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IJPPM
69,1
22
Received 28 March 2019
Revised 30 July 2019
31 July 2019
Accepted 5 August 2019
International Journal of
Productivity and Performance
Management
Vol. 69 No. 1, 2020
pp. 22-43
© Emerald Publishing Limited
1741-0401
DOI 10.1108/IJPPM-03-2019-0134
Evaluation of labor hiring
policies in construction
projects performance using
system dynamics
Soroush Abbaspour
Department of Construction Engineering and Management,
Islamic Azad University Isfahan (Khorasgan) Branch, Isfahan, Iran, and
Shahin Dabirian
Department of Architecture, Art University of Isfahan, Isfahan, Iran
Abstract
Purpose – The purpose of this paper is to assess different labor hiring policies for construction projects
using system dynamics (SD) which have a considerable impact on project performance. Time intervals and
work crew composition are two such policies. Through the implementation of a variety of policies, a
managerial opportunity presents itself for the effective allocation of human resources and improvement in
project performance.
Design/methodology/approach – The study developed a dynamic model to assess different labor hiring
policies using SD based on literature. To further distinguish between findings, the effects of the applied
policies on performance were considered using earned value management. Based on a real case for validating
the model, the paper discusses the potential benefits of the model, including: having a systematic and holistic
view, considering dynamic the labor need and allocation, identifying alternative strategies for performance
improvement and simulating the reality of the projects in a virtual model.
Findings – The achieved simulation results show how different hiring policies affect project performance.
This research model can aid decision makers to assess labor hiring policies in various time intervals with
different compositions and assist them in selecting the best policies for effective implementation of project.
Originality/value – The proposed model would be a major attempt using SD to model labor hiring policies
more accurate in construction projects performance. In fact, an accurate estimate of labor needed, along with the
proper planning and implementing of various labor hiring policies, presents a managerial opportunity whereby
the effective allocation of workforces can be optimized leading to drastic improvement in project performance.
Keywords Performance management, Human resource management, Construction projects,
System dynamics, Earned value management, Labour hiring policies
Paper type Research paper
1. Introduction
It is clearly specified that the human resource management (HRM) is in charge of the
strategic roles in organizations and companies (Belout and Gauvreau, 2004; Keegan et al.,
2018). Additionally, HRM is regarded as a fundamental process for the effective use of
workforce in order to reach desired project performance. In fact, project targets are met only
by human resources and project success depends heavily on human resources (Armstrong,
2003). Projects are constantly experiencing either an excess or shortage of workforce (Paul,
2010) and these conditions have varying effects of effectiveness. Shortage of workforce
leads to the reduction of project progress and eventual postponement. In contrast, excess of
workforce results in crowded work areas, communication difficulties, productivity
reduction, waste of labor and the project may incur cost overrun. Therefore, an accurate
estimate of the amount of labor needed, along with the proper planning and implementing of
various labor hiring policies, presents a managerial opportunity whereby the effective
allocation of human resources can be optimized leading to drastic improvement in
project performance.
 According to the investigations of the International Labor Office, the construction industry Evaluation of
is recognized as more labor-intensive than any other industry in the world economy (Ernst and labor hiring
Sarabia, 2015). Also, workforce plays a key role as a principle component in improving policies
construction productivity (Mawdesley and Al-Jibouri, 2009). To meet the functional goal of a
project, proper supply of the labor needed in a construction project needs to be regarded as an
integral component of HRM measures. Ensuring the formation of project teams along with
sufficient labor is vital in construction projects (Druker and White, 1996). Once a new project is 23
launched, human resources configuration (project team arrangement) must be formed. This
needs new processes, which can include labor allocation for a project. Allocation of human
resources could be based on available labor and estimated labor need (Lee et al., 2008). What is
important in the process of labor allocation is planning for the adequate employment of labor
and turnover of excessive labor in project. Construction projects have a dynamic nature. One
of these natural dynamics is labor changes during the project (Lyneis and Ford, 2007) which is
due to labor hiring and turnover. Considering the fluctuating nature and abundant changes of
a workforce, without an effective planning, projects would certainly face a shortage or excess
of labor (Uwakweh and Maloney, 1991). Three policies of hiring, overtime and motivating
project staff to work at an increased rate are implemented to compensate for the arrears of
scheduling, among which the policy of hiring is of great importance (Edward, 1978; Rodrigues
and Bowers, 1996; Lyneis and Ford, 2007; Li et al., 2011). Hiring and selection is one of the
central functions in human resources (Farashah et al., 2019). In the policy of labor hiring,
employment of new workforce (especially in short term) could lead to dilution of skills,
experience (work familiarity) and increases in errors and consequently leads to increased
rework (Eden et al., 2000; Wang et al., 2008). Generally, hiring could be determined based on the
amount of labor needed and project work-flow, i.e. time and work remaining (Park, 2005).
Labor hiring need and turnover may vary during different intervals of project execution.
Mostly, there is more labor need at the beginning of the project which causes an increase in
hiring rate, whereas the need may decrease during project execution (Lyneis and Cooper,
2001). Labor hiring includes specific duration based on contract terms. For instance, according
to labor laws of Ministry of labor and social affair in Iran, labor recruitment duration is divided
into definite and indefinite periods. In temporary contracts, contract duration could be hourly,
or yearly. However, the labor contracts in construction projects mostly use weekly, bi-weekly,
tri-weekly and monthly intervals. Inappropriately, allocating labor recruitment periods could
negatively impact the project time performance (Lee et al., 2008).
Dismissing from the project would result in a lack of work familiarity and labor skills.
Moreover, it takes some time for the new workforce to get familiar with project conditions.
The reason for this is that labor needs to update and collect information regarding the new
project (Trammell et al., 2016). Therefore, as the newly employed labor gets familiar with the
work after some time (Abdel-Hamid, 1984), maintaining this workforce becomes an issue of
high priority for project managers. Thomas and Yiakouimis (1987) claimed that improved
productivity resulting from familiarization of workforces with highly repetitious work has
positive effects on the results. In order for the project to gain a desirable performance, it is
both necessary to recruit workforce needed for the project in the specific time and make sure
they are accustomed to the work compositions needed by the project and maintaining the
workforce that is skilled and familiar with the work. Maintaining these workforces get a
high priority since they are more productive compared to the non-skilled labor. To improve
project performance it is necessary to manage personal capabilities (Martínez-León et al.,
2018). Thus, it is necessary to implement several labor hiring policies in order to determine
the best policies and subsequently assess the effects of their implementation on project
performance. In current research, these varied labor hiring policies have been studied using
system dynamics (SD) approach. Also, earned value management (EVM) Technique is used
to complete the project performance evaluation process. Policies of labor hiring evaluated in
IJPPM this research generally may include work crew composition and hiring intervals, i.e.
69,1 employment of the needed labor in different time intervals. Work crew composition refers to
the recruitment of a varied workforce in terms of skill and ability which are present in
different compositions with regard to their number. By evaluating different hiring policies
and their consequent results on project performance, the best policies could be chosen
according to project goals and expectations of the owner.
24 So far few studies have investigated the application of different labor hiring policies in
construction projects. In applying various hiring policies and labor turnover, it is necessary to
make an accurate estimation of the amount of the labor needed in the project. Incorrect
estimation of resources can lead to conflicts with other projects, which can ultimately lead to a
project running short of funds or resources (Petit, 2012). With respect to the importance of
labor need estimation in project management along with its role in planning and implementing
hiring policies, there would be a brief description of the most important methods of
labor estimation. Generally, labor estimation techniques include four categories; judgment
estimation, stock-flow estimation, models of time series estimation and models of econometrics
based on regression. Judgment-based estimation is a simple method for labor estimation using
expert knowledge and experience (Marshall and Rossman, 1999). Due to the impact of an
expert’s judgments on this type of estimation, it is hard to trust this method. For example, it
was used by Australia’s engineering and mining industry but the predictions led to a
considerable shortage of skilled labor (PricewaterhouseCoopers, 2012). Stock-flow models are
used for labor displacements in organizations (Purkiss, 1981). Sing et al. (2012a, b) presented a
stock-flow model for long-term estimation of labor which is able to estimate the amount of
labor in the industry for the next ten years. That model is based on transition concept (inflow
and outflow). Also, several researchers have estimated the labor for construction in 1995, 2003
and 2009 using time series (Persad et al., 1995; Bell and Brandenburg, 2003; Hanke et al., 2009).
As this estimation method is based on previous data, it cannot consider dynamics of labor
supply. So far, many studies have been conducted in order to model econometrics by way of
multiple regressions, which is used to estimate construction labor need (Wong et al., 2008; Sing
et al., 2012a, b, 2015; Liu et al., 2014). Generally, in such models, economic variables, including
consumed material and labor productivity are considered.
Although mentioned models of labor estimation are able to estimate the labor need, there
are two main drawbacks: first, considered variables and their relations are limited. In fact, they
lack a systematic view. Second drawback observed in these models is their inability to
consider variables of the model dynamically during time. Therefore, a model is needed which
can consider project dynamics as well as its various effective variables, which can in turn solve
these problems. SD is able to estimate the labor needed for the project and consider its effective
factors. Safarishahrbijari (2018), conducted a research to evaluate workforce forecast models in
different industries. In that research, the models and research techniques classified into eight
categories including: qualitative, time series, optimization, statistical, simulation, analytical
stock and flow, generic mathematical models, and models using fuzzy logic, gray analysis, GA
and neural networks. Among all methods, SD technique recommended for non-linear dynamic
systems, especially when feedbacks and delays are inevitable. This is due to the capability of
SD to solve problems in complicated systems.
In previous studies regarding modeling human resources of projects by making use of
SD project, labor hiring is considered general and simple. The presented models are not
tangibly close to reality due to the unspecific exact amount of labor which is adjusted in
delay duration. Also in some cases, newly employed labor develop to skilled labor. Further,
exact and momentary estimation of human resources has not been done, while, according to
project facts, it is necessary to deal with this issue more accurately and in detail. Abdel-
Hamid and Madnick (1991) considered two stocks of new and skilled labor for modeling
labor supply in product development projects. In a study conducted by Ford (1995), project
dynamics, labor structure, rework, work available, quality and project scope was modeled Evaluation of
by SD. In that study, subsystems of project scope and project work-flow as well as human labor hiring
resources, were developed. Change in headcount is made according to the required policies
headcount which itself is with regard to time available and required person-weeks. Ford and
Sterman (1998) presented a SD model to investigate product development process for
multiphase projects. In their research, the effect of workforce size and labor allocation on
product development process was studied. Lyneis et al. (2001) studied strategic management 25
of complex projects by SD and pointed out the inefficiency of old tools, including PERT and
CPM, in the prediction of project completion time without considering the natural dynamics
of the project. In their research, changes of labor in projects were studied according to
several projects such as software and shipbuilding industries.
In a research conducted by Ogunlana et al. (2003), three different policies in a construction
project were assessed in order to improve the performance of cost and time in project. In that
presented model, project work-flow included project scope, rework, productivity, work
completion rate and hiring, which is based in nature on building project capacity. Park and
Pena-Mora (2003), studied management of project dynamic changes, primarily that of reworks.
One of the considered policies to solve this problem in the research was labor adjusting rate.
The authors assessed different time intervals in order to investigate the performance of cost
and time in project. These intervals included 3, 7, 14 and 21 days for hiring and increase
of labor. Results showed that reducing hiring time and RFI reply improves the performance of
cost and time in project. Park (2005), dynamically expressed resource management of
construction projects using SD. The amount of labor needed for a construction activity was
determined according to required construction rate and average productivity. Furthermore,
stock of labor changed by workforce adjust rate. In a study by Lyneis and Ford (2007), model
structure of SD was presented in four groups of project characteristics, rework cycle, project
control and effect of policies for project management, Among which hiring was one of the
policies of labor shortage compensation in order to complete the remaining work. Son and
Rojas (2011), studied the effect of organizational dynamics on construction planning and
performance. They indicated the importance of maintaining an adequate inflow of resources to
the project in order to maintain predicted productivity. In their research, amount of desired
labor was determined by productivity and labor shortage, additionally shortage of skill of
labor was pointed out as one of the risk factors in optimism bias. Also, to make up excessive
productivity deviation, hiring policy was applied with three resource hiring time. Moreover,
the aim of finding out optimal crew size according to desired and expected productivity was
helping the processes of decision making. Sing et al. (2016) presented a dynamic model for
planning human resources for infrastructure projects. In that study, accurate estimation to
reduce oscillation caused by shortage or excess of labor. Planning for recruiting required and
skilled labor was also illustrated. Using SD, Trammell et al. (2016) studied the effects of
fluctuations caused by delay in software development projects. New workforces were supplied
by a hiring process modeled as a flow from the world outside the model scope. New hiring rate
was determined by applying a hiring delay measured in days to any positive gap between
workforce level sought and total workforce. Abotaleb and El-adaway (2018) reviewed
researches regarding managing construction projects through dynamic modeling. In fact, they
considered human resources as a key dynamic parameter and also suggested developing
dynamic models of HRM based on its highly applicable in construction project management
for future works. Recently, Pargar et al. (2019) introduced a qualitative SD model to determine
and explain the dynamics of value creation processes in the context of project alliance. They
emphasized on the importance of effective utilizing resource (i.e. people) for reducing project
cost in value creation processes. Also, they claimed that employing additional resources to
close the gaps between project performance and goals is another managerial action of the
project alliance team for project control.
IJPPM 2. Methodology
69,1 The SD presented in 1961 by Forrester, is a method for studying and managing complex
systems (Sterman, 2000). SD models capturing a wide array of such behaviorally grounded
feedbacks are now widely used to gain understanding of a system with complex, dynamic
and non-linearly interacting variables (Shen et al., 2005) and also in proactive management
improve project performance (Godlewski et al., 2012). Moreover, SD models aggregate stocks
26 and the flows into and out of them (Bowles and Gardiner, 2018) and help the managers to
understand the long- and short-term consequences of actions. By this method, accurate
assessment of labor hiring policies of the project is made possible considering dynamics in
project. The advantage of SD is illustration of system behavior by modeling system
feedback processes through stock-flow diagrams (SFDs) and non-linear relations. In general,
SD models have three types of variables: stock variables (state variables); flow variables;
and auxiliary variables and constants (Garcia, 2006). Stocks show system behavior which
includes labor, as an instance while variables of rate flow, like labor hiring and turnover,
show change of system. The workforce hiring model is expressed as (Abotaleb and
El-adaway, 2018):
Z t
Stockðt Þ ¼ ½InflowðsÞ–OutflowðsÞds þStock ðt 0 Þ; (1)
t0

where t0 ¼ initial time; t ¼ current time; stock (t0) ¼ initial value of workforce; and inflow(s)
and outflow(s) rates ¼ either newly hired workforces who become in stock, or turnover
workforce who become out of stock at any time between the initial time t0 to and current
time t. Inflow(s) and outflow(s) have the units of stock (t) divided by time.
The methodology uses simulation models as a means to examine dynamic problems
(Guevara et al., 2017). In project management studies, the important role of feedback
mechanisms for resource allocation to projects in short term and long term have been
expressed. Sterman et al. (2015), argued the importance of human resources in project
management processes and its dynamics. The authors emphasized the fact that modeling
by SD has provided great opportunities for research in operations management. As Bianchi
et al. (2018), stated SD modeling has been used to support an understanding of: how
end-results can be affected by performance drivers; how performance drivers can, in turn, be
influenced by the use of policy levers aimed to affect strategic resource accumulation and
reducation processes; and how the flows of strategic assets are affected by end-results. The
proposed model in this paper would be a major attempt using SD to model labor hiring
policies more accurate in construction projects.

3. Model structure
General model structure will be explained in the form of model subsystems and their
relation to each other. Furthermore, causal loop diagram (CLD) of the model will be
presented. The CLD of research is constructed using cause and effect feedback loops.
Finally, subsystems of research will be explained in SFD. From the following presented
model, the effects of implementing different labor hiring policies on performance
improvement of construction projects could be assessed.

3.1 Causal loop diagram

Feedback structure depicts the complexities of environment-behavior during time
(Goodman, 1989). Figure 1 includes reinforcing (R) and balancing loops (B) to show labor
employment of construction projects according to project work-flow. Arrow is used to
represent a causal link from one variable to another. It also includes a sign (either + or −) on
each link. Sign “+” means the causal link from A to B is positive (i.e. if either A adds to B or a
 +
Project Scope Evaluation of
labor hiring
Reformed Expected delays in the
+
policies
Scope Project Completion +
Work Planned-
+ + to Do
+
Labor Labor Need
Shortfall +
Work 27
Work in Accepted
– Skilled Labor
Progress
Scope Hiring + +
Changes
+ +
+ + Familiarized
+ Work Done
Total Labor Labor Awaiting for
+ + Acceptance
+
Non-skilled + +
Labor Hiring
Work Done and
Released

Rework + Completion
+ Rate
Labor +
Productivity

+ Figure 1.
Unaccepted
+
Work CLD of labor hiring
Errors

change in A produces a change in B in the same direction). Meanwhile, sign “−” means the
causal link from A to B is negative (i.e. if either A subtracts to B or a change in A produces a
change in B in the opposite direction). For example, with an increase of errors, unaccepted
work increases. As a result, there will be a need to do more rework. When reworks
increase, scope undergoes changes due to error identification and its corrected amount
increases. When the work scope expands, the amount of “Work planned to do” goes up, that
consequently, “Work in Progress” and completed work increase. Finally, unaccepted work
increases again in a reinforcing loop, whereas required labor (skilled and unskilled) could be
employed to balance this loop. Another one, when “Work planned to do” increase, the
amount of work in progress goes up. This leads to increase in “Work done” and “Work
accepted.” Consequently, “Work planned to do” decrease. It should be noted that required
labor supply of project by hiring is postponed, though.

3.2 Project work-flow

Figure 2 shows the stock-flow structure of project work-flow. The developed model of
project work-flow has seven stocks including “project scope,” “project scope to be planned,”
“work planned to do,” “work in progress,” “work done waiting for acceptance,” “rework
backlog” and “work accepted.” Project scope may undergo a change due to several reasons
like changes in drawings and changes in owner request, which the stock of project scope
calculates this amount. After scope confirmation, its planned amount will be determined by
stock of planned project scope. Then, this amount will be transferred to the stock of planned
work to be done. Regarding the rate of work availability, work in progress will be calculated.
After this stage, work is done with regard to available labor in project and their
productivity. Afterwards, the work available in the stock of work done waiting for
acceptance, with regard to obvious error uncovered and required rework, is again
transferred to the stock of rework backlog. Also, in case of final work acceptance, if
an uncovered and hidden error exists, it is moved to the stock of rework backlog again.
IJPPM <Productivity SL>
Effective
Effective
Workforce SL
69,1 Workforce NL <Productivity FL>
<Productivity NL>
Completion Effective
Rate Workforce FL
Work Done
Work in Progress Awaiting for
Acceptance
Rework
<Contract Official Completion Rate

28 Work
Duration> Time Period to
Correct Error
Availability
Work Availability Remained Rework in
Fraction Temporary Termination
Time

Work Planned to
Do Rework Backlog

Rework Rate

Rework
Planning and
Design Planning and Design
Release
Fraction
<Uncovered Error
Fraction>
Project Scope Project Scope to
be Planned

Work Accepted
Change in Change in Project Discover
Scope Change Project Scope Scope Planning Hidden Error

<Hidden Error
Fraction> <Time
Counter>
Figure 2. Termination
SFD of project
work-flow

After rework, the work is investigated again and this cycle is repeated in case of the
existence of error, otherwise, the work will undergo final confirmation. The existence of
error and rework during the process of project implementation is due to low quality of work
compared to desired condition. Rework processes are not cost and time effective (Arashpour
et al., 2019), therefore they should be taken into account. It is worth to note that the time
remaining for doing rework during project is limited, especially when rework has to be done
at the end of project. This issue is considered in the model. Finally, when the work is
confirmed, the project is delivered to the owner.

3.3 Labor need

Accurate and momentary labor estimation of project has always been considered one of the
main issues of contractors and project managers. The developed SD model presented in this
research is able to estimate the labor accurately and momentarily with regard to dynamics
of project work-flow. It is able to predict the changes and fluctuations of labor need and level
human resources by reducing oscillation. According to Figure 3, the amount of work
remaining is determined based on project scope and accepted cumulative work. With
distinguished remaining work and time to do the work, the rate of goal completion is
determined. The rate of desired work along with total productivity of average labor defines
desired labor. Furthermore, considering the comparison of amount of desired labor with
total labor available in project, amount of labor required is determined. This kind of demand
will enter in stock of labor need as a rate. On the other hand, according to the amount of
labor hiring and turnover, amount of labor need will be balanced. With regard to the nature
of a SD model which includes a collection of differential equations, it could be argued that
 Productivity of
NL Evaluation of
<Cumulative Work
Accepted>
<Project
Scope> <Skilled Labor> <Non-skilled
Labor>
labor hiring
<Contract Official
Remained work for
project completion
Productivity of policies
Duration> Optimum SL
workforce Total labor mean
productivity <Total Familiarized
Remained duration for Labor>
project completion on
time Goal
completion rate Productivity of
FL
29
Labor shortfall

Labor demand
<Time>
Labor shortfall
reporting time <Completion <Total Labor>
Fraction>

Labor Need

Labor
Adjustment <Hiring>
<Turnover> Figure 3.
SFD of labor need

the developed labor need model in current research is able to accurately simulate and
estimate the labor needed by the project and can show momentary fluctuations and changes
of project labor for better allocation of labor.

3.4 Labor constraints

After determination and estimation of the exact amount of labor need, amount of labor
hiring and turnover could be determined. For this means, by considering the limitation of
available labor due to a shortage of working area and allocated budget to human
resources of project, the maximum amount of hirable labor could be identified (Figure 4).

Min labor
Work Area density

Max available labor

based on Work area
limitation

<Contract Official
Duration> Max labor level

Max available labor

based on Budget
Normal cost of
labor wage
Labor Cost
Daily mean
labor cost

Normal cost of Figure 4.

SFD of labor
insurance and food and <Contract Official constraints
etc. Cost>
IJPPM By comparing the amount of project labor need with maximum available labor, amounts of
69,1 hiring and turnover are determined. It is worth noting that hiring and turnover of
workforces are done according to a selected period. Labor costs generally make up 30 to
50 percent of overall project costs in the construction phase (Harmon and Cole, 2006). In the
project being studied, since the project is labor-intensive, 50 percent of project costs have
been assumed as related to labor costs.
30 It should be noted that the relationships existed between different variables are
determined by appropriate mathematical functions. As an example, the model equations
used in labor constraints are presented in Appendix.

3.5 Labor turnover

Labor turnover can also be considered as a policy to improve project performance. In the
presented model, due to the importance of maintaining highly productive labor, workforces
are dismissed from unskilled labor, skilled labor and familiarized labor, respectively
(Figure 5). This is one of the advantages of proposed model. Also when the project is
completed, all the labor is dismissed.

3.6 Labor hiring

Aghazadeh (2003) stated that hiring appropriate workforces is the first “personnel” role in
HRM. Labor hiring as the main policy to supply labor need of project is the concern of
current research. This section includes four stocks of “non-skilled labor,” “skilled labor,”
“total familiarized labor” and “total labor turnover” (Figure 6). According to Figure 6, labor
hiring takes place in two stages. First, to start the project, the amount of initial labor is
calculated based on project contract time, project scope and normal daily productivity for
each workforce. Then, according to percentage of allocation, specific labor enters the project.
Generally, both skilled and unskilled labor is needed in implementing construction projects.
Percentage of their allocation differs as well, which depends on conditions and complexities
of the project, which needs attention. Therefore, labor is employed according to the
percentage of selected allocation. Based on assumption and according to the data of the
project being studied, the proportion of skilled labor to unskilled labor is considered 2 to 3,
i.e. for every two skilled workers, there are three non-skilled workers. After hiring the labor
in two types of skilled and unskilled, all of the workforces get familiar to work after some
specific time. Since every project has unity and especial conditions rule, both skilled and

<Non-skilled
Labor>

Excess NL
<Total Familiarized
Labor>
<Turnover>

Total Excess <Total Labor>

man-hour Labor
Excess Total
Familiarized Labor

Turnover
Duration

Excess SL
Figure 5.
SFD of labor turnover <Skilled
Labor>
 Total
Labor Evaluation of
Cumulative
<Skilled
Total man-hour
Labor
labor labor hiring
Labor> <Total Familiarized
Labor> policies
Non-skilled
Labor Work Familiarity
NL Hiring Rate
of NL
Time Period

NL Hiring
Normal Labor Initial NL NL Turnover <Total Excess
man-hour Labor> Work Familiarity
31
Productivity Fraction of NL
Time Counter <INITIAL <Excess Total
<Total Labor> PROJECT SCOPE> <Excess NL> Familiarized Labor>

Initial labor Total

<Time> Percentage of Initial man-hour Total Familiarized
Hiring Turnover
labor assigned Rate of Initial Labor Total Familiarized Labor
Completion Required Labor Turnover
Turnover <Excess SL>

SL Hiring <Contract Official Work Familiarity

<Labor Need> Duration> Initial SL Fraction of SL
SL Turnover <Total Excess
<Max labor level> man-hour Labor>

SL Hiring Rate Skilled

Work Familiarity
of SL Figure 6.
Labor SFD of labor hiring

unskilled labor need some time to update their information and get familiar with conditions
of project. This time elapse for familiarity is different for skilled and unskilled labor.
When the labor gets familiar with the project conditions, its productivity goes up. In this
case, it can be assured that the project workforce is being productive. It is worth noting that
it is assumed in modeling that all of the employed labor has the initial experience required
through the past similar projects. In the modeling of labor hiring, units are selected based
on man-hour.

3.7 Performance indices

All of the costs related to human resources are considered in the modeling of labor hiring of
construction projects. Human resources costs include wage, employment and interview,
food, facilities and insurance. Different types of workforces have different income. In
addition, overheads like utilities and the technical office of the project are considered. Also,
costs of materials, tools and equipment affect the total costs. Project time is also determined
according to project delivery from the subsystem of project work-flow (Figure 7(a) and (b)).

4. Validation and application of the model

To show the efficiency and capabilities of the model in simulation, current model is
implemented on a sample project for the activity of tiling (Table I). Table I shows the value
of different variables in a real case including: contract official time and cost, project scope,
productivity of non-skilled/skilled labor, initially expected quality, time duration to find
error, skilled/non-skilled labor wage, material/equipment unit cost. The project being
studied is part of a housing project executed in Iran. Model validation process is performed
to make the model results reliable. In order to validate the presented model and simulation
results, several standard tests suggested in the literature are used (Table II). They include
adequacy of model boundary (to assess the model’s boundary adequacy and coordination in
term of purposes), structure assessment (assessing the model’s compatibility with real case
knowledge and description of system relation to purposes), dimensional consistency (to
ensure that all variables are mathematically consistent and further, to have variables that
have real-world meaning), assessment of variables (to assess the value of each parameter in
terms of its reasonability), extreme conditions (whether the model behaves in a realistic
IJPPM (a) (b)
69,1
Overhead cost
except labor
Indirect Cost Rate
except Labor
Insurance cost FL Wage
<Hiring>
Indirect labor cost
of Hiring
Total Indirect Cost
Indirect Labor Cost <Project Scope>
Due to the Hiring
NL Wage
32 Labor Cost for other
things like food etc. <Total Labor>
SL Wage <Total Familiarized
Labor>
Temporary
Completion
Fraction

<Rework Delivery Time

<Termination>
Completion Rate>
Total Project Cost of Labor
Total Material Cost
Material Cost Cost Wage <Skilled Cumulative Work
Labor> Permanent Accepted
<Completion Material unit Delivery Time
Rate> cost Total Direct <Non-skilled Contract Official
Labor Cost Labor> Duration

Total Equipment
Equipment Cost
Cost

Figure 7. Number of
Equipment
SFD of Equipment Unit
Cost
project performance
Notes: (a) Project cost; (b) project time

Model variables
Category Variable name Value Unit

Activity Contract official time 300 Day

Project scope 2,45,00 M2
Project budget 2,38,000 Dollar
Productivity PDY of non-skilled 1.5 M2/(man × Hour)
PDY of skilled 1.875 M2/(man × Hour)
Quality Initially expected 90% Dimensionless
Time duration to find error 7 Day
Cost Skilled labor wage 4.5 Dollar/(man × Hour)
Table I. Non-skilled labor wage 3 Dollar/(man × Hour)
Model setting for Material unit cost 8 Dollar/M2
industry application Equipment unit cost 15 Dollar/number

fashion no matter how extreme the inputs or policies imposed on the system are),
behavior reproduction (to assess a model’s ability to reproduce the expected behavior of the
system) and sensitivity analysis (to test the robustness of the model behavior in uncertain
conditions). For instance, the model boundary test is presented, which identifies
endogenous, exogenous and the excluded variables (Figure 8).

4.1 Simulation results

According to Figure 9(a), labor need differs during performing the project, i.e. due to the
dynamics of project work-flow like errors and reworks, project labor need has changes and
fluctuations as well. The reason for these changes is the calculation of labor needed at the
beginning of the project. In other words, based on the model, the project starts with five
individuals of workforce and after the delivery of a part of work in the first week, it tests the
labor need and accordingly, hiring or turnover will take place. This process continues until it
reaches the minimum amount. Labor need in the early stage of the project will certainly
include changes which are more at the beginning. The advantage of the research model is
Test Objective Tools and methods in the model test
Evaluation of
labor hiring
Adequacy of Assessment of adequacy and The project documents, interviews with experts and policies
boundaries coordination of the model boundary practitioners and literature have been used to
with the model objectives confirm the adequacy of the model boundaries as
well as the lack of an important potential feedback in
the model
The purpose of the model either the endogenous, 33
exogenous and exception variables is using the
subsystem diagram and direct examination of
the equations
Ensuring any important potential feedback in the
model was carried out by interviewing the project team
members and reviewing the literature as well as
considering the causal loop diagram (CLD) and the
stock-flow diagrams (SFD)
Structural Evaluation of compatibility between the The causal loop diagram (CLD) and the Stock-flow
assessment structure and purpose of the model with Diagrams (SFD) to determine the model’s purpose
the actual and descriptive knowledge of Causal loop diagram (CLD) – an indication of the
the system information used in each decision
To develop a model, the adaptation is centered on
the main physical realities, such as the survival and
real law of the decision – ensuring equality is the
accepted work with the initial scope of the project
Preventing unreasonable values – existence of
negative values for reservoirs such as accepted work
and […]
Dimensional Ensuring the units compatibility Analysis of units by tools provided by the Vensim
consistency between all variables and, more (SD simulation software used in this research) – to
importantly, matching with the real ensure the absence of errors in variables units
world Direct examination of equations – ensuring the
compatibility of variables in the equation with the
real world, as well as the absence of additional
variables that do not correspond to the
actual system
Parameters Evaluating the value of each parameter Use official statistics – to obtain numerical data
evaluation in terms of its rationality available (e.g. the wage rate of workers according to
the report provided by the Iranian Statistics Center)
Use judgment of experts – as complementary to
numerical data that is not available – (e.g. the ratio
of rework)
Extreme Matching model behavior with reality Applying a variety of extreme conditions to a model
conditions no matter how the inputs or policies as a powerful test for model behavior – reducing
applied on the model material and labor costs to zero and producing
realistic results from the model
Behavior Assessing the model’s capacity to Comparison of the behavior generated by the model
reproduction generate expected behavior in the with known behavior in reality – assessment of
system the model’s capability to generate known
historical behavior
Matching the data produced by the model with the
actual data of the project under study
Providing average and identical trends with real but
different data with point-to-point data
Sensitivity Assessing the robustness of model Analyzing numerical, behavioral, and policy
analysis behavior under uncertainties sensitivity – if the assumptions of numerical values, Table II.
behavioral patterns, and effects of the proposed Tests for assessment
policies change, then the results will also change of the model
IJPPM
69,1 Excluded
Safety Cost
Exogenous
Labor Motivation Labor Productivity Endogenous
Labor Training Labor Wage
Labor Hiring Labor Need
Work Area
34 Owner Financing Labor Turnover Completion Rate
Cash-Flow Material Unit Cost
Rework Work accepted
Equipment Unit Cost
Available Labor

Figure 8.
Model boundary

(a) (b)
Labor Need Workforce
10 40 man×Hour
30 man×Hour 3 3 3 3 3 3 3 3
5 50 man×Hour
60 man×Hour 2
Man

0 1 1 1 1 1 1 1 1 1 1 1 1 1
0 man×Hour
3
–5 0 man×Hour
0 man×Hour 4 4 4 4 4 4 4 4
0 man×Hour
–10 1 2 1 2 1 2 12 12 12 1 2 1 2 1 2 3
0 32 64 96 128 160 192 224 256 288 320 0 32 64 96 128 160 192 224 256 288 320
Time (Day) Time (Day)

Labor Need: Base Run 1 1 1 1 1 1 1 1 1 1 1 “Non-skilled Labor”: base run 1 1 1 1 1 1 man×Hour

Skilled Labor: base run 2 2 2 2 2 2 2 man×Hour
Total Familiarized Labor: base run 3 3 3 3 3 man×Hour
Total Turnover: base run 4 4 4 4 4 4 4 man×Hour

(c)
Total man-hour Labor
60

1
45
1 1 1 1 1 1 1 1 1 1 1 1 1
1
Man×Hour

30

15

0
0 32 64 96 128 160 192 224 256 288 320
Figure 9. Time (Day)
Simulation results “Total man-hour Labor”: Base Run 1 1 1 1 1 1 1 1 1
of base run
Notes: (a) Labor need; (b) project labor; (c) total man-hour labor
reducing the oscillation of these changes. In fact, the more the project proceeds, it maintains Evaluation of
more desired (productive) labor and minimizes the fluctuations. It should be noted that positive labor hiring
numbers on the chart show labor need and more hiring, whereas negative numbers show policies
excessive labor and the need for turnover. The available systematic model supplies the project
labor need every week after accurate prediction of labor need and balances the system.
Figure 9(b) has simulated the situation of available human resources in the project. The
number of initial workforces is five based on model calculation, that with the change of labor 35
need, the number of workforce has changed. The initial workforce is allocated to the project
based on a specific percentage of a combination of skilled and unskilled labor. Generally,
from the beginning of the project to a certain time, the number of newly employed labor
(skilled and unskilled) increases and due to work familiarity of the labor during time, the
employment amount decreases. Therefore, according to Figure 9(b), it could be argued that
the labor gradually gets familiar with the project and its governing conditions from the day
15 and will remain in the project due to the application of the policy of maintaining work-
familiar labor when finally get dismissed in the day 310 after project completion. It is worth
to note that labor turnover is performed from the unskilled labor, skilled labor and work-
familiar labor, respectively.
Cumulative man-hour of the project labor is presented in the following Figure 9(c). As it
is shown in Figure 9(c), at the early stage of the project the labor had increasing trend and
due to a reduction in labor need, it has gone downward until all the labor is dismissed on day
312, when the project is completed.
Assessment of project time and project cost performance has always been considered by
managers. According to Figure 10(a), it can be concluded that temporary and permanent
termination of the project happens on days 281 and 311, respectively. Temporary delivery is
based on 95 percent completion of the activity of tiling. After the completion of work and
elapse of guaranty period, the project is delivered to the owner.
The final cost of the project, according to the Figure 10(b), is $256,839 which had $18,839
cost overrun compared to the predicted budget ($238,000).

5. Labor hiring policies

To improve the behavior of a system and its results, appropriate and efficient policies are
needed to be implemented. Applying any of the designed policies must be according to the
facts and conditions of the project. Policy design involves creating totally new strategies,
structures and decisions (Sterman, 2000). Lack of employment policy for a project’s workforce
can have undesirable effects on the project performance. Figure 11 shows the time of project
completion comparing the use of fixed labor with the use of hiring policy (base run).

(a) (b)
Project Termination Time 300,000
1Dmnl 2 2
1Dmnl 1 1 1 1 1 1 1 1 1 1 1 12 1 1
225,000 2
2
2
Dollar

2
0.5 Dmnl 150,000 2
0.5 Dmnl 2
2
75,000 2
2
0 Dmnl 2
0 Dmnl 0 2
12 12 12 12 12 12 12 12 12 12 12 12 12 12
0 32 64 96 128 160 192 224 256 288 320 0 32 64 96 128 160 192 224 256 288 320

Time (Day) Time (Day)

Figure 10.
Temporary Termination Time: base run 1 1 1 1 1 1 1 Dmnl Project Budget: Base run 1 1 1 1 1 1 1 1 1 1 1
Permanent Termination Time: base run 2 2 2 2 2 2 2 2 Dmnl Total Project Cost: Base run 2 2 2 2 2 2 2 2 2 2 Base run simulation of
project performance
Notes: (a) Project termination time; (b) project cost
IJPPM Temporary Termination Time
1
69,1
0.75

Dmnl
0.5
36
0.25

0 12 12 12 12 12 12 12 12 12 12 12 12 12 1 1
0 50 100 150 200 250 300 350
Figure 11. Time (Day)
Base run vs
constant labor Temporary Termination Time: Constant Labor 1 1 1 1 1 1 1
Temporary Termination Time: Base Run 2 2 2 2 2 2 2 2

As demonstrated in Figure 11, the project will be delivered later in case of using constant labor
compared to use of hiring policy.
Reduction of fluctuations in project labor need results in more convenient planning of
managers for hiring and turnover of labor. In other words, since the processes of hiring and
turnover are costly, the fewer the fluctuations are, the fewer costs are imposed on the project.
According to Figure 12, fluctuations of a tri-weekly period are fewer than the monthly
period and bi-weekly period has fewer fluctuations than tri-weekly and monthly which show
the reduction of labor supply fluctuations. Hiring in weekly period has the least fluctuation.
When fluctuations of labor need are fewer, balancing and allocation of project labor need
can be managed more easily. Although the investigation of the amount of project labor
needs in shorter intervals has more costs, it may reduce the total project completion costs
compared to longer periods due to better need analysis and allocation of the labor. Labor
hiring policies according to time and composition of labor are the focus of current study.

Weekly Bi-Weekly

Labor Need
30
1

15
2
1
Man

1 1 1
0 34 3 4 2 3 4 2 3 4 2 3 4 2 3 4 2 3 4 2 3 4 1 23 4 1 2 3 4 12 34
2 1
–15

–30
0 32 64 96 128 160 192 224 256 288 320
Time (Day)
Labor Need: Monthly 1 1 1 1 1 1 1 1 1
Labor Need: Tri-weekly 2 2 2 2 2 2 2 2
Labor Need: Bi-weekly 3 3 3 3 3 3 3 3
Labor Need: Base Run 4 4 4 4 4 4 4 4
Figure 12.
Comparing impacts of Tri-Weekly Monthly
hiring time intervals
on labor need
Effects of implementing hiring policies on performance of the project being studied are Evaluation of
assessed. Table III shows different implemented hiring policies in the model and their labor hiring
consequent results. Since in the studied project, hiring has taken place weekly, labor hiring policies
policies are studied in three periods of bi-weekly, tri-weekly and monthly. It is worth noting
that the proportion of skilled labor to unskilled is 2 to 3 in basic mood.
As it was mentioned before, implementing each of the hiring policies has a different
effect on the project performance. Increase of labor hiring and turnover intervals has 37
increased project costs, while the time of project delivery has remained unchanging in
weekly and bi-weekly periods. In using shorter periods, it was considered that project
costs have gone up due to soon investigations of labor, while the simulation results show
that, in long-term, the total cost was less in using shorter periods than longer. Project time
in monthly period has been less than other periods which can be a suitable policy to finish
the project earlier. However, the cost of implementing the policy of monthly hiring is more
than the base run (weekly). For example, implementing monthly hiring policy with
allocation proportion of 0.4 to 0.6 costs $297,908, while its equivalent in weekly policy is
$256,839. In fact, although the project is finished ten days earlier, project cost is 16 percent
more in monthly hiring policy than the basic (weekly). According to the Table III, using
different labor compositions has been effective on the project costs, however, its
effect on project performance was not noticeable. In the following, indices of EVM of the
project are studied in order to compare and assess the effects of implementing each of
labor hiring policies.

5.1 Earned value management

The EVM method is considered a standard tool in the project management area, enabling
professionals to plan and control cost and time (Picornell et al., 2016; Sutrisna et al., 2018). The
concept of EVM of the project is simple and understandable and is regarded as one of the most
frequent methods of estimation and assessment of project performance. It is basically a
comparison between budgeted and scheduled with performed, obtaining different measures to
report the progress of the project in terms of time and cost (Ponz-Tienda et al., 2012). In the
EVM of project, it is possible to assess the variables of scope, cost and time of the project
dynamically. At the same time, only through the SD approach could dynamic modeling of
structure and the dynamic behavior of project activities be possible. Therefore, by matching
EVM and SD, it is viable to assess index improving policies to develop the project performance
before implementation in a virtual environment. In order to calculate the indicators of EVM,
some variables of cost and time are applied.
Planned value (PV ) is the authorized budget planned to be spent on an activity during a
given period. Actual cost (AC) is the direct and indirect cost incurred in accomplishing the
work on an activity. Earned value (EV ) is an estimation of the value of physical work
actually completed. Cost variance (CV ) is the EV minus the AC. If CV is negative, it means
that the actual work performed cost more than the value earned so far. Schedule variance
(SV ) is, by definition, the EV minus the PV. SV calculates the difference between the current

Hiring time
intervals Weekly Bi-weekly Tri-weekly Monthly
Work crew
composition
(skilled/non-
skilled) 0:6=0:4 0:5=0:5 0:4=0:6 0:6=0:4 0:5=0:5 0:4=0:6 0:6=0:4 0:5=0:5 0:4=0:6 0:6=0:4 0:5=0:5 0:4=0:6

Cost 256,834 256,838 256,839 268,685 268,685 268,685 280,703 280,717 280,698 298,172 298,154 297,908
(base run) Table III.
Time 281 281 281 281 281 281 274 274 274 271 271 271 Hiring policies results
IJPPM value earned and the value that was planned to be earned at this point in time. Cost
69,1 performance index (CPI) is the ratio of EV to AC and can be used to compute the projected
cost of completing the project. An index equal to “1” (or 100 percent) denotes that EV and
ACs are equal, or in other words, costs are exactly as planned. If the index is lower than 1 (or
100 percent), the project is over budget. Schedule performance index (SPI) is the ratio of EV
to PV and can be used to estimate the projected time to complete the project. This index is
38 interpreted similar to the CPI, with the difference that SPI measures the time and schedule
aspects instead of the costs. EVM indicators are presented in Table IV.
Project performance indicators are considered vital information to enable monitoring and
control of projects and ensure they achieve their goals (Leon et al., 2017). EVM indicators
have been assessed by assumptions and data of the studied project and different hiring
policies based on hiring intervals. As explained in Table III, the policy of monthly labor
hiring imposes more costs on the project. The results of implementing the policies are
described in detail in Figure 13. SD models are capable of forecasting performance of
construction projects (Leon et al., 2017).

Indicator Formula

Earned value EV ¼ PV × percent completed

Cost variance CV ¼ EV – AC
Schedule variance SV ¼ EV – PV
Table IV. Cost performance index CPI ¼ EV/AC
EVM indicators Schedule performance index SPI ¼ EV/PV

CPI SPI
1 1

0.75 0.75
Dmnl
Dmnl

0.5 0.5

0.25 0.25

0 0
0 32 64 96 128 160 192 224 256 288 320 0 32 64 96 128 160 192 224 256 288 320
Time (Day) Time (Day)
CPI: Monthly 1 1 1 CPI: Bi-Weekly 3 3 SPI: Monthly 1 1 1 SPI: Bi-Weekly 3 3
CPI: Tri-Weekly 2 2 2 CPI: Base Run 4 4 4 SPI: Tri-Weekly 2 2 2 SPI: Base Run 4 4 4

Cost Variance Schedule Variance

0 0

–50,000 –20,000
Dollar

Dollar

–100,000 –40,000

–150,000 –60,000

–200,000 –80,000
0 32 64 96 128 160 192 224 256 288 320 0 32 64 96 128 160 192 224 256 288 320
Time (Day) Time (Day)
Figure 13.
Cost Variance: Monthly
Result of Cost Variance: Tri-Weekly
1
2
1
2
1
2
1
2
1
2
1
2
1
2
1
2
Schedule Variance: Monthly 1
Schedule Variance: Tri-Weekly 2
1 1 1 1 1 1 1
2 2 2 2 2 2 2
EVM indicators Cost Variance: Bi-Weekly 3 3 3 3 3 3 3 Schedule Variance: Bi-Weekly 3 3 3 3 3 3 3
Cost Variance: Base Run 4 4 4 4 4 4 4 4 Schedule Variance: Base Run 4 4 4 4 4 4 4
CPI of monthly hiring equals to 0.80157 which is the least amount through other hiring Evaluation of
policies. Although, none of the applied policies have CPI ¼ 1 or higher, in all of them SPI has labor hiring
reached to 1 before the legal deadline which means delivery is earlier than the deadline. The policies
reason for the value of CPI at the beginning of the project to be zero is that some cash-flow
factors such as prepayment have been not considered in the model boundary. It should be
noted that one of the features of the presented dynamic model in current research is its
ability to detect labor need accurately and momentarily as well as labor supply and 39
turnover. In fact, in a balancing loop, the system moves toward early delivery of the project.
Considering variances of Figure 13, it can be concluded that policies of weekly, bi-weekly,
tri-weekly and monthly, respectively, are appropriate for cost-related decisions. On the other
hand, in case of prioritizing the project completion time, monthly or tri-weekly policies could
be applied since their SV has reached 0 earlier than weekly and bi-weekly policies.

6. Conclusion
Due to the labor-oriented nature of the construction industry, with regard to other
industries, along with the heavy influence of human resources in relative costs associated
with the implementation of construction projects, it is necessary to pay particular attention
to the HRM. One of the fundamental measures in HRM is the estimation and supply of the
project labor required. A cornerstone advancement strategy applied in project labor supply
is employment; the employment of adequately skilled individuals, when performed in a
timely and accurate manner, can significantly affect the utility of a project. Project labor
supply must be compatible with the natural dynamics and complexities of the project, these
are satisfied by SD. Research conducted in the field of labor hiring under SD have generally
studied the issue of hiring, but they often have not considered construction projects and
employment in their assertions. Different labor hiring policies were studied in current
research. Accordingly, the most important effective factors were determined through the
dynamic project work-flow, estimation, hiring and turnover of labor, feedback and causal
relationships among them were identified. The CLD is then produced. By formulating a
model in the form of an SFDs, the quantitative model of hiring manpower in construction
projects was built. To maintain consistency of the model in regards to reality, data were
used from a real project in Iran. Presented policies for labor employment were divided into
two categories:
(1) Hiring based on time (hiring intervals): labor hiring and turnover took place based
on project realities and the form of contracts which were weekly, bi-weekly, tri-
weekly and monthly.
(2) Hiring based on labor composition (work crew composition): labor employment
according to the usual implementation of construction projects which needs a
combination of skilled and unskilled labor to perform the project.
For better assessment and comparison of the policies, EVM indicators and variances were
used. Results of implementing labor hiring policies showed that applying different
compositions of skilled and unskilled labor does not have any effect on the project time, but
did slightly affect the project costs. Furthermore, hiring in longer periods reduced the
project finishing time, however it escalated the project costs compared to shorter periods. As
a matter of fact, the monthly policy saw a 16, 11 and 6 percent, approximately, cost increase
compared to the weekly policy (base run), bi-weekly and tri-weekly, respectively. In another
form, EVM indicators show the effects of applying different policies in construction projects
performance. CPI of monthly hiring equals to 0.80157 which is the least amount through
other hiring policies. However, SPI has reached to 1 before the legal deadline (which means
delivery is earlier than the deadline), demonstrate that by applying monthly hiring policy
IJPPM the project will be terminated earlier than other time intervals. The proposed SD model
69,1 presents a flexible method in order to simulate the hiring policies. Therefore, it is possible to
improve project performance by selecting the most suitable labor hiring policies.

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Further reading
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in construction projects”, paper presented at the 29th Annual International Conference of the
System Dynamics Society, Washington, DC, July 24–28, available at: www.systemdynamics.org/
assets/conferences/2011/proceed/papers/P1293.pdf
Ministry of Labor and Social Affair in Iran (1990), “Employment contract, Chapter 2, labor code”,
Rouznameh Rasmi, February 17, 1991, No. 13387, p. 114, available at: www.ilo.org/dyn/natlex/
docs/WEBTEXT/21843/64830/E90IRN01.htm

Appendix
Mathematical relationships used in the labor constraints:
Daily mean labor cost ¼ Normal cost of labor wage + Normal cost of insurance, food, etc.
Labor cost ¼ 0.35 × Contract Official Cost
Max. labor based on budget ¼ Labor cost/(Contract official duration × Daily mean labor cost)
Max. labor based on work area limitation ¼ Work area/Min. labor density
Max. labor level ¼ INTEGER(Min.(Max. labor based on budget, Max labor based on work area
limitation))

Corresponding author
Shahin Dabirian can be contacted at: sh.dabirian@aui.ac.ir

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