• Garfield and the Puzzling Negotiation That Resolved a Labor Inefficiency Claim
  • April 10, 2013 | Author: Eugene J. Heady
  • Law Firm: Smith, Currie & Hancock LLP - Atlanta Office
  • Lasso in hand, Garfield stood stoically up against the magnificent Saguaro Cactus, its five arms towering above him.  The scorching desert sun beat down on him.  Garfield peered out from beneath the brim of his cowboy hat, which was tipped forward covering the oversized white of his left eye.  The two-inch spines, which were clustered along the ribs of the Saguaro Cactus, brushed up against Garfield’s orange and black-striped fur.  His long, furry tail flickered in obvious agitation.  Garfield, of course, was a cat.  He had never been called upon to help resolve a contentious construction dispute.  Joe, however, needed him now.

    Joe’s dispute with the Owner had reached a fever pitch.  Settlement negotiations had reached an impasse.  While Joe could have used any puzzle to prove his point and break the deadlock, Joe chose one with Garfield, a familiar cartoon character.  Joe carefully cut the top from the puzzle box so that it laid flat.  He slid the cardboard cartoon picture of Garfield and the Saguaro Cactus into a large unmarked manila envelope.  In another large unmarked manila envelope, Joe deposited the 300 puzzle pieces, which when properly fitted together would reveal Garfield standing against the magnificent Saguaro Cactus.  With the two envelopes in hand, Joe hopped up into his truck and headed out for a meeting with the Owner where Joe and the Owner would continue their contentious negotiation of Joe’s change order request.

    Joe was managing the electrical work on the construction of a sanitary sewer pump station on a large airport expansion project.  The contract required that the electrical contractor furnish and install all of the controls together with the associated conduit and wiring necessary for the complete operation of the pump station.  While most of the control devices were shown on the drawings, none of the conduit and wiring was shown.  Making matters worse, there were no schematic diagrams included in the competitive bid documents.  The control wiring turned out to be much more extensive and complicated than Joe’s estimator had originally calculated at bid time.  Joe feared that he may have a bid bust on his hands.

    Bid bust or not, Joe needed much more information in order to successfully and efficiently complete the control wiring.  Unfortunately, the numerous requests for information that Joe sent to the Owner and the Owner’s design team went unanswered or were answered with a terse response directing Joe to provide a complete and operational control system.  The design team was of no help.  Joe and his electricians were left to sort it all out in the field.  Needless to say, Joe’s electricians were not working as efficiently as planned, and Joe’s labor costs skyrocketed.  Joe’s request to the Owner for payment of the labor inefficiency costs fell on deaf ears.  While the Owner did acknowledge that Joe was entitled to recover some additional costs due to some admitted shortcomings in the electrical design, the Owner simply could not understand why the claimed additional labor costs were so high.  Thus, the Owner steadfastly refused to pay any additional labor costs.

    Joe arrived at the Owner’s office and climbed down out of his truck.  As he entered the Owner’s office, Joe smiled and said, “Before we get started, let me ask you this.”  Joe sat down, opened the first large manila envelope, and dumped 300 colorful puzzle pieces onto the middle of the Owner’s desk.  Joe asked, “How long would it take you to complete this puzzle?”

    The Owner grinned sarcastically and responded, “About X number of hours, I suppose.”

    “Great,” Joe responded.  Joe then opened the second large manila envelope and slid out the puzzle box top, revealing the cardboard cartoon picture of Garfield and the Saguaro Cactus, and placed it on the Owner’s desk.  “With the puzzle box top in front of you, now how long would it take you to complete this puzzle?”  Joe asked.

    The Owner again grinned sarcastically and responded, “About Y number of hours, I suppose.”

    “Wouldn’t you agree that if you had the big picture in front of you from the very beginning, you could complete the puzzle in half the time?”  Joe asked.  “Wouldn’t your work on the puzzle be much more efficient if you had a clear vision of the big picture?”

    The Owner smiled and responded, “Joe, you’ve made your point.  I believe that there is some negotiating room here.  Give me a copy of your original estimate together with all of the backup information that shows your actual labor costs incurred to complete the control wiring.  Let’s see if we can get this dispute resolved and behind us.”

    Joe and the Owner went on to negotiate their differences in good faith and ultimately resolved their dispute amicably.

    Develop and maintain a clear vision of the big picture from the outset.  As the interaction between Joe and the Owner suggests, having a clear picture of the end product is an important element in maintaining good labor productivity.  Lost productivity claims, oftentimes referred to as labor inefficiency claims, may arise on a construction project when the construction documents lack the appropriate detail and when the anticipated means, methods, techniques, scheduling, or work sequence is changed or impacted by events or circumstances beyond the control of the impacted contractor.  Inefficiency claims are multifaceted and factually complex.  Inefficiency claims, for example, may involve out-of-sequence work, multiple owner-directed changes, stacking of trades, concurrent operations, start-stop work, dilution of supervision, poor site access, competition for limited labor resources, crew size inefficiency, added crews, acceleration, delays, overtime, shift work, and equipment and material inefficiencies.

    When considering whether to assert an inefficiency claim against an owner, the contractor should first review its contract to determine whether there is a basis for recovery.  In addition, the contractor should review the contract for any notice requirements and provide timely notice of all claims.  If there is a contractual basis for establishing the owner’s liability, the contractor must then consider what evidence exists to demonstrate that the inefficiencies were caused by the owner’s conduct rather than by the contractor’s failure to accurately estimate the complexity and cost of the project to begin with or were caused by the contractor’s failure to properly schedule, manage and coordinate the work.

    When faced with losses in productivity as a result of delays or disruptions caused by the owner or another project participant, the contractor should take immediate steps to document the impact on its project costs.  The contractor should also immediately establish and put in place an accounting system to track contemporaneously and accurately the impact of such delays or disruptions on its labor force and costs.  The contractor should segregate and accumulate all additional costs, to the extent possible, that are related to the delays, disruptions or other events causing the labor inefficiencies.  For example, if the events resulted in overtime, extra shifts, added crews, or hiring subcontractors, the contractor should make sure that it segregates and tracks these costs.

    The contractor should also make every reasonable effort to mitigate its damages.  To mitigate damages effectively, the contractor must work quickly to identify and immediately address the delays and disruptions which may be causing the losses in productivity.  The contractor should make sure that all project participants have readily available the information necessary to get back on track, stay on track, and perform their work efficiently.  For example, when requests for information are submitted, the contractor should work closely with the owner and the design team to ensure that the RFIs are timely and properly routed and that all responses to RFIs are complete, helpful and timely.

    Like working a puzzle, a contractor can minimize productivity losses and avoid labor inefficiency claims by making sure that all of the project participants have a clear vision of the big picture from the outset together with a clear vision of what it will take to finish the project efficiently, profitably and on schedule.