What Happens When There Is Construction Productivity Loss?

Productivity loss is common in the construction industry, particularly in large projects requiring intricate planning and coordination. In 2023, 45% of contractors saw labor productivity decline. A lack of qualified laborers, poor planning, and miscommunication are some of the top causes of productivity issues. 

Impacts of Productivity Loss

When project teams do not meet productivity benchmarks, it can result in the following consequences: 

Schedule Delays 

Lost productivity often leads to schedule delays, affects project timelines and milestones, and ultimately results in cost overruns. It can create a ripple effect throughout the project schedule, derailing subsequent tasks and leading to costlier disruptions.

For instance, if an electrician needs the engineer to clarify the design, they may lose productive time waiting for an answer. Construction workers may also be left waiting idly if they can’t proceed until after electrical wiring is installed. Therefore, the vague design has caused a task to extend beyond its expected duration. The overall schedule may be delayed as a result. 

Cost Overruns 

Productivity issues can quickly lead to cost overruns, as productivity loss can require additional labor hours or other resources to cover the scope of the project.

For example, if tasks take longer to complete than planned, a construction company may need to pay workers overtime, hire temporary staff, or rent additional equipment to meet project deadlines, increasing overhead costs. If the company has workers needing the equipment or resources at other sites, they may be left without work, leading to further financial loss.

Contractors may seek compensation for productivity losses caused by forces beyond their control, which could potentially lead to conflicts with stakeholders and complicate project circumstances.

Quality Issues  

When productivity slows down, and managers notice deadlines not being met, they may decide to accelerate work — especially if the project owner refuses to provide a time extension. Workers might rush to complete tasks on time, resulting in decreased workmanship quality and low morale.

In a tight labor market, project managers may need to hire less skilled workers, which can lead to lower quality work or defects — and potentially the need for costly reworks. Consider that the cost to complete a rework in a large civil engineering project ranges between 5% and 20% of the contract value, which could translate to thousands or millions of dollars lost.

Additionally, multiple subcontractors may need to work alongside each other to stay on schedule. If there’s insufficient space, it can be challenging for workers to complete tasks efficiently or accurately. 

Disputes

Project delays and escalating costs can quickly cause tension between stakeholders and, if left unchecked, lead to damaged reputations or litigation.

For example, contractors often attribute productivity losses to actions by the owner or others. As a result, they may submit delay or disruption claims to recover the costs incurred from productivity loss that project owners disagree with. Or, project owners may assert that contractors completed projects late due to poor management and desire to impose liquidated damages, potentially leading to a dispute. 

In any case, when a project team fails to meet stakeholder expectations, it lays the groundwork for conflict. If disputes are not successfully resolved through negotiation or mediation, they can result in costly litigation and put a complete halt to project progress.

Key Indicators of Productivity Decline

How can project managers identify waning productivity before it becomes a delay? Labor productivity can be impacted by a large number of factors. The following is just a sample of common on-site conditions that signify disruptions impacting productivity:

• Overcrowded work areas
• Skilled labor shortages
• Reworks or errors
• Out-of-sequence work
• A multitude of project changes
• Increased break times, absenteeism, injuries, or turnover
• Extreme weather or other force majeure events
• Logistics issues or constrained access
• Decreased employee morale

If you detect decreasing productivity, either through the above indicators or monitoring tools, it’s crucial to act promptly to mitigate its impact. Often, the first step is to pinpoint the root causes of productivity issues, the impacted areas, and the cost implications.

Additionally, it’s important to communicate the issues you identified with key stakeholders, like project owners, contractors, and subcontractors. Aim to collaborate with stakeholders to devise a realistic action plan and get the project back on track.

Quantification of Productivity Loss

Accurately quantifying the effects of delays caused by loss of productivity poses additional challenges for project teams. The process often requires technical expertise to identify and analyze all the factors contributing to productivity loss.

That said, there are multiple ways to quantify productivity loss. It’s recommended to use quantitative methods like measured mile analysis to accurately assess the extent of the loss, which can be challenging to perform without the right skill set. You can also conduct a discrete labor study of a specific task within a particular period to measure productivity and quantify the impact of contributing factors.

Monitoring Productivity Loss

Monitoring productivity lets you detect loss early and take corrective action before it significantly impacts project timelines. It’s important to track productivity by trade or discipline to identify specific issues.

Productivity monitoring requires tracking labor hours and units installed for each period over the life of the project. These numbers must be accurate to inform your decision-making reliably. Additionally, labor hours and units installed must be analyzed each period to identify variances and trends. 

Leverage Productivity Monitoring Tools

Today’s project managers face endless options to digitally track and monitor productivity. These tools can complement project management techniques like earned value management. Some of the options include:

• Project management software: Platforms like Procore allow project managers to track and monitor labor costs, individual employee hours, and production quantities in real time so they know when to adjust their workforce to stay on schedule and within budget. Microsoft Project is another common solution that can be used to track time and determine if tasks are on track.
• Field management software: Solutions designed for on-site teams allow workers to log progress so management can gain instant insight into productivity. Autodesk Build and Fieldwire are examples of tools that allow construction teams to track performance on-site in real time.
• Building information modeling (BIM): BIM software provides a 3D representation of project progress, empowering teams to detect clashes in the design phase to prevent reworks and delays later on. BIM solutions can also be used to collect productivity data and measure on-site performance by tracking planned progress against actual progress in real time.

Preventing Productivity Loss 

Project managers play a significant role in preventing, monitoring, and mitigating productivity loss. They can address most high-impact factors that can lead to productivity loss during the planning phase.

It’s also up to management to catch issues early in the project life cycle. Projects that do not start strong can be much more challenging to recover.

The following tips can help your team prevent productivity loss as the project progresses:

Proactively Plan and Schedule  

The best way to begin a project confidently and with momentum is through proactive planning and scheduling. A well-prepared plan and detailed schedule enable you to allocate resources strategically and effectively.

You can also set realistic timelines and identify priority tasks — which you can then track — as you plan and schedule. Consider these strategies:

• Leverage advanced project management software: Consider adopting robust project management software to streamline project scheduling, coordination, and communications. Advanced construction project management software has been found to significantly improve cost efficiency, scheduling processes, and resource allocation, which all contribute to a project’s success.
• Establish a detailed work breakdown structure (WBS): A WBS helps you break your project into more manageable components so you can look at tasks on a granular level. You can use a WBS to gain clarity on work tasks so you can ensure team members know what to do.
• Conduct look-ahead planning: This technique defines the short-term resources and labor needed so managers can clearly communicate timelines and responsibilities to their teams. Look-ahead planning can decrease delays related to poor resource planning and prevent productivity issues resulting from such delays.
• Perform cost forecasting: Cost forecasting helps you set a comprehensive, realistic budget so you can allocate resources effectively and prevent disruptions caused by a labor or material shortage. You’ll likely need to update forecasts as the project progresses and evolves so you can adjust resource allocation accordingly.

Address Communication Breakdowns 

Clear communication is crucial for preventing delays, including those related to productivity. When managers clearly define roles and responsibilities for their teams, workers understand what’s expected of them, allowing them to focus fully on their tasks.

Effective communication also involves ensuring tasks are coordinated well and stakeholders stay updated on schedules and timelines. When everyone’s on the same page, there’s a decreased risk of overcrowded worksites, misunderstandings around goals and expectations, and missed deadlines.

Still, maintaining communication and seamless coordination with numerous stakeholders can be challenging, particularly in the fast-paced world of construction. Here are tips to help you improve communications between multiple stakeholders:

• Identify and prioritize stakeholders: Project managers across industries agree — it’s vital to know who your stakeholders are, what they do, and how much impact they can have on a project’s success. List everyone you need to communicate with, including their names, roles, and contact information, and then prioritize them based on their influencing power.
• Create a communication plan: Before work begins, determine the tools and formats you’ll use to communicate with stakeholders, how often you’ll engage with them, and what technology they’ll have access to for viewing information and updates. Aim to relay communications consistently.
• Establish transparency: Transparency is key to building trust and can be instrumental in preventing conflicts. Let stakeholders know that you value transparency by keeping them informed at every phase, communicating what-if scenarios to promote proactive collaboration, sharing the reasoning behind important decisions, and regularly checking in with them.
• Keep communication channels open: It’s important that stakeholders feel comfortable communicating their concerns so you can work toward a solution before issues escalate. Create a culture that encourages employees, management, and other stakeholders to communicate questions, concerns, and ideas during any project phase.
• Document everything: Keep a record of your interactions with stakeholders, as these documents will be useful if a conflict arises. You can use this documentation to support your standpoint in a dispute, which may help to settle matters faster and prevent escalation.

Harness Automation and Off-Site Techniques

In a market with consistent labor shortages, harnessing technology can decrease reliance on manpower and ensure productivity needs are met. For example, construction companies can use software that automates time-consuming tasks, reducing human error, decreasing the administrative workload, and enabling faster decision-making.

Additionally, construction teams can embrace generative AI to assist with design and scheduling processes, monitor project progress, and receive automatic alerts if a variation occurs that could lead to a delay or cost overrun.

Meanwhile, on-site teams can use automated equipment to perform repetitive tasks — completing them faster and with greater precision. For example, they can use robotic equipment for bricklaying or drywall finishing. Drones can be deployed to survey the site. 

Businesses might also choose to use off-site options, like prefabricated or modular construction processes, to decrease on-site hours and solve a labor shortage.

Minimize the Risk of Legal Disputes 

There’s no disputing that productivity loss can lead to legal conflicts. Missing deadlines might be a breach of contract, leading project owners to take legal action. Or, contractors might seek time extensions related to delays, which can lead to disputes over contractual clauses. 

Numerous circumstances could result in conflict, but fortunately, there are ways to prevent escalation.

Effective Contract Management

Construction contracts are often complex and the source of disagreement. Having a system to manage every aspect of the contract can bring clarity and accountability to construction projects. Contract management includes: 

• Understanding the contract: Ensure your team understands contractual provisions related to productivity, like those dealing with critical path activities and change order procedures. That way, employees will clearly understand what’s expected of them based on the contract and the consequences of noncompliance.
• Practicing effective change order management: Establish a clearly defined process for creating and managing change orders and ensuring the documentation requirements are met. Having accurate assessments of changes to project scope or schedule provides evidence to support your case if there’s a disagreement.
• Quantifying loss of productivity accurately: Managers or contractors must be able to accurately quantify productivity loss if they wish to seek compensation for additional labor costs. Having clear and comprehensive documentation to support a claim is key to facilitating smooth negotiations. 

Risk Management

Risk management is crucial for mitigating the impact of productivity issues and preventing disputes. A key element of risk management is early risk identification.

Develop a process for identifying and managing productivity risks such as labor availability issues. Prepare risk mitigation strategies to respond promptly to anticipated risks, addressing them before they develop into disputes.

Other important aspects of effective risk management include communication and documentation. Hold regular meetings with stakeholders to coordinate activities and discuss project progress, challenges, and expectations. Invite stakeholders to express their concerns and ideas to avoid or mitigate risks before they impact work. Be sure to document the discussion so you have something to reference if a dispute arises.

Keep Your Construction Project on Track With Spire

Addressing productivity issues promptly is crucial to preventing delays, cost overruns, and disputes. Yet, it can be challenging to correct your course if you’re unable to identify the factors that pushed the project off track. Resolving productivity issues also requires accurately quantifying losses, which can be a complex process in itself.

We can help you identify and quantify productivity loss — and prevent issues in the future.

At Spire Consulting Group, we’re a multidisciplinary construction consulting firm with firsthand experience managing complex, high-stakes construction projects across various industries. We offer proactive services, such as project controls and project management, to keep your projects on track, as well as forensic analysis and dispute resolution to help you quickly recover from setbacks.

Contact us today for a consultation and learn how we can help you overcome your most complex productivity challenges. Explore our case studies to see our results.

The content included in this article is for informational purposes only and does not reflect the opinions or recommendations expressed by any individual unless otherwise stated.