CCEC-Lec06-Labor-Ch 7

Estimating in Building Construction
Chapter 7 Labor
LABOR HOURS AND PRODUCTIVITY
• Estimating labor requires determining the number of labor hours to do a
specific task and then applying a wage rate.
• A labor hour is defined as one worker working for one hour.
• Determining the labor hours requires knowing the quantity of work to be
placed and the productivity rate for the specific crew that will perform the
work.
• The productivity rate is often expressed as a number of labor hours per unit of
work, although it may also be expressed as the quantity of work performed by
a crew during a standard eight-hour day.
Labor Hours
Productivity Rate =
Quantity
Labor Hours = Quantity Takeoff × Productivity Rate
Adjusted labor hours = Labor hours × Productivity factor

Availability and Productivity of Labor
• When there is plenty of work available and workers are scarce, less trained
craft persons are accepted.
• These less-trained persons will require more time or labor hours to complete
the required task, and a productivity factor greater than one is used.
• Conversely, when construction projects are scarce, workers may become
motivated, and the contractor can be selective and hire only the most
qualified workers.
• This will result in producing more work per labor hour, and a productivity
factor less than one is used.
Climatic Conditions
• Typically, any weather extremes will slow down the work pace and may
require additional precautions that add labor hours to the project.
• The estimator must try to factor in each of these to determine the most cost-
effective approach.
• A productivity factor of less than one would be used when the anticipated
weather conditions are better than the average weather conditions for the
historical data.
Working Conditions
• The job site working conditions can have a great effect on the rate of work.
• A project being built in the city with little working space, limited storage
space, and difficult delivery situations typically has less work accomplished
per labor hour just due to the difficulty of managing the resources.
• Again, a productivity factor of greater than one is used when conditions are
worse than average, and a productivity factor of less than one is used when
conditions are better than average.
Other Consideration
• Workers seldom work a full 60 minutes during the hour. Studies of the actual
amount of time worked per hour averaged 30 to 50 minutes. This is often
referred to as system efficiency.
• Keep in mind that the time it takes to “start up” in the morning, coffee breaks,
trips to the bathroom, a drink of water, discussing the big game or date last
night, lunches that start a little early and may end a little late, and clean-up
time all tend to shorten the work day.
EXAMPLE
Labor Hours
EXAMPLE
PRODUCTIVITY RATE USING CYCLE METHOD
EXAMPLE
PRODUCTIVITY RATE USING RATE OF PROGRESS
UNION-WAGES AND RULES
• Local unions and their work rules should be given particular attention, since
they may affect the contractor in a given community.
• The estimator will have to determine whether the local union is cooperative
and whether the union mechanics tend to be militant in their approach to
strike or would prefer to talk first and strike as a last resort.
• While surveying the unions, the estimator will have to get information on the
prevailing hourly wages, fringe benefits, and holidays. when the present
contract expires, and what the results and attitudes during past negotiations
have been.
LABOR OVERBURDEN
• The wages paid to labor are known as the bare hourly wage rate or bare wage
rate (in the case of salaried employees).
• In addition to the bare hourly wage rate, the contractor incurs a number of
costs associated with employing the labor that needs to be included the labor
rate. These costs are known as labor burden.
• The burdened labor rate is calculated by totaling all of the costs of the
employee over the course of the year or the project and dividing these costs
by the number of hours that are billable to the project during the year or the
duration of the project.
LABOR OVERBURDEN
Cash Equivalents and Allowances.
• Cash allowances are funds paid to the employee for the employee to provide
his own tools or for the use of his personal vehicle.
• Cash allowances are not reimbursements to the employee for actual
expenses, but an allowance given to the employee to defer the cost of
providing his own tools and vehicle.
LABOR OVERBURDEN
Payroll Taxes.
• Employers and employees are required to pay social security and Medicare
taxes by the Federal Insurance Contribution Act (FICA).
• In 2009, both the employer and the employee were required to pay 6.2
percent social security tax on the first $106,800 of taxable wages for the
employee.
LABOR OVERBURDEN
Unemployment Insurance.
• The Federal Unemployment Tax Act (FUTA) and State Unemployment Tax Act
(SUTA) require employers to provide unemployment insurance for their
employees.
• The FUTA and SUTA tax is paid entirely by the employer and is a labor burden
cost.
LABOR OVERBURDEN
Workers’ Compensation Insurance.
• Workers’ compensation insurance provides medical insurance benefits and
may reimburse some of the lost wages to employees injured on the job or
who contract an occupational illness.
• It may also provide some death benefits for employees killed on the job.
LABOR OVERBURDEN
General Liability Insurance.
General liability insurance provides the company with protection from lawsuits
arising from negligence of company employees, including bodily injury, property
damage or loss, and damage to one’s reputation due to slander.
LABOR OVERBURDEN
Insurance Benefits.
• Companies often provide employees with health, dental, life, or disability
insurance.
• The portion of the premiums paid by the employer represents a cost to the
employer and is part of the labor burden.
LABOR OVERBURDEN
Retirement Contributions.
• Many employers provide employees with access to 401(k) retirement
programs or other retirement programs.
• Often the employer contributes money to the employee’s retirement
program.
LABOR OVERBURDEN
Vacation, Holidays, and Sick Leave.
Vacation, holidays, and sick leave are incorporated into the labor burden by
including the wages paid for vacation, holidays, and sick leave in the employee’s
wages before other burden costs are calculated.
LABOR OVERBURDEN
Burdened Hourly Wage Rate.
The cost of any other benefits paid by the employer should be included in the
cost of the employee before determining the burdened hourly wage rate.
PRICING LABOR
To price labor, first the estimator must estimate the labor hours required to do
the work.
These labor hours can then be multiplied by the burdened wage rate to develop
the labor costs.
However, when the crew is made up of different crafts being paid different wage
rates, a weighted average burdened wage rate must be determined.
EXAMPLE
Craft—Mason
Wage rate—$29.00 per hour
Hours worked—50 hours per week for 20 weeks and 40 hours per week for 29
weeks
Paid vacation, holidays, and sick leave—Three weeks at 40 hours per week
Overtime—Time-and-a-half for any hours over 40 per week
Gas allowance—$100 per month
Annual bonus—$500 Social security—6.2 percent on the first $106,800 of wages
Medicare—1.45 percent of all wages
EXAMPLE
FUTA—0.8 percent on the first $7,000 of wages
SUTA—4.5 percent on the first $18,000 of wages
Worker’s compensation insurance—$7.25 per $100.00 of wages
General liability insurance—0.75 percent of wages
Health insurance (company’s portion)—$300 per month per employee
Retirement—$0.75 per $1.00 contributed by the employee on 6 percent of the
employee’s wages
SOLUTION
SOLUTION
SOLUTION
Thank You

CCEC-Lec06-Labor-Ch 7

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Estimating in Building Construction

Labor Hours = Quantity Takeoff × Productivity Rate

Adjusted labor hours = Labor hours × Productivity factor

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