Change Order Impacts - The Effects of Changes on Labor Productivity: Why and How Much (Archived)

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Overview

Changes and the resulting contract change orders are a source of concern to owners and contractors alike. Changes are an important contributor to cost overruns, schedule extensions, and contract acceleration. This research examines the quantitative effect of changes on labor productivity using productivity data collected from four active construction sites between 1989 and 1992. In total, the database contains 151 weeks of data that shows a significant average loss of efficiency when performing work that results from a change. Importantly, the report also investigates the reasons why there is a degradation of labor productivity. Understanding the causes is a prerequisite to formulating effective strategies for managing changes.

The research team’s review of existing industry literature on construction changes and change orders determined that little information exists on the quantitative aspects of changes and most articles were directed more towards publicity and advertising than claims avoidance or increasing knowledge about understanding and managing changes. The Task Force prepared a report on the impact of changes on cost and schedule  that concluded that changes were inevitable on projects, but were most troublesome on fixed price or guaranteed maximum price contracts. Therefore, the consequences need to be understood by the person directing the change.

The objectives of this research are:

  • Quantify the impact of changes on field labor efficiency
  • Determine the relationship between changes and various types of disruptions
  • Establish why and to what extent changes affect labor efficiency
  • Present a conceptual model for estimating the impact of change on labor efficiency                                        

Key Findings and Implementation Tools

1 : Impact of Change Orders on Labor Productivity

The analysis of productivity data reveals that, on average, labor efficiency is about 70 percent of normal when work is performed on changes; that is, there is a 30 percent loss of labor efficiency that results from the change. (SD-99, p. v)
Reference: (SD-99)

2 : Change Impact on Materials and Out-of-Sequence Work

Additional analyses support the conclusion that changes cause disruptions to the work which negatively affect labor efficiency. The most significant types of disruptions are 1) lack of materials and information and 2) having to perform the work out-of-sequence. These disruptions result in a daily loss of efficiency in the range of 26 to 47 percent. (SD-99, pp. v, 63)
Reference: (SD-99)

3 : Effect of Timing of Change Orders on Efficiency

The principal factor leading to disruptions and loss of efficiency is timing of the change. If changes are identified before the work is given to the crafts, the effect of changes on labor productivity is probably minimal. However, if a change is identified by the crew in the field, then productivity is adversely impacted because the crew has to stop work in progress and either wait for information and materials or move to another location and come back later to implement the change. (SD-99, pp. vi, 63)
Reference: (SD-99)

4 : Model Correlating Changes, Rework and Labor Productivity

A conceptual model was described that explained how changes and rework affected labor productivity. The model is based on disruptions. The model states that changes themselves do not cause losses of productivity, but instead cause disruptions to occur. It is these disruptions that cause productivity losses. Changes that can be made that avoid disruptions can be completed with little or no impact on labor. (SD-99, p. 57)
Reference: (SD-99)

5 : Factor Model

This model is based on the factors that affect labor productivity. The work environment and work to be done are factors that influence the workhours needed to produce the output. This is illustrated in the two figures below. (SD-99, p. 23)

Reference: (SD-99)

Key Performance Indicators

Improved cost, Improved schedule, Reduced project growth, Improved craft productivity

Research Publications

The Effects of Change on Labor Productivity: Why and How Much - SD-99

Publication Date: 08/1994 Type: Source Document Pages: 73 Status: Reference


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