Impact of Change Orders on Labor Efficiency for Electrical Construction

Change orders are a source of many disputes in today's construction industry. The issue at hand is whether or not the execution of change orders work has a negative impact on overall labor efficiency on a construction project. Previous literature demonstrates evidence that change orders affect labor efficiency. Attempts have been made to quantify these impacts by many researchers, with limited success. Using the electrical construction industry, a research study has been conducted to quantify the impacts of change orders on labor efficiency. In this paper, results of hypothesis testing and regression analysis are presented. A linear regression model that estimates the loss of efficiency, based on a number of independent variables, is also presented. The independent variables used in this model are (1) qualitative and quantitative criteria used to determine whether projects are impacted by changes or not; (2) the estimate of change order hours for the project as a percentage of the original estimate of work hours; (3) the estimate of change order hours for the project; and (4) the total number of years that the project manager had worked in the construction industry. Additional projects were used to validate the model, with an average error rate of 5%. The results of this research study are useful for owners, construction managers, general contractors, and electrical specialty contractors, because they provide a means to estimate the impact of a change order under certain project conditions. This research also identifies factors, which, when understood and effectively managed, may be used to mitigate the impact of a change order on project costs and efficiency.     

Cumulative Effect of Project Changes for Electrical and Mechanical Construction

Change is inevitable on construction projects, primarily because of the uniqueness of each project and the limited resources of time and money that can be spent on planning, executing, and delivering the project. Change clauses, which authorize the owner to alter work performed by the contractor, are included in most construction contracts and provide a mechanism for equitable adjustment to the contract price and duration. Even so, owners and contractors do not always agree on the adjusted contract price or the time it will take to incorporate the change. What is needed is a method to quantify the impact that the adjustments required by the change will have on the changed and unchanged work. Owners and our legal system recognize that contractors have a right to an adjustment in contract price for owner changes, including the cost associated with materials, labor, lost profit, and increased overhead due to changes. However, the actions of a contractor can impact a project just as easily as those of an owner. A more complex issue is that of determining the cumulative impact that single or multiple change orders may have over the life of a project. This paper presents a method to quantify the cumulative impact on labor productivity for mechanical and electrical construction resulting from changes in the project. Statistical hypothesis testing and correlation analysis were made to identify factors that affect productivity loss resulting from change orders. A multiple regression model was developed to estimate the cumulative impact of change orders. The model includes six significant factors, namely: Percent change, change order processing time, overmanning, percentage of time the project manager spent on the project, percentage of the changes initiated by the owner, and whether the contractor tracks productivity or not. Sensitivity analysis was performed on the model to study the impact of one factor on the productivity loss (%delta). The model can be used proactively to determine the impacts that management decisions will have on the overall project productivity. They may also be used at the conclusion of the project as a dispute resolution tool. It should be noted that every project is unique, so these tools need to be applied with caution.     

Impact of Shift Work on Labor Productivity for Labor Intensive Contractor

Generally, a contractor has three options in accelerating a construction schedule: working longer hours, increasing the number of workers, or creating an additional shift of workers. There has been a significant amount of research conducted on scheduled overtime on construction labor productivity. However, little information has been found in the literature addressing the labor inefficiency associated with working a second shift. This paper has qualitative and quantitative components. The qualitative part details why and how shift work affects labor productivity, and then addresses the appropriate use of shift work. The quantitative component determines the relationship between the length of shift work and labor efficiency. The results of the research show that shift work has the potential to be both beneficial and detrimental to the productivity of construction labor. Small amounts of well-organized shift work can serve as a very effective response to schedule compression. The productivity loss, obtained from the quantification model developed through this study, ranges from ?11 to 17% depending on the amount of shift work used.     

Quality-Based Contractor Rating Model for Qualification and Bidding Purposes

A quality contractor on every construction project would make project management simpler for Department of Transportation (DOT) project engineers and strategic planning more accurate for DOT executives. A qualification model that includes the quality of a contractor’s past work would be invaluable in assuring that each project had a quality contractor. Including the quality of past work in the bidding process would further help in this goal. Implementation of such a model for both its potential uses would require business process reengineering for the DOT in two important areas: qualification of contractors and contract award procedures. The research team has produced an innovative model, called the Quality-Based Performance Rating (QBPR) system. This model receives inputs from traditional subjective sources and integrates them with totally objective data input from the results of tests of the project’s materials and workmanship, then uses these inputs to produce a score for each project that is further used by the system to generate an index for each contractor reflecting that contractor’s quality of work over a specified time frame.     

Quantitative Definition of Projects Impacted by Change Orders

Change, defined as any event that results in a modification of the original scope, execution time, or cost of work, is inevitable on most construction projects due to the uniqueness of each project and the limited resources of time and money available for planning. Change may occur on a project for a number of reasons, such as design errors, design changes, additions to the scope, or unknown conditions. For each change, contractors are entitled to an equitable adjustment to the base contract price and schedule for all productivity impacts associated with the change. Changes may or may not have an impact on labor productivity. Existing literature uses subjective evaluation to determine whether the project is impacted. Projects impacted by change cause the contractor to achieve a lower productivity level than planned. The focus of this paper is to quantify whether an electrical or mechanical project is impacted by a change order. Through statistical hypothesis testing, groups of factors that correlate with whether a project is impacted by change orders were identified and used to develop a quantitative definition of impact. Logistic regression techniques were used to develop models that predict the probability of a project being impacted. The results of this research show that percent change, type of trade, estimated and actual peak manpower, processing time of change, overtime, overmanning, and percent change related to design issues are the main factors contributing to the project impact.     

Work Flow Variation and Labor Productivity: Case Study

Different types of flow variation and how they affect construction project performance have been studied by previous researchers. One aspect that has not been well researched is how work flow variation and labor productivity are related in construction practice. To study that issue, 134?weeks of project production data were collected and analyzed to explore this relationship. Labor productivity was found to be positively correlated with Percent Plan Complete (PPC), a measure of work flow variation. The relationship between productivity and the ratio of total task completion to planned tasks, weekly workload, weekly work output, and weekly work hours was also studied, and no significant correlation was found. The results suggest that productivity is not improved by completing as many tasks as possible regardless of the plan, nor from increasing workload, work output, or the number of work hours expended. In contrast, productivity does improve when work flow is made more predictable. These findings can help project managers focus on actual drivers of productivity. It can also help consulting companies pinpoint responsibility for productivity losses in claims.     

Quantifying the Impact of Schedule Compression on Labor Productivity for Mechanical and Sheet Metal Contractor

In a typical construction project, a contractor may often find that the time originally allotted to perform the work has been severely reduced. The reduction of time available to complete a project is commonly known throughout the construction industry as schedule compression. Schedule compression negatively impacts labor productivity and consequently becomes a source of dispute between owners and contractors. This paper examines how schedule compression affects construction labor productivity and provides a model quantifying the impact of schedule compression on labor productivity based on data collected from 66 mechanical and 37 sheet metal projects across the United States. The model can be used in a proactive manner to reduce productivity losses by managing the factors affecting productivity under the situation of schedule compression. Another useful application of the model is its use as a litigation avoidance tool after the completion of a project.     

A Fuzzy Decision Framework for Contractor Selection

Contractor selection is the process of selecting the most appropriate contractor to deliver the project as specified so that the achievement of the best value for money is ensured. Construction clients are becoming more aware of the fact that selection of a contractor based on tender price alone is quite risky and may lead to the failure of the project in terms of time delay and poor quality standards. Evaluation of contractors based on multiple criteria is, therefore, becoming more popular. Contractor selection in a multicriteria environment is, in essence, largely dependent on the uncertainty inherent in the nature of construction projects and subjective judgment of decision makers (DMs). This paper presents a systematic procedure based on fuzzy set theory to evaluate the capability of a contractor to deliver the project as per the owner’s requirements. The notion of Shapley value is used to determine the global value or relative importance of each criterion in accomplishing the overall objective of the decision-making process. The research reported upon forms part of a larger study that aims to develop a fuzzy decision model for construction contractor selection involving investigating multiple criteria selection tendencies of construction clients, relationship among decision criteria, and construction clients’ preferences of criteria in the contractor selection process. An illustration with a bid evaluation exercise is presented to demonstrate the data requirements and the application of the method in selecting the most appropriate contractor for the project under uncertainty. The proposed model is not intended to supplant the work of decision-making teams in the contractor selection process, but rather to help them make quality evaluations of the available candidate contractors. One major advantage of the proposed method is that it makes the selection process more systematic and realistic as the use of fuzzy set theory allows the DMs to express their assessment of contractors’ performance on decision criteria in linguistic terms rather than as crisp values.     

Transient Response Analysis of a Dual Cycle System

The increasing competition in the construction industry today not only calls for lower bid prices but for accurate estimates as well. Therefore, a contractor must continuousiy strive to improve his or her estimating techniques. A computer simulation which can be used to estimate the loss in efficiency that results when a dual cycle system is being started up each shift is presented. It does this by using the CYCLONE simulation model for several different simulated cases.     

Using Agent-Based Modeling to Study Construction Labor Productivity as an Emergent Property of Individual and Crew Interactions

Lean construction research has shown that managing work flow effectively and maintaining labor flow on site can improve construction labor performance. Related research also shows that congestion on construction sites often leads to lowered efficiency. Using these findings as a point of departure, we use the agent-based modeling method to represent the construction site as a system of complex interactions and explore whether labor efficiency can be treated as an emergent property resulting from individual and crew interactions in space. This allows us to use a “bottom-up” approach to analyzing labor efficiency, which supplements existing “top-down” approaches to modeling the impacts of space congestion on labor efficiency. A pilot implementation of the agent-based model, and preliminary results illustrating the relationships between congestion and labor efficiency are presented. The empirical studies exhibit system behavior that support published principles of work-force management. The primary contribution of this paper is that it provides a method that can be used to efficiently utilize construction space, and develop plans and schedules that account for congestion arising from crew interactions in space.     

Impact of Change Orders on Labor Efficiency for Mechanical Construction

Change orders have become an everyday occurrence in construction. It is widely accepted by both owners and contractors that change orders have an effect on the labor efficiency, but these effects are difficult to quantify and frequently lead to disputes. Data from 61 mechanical construction projects were collected to develop a statistical model that estimates the actual amount of labor efficiency lost due to the change orders. The input variables needed in the model are as follows: (1) The original estimated labor hours; (2) impact classification; (3) total estimated change hours; (4) number of change orders; and (5) the timing of changes. The results of this study show that impacted projects have a larger decrease in labor efficiency than unimpacted projects. Additionally, the later a change order occurs in the life of a project the more impact it will have on the labor efficiency. The results appear to be consistent with the intuition of experienced professionals. Although each project has unique characteristics, the resultant model provides owners and contractors with a baseline measure of lost labor efficiency.     

Method to Determine Minimum Contract Bid for A+B+I?/D Highway Projects

More and more state highway agencies (SHAs) have begun to consider the value of time in highway construction. The “A?(cost)+B?(time?cost)+I/D?(incentive/disincentive)” bidding concept is designed to shorten the total contract time by allowing each contractor to bid the number of days in which the work can be accomplished, in addition to the traditional cost bid. I/D are not only used to provide an incentive to the contractor for earlier completion, but also to provide a disincentive for late completion of a project. Contractors are then presented with the problem of determining the best strategy of bid estimation, including construction cost, time cost, and incentive/disincentive. SHAs are also faced with the problem of placing a maximum and/or minimum on the time bid. To provide users a useful tool to estimate project time more accurately using this advanced method, this study develops a quantified model of the price-time bidding contract. The functional relationship between the construction cost and time duration is developed based on data from the Florida Department of Transportation (FDOT). The contractor’s construction cost “A” is then combined with the road user cost and incentive/disincentive to determine the optimum low bid price and time. This optimum can then be used by the SHA to set limits on the range of acceptable time bids. Finally, several projects completed by the FDOT will be used to illustrate the validity of this model.     

Profit Measures for Construction Projects

The basic issues related to profit measures of a construction project for the contractor are presented. Specifically, the problem of measuring gross operating profit and financing costs under fluctuating economic environments which has been heretofore inadequately treated in the literature of construction management is addressed. A framework for analyzing financing costs under different financial mechanisms, including the effects of overdraft and other borrowing arrangements, is presented. The general procedure is also applicable to the analysis of the effects of inflation and of work stoppages on profit. Finally, the cost of a project to the owner and the relationship between uncertainty and contract price from the views of both the owner and the contractor are considered.     

Benchmarking Productivity Indicators for Electrical/Mechanical Projects

Labor-intensive industries such as the electrical and mechanical trades are considered high risk due to the high percentage of labor costs. Because of this high risk, it is important for contractors in these industries to closely track labor costs on projects and compare these costs to industry benchmarks. In this paper, benchmark indicators for these industries are established on the basis of actual project data. These benchmarks include the relationship between the percent complete or percent time and cumulative work hours or cost, project size and duration, project size and average man power, project size and peak man power, and average versus peak man power. These relationships were developed using regression analysis. Man power loading charts and the related S-curves were developed from actual project data. The man power loading charts and the related S-curves are useful for resource planning and for tracking progress on a construction project. They can be used to show the cause-and-effect relationship between projects impacted by outside factors and normal labor productivity.     

Optimal Schedule Planning for Multiple, Repetitive Construction Process

This study attempts to develop a construction scheduling model using a conceptual approach to improve the efficiency of construction resources for a multiple, repetitive construction process (MRCP). It is important for a project manager to arrange the number of horizontal repetitive work areas by each crew group to reduce the work interruption period in MRCP. This study suggests some equations for estimating the optimal number of horizontal repetitive work areas for a crew group and pursued a conceptual model for MRCP, which can reduce the loss in manpower and use of construction equipment that is caused by work interruption periods. A computer program developed for the analysis of MRCP shows an appropriate performance through the application to a case study based on the proposed procedure model in this study. Supposing that there is time to spare in the project completion date, the result of the study shows that cost loss could be greatly reduced by the proposed methodology.     

Owner–Contractor Work Structures: Process Approach

This paper describes a process to assist project managers, within owner companies, define work relationships between owners and their contractors for capital project development, and execution. The owner–contractor work structure process was developed by the Construction Industry Institute as a step-by-step process for making rational decisions about the most appropriate owner–contractor work structure for capital projects. A work structure is described by a set of project competencies and the extent of involvement of the owner and contractor in performing, leading, and/or providing input with respect to those project competencies. The process is described using a formal process modeling technique. Three case studies, conducted to validate the owner–contractor work structure process, are discussed. The results from these case studies suggested some basic changes to the process that would enhance its use in practice. A modified owner–contractor work structure process is then presented.     

Sequence Planning for Electrical Construction

The sequences in which work is completed bear significantly on the performance of electrical contractors in building construction projects. When project work sequences are poorly planned or poorly executed, electrician constructors often must contend with compressed schedules, trade stacking, and out-of-sequence work to ensure timely completion of a project. This paper analytically evaluates the importance of sequence planning to efficient electrical work. It describes changes that were made to crew-level planning procedures for an electrical contractor and the impact these had on crew performance. The analysis shows that sequence planning at both the project level and the crew level are important to the performance of electrical crews. Most notably, a strong correlation (0.73) was detected between crew planning performance one week and crew productivity performance in the following week. Results of the study are provided. Principles of sound sequences and guidelines for sequence planning are also captured from the analysis. These sequence guidelines are designed to avoid, where possible, the often adverse project conditions in which electrical contractors find themselves and to handle those conditions most effectively when they cannot be avoided.     

Performance Modeling for Contractor Selection

This paper proposes a contractor selection system that incorporates the contractor’s performance prediction as one of the criteria for selection. This research was developed working with an owner organization that was interested in developing a framework for evaluating contractors for future work. A modeling framework, developed in previous research, was used to develop a conceptual model of a project that depicts a causal structure of the variables, risks, and interactions that affect a contractor’s performance for a specific project from the owner’s point of view. The conceptual model helps to identify information needed for a comprehensive evaluation; some information can be readily available from historical records, while other can be unavailable and can be replaced by estimates based on experience. Ideally, over time, the owner should collect most of the information required for future evaluations. A mathematical component of the model can generate predictions of multiple project performance outcomes for each contractor under evaluation; these predictions and a contractors’ bid prices are then used for contractor evaluation purposes.     

Impact of Change Orders on Small Labor-Intensive Projects

In today’s construction, small projects can be just as important if not more important than the larger projects. However, small projects are usually fast track projects, which often involve overlapping design and construction time. Subsequent modifications may be required for the sections that are already under construction. These disruptions to the ongoing project are labeled as change orders. The impact due to changes has been described as the adverse effect upon the unchanged work due to changes in the contract. For this study, 34 projects were selected to develop a statistical model that estimates the amount of labor efficiency lost due to change orders for small projects. The variables in the final model are percent design related changes, percent owner initiated changes, the ratio of actual peak labor to estimated peak labor, the ratio of actual project duration to estimated project duration, and project manager’s percent time on the project. The results of this paper are of value to owners, electrical and mechanical contractors, and construction managers. The model quantifies the impact of change orders by introducing the most important variables that bring the largest disruptions.     

Risk Allocation by Law—Cumulative Impact of Change Orders

Change, defined as any event that results in a modification of the original scope, execution time, or cost of work, is inevitable on most construction projects due to the uniqueness of each project and the limited resources of time and money available for planning. There are many factors that may cause a change such as design errors, design changes, additions to the scope, or unknown conditions in the field. For each change, contractors are entitled to an equitable adjustment to the base contract price and schedule for all productivity impacts associated with the change. The focus of this paper is to outline the types of changes that can occur on a construction project and also to spell out the financial recovery possibilities that exist for the contractor for each type of change. There are many historical and current court decisions that shape the outcomes of such claims and determine who holds the risks associated with various project changes. Also, an effective cumulative impact claim contains certain vital elements upon which the final outcome will be determined by the legal system. Last, there are certain actions that a contractor and owner can do to either enhance or mitigate the effectiveness of a potential cumulative impact claim.