Labor Productivity and Analysis

Lecture 2-1

© Dr. Farrukh Arif, Assistant Professor, NED UET

CE-591- Cost Engineering and Control

Lecture 2Labor Productivity and

Analysis_______________________

Dr. Farrukh Arif, Assistant Professor, NED UET

Lecture 2-2


Overview

� Labor and Labor Costs−Determining Costs−Labor Hour−Productivity

� Time Study� Work Sampling� Wages and Fringe Benefits

−Incentive Pay

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Labor Classification (1/2)

� Major Classification includes−Direct Labor

� “Touches” the Product� Changes – Adds Value to the Product

−Indirect Labor� Supports Direct Labor Efforts

� Labor Pro. & Analysis is concerned with direct labor

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Labor Classification (2/2)

� Other Classifications−Recurring-nonrecurring−Designated-non designated−Wage-salary−Management-blue collar−Union-nonunion−Social, political and other factors based classification

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Determining Labor Costs (1/2)

� Labor Cost = Time x Wage−Time

� For individuals or for crew work� Expressed relative to unit of measure such

as stud, piece, bundle, container, 100 units, 1000 board feet etc.

� Units: minute, hour, day, month or year.

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Determining Labor Costs (2/2)

� Labor Cost = Time x Wage−Worker Pay includes

� Basic Wages� Fringe Benefits

−Worker Pay based on � Type of Labor/Work� Attendance � Performance

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� In early estimate, −Building design may be known only by total square feet and type −Large quantities of time are used.

� Guesstimate− Unrelated to any measures, referenced or analyzed data− Based on observational or rough experience

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Labor Productivity and Analysis

� Concerned with the analysis of direct labor only � Direct labor

− Carpenter

− Mason

− Electrical wireman

− Roofer

− Engineers (in some cases)

� Indirect Labor − Time Keeper

− Superintendent

Lecture 2-9


Labor Hour (1/4)(The Mythical Man Hour)

� Man-hour = One Worker Working for One Hour− Number of welder man hours per inch of field welding− Number of carpenter man hours to erect 100 ft2 of wooden framework− Number of road crew and equipment hours per mile of 28-ft wide asphalt road construction

� Labor Year (man year)52 Weeks x 40 Hours = 2080 Hours

� Labor Month (man month)2080 / 12 = 173.3 Hours

� Should Be “Time Working NOT Time at Work”

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� Misconceptions in Estimating Labor hour− (1) Confusing effort with progress

� Example: 20 man-hrs proposed for a task or one worker will consume 20 hours.

� We assume crew of 2 will consume 10 hours.� Accepted but “Unproved hypothesis”� Cost varies as product of no. of labor and man

hours, progress may not.

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� Misconceptions in Estimating Labor hour

− (2) Not considering interface dependencies.

� Philosophy that “Sum of the individual man-hour estimates will equal a total for the jobwithout any slippage of the man-hourconstants.”

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� Misconceptions in Estimating Labor hour

− (3) Relying only on experience.� Using estimating information based on non-

quantitative measurement, supported by little data and more experience.

� Incompleteness and inconsistencies show up in implementation stage that is too late.

Lecture 2-13


Productivity Measurement (1/2)

� “time is the measure of productivity.” � Historical records provide

−Cost of labor

−Supervision

−Methods

−But have significant errors

� Four methods for measurement of construction time−Job-ticket reports

−Non repetitive one-cycle time study

−Multiple cycle time study

−Work sampling

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ProductivityMeasurement (2/2)

Productivity Analysis Definitions

Lecture 2-15


Job-Ticket Reports and Man-Hour Analysis (1/9)

� Job-ticket is just a time card with additional information.

� Workers may complete their own job ticket.� Job ticket verification can be done through

computer-terminal, or foreman’s report.

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� Several job tickets can be collected for variety of jobs.

� The engineer will examine the collected data for consistency, completeness and accuracy using

−Other instructional sheets−Construction codes−Engineering drawings

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� After that, a spreadsheet can be devised for the collected job tickets.

� A spreadsheet brings together the facts and prepares data for subsequent mathematical analysis.

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� Job-ticket reports and man-hour analysis will vary with different construction trades.

� Example 1−Following is a foreman’s report of rough framing of a residence.−The foreman is non-working and spends only 15% of his time on the job.

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−After searching the spreadsheet the work is matched against code 06111.10 “rough framing of partitions.” see the following spreadsheet.

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� The elapsed time in the spreadsheet is −8 hours X 2 crew = 16 hours−Total hours are reduced by 80% for cold weather.−Allowed total hours = 12.8 hours−Reduction for cold weather applied to each activity for the whole item of work.

Lecture 2-24


Non-repetitive One-Cycle Time Study (1/7)

� Also called all-day time study� Useful for direct/indirect labor, long cycles type of

work� Non-repetitive because difficult to pre-plan in fine

detail. � Tight statistical reliability of the results is unlikely� Superior to guesstimating and job-ticket analysis� Requires continuous timing with an electronic stop

watch or video camera

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� Field and Office Procedure:−Recording Information

� Inform the labor that is to be time studied� Record job, equipment, worker(s), environmental conditions and other

circumstances before and during the work

−Time Information and Rating� Time the work and write down the job elements� Record any job change� Record the time consumed by each element� Rate the pace and tempo of each element

−Calculations� Calculate the normal time� Adopt pre-approved allowances, calculate allowance multiplier and extend

normal time to standard time� Express the standard in common units of productivity

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� Recording Information−Short as Possible (but Time-able)−Have Identifiable Start & End Points−Separate Operator & Machine Elements−Separate Constant & Variable Elements

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� Time Information and Rating−Stopwatch−Continuous Methods−Performance Rating

� Trained Observer� Subjective Comparison � Observed Operator to Typical Operator

Working at Normal Circumstances

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� Calculations−Normal time

� Where, Tn = normal time, hours, days etc

� To = observed time, hours days

� RF = rating factor, arbitrarily set, number

Tn = To X RF

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� Calculations for allowances−Personal−Fatigue−Delay−Together PF&D (in Percent)−Convert to Factor

� Where, Fa = allowance multiplier for PF&D

� PF&D = personal, fatigue and delay allowance, percentage

PF&D%

%Fa −

=100

100

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� Calculations for standard productivity

� Where Hs = standard time for construction job per unit of effort, hour, day etc.

Hs = Tn X Fa

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Example 2

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Multiple-Cycle Time Study

� Observing several cycles of a work on same or different locations/occasions

� For improving statistical reliability of the collected data

� Procedure is same as done for non-repetitive cycle time study

� Observations can be “Snap-Back” i.e. stopping and starting stop watch fro each element of the work/activity

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Example table 3

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Work Sampling (1/6)

� Used for General Purposes:−Estimating Costs−Scheduling−Labor Requirements−Monitoring and Managing Performance

� Statistical Technique

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Work Sampling (2/6)

� Compared to Time Study−Multiple Workers / Machines−Study Large Area−Can Handle Long Cycle Times−Less Study Time Required (Lower Cost)−Less Disruptive of Work−Reduces Performance Issues

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Work Sampling (3/6)

� Determines Proportion of Time Spent on Predetermined Activities

� Based on Probability & Statistics−Random, Discrete Observations−Sufficient Number of Observations−Representative of Distribution of Population

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Work Sampling (4/6)Preliminary Sampling

� Uncovers Potential Problems� Refines Activity Definitions� Helps “Sell” the Sampling Study� Provides an Estimate for P’ i

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Work Sampling (5/6)Standard Time

� Compute the Standard Time−Do Not Include Idle Activities

� Hs = standard time for construction job per unit of effort, hour, day etc� Ni = observations of event i, number � H = total man-hours worked during work sampling study� R = rating factor, decimal� PF&D = personal, fatigue and delay allowances, decimal� Np = construction units accomplished during period of observing this event, number

( ) ( )p

is N

DPFHRNNH

&1/ +=

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Work Sampling (6/6)Considerations for Sampling

� Explain and Sell Prior to Starting� Appropriately Isolate Studies� Use as Large a Sample Size as Practical� Observe at Random Times� Conduct the Study Over a Long Period

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Example 4

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Wages

� Wage –−Money Paid for an Amount of Work−Usually for Direct Labor−Sometimes for Indirect Labor

� Salary –−Money Paid for a Given Period of Time

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Fringe Benefits

� Additional Costs to Company� For Employees� Required by Law, Contract, Agreement� Can Be Included in Hourly Rates

Or � Covered in Overhead

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Determining Wages

� Wage Only � Gross Hourly Cost

−Wages and Fringe Benefits Costs

� Wage Only Calculation−Based on Time in Attendance

Cdl = Ha x Rh

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Incentive Wages

� Pure Incentive−(e.g. Working on Commission)

Cdl = NpRp

� Guaranteed Wage Plus IncentiveCdl = HaRh + Rh(HsNp – Ha)

� Minimum Cdl = HaRh

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Efficiency

� Ratio of Standard Hours Produced to Actual Hours Worked

� Measure of Labor Efficiency or Productivity

100×=a

sp H

HNE

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Gross Hourly Cost� Wages Plus Fringe Benefits Costs� Detailed Calculations Required

−By Engineering −Or (Preferably) Accounting

� Fringe Costs Include:−Legally Required Employee Costs−Contractual Costs−Voluntary Program Costs−Costs for Time Paid but Not Worked

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Legally Required Costs

� Social Security −Employer’s Contribution7.65% of First $87,000 (as of 2003)

� Medicare−Employer’s Contribution1.45% of All Wages Paid

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More Legal Requirements� Worker’s Compensation

−Income for Worker Who Cannot Work Due to Injury on the Job

� Unemployment Insurance−Pays Workers Laid Off Through No Fault of Their Own

� Non-Exempt Time-and-a-Half Pay−Over 8 Hours/Day and/or 40 Hours/Week

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Other Fringe Costs

� Supplemental Medical Insurance−All or a Portion of the Premiums−Can Be Around $500/Month ($2.89/Hr)

� Life Insurance Premiums� Disability Insurance Premiums� Supplemental Pension

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Pay for Time Not Worked

� Vacation, Holidays, Sick Pay−Amount of Pay for this Time Is Apportioned Over Total Hours in the Work Year−Added to Wage Rate

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Joint Labor Costs

� More Than One Product Produced By Common Labor

� Common Production Up to a Split Point

� Common Labor Costs Need to Be Apportioned to the Different Products

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(De)Jointing Labor Costs

� Determine a Common Metric� Find a Proportional Relationship for the

Products� Apply the Same Proportions to the Costs� Market Effects/Strategy Can Distort

−Some Products Subsidize Others−Price Is Not Proportional to Cost

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Lecture Summary� Definitions Relative to Labor Costs� How to Determine Time for the Job

−Job-ticket analysis−Time Study (non-repetitive, multiple)−Work Sampling−Other

� Finding the Labor Cost Rate−Wages, Fringe Benefits, Gross Hourly Cost

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End of Lecture

Documents

Labor Productivity and Analysis