SYSTEMATIC AUTOMATED MANAGEMENT

EXCEPTION REPORTING
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By Samer F. Abu-HijlehI and C. William lbbs, 2 Member, ASCE

ABSTRACT; Exception reporting, hardly a new concept, is too often still largely
that--a concept. Modern project-control information systems should generate an
assortment of useful exception reports. As decision support systems, they must
provide all levels of management with current information about various aspects
of project performance in a timely and meaningful manner. Exception reports can
enhance management's productivity by focusing on the most critical subset of per-
formance information. This paper presents a systematic approach to exception
reporting for construction labor cost and related performance aspects. Several
exception reports are used, individually and in combination, to provide structured
and guided exception-reporting and variance-analysis capabilities. These reports,
and their underlying concepts, are demonstrated using a computerized prototype.
The purpose of such exception-reporting capability is to enable managers to identify
critical control points, prioritize their limited time and improve their effectiveness.
Flexibility,versatility, user-defined criteria, and multiple reporting perspectives are
emphasized.

INTRODUCTION

Project-control efforts are increasingly u n d e r b u d g e t e d and understaffed.

Simultaneously, innovation in project-control reporting and analysis has
lagged. Most project-control systems still generate lengthy and c u m b e r s o m e
reports that provide little support for intelligent m a n a g e m e n t by exception.
Cost engineers, for the most part, still identify problems by sifting through
thick, text-based printouts.
This p a p e r describes our exception-reporting and variance-analysis re-
search. Labor-cost exception reporting with user-defined criteria is the fo-
cus. Flexibility and versatility in viewing labor data are themes. Multiple
reporting perspectives are emphasized. A key premise is that the users
should be able to frame queries themselves. The purpose is to enable man-
agers to identify critical control points, prioritize their limited time, and
improve their effectiveness.
O u r approach to enhancing performance exception reporting:

1. Uses performance thresholds that vary relative to achieved progress

instead of fixed thresholds
2. G e n e r a t e s reports to support a selective approach to exception iden-
tification and analysis
3. Relates various performance data by intersecting different report types.

Systematic a u t o m a t e d m a n a g e m e n t exception reporting ( S A M E R ) sys-

tem, is a prototype control system that we developed. It combines decision

LSr. Engr., Automation Integration Methods Group, Bechtel Corp., San Fran-
cisco, CA; formerly PhD candidate, Univ. of California, Berkeley, CA 94720.
"Assoc. Prof., Dept. of Civ. Engrg., Univ. of California, Berkeley, CA.
Note. Discussion open until August 1, 1993. To extend the closing date one month,
a written request must be filed with the ASCE Manager of Journals. The manuscript
for this paper was submitted for review and possible publication on December 31,
1991. This paper is part of the Journal of Construction Engineering and Management,
Vol. 119, No. 1, March, 1993. 9 ISSN 0733-9364/93/0001-0087/$1.00 + $.15
per page. Paper No. 3191.

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J. Constr. Eng. Manage. 1993.119:87-104.

 support system concepts with object-oriented programming technology in
order to achieve these goals. It uses Smalltalk-80, an object-oriented pro-
gramming environment running on a SUN Unix workstation. Screen dumps
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from this prototype will be used to illustrate the concepts developed.

After defining some of the conceptual groundwork embodied in SAMER,
we describe some of the features and reports contained in this project-control
system.

VARIANCETHRESHOLDS
Thresholds are central to management by exception. They define toler-
able performance levels by demarcating an envelope above and below the
planned performance level. This envelope allows actual performance to
deviate slightly without triggering alarms.
A big noise factor in tracking labor performance is the accuracy of work
quantity measurements (Langworthy, 1988, private communication; Hart,
1990, private communication; Kerby, 1990, private communication; Herrell,
1988, private communication). Work quantities are used to compute physical
percent completion and unit productivity, crucial performance metrics. Un-
certainty in man-hour allocations to specific accounts is also a source of
noise. Man-hour allocation deviations are affected by the size of the time
unit chunks used to report progress, too.

Threshold Variability
A variance threshold must also allow for the inevitable variability of actual
performance about the estimated average. Actual period costs routinely
vary from the estimate. What matters is that actual costs eventually converge
toward the at-completion budget. Another important practical point is the
amount of budget deviation that can be tolerated at completion. Because
no two jobs are identical, actual production levels will differ. Thresholds
should be set judiciously and in accordance with the specific characteristics
of the individual project.
This also means that a constant, cumulative threshold throughout an
account's progress fails to provide for the relatively turbulent performance
data of early progress stages. Thresholds should have different variances at
the various progress stages. At the project's beginning, operations do not
achieve a smooth production mode; there are account setup and other front-
end fixed-cost activities that an intelligent system would recognize.
As a consequence most cost engineers are cautious about performance
data trends until approximately 15%-20% completion is achieved (Eang-
worthy, 1988, private communication; Kerby, 1990, private communication;
Hart, 1990, private communication; Herrell, 1988, private communication).
The dilemma is that a cost engineer cannot wait too long before acting on
observed trends. The opportunity window for effective remedial steps be-
comes smaller as time passes.
Early progress performance assessments are most susceptible to perfor-
mance data noise. Quantity measurement and man-hour allocation noise is
increasingly diluted as the project progresses. The dilution is caused by
offsetting period measurement and allocation errors, and by a declining
incremental impact of period data on the cumulative results. As work pro-
gresses the expected reduction in data noise should therefore be translated
into diminished tolerance of observed performance variance. Our system
allows the user to define variable threshold levels based on an important
concept called the window of opportunity.
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J. Constr. Eng. Manage. 1993.119:87-104.

 The Window of Opportunity
This paper defines three distinct stages of project progress: (1) The early
stage (say, 0 % - 2 0 % ) ; (2) the steady-state production stage (e.g., 2 0 % -
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80%); and (3) the late stage (e.g., 80%-100%). These points are approx-
imate points of delimitation and are not the same for every account or
project. The significance of the first stage has already been explained. The
last stage marks the point beyond which management cannot meaningfully
affect performance (Hart, 1990, private communication). By then most
budgeted resources are expended and overruns are not correctable. Prob-
lems usually display early warning signs (Hart, 1990, private communication;
Langworthy, 1988, private communication). EarIy detection within the 0 % -
80% completion window of opportunity improves chances for the success
of corrective efforts.

Threshold Values
Threshold level tightness must be commensurate with the degree of con-
trol management plans to exercise. Industry professionals are reluctant to
define even extreme threshold values without a specific project scenario
(Langworthy, 1988, private communication; Pancham, 1990, private com-
munication; Hart, 1990, private communication). In theory, a project man-
ager will refuse to accept any overrun. The consensus of this study's industry
advisors is, however, that at least 3 % - 5 % variance must be allowed for
data noise, especially in quantity measurements. One project manager com-
mented that a 10% period or cumulative variance is almost always a prob-
lem, except for small accounts. Our prototypical system allows the user to
specify the three different project ranges and the threshold for each on both
a relative and absolute basis. It can do it for a number of perspectives,
which are described in the next section.

EXCEPTION REPORTING
To support decision making at various management and supervision lev-
els, multiple labor performance data views must be supported. The basic
premise is that users should be provided a perspective that best serves their
level of responsibility. Thus, from the overall company's viewpoint, a variety
of reporting perspectives is needed.

1. Work breakdown structure (WBS):

9 Work elements
9 Work packages
9 Discipline/work category
9 Subarea/subfacility
9 Area/facility

2. Work classification (type of work/commodities) breakdown structure

(WCBS)
3. Organizational breakdown structure (OBS):

9 Superintendents or foremen
9 Performing organizational units

4. Schedule activities
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J. Constr. Eng. Manage. 1993.119:87-104.

 Many of these perspectives are aggregates of work elements. Work ele-
ments are the lowest elements in the CWBS, and represent the level at
which construction activities are planned and executed. They are control
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centers against which actual performance data is captured.

By summarizing the work breakdown hierarchy, exceptions can be re-
ported by work package, discipline/category of work, subarea/subfacility,
or area/facility. Data for work elements involving similar types of work
(work classification code) can be consolidated and exceptions reported by
work classification. Similarly, by sorting and consolidating work elements
according to responsibility assignment (OBS code), reporting by individual
supervisory personnel and performing organization units is achieved. A
different sort field in the account code is used in each case.
The research emphasizes weekly job-oriented exception reports to pin-
point problem areas in direct labor cost and performance. The reports
identify exceptions based mostly on work-quantity, man-hour, and labor-
cost data. The goal is to identify performance problems down to the work
execution level.
The WCBS perspective combines performance data from similar work
elements that are packaged separately. It pulls all the work elements with
the same work classification code together, providing a broader perspective.
Such work elements involve similar crew configurations or construction
methods. By detecting large performance deviations in a work classification,
management can assess its impact on related, down-the-line work elements.
If the excepted work classification is repetitive or has substantial remaining
value, management's prompt attention may be able to salvage performance.
The rest of this paper will briefly describe various exception reports that
examine labor performance from different perspectives. Other, more de-
tailed reports can, in turn, be derived as this paper demonstrates. For
detailed description of each of the reports, see (Abu-Hijleh 1991).

A SYSTEMATICAPPROACH
Each of SAMER's exception reports is useful by itself because it allows
the user to focus on a specific aspect of labor-related performance. The full
decision support potential of these reports is best realized, however, when
they are used together synergistically.
A road-map approach guides the overall variance-analysis approach. This
approach helps management ask the right questions. Fig. 1 presents this
road map, which we call the variance-analysis path diagram (VAPD). The
user follows this road map when using the system to identify exceptions and
analyze variances. The following relationship conceptually defines cost var-
iance in terms of its major components:
CV = CW/v I -~ C V L -~ C V E --~ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1)

This equation implies that residual sources of cost variance remain and are
not only accounted for by material, labor, or equipment. They may also
include subcontract, indirects, and other cost types. The components ex-
plicitly identified in the equation, however, are typically the major ones.
The labor component of cost variance (CVL) is the focus of the VAPD
and starts at the top with labor cost in bubble 1. Because only labor cost
and hours are analyzed from this point on, the subscript L will be dropped
from the notation.
Most of the shaded bubbles in Fig. 1 are associated with one of the
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J. Constr. Eng. Manage. 1993.119:87-104.

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FIG. 1. Variance-Analysis Path Diagram (VAPD)

principal exception reports discussed in this paper. Each report identifies

the specific type of variance as suggested by the report's name and associated
bubble. As Fig. 1 suggests, each report breaks down variances into pro-
gressively lower level sources.
Unshaded bubbles in Fig. 1 are factors that exist but cannot be addressed
by computerized information systems currently. Many are not captured
electronically but are observed by site engineers. Others require data from
specialized systems not part of SAMER's scope; e.g., a procurement system.
The thick, solid arrows represent direct and usually quantifiable variance
relationships. Most of these relationships are addressed in the implemen-
tation. The dashed arrows represent relationships that are difficult to quan-
tify, and are included in SAMER on a suggestive basis. Finally, the thin,
solid arrows represent other important relationships that are beyond our
scope.
The following sections illustrate how labor performance can be system-
atically analyzed using SAMER.

Labor-Cost Exception and Variance Analysis

Labor cost, represented by bubble 1 in Fig. 1, is the first logical quantity
for exception analysis. It reflects the aggregate position of labor performance
in either dollars or labor hours. Analysis of lower-level elements would
rarely be performed unless labor cost shows sizable variance. Exceptions to
this rule occur when the user suspects that labor-cost variance may be
masking offsetting lower-level deviations.
The labor-cost exception report (LCER) identifies accounts with sizable
labor-cost variances. This report is the first that the user reviews. Highlighted
accounts are then subjected to detailed analysis by interacting with addi-
tional, sublevel reports.
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J. Constr. Eng. Manage. 1993.119:87-104.

 Fig. 2 shows the editor screen for LCER. This three window screen allows
the user to define parameters, edit input, and define default values that will
be used to generate the report. The upper left window lists all the assignable
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report parameters, with definitions available in the upper right window by

Absolute At Completion Threshold T h e Relative At Completion Threshold is the u p p e r b o u n d on the

Initial To-Date Threshold deviation of actual performance from the target.
Relative Period Threshold
It is expressed in units of p e r c e n t (%)
Absolute Period Threshhold
Start Point for Reliable T r e n d s
The default value for the Relative At Completion Threshold is 4%
M i n i m u m Account L a b o r Budget
This p a r a m e t e r ' s currently assigned value is shown in the window
Minimum Account M a n h o u r s
Critical W o r k Classifications below.
Threshold Modification Factors

T h e following are currently assigned p a r a m e t e r values:

At Completion Threshold (%): 3
At Completion Threshold (Dollars): 500
Initial To-date Threshold (%): 7
Period Threshold (%): 0
Period Threshod (Dollars): 0
U n d e r r u n Threshold Factor: nil
Start Point for Reliable T r e n d (%): 20
E n d Point for Window of Opportunity (%): 70
M i n i m u m Account L a b o r Budget (%): 0
Minimum Account Manhours: 0
M i n i m u m Percent Completion (%): nil
M i n i m u m Remaining Cost ($): nil
M i n i m u m Period Cost ($): nil
Critical Work Classifications: # 0
Threshold Modification Factor: 1.0

FIG, 2. Labor-Cost Exception Report Editor

Report Date: l0 Mar 91

ProjectPJ001 UNIT LABOR COST VARIANCE EXCEPTIONS Period: 4 Mar 91 to 10 Mar 9t
Actual Budget Variance Breakdown
Item Code UM ($/UM) ($~UM)UCR Index Produc, Unit Joint Remarks
Price

1110.1210A703 27 Ions 376,22 245.69 1.53 -7832 100 -7518 .207 -10 *Over~nlzhtrgdyduetolowrthaaest. produ~
(100%) (96%) 43%) (1%) .Ge~tcUni4ProductivityEll for furtherins~hl

1110.1120.1403 65 tons r~9.04 504.0 lo29 -4727 60 -3402 -1152 -173 *ny.~un~largelyd~tolowertbau~t.prodm.
(100% (72%) (24%) (4%) .Ge~rateUrdtProdectivRyEaf~furtborinsiglo
* Ove~enis sobstanfialiydue to higherthat1Mr.
laborunitprice:
I - Ge~ate LaborUnitPriceER for i'urth~ insist

i
[110.1120.1443 50 :y 49.17 46.24 1.06 -I173 15 -2127 856 !98 *Ov~nt~enttr~ly d~to;ewer thanest,prod~
(I00%) O81%) (-73%3 (-S%) .Ge~at*UnitProductivttyEa f~fnrtherinstl~
9 A largeoff~ttingunder~n dee to lowerOt~ ~t.
10 labor emltpriceexist&
- ~ # t e LaborUnitPrice]~1~for furth~ titbit
110,2110.2305 !f 30.69 27.71 L14 -649 8 -302 - 3 3 0 1-17 *Overr~issubstanttallyd~loIower t h a n ~
4100%) (47%) 451%) (3%) prudu~
. GenerateUnitProductivRyER for fartherinslghl
9 o ~ u n is largelyd e to higherth~ ~t~labor
unit p ~ :
9Ge~att Lal~r UnitPriceER for furtherinslgnt

Reporting Level: Work Breakdown Reporting Level: Work Element

No. of Exceptions: 4

Pe~od ~ I A~o~t~

FIG. 3. Labor-Cost Exception Report (LCER)

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J. Constr. Eng. Manage. 1993.119:87-104.

 clicking on any of these parameters. The description includes a functional
definition and the default value. The lower window is an editor that displays
current parameter values, which can be changed as desired. For instance,
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the window of opportunity is set between 20% and 70% for this account.
A LCER is shown in Fig. 3. Generally to-date results will be shown in this
paper, though the three buttons at the bottom of the output screen allow
the user to switch between current, to-date, and forecast at-completion
report periods.
Item code identifies exceptions by account or classification code, The PC
column reports percent completion. Next is the budgeted labor cost of work
performed (labor earned value) in the BCWP column. ACWP is the actual
labor cost of work performed. The labor cost variance (BCWP - ACWP)
in the CV column is reported in dollars or man-hours, as well as a percentage
of the corresponding earned value (BCWP) in parentheses. (In this case,
the cost variance percentage change is negative.) Next is the relative rank
index of the overrun exception in the rank index column sorted in descending
order. The rank index normalizes each exception on a scale of 100. Con-
ventional practice is to report only the overruns. Though this figure does
not show it, we feel that information systems should highlight successes,
too, so we include both in one report to stress them equally. It is possible
though to switch this feature off.
The next three columns provide an analysis of the reported labor cost
variance (CV). Labor cost (C) for an account can be computed as follows:
C = O x UC .............................................. (2)
where Q = work quantity in units of measure (uom), bubble 9 in Fig. 1;
and UC = unit labor cost (labor $/uom), bubble 2 in Fig. 1.
Any labor-cost variance results from problems with work quantity, unit
labor cost, or combined deviations. SAMER's breakdown of labor-cost
variance for each exception item enables the user to quickly trace the sig-
nificant next-level source(s) of the reported variance.
The quantity column reports the portion of the account's CV due solely
to actual work quantity deviation from the account's total budgeted work
quantity, CVo, for the selected reporting period. Budget unit labor cost is
used to compute the contribution to labor-cost variance. For the current
period a work quantity deviation occurs only if all or part of the quantity
installed during the period exceeds the total work quantity account budget.
Therefore:

Quantity deviation contribution to labor-cost variance can only rep-

resent an overrun for period evaluation.
The work quantity deviation (overrun) is equal to the quantity in-
stalled during the period in excess of the account's total budgeted
quantity.

For the to-date period, a work quantity deviation occurs if and only if
the cumulative quantity installed to date is larger than the total work quantity
budgeted for the account. Therefore:

9 Quantity deviation contribution to labor-cost variance can only rep-

resent an overrun for cumulative evaluation.
9 The work-quantity deviation (overrun) is equal to quantity installed
to date in excess of the account's total budget quantity.
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J. Constr. Eng. Manage. 1993.119:87-104.

 For the at-completion (forecast) period, a work-quantity deviation occurs
if the forecasted work quantity at completion is different from the total
work quantity budgeted for the account. Therefore:
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9 Quantity deviation contribution to labor-cost variance can represent

an overrun or underrun for forecast evaluation.
9 The quantity deviation is equal to the difference between the ac-
count's total budgeted work quantity and its quantity at completion.

The unit cost column identifies the portion of CV solely due to deviation
of the account's actual unit labor cost for the reporting period from the
account's budget unit labor cost. This definition of labor-cost variance due
to unit labor-cost variance (CVuc) is consistent for all three reporting pe-
riods. Thus for the reporting, to-date, and at-completion periods, a unit
labor-cost deviation occurs if the actual unit labor cost for the reporting
period is different from the account's budget unit labor cost. Therefore:

9 Unit labor-cost deviation contribution to labor-cost variance can

represent an overrun or underrun for reporting period, to-date, and
at-completion evaluations.
9 The unit labor-cost deviation is equal to the difference between the
account budget and the actual unit labor cost for the period.

The portion of CV due to joint work quantity and unit labor-cost devia-
tions (CVonuc) is reported in the joint column. Joint work quantity and
unit labor-cost deviation occurs when both work-quantity and unit labor-
cost deviations exist for the selected reporting period according to the afore-
mentioned definitions. It is computed by multiplying the quantity deviation
by the unit labor-cost deviation. The variance breakdown is reported in
dollars or equivalent budget man-hours, and as a percentage of the labor-
cost variance in parenthesis.
The L C E R breaks labor-cost variance into three components
CV = CV o + CVuc + CVonuc .............................. (3)
This variance analysis is useful because it points the user toward the next
step(s) in the variance-analysis path. The user can then interactively generate
the recommended reports and display them on the screen alongside the
LCER. More detail is obtained from each additional recommended report.
The remarks column is an innovative feature of most of SAMER's ex-
ception reports. It provides a narrative interpretation of the variance-anal-
ysis results. Numbers are sometimes misleading, especially when changes
of sign are involved. The remarks eliminate such confusions and recommend
certain action for further insight. They are constructed by a set of if-then
rules that reason about variance-analysis results.
If variance analysis points to work quantity as a sizable contributor to
labor-cost variance, a general statement to that effect is provided. Note that
work quantity deviations do not in themselves necessarily impact labor
production.
If unit labor cost is a major contributor to CV, the user will be advised
to generate a unit labor-cost exception report, as discussed in the next
section. By examining the different exceptions in the LCER, the user may
be able to recognize commonalities across accounts that explain some var-
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J. Constr. Eng. Manage. 1993.119:87-104.

 iances. This is one advantage of generating an exception report rather than
examining individual accounts singly.
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Unit Labor-Cost Exceptions and Variance Analysis

After identifying significant unit labor-cost deviations in the LCER, the
user generates a unit labor-cost exception report (ULCER); see Fig. 4. The
UM column contains the unit of measure for the exception. Actual UC is
the actual unit labor cost for the selected time period. Next is the budget
unit labor cost, in the budget UC column. The unit cost ratio (UC = actual
unit cost/budget unit cost) reflects unit labor-cost deviation. The CV column
reports the labor-cost variance due to unit labor-cost deviation. The numbers
in this column, both absolute and relative, should match the numbers in
the unit cost column (under variance breakdown) of the LCER for the same
item and reporting period.
The three variance breakdown columns report the variance-analysis re-
"=ults. Unit labor cost (bubble 2 in Fig. 1) is a composite of unit labor
productivity (bubble 3) and labor unit price (bubble 4)
UC(labor $/uom) = P(man-hours/uom) • UP(labor S/man-hour) . . . (4)
Labor-cost variance due to unit labor-cost deviation (CVur therefore can
be broken into three components
CVuc -- CV~ + CVup + CV~u~ ............................. (5)
where CVe = labor-cost variance solely due to unit productivity deviation;
CVue = labor-cost variance solely due to labor unit price deviation; and
CVenue = labor-cost variance due to joint unit productivity and labor unit
price deviation.
The productivity column reports CVe. Labor-cost variance due to pro-
ductivity deviations occurs when the account's actual unit productivity for
a period differs from it's budget unit productivity. Therefore

9 Unit productivity deviation contribution to labor-cost variance can

Report Date: 10 Mar 91

Project pJ00l Direct L A B O R C O S T V A R I A N C E E X C E P T I O N S Period: 4 Mar 91 to 10 Mar 91
CV Variance Breakdown
Item Code (P%C) BCWP ACWP ($) Rank Remarks
($) ($) ~,f~ Index Quantity Unit Cost Joint

1110.1210.1703 25 14742 22574 -7832 I 100 0 -7832 0 * Overrun Is entirely due to higher than ~t. unit
(-~%) ! (0%) (1oo%) (o%) labor cost:
Generate Unit Labor Cost ER for further insight

1110.1120.1403 75 2268~ 27467 -4727 I 60 0 -4727 0 * Overrun is entirely due to higher than est. unit
(.21%) [ (0%) (100%) (0%) labor cost:
i Generate Unit Labor Cost ER for further Iltstght
1110.1120.1443 50 18496 19669 -1173 15 0 -1173 0 *Overronisentirelyduetohigherthanest. unit
(-6%/ (0%) (10o%) (0%) labor cost:
Generate Unit L~bor Cmt ER for farther insight
1110.2110.2305 10 6048 6697 -649 8 0 -649 0 * Overrun is entirely d~e ~ohigher than est. unit
(-11%) (0%) O00%) (0%) labor cost:
Generate Unit Labor Cost ER for further insight

Reporting Level: Work Breakdown Reporting Level: Work Element

No. of Exceptions: 4

. . . . . . . .~. . ~ ......... . . . . . . . . . . . .~! ~I~] Period ~ AtCompletion 1[ ' ~ ~ ~ ~ ~!!~? ~ ~t

FIG. 4. Unit Labor-Cost Exception Report (ULCER)

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J. Constr. Eng. Manage. 1993.119:87-104.

 represent an overrun or underrun for current, to-date, and at-com-
pletion evaluations.
The unit productivity deviation is equal to the difference between
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the account budget unit productivity and the actual unit productivity
for the reporting period. Budget quantity and labor unit price are
used to compute the contribution to labor-cost variance.

The unit price column contains CVtje. Labor-cost variance due to labor
unit price deviation occurs when the account's actual labor unit price for
the selected reporting period differs from the budget labor unit price. This
definition is consistent for all three reporting periods. Thus for the current,
to-date, and at-completion periods, a labor unit price deviation occurs if
the actual labor unit price differs from the account's budget labor unit price

Unit labor price deviation contribution to labor-cost variance can

represent an overrun or underrun for current, to-date, and at-com-
pletion evaluations.
The labor unit price deviation is equal to the difference between
the account budget labor unit price and the actual labor unit price
for the reporting period. Budget quantity and unit productivity are
used to compute the contribution to labor-cost variance.

CVpnup appears in the joint column. A joint unit productivity and labor
unit price deviation occurs when both productivity and labor unit price
deviations exist for the reporting period according to the aforementioned
definitions. It is computed by multiplying the productivity deviation by the
labor unit price deviation and the budget quantity. It can also be computed
from (5); e.g., -4,727 = (-3,042) + ( - 1,152) + CVenup, or CVpnup =
- 173.
Each variance component is also reported as a percentage of the labor-
cost variance due to unit labor-cost deviation (CV column). The quantity
and unit labor-cost joint variance (CVqnue) from the LCER may also be
subdivided. This produces two additional joint variances: a quantity and
labor unit price joint variance, and a quantity and unit productivity joint
variance. For clarity, joint variances are not carried down to the next analysis
level because numerous two- and three-way joint variances would have to
be computed. The remarks provide textual interpretation of variance anal-
ysis results and direct the user to the next report level(s) to generate if
additional information is desired.
The user can get the next-level breakdown of the labor-cost variance for
a particular account by generating the ULCER. Furthermore, this report
enables the user to examine the account's relative unit cost deviation. Some
common denominator may be recognized by stepping back from individual
exceptions and examining accounts collectively. Exceptions will hopefully
fall into a number of meaningful groupings. Examples of such groupings
may include:

Accounts with the same general location identifier with significant

productivity degradation contribution to unit labor-cost variance.
Information about work in the particular location may shed light
on access or congestion problems. Other possibilities include un-
favorable working conditions, lack of coordination between crews
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J. Constr. Eng. Manage. 1993.119:87-104.

 and inadequate support services or facilities. The unit productivity
exception report provides better visibility of accounts in such situ-
ations.
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Instead of a common location, some of the problem accounts may

be employing the same trades. Inferior craft skills, craft shortages,
and inadequate supervision are potential contributors.
Accounts involving similar work may have significant labor unit
price deviation contributions to their unit labor-cost overrun. Re-
lated craft wage rate escalations may be the reason. When such is
the case, however, management would often expect overruns in the
affected accounts. When escalation is not the major culprit, exces-
sive overtime or a high journeyman-to-apprentice ratio may be.

The next section discusses how managers can use SAMER when a unit
price deviation is reported.

Labor Unit Price Exceptions and Variance Analysis

If analysis points to labor unit price deviation as a significant contributor
to labor-cost variance, the user will be advised to generate the labor unit
price exception report (LUPER). This component of unit labor cost is the
cost of labor rather than labor productivity performance.
The output screen for this report is shown in Fig. 5. The actual unit price
column contains the actual labor unit price for the selected period. Next is
the budget unit price column. The unit price ratio (UPR = actual unit price/
budget unit price) is reported in the UPR column. This reflects the extent
of the labor unit price deviation. The CV column reports the labor-cost
variance due to labor unit price deviation. The numbers in this column,
both absolute and relative, should match the numbers in the unit price
column (under variance breakdown) in the ULCER for the same item and
reporting period.
The variance breakdown columns display the variance-analysis results.

ProJectPJ001 LABOR UNIT PRICE VARIANCE EXCEPTIONS Report Date: 10 Mar 91

Acteal Budget Rank Variance Breakdown

Item Code PC UaitPrkcUldtPrioeUPR CV
, (%) ($4tr) (raltr) $ I n d e x CraltRates CrewMiz Remarks

1110.1120.1403 65 26.48 2520 1.05 -1152 100 -1152 0 *A$1152unitpriceoverrunisconiibufingtoa

(24%) (]~0%) (e%) $4727 unit labor cost overrun
* Overrun is entirely due to higher than ~ L craft
rates
11110.1120.1443 50 22.05 23.12 0 . 9 5 856 74 0 856 * A $1152 unit price underrun is offseting a unit
(-73%} (0%) (]oo,~) labor cost overrun down to $I 173
* Underrun is entirely due to a less expensive crew
mix than budgeted

Reporting Level: Work Breakdown

No o[ Exception: 2

Pednd ..... AtCompletion

FIG. 5. Labor Unit Price Exception Report (LUPER)

97

J. Constr. Eng. Manage. 1993.119:87-104.

 Labor-cost variance due to unit price deviation (CVuF) consists of three
components
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CVup = CVcR + CVcM + CVcRnc~l .......................... (6)

where CVcR = labor-cost variance solely due to craft rates deviation (bubble
5 in Fig. 1); CVc~ = labor-cost variance solely due to crew mix deviation
(bubble 6 in Fig. 1); and CVcRcnMv = labor-cost variance due to joint crew
mix and craft rates deviation. The craft rates column reports the variance
portion that is solely due to deviation in craft wage rates (CVcR). A craft-
rate deviation occurs when an account's actual craft rates for the reporting
period are different from the rates used in preparing the account's labor
budget. Systems that lack access to labor budget details cannot compute
this component of the variance accurately. An account's specific crew mix
is usually found in the detailed estimate. All that usually makes its way to
the cost system is the estimated average labor unit price. More of this will
follow.
This component of labor-cost variance usually results from escalations in
craft rates beyond those foreseen and allowed for in the estimated craft
rates. Use of overtime labor beyond the budget allowance is another po-
tential source. This definition is consistent for all three reporting periods.
Hence, for the current, to-date, and at-completion periods, a craft-rate
deviation occurs if the account's actual labor unit price for the reporting
period differs from the account's budget labor unit price:

Craft-rate deviation contribution to labor-cost variance can repre-

sent an overrun or underrun for period, to-date, and at-completion
evaluations.
The craft-rate deviation equals the difference between the account
budget labor unit price and the actual labor unit price for the period
based on the budgeted crew mix. When the actual crew-mix labor
unit price is used in the computation, the result is inaccurate. This
inaccuracy accounts for the joint craft rates and crew-mix deviation
as well as the true craft-rate deviation. Any system should be capable
of rectifying this computation. SAMER does this by capturing all
labor budgets details at the work element level.

The crew-mix column gives the variance portion due to crew mix or
configuration changes (CVcM). Crew mix addresses types and ratios of crafts
as well as journeymen-apprentices mix. As before, the entries in the remarks
column interpret the variance-analysis results. Remarks, however, do not
include direction to more reports or point further down the variance-analysis
path because craft rate and crew mix are the lowest level in the VAPD at
this time. These are parameters that the user may or may not be able to
control. Management must determine this on a case-by-case basis. Knowing
the share of each component helps a manager decide the utility of corrective
measure. This report allows the user to examine a specific labor unit price
exception relative to other cost elements excepted in the same category. Its
placement relative to other exceptions may be useful information. Insight
may also be gained by comparing the different accounts experiencing similar
problems.
SAMER identifies where escalation in craft rates results in significant
labor-cost variance. If normal overtime usage for an account can be defined,
98

J. Constr. Eng. Manage. 1993.119:87-104.

 the system can be extended to quantify the specific contribution of overtime
premiums by account. SAMER also detects the use of crew mixes more or
less expensive than originally planned.
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Unit Productivity Exceptions and Variance Analysis

Unit productivity is a significant indicator of labor performance. The unit
productivity exception report (UPER) identifies sizable variances in this
category. The user generates this report for the valuable information it
provides by itself, or as an extension of the ULCER.
Fig. 6 shows the output screen for the UPER. The actual unit productivity
column contains the actual unit productivity for the selected period. Next
is the budget unit productivity in the budget unit prod column. The needed
unit prod column reports the remaining unit productivity required to meet
budget. This accounts for both past productivity and any quantity changes.
The actual productivity ratio (APR = actual unit productivity/budget unit
productivity) is reported in the APR column, reflecting the extent of unit
productivity deviation. The needed productivity ratio (NPR = needed unit
productivity/actual unit productivity) in the NPR column reflects the diffi-
culty level of achieving the needed productivity. The CV column reports
the labor-cost variance due to labor unit productivity deviation. The num-
bers in this column, both absolute and relative, should match those in the
productivity column (under variance breakdown) of the ULCER for the
same item and period.
No quantitative variance analysis is performed in this report. Productivity-
related labor-cost variance can be attributed to many factors whose impacts
are very difficult to quantify and beyond the data collection of contemporary
project control systems. Analysis of productivity variances requires field
investigations and observations. Future innovations in data capture and
analysis may make it possible to do more in the future.
The remarks column provides a narrative interpretation of the produc-
tivity variance. For the current and to-date periods, remarks will include a

Report Date: 12 Mar 91

Pco~ect PJ001 LABOR UNIT PRODUCTIVITY VARIANCE EXCEPTIONS Period: 4 MaF 91 tu 10 Mar 91
PC Actual Budget Needed CV Rank
Item Code (%) UM UnitProd UnitPrmi UnitProd APR NPR Renmrks
/Mhr/UMt tMhr/UMI ~ l r / U M t ($) Index
[110.1210,1703 15 tons 15.1 10.0 9.05 1.51 0.59 i -7518 I100 *Overrunisduetoverypoorproduc0vity
(96%) *Very significant productivity improvemenl
is required to control overrun
* Absenlleisra Rail = 9%
* Actual crew mix is different from that
planned

1110.1120.1403 75 torat 23.0 20.0 6.87 1,15 0.29 -3402 ;5 * Overrun is due to poor productivity
(72%) * Signllicant productivity improvement
is required to control overrun
* Absenteeism Pall = 6%

1110,1120,1443 $0 cy 2.23 2,0 1.77 1.11 0.79 -2127 28 * Overrun is due to poor productivity
(181%) * Slgrdflcant productivity improvement
is required to control overrun
* Absenteeism Rate = 0%
* Actual crew mix is different from that
planned

1110,1120,1423 90 ;f 0.19 0.2 --- 0.97 - - - 413 $ * Overrun is due to fair productivity
(100%) * Absenteeism Rate = 0%

Reporting Perspective: Work Breakdown

No of Exceptions: 4

FIG. 6. Unit Productivity Exception Report (UPER)

99

J. Constr. Eng. Manage. 1993.119:87-104.

 statement about crew-mix change if one is detected (bubble 6 in Fig. 1).
Moreover, a labor absenteeism rate for the current or to-date periods is
reported based on labor time-card information (bubble 7 in Fig. 1). These
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types of remarks point to likely contributors to the productivity variance.

Labor Absenteeism Exceptions

As Fig. 1 indicates, absenteeism can have an indirect effect on labor
productivity. Reporting absenteeism by account is not presently practiced
by many contractors, yet was stressed as a key indicator of job morale by
our industry advisors. It requires that supporting data be captured against
account codes through time-card entries. This would require foremen to log
more information than is presently done. Although this may be difficult at
the beginning, it would be useful.
As discussed, account absenteeism rates are reported in the remarks
column of the UPER. Management may be interested in absenteeism rates
on an account basis. The information may then be used to detect common
accounts with high absenteeism rates. The problem may be related to work-
ers under specific supervisory personnel, certain areas of the project, or
some types of work. If commonalities are identified, explaining and dealing
with the high rate may be easier. Alternatively, management should be
interested in absenteeism rates along craft lines to see if any crafts are
particularly impacted. Though not illustrated here because of space limi-
tations, the labor absenteeism exception report (LAER) addresses these
needs.
The user has a choice between work breakdown or craft perspectives. At
this time S A M E R permits users to switch only between current and to-date
outputs because forecasting absenteeism is highly speculative. A total hours
column reports the total man-hours accumulated for current or to-date
periods by the excepted craft or account. This includes worked and absentee
hours. The accumulated absentee hours are contained in an absentee hours
column. The resultant absentee rate is displayed in the absentee rate column.
Exceptions are sorted in decreasing order.

Schedule Exceptions
Construction schedule performance is directly influenced by labor pro-
ductivity (bubbles 8 and 3 in Fig. 1). Recognizing that, this study sought
ways to relate the two performance aspects to one another. The results are
the schedule exception report, (SER), Fig. 7, and the schedule activity
exception report (SAER), not shown.
For the SER, a BCWS column contains the budgeted labor cost of work
scheduled. The schedule variance (SV = BCWP - BCWS) is reported in
the first SV column. BCWP, BCWS, and SV are reported in dollars or man-
hours depending on user selection during report initialization. SV is also
reported as a percentage in a second SV column. Exceptions are sorted in
order of decreasing relative schedule variance.
SER's remarks column suggests interpretations of the reported schedule
variances. It also reports any productivity-related variance relevant to the
schedule variance. The implication is that a productivity variance may be
translating into a schedule variance. There may also be an indication of
unreliable trends or bad data. For example, a work package may be reported
as possibly ahead of schedule while suffering from productivity overruns.
Such conflicting indications help management identify situations where an
audit may be in order.
100

J. Constr. Eng. Manage. 1993.119:87-104.

 Project pJO01 Report Dale: 11 Mar 91
L A B O R - B A S E D SCHEDULE VARIANCE EXCEPTIONS

Item Code PC BCWP BCWS SV SV Rank

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(%) ($) ($) ($) (%) Index Remarl~

111~2110 10 6048 12096 -6048 -100 100 * Very si~Jficant schedule delay may be necuring. Check network.
9 Check activity A600.
9 Element has a protiuctivity overrun of $302 (5 %)
1110.1120 67 56048 29561 26486 47 47 * Very significant schedule saving may be occuring. Check network.
9 Check activity A200, A300, A400
9 Element has a productivity overrun of $5116 (9%)
1110.1210 25 14742 18428 .3686 -25 25 * Significant schedule delay may be occuring. Check network.
9 Check activity AS00,
9 Element has a productivity overrun of $7518 (51%)

Reporting Level: Work Package

No. of Exceptions: 3

FIG. 7. Schedule Exception Report (SER)

A remark may also appear that points to one or more network activities
that should be checked for possible schedule variance. To check activities
highlighted by the SER, the SAER is generated. This report examines all
activities that are underway at the time the report is prepared as well as
any activity whose early start falls within the next two weekly periods. The
activity number column identifies all activities that have been excepted. The
current early start column defines each activity's early start date as of the
last schedule update. The deviation between the original and current early
start dates is reported in the early start variance column. The total float of
an excepted activity is found in the total float column. The total float var-
iance column lists the deviations that the current total float values have
experienced. The same applies to the duration and duration variance col-
umns.
The excepted activities in this report are sorted according to early start.
The remarks column interprets the early start, total float, and duration
variances. A remark will sometimes caution the user that the excepted
activity seems to have been impacted by other activities along its path.

INTERSECTING EXCEPTIONS

Every report described so far has a specific and distinct focus and scru-
tinizes one subset of performance data. All relate the performance of labor
resources, or provide information about factors that can impact labor per-
formance. They also analyze ripple effects.
Additional insight can sometimes be gained by intersecting two or more
exception reports. Three types of intersection reports are discussed here.
The idea is to explore the interrelationships that are known to exist between
different project data. That has been accomplished to some extent with the
individual reports via the variance breakdown and remarking features. Yet
there is still value to intersecting pairs of reports because it focuses attention
at the joint events rather than leave it to the user to recognize them.
101

J. Constr. Eng. Manage. 1993.119:87-104.

 The Productivity and Schedule Activity Exception Report
Inferior productivity performance can have adverse impacts on schedule
performance. By intersecting the U P E R and SAER, it may be possible to
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corroborate whether labor productivity problems are actually translating

into schedule performance problems. The significance of such evidence is
diminished in cases where one-to-many or many-to-many links between
activities and accounts exist. It becomes more difficult to establish that poor
productivity in one account is cause of duration overruns in its linked ac-
tivities if those activities are linked to other accounts.
The focus can be on the cumulative or current period. The goal is to
identify work elements that appear in the selected section of the U P E R
(current or to-date) and are linked to activities that appear in the SAER
and have experienced changes in duration. Correlation may be drawn be-
tween poor productivity and extended durations. Similarly, correlation may
be drawn between superior productivity and reduced durations. Conflicting
productivity and activity duration signals may raise data accuracy questions
or indicate that the cause of the problem lies elsewhere.
Each work element's schedule links are checked to determine whether
any related activities experiencing significant duration changes appear in
the activity exception report. If the check is positive, the work element is
included in the new report. This process is repeated until all work elements
in the to-date part of the U P E R are checked. This report is known as the
productivity and activity exception report (PAER).

The Labor Absenteeism and Productivity Exception Report

High rates of absenteeism erode labor productivity and indicate serious
morale and motivation problems. One way to monitor the correlation be-
tween absenteeism and productivity is to intersect the U P E R with the L A E R
and analyze the outcome. If high absenteeism rates exist among crafts, work
elements or classifications that rely on those crafts will likely exhibit sig-
nificant productivity problems.
Use of absenteeism data for project-control purpose is still in its infancy.
One of the challenges is determining the level beyond which absenteeism
events translate into significant performance problems. A better under-
standing of the relationship between absenteeism and a performance metric
(such as productivity) would be enormously valuable. By monitoring trends
in absenteeism and productivity data, it may be possible to detect trends
developing in parallel. Management can then derive some project-control
value from absenteeism data.
Work elements or classifications that appear in the to-date parts of the
UPER and L A E R are included in a new report. The report is known as
the labor absenteeism and productivity exception report (LAPER).

The Cost and Schedule Exception Report

The L C E R and the SER are the only reports that can examine both cost
and schedule performance in the context of the same control elements. By
intersecting an L C E R and an SER generated at the same reporting level,
project elements that experience excessive cost and schedule overruns con-
currently can be identified. The resulting report is the cost and schedule
exception report (CSER). The CSER intersects the to-date sections of the
LCER and SER only as long as they are both prepared at the same reporting
level.
Fig. 8 presents the output screen of CSER. This report is generated by
102

J. Constr. Eng. Manage. 1993.119:87-104.

 Projed PJ001 L A B O R C O S T AND S C H E D U L E V A R I A N C E E X C E P T I O N S
SV Rank
Item Code PC BCWP ACWP BCWS ('$i
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1110.1210 25 14742 22574 18428 -7832 -3686 100 *Thereportedcostoverllunisextremelyexcesslve

(-S3",~) ( - ~ ,,~] * There Is evidence of very sutstantial schedule delay
r Cost & schedule performances are glx4nga consistent indlcat~
1110.1120 67 f~048 61534 29561 -5487 Z64~ 70 * The reportM cost overrun ls moderate
(.1o r 47~] * There Is evidence of extremely excesslveschedole saving
9 Cc~t & schedule performances giving contradictory indicators
1110.2110 ]10 6048 6 6 9 7 12096 - 6 4 9 -3686 8 *Thereportedco~toverrunlssubstanUal
(-ll c~) INqGi * There is evidence of extremdy excessiveschedule dday
9 Cost & schedule performances are giving a coherent indicator

Reporting Level: Work Package

No. of Exceptions: 0

FIG. 8. Cost and Schedule Exception Report (CSER)

directly intersecting the to-date portions of the LCER and SER. The joint
section of the report contains elements that have been excepted based on
both counts; i.e., threshold-penetrating cost and schedule variances. The
CV and SV for any one exception need not necessarily be consistent. That
is, they need not be both overruns or underruns. In fact, examining the
different combinations can be interesting. In the joint portion of the report,
there may be elements that are doubly troublesome. Accounts significantly
exceeding their budgets and schedules should get management's attention.
Other accounts in the joint portion of the report may be doing better than
planned in one area but failing miserably in the other. It is not uncommon
that one of the performance aspects is doing well at the expense of the
other; for example, work undergoing acceleration using overtime labor.
The disjoint section of the report identifies accounts experiencing exces-
sive deviation in one or the other performance aspect, but not both. That
in itself may be useful information. For example, why is schedule on track
despite a depressed production level that is resulting in substantial overruns?
Another account may experience the exact opposite. It may very well be
that the information is incomplete, or erroneous. Such knowledge is in itself
helpful. If the reporting system can stimulate management to ask the right
questions, then the system will be effective.

SUMMARY
This paper describes a new approach to project control. It relies upon a
variety of highly customizable exception reports that provide different win-
dows onto labor performance data. A systematic approach to labor excep-
tion reporting and variance analysis was explained and illustrated. Decision
support system concepts underlie much of SAMER, a prototype developed
for this purpose. Example reports demonstrated some of the enhancement
proposed by this study. The prototype's capability to graphically display
exception results is currently rudimentary (mostly bar charts). A more robust
graphic capability will be a major part of our future version.
This paper also emphasizes the importance of looking beyond the im-
103

J. Constr. Eng. Manage. 1993.119:87-104.

 mediate and the obvious. Insightful information may be available in seem-
ingly unrelated sets of data; e.g., unit productivity and absenteeism. Ex-
ception reporting should allow the next generation of computer-literate
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project-control managers to take a fresh, personalized, and new look at

performance data. It should even allow the user to hypothesize about project
control problems and successes, and test that hypothesis to its logical con-
clusion while on line. By intersecting different pieces of information, some-
thing new may be learned. This paper provides a sample of the things that
can be done. More is possible and is being researched.

ACKNOWLEDGMENTS
We wish to thank John Herrell of Guy F. Atkinson Construction Co.,
Hugh Langworthy of Bechtel, Inc., and Dr. Paul Teicholz of Stanford Uni-
versity for suggestions to this research. We also thank the reviewers of this
paper for their comments that improved the first draft of this manuscript.
This research was supported by the U.S. National Science Foundation under
Grant MSM-8451561, Presidential Young Investigator's Award.

APPENDIX. REFERENCE
Abu-Hijleh, S. F. (1991). "A model for variance-based exception reporting with
user-defined criteria," PhD thesis, Univ. of California, Berkeley, Calif.

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