Dr.

Farrukh Arif, Assistant Professor, NED UET

CE-591- Cost Engineering and Control

Lecture 2
Labor Productivity and
Analysis
_______________________
Dr. Farrukh Arif,
Assistant Professor, NED UET

Lecture 2-1

Dr. Farrukh Arif, Assistant Professor, NED UET

Overview

Labor

and Labor Costs

Determining Costs
Labor Hour
Productivity

Time

Study

Work Sampling

Wages and Fringe Benefits
Incentive Pay
Lecture 2-2

 Dr. Farrukh Arif, Assistant Professor, NED UET

Labor Classification (1/2)

Major

Classification includes

Direct Labor
Touches the Product

Changes Adds Value to the Product

Indirect Labor

Supports Direct Labor Efforts

Labor

Pro. & Analysis is concerned

with direct labor
Lecture 2-3

Dr. Farrukh Arif, Assistant Professor, NED UET

Labor Classification (2/2)

Other

Classifications

Recurring-nonrecurring
Designated-non designated
Wage-salary
Management-blue collar
Union-nonunion
Social, political and other factors based classification

Lecture 2-4

 Dr. Farrukh Arif, Assistant Professor, NED UET

Determining Labor Costs (1/2)

Labor

Cost = Time x Wage

Time
For individuals or for crew work

Expressed relative to unit of measure such
as stud, piece, bundle, container, 100 units,
1000 board feet etc.

Units: minute, hour, day, month or year.

Lecture 2-5

Dr. Farrukh Arif, Assistant Professor, NED UET

Determining Labor Costs (2/2)

Labor

Cost = Time x Wage

Worker Pay includes

Basic Wages

Fringe Benefits

Worker Pay based on

Type of Labor/Work

Attendance

Performance

Lecture 2-6

 Dr. Farrukh Arif, Assistant Professor, NED UET

In early estimate,
Building design may be known only by total
square feet and type
Large quantities of time are used.

Guesstimate
Unrelated to any measures, referenced or
analyzed data
Based on observational or rough experience
Lecture 2-7

Dr. Farrukh Arif, Assistant Professor, NED UET

Labor Productivity and Analysis

Concerned with the analysis of direct labor only

Direct labor
Carpenter
Mason
Electrical wireman
Roofer
Engineers (in some cases)

Indirect Labor
Time Keeper
Superintendent

Lecture 2-8

 Dr. Farrukh Arif, Assistant Professor, NED UET

Labor Hour (1/4)

(The Mythical Man Hour)

Man-hour = One Worker Working for One Hour

Number of welder man hours per inch of field welding
Number of carpenter man hours to erect 100 ft2 of wooden
framework
Number of road crew and equipment hours per mile of 28-ft wide
asphalt road construction

Labor Year (man year)

52 Weeks x 40 Hours = 2080 Hours

Labor Month (man month)

2080 / 12 = 173.3 Hours

Should Be Time Working NOT Time at Work

Lecture 2-9

Dr. Farrukh Arif, Assistant Professor, NED UET

Labor Hour (2/4)

(The Mythical Man Hour)

Misconceptions in Estimating Labor hour

(1) Confusing effort with progress
Example: 20 man-hrs proposed for a task or one
worker will consume 20 hours.

We assume crew of 2 will consume 10 hours.

Accepted but Unproved hypothesis

Cost varies as product of no. of labor and man
hours, progress may not.

Lecture 2-10

 Dr. Farrukh Arif, Assistant Professor, NED UET

Labor Hour (3/4)

(The Mythical Man Hour)

Misconceptions

in Estimating Labor

hour
(2) Not considering interface
dependencies.

Philosophy that Sum of the individual manhour estimates will equal a total for the job
without any slippage of the man-hour
constants.
Lecture 2-11

Dr. Farrukh Arif, Assistant Professor, NED UET

Labor Hour (4/4)

(The Mythical Man Hour)

Misconceptions

in Estimating Labor

hour
(3) Relying only on experience.
Using estimating information based on nonquantitative measurement, supported by
little data and more experience.

Incompleteness and inconsistencies show
up in implementation stage that is too late.

Lecture 2-12

 Dr. Farrukh Arif, Assistant Professor, NED UET

Productivity Measurement (1/2)

time is the measure of productivity.

Historical records provide
Cost of labor
Supervision
Methods
But have significant errors

Four methods for measurement of construction time

Job-ticket reports
Non repetitive one-cycle time study
Multiple cycle time study
Work sampling
Lecture 2-13

Dr. Farrukh Arif, Assistant Professor, NED UET

Productivity
Measurement (2/2)
Productivity
Analysis
Definitions

Lecture 2-14

 Dr. Farrukh Arif, Assistant Professor, NED UET

Job-Ticket Reports and ManHour Analysis (1/9)

Job-ticket is just a time card with additional
information.

Workers may complete their own job ticket.

Job ticket verification can be done through
computer-terminal, or foremans report.

Lecture 2-15

Dr. Farrukh Arif, Assistant Professor, NED UET

Job-Ticket Reports and ManHour Analysis (2/9)

Lecture 2-16

 Dr. Farrukh Arif, Assistant Professor, NED UET

Job-Ticket Reports and ManHour Analysis (3/9)

Several

job tickets can be collected for

variety of jobs.

The engineer will examine the
collected data for consistency,
completeness and accuracy using
Other instructional sheets
Construction codes
Engineering drawings

Lecture 2-17

Dr. Farrukh Arif, Assistant Professor, NED UET

Job-Ticket Reports and ManHour Analysis (4/9)

After

that, a spreadsheet can be

devised for the collected job tickets.

A

spreadsheet brings together the

facts and prepares data for
subsequent mathematical analysis.
Lecture 2-18

 Dr. Farrukh Arif, Assistant Professor, NED UET

Job-Ticket Reports and ManHour Analysis (5/9)

Lecture 2-19

Dr. Farrukh Arif, Assistant Professor, NED UET

Job-Ticket Reports and ManHour Analysis (6/9)

Job-ticket reports and man-hour analysis
will vary with different construction trades.

Example 1

Following is a foremans report of rough framing of a

residence.
The foreman is non-working and spends only 15% of
his time on the job.

Lecture 2-20

 Dr. Farrukh Arif, Assistant Professor, NED UET

Job-Ticket Reports and ManHour Analysis (7/9)

Lecture 2-21

Dr. Farrukh Arif, Assistant Professor, NED UET

Job-Ticket Reports and ManHour Analysis (8/9)

After searching the spreadsheet the work is matched against code
06111.10 rough framing of partitions. see the following
spreadsheet.

Lecture 2-22

 Dr. Farrukh Arif, Assistant Professor, NED UET

Job-Ticket Reports and ManHour Analysis (9/9)

The

elapsed time in the spreadsheet is

8 hours X 2 crew = 16 hours

Total hours are reduced by 80% for cold
weather.
Allowed total hours = 12.8 hours
Reduction for cold weather applied to
each activity for the whole item of work.
Lecture 2-23

Dr. Farrukh Arif, Assistant Professor, NED UET

Non-repetitive One-Cycle Time

Study (1/7)

Also called all-day time study

Useful for direct/indirect labor, long cycles type of
work
Non-repetitive because difficult to pre-plan in fine
detail.
Tight statistical reliability of the results is unlikely
Superior to guesstimating and job-ticket analysis
Requires continuous timing with an electronic stop
watch or video camera
Lecture 2-24

 Dr. Farrukh Arif, Assistant Professor, NED UET

Non-repetitive One-Cycle Time

Study (2/7)

Field

and Office Procedure:

Recording Information

Inform the labor that is to be time studied

Record job, equipment, worker(s), environmental conditions and other
circumstances before and during the work

Time Information and Rating

Time the work and write down the job elements

Record any job change
Record the time consumed by each element
Rate the pace and tempo of each element

Calculations

Calculate the normal time

Adopt pre-approved allowances, calculate allowance multiplier and extend
normal time to standard time
Lecture 2-25
Express the standard in common units of productivity

Dr. Farrukh Arif, Assistant Professor, NED UET

Non-repetitive One-Cycle Time

Study (3/7)

Recording

Information

Short as Possible (but Time-able)

Have Identifiable Start & End Points
Separate Operator & Machine Elements
Separate Constant & Variable Elements

Lecture 2-26

 Dr. Farrukh Arif, Assistant Professor, NED UET

Non-repetitive One-Cycle Time

Study (4/7)

Time

Information and Rating

Stopwatch
Continuous Methods
Performance Rating
Trained Observer

Subjective Comparison

Observed Operator to Typical Operator
Working at Normal Circumstances

Lecture 2-27

Dr. Farrukh Arif, Assistant Professor, NED UET

Non-repetitive One-Cycle Time

Study (5/7)

Calculations

Normal time
Tn = To X RF

Where, Tn = normal time, hours, days etc

To = observed time, hours days
RF = rating factor, arbitrarily set, number

Lecture 2-28

 Dr. Farrukh Arif, Assistant Professor, NED UET

Non-repetitive One-Cycle Time

Study (6/7)

Calculations for allowances

Personal
Fatigue
Delay
Together PF&D (in Percent)
Convert to Factor

Fa =

100%
100% PF&D

Where, Fa = allowance multiplier for PF&D

PF&D = personal, fatigue and delay allowance, percentage

Lecture 2-29

Dr. Farrukh Arif, Assistant Professor, NED UET

Non-repetitive One-Cycle Time

Study (7/7)

Calculations

for standard productivity

Hs = Tn X Fa

Where Hs = standard time for construction job per unit of

effort, hour, day etc.

Lecture 2-30

 Dr. Farrukh Arif, Assistant Professor, NED UET

Example 2

Lecture 2-31

Dr. Farrukh Arif, Assistant Professor, NED UET

Multiple-Cycle Time Study

Observing several cycles of a work on same or

different locations/occasions
For improving statistical reliability of the collected
data
Procedure is same as done for non-repetitive
cycle time study
Observations can be Snap-Back i.e. stopping
and starting stop watch fro each element of the
work/activity
Lecture 2-32

 Dr. Farrukh Arif, Assistant Professor, NED UET

Example table 3

Lecture 2-33

Dr. Farrukh Arif, Assistant Professor, NED UET

Work Sampling (1/6)

Used

for General Purposes:

Estimating Costs
Scheduling
Labor Requirements
Monitoring and Managing Performance

Statistical

Technique
Lecture 2-34

 Dr. Farrukh Arif, Assistant Professor, NED UET

Work Sampling (2/6)

Compared

to Time Study

Multiple Workers / Machines

Study Large Area
Can Handle Long Cycle Times
Less Study Time Required (Lower Cost)
Less Disruptive of Work
Reduces Performance Issues
Lecture 2-35

Dr. Farrukh Arif, Assistant Professor, NED UET

Work Sampling (3/6)

Determines

Proportion of Time Spent

on Predetermined Activities

Based on Probability & Statistics
Random, Discrete Observations
Sufficient Number of Observations
Representative of Distribution of
Population
Lecture 2-36

 Dr. Farrukh Arif, Assistant Professor, NED UET

Work Sampling (4/6)

Preliminary Sampling

Uncovers

Potential Problems

Refines Activity Definitions

Helps Sell the Sampling Study

Provides an Estimate for Pi

Lecture 2-37

Dr. Farrukh Arif, Assistant Professor, NED UET

Work Sampling (5/6)

Standard Time

Compute

the Standard Time

Do Not Include Idle Activities

Hs =

(N i / N )HR(1 + PF & D )
Np

Hs = standard time for construction job per unit of effort, hour, day etc
Ni = observations of event i, number
H = total man-hours worked during work sampling study
R = rating factor, decimal
PF&D = personal, fatigue and delay allowances, decimal
Np = construction units accomplished during period of observing this event, number
Lecture 2-38

 Dr. Farrukh Arif, Assistant Professor, NED UET

Work Sampling (6/6)

Considerations for Sampling

Explain

and Sell Prior to Starting

Appropriately Isolate Studies

Use as Large a Sample Size as Practical

Observe at Random Times

Conduct the Study Over a Long Period

Lecture 2-39

Dr. Farrukh Arif, Assistant Professor, NED UET

Example 4

Lecture 2-40

 Dr. Farrukh Arif, Assistant Professor, NED UET

Wages

Wage

Money Paid for an Amount of Work

Usually for Direct Labor
Sometimes for Indirect Labor

Salary

Money Paid for a Given Period of Time

Lecture 2-41

Dr. Farrukh Arif, Assistant Professor, NED UET

Fringe Benefits

Additional

Costs to Company

For Employees

Required by Law, Contract, Agreement

Can Be Included in Hourly Rates
Or

Covered in Overhead
Lecture 2-42

 Dr. Farrukh Arif, Assistant Professor, NED UET

Determining Wages

Wage

Only

Gross Hourly Cost
Wages and Fringe Benefits Costs

Wage

Only Calculation

Based on Time in Attendance

Cdl = Ha x Rh
Lecture 2-43

Dr. Farrukh Arif, Assistant Professor, NED UET

Incentive Wages

Pure

Incentive

(e.g. Working on Commission)

Cdl = NpRp

Guaranteed Wage Plus Incentive

Cdl = HaRh + Rh(HsNp Ha)

Minimum Cdl = HaRh

Lecture 2-44

 Dr. Farrukh Arif, Assistant Professor, NED UET

Efficiency

Ratio

of Standard Hours Produced to

Actual Hours Worked

Measure of Labor Efficiency or
Productivity

E = Np

Hs
100
Ha
Lecture 2-45

Dr. Farrukh Arif, Assistant Professor, NED UET

Gross Hourly Cost

Wages Plus Fringe Benefits Costs

Detailed Calculations Required

By Engineering
Or (Preferably) Accounting

Fringe Costs Include:

Legally Required Employee Costs
Contractual Costs
Voluntary Program Costs
Costs for Time Paid but Not Worked
Lecture 2-46

 Dr. Farrukh Arif, Assistant Professor, NED UET

Legally Required Costs

Social

Security

Employers Contribution
7.65% of First $87,000 (as of 2003)

Medicare

Employers Contribution
1.45% of All Wages Paid

Lecture 2-47

Dr. Farrukh Arif, Assistant Professor, NED UET

More Legal Requirements

Workers

Compensation

Income for Worker Who Cannot Work Due

to Injury on the Job

Unemployment

Insurance

Pays Workers Laid Off Through No Fault

of Their Own

Non-Exempt

Time-and-a-Half Pay

Over 8 Hours/Day and/or 40 Hours/Week

Lecture 2-48

 Dr. Farrukh Arif, Assistant Professor, NED UET

Other Fringe Costs

Supplemental

Medical Insurance

All or a Portion of the Premiums

Can Be Around $500/Month ($2.89/Hr)

Life

Insurance Premiums

Disability Insurance Premiums

Supplemental Pension
Lecture 2-49

Dr. Farrukh Arif, Assistant Professor, NED UET

Pay for Time Not Worked

Vacation,

Holidays, Sick Pay

Amount of Pay for this Time Is

Apportioned Over Total Hours in
the Work Year
Added to Wage Rate

Lecture 2-50

 Dr. Farrukh Arif, Assistant Professor, NED UET

Joint Labor Costs

More

Than One Product Produced By

Common Labor

Common Production Up to a Split
Point

Common Labor Costs Need to Be
Apportioned to the Different Products
Lecture 2-51

Dr. Farrukh Arif, Assistant Professor, NED UET

(De)Jointing Labor Costs

Determine

a Common Metric

Find a Proportional Relationship for the
Products

Apply the Same Proportions to the Costs

Market Effects/Strategy Can Distort
Some Products Subsidize Others
Price Is Not Proportional to Cost
Lecture 2-52

 Dr. Farrukh Arif, Assistant Professor, NED UET

Lecture Summary

Definitions

Relative to Labor Costs

How to Determine Time for the Job
Job-ticket analysis
Time Study (non-repetitive, multiple)
Work Sampling
Other

Finding

the Labor Cost Rate

Wages, Fringe Benefits,

Gross Hourly Cost
Lecture 2-53

Dr. Farrukh Arif, Assistant Professor, NED UET

End of Lecture

Lecture 2-54