The Difference Between Productivity and Inefficiency in Construction

Now that we’ve talked about and identified some sources of inefficiency, let’s really drill down and gain a clear understanding of what the essentials of productivity and inefficiency are. These two terms are NOT interchangeable.

Let’s start with productivity. What is it? Productivity is the ratio of the work performed to the resources expended to complete that quantity of work. This succinct definition of productivity requires us to further define the phrases “work performed” and “resources expended.” The “work performed” component of the ratio should always be a measurable quantity of work, like 200 cubic yards of concrete or 15,000 linear feet of pipe, that represents the portion of the operation that is being evaluated. The “resources expended” component of the ratio should be the documented effort expended to complete the quantity of “work performed.” It should be described in terms of labor hours or crew hours, or some other relevant measure of resources. An example of productivity would be cubic yards of concrete installed per labor hour.

The quantity of work performed and resources expended are the preferred project information to be used when measuring productivity. All too often, when attempting to demonstrate instances of lost productivity, contractors, owners, and analysts compare planned and actual costs or rely on an operation’s percent completion. Contractors, owners, and analysts should avoid the trap of using cost-related data in calculating productivity, because cost-related data does not necessarily represent the quantity of work performed or the resources expended. Instead, it primarily captures the cost of the effort expended.

So Then What’s Inefficiency?

Inefficiency is measured by comparing productivities. You have to remember that when we’re talking about whether an operation is efficient or inefficient, we’re comparing two different rates of productivity. Also keep in mind that the measure of efficiency is always relative to the expected or achieved rate of productivity that you’re using as the baseline.

This comparison of productivity rates could be between the actual, achieved productivity rate of an operation to the planned or expected productivity rate of the same operation, or a comparison of actual, achieved productivity rates of the same operation from two distinctly different time periods.

Relative Measurement

In some instances, contractors and analysts try to measure inefficiency or reduced productivity by comparing the actual productivity achieved to the contractor’s planned productivity for a particular operation. However, a comparison of the planned productivity from the bid to an achieved level of productivity alone is not sufficient evidence to demonstrate lost productivity, because in most instances the planned level of productivity in the contractor’s bid has not been quantitatively or qualitatively supported.

In order to use a bid productivity rate as the basis of an inefficiency analysis, the contractor or analyst must demonstrate that the planned level of productivity from the bid is reasonable, supportable, and achievable.

Mark Nagata is a Director/Shareholder of TRAUNER and is an expert in the areas of critical path method scheduling, delay and inefficiency analysis, and construction claim preparation and evaluation. He loves to get questions at mark.nagata@traunerconsulting.com.

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