Labor Productivity and Analysis

Dr.
Farrukh Arif, Assistant Professor, NED UET
CE-591- Cost Engineering and Control

Lecture 2
Labor Productivity and
Analysis
_______________________
Dr. Farrukh Arif,
Assistant Professor, NED UET
Lecture 2-1
Dr. Farrukh Arif, Assistant Professor, NED UET
Overview
Labor
and Labor Costs
Determining Costs
Labor Hour
Productivity
Time
Study
Work Sampling
Wages and Fringe Benefits
Incentive Pay
Lecture 2-2
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
Lecture 2-3
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
Lecture 2-4
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.
Lecture 2-5
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
Lecture 2-6
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
Lecture 2-7
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 2-8
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
Lecture 2-9
Labor Hour (2/4)

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.
Lecture 2-10
Labor Hour (3/4)

Misconceptions
in Estimating Labor
hour
(2) Not considering interface
dependencies.
Philosophy that Sum of the individual manhour estimates will equal a total for the job
without any slippage of the man-hour
constants.
Lecture 2-11
Labor Hour (4/4)

Misconceptions
in Estimating Labor
hour
(3) Relying only on experience.
Using estimating information based on nonquantitative measurement, supported by
little data and more experience.
Incompleteness and inconsistencies show
up in implementation stage that is too late.
Lecture 2-12
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
Lecture 2-13
Productivity
Measurement (2/2)
Productivity
Analysis
Definitions
Lecture 2-14
Job-Ticket Reports and ManHour 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 foremans report.
Lecture 2-15
Lecture 2-16

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
Lecture 2-17

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.
Lecture 2-18
Lecture 2-19

Job-ticket reports and man-hour analysis
will vary with different construction trades.
Example 1
Following is a foremans report of rough framing of a

residence.
The foreman is non-working and spends only 15% of
his time on the job.
Lecture 2-20
Lecture 2-21

After searching the spreadsheet the work is matched against code
06111.10 rough framing of partitions. see the following
spreadsheet.
Lecture 2-22

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 2-23
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
Lecture 2-24

Study (2/7)
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
Lecture 2-25
Express the standard in common units of productivity

Study (3/7)
Recording
Information
Short as Possible (but Time-able)

Have Identifiable Start & End Points
Separate Operator & Machine Elements
Separate Constant & Variable Elements
Lecture 2-26

Study (4/7)
Time
Information and Rating
Stopwatch
Continuous Methods
Performance Rating
Trained Observer
Subjective Comparison
Observed Operator to Typical Operator
Working at Normal Circumstances
Lecture 2-27

Study (5/7)
Calculations
Normal time
Tn = To X RF

Where, Tn = normal time, hours, days etc

To = observed time, hours days
RF = rating factor, arbitrarily set, number
Lecture 2-28

Study (6/7)
Calculations for allowances

Personal
Fatigue
Delay
Together PF&D (in Percent)
Convert to Factor
Fa =
100%
100% PF&D
Where, Fa = allowance multiplier for PF&D
PF&D = personal, fatigue and delay allowance, percentage

Lecture 2-29

Study (7/7)
Calculations
for standard productivity

Hs = Tn X Fa
Where Hs = standard time for construction job per unit of

effort, hour, day etc.
Lecture 2-30
Example 2
Lecture 2-31
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
Lecture 2-32
Example table 3
Lecture 2-33
Work Sampling (1/6)

Used
for General Purposes:
Estimating Costs
Scheduling
Labor Requirements
Monitoring and Managing Performance
Statistical
Technique
Lecture 2-34
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
Lecture 2-35
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
Lecture 2-36
Work Sampling (4/6)

Preliminary Sampling
Uncovers
Potential Problems
Refines Activity Definitions
Helps Sell the Sampling Study
Provides an Estimate for Pi
Lecture 2-37
Work Sampling (5/6)

Standard Time
Compute
the Standard Time
Do Not Include Idle Activities

Hs =

(N i / N )HR(1 + PF & D )
Np
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
Lecture 2-38
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
Lecture 2-39
Example 4
Lecture 2-40
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

Lecture 2-41
Fringe Benefits
Additional
Costs to Company
For Employees
Required by Law, Contract, Agreement
Can Be Included in Hourly Rates
Or
Covered in Overhead
Lecture 2-42
Determining Wages
Wage
Only
Gross Hourly Cost
Wages and Fringe Benefits Costs
Wage
Only Calculation
Based on Time in Attendance

Cdl = Ha x Rh
Lecture 2-43
Incentive Wages
Pure
Incentive
(e.g. Working on Commission)

Cdl = NpRp
Guaranteed Wage Plus Incentive

Cdl = HaRh + Rh(HsNp Ha)
Minimum Cdl = HaRh
Lecture 2-44
Efficiency
Ratio
of Standard Hours Produced to

Actual Hours Worked
Measure of Labor Efficiency or
Productivity
E = Np
Hs
100
Ha
Lecture 2-45
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
Lecture 2-46
Legally Required Costs

Social
Security
Employers Contribution
7.65% of First $87,000 (as of 2003)
Medicare
Employers Contribution
1.45% of All Wages Paid
Lecture 2-47
More Legal Requirements

Workers
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

Lecture 2-48
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
Lecture 2-49
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
Lecture 2-50
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
Lecture 2-51
(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
Lecture 2-52
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
Lecture 2-53
End of Lecture
Lecture 2-54

Labor Productivity and Analysis

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Dr.

Farrukh Arif, Assistant Professor, NED UET

CE-591- Cost Engineering and Control

Dr. Farrukh Arif, Assistant Professor, NED UET

and Labor Costs

Dr. Farrukh Arif, Assistant Professor, NED UET

Labor Classification (1/2)

Supports Direct Labor Efforts

Pro. & Analysis is concerned

Dr. Farrukh Arif, Assistant Professor, NED UET

Labor Classification (2/2)

Dr. Farrukh Arif, Assistant Professor, NED UET

Determining Labor Costs (1/2)

Cost = Time x Wage

Dr. Farrukh Arif, Assistant Professor, NED UET

Determining Labor Costs (2/2)

Cost = Time x Wage

Worker Pay includes

Worker Pay based on

Dr. Farrukh Arif, Assistant Professor, NED UET

Dr. Farrukh Arif, Assistant Professor, NED UET