COST CONTROL DURING CONSTRUCTION-Forecasting Direct Field Labor [Compatibility Mode]

8/19/2019 COST CONTROL DURING CONSTRUCTION-Forecasting Direct Field Labor [Compatibility Mode]

1/15

Lecture 10-1CE-591 Cost Engineering and Control

Dr. Farrukh Arif, Assistant Professor, NED UETDr. Farrukh Arif, Assistant Professor, NED UET

CE-591- Cost Engineeringand Control

COST CONTROL DURINGCONSTRUCTION

Forecasting Direct Field Labor


Dr. Farrukh Arif, Assistant Professor, NED UET

OUTLINE Introduction

Factors Impacting Field Labor

Forecasting Tools

Labor Productivity

How Productivity Varies?

How Calibration Curves areDeveloped?

Forecasting from ProductivityProfiles

Other Uses of Productivity Profiles

Trend Curves

Forecasting from Trend Curves

Danger of Plotting against Time

Another type of Productivity Profile

Typical Shapes of Theoretical(calibration) Profile

Workhours for 1% Completion

Productivity as WorkPower per Unit ofwork

Impact of Overtime

Crew Size and Layoff Schedule

Direct Labor Manning curves

Manning vs. Productivity

Completion and But List

Average Wage

Summary


2/15



Introduction

Most important aspect of CE’s job in the engineering office.

Direct Labor: labor required for direct construction of the permanentfacilities.

Indirect Labor: labor required for temporary facilities, timekeeping,

warehousing, and construction equipment repair.

For direct-hire, reimbursable job, CE’s most difficult job is forecastingdirect labor.

Construction Management requires forecasts of total direct laborupdated on monthly basis.

Two parts of labor costs are;

− Number of workhours required.

−average wage or dollars per hour.



Factors Impacting Field Labor There are controllable and uncontrollable factors (by construction

management) that impact field labor productivity.

Common controllable factors by construction management are:− Job planning and sequencing.

− Equipment and tools.

− supervision through foreman level.

−Availability of materials.

− Support facilities.

− Overtime.

− Worker density.

−

Rework (correction of faulty work). Some less controllable factors are:

− Weather.

− Craft union attitude and restrictions.

− High economic activity (skilled labor shortage).

− Government Regulations.


3/15



Forecasting Tools

Following are the tools required for the process of forecastingdirect field workhours.

− Control Estimate (budget): The first forecast.

− Material takeoffs: The budget workhour outlook is modified to reflect

actual designed quantities, called as quantity adjusted budget (QAB).

− Productivity profiles: QAB modified to reflect construction experience.

− Crew size and layoff schedules: Important for final stages ofconstruction.



Labor Productivity (1/3) A knowledge of how actual job productivity compares to that predicted in the

control estimate (budget) is the key to forecasting direct labor workhours.

When preparing the control estimate (budget), the estimator uses a base

productivity relative to some standard location.

Once construction starts, we are no longer interested in the standard location.

Therefore, estimated productivity reflected in the QAB is used as control baseand is set equal to 1.0.

Productivity when a subject work is complete.

1. Productivity = QAB workhours

actual workhours

Productivity during the progress of the work.2. Productivity = % physical completion

% of QAB workhours used

Productivity for activities with readily measurable quantities such as; cu.yd ofconcrete, lineal feet of electrical conduit.

3. Productivity = budget unit rate

actual unit rate


4/15



Labor Productivity (2/3)

Example 1:− QAB workhours for installing concrete = 800 workhours

− actual workhours = 1000

− Productivity (formula 1) = 0.8

Example 2:− Concrete activity is 32% complete

− 40% of QAB workhours expanded (used)

− Productivity (formula 2) to the QAB base = 0.8

Example 3:− QAB unit rate for pouring concrete foundations = 8 workhours/cu. Yd.

−

Actual rate = 10 workhours/cu. Yd.−Productivity (formula 3) to the QAB? Base = 0.8



Labor Productivity (3/3) Experience shows that productivity

varies throughout the life cycle of aconstruction project according to well-established curves/patterns, called

productivity profiles .

Shape of productivity profile differs foreach particular activity.

These profiles are sensitive to methodsused for calculating percent completionand may vary between contractors.

Typical profile starts out poor , reachesa maximum between 30 and 80%, andtapers off to final completion.


5/15



How Productivity Varies?

Actual productivity profile tend to be more irregular than theoretical curve

shown in figure 1.

The irregularity can be caused by extraneous events, usually of short duration,including the following:

Weather− Month of exceptionally bad or good weather.

Length of working day− High overtime usually causes a drop in productivity.

Density of Labor− When all crafts are working in the same area, at the same time, productivity tends to decline.

Supervision− Good or bad supervision can improve or decline productivity.

Union negotiations− Productivity declines during such negotiations.

Critical jurisdictional disputes− Disputes and as a result work stoppages can cause significant dip in productivity.



How Calibration Curves are Developed?

The theoretical or calibration curve shown in figure is for an area where skilledlabor is not readily available and training is required.

In general, in the U.S., the profile is flatter.

It starts at productivities of 0.85 or 0.9 and reach peak between 20 and 30%

complete.

Theoretical profile is obtained by plotting data from several similar past jobswhere the same methods for calculating percent completion has been used.

The theoretical percentage of budget workhours to acehive any given percentcompletion can be calculated.

Example using figure 1

−At 10% completion, theoretical productivity is 0.7.

− Divide % completion (10%) by the productivity (70%) to obtain theoretical budgeted workhours(14%).

− This is theoretical rate of expending QAB workhours.

By plotting actual productivity and comparing it to the theoretical, we have

tool for forecasting total workhours to project completion.


6/15



Forecasting from Productivity Profiles

Example 4: Let us suppose that a construction project contains

120,000 QAB workhours and has a calibration profile similar to Figure1. What will be the forecasted overrun when 36% of the budgetedworkhours has been used and the project is 30% complete?



Solution

Actual Productivity = 30/36 = 0.83

Theoretical Productivity (fromCalibration Curve)= 0.88 (approx)

Difference in Productivity

= (0.88-0.83)/0.88 X 100 = 5.7%

Overrun = 5.7% X 120,000 = 6800Works hours (approx)


7/15



Other Uses of Productivity Profiles

Comparison of effectiveness of area superintendents by plotting

overall curves for the area supervised by each superintendent.

To pinpoint trouble spots. If period productivity on a weekly or monthlybasis are plotted on the same chart with cumulative productivity,

adverse trends are immediately apparent.



Trend Curves

Productivity profiles are useful tool,however, workhour trend charts give amore complete picture and arefrequently used for presentation tocompany management.

Trend charts are simply workhours plotted against percent completion .

Trend chart calibration (theoretical)curve is developed directly from theproductivity profile.

Figure 2

30% completion Actual

30% completion Planned

Using

Productivity

Profile Fig. 1


8/15



Forecasting From Trend Curves

Example 5: Let us suppose that construction activity has a QAB of

120,000 workhours. What will be the total forecast if 43,000 workhourshave been expanded when the activity reaches 30% physicalcompletion and the trend chart calibration curves is shown in figure 2?

Comment: The solution assumes that no corrective action will betaken, and that actual workhours will maintain a constant percentage

relationship with the calibration curve.



Danger of Plotting Against Time

In figure 2, instead of plotting workhoursagainst percentage completion, we couldhave used time (Figure 3).

Shapes of the curves become different.

Apparent overrun has been transformedinto an underrun .

This approach neglects the importantaspect of percent completion.

Workhours are liquidated but the expectedprogress is not achieved.

In an extreme case, it is possible that allworkhours are used without any progress,but the curve plotted against time will notgive any clue regarding this problem.


9/15



Another type of Productivity Profile

Percentage Completion vs. EfficiencyMultiplier

Efficiency Multiplier is reciprocal ofproductivity.

Forecasted Workhours = QAB X Muliplier

Bad Productivity: Above budget line

Good Productivity: Below budget line

Period Productivity

27% 70%

Bad Productivity

1.7

Delayed

Corrective

Action Taken

Dramatic

Improvement in

Productivity

46% 55%

Jan

Forecast

using 1.53



Trend Curve

On schedule

15 days delay


10/15



Typical Shapes of Theoretical (calibration) Profile



Workhours for 1% Completion If there were no change orders and QAB workhours remained constant, the

1% completion curve (refer lecture related to engineering costs) and

productivity profile plotted against efficiency multiplier will have identical

shapes.

Formulae:

1. Productivity = % physical completion

% of QAB workhours used

2. Productivity = % physical completion X QAB workhours

workhours used

3. Productivity = 1/Productivity

4. Efficiency Multiplier = __________workhours used_______

% physical completion X QAB workhours


11/15



Productivity Expressed as Workpower Per Unit of Work

As mentioned previously, productivity for a unit of work/activity is:

Productivity = budget unit rate

actual unit rate

Unit measurement can be used to compare the individual performance of thework crews or to set targets for construction supervisors.



Impact of Overtime (1/3)

Labor productivity decreases as the work week is extended.

When scheduled day is extended from 8 to 10 or 11 hours, workers tend to

pace themselves.

The effect is magnified if the job is put on a schedule of 6 or 7-day week.

Absenteeism further decreases productivity.

Overtime is used as a crutch to replace good planning and scheduling.− Increased wages.

− Reduced productivity.

Based on some evidence;− 60-hr week for a prolonged period of three months will reduce productivity by 35% as comparedto normal 40-hr week.

−50-hr weeks will reduce productivity by more than 25%.

Direct tangible costs.


12/15




Example 6: After two months of steady 60-hr weeks, productivity has dropped

by 15%, and by union agreement, double time is paid for overtime. Calculatepercentage cost increase compared to a 40-hr week.




Overhead and intangible costs.− Extended hours for supervisory staff.

− Keeping warehouse and tool sheds open.

− Indirect support such as scaffolding, job cleanup, material handling, and inspection.

− Construction equipment and jobsite transportation.

− Increased accidents.

− Lower quality work.

−Increased absenteeism.

Good reasons for prolonged overtimes.− To maintain or improve schedule.

− To attract skilled craftsmen.

− To attract workers to remote, undesirable locations.

− To take advantage of weather windows.


13/15



Crew Size and Layoff Schedule

Near the end of a large project or shortly past the midpoint of on a small job , it

becomes possible to forecast labor by crew size and labor rundown curves.

In such cases, field supervisors estimates of crew days required for completionare usually more accurate than trend or productivity curves .

Such estimation methods are especially useful for small jobs where there has

been no opportunity to collect the data required for more sophisticated tools.



Direct Labor Manning Curves

Number of workers plotted against time.

Planned labor rundown didn’t

happen and PM was alerted

about possible overrun

Revised forecast

mid February

Project delay by 1.5 months


14/15



Manning vs. Productivity Curves

Peak productivity

occurs well ahead of

peak manning

At peak workpower,

monthly rate of

progress is same as

that at lower work

power



Average Wage

Second part of predicting labor costs is forecasting wages.

Similar to productivity, average wage rate also varies over the life of the

project.

Factors influencing wage rates are:1. Amount of overtime hours (because overtime paid at 1.5 or double time).

2. Merit increases and promotions.

3. Labor contracts and negotiations.

4. Other projects in same general area (similar projects within the same commuting area drivewages upward).

5. Craft-to-helper ratio and skilled-to-unskilled-labor mix (as project progress labor mix changesfrom less skilled to more skilled).


15/15



Summary

Forecasting tools available include:

− The original budget estimate.

− The QAB.

− Productivity Profiles.

− Manning curves.

− Crew Size and Layoff Schedule.

Documents

COST CONTROL DURING CONSTRUCTION-Forecasting Direct Field Labor [Compatibility Mode]