VA Board of Contract Appeals Permits Application of “Measured Mile” Approach for Determining Inefficiencies Using Similar But Non-Identical Tasks as Standard of Comparison

In re P.J. Dick, Inc.
2002 VA BCA LEXIS 2; 2002-1 B.C.A. (CCH) P31,732 (9/27/01)

The Department of Veterans Affairs (“VA”) awarded P.J. Dick, Inc. (“PJD”) a contract for the construction of a clinical addition to the Department of Veteran Affairs Medical Center in Ann Arbor, Michigan (the “Contract”). To complete its work under the Contract, PJD entered into a subcontract with Kent Electric Services (“KES”) pursuant to which KES agreed to perform all electrical work for the project for labor and material costs plus a $10,000 per month management fee.

Factoring in change orders, KES budgeted approximately 27,000 man hours to complete the branch circuit work for the project. Due to deficiencies in the electrical drawings and acceleration of the electrical work, KES expended over 70,000 man-hours installing and completing the branch circuit. Per the subcontract, PJD paid KES for the 70,000 plus hours. In turn, PJD asserted a claim against the VA for damages resulting from labor inefficiencies and loss of productivity caused by (1) the VA’s repeated revisions of electrical drawings during the installation of the branch circuits and (2) the VA’s acceleration of the project by its refusal to grant extensions of time.

PJD argued the issuance of revised drawings during the installation precluded KES from scheduling its work ahead of time, resulted in “piece meal” installation and prevented KES from obtaining a rhythm in its work. Moreover, because the VA constructively accelerated the project, KES had to have several crews working at once. This caused more inefficiencies because KES’s supervisory personnel were spread throughout the project and KES’s labor personnel never enjoyed the benefit of their learning curve.

The VA argued that KES’s labor problems stemmed from, inter alia, too few foremen and the effects of winter weather. The Board, however, found in favor of PJD and that the VA was liable for causing labor inefficiencies with respect to the branch-circuit installation.
In determining damages, the Board accepted a calculation relating to the inefficiency of branch-circuit installation using the “measured mile” method as compared to benchmarks established in the installation of the feeder circuit work.

Although the “measured mile” method is recognized as the an acceptable methodology for quantifying labor inefficiency, it is often assumed that the analysis requires productivity rates will be compared for the same work. Here, the Board found that there was no portion of the branch work installation that was not affected by the VA’s revisions and acceleration; therefore, there was no basis to determine the loss of productivity by reference to the branch work which was performed in unimpacted circumstances.

Nevertheless, over the VA’s objections, the Board accepted an efficiency factor obtained from the “measured mile” of the feeder circuit work on the grounds that the branch and feeder work (1) used same labor pool; (2) required reasonable similar skill, knowledge and effort; and (3) were performed in the working conditions upon planned and budgeted by KES. The Board acknowledged a departure from the established measured mile methodology, but still concluded that the approach provided a reasonable standard of comparison.

 

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