Lesson 4:

Labor
CEng 158 : Construction Cost Engineering
Engr. Ramil B. Vinculado, Jr.
TOPICS
• Labor Classification
• Developing Labor Rates
• Performance Monitoring
 Labor Classifications
(adapted from AACE International’s Cost Engineer’s Notebook)

Direct Labor

Indirect Labor

Overhead Labor
 Direct Labor
The labor involved in the work
activities that directly produce the
product or complete the installation
being built.
 Indirect Labor
The labor needed for activities
that do not become part of the final
installation, product, or goods
produced, but that are required to
complete the project.
 Overhead Labor
The labor portion of costs inherent
in the performing of a task (such as
engineering, construction, operating, or
manufacturing), which cannot be
charged to or identified with a part of
the work, and, therefore, must be
allocated on some arbitrary basis
believed to be equitable, or handled as
a business expense independent of the
volume of production.
Developing Labor
Rates
Developing Labor Rates

Base Wages
The base wage is the amount
that will go directly to the employee.
The source of these wage structures
can be found in databases from
previous projects, labor contracts,
etc.
Developing Labor Rates

Fringe Benefits
• Paid Time Off (PTO)
• Medical & Life Insurance Benefits
• Government Mandated Benefits
Weighted Average
Rates/ Crew
Composition Rates
Example No. 1
A contractor needs to make up time in his
schedule. If he works the concrete crew
shown above 10 hours per day for two
weeks and 10 hours a day on two
Saturdays, how much extra will it cost him?
Overtime is paid for all hours over eight,
Monday thru Friday and the first eight
hours on Saturday. Double-time is paid for
hours greater than eight on Saturday and
all Sunday work.
Estimating Work
Hours to
Complete a
Given Scope of
Work
Class 3 Estimate
• Major equipment has been identified
• Layout drawings are available
• Rough quantities are available for
many of the major elements (cu. yards
of concrete, lin. ft. of pipes, etc.)
Work Packaging or
Work Breakdown
Structure
The first step is to review the project and
develop meaningful work packages.
 Factors Affecting
Productivity
• Is sufficient labor available locally, or will
workers have to come from a long
distance away?
• What will the weather conditions be like
(hot, cold, rainy, etc.)?
• Are there any local holidays?
• Are temporary living quarters needed?
• Is overtime necessary to attract workers?
• What are the standard work hours and
work days?
Richardson Estimating
System
• Jobsite Conditions
Good + 3% to 5%
Average + 6% to 8%
Poor + 9% to 15%
• Worker Skill Level
High + 2% to 5%
Average + 6% to 10%
Poor + 11% to 20%
Richardson Estimating
System
• Temperature
Below 40 degrees or above 85
degrees add 1% per degree of variance
• Work Weeks in excess of 40 hours
40 to 48 hours + 5%b to 10%
49 to 50 hours + 11% to 15%
51 to 54 hours + 16% to 20%
55 to 59 hours + 21% to 25%
60 to 65 hours + 26% to 30%
66 to 72 Hours + 31% to 40%
Example
The standard labor cost for 100 LF of
footing 8 inches by 12 inches = $130.90
Using Commercially
Available Data for
Estimating and
Location
Example
Example
For example, a building in Chicago was
erected for $1,540,000. I want to estimate
the cost of the same building in Los
Angeles.
Performance
Monitoring
Work Packaging or
Work Breakdown
Structure
 Graphic
Presentation of
Earned Value Data
Definition of Terms:

• Cost Performance Indicator (CPI) - is

a measure of the financial
effectiveness and efficiency of
a project. It represents the amount of
completed work for every unit
of cost spent.

Note: If the ratio has a value higher than 1 then it indicates

the project is performing well against the budget. A
CPI of 1 means that the project is performing
on budget. A CPI of less than 1 means that
the project is over budget.
Definition of Terms:

• Schedule Performance Indicator (SPI)

- is a is a ratio of the earned value to
the planned value . It tells how far
ahead or behind the project is at
the point of analysis.

Note: If the SPI is less than one, it indicates that the project is
potentially behind schedule to-date whereas an SPI
greater than one, indicates the project is running ahead
of schedule. An SPI of one indicates the project is
exactly on schedule.
If you subtract the SPI from 1, you can see by what
percentage you are ahead or behind schedule.
The end…….