Effects of Disruption

This post discusses the effects of disruption on construction projects. This is the third post in a three-part series on disruption. The first post discusses the definition of disruption, three general principals associated with disruption, and how disruption is different from delay, and the second post discusses noncompensable and compensable disruption.

Disruption to a contractor’s operations usually results in productivity loss and, almost inevitably, a loss of momentum in the work. Productivity loss is a typical result of disruption because in the end, more labor and equipment hours will be required to do the same work. To illustrate, consider a simple and common disruption such as unknown and unanticipated underground utilities that are either misplaced or not shown in the contract drawings. Also, imagine that a pipelaying crew of laborers, pipefitters, and equipment operators, with an assigned spread of equipment, is proceeding consistently with the contractor’s estimated progress rates. When the crew encounters the unanticipated underground utilities, the owner directs the contractor to have the crew and equipment continue rather than stop working until either these utilities are removed or the direction of the pipe installation is modified. Because the contractor must exercise additional care in machine excavation, utilize additional labor-intensive excavation, and expend additional effort in placing pipes under or around existing utility pipes, conduit, ducts, or cables lying in the path of the work in the trench, the contractor may take as much time to lay 50 feet of pipe today as it took to lay 200 feet of pipe yesterday.

Effect on Learning Curve
Disruptions profoundly affect contractor learning curves. Each contractor’s bid price contains certain productivity assumptions, typically including a learning curve effect. For example, as a trade crew becomes more and more involved in a particular task, that crew’s productivity improves. Through continual, repetitive progress, workers gain skill and efficiency as the job progresses and, therefore, work faster (the learning curve effect). Disruption interrupts this flow, thereby reducing or halting the contractor’s planned progress and diminishing or eliminating the learning curve effect. This disruption exposes the contractor to additional costs of performance beyond the obvious costs of delay because the contractor is deprived of a labor force that continually proceeds in singular, methodical steps.

Similarly, because of disruptions and changes in crew size and composition, the need to return to a work location greatly reduces the learning curve. Suspensions in work may force a contractor to train its crews for tasks that they otherwise would not have performed to maintain progress on the job and mitigate the impact of the suspensions. Consequently, the contractor is deprived of the expected increase in efficiency that normally results from using a specialized crew that continuously repeats a single function.

Out-of-Sequence Work
Disruption can also occur when trade contractors must work out of sequence. For example, a general contractor may have to radically deviate from the original contract schedule, forcing the masonry subcontractor to install exterior walls in the winter rather than in the warmer months, as was originally planned. To prove the impact of this change, the subcontractor would have to provide evidence that winter masonry work was less efficient than nonwinter work and increased its labor costs.

Demobilization and Remobilization
A disruptive act can also cause incremental demobilization and remobilization, resulting in stop and restart costs. Typically, once a trade crew has been mobilized and proceeds to work, the crew does not fully stop until the scheduled activity is completed. However, disruptive acts can cause multiple work stoppages and restarts, causing unplanned demobilization and remobilization costs. Moreover, the disruption can also increase setup time for activities like moving scaffolding.

Overcrowding
A further disruption can be caused by overcrowding, which can result from poor directions or attempts to accelerate to make up for lost schedule time, thereby requiring several trades to work in small, confined areas simultaneously. Insufficient space to work effectively usually results in lower productivity for all trades involved.

Effect of Owner’s Inadequate Scheduling
The contractor’s required reliance on the owner’s or its project/construction manager’s scheduling leaves the owner vulnerable to disruption claims if it improperly manages scheduling. For example, if an electrical contractor relies on the owner’s schedule to sequence electric installations on a multi-story building on bottom-to-top floors, the owner must ensure that the preceding structural, civil, window installation, drywall, and mechanical work on each floor proceeds in the planned sequence and schedule upon which the electrical contractor has planned its work. If the preceding work is re-sequenced such that the electrical contractor cannot perform its work in an orderly manner, then the electrical contractor may be justified in seeking recovery from the owner of its increased labor costs due to its lost labor productivity resulting from such disruption.

Owner’s Failure to Coordinate the Work of Other Contractors
Similarly, on projects where the owner hires multiple contractors to perform work, the owner or its project/construction manager must coordinate the work of all contractors so that they do not interfere with and disrupt other contractors’ performance. A common example is one contractor’s reliance on the owner to coordinate another contractor’s relocation and protection of utilities traversing the jobsite. Failure to prepare the jobsite for construction by removing utility obstacles may result in major disruption claims by follow-on contractors. Utilities may further disrupt planned progress if they are unexpectedly encountered during excavation because the contractor must either halt excavation or proceed in a more cautious manner.

Ripple Effect/Cumulative Impact¹
Efficient performance usually involves a sequence of operations anticipated by the contractor. Once the sequence is disrupted anywhere within the proposed progression of activities, a ripple effect evolves and negatively affects performance on subsequent activities, creating additional delay even though the initial disruption does not directly affect these activities. The cost of this productivity loss can be difficult to quantify, especially when a series of disruptive events, such as a blizzard of changes to the work, has a compounding negative effect on the contractor’s productivity. This is why contractors are reluctant to sign off on full accord and satisfaction for change orders when they cannot quantify the loss of productivity that may result from the conditions that exist when the changed work is actually performed.

For example, a change issued to a piping contractor requiring a change in the flow and location of a control valve in a steam distribution system is likely to have both direct and indirect effects on the contractor’s performance. The direct effects are probably the relocation of the control valve to another location in the piping layout and potentially ordering a new control valve. The contractor is entitled to an equitable adjustment of the contract for the direct costs of the change, namely the cost of the new control valve and associated flanges and fittings. However, such a change is also likely to result in increased costs due to disruption of the contractor’s other operations in the physical area of the change. Relocation of the control valve may disrupt other installations being performed by the piping contractor as well as the instrumentation subcontractor, who may have to revise or relocate other piping and instrumentation tubing running to the control valve and possibly move other equipment and instrumentation. These indirect effects cause increased labor costs due to the ripple effect of the control valve location change.

¹     See Richard J. Long, Rod C. Carter, and Harold E. Buddemeyer, Jr., Cumulative Impact and Other Disruption Claims in Construction, Virtual Bookworm, 2014.

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