Project Cost Reduction

and
Value Engineering

Project Updating
and
Resource Allocation

1-2 1
 Overview
Understand how the process of estimating and pricing, from concept
through detailed estimating to change orders.
Understand how cost reporting can improve the overall success of a
project.
Know and apply important project cost management principles.
Know and apply basic management ideas, principles, and skills that
will enable you to immediately manage the crew on your construction
project more effectively.
Proactively manage project costs.
Proactively manage various risks/potential delays that could impact
your project.

1-3
2
 Session List

Session 1: Introduction to Improving Productivity and Managing Project

Costs
Session 2: Construction Estimates, Planning and Scheduling
Session 3: Who Controls Project Costs?
Session 4: Reporting and Analyzing Actual Costs
Session 5: Planning for Cost Control
Session 6: Cost Control Strategies
Session 7: Quantifying Lost Labor Productivity
Session 8: Equipment Management for Productivity Improvement
Session 9: Working with Project Partners
Session 10: Post-Project Evaluations

1-4
3
 Learning Objectives

Identify how contractors obtain work and the process that leads up to
the physical construction process.
Recognize the role of the contractor’s staff and the designers in the
pre-construction phases of the project.
Indicate how a project is obtained and how that process relates to the
construction of the project.

1-54
 A New Project

Why is this project being built?

What is the scope of our work?
Who is the “owner”?
Is our client someone other than the owner?
Who designed the project?
How much should it cost?
Which costs do I have control over?
How long should it take to build?

1-65
The Construction Process

1-76
 The Pre-Design Phase

Developing the project budget

What can the owner afford/finance?
Developing the schedule
When will the facility be needed?
Determining the program (the project’s physical parameters)
Amount of area needed/wanted.
Types of space.
Building type.
Starting point for the design.

1-87
 The Design Phase

Schematic design
Floor plans, elevations, site plans.
Design development
Progression of design; includes structural, electrical, and
mechanical, modeling of components, including clash
detection.
Construction documents
Completion of details, production of drawings, and
specifications.

1-98
 The Bid

Occurs after completion of construction documents by the

designer.
Could be negotiated, select bidders list, or public bid.
Every contractor has his or her own procedures for compiling the
bid.

1-10
9
 Examine Documents

A contractor will determine whether to bid the project based on:

Size of project
Type of work
Geographic location
Work relationships (owner, architect, engineers)
Quality of documents
Schedule
Special conditions
Prevailing wage requirements
Disadvantaged Business Enterprise utilization
Financial arrangements

1-11
10
 Estimating Process

Review and understand construction documents.

Decision to bid and planning for the estimate.
Conduct a site visit.
Develop a subcontractor contact list.
Complete a quantity take-off.
Price labor, equipment, materials, subcontractors and other costs (
including general conditions).
Determine the bid price.
Submit the bid.

1-12
11
 Estimating Process
SPECIFIC ISSUES FOR CONSIDERATION:
Bidding time
Surety bond requirements
Consistent with company business plans
Personnel required
Cost of bidding
Other projects being bid
Equipment
Supervision
Support staff
Finances
Adequacy of company resources

1-13
12
 Estimating Process
SPECIFIC ISSUES FOR CONSIDERATION (continued):
Competition
Experience with parties to the contact
Design considerations in the contract
Conditions in the contract
Quality of documents
Labor supply
Licensing
Community Relations
Availability of suppliers and subcontractors
Time
Availability of funds
Special requirements

1-14
13
 The Rest of the Process

Owner selection of a contractor

Indication of award of the contract.
Notice to proceed.
The construction phase
Actual construction of the project.
Post-construction phase
Move-in.
Maintenance and operating instructions.
Warranty period.

1-15
14
 Project Delivery Methods

CM at-Risk: A construction manager is first hired and takes on the

risk of building a project. The designer is later hired under a
separate contract.
Design-Bid-Build: Separate contracts for constructor and
designer. The building is designed before sent to bid.
Design-Build: One entity contracted to complete the design and
construction.
Integrated Project Delivery: A collaborative process that
harnesses the talents and insights of all participants to reduce
waste and optimize the whole project through all phases of
design, fabrication, and construction.

1-16
15
 Construction Contract Types

Guaranteed maximum price (GMP)

A maximum price is guaranteed, both owner and
contractor benefit if costs are minimized.
Lump-sum basis (LS)
Time and materials (T&M)
Actual cost plus a fee
Unit-price

1-17
16
 The Project

Project plans are included

Project elements:
Site excavation and grading
Two bridges
Two gatehouses
Office building
Receiving warehouse
Foundations and slabs for three warehouses
Paving and landscaping

1-18
17
 Session 1 Review

Pre-Construction Phases
Pre-design
Design
Bid/award
The Estimating Process
Project Delivery and Contract Types
The Project

1-19
18
 Apply What You Have Learned

Learn some of the history behind your project:

What was the intended use of the project and how did this new
project start?
What involvement did your company have in the design phase, if
any?
How and when was the construction estimate for the project
completed?
Is there a plan for the project to be LEED certified?
Did your firm use Building Information Modeling (BIM) in the
pre-construction phases for the project?
Will BIM be used during construction?

1-20
19
 Looking Forward to Session 2

Learn about the estimate that was required for your firm to win
the job you are currently on.
Bring an engineer’s scale and an architect’s scale to the next
session.

1-21
20
 What is Value Engineering?
Value engineering is a systematic method to improve the “value” of a product or
service that the project produces. It is an integral component of project quality.
Value is defined as containing two components, function and cost:
Value = Function / Cost
Function: a measure of the the performance capabilities of the product, service, or
project. A function might be to “achieve traffic flow across the river.” In practice
value engineers look at many different functions that the bridge serves, like
accommodating floods, passengers, bicycles, endangered turtles, emergency
vehicles, the sun on the horizon, and anything else that serves in a functionary
capacity.
Cost: The resources required to achieve the function. This can include materials,
tools, price, time, or anything that is required to achieve the functional
specifications.
Clearly, project value is increased when the function is increased, the cost is
decreased, or both. Alternatively, the function and cost could both be increased or
decreased, as long as the cost becomes proportionately less to the function, the
value will increase. 21
 Value Engineering
Value Engineering (VE) is not a design/peer review or a
cost-cutting exercise. VE is a creative, organized effort, which
analyzes the requirements of a project for the purpose of
achieving the essential functions at the lowest total costs
(capital, staffing, energy, maintenance) over the life of the project.
Through a group investigation, using experienced,
multi-disciplinary teams, value and economy are improved
through the study of alternate design concepts, materials, and
methods without compromising the functional and value
objectives of the client.

In the final analysis, Value Engineering is not only beneficial, but

essential because:

The functionality of the project is often improved as well as

producing tremendous savings, both initial and Life-Cycle Cost.

A "second look" at the design produced by the architect and The VE Job Plan follows five key steps:
engineers gives the assurance that all reasonable alternatives 1. Information Phase
have been explored. 2. Speculation (Creative) Phase
Cost estimates and scope statements are checked thoroughly 3. Evaluation (Analysis) Phase
assuring that nothing has been omitted or underestimated. 4. Development Phase (Value Management
Proposals)
Assures that the best value will be obtained over the life of the
5. Presentation Phase (Report/Oral
building
Presentation)

22
 Session 2

Construction Estimates, Planning and Scheduling

23
 Learning Objectives

Identify and prepare a conceptual estimate.

Review quantity take-offs.
Perform take-offs.
Review the pricing of an estimate and compile an
estimate.
Complete a subcontractor selection process and
select subcontractors for an estimate.

2-2
24
 The Conceptual Estimate

Developed early in project development.

Limited accuracy.
Large contingency may be required (depending on contractor’s
database).
Usually based on simple parameters.
Such as gross area multiplied by the square foot cost for similar
projects.
Helps the owner make basic decisions about moving forward with
the project.

2-3
25
 A Simple Conceptual Estimate
Item Type Area SF Cost Total Cost

Building A Office Building 20,000 $100.00 $2,000,000

Building B 65,000 $65.00 $4,225,000

Warehouse
Site Development 225,000 $2.00 $450,000

Site Utilities 225,000 $1.50 $337,500

Parking Lots 50,000 $2.20 $110,000

Landscaping 90,000 $1.30 $117,000

$7,239,500

Contingency 20% $1,447,900

Total Construction Costs $8,687,400

Figure 2.1

2-4
26
 Conceptual Estimate Summary Sheet
for the Project
Item Description Area Unit Unit Price Cost
Site Development Entire Site 3,525,000 SF $ .20 $ 705,000
Bridges 2 Each 7,200 SF $ 100.00 $720,000
Site Utilities Entire Site 3,525,000 SF $ .20 $705,000
Truck Access Paving 624,483 SF $ 2.72 $1,698,594
Parking Lots +90,000 SF 141,750 SF $ 2.09 $ 296,258
Landscaping 75,474 SY $ .81 $ 61,134
Gatehouse 1 200 SF $ 150.00 $ 30,000
Gatehouse 2 200 SF $ 150.00 $ 30,000
Building A Receiving Building 35,000 SF $ 33.51 $1,172,850
Building B Warehouse 250,000 SF $ 33.51 $8,377,500
Building C Warehouse 250,000 SF $ 33.51 $8,377,500
Building D Warehouse 250,000 SF $ 33.51 $8,377,500
Office Building 25,000 SF $ 103.43 $2,585,750
Total Cost $ 33,137,086
20% Contingency $6,627,417
Total Budget $ 39,764,503

Completed Form 2.1

2-5
27
 Creating the Project Budget

Project spread over three years to finance:

Phase I: Site work; gatehouses; bridges; Building A for offices;
slabs of Buildings B, C, and D; site asphalt paving and
landscaping.
Phase II: Complete three warehouse buildings.
Phase III: Construction of new office building, remodel Building A.

28
2-6
 Phase I Budget

Figure 2.3

2-7
29
 Phase II Budget

Figure 2.3 (Continued)

2-8
30
 Phase III Budget

Figure 2.3 (Continued)

2-9
31
 The Detailed Estimate

Identifies assembly elements.

Detailed take-off of material quantities.
The more detailed the estimate, the more accurate the estimate
can be.
As the documents increase in detail, the estimate increases in
detail, and the included contingency decreases.
More accurate than the conceptual estimate.
Little or no contingency is added.

2-10
32
 The Detailed Estimate
The Detailed Estimate Includes:
1. A break down of the work by categories of similar items or as required by
the bid form.
2. Quantification of similar elements of work for each category for costing.
3. Determination of a construction plan.
4. Determination of a construction schedule.
5. An estimate of cost of labor, material, equipment, subcontractors and
service providers for each element of each item of work.
6. The direct and indirect cost of the work which includes all the cost
elements.
7. Solicitation and receipt of quotes for materials, services by others and work
to be subcontracted.
8. A summary of all elements of costs (labor, material, equipment,
subcontractors and service providers) to determine the total estimated cost
of work.
9. Analysis of risk the project should bear.
10. Determination of a markup to be added to the cost of work to produce a
2-11
33
selling or bid price.
 Commonly Used Conversion Factors

Figure 2.4

34
2-12
Relationship of Estimating, Accounting,
and Productivity

Figure 2.5

35
2-13
 Concrete Quantity Take-Off

Item Cost Item Quantity Unit

Grade Beams Form Beam Sides 30,000 SFCA
Reinforcing Steel 23.7 Tons
Place Concrete 611 CY
Chamfer Strips 2,500 LF
Float Top 2,500 SF
Embeds 1,250 Each
Slab-on-Grade Fine Grade 250,000 SF
Compacted Base Course 3,361 CY
Vapor Barrier 282,500 SF
Reinforcing Steel 183.7 Tons
Edge Form 2,500 LF
Screeds 5,000 LF
Expansion Joint 4,861 LF
Finish 250,000 SF
Cure 250,000 SF
Box-Out Columns 108 SF

Completed Form 2.2

36
2-14
 Concrete Quantity Take-Off
Project Concrete Recap Labo Materia
Sheet r l
Man- Unit
Cost Ite Quantity Uni Unit/h hours Cost/h Total Cos Total Total
code m t r r Labor t Mat. Cost
03 03 Grade
03 03 Beams
Form Beam 30,00 SFC 1 300 $ 45.0 $ 135,00 $ 0.3 $ 10,50 $ 145,50
03.01
03 03 Sides
Reinforcing 0 23. A
Ton 0.0370 0 63 0
$ 50.0 $ 0 31,60 5
$ 500.0 $ 0
11,850 $ 0 43,45
03.02
03 03 Steel
Place 761 C 5 3 2
20 0
$ 42.0 $ 0 8,55 $ 0 52.0 $ 31,77 0
$ 40,32
03.03
03 03 Concrete
Chamfer 1
250 Y
L 20 41 0
$ 45.0 $ 4 56 $ 0 0.1 $ 2 25 $ 6 81
03.04
03 03 Strips
Float 0
250 F
S 0
30 38 0
$ 42.0 $ 3
35 $ 0- $ 0- $ 3
35
03.05
03 03 Top
Embed 0
125 F
E 0 3 41 0
$ 50.0 $ 0
20,83 $ 17.0 $ 21,25 0
$ 42,08
03.06 sTotal Grade Beams 0 a 7
427 0 $ 3
196,90 0 $ 0
75,62 3
$ 272,52
03 03 Slab-on-Grad 3 0 2 2
04
03 03 e
Fine 25000 S 40 62 $ 42.0 $ 26,25 $ - $ - $ 26,25
04.01
03 03 Grade
Slab 0 336 F
C 0 5 5
67 $042.0 $ 0
28,23 $ 10.5 $ 35,29 $ 0
63,52
04.02
03 03 Gravel
Vapor Barrier 1
28250 Y
S 100 2
28 $042.0 $ 2
11,865 $ 0 0.0 $ 1 5,65 $ 3
17,51
04.03
03 03 Reinforcing 0 183. F
Ton 00.0 3
367 $050.0 $ 183,70 2
$ 500.0 0
$ 91,85 $ 5
275,55
04.04
03 03 Steel
Edge 7250 L 5 2 4 12 $045.0 $ 0 5,62 $ 0 1.0 $ 0 2,50 $ 0 8,12
04.05
03 03 Form
Screed 0
500 F
L 0
4 5
12 $045.0 $ 5
5,62 $ 0
0.3 $ 0
1,50 $ 5
7,12
04.06
03 03 sExpansion 0
900 F
L 0
4 5
22 $045.0 $ 5
10,12 $ 0
0.3 $ 0
2,88 $ 5
13,00
04.07
03 03 Joint
Place 0
486 F
C 0 2 243 5 0
$ 42.0 $ 5
102,08 2
$ 52.0 0
$ 252,77 $ 5
354,85
04.08
03 03 Concrete
Finis 1
250,00 Y
S 12 1
208 0
$ 42.0 $ 1 87,50 $ 0 - $2 - $ 3 87,50
04.09
03 03 h
Cur 0
250,00 F
S 0
100 3 25 0
$ 42.0 $ 0
10,50 $ 0.0 $ 15,00 $ 0
25,50
04.10
03 03 e
Box-Out 0 10 F
S 0 6. 01 0
$ 45.0 $ 0 74 $ 6
2.5 $ 0 27 $ 0 1,01
04.11 Columns
Total Slab-on-Grade 8 F 5 10507 0 $ 472,258 0 $ 407,710 $ 8
879,96
9 1 3 4

Pricing for Form 2.2

37
2-15
 Selecting Subcontract Bids

Bid analysis is necessary to determine:

Lowest prices, including full scope.
No duplications.
No “holes.”
Responsible subcontractors.
Preferred subcontractors (those you have a long-term
relationship with and have used in the past).

38
2-16
 Combination Bid Analysis

Figure 2.6

2-17
39
 Subcontractor Selection
Section Description Bidder Price
31 64 00 Piles/Caissons Northwest Caisson $1,220,990
32 12 16 Asphalt Paving Statewide Paving $1,730,000
32 90 00 Landscaping Mulchers, $ 42,000
LGL Sprinkler $ 35,000
03 45 00 P/C Deck Panels PC Precast $ 85,000
05 10 00 Structural Steel Steel Struct, Inc. $ 175,000
05 20 00 Metal Joists Steel Struct, Inc.
05 30 00 Metal Deck Steel Struct, Inc.
06 40 00 Arch. Woodwork Chris’s Cabinets $ 7,200
07 20 00 Insulation Quick Insulation $ 35,000
07 50 00 Membrane Roofing Local Roofing $ 89,916
07 60 00 Flashing Local Roofing
08 31 00 Overhead Doors Door & Window Co. $ 18,000
08 80 00 Glazing/Windows Door & Window Co.
09 25 00 Gypsum Drywall Universal Finishes $ 7,300
09 65 00 Floor Covering Universal Finishes
09 90 00 Painting Universal Finishes
23 00 00 Mechanical Charlie’s Plumbing $ 249,000
26 00 00 Electrical Ellen’s Electrical $ 309,000
Total Subcontracts $4,003,406

Completed Form 2.3

40
2-18
 Session 2 Review

Conceptual estimates may be based on specific

project areas (measured in SF).
Conceptual estimates are used to establish the
project budget.
Contingencies allow for the uncertainties at a
specific time in the project design.
More detailed estimates are prepared as the
documents are completed.
A take-off of quantities is completed to provide
more detail estimates.
These quantities are used to estimate labor,
material, and equipment.

41
2-19
 Session 2 Review
(Continued)

Subcontractor selection is completed using an

analysis based on the candidates’ capabilities,
scope and price.
A project plan and schedule are usually prepared using either a bar chart
format or a critical path method format.
An updated project plan is needed to help the supervisor avoid incorrect
management decisions

2-20
42
 Apply What You Have Learned

Look at the original estimate for your project.

How is it organized?
How is the information condensed for owner’s billings?
How was the data generated?
How were subcontractors selected?
Is there a correlation between subcontractor selection
and subcontractor problems on the job?
Is the estimate organized into crew activities?

43
2-21
 Looking Forward to
Session 3

Become familiar with the type of cost control system your firm uses.
Evaluate the cost reporting and control system on your project

44
2-22
 Session 3

Who Controls Project Costs?

45
 Learning Objectives

Analyze the relationship between the estimated

costs and those reported within the cost control
system.
Define the relationship between cost and the
degree of risk inherent to the project.
Classify major risks innate to every construction
project.
Define the individual responsibilities for project
team members relative to project cost control.

3-2
46
 From Estimate to Construction

The Construction Estimate:

Is a carefully measured, quantified, and priced prediction of the costs,
assuming:
Scope of work does not change from what is represented on the
construction documents.
Project will be built during a particular time period, adhering to a
specific schedule.
Site conditions will be as observed or reported.
Labor crews’ productivity can be predicted based on the assumption
in the contractor’s estimate with consideration of experience from
previous similar projects.

3-3
47
 Cost Control

The goal of cost control is to ensure you are building to the

estimated costs.
Ideally equal to or less than the estimated amount (at least in
most cases).
Project fee is increased when costs are less than estimated.
The goal is to manage costs effectively.

3-4
48
 Typical Mistakes in Estimates

Inaccurate calculation of quantity of material (too high or too low).

Use of non-qualified or responsive material suppliers.
Inaccurate prediction of productivity and labor cost.
Scope gaps not identified between subcontractors.
Use of non-qualified subcontractors.
Shortage of equipment or personnel.
Unanticipated time delays.
Miss-interpretation of contract clauses.

3-5
49
 Responsibility for Cost Control

Estimator
Responsible for the quality of estimate.
Project manager
Responsible for the overall project and primary manager
of the project costs.
Superintendent
Responsible for crew productivity and for reporting the
actual amount of work performed by the crews under his
or her direction.

Good communication helps all project team members identify and

understand project challenges.
3-6
50
 A Role Play in Cost Responsibility

Roles:
Project Manager
Estimator
Superintendent
Discuss, maintaining your roles, in groups.
What resolution did your group reach?

Worksheet 3-1

3-7
51
 Potential Financial Risks

Material
Relatively small risk.
Labor
Largest potential risk.
Equipment
Tied to productivity estimates for labor.
Subcontracts
Could substantially affect total project costs, especially general
conditions and labor productivity.
Jobsite Overhead (General Condition) Costs
Extended project schedule will increase these costs.

3-8
52
 Identifying Cost Risks from
the Construction Documents

Higher risk areas:

Significant work areas with multiple crews.
Complicated/congested work areas.
Unfamiliar construction processes or systems
A tight schedule.
Subcontractor work that may not be on the project’s
schedule.

3-9
53
 Identifying Cost “Trouble Spots”
on the Project

Use Figure 3.1 for the project schedule.

Analyze the project drawings and the schedule to identify trouble
spots in the Project.

Worksheet 3-2

3-10
54
 Session 3 Review

The estimate is based on several assumptions that may change as

construction progresses.
The estimate is based on available information and should be an
accurate prediction of construction costs.
All project team members have defined responsibilities in cost
control.

3-11
55
 Session 3 Review
(Continued)

Financial risks exist for every project.

Labor and equipment are usually the most significant potential
risks.
Project characteristics provide identifiable potential risks that should
be proactively managed.

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56
 Apply What You Have Learned

Identify potential trouble spots for controlling costs on your current

project by reviewing the estimate and the construction documents.
Compare the estimate items to the cost control items. Are they the
same?

3-13
57
 Looking Forward to Session 4

Become familiar with your firm’s cost control system.

3-14
58
 Session 4

Reporting and Analyzing Actual Costs

59
 Learning Objectives

Explain the reasons for implementing cost controls.

Review the methods for developing a cost control system.
Analyze the cost control process.
Convert the estimate into cost control items.

4-2
60
 The Importance of Cost Control

What is Cost Control?

– Cost control is a systematic analysis of actual construction
costs, including units of measure, compared with the
estimated cost and units, and the use of that analysis to
proactively manage the actual costs and units to stay within or
near the budget.

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61
The Contractor’s Accounting System

Figure 4.1

4-4
62
 Generating Cost Data

Labor Hours
Labor is coded to specific activities.
Cost codes may be organized using MasterFormat 2004
numbers, or developed from a Work Breakdown Structure.
Example:
A labor cost will come from time cards. Cards will be coded to
specific cost items.
03 30 02 is cast-in-place concrete.

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63
 Daily Time Sheet for Cast-in-Place
Concrete Work

Date Name Classification 03 30 02-02 03 30 02-03

7/15 Anderson, F.A. Laborer -2 8
Brown, W.R. Laborer -2 8
Carter, I.L. Laborer -2 8
Smith, N.R. Laborer -2 8
Wilson, D.E. Laborer -2 4 4
Hill, J.S. Carpenter 8
Garcia, J.E. Carpenter 8
Smith, H.H. Carpenter 8
7/15 Totals 36 L2 4 L2, 24 C

Figure 4.2

4-6
64
 Reporting Process
for Labor Hours

Figure 4.5
4-7
65
Reporting Process for Material Purchases

Figure 4.5
4-8
66
 Reporting Process for
Company-Owned Equipment

Figure 4.6
4-9
67
 Analysis of Cost Data

Information required to examine current progress.

The costs to date.
The production to date.
The quantity (units) of work completed.
A comparison of the estimated cost and units with the current
cost and units.

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68
 Analysis of Cost Data

Case study: Tim and Tom at Lost Lake

Bid of $8,320 for installing drywall (taping is a separate line
item)
10,667 Square Foot area
160 labor hours at $52/hr
2 installers (Tim and Tom) for 2 weeks

Worksheet 4-1

4-11
69
 Analysis of Cost Data
(Continued)
Tim and Tom want to take a day off and go holiday. To accomplish
this they must:
Complete all work in nine days or less instead of ten.
Cover their wages for the last day $832 + $250 in estimated
expenses.
Use the cost data from Week 1 to forecast their final costs and
determine whether they can go holiday.

4-12
70
 Tim and Tom’s
Week 1 Cost Analysis

Monday Tuesday Wednesday Thursday Friday Total

1-June 2-June 3-June 4-June 5-June

Hours 16 16 16 16 16 80

Production 1,050 1,280 1,280 1,050 1,280 5,940

Cost at $52/Hr $832 $832 $832 $832 $832 $4,160

Cost/SF $0.79 $0.66 $0.66 $0.79 $0.66 $0.70

As Per Bid at $819 $998 $998 $819 $998 $4,632

$0.78/SF

Daily Cost $ (13) $166 $166 $ (13) $166 $ 472

Variance

Completed Form 4.1

4-13
71
 Information from Cost Data

Their average production cost for Week 1 was $0.70/SF—better

than the $0.78/SF estimated.
They achieved $0.66/SF cost per unit on three days.
The costs were $472 below what was included in the estimate for
this week.

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72
 Typical Analysis Information
from Cost Data
Quantity of work remaining
Current percentage of work completed
Current cost variance
Forecasted unit cost
Projected cost of remaining work
Projected variance
Percent variance

4-15
73
 Analysis of Tim and Tom’s Cost Data
Week 1 (Continued)
Projected cost remaining
Quantity remaining x Forecasted unit cost
4,727 x $0.70 = $3,308.90
Projected variance
Estimated cost – (Current cost + Projected cost remaining)
$8,320 – ($4,160 + $3,308.90) = $851.10
Percent variance
Projected variance/Estimated cost
$851.10/$8,320 = 10.2%

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74
 Should Tim and Tom Go Fishing?

Forecasted time to complete the work:

4,727/4 days = 1,182 SF necessary per day. They can
accomplish this.
Forecasted cost:
Projected savings of $851.10, which covers their wages. They
will have to finish early to pay for fishing.
2½ hours early on Thursday = $260.00
Decision:
Go for it!

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75
 Tim and Tom’s
Week 2 Cost Analysis

Monday Tuesday Wednesday Thursday Total for Week Total

8-June 9-June 10-June 11-June

Hours 16 16 16 11 59 139

Production 1,280 1,280 1,280 887 4,727 10,667

Cost at $832 $832 $832 $572 $3,068 $7,228

$52/Hr

Cost/SF $0.65 $0.65 $0.65 $0.64 $0.65 $0.678

As Per Bid at $998 $998 $384 $692 $3,687 $8,320

$0.78/SF

Daily Cost $166 $166 $166 $120 $618 $1,092

Variance

Completed Form 4.3

4-18
76
 Analysis of Cost Data

Labor Material Total

Cost to Date $12,124.00 $2,928.00 $15,052.00

Quantity (SFCA) to Date 4,320 SFCA

Quantity (SFCA) Remaining 6,480 SFCA

Percent Complete to Date 40% 80%

Estimated Cost to Date $13,093.92 $3,024.00 $16,117.92

Current Variance $969.92 $96.00 $1,065.92

Forecasted Unit Cost (SFCA) $2.81 $.34 $3.15

Estimated Cost/SFCA $3.03 $.35 $3.38

Projected Cost at completion $30,348.00 $3,660.00 $34,008.00

Projected Cost/SFCA $2.81 $.34 $3.15

Projected Variance from $2,386.80 $120.00 $2,506.80

original estimate
Percent Variance 7%

Completed Form 4.4

4-19
77
 Converting Estimate Items
to Cost Control Items
Cost control items need to be easily identifiable and unique.
The work activity must be unique for reporting and historical cost
data.
A cost control item shouldn’t be too small (in cost, quantity, or
time).
A cost control item should align with the firm’s historical cost
control database whenever possible.

4-20
78
 Converting Estimate Items
to Cost Control, Gatehouses

Item Unit Labor Per Labor Quantity Unit Price Material Total Cost
hours Hour Cost Cost
Footings 5.4 12 $30.36 $364.32 132 SFCA $0.40 $375.47 $739.79

Walls 10.8 24 $30.36 $728.64 528 SFCA $0.40 $856.53 $1,585.17

Slab 2.7 20 $26.64 $532.80 2.7 CY $60 $261.33 $794.13
19 $1,625.76 $1,493.33 $3,119.09
Balance $1,625.76 $1,528.14 $3,135.00
Wall 541 8 $31.82 $446.64 .541 MBF $400/MBF $273.43 $720.07
Framing 7 $27.44
Roof 266 6 $31.82 $355.56 .266 MBF $800/MBF $349.69 $705.25
Framing 6 $27.44
Floor 85 6 $31.82 $190.92 .01 MBF $800/MBF $176.89 $367.81
Framing
Total $1,793.13

Completed Form 4.5A

4-21
79
 Converting Project Estimate Items
to Cost Control, Bridge 1

Item Unit Man-ho Per Hour Labor Quantity Unit Material Total Cost
urs Cost Price Cost
Abutment 40 crew $150.34/ $6,013.60 2107 SFCA .50 $1,053.50 $7,067.
Forms hours crew hour
Abutment 5.3 Ton $4,240.00 5.3 Ton $600 $3,180.00 $7,420.
Rebar
Pour 136 CY 8 crew $169.02/ $1,352.16 136 CY $60 $8,160.00 $9,513.
Abutment hours crew hour
Total $24,000.

Completed Form 4.5B

4-22
80
 Session 4 Review

Cost control is a systematic comparison of actual costs and units

with estimated costs and units, the use of that comparison to
manage the costs and units, keeping them on or near the budget.
Timely cost and unit comparison enables the contractor to
proactively identify and solve problems.
Cost and unit data comes from several sources.

4-23
81
 Session 4 Review
(Continued)

Cost and unit data must be organized into activities to allow

comparisons with the estimate.
The estimate should be organized into work activities. Most estimate
items are small items and need to be condensed or combined for
cost and unit control reporting purposes.

4-24
82
 Apply What You Have Learned

Examine your project’s cost control system and reporting.

Do you receive daily cost and production reports?
Does your cost control system give you the opportunity to make
decisions about managing the costs and units during the progress of
an activity?
How does your firm establish cost control items?

4-25
83
 Looking Forward to Session 5

Examine how your firm develops its cost control system.

Examine how your firm uses its cost control system to evaluate
variances and projections to complete.

4-26
84
 Session 5

Planning for Cost Control

85
 Learning Objectives

Explain planning as a primary tool in cost control.

Develop the bill of materials.
Prepare a bill of materials for a portion of the Project.
Plan labor crews and production to manage construction cost.
Prepare a labor plan for the Project.
Describe how crew feedback during construction can improve
productivity.

5-2
86
 Cost Management Plan

Step 1: Establish a budget.

Step 2: Identify cost activities and cost control
numbers.
Step 3: Assign responsibility for daily coding and
reporting cost data.
Step 4: Determine a method of organizing material
purchases for the cost control system.

5-3
87
Cost Management Plan
(Continued)

Step 5: Make activity-based crew assignments.

Step 6: Determine a method of analysis and
remedial strategy.
Step 7: Determine a method for obtaining supervisor
feedback.
Step 8: Develop a reporting method for determining
the impact of subcontractor actions.

5-4
88
 Identifying Cost Activities
and Cost Control Numbers
Description of the activity, from start to finish.
Quantity of the activity.
Crew for the activity.
Hours necessary to complete the activity:
Composite crew cost per hour
Average hourly cost per hour
Cost of each craft per hour

5-5
89
 The Responsibility for Daily
Coding and Reporting Cost Data

Supervisors supply data.

The superintendent is responsible for ensuring
accurate data is recorded in the cost control
system.

Goal: Report accurate cost information daily.

5-6
90
 Method for Organizing
Material Purchases
Identify:
The specific materials used in the work
activity.
The material costs for the work activity.
The vendor and purchase order.
The order and delivery dates.

5-7
91
 Sample Bill of Materials

Figure 5.1

5-8
92
Crew Assignment Information
Cost code number.
Description of activity.
Quantity of work involved.
Crew composition.
Time allowed for the activity.
Cost of labor for the activity.
Material required for the activity.

5-9
93
 Crew Assignment Information
(Continued)

Necessary equipment and cost.

Necessary tools and location.
Subcontractors involved.
Drawings and other information that will
assist the crew.

5-10
94
Bill of Materials for Grade Beam

Bill of Materials
Cost Code: 03 03 02 11
Item Quantity Unit Price Total
BB Form-Ply 10,800 MSF $929 $10,033.00
2x4 21.222 MBF $407 $8,637.35
Ties 27 C $75 $2,025.00
Rebar 8.72 Tons $540 $4,708.80
Concrete 220 CY $56.45 $12,419.00

5-11
95
Bill of Materials for Bridge 1

Bill of Materials
Cost Code: 03 03 02 11
Item Quantity Unit Price Total
3/4” Form-Ply 2.11 MSF $929 $1,960.19
4x4 12.4 MBF $858 $10,639.20
Ties 1,050 Ea $4.62 $4,851.00
Rebar 5.3 Tons $540 $2,862.00
Concrete 136 CY $60.93 $8,286.48
Note: 2 abutments (2 x above)

5-12
96
 Crew Assignment for Grade Beam
Work
STP Construction Co.
Work Assignment • Sure Fresh Project • STP Project 01-10
Cost Code: 03 03 02 11
Project Area: Building A Grade Beam
Work Description: Form grade beam at Building A Drawing of Details and Work Area:
Document Reference: Foundation plan, sheet 3; Sections, sheet 6
Quantity of Work: 10.800 SFCA formwork
Crew and Rates: 3 carpenters at $52.00 + 1 laborer at $48.00/Hour
Crew Rate: $204/Hour $1,632/Day
Daily Production: 50 LF/day
Time Allowed: 18 days
Labor Cost: $29,376.00
Material: 10,800 MSF B-B OES; 21.22 MBF 2x4 studs/walers;
2,700 snap ties; 5,400 wedges
Material Location: To be delivered to Building A
Equipment/Equipment Cost: Forklift at $100/day
Tools: 4 skill saws; cut-off saw; 2 drills; form oil sprayer

5-13
97
 Crew Assignment for Bridge 1
STP Construction Co.
Work Assignment • Project • STP Project 01-10
Cost Code: 03 03 02 11
Project Area: Bridge 1
Work Description: Form abutment, Bridge 1 Drawing of Details and Work Area:
Document Reference: Sheet 8
Quantity of Work: 4,220 SFCA formwork
Crew and Rates: 3 carpenters at $52.00 + 1 laborer at $48.00 +
1 equipment operator at $56.00
Crew Rate: $260/Hour $2,080/Day
Daily Production: 422 SFCA/day
Time Allowed: 10 days
Labor Cost: 20,800.00
Material: 2.11 MSF 3/4” B-B OES; 12.4 MBF 4x4; 1,050
rods/catheads (rental) at each abutment
Material Location: To be delivered close to each abutment
Equipment/Equipment Cost: 30-ton crane
Tools: 4 skill saws; cut-off saw; 2 drills; form oil sprayer

5-14
98
 Day-by-Day Projection of Budgeted
Costs
29-Nov 30-Nov 1-Dec 2-Dec 3-Dec 6-Dec 7-Dec 8-Dec 9-Dec 10-Dec
Budgeted
Daily Labor $1,544 $1,544 $1,544 $1,544 $1,544 $1,544 $1,544 $1,544 $1,544 $1,544
Cost

Accumulated
$1,544 $3,088 $4,632 $6,176 $7,720 $9,264 $10,808 $12,352 $13,896 $15,440
Labor Cost

Estimated
200 200 200 200 200 200 200 200 200 200
Daily Quantity

Estimated
Accumulated 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000
Quantity

Budgeted
Cost/LF $7.72 $7.72 $7.72 $7.72 $7.72 $7.72 $7.72 $7.72 $7.72 $7.72
Today

Budgeted
Cost/LF $7.72 $7.72 $7.72 $7.72 $7.72 $7.72 $7.72 $7.72 $7.72 $7.72
Accumulated

Figure 5.3

5-15
99
4-Day Comparison of Actual Costs with Budgeted Costs
29-Nov 30-Nov 1-Dec 2-Dec 3-Dec 6-Dec 7-Dec 8-Dec 9-Dec 10-Dec
Budgeted
Daily Labor $1,544 $1,544 $1,544 $1,544 $1,544 $1,544 $1,544 $1,544 $1,544 $1,544
Cost
Actual Daily
Labor Cost $1,544 $1,544 $1,544 $2,448
Budgeted
Accumulated $1,544 $3,088 $4,632 $6,176 $7,720 $9,264 $10,808 $12,352 $13,896 $15,440
Labor Cost
Actual
Accumulated $1,544 $3,088 $4,632 $7,080
Labor Cost
Estimated
Daily Quantity 200 200 200 200 200 200 200 200 200 200
Actual Daily
Quantity 160 200 155 230
Estimated
Accumulated 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000
Quantity
Actual
Accumulated 160 360 515 745
Quantity
Budgeted
Cost/LF Today $7.72 $7.72 $7.72 $7.72 $7.72 $7.72 $7.72 $7.72 $7.72 $7.72
Actual Cost/LF
Today $9.65 $7.72 $9.96 $10.64
Budgeted
Cost/LF
Accumulated $7.72 $7.72 $7.72 $7.72 $7.72 $7.72 $7.72 $7.72 $7.72 $7.72
Actual Cost/
LF
Accumulated $9.65 $8.58 $8.99 $9.50

Figure 5.4
5-16
100
 4-Day Comparison of Labor Cost
Variances
29-Nov 30-Nov 1-Dec 2-Dec

Quantity to
1,840 1,640 1,485 1,255
Complete

Projected Cost at
Accumulated $19,300.00 $17,160.00 $17,980.00 $10,000
Rate

Variance from
$(3,860.00) $(1,720.00) $(2,540.00) $(3,560.00)
Budget

Figure 5.5

5-17
101
 Comparison of Actual Costs with
Budgeted Costs, Lowered Productivity

Figure 5.6

5-18
102
 Resource allocation

“In project management, resource allocation or resource

management is the scheduling of activities and the
resources required by those activities while taking into
consideration both the resource availability and the project
time” – Wikipedia
Common challenges of resource allocation
1. Client changes
2. Availability of resources
3. Project dependencies
4. Project uncertainties
5. Priorities across the company

103
 Updating a Project
A network designed during planning may not adhere to the schedule
when put to work, because situations are sometimes keep on changing
and during actual execution they are different than that assumed at the
stage of planning.
Following are few reasons for not following the designed schedule
exactly:
(i) Error in estimation during planning. Planner’s under or over
estimation is mainly responsible for not adhering to the schedule.
(ii) Unforeseen circumstances, like delay in availability of resources as
planned, break down in plant and machinery.
(iii) National calamity etc.
Updating helps in evaluating the present status of the project and assess
the probability of completing the project in due time. Updating enables
to take corrective actions in time and take managerial decisions in
problem areas. The updating must regularly be done.

104
 Method for Obtaining
Supervisor Feedback
A superintendent will need to know why a problem
happened to solve it.
Supervisors need encouragement to supply
information.
You need to have a system that will offer reliable
information.
If not verbal, then develop a written report for
supervisors.

5-19
105
 Determining the Impact
of Subcontractor Actions
Your planning should include:
Dates subcontractors must be on the project.
List of subcontractor activities.
Creating awareness among supervisors regarding
subcontractor involvement.
A reporting method for problems.
A predetermined channel of communication.

5-20
106
 Session 5 Review

A cost control plan must:

Identify cost activities and cost control
numbers.
Determine/assign the responsibility for daily
coding and cost reporting.
Establish a method of crew assignment.
Establish a method of cost analysis.

5-21
107
 Session 5 Review
(Continued)

A cost control plan must also:

Establish a planning process for resolving cost
variances and projecting the cost and units to
complete the work.
Establish a method for supervisor feedback.
Establish a method of reporting/managing
subcontractor challenges.

5-22
108
 Apply What You Have Learned

Determine how your firm completes cost control planning,

analysis of variances, and projections to complete.
What are some methods that your firm uses to organize
and report costs?
Does your firm have a standard method to develop crew
assignments?
Do you use supervisor/crew feedback to solve challenges
on the job? If not, try asking your supervisors what went
wrong on a problem.

5-23
109
Looking Forward to Session 6
Discuss the control of labor costs.
Familiarize yourself with the ways that
your firm encourages crew productivity,
efficiency and cost savings.
Discuss the change order process.

5-24
110
 Session 6

Cost Control Strategies

111
 Learning Objectives

Identify strategies for obtaining cost data.

Describe how to use cost control data in minimizing costs.
Identify causes of additional costs.
Analyze a jobsite problem.
Describe methods for recovering compensation for additional
costs.
Discuss the use of cost control information in identifying and
analyzing change orders and subcontractor back charges.
Isolate change order costs.

6-2
112
 Implementing Cost Control

Obtain cost data.

Organize to compare with estimate.
Report labor hours and cost.
Report material cost and quantities.
Report equipment hours and cost.
Report subcontractor activity and progress.
Use feedback to resolve problems.

6-3
113
 Implementing Cost Control
(Continued)

Analyze the data.

Compare actual costs with the estimate.
Identify reasons for any variance.
Implement recovery efforts.
Manage the labor force and crew assignments.
Implement changes to materials, tools, equipment.
Find sources of reimbursement, such as change orders or
back charges.

6-4
114
Cost Control Summary

Figure 6.1

6-5
115
 Accounting for the “Learning
Curve”
Production on the activity starts out slow and then picks up
pace.
Allocate production to take this into account.
Expect higher productivity later in project.

Day 1 Day 2 Day 3 Day 4 Day 5

Evenly
1,200 1,200 1,200 1,200 1,200
Distributed
Expected
800 1,200 1,200 1,400 1,400
Production

6-6
116
 Review Questions for
Supervisors
Were the instructions/layout adequate?
Were the details adequate?
Was there amount of work as expected?
Were the shop drawings accurate/adequate?
Was there enough material?
Was the material in good condition?
Was the material in a convenient location?

6-7
117
 Review Questions for Supervisors
(Continued)

Did you have the correct tools?

Did the tools operate properly?
Did you have enough equipment?
Was the estimated time sufficient?
Was the crew properly trained for the task?
Was the crew sized properly for the task?
Was the crew’s attitude positive?
Were the working conditions as expected?
Were the working conditions adequate?

6-8
118
 Review Questions for Supervisors
(Continued)

Did subcontractors perform as expected?

Were the subcontractors on time?
Were inspections called for in time?
Were the inspections completed on time?
Was the work approved by the inspections?
Is everything ready for tomorrow?

6-9
119
 Management Responsibilities

Provide accurate work assignments.

Analyze crew size, makeup and compatibility.
Provide adequate equipment and tools.
Provide adequate working conditions.
Ensure timely material delivery.
Correlate the activity with the estimate.

6-10
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 Compensation from Owner
Must have agreement.
Areas where it might occur:
Errors and omissions in construction documents.
Discovery of unknown or latent conditions.
Direction to complete additional work.
Requirement to complete additional work to
accommodate a specified product.

6-11
121
 A Role Play in Problem Analysis

This role-playing activity examines cost problems,

their impact, and how to analyze them.
The roles in the groups will be:
1. Project Superintendent
2. Crew Supervisor
3. Designer’s Representative
4. Plumbing Subcontractor
5. Electrical Subcontractor

6-12
122
 Cost Control for
Change Orders
To develop a cost control account for a change
order:
Develop a detailed description of the work.
Develop an estimate for each work area.
Determine a method for isolating and verifying each
cost.
Record the change order costs.
Compare the change order estimate with actual costs.

6-13
123
 Change Order Estimate for
Electrical Work
in Project Gatehouses
Section Item Labor Material Subcontract Total
32 90 00 Fencing $ 600.00 $ 600.00
06 41 00 Cabinets $ 408.00 $1,000.00 $1,408.00
26 00 00 Electrical $9,500.00
26 30 00 Underground Conduit $3,000.00
26 05 23 Wiring $2,500.00
27 51 00 Itercom $2,000.00
25 13 16 Control Panels $2,000.00
Total Cost $11,508.00
15% Profit and Overhead $ 1,726.20
Change Proposal Estimate $13,234.20

Figure 6.12

6-14
124
 Organizing Change Order Cost
Information

Prepare the change order information for the

Project:
Describe the work.
Prepare a cost breakdown for the change.
Prepare a crew assignment isolating the two kinds
of work for cost control.

Worksheet 6-2

6-15
125
Dock Seals Work Assignment
STP Construction Co.
Work Assignment • Project
SCC Project 01-10 Date: ___________________________
Cost Code: 11 16 01, 11 16 03 Project Area: Building A

Work Description 11 16 01: (Change Order 2): Install dock seals at the 5 overhead doors, Building A. 11 16 03:
Install dock bumpers at the 5 overhead doors, Building A. Note: Separate cost for dock seal
from door bumper. Dock seals are Change Order 2.
Document Reference Sheets 3, 5, and 6. Section 11 16 00, loading dock equipment. Shop drawings and submittals
from Ted’s Loading Dock Supply Company.
Quantity of Work 11 16 01: 5 Dock Seals
11 16 03: 5 Dock Bumpers
Crew and Rates 1 Carpenter @ $52.00/hour
1 Laborer @ $48.00/hour
Crew Rate $100.00/Hour $800/Day
Daily Production 1 dock seal; or dock bumper and a portion of the dock seal
Time Allowed 11 16 01: Dock Seal: 8 hours
11 16 03: Dock Bumper: 2 hours
Labor Cost (11 16 01) Dock Seal: $800.00 x 5 = $4,000.00
(11 16 03) Dock Bumper: $200.00 x 5 = $1,000.00
Material Door Seals, Dock Bumpers (Ted’s Loading Dock Supply)
Miscellaneous screws and anchor bolts
Material Location In Building A
Equipment/ Rolling Scaffold, No charge
Equipment Cost
Tools Drill # 106, Rolling Dolly

Form 6.1

6-16
126
 Dock Seals Change Order

Cost Estimate, Change Order ro Provide Dock Seals

Section Description Quantity Labor Crew/Hr Labor Material Total
Hrs/Ea
11 16 01 Dock Seals 5 8 $100 $800 1500 $11,500

15% Overhead and Profit $1,725

Total Change Order Amount $13,225

Worksheet 6-2

6-17
127
 Subcontractor Back
Charges
You might want to back charge subcontractors for:
Work in their contract that was accomplished by your
crew or by use of your equipment.
Work in their contract that was accomplished by
another subcontractor.
The cost of causing delays for other crews (this might be
difficult).
Rework charges.

6-18
128
 Subcontractor Back
Charges
(Continued)

Practices to observe:
Be sure the contractor-subcontractor agreement has a
clause allowing back charges.
Get agreement from the subcontractor’s supervisor on
charges.
Keep track of exact charges.
Present a detailed record of the back charge.

6-19
129
 Session 6 Review

Cost data need to be organized to indicate trends in cost

variance.
It is important to discover why the variance is occurring,
regardless of whether the variance is over or under.
Management can be responsible for some of the
problems.
It is important to recognize the cause and take action
immediately.
Understand the scope of work, your work and the
change order process.

6-20
130
Apply What You Have Learned
Examine the challenges and cost overruns on your
job:
Is there a pattern to the causes?
Look carefully at your scope of work and potential
change orders.
Is there a comparison made between estimated and actual
costs?
Was there work performed outside of your scope of work?
Were change orders requested for this additional work?
What will you do differently on the next project?
Where did you make money on this project?
Where did you lose money on this project?
Why did you make money on this job?

6-21
131
Looking Forward to Session 7

Labor costs will vary more than other costs

on most construction projects, so labor is the
main emphasis of managing cost variances.
Familiarize yourself with the ways that your
firm addresses, analyzes and measures
productivity, efficiency and cost savings.

6-22
132
 Session 7

Quantifying Lost Labor Productivity

133
 Learning Objectives

Identify six different categories of factors that negatively

impact labor productivity.
Quantify lost productivity for working overtime.
Quantify lost productivity due to worker learning.
Quantify lost productivity due to unreasonable crew size.
Quantify lost productivity due to the number of crews.
Quantify lost labor productivity because of weather changes.
Quantify lost labor productivity due to changes in project
logistics.
Quantify lost labor productivity due to change and change
orders.

7-2
134
7-3
135
 Categories of Factors That
Negatively Impact
Productivity (negative impact factors)
Worker ability to do work.
Work sequencing (continuity of the work process).
Environmental factors.
Disruption of the work process.
Added support activities.
Human element.

7-4
136
 Loss of Labor Productivity
(Impact) Due to Changes and
External Events
Examples of construction changes include the
following:
Schedule changed and work shifted into colder temperatures.
Contractor required to work overtime due to owner or designer delays.
Contractor required to add workers to project to accelerate schedule.
Contractor required to do work in an unexpectedly crowded or tight
working area.
Contractor required to store materials farther from project than
planned, due to unavailability of lay-down areas.
Contractor required to start-stop, start-stop work process because
design documents or design decisions are unavailable.

7-5
137
 Loss of Labor Productivity
Construction labor productivity is a complex process and
the productivity or units of output produced per
person-hour of effort or input is very sensitive to many
input factors:
• The amount and quality of labor, equipment, materials, weather,
and expected working conditions.
• The quality and completeness of the drawings and specifications.
• The expected actions of the project owner.
The contractor’s labor productivity estimate is predicated
upon a reasonable estimate of each of these factors. This is
illustrated in the next slide.

7-6
138
 Unexpected Events That
Negatively Impact Site Labor
Productivity
(outside of the Construction Supervisor’s control)

Added work due to change orders.

Changed job conditions (different weather, soil
conditions, material lay-down areas).
Incomplete drawings or specifications.
Late project owner and designer decisions.

7-7
139
 Unexpected Events That
Result in Work Performed
Under Adverse Conditions
Overtime
Learning curve
Temperature, wind, humidity
Start-stop-start-stop
Double handling of material
Morale problems

7-8
140
 Impact of Overtime on
Productivity
Overtime needed to accelerate the work
process.
Construction is hard, physically-demanding
work. When required to work overtime, the
onsite craft worker is likely to become fatigued
and do less than the normal hourly output.
Studies conducted by the Business Roundtable,
the National Electrical Contractors Association
(NECA) and various contractor associations and
contractor groups illustrate the loss of
productivity, as shown in the next slide.
7-9
141
Impact of Overtime on
Productivity

7-10
142
 Impact of Crew Size on
Productivity
Ideal Crew Size
There normally is an ideal crew size and mix for every work task.
The construction firm and supervisor should collect data from past
performances of work tasks to estimate productivity lost when crew size is
changed.
Dilution of Supervision
Supervision is a critical component of worker productivity.
Studies have indicated a 15% to 20% possible decrease in worker
productivity if needed supervision is absent.
When workers or crews are added to the supervisor’s workload, the
supervisor’s inability to be in three places at one time will result in lower
worker productivity.

7-11
143
Impact of “Learning” on
Productivity

7-12
144
 Impact of Work Space on
Productivity
Stacking – Available Work Space
To make up time crew sizes may be increased.
To make up time crews may be brought in before previous
work finished.
Extra workers or crews in a space reduces productivity.

7-13
145
Impact of Work Space on
Productivity

7-14
146
 Impact of “Learning” on
Productivity
Learning Curve of Workers

Worker output is lower with new, unfamiliar work processes.

Productivity increases as the worker completes the work processes
more times.
As proficiency increases, output reaches a steady state.
Studies have modeled a worker’s ability to produce as a function of
how many times he or she has done a work process. An example is
illustrated in the next slide.
Given the need to accelerate the work process, the supervisor
could use such “learning data” to quantify extra labor hours to
accomplish the tasks.

7-15
147
Impact of Environmental Factors
on Productivity
Adverse temperature (hot and/or cold).
Humidity.
Wind.
Precipitation.
Noise.
Poor lighting.
Significant variation from the expected would require the supervisor
to attempt to quantify the impact on worker productivity and adjust
accordingly.

7-16
148
Impact of Temperature
on Productivity

7-17
149
 Session 7 Review

Look back over Session 7 and review these key points to be sure you
understand them.
There are six different categories of factors that negatively impact labor
productivity.
There is a loss of productivity when a worker is subjected to conditions
that were not expected.
There has been a considerable amount of research conducted on
measuring lost productivity as a function of various impact factors.
Change orders can negatively impact overall project productivity.

7-18
150
 Apply what you have Learned

Learn how your firm uses data on the learning curve for new work
processes.
Determine how your firm gathers and uses data on work process
disruption.
Determine how your firm gathers and uses data on environmental
effects.
Determine how your firm gathers and uses data on human element
productivity impacts.
Learn what data your firm uses when workers or crews must be added
to the work space.

7-19
151
 Session 8

Equipment Management for Productivity Improvement

152
 Learning Objectives

Identify the differences between labor and equipment.

Describe a ten-step program of improving equipment productivity.

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Ten-Step Equipment Productivity
Improvement Program
1. View equipment as money, not
just as equipment or metal.
2. Plan the logistics of equipment.
3. When determining the best
method to do a work task,
evaluate the benefits of using
equipment versus labor.
4. Be attentive to the work capacity
of a machine.
5. Be attentive to the percentage of
time equipment is working 10.
versus being idle.
6. Be attentive to scheduling work
tasks around equipment
availability.
7. Be attentive to proper equipment
maintenance.
8. Always be attentive to working safe
with equipment.
9. Be attentive to equipment as
having an ownership and an
operating cost component.
Be prepared to model or consider
the interrelationship of two or
more pieces of equipment working
together.
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 Determining the Hourly Cost
of Owning Equipment
Hourly Cost=
Depreciation + Interest + Maintenance + Repair + Operating + Insurance + PT +Repl. + Prod Loss
Hours of Use

Fixed Costs (Ownership) Variable Costs (Operating)

Depreciation Depreciation
Interest Maintenance
Insurance Repair
Property Tax Operating
Replacement Productivity Loss

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 Modeling the Queuing
or Waiting Line Problem
Secondary work task

Queue
= Arrival units
= Service unit

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 Session 8 Review
View equipment as money, not just as machinery or metal.
Plan the logistics of equipment.
Adequately staff equipment with needed labor support.
Be attentive to the work capacity of a machine.
Be attentive to the percentage of time equipment is working versus
being idle or in a “support” state.
Be attentive to scheduling work tasks around equipment availability.
Be attentive to proper equipment maintenance.
Always be attentive to working safely with equipment.
Remember that equipment has an ownership cost component and an
operating cost component.
Be prepared to model or consider the interrelationship of two or more
pieces of equipment working together.
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 Apply what you have Learned
While on your projects, focus on a few pieces you
are using at the project and a few workers.
Using random samples of their work states, calculate
the amount of time each worker and each machine
is in a non-productive work state.
If you don’t know the equipment’s hourly cost
(ownership and operating), attempt to determine the
hourly cost of each piece of equipment by use of a
cost estimating book or the US Army Corps of
Engineers publication. 8-7
158
 
 Session 9

Working with Project Partners

159
 Learning Objectives

Describe the costs and cost effects associated with project partners.
Explain how to examine scope statements and specifications to
determine project partners’ responsibilities and the scope of work on
the jobsite.
Describe how to use the construction schedule to track subcontractor
progress.
Explain methods of providing information to project partners.
Describe control of changes and cost-plus subcontractor activities.
Explain back charging to receive compensation from subcontractors.
Explain the importance of documentation in working with project
partners.

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 The Cost Impact of Project Partners

Spread the risk.

Improved schedule.
Improved expertise.
Greater capacity.

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The Cost Impact of Project
Partners
Exclusions, non-covered work.
Additional work required by subcontractor.
Subcontractor default or bankruptcy.

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 Working with Project Partners
During the Bid Period

Cover the scope of subcontractor bids.

Pre-Qualify Subcontractors – financial, experience,
personnel and work history.
Exclude irresponsible/non-responsive subcontractors.
Carefully analyze subcontractors and their scope of the
work.
Note: The bid period is short and chaotic.
Estimators try to avoid problems, but some inevitably
slip through.

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 Working with Project Partners
During the Buyout Period

Include all subcontract work in the project

subcontracts.
Don’t duplicate scope in subcontracts.
Include all special clauses and requested exclusions
in subcontracts.
Write the scope statement so that it can be
understood by field management.

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 Working with Project
Partners
During the Buyout Period
(Continued)

Provide the subcontractor with the following

information:
List of submittals and shop drawings required, and a
schedule of when they are required.
Construction schedule showing their work activities (include
them in developing this schedule).
Notification of the pre-construction meeting.

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Working with Subcontractors
Before They Start Work
Meetings
Notify project partners of all applicable meetings.
Set expectations for who attends.
Provide meeting minutes.
Update on progress and changes.
Advise on schedule progress.
Conduct an onsite orientation meeting.

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 Subcontractor Orientation

Job site storage of material and equipment.

Location for trailers.
Jobsite access and parking.
Jobsite security issues.
Subcontractor’s schedule.
Coordination with other work.
Safety program.
Introduction to key jobsite personnel and procedures.

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 Subcontractor
Orientation
Topics for Orientation:
Jobsite access.
Storage of material.
Schedule for work.
Weather protection, if necessary.
Coordination with other work.
Safety.
Jobsite security.
Cleanup.
Communication channels.

Worksheet 9-1

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 Subcontractor
Orientation
Subcontracts to examine:
Structural steel, joist, and deck erection.
Roofing, roof insulation, and flashing.
Building electrical.
Building HVAC.
Building plumbing.
Overhead doors.
Windows/storefront.
Painting.

Worksheet 9-1 (Continued)

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Working with Subcontractors
While They Are on the Job
As the subcontractor starts of work, the
superintendent and subcontractor’s supervisor should
discuss:
Quality of work expected.
Coordination with other work.
Your expectations for cleanup (in the contract?).
Hours of work.
Special security requirements.
Safety policies and your safety program.
Access and equipment usage.

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 Documenting Subcontractors
During the Project

Document subcontractor activities daily.

Document material delivery to site.
Document when subcontractors are not available.
Document in daily reports and with photographs.

9-13
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 Analyzing a
Subcontractor
Change
Proposal

Figure 9.5

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Working with Subcontractors
Before They Leave the Jobsite
Review with the subcontractor:
Their work.
Acceptance of finishes by other subs.
Any additional cleaning of work and waste
disposal.
Any protection of work in place.

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 Working with Subcontractors
Before They Leave the Jobsite
(Continued)

Review with the subcontractor:

Delivery of spare materials and parts.
Delivery of operations and maintenance
materials and instruction.
Provide any as-built drawings.
Schedule for any additional work.
Plan for punch list completion.

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Project Partner Management
The building envelope must be complete by
October 7 to allow the 30 working days
guaranteed for the Tenant Improvements
contract.
Read subcontractor action descriptions.
Discuss, in groups, what could have been done
to avoid the problems.
Worksheet 9-5

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 Project Partner
Management

During During Before the

Subcontractor’s
the Bid Buyout Arrival at the Jobsite

Worksheet 9-5 (Continued)

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 Session 9 Review

Subcontractor performance can impact cost

by:
Adding labor costs due to delay or lowering
costs by expediting work.
Not accomplishing work anticipated.
Requiring additional work by your crews.
Defaulting or refusing to do work.

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 Session 9 Review
(Continued)

Management can reduce the cost impact

from subcontractors:
During the bid period.
During the buyout period.
Before subcontractors start work.
While the subcontractor is on the job.
Before the subcontractor leaves the job.

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Apply What You Have Learned

On your current project, look at the challenges

involving subcontractors:
What extra costs were caused by these challenges?
What portion of your time do you spend working with
subcontractors?
Could you avoid more problems if you spent some time
communicating your expectations with
subcontractors?

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Looking Forward to Session 10

Review how your company analyzes projects

after they are completed.

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 Session 10

Post-Project Evaluations

181
 Learning Objectives

Examine post-project data.

Analyze post-project cost comparison data.
Analyze problems that affected schedule and quality.
Describe ways to implement the lessons learned to manage
future projects.
Describe communication strategies for relaying information to
other project teams to improve productivity on future projects.
Analyze a case study and discuss the project’s analysis.
Review the entire STP unit and its impact.

10-2
182
 Evaluating the Project

Did the project recover all the company overhead?

Did the project recover all its project overhead?
Did the project make its anticipated fee?
Which items cost less than anticipated? Why?
How will you share this with other project teams?
Which items cost more than estimated? Why?

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 Evaluating the Project (Continued)

Should items be adjusted for the next estimate or were they

unusual?
What successful processes/techniques can be used in future
projects?
Is there something identifiable that could have prevented an
overrun on any items? Is it something that could be done in
the future?
Were there expectations by the owner, designer, and/or
building inspector that should be anticipated in other
projects?

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184
Measures of Project Success

Fee recovery.
Meeting schedule.
Quality.
Safety.
Customer satisfaction.

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185
 Evaluation Analysis
Evaluation of cost reports should determine:
Project fee recovery.
Line item performance compared with the estimate.
Data update for historical cost data.
The identification of successful methods for
future cost reduction.
The identification of work processes to be improved.
The identification of areas that shouldn’t be
self-performed.
The evaluation of processes/techniques for
current activities.

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 Actions Following
Evaluation
Update/change historical cost data.
Company adoption of processes, techniques or
equipment for specific activities.
Determination of alternatives to those activities
failing to meet budget/expectations.
Seek or avoid projects with comparable attributes.
Make personnel decisions.

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 Possible Conclusions
from Evaluation
Effectiveness of management team.
Future training needs for jobsite personnel.
Future use of subcontractors.
Future use of suppliers and/or products.
Future pursuit of the type of work and geographical
area.
Willingness to work with designer on future projects.
Willingness to work with owner on future projects.

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Evaluation Communication
The lessons learned from project
evaluations should be shared with:
Project supervisors.
Project team.
Other project teams.
Upper management.

10-9
189
 Session 10 Review

Formally evaluating the project helps plan

future projects.
The historical cost database is updated from
project cost records.
Training should be conducted to share the
lessons learned.
Personnel decisions can be made.

10-10
190
 Course Review

Session # SESSION DESCRIPTION

1. Introduction to Improving Productivity & Managing Project Costs
2. Construction Estimates, Planning and Scheduling
3. Who Controls Project Costs?
4. Reporting and Analyzing Actual Costs
5. Planning for Cost Control
6. Cost Control Strategies
7. Quantifying Labor Lost Productivity
8. Equipment Management for Productivity Improvement
9. Working with Project Partners
10. Post-Project Evaluations

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Thank you

10-12
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