Chapter 4

Labor
1
INTRODUCTION
As an owner, employer, project manager, and estimator, I have a given set of
work tasks that I need a worker to complete.

As such, I need to know how much this will cost me.

I also need to know how to set up and monitor the effort, so that I can be
assured that I am getting the desired work product in the time frame
required and for a price that I can afford.

In order to do this, I need to understand the cost factors that go into this
work and the techniques to monitor progress to ensure that I will achieve my
goals.

LEARNING OBJECTIVES
After completing this chapter, the reader should be able to:
• identify different classifications of labor and how each contributes to the final
completed project;

• develop labor rates for estimating, and develop and use weighted average
rates/composite crew rates;

• include indirect and overhead labor and other costs;

• estimate work hours for a given work scope at a given location; and

• use labor hours to monitor work progress.

LABOR CLASSIFICATIONS
The following definitions were taken or adapted from AACE International’s
Cost Engineer’s Notebook [1].

• 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)‫ جزء (نصيب‬of costs inherent ‫ مالزم‬in

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 تحكمي‬basis
believed to be equitable9‫ بانصاف‬, or handled as a business expense
independent of the volume of production.
Table 4.1 provides examples of different labor classifications and costs.
The examples are not all-inclusive and only serve to illustrate the elements of each type
of labor.
The difference between indirect and overhead labor appears to be
somewhat vague ‫غامضة بعض الشيء‬.
Depending upon the size of a project, plant, or office and its location, some
elements could shift from indirects to overheads, and there may be instances
‫ حاالت‬where direct labor moves to indirects and overheads as well.

For example, if the construction project is small, payroll and accounting

may be located offsite ‫ بعيدا‬and may be composed of personnel who are
splitting their time between several projects at different locations.
In this instance, this function could be an indirect or an overhead.
Therefore, it is imperative ‫ واجب‬that the estimator and/or cost engineer
understand where within his project, industry, and company each of these
costs are included, so that they can be correctly estimated and included in
the estimate and budget.