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Dr.

Farrukh Arif, Assistant Professor, NED UET

CE-591- Cost Engineering


and Control
COST CONTROL DURING
CONSTRUCTION
Forecasting Direct Field Labor

Lecture 10-1

CE-591 Cost Engineering and Control

Dr. Farrukh Arif, Assistant Professor, NED UET

OUTLINE












Introduction
Factors Impacting Field Labor
Forecasting Tools
Labor Productivity
How Productivity Varies?
How Calibration Curves are
Developed?
Forecasting from Productivity
Profiles
Other Uses of Productivity Profiles
Trend Curves
Forecasting from Trend Curves
Danger of Plotting against Time

CE-591 Cost Engineering and Control















Another type of Productivity Profile


Typical Shapes of Theoretical
(calibration) Profile
Workhours for 1% Completion
Productivity as WorkPower per Unit of
work
Impact of Overtime
Crew Size and Layoff Schedule
Direct Labor Manning curves
Manning vs. Productivity
Completion and But List
Average Wage
Summary

Lecture 10-2

Dr. Farrukh Arif, Assistant Professor, NED UET

Introduction







Most important aspect of CEs job in the engineering office.


Direct Labor: labor required for direct construction of the permanent
facilities.
Indirect Labor: labor required for temporary facilities, timekeeping,
warehousing, and construction equipment repair.
For direct-hire, reimbursable job, CEs most difficult job is forecasting
direct labor.
Construction Management requires forecasts of total direct labor
updated on monthly basis.
Two parts of labor costs are;
Number of workhours required.

average wage or dollars per hour.

Lecture 10-3

CE-591 Cost Engineering and Control

Dr. Farrukh Arif, Assistant Professor, NED UET

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.

CE-591 Cost Engineering and Control

Lecture 10-4

Dr. Farrukh Arif, Assistant Professor, NED UET

Forecasting Tools


Following are the tools required for the process of forecasting


direct 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 of
construction.

Lecture 10-5

CE-591 Cost Engineering and Control

Dr. Farrukh Arif, Assistant Professor, NED UET

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 base
and 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 of
concrete, lineal feet of electrical conduit.
3. Productivity =
budget unit rate
Lecture 10-6
CE-591 Cost Engineering and Control
actual unit rate


Dr. Farrukh Arif, Assistant Professor, NED UET

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

Lecture 10-7

CE-591 Cost Engineering and Control

Dr. Farrukh Arif, Assistant Professor, NED UET

Labor Productivity (3/3)




Experience shows that productivity


varies throughout the life cycle of a
construction project according to wellestablished curves/patterns, called
productivity profiles.

Shape of productivity profile differs for


each particular activity.

These profiles are sensitive to methods


used for calculating percent completion
and may vary between contractors.

Typical profile starts out poor, reaches


a maximum between 30 and 80%, and
tapers off to final completion.

CE-591 Cost Engineering and Control

Lecture 10-8

Dr. Farrukh Arif, Assistant Professor, NED UET

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

Length of working day

Month of exceptionally bad or good weather.


High overtime usually causes a drop in productivity.


Density of Labor

Supervision

Union negotiations

Critical jurisdictional disputes

When all crafts are working in the same area, at the same time, productivity tends to decline.
Good or bad supervision can improve or decline productivity.
Productivity declines during such negotiations.
Disputes and as a result work stoppages can cause significant dip in productivity.
Lecture 10-9

CE-591 Cost Engineering and Control

Dr. Farrukh Arif, Assistant Professor, NED UET

How Calibration Curves are Developed?







The theoretical or calibration curve shown in figure is for an area where skilled
labor 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 jobs
where the same methods for calculating percent completion has been used.
The theoretical percentage of budget workhours to acehive any given percent
completion 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.

CE-591 Cost Engineering and Control

Lecture 10-10

Dr. Farrukh Arif, Assistant Professor, NED UET

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 Figure
1. What will be the forecasted overrun when 36% of the budgeted
workhours has been used and the project is 30% complete?

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CE-591 Cost Engineering and Control

Dr. Farrukh Arif, Assistant Professor, NED UET

Solution
 Actual

Productivity = 30/36 = 0.83


 Theoretical Productivity (from
Calibration Curve)= 0.88 (approx)
 Difference in Productivity
= (0.88-0.83)/0.88 X 100 = 5.7%
 Overrun

= 5.7% X 120,000 = 6800


Works hours (approx)

CE-591 Cost Engineering and Control

Lecture 10-12

Dr. Farrukh Arif, Assistant Professor, NED UET

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 monthly


basis are plotted on the same chart with cumulative productivity,
adverse trends are immediately apparent.

Lecture 10-13

CE-591 Cost Engineering and Control

Dr. Farrukh Arif, Assistant Professor, NED UET

Trend Curves


Productivity profiles are useful tool,


however, workhour trend charts give a
more complete picture and are
frequently used for presentation to
company management.
30% completion Actual

Trend charts are simply workhours


plotted against percent completion.
Trend chart calibration (theoretical)
curve is developed directly from the
productivity profile.

Using
Productivity
Profile Fig. 1
30% completion Planned

Figure 2

CE-591 Cost Engineering and Control

Lecture 10-14

Dr. Farrukh Arif, Assistant Professor, NED UET

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 workhours
have been expanded when the activity reaches 30% physical
completion and the trend chart calibration curves is shown in figure 2?

Comment: The solution assumes that no corrective action will be


taken, and that actual workhours will maintain a constant percentage
relationship with the calibration curve.

Lecture 10-15

CE-591 Cost Engineering and Control

Dr. Farrukh Arif, Assistant Professor, NED UET

Danger of Plotting Against Time




In figure 2, instead of plotting workhours


against percentage completion, we could
have used time (Figure 3).

Shapes of the curves become different.

Apparent overrun has been transformed


into an underrun.

This approach neglects the important


aspect of percent completion.

Workhours are liquidated but the expected


progress is not achieved.

In an extreme case, it is possible that all


workhours are used without any progress,
but the curve plotted against time will not
give any clue regarding this problem.

CE-591 Cost Engineering and Control

Lecture 10-16

Dr. Farrukh Arif, Assistant Professor, NED UET

Another type of Productivity Profile




Percentage Completion vs. Efficiency


Multiplier
Dramatic
Improvement in
Productivity

Efficiency Multiplier is reciprocal of


productivity.

Forecasted Workhours = QAB X Muliplier

Bad Productivity
Jan
Forecast
Delayed
using 1.53
Corrective
Action Taken

Period Productivity




Bad Productivity: Above budget line


Good Productivity: Below budget line

1.7

27%

70%
46%

55%

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CE-591 Cost Engineering and Control

Dr. Farrukh Arif, Assistant Professor, NED UET

Trend Curve
15 days delay

On schedule

CE-591 Cost Engineering and Control

Lecture 10-18

Dr. Farrukh Arif, Assistant Professor, NED UET

Typical Shapes of Theoretical (calibration) Profile

Lecture 10-19

CE-591 Cost Engineering and Control

Dr. Farrukh Arif, Assistant Professor, NED UET

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

CE-591 Cost Engineering and Control

Lecture 10-20

Dr. Farrukh Arif, Assistant Professor, NED UET

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 the
work crews or to set targets for construction supervisors.

Lecture 10-21

CE-591 Cost Engineering and Control

Dr. Farrukh Arif, Assistant Professor, NED UET

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 compared
to normal 40-hr week.
50-hr weeks will reduce productivity by more than 25%.

Direct tangible costs.

CE-591 Cost Engineering and Control

Lecture 10-22

Dr. Farrukh Arif, Assistant Professor, NED UET

Impact of Overtime (2/3)




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. Calculate
percentage cost increase compared to a 40-hr week.

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CE-591 Cost Engineering and Control

Dr. Farrukh Arif, Assistant Professor, NED UET

Impact of Overtime (3/3)




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.

CE-591 Cost Engineering and Control

Lecture 10-24

Dr. Farrukh Arif, Assistant Professor, NED UET

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 completion
are 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.

Lecture 10-25

CE-591 Cost Engineering and Control

Dr. Farrukh Arif, Assistant Professor, NED UET

Direct Labor Manning Curves




Number of workers plotted against time.

Planned labor rundown didnt


happen and PM was alerted
about possible overrun

Revised forecast
mid February

Project delay by 1.5 months


CE-591 Cost Engineering and Control

Lecture 10-26

Dr. Farrukh Arif, Assistant Professor, NED UET

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

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CE-591 Cost Engineering and Control

Dr. Farrukh Arif, Assistant Professor, NED UET

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.
2.
3.
4.
5.

Amount of overtime hours (because overtime paid at 1.5 or double time).


Merit increases and promotions.
Labor contracts and negotiations.
Other projects in same general area (similar projects within the same commuting area drive
wages upward).
Craft-to-helper ratio and skilled-to-unskilled-labor mix (as project progress labor mix changes
from less skilled to more skilled).

CE-591 Cost Engineering and Control

Lecture 10-28

Dr. Farrukh Arif, Assistant Professor, NED UET

Summary


Forecasting tools available include:


The original budget estimate.
The QAB.
Productivity Profiles.
Manning curves.
Crew Size and Layoff Schedule.

CE-591 Cost Engineering and Control

Lecture 10-29