors
to calculate productivity losses on the project, secured
the general contractor and mechanical contractor awards
by the GSBCA of more than $1 million each.
The
case arose out of construction of the National Oceanic and
Atmospheric Administration building in Boulder, Colorado.
Hensel Phelps Construction was the general contractor on
the project. Trautman & Shreve was the plumbing and
HVAC subcontractor. The project consisted of four separate
buildings joining to form one large building encompassing
approximately 372,000 square feet. The buildings were separated
by function; some housing offices and others consisting
of laboratories. The original contract price for the mechanical
work was $7,840,014.
Soon
after construction began, problems arose with the mechanical
drawings. The problems proved so extensive that most of
the plans were re-drawn and extensively modified. In addition,
contrary to customary mechanical contracting practices in
the area, the GSA engineer insisted on vibration isolation
on all piping, including plumbing piping throughout the
project. As this was not apparent from the drawings and
was discovered well after construction had begun, significant
time was lost in retrofitting piping that already had been
installed.
The
GSA, Hensel Phelps and Trautman met frequently throughout
the project to discuss the problems that arose. Although
the parties frequently disagreed on the extent of the problems,
they agreed to keep the project on schedule. Consequently,
Trautman and Hensel Phelps added manpower to the project
and changed the supervisory structure of the trades, substituting
non-working for working foremen, to keep the project on
schedule. A dispute eventually arose, however, as to who
was financially responsible for the additional manpower
used on the project.
Trautman
and Hensel Phelps submitted a claim to the Contracting Officer
seeking reimbursement for the additional manpower required
to retrofit the vibration isolation piping and for changes
necessitated by the inadequacy of the mechanical drawings.
That claim was rejected, and Trautman and Hensel Phelps
appealed. The GSBCA, on review of the record, issued more
than 150 separate findings regarding the cost overruns on
the project, the deficiencies in the mechanical drawings
and the ambiguities surrounding the vibration isolation
issues. The GSBCA's findings almost unanimously affirmed
Trautman and Hensel Phelps' contentions.
With
regard to the vibration isolation retrofitting issue, Trautman
established a separate billing code to track the time spent
on performing such work. The GSBCA found that the practice
produced a reliable record of the costs related to such
work and that the costs related to the work were reasonably
based. Accordingly, those costs were awarded.
The
loss of productivity on work not directly impacted by the
changes to the vibration isolation and from changes necessitated
by the problems associated with the mechanical drawings
was more difficult to quantify. Trautman initially used
the Modification Impact Evaluation Guide of the Army Corps
of Engineers. Upon submitting its figures to GSA, however,
it was told that GSA did not recognize the guide and that
it no longer was used by the Corps of Engineers. Consequently,
Trautman would have to recalculate the figures.
Throughout
the remainder of the project, the parties were unable to
agree on a method to assess the productivity losses. In
July 1998, the contracting officer formally rejected the
claim. In response, Hensel Phelps submitted a claim to the
GSBCA. It included Trautman's claims, but this time, the
claim was based on the MCAA factors rather than the Corps
of Engineers guide.
At
the appeals hearing, Hensel Phelps brought in an expert
witness, Steven Huyghe, to testify regarding its claims.
Huyghe was a project manager with more than 30 years of
experience in mechanical contracting. He submitted a report
based on his review of the documentation of the project,
the mechanical drawings and interviews with principals involved
in the construction. He based his calculation of the effects
of the problems incurred on the project on 6 of the 16 factors
set forth in the MCAA manual: Morale and Attitude, Reassignment
of Manpower, Stacking of Trades, Concurrent Operations,
Dilution of Supervision, and Learning Curve.
Rather
than utilize the percentages set forth in the MCAA manual,
however, Huyghe assigned his own percentages of impact based
on his experience in the industry. The percentages he assigned
were conservative when compared to the MCAA factors, falling
between what the MCAA percentages designate for minor and
average disruptions. Huyghe also separated the work in the
various buildings and assigned percentages based on the
work actually performed at each building. Consequently,
not all factors were applicable to each building. Based
on the factors and his calculations, Huyghe calculated that
Trautman lost more than 25,000 hours in labor productivity
on the entire job. Some 19,335 of those hours were associated
with productivity losses not connected with the vibration
isolation work.
The
GSBCA was impressed, both with Huyghe's credentials and
with the depth of his analysis of the project. Conversely,
it was quite dismissive of the government's presentation,
lending it no credence whatsoever. The GSBCA noted that
Hensel Phelps' and Trautman's use of the MCAA factors not
only provided a rational basis for the claims but, in addition,
changed the nature of the claim itself. Rather than being
classified an acceleration claim, Hensel Phelps' and Trautman's
claim became a claim for labor inefficiencies. Such a claim
successfully circumvented the special conditions ordinarily
required for reimbursement of acceleration claims in government
contracts. It also allowed Hensel Phelps to obtain compensation
for impact, not only to critical path activities but also
to other activities.
The
GSA's expert witness suggested that the MCAA factors were
out of favor and inappropriate for such an analysis. He
suggested that a measured mile analysis was the proper approach
to quantifying productivity losses on the project. The GSBCA
noted that while a measured mile analysis often is used
in assessing lost productivity, it would not work in this
case because of the large number of schedules and schedule
revisions. Instead, it noted that Huyghe's use of the MCAA
factors produced the more accurate valuation of lost productivity.
Citing Huyghe's figures extensively, the GSBCA awarded Trautman
$1,254,124.00 for productivity losses and related equipment
and overhead expenses. It awarded Hensel $1,518,382.00 for
its labor productivity claim. The only portions of the claim
disallowed were some materials handling claims and equipment
costs totaling about $150,000.
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For more information about the issues covered in this report, please contact Paul Berning in our San Francisco office at 415-848-4996 or at paulberning@howrey.com or contact your Howrey attorney. For more information about Howrey's Construction Practice Group, click here.
©2001 Howrey LLP
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