HOW TO USE

THE MCAA LABOR

FACTORS
Presented by
John R. Koontz
MCAA
About the Teacher

John Koontz
MCAA, Director of Project Management Education (Since 1999)

u MCAA IPM/AIPM Director – 21 years

u Associate Professor (Purdue University) – 8 yrs
u Mechanical Industry Consultant – 25 yrs +
u Mechanical Project Manager – 15 yrs
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 Goals for This Session
• My focus today will be a 60-minute
general description, explanation, and
awareness of how to use the MCAA labor
factors
• This a large subject for a 60-minute
webinar. Therefore, I hope to inspire and
motivate you to learn more about the
“when and how” regarding the effective
use of the MCAA labor factors
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LEGAL DISCLAIMER
uThe information discussed in this
webinar is not intended to
constitute legal advice. Instead,
all information, content, and
materials discussed are for
general informational purposes
only. Please contact your attorney
to obtain specific legal advice.
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We are going to
be reviewing
pages 135 to 161

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 The MCAA Labor Factors
u Historically they have been referred to
as:
uMCAA Management Methods Bulletin
PD2
uor just “PD2”
uThe MCAA Factors
uMCAA Factors Effecting Labor
Productivity 6
 The MCAA Labor Factors are an Old
and Well-Established Method
u Introduced by MCAA in 1971
u Since introduced in 1971, the factor titles, their
descriptions and their “percentage of loss per
factor” percentages have remained unchanged
u It is important to note that over the last 40-50
years, the MCAA factors have gained wide
acceptance in the construction industry and
before various courts, boards of contract appeals,
and tribunals of the American Arbitration
Association
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9
 The Range of Impact
u Minor
u occasionally, sometimes, once in awhile, disruptive
u maybe a score of 1 to 3 on a scale of 10
u Average
u regularly, often, common, detrimental, damaging
u maybe a score of 4 to 7 on a scale of 10
u Severe
u most of the time, constantly, consistently, crippling,
u maybe a score of 8 to 10 on a scale of 10

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AVERAGE IMPACT DOES NOT MEAN AVERAGE CONDITIONS!

u No Impact:
u I’m in the library and trying to read:
u MINOR CONDITION: It’s mostly quiet and good reading conditions
u AVERAGE CONDITION: I heard someone whisper and I looked up and then
continued reading
u SEVERE CONDITION: I heard someone talk and I looked up, frowned, and
sighed in disgust, and then I continued reading
u Impacted:
u I’m in the library and trying to read:
u MINOR IMPACT: People are talking loudly a lot, I’m struggling to read and
and its hard to concentrate!
u AVERAGE IMPACT: People are yelling and screaming a lot, reading is slow
and difficult, concentration is sometimes nearly impossible
u SEVERE IMPACT: People are having a loud party and playing heavy metal
music and its almost impossible to read, even with my headphones on! I gotta
get outta here! I feel like I’m never going to get this book read!
Connecting the Cause and the Effect

u FACTOR= CAUSE
u PERCENT OF LOSS = Effect

u Excellentcontemporaneously written
project records from the site
management team will be crucial
Connecting the “Cause” and “Effect”
in Loss of Productivity Claims
u “ One of the fundamental issues that a trier of fact
considers in hearing a contractors inefficiency claim is
“cause and effect”. Important in the consideration is the
question of whether or not the contractor’s claims as to
productivity impacts comport with the quantum being
sought.”
u Comport means “agree with” and quantum means
“quantity or amount”.
u What do you think the Judge means by this statement?

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Connecting the “Cause” and “Effect”
in Loss of Productivity Claim
u “However, where productivity is concerned, there is no
general agreement and no “black letter” law as to how
this is to be quantified. This is equally true of quantifying
the loss of productivity”
u There is NO accepted empirical study/specific
methodology or means of record keeping that proves
productivity or loss of productivity
u However, “The Measured Mile Analysis” is highly accepted
u (Last Week’s webinar)

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Connecting the “Cause” and “Effect” in a Loss of
Productivity Claim

u “The inability to prepare a measured mile analysis does

not, in and of itself, bar a contractor’s loss of productivity
claim. In such cases, the contractor must apply a
different methodology to connect the cause and effect.”
u The MCAA Factors Affecting Labor Productivity is the basis
for this “different methodology”
u It is the process of matching facts with the claimed loss
of productivity
u “It is well recognized that a contractor does not have to
prove its loss of productivity with mathematical
exactitude; however this does not relieve the contractor
from making a compelling case as to the specific causes of
the impacts and to then connect them with a logical
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effect.”
Two Methods Used With the MCAA Labor factors
u Forward Priced Productivity Loss Estimate
u Used for pricing before the change is made
u Includes known or anticipated impacts
u Retroactive Productivity Loss Analysis
u Afterthe changes are completed or usually used at
conclusion of the project
u All impacts are known because the work is complete
u Bothare valid methods and the project may
require using either one or both

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Direct Impacts AND Cumulative Impacts

u A contractor must consider both the direct impacts of a loss

of labor productivity caused by a change to the contract
scope of work, as well as the CUMMULATIVE IMPACT of
changes in scope to the unchanged work.
u The MCAA Labor Factors can be applied equitably and
reasonably when retroactively quantifying the cumulative
effects of changes on the productivity of a construction
project

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 Cumulative Impact Claims
u FACT:
u Most experts in the field of construction productivity
loss analysis believe that the only means of
recovering a significant portion of productivity loss is
to measure such losses in their totality, at the end of
a project, particularly when such losses are a result
of a large number of scope changes, which add a
significant number of craft hours.
u Why?
u These claims are called “Cumulative Impact Claims”

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What does your contract, contract documents,
waivers, and/or change order forms say about
cumulative productivity impact claims?

u There’s a lot of murky legal water regarding

change order forms, waivers, broad waiver
language, contract documents, full accord and
satisfaction contract language, knowable impacts,
unknowable impacts, etc.
u READ THE MANUAL
u GET ADVICE FROM EXPERIENCED CONSTRUCTION
COUNSEL
Which of the
MCAA Labor
Factors are
most
appropriate?
 Which factors are most appropriate?
u You must determine which MCAA Labor Factors are most
appropriate for the specific change scenario or window of
time and apply the appropriate factor categories and
percentages
u If possible, the factors and their 3 levels of intensity
should be applied cautiously and with significant input by
those who witnessed the conditions under evaluation
u You must interview your jobsite labor supervision, ask
them good questions, AND carefully review their
contemporaneously written records (aka: Foreman Daily
Logs, etc.)

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Your rationale for choosing the factors
and their intensity will be scrutinized.

Rational explanation needs to be

supported by project productivity
records, written documentation, and
other detailed information obtained
from your field supervisory personnel
 AVOID OVERLAPS AND DUPLICATION

u Care must be taken to eliminate overlapping factors

u Morale and Attitude is a good example
u Stacking of trades, overtime fatigue, and reassignment of
manpower already include in their losses a factor for
decreased morale and attitude
u You must also consider “Ripple Effect” when striving
to avoid factor duplication
u Example: When you are asking for additional costs for
additional supervision, it may be duplicative to ask for
“Dilution of Supervision”

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How many MCAA factors should you choose?

u Theindiscriminate choice of multiple

factors will lead to unreliable results and
the overstating of impacts – be cautious
and choose them with care!
u Although there is no exact answer, in most
cases, 3-6 factors are both necessary and
applicable
u Maybe fewer than 3 but rarely more than 6
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CHOOSE CAREFULLY ; CHOOSE WISELY

Choose the appropriate factors

Choose the appropriate intensity %

for each factor
 The MCAA Labor Factors are Additive

u Once all the factors have been

carefully evaluated for each changed
condition, the percentages are added
together. When used for forward
pricing, the total percentage is then
multiplied against the estimated craft
labor hours for the change.

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Forward Pricing Sample Calculation
u Estimated Change Order hours w/o impacts are 2,000 hours
u MCAA factors:
uCrew Size Inefficiency = 10%
uLearning Curve = 10%
uReassignment of manpower = 5%
TOTAL = 25%
u What is the estimated loss of efficiency hours?
uAnswer: 2,000 hours X 0.25 = 500 Hours
u What would be the total required craft hours for this work?
uAnswer: 2,000 hours estimated + 500 hours estimated
productivity loss = 2,500 hours total
 Modified Forward Pricing
u It is a well understood principle that when significant
changes in scope are issued to a contractor, a loss of
labor productivity may affect the change order labor
hours AND the base contract labor hours
u The previous slide was an estimation of only the
productivity impact on the change order hours
only….it did not include the impact to the base
contract hours

u Modified Forward Pricing looks at BOTH

Modified Forward Pricing – Time Specific Method

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 Retroactively Pricing Losses of Labor
Productivity Using the MCAA Labor Factors

u In most instances, the only option for a contractor

attempting to recover a loss of labor productivity
caused by changed conditions is to wait until the
project is over and review the actual loss:
planned versus actual.
u These claims are usually called “Cumulative
Impact Claims”

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 Practical Considerations
u Before pursuing a Cumulative Impact Claim at the conclusion
of a project, several obvious and practical considerations must
be made including the following five:
1. Was the estimate/plan of craft hours accurate and reasonable?
2. Were the conditions, which caused the loss of productivity, reasonably
foreseeable when the project was bid/negotiated?
3. Did the contractor cause this loss of productivity?
4. Were the principal causes for the loss of productivity the responsibility
of identifiable parties?
5. Will the potential cost of recovery exceed the loss?

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 NO DOUBLE DIPPING ALLOWED

u Youmust be cautious to remove, from your

retroactively developed loss of productivity
claim, if any, the forward priced loss of
productivity hours which were included in
your executed change orders.
MCAA factors must not be applied against actual hours!

u Why?
u Loss of productivity will be overstated
u Actual hours must be adjusted to remove:
1. Time and material hours
2. Hours spent to repair the contractor’s defective work
3. Change orders on which a loss of productivity has
already been calculated or forward priced
4. Hours associated with executed changes where its
been determined that the contractor is barred from
recovering the impact
5. Hours expended by crews that were not affected by a
loss of productivity
6. Other types of productivity losses for which the
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contractor is responsible (i.e., bid errors, etc.)
 Be Cautious
u Be cautious applying the total MCAA factor to the total
hours for the entire project duration
Why?
u Inaccurate results can occur because the effects of labor
inefficiency can change during the life of the project
u The MCAA factors often change as the actual project
conditions change – Use the Time Specific Method
u Apply the MCAA factors to the specific impacted time
frames within the overall project schedule (see next
slide)

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 The 1,344 hours are the
“should have spent hours”
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The Should Have Spent Labor Hours

u One of the foundations of a loss of labor productivity

claim is to determine how many hours the contractor
should have spent to perform the work had the
contractor not been affected by events caused by others
u THE UNICORN – The hypothetical condition that almost
never exists
u “In a hypothetical project, one without changes in
scope, estimate errors, and contractor-caused
inefficiencies, the calculated “should have spent”
hours should, theoretically, equal the original
estimated hours”
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Calculating the “should have spent” hours

u This example is from page 154-156 of the 2020 manual

u 18,000 = actual hours expended
u 10,000 = original estimated hours
u 3,000 = change order/scope change hours
u 300 = contractor self inflicted rework hours
u 4,085 hours of productivity loss from impacts (30% impact
determined from MCAA labor factors and their applicable
intensities)
u 18,000 - 300 = 17,700 hours adjusted for rework
u 17,700/1.30 = 13,615 should have spent hours
u 17,700 – 13,615 = 4,085 inefficient hours
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Calculating the “should have spent” hours

u 18,000 = actual hours

u (10,000) = original estimate hours
u (300) = rework hours
u (3,000) = change order hours
u (4,085) = productivity loss hours
u = 615 Hours remaining ???

u These 615 hours are the contractor’s productivity loss

hours that remain undefined and are the not claimed by
the contractor - Why?
Calculating the “should have spent” hours
u What about the difference between the original estimate
hours (10,000 hours) and the “should have spent hours”
(13,615 hours)?
o 13,615 – 10,000 = 3,615 hours???
u The 3,615 hours is the change order hours of 3,000 hours
and the undefined contractor caused inefficiencies of 615
hours)
u The 615-hour difference is caused by the contractor’s
MCAA Labor Factor estimate of 30%.
u An estimate greater than 30% would reduce the 615 hours
and an estimate lower than 30% would increase the 615
hours.
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Does your
brain hurt
just a little?

Sorry!
41
The next webinar in this 4-part
series:

Tuesday, June 23, 2020 – 1-2pm

“How to Estimate the Impacts of

Overtime on Productivity”
Acquiring the Manual – mcaa.org

u Free PDF Download

for MCAA Members
u $150 for a Hard Copy

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Questions
and
Comments

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John Koontz
Email:
john@johnkoontz.com

Text or Call:
765-426-8376 45