| Overtime,
Project Size and Labor Productivity
By
John S. Mrowiec
In the February 2001 issue of Midwest Construction,
we discussed some of the empirical research which attempted to quantify reduced
labor productivity resulting from working overtime hours as compared to productivity
for labor hours where overtime was not utilized.
Owners, contractors and
subcontractors often dispute the amount of proper compensation for overtime.
Aside
from disputing the reasons for the need for overtime, the parties dispute how
much the compensation for the overtime should be. Is it merely the premium time
wage and burden differential on the overtime hours or, instead, that amount plus
some multiplier of the total hours worked for "loss of productivity"
caused by working overtime?
Professor Awad Hanna, who has written a number
of articles on construction labor productivity, along with other contributors,
has recently published a new article. Hanna explores the "quantitative relationship
among overtime, project duration, and labor productivity on projects employing
extended-duration overtime," A. Hanna, C. Taylor and K. Sullivan, Impact
of Extended Overtime on Construction Labor Productivity, 131:6 J. Constr. Eng.
& Mgmn't 734 (June 2005).
Research Aim The
objective of Hanna's research was to attempt to quantify the impact on labor productivity
of employing overtime for long durations.
Typically, we think of the use
of overtime as necessary to overcome project delays. Increasingly, however, overtime
is planned from the inception.
Planned overtime is used to address craft
labor shortages by providing incentive to the craft laborers of the certainty
of premium pay or because the owner wants the completed project as fast as possible
for market reasons.
Overtime is often preferred as a schedule compression
technique over the use of shift work (which presents coordination difficulties)
or additional manning (which depends on availability and its own set of productivity
issues.)
Nevertheless, overtime might introduce a series of problems including
fatigue, low morale, a higher cost per unit, a higher accident rate and, as described
by the U.S. Army Corps of Engineers in 1979, a pacing phenomenon, any or all of
which might lead to reduced labor productivity and increased costs. Disputes about
payment for this lost productivity lead to expensive legal battles.
Previous
overtime studies, according to Hanna, focused on overtime solely as a short-term
schedule compression technique. Accordingly, Hanna contends these studies can
be applied properly only to projects with no more than 15 continuous weeks of
overtime.
Hanna also cites the critiques of earlier overtime productivity
research. One author argued that the overtime data published by Kosarris (1947),
National Electrical Contractors Association (1969), the Mechanical Contractors
Association of America (1976), U.S. Army Corps of Engineers (1979) and Business
Roundtable (1980) might be taken from one or two common sources and then manipulated
to make each study appear unique, R.E. Larew, Are Any Construction Overtime "Studies"
Reliable? 40:9 Cost. Eng. 24 (1998).
Data Collected Hanna collected his data by a questionnaire
directed primarily to union specialty electrical, mechanical and general contractors
performing labor intensive work across the United States. Data collected included
project type, specific trade work, budgeted and actual hours expended, estimated
and actual project duration, average hours worked per crewmember per week, crew
schedule used, crew size and union or non-union workforce.
Eventually the
project databank contained 88 projects: 30 using a 5(10)s schedule, 13 using a
6(10)s, 23 using a 5(8)s and 22 using a 4(10)s schedule. The projects ranged in
size from 700 to over 1.4 million work-hours. Hanna opined that this large diversity
contained within the data set allows the final regression model to be applicable
to a wide spectrum of projects.
Hanna then employed both hypothesis testing
and regression analysis. The hypotheses testing supported findings from earlier
studies that the 5(10)s and 6(10)s schedules were shown to significantly reduce
levels of productivity, on average, compared to the two 40 week schedules. The
hypothesis testing showed there was no significant productivity difference between
the 5(8)s and 4(10)s schedules.
However, the 6(10)s was significantly
less productive than the 5(10)s schedule.
To arrive at a quantitative relationship
among productivity, overtime and project size (measured by total work hours),
Hanna used regression techniques. He was able to develop a series of tables suitable
for predictive use in the seven 200,000 man-hour increments from 700 to 1.414
million hours. Because the regression model was developed with projects using
a single crew schedule, Hanna cautions that the model cannot be used to predict
productivity on a combination of schedules.
Research
Results Hanna's results are shown in the article for actual work hours between
200,000 and 400,000 and for weekly average hours ranging from 32 to 65. He cautions
that the results should be applied only to projects with those parameters. (Results
from greater hourly project sizes are available from the Construction Industry
Institute.)
In general, Hanna's results at the project size of 200,000 to 400,000
man-hours showed productivity was reduced between 4 percent and 5 percent for
each 5-hour additional increment above 35 hours. Average productivity for projects
employing a 60-hour work-week was 24 percent less than for a 40-hour workweek
at a 200,000 hour project size and 23 percent less at a 400,000 hour project size.
Employing
a 50-hour workweek, the productivity was 8 percent less than for a 40-hour workweek
at a 200,000-hour project size and 9 percent less at a 400,000-hour project size.
Hanna's article should be consulted for more precise results in comparing project
size to weekly hours.
Comparing to earlier overtime studies, Hanna's 2005
study was developed from current project data in a database of 88 projects. Additionally,
none of the earlier studies analyzed the impact of extended overtime and, thus,
they were to be limited to projects using overtime for less than 15 weeks.
Hanna
argues his model thus is superior to older studies. He asserts his results may
be used proactively to estimate planned overtime and reactively in a claim setting.
The
time for critique of the Hanna study has not yet elapsed. Depending on whether
any critique is valid, the Hanna 2005 study might become the new benchmark for
measuring the impact of overtime on labor productivity for most construction projects. A
Postscript from Wisconsin Our January 2004 article in Midwest Construction
was entitled May a Mistaken Public Bid be Withdrawn Without Penalty?
A
featured case in the article was the Wisconsin Appellate Court's Opinion in James
Cape & Sons Co. v. Mulcahy, 268 Wis. 2d 203, 672 N.W. 2d 292 (4th Dist. 2003).
Recently,
the Wisconsin Supreme Court affirmed the Appellate Court's holding. A contractor
should have been allowed to withdraw its bid under Wisconsin Statute § 66.0901
(5) and have its bid bond returned.
The contractor had swiftly notified
the public owner of a failure to incorporate a subcontractor's last minute change
in offered subcontractor price into contractor's bid price. Under the facts of
the case, it was not clearly erroneous for the trial court to have held that the
contractor's mistake was free from carelessness, negligence and inexcusable neglect,
James Cape & Sons Co. v. Mulcahy, 2005 Wis. LEXIS 392 (July 15, 2005).
John
S. Mrowiec is a partner with Chicago-based Conway & Mrowiec, a construction
and public contracts law and litigation practice. He may be reached at (312) 658-1100.
For information, go to the firm's Web site at www.cmcontractors.com. |
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