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Lecture 10-1CE-591 Cost Engineering and Control
Dr. Farrukh Arif, Assistant Professor, NED UETDr. Farrukh Arif, Assistant Professor, NED UET
CE-591- Cost Engineeringand Control
COST CONTROL DURINGCONSTRUCTION
Forecasting Direct Field Labor
Lecture 10-2CE-591 Cost Engineering and Control
Dr. Farrukh Arif, Assistant Professor, NED UET
OUTLINE Introduction
Factors Impacting Field Labor
Forecasting Tools
Labor Productivity
How Productivity Varies?
How Calibration Curves areDeveloped?
Forecasting from ProductivityProfiles
Other Uses of Productivity Profiles
Trend Curves
Forecasting from Trend Curves
Danger of Plotting against Time
Another type of Productivity Profile
Typical Shapes of Theoretical(calibration) Profile
Workhours for 1% Completion
Productivity as WorkPower per Unit ofwork
Impact of Overtime
Crew Size and Layoff Schedule
Direct Labor Manning curves
Manning vs. Productivity
Completion and But List
Average Wage
Summary
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Lecture 10-3CE-591 Cost Engineering and Control
Dr. Farrukh Arif, Assistant Professor, NED UET
Introduction
Most important aspect of CE’s job in the engineering office.
Direct Labor: labor required for direct construction of the permanentfacilities.
Indirect Labor: labor required for temporary facilities, timekeeping,
warehousing, and construction equipment repair.
For direct-hire, reimbursable job, CE’s most difficult job is forecastingdirect labor.
Construction Management requires forecasts of total direct laborupdated on monthly basis.
Two parts of labor costs are;
− Number of workhours required.
−average wage or dollars per hour.
Lecture 10-4CE-591 Cost Engineering and Control
Dr. Farrukh Arif, Assistant Professor, NED UET
Factors Impacting Field Labor There are controllable and uncontrollable factors (by construction
management) that impact field labor productivity.
Common controllable factors by construction management are:− Job planning and sequencing.
− Equipment and tools.
− supervision through foreman level.
−Availability of materials.
− Support facilities.
− Overtime.
− Worker density.
−
Rework (correction of faulty work). Some less controllable factors are:
− Weather.
− Craft union attitude and restrictions.
− High economic activity (skilled labor shortage).
− Government Regulations.
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Lecture 10-5CE-591 Cost Engineering and Control
Dr. Farrukh Arif, Assistant Professor, NED UET
Forecasting Tools
Following are the tools required for the process of forecastingdirect field workhours.
− Control Estimate (budget): The first forecast.
− Material takeoffs: The budget workhour outlook is modified to reflect
actual designed quantities, called as quantity adjusted budget (QAB).
− Productivity profiles: QAB modified to reflect construction experience.
− Crew size and layoff schedules: Important for final stages ofconstruction.
Lecture 10-6CE-591 Cost Engineering and Control
Dr. Farrukh Arif, Assistant Professor, NED UET
Labor Productivity (1/3) A knowledge of how actual job productivity compares to that predicted in the
control estimate (budget) is the key to forecasting direct labor workhours.
When preparing the control estimate (budget), the estimator uses a base
productivity relative to some standard location.
Once construction starts, we are no longer interested in the standard location.
Therefore, estimated productivity reflected in the QAB is used as control baseand is set equal to 1.0.
Productivity when a subject work is complete.
1. Productivity = QAB workhours
actual workhours
Productivity during the progress of the work.2. Productivity = % physical completion
% of QAB workhours used
Productivity for activities with readily measurable quantities such as; cu.yd ofconcrete, lineal feet of electrical conduit.
3. Productivity = budget unit rate
actual unit rate
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Lecture 10-7CE-591 Cost Engineering and Control
Dr. Farrukh Arif, Assistant Professor, NED UET
Labor Productivity (2/3)
Example 1:− QAB workhours for installing concrete = 800 workhours
− actual workhours = 1000
− Productivity (formula 1) = 0.8
Example 2:− Concrete activity is 32% complete
− 40% of QAB workhours expanded (used)
− Productivity (formula 2) to the QAB base = 0.8
Example 3:− QAB unit rate for pouring concrete foundations = 8 workhours/cu. Yd.
−
Actual rate = 10 workhours/cu. Yd.−Productivity (formula 3) to the QAB? Base = 0.8
Lecture 10-8CE-591 Cost Engineering and Control
Dr. Farrukh Arif, Assistant Professor, NED UET
Labor Productivity (3/3) Experience shows that productivity
varies throughout the life cycle of aconstruction project according to well-established curves/patterns, called
productivity profiles .
Shape of productivity profile differs foreach particular activity.
These profiles are sensitive to methodsused for calculating percent completionand may vary between contractors.
Typical profile starts out poor , reachesa maximum between 30 and 80%, andtapers off to final completion.
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Lecture 10-9CE-591 Cost Engineering and Control
Dr. Farrukh Arif, Assistant Professor, NED UET
How Productivity Varies?
Actual productivity profile tend to be more irregular than theoretical curve
shown in figure 1.
The irregularity can be caused by extraneous events, usually of short duration,including the following:
Weather− Month of exceptionally bad or good weather.
Length of working day− High overtime usually causes a drop in productivity.
Density of Labor− When all crafts are working in the same area, at the same time, productivity tends to decline.
Supervision− Good or bad supervision can improve or decline productivity.
Union negotiations− Productivity declines during such negotiations.
Critical jurisdictional disputes− Disputes and as a result work stoppages can cause significant dip in productivity.
Lecture 10-10CE-591 Cost Engineering and Control
Dr. Farrukh Arif, Assistant Professor, NED UET
How Calibration Curves are Developed?
The theoretical or calibration curve shown in figure is for an area where skilledlabor is not readily available and training is required.
In general, in the U.S., the profile is flatter.
It starts at productivities of 0.85 or 0.9 and reach peak between 20 and 30%
complete.
Theoretical profile is obtained by plotting data from several similar past jobswhere the same methods for calculating percent completion has been used.
The theoretical percentage of budget workhours to acehive any given percentcompletion can be calculated.
Example using figure 1
−At 10% completion, theoretical productivity is 0.7.
− Divide % completion (10%) by the productivity (70%) to obtain theoretical budgeted workhours(14%).
− This is theoretical rate of expending QAB workhours.
By plotting actual productivity and comparing it to the theoretical, we have
tool for forecasting total workhours to project completion.
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Lecture 10-11CE-591 Cost Engineering and Control
Dr. Farrukh Arif, Assistant Professor, NED UET
Forecasting from Productivity Profiles
Example 4: Let us suppose that a construction project contains
120,000 QAB workhours and has a calibration profile similar to Figure1. What will be the forecasted overrun when 36% of the budgetedworkhours has been used and the project is 30% complete?
Lecture 10-12CE-591 Cost Engineering and Control
Dr. Farrukh Arif, Assistant Professor, NED UET
Solution
Actual Productivity = 30/36 = 0.83
Theoretical Productivity (fromCalibration Curve)= 0.88 (approx)
Difference in Productivity
= (0.88-0.83)/0.88 X 100 = 5.7%
Overrun = 5.7% X 120,000 = 6800Works hours (approx)
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Lecture 10-13CE-591 Cost Engineering and Control
Dr. Farrukh Arif, Assistant Professor, NED UET
Other Uses of Productivity Profiles
Comparison of effectiveness of area superintendents by plotting
overall curves for the area supervised by each superintendent.
To pinpoint trouble spots. If period productivity on a weekly or monthlybasis are plotted on the same chart with cumulative productivity,
adverse trends are immediately apparent.
Lecture 10-14CE-591 Cost Engineering and Control
Dr. Farrukh Arif, Assistant Professor, NED UET
Trend Curves
Productivity profiles are useful tool,however, workhour trend charts give amore complete picture and arefrequently used for presentation tocompany management.
Trend charts are simply workhours plotted against percent completion .
Trend chart calibration (theoretical)curve is developed directly from theproductivity profile.
Figure 2
30% completion Actual
30% completion Planned
Using
Productivity
Profile Fig. 1
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Lecture 10-15CE-591 Cost Engineering and Control
Dr. Farrukh Arif, Assistant Professor, NED UET
Forecasting From Trend Curves
Example 5: Let us suppose that construction activity has a QAB of
120,000 workhours. What will be the total forecast if 43,000 workhourshave been expanded when the activity reaches 30% physicalcompletion and the trend chart calibration curves is shown in figure 2?
Comment: The solution assumes that no corrective action will betaken, and that actual workhours will maintain a constant percentage
relationship with the calibration curve.
Lecture 10-16CE-591 Cost Engineering and Control
Dr. Farrukh Arif, Assistant Professor, NED UET
Danger of Plotting Against Time
In figure 2, instead of plotting workhoursagainst percentage completion, we couldhave used time (Figure 3).
Shapes of the curves become different.
Apparent overrun has been transformedinto an underrun .
This approach neglects the importantaspect of percent completion.
Workhours are liquidated but the expectedprogress is not achieved.
In an extreme case, it is possible that allworkhours are used without any progress,but the curve plotted against time will notgive any clue regarding this problem.
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Lecture 10-17CE-591 Cost Engineering and Control
Dr. Farrukh Arif, Assistant Professor, NED UET
Another type of Productivity Profile
Percentage Completion vs. EfficiencyMultiplier
Efficiency Multiplier is reciprocal ofproductivity.
Forecasted Workhours = QAB X Muliplier
Bad Productivity: Above budget line
Good Productivity: Below budget line
Period Productivity
27% 70%
Bad Productivity
1.7
Delayed
Corrective
Action Taken
Dramatic
Improvement in
Productivity
46% 55%
Jan
Forecast
using 1.53
Lecture 10-18CE-591 Cost Engineering and Control
Dr. Farrukh Arif, Assistant Professor, NED UET
Trend Curve
On schedule
15 days delay
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Lecture 10-19CE-591 Cost Engineering and Control
Dr. Farrukh Arif, Assistant Professor, NED UET
Typical Shapes of Theoretical (calibration) Profile
Lecture 10-20CE-591 Cost Engineering and Control
Dr. Farrukh Arif, Assistant Professor, NED UET
Workhours for 1% Completion If there were no change orders and QAB workhours remained constant, the
1% completion curve (refer lecture related to engineering costs) and
productivity profile plotted against efficiency multiplier will have identical
shapes.
Formulae:
1. Productivity = % physical completion
% of QAB workhours used
2. Productivity = % physical completion X QAB workhours
workhours used
3. Productivity = 1/Productivity
4. Efficiency Multiplier = __________workhours used_______
% physical completion X QAB workhours
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Lecture 10-21CE-591 Cost Engineering and Control
Dr. Farrukh Arif, Assistant Professor, NED UET
Productivity Expressed as Workpower Per Unit of Work
As mentioned previously, productivity for a unit of work/activity is:
Productivity = budget unit rate
actual unit rate
Unit measurement can be used to compare the individual performance of thework crews or to set targets for construction supervisors.
Lecture 10-22CE-591 Cost Engineering and Control
Dr. Farrukh Arif, Assistant Professor, NED UET
Impact of Overtime (1/3)
Labor productivity decreases as the work week is extended.
When scheduled day is extended from 8 to 10 or 11 hours, workers tend to
pace themselves.
The effect is magnified if the job is put on a schedule of 6 or 7-day week.
Absenteeism further decreases productivity.
Overtime is used as a crutch to replace good planning and scheduling.− Increased wages.
− Reduced productivity.
Based on some evidence;− 60-hr week for a prolonged period of three months will reduce productivity by 35% as comparedto normal 40-hr week.
−50-hr weeks will reduce productivity by more than 25%.
Direct tangible costs.
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Lecture 10-23CE-591 Cost Engineering and Control
Dr. Farrukh Arif, Assistant Professor, NED UET
Impact of Overtime (2/3)
Example 6: After two months of steady 60-hr weeks, productivity has dropped
by 15%, and by union agreement, double time is paid for overtime. Calculatepercentage cost increase compared to a 40-hr week.
Lecture 10-24CE-591 Cost Engineering and Control
Dr. Farrukh Arif, Assistant Professor, NED UET
Impact of Overtime (3/3)
Overhead and intangible costs.− Extended hours for supervisory staff.
− Keeping warehouse and tool sheds open.
− Indirect support such as scaffolding, job cleanup, material handling, and inspection.
− Construction equipment and jobsite transportation.
− Increased accidents.
− Lower quality work.
−Increased absenteeism.
Good reasons for prolonged overtimes.− To maintain or improve schedule.
− To attract skilled craftsmen.
− To attract workers to remote, undesirable locations.
− To take advantage of weather windows.
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Lecture 10-25CE-591 Cost Engineering and Control
Dr. Farrukh Arif, Assistant Professor, NED UET
Crew Size and Layoff Schedule
Near the end of a large project or shortly past the midpoint of on a small job , it
becomes possible to forecast labor by crew size and labor rundown curves.
In such cases, field supervisors estimates of crew days required for completionare usually more accurate than trend or productivity curves .
Such estimation methods are especially useful for small jobs where there has
been no opportunity to collect the data required for more sophisticated tools.
Lecture 10-26CE-591 Cost Engineering and Control
Dr. Farrukh Arif, Assistant Professor, NED UET
Direct Labor Manning Curves
Number of workers plotted against time.
Planned labor rundown didn’t
happen and PM was alerted
about possible overrun
Revised forecast
mid February
Project delay by 1.5 months
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Lecture 10-27CE-591 Cost Engineering and Control
Dr. Farrukh Arif, Assistant Professor, NED UET
Manning vs. Productivity Curves
Peak productivity
occurs well ahead of
peak manning
At peak workpower,
monthly rate of
progress is same as
that at lower work
power
Lecture 10-28CE-591 Cost Engineering and Control
Dr. Farrukh Arif, Assistant Professor, NED UET
Average Wage
Second part of predicting labor costs is forecasting wages.
Similar to productivity, average wage rate also varies over the life of the
project.
Factors influencing wage rates are:1. Amount of overtime hours (because overtime paid at 1.5 or double time).
2. Merit increases and promotions.
3. Labor contracts and negotiations.
4. Other projects in same general area (similar projects within the same commuting area drivewages upward).
5. Craft-to-helper ratio and skilled-to-unskilled-labor mix (as project progress labor mix changesfrom less skilled to more skilled).
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Lecture 10-29CE-591 Cost Engineering and Control
Dr. Farrukh Arif, Assistant Professor, NED UET
Summary
Forecasting tools available include:
− The original budget estimate.
− The QAB.
− Productivity Profiles.
− Manning curves.
− Crew Size and Layoff Schedule.