Measure the surface area of the wall and divide the number by 32. Round up to the next whole number. This will determine how many 4-by-8-foot sheets of 2-inch polystyrene paneling is needed to cover the wall. (Each sheet covers 32 square feet.) They can be easily cut with a utility knife. Use a tape measure, pencil and chalk line to measure and mark level horizontal lines on the paneling. Place the horizontal lines on 2-foot centers starting from the bottom of the wall. Also mark plumb vertical lines on the paneling on 16-inch centers starting from one corner and measuring to the other corner. Cover the entire wall with the 2-inch polystyrene panels by adhering them to the concrete wall with foam-insulation adhesive.
Measure and cut enough 1-by-3-inch lumber to cover each horizontal, vertical and perimeter line. Mark these same boards two inches from each end. Drill holes at these marks. Drill additional holes every 16 to 20 inches.
Lay the predrilled 1-by-3-inch lumber flat against the wall with its edge on the floor. Drill two holes in the concrete wall through the polystyrene paneling where the two end holes are in the lumber, using a 3/16-inch diameter mason bit and hammer drill. Use the predrilled holes in the lumber as a guide.
Use 4-inch long, 1/4-inch diameter concrete screws to attach the two ends of the lumber to the wall. This will help hold the lumber in place while drilling the rest of the holes for this row of lumber. Finish drilling the rest of the holes into the concrete through the remaining predrilled holes in the 1-by-3-inch lumber and insert the concrete screws. Start with the center hole and work to each side. Install the next piece of lumber along the floor to finish the first run by butting up to the end of the first board until the full length of the wall has been covered.
Install the precut 1-by-3-inch lumber along the top of the wall and on every horizontal line on the paneling. Use the same method as the run of 1-by-3-inch lumber laid on the bottom edge of the wall. This will use all of the predrilled, precut lumber being used for covering the horizontal lines.
Use the vertical lines as a guide to attach the 1-by-3-inch lumber over the horizontal lumber with 2 1/2-inch screws where they intersect. Attach 1-by-3-inch lumber in each perimeter side using the same method. All of the vertical 1-by-3-inch lumber should be attached only to the horizontal lumber. The wall is now ready for any plumbing and electrical and can be finished with drywall afterward.