How To Make Labor Costing Estimates For Civil Engineering Projects?

Cost of Labor
For a detailed estimate, it is imperative that the cost of labor resources be determined with precision. This is accomplished through a three-part process from data in the construction bidding documents that identify the nature of work and the physical quantity of work.

The first step in the process involves identifying the craft that will be assigned the work and determining the hourly cost for that labor resource. This is termed the labor rate.

The second part of the process involves estimation of the expected rate of work accomplishment by the chosen labor resource. This is termed the labor productivity.

The third step involves combining this information by dividing the labor rate by the labor productivity to determine the labor resource cost per physical unit of work. The labor cost can be determined by multiplying the quantity of work by the unit labor resource cost.

Labor Rate — The labor rate is the total hourly expense or cost to the contractor for providing the particular craft or labor resource for the project. This labor rate includes direct costs and indirect costs.

Direct labor costs include all payments made directly to the craftsworkers. The following is a brief listing of direct labor cost components:

1. Wage rate
2. Overtime premium
3. Travel time allowance
4. Subsistence allowance
5. Show-up time allowance
6. Other work or performance premiums

The sum of these direct labor costs is sometimes referred to as the effective wage rate. Indirect labor costs include those costs incurred as a result of use of labor resources but which are not paid directly to the craftsworker. The components of indirect labor cost include the following:

1. Vacation fund contributions
2. Pension fund contributions
3. Group insurance premiums
4. Health and welfare contributions
5. Apprenticeship and training programs
6. Workers’ compensation premiums
7. Unemployment insurance premiums
8. Social security contribution
9. Other voluntary contribution or payroll tax

It is the summation of direct and indirect labor costs that is termed the labor rate — the total hourly cost of providing a particular craft labor resource. Where a collective bargaining agreement is in force, most of these items can be readily determined on an hourly basis.

Others are readily available from insurance companies or from local, state, and federal statutes. Several of the direct cost components must be estimated based on past records to determine the appropriate allowance to be included.

These more difficult items include overtime, show-up time, and performance premiums. A percentage allowance is usually used to estimate the expected cost impact of such items.

Labor Productivity — Of all the cost elements that contribute to the total project construction cost, labor productivity ranks at the top for variability. Because labor costs represent a significant proportion of the total cost of construction, it is vital that good estimates of productivity be made relative to the productivity
that will be experienced on the project.

Productivity assessment is a complex process and not yet fully understood for the construction industry.
The following example illustrates the calculation of a unit price from productivity data.

Example 11
To form 100 square feet of wall requires 6 hours of carpenter time and 5 hours of common laborer time. This assumption is based on standards calculated as averages from historical data. The wage rate with burdens for carpenters is $60.00/h. The wage rate with burdens for common laborers is $22.00/h.

Solution. The unit cost may be calculated as follows:
This labor cost is adjusted for the following conditions:
Carpenter — 6 h at $60.00/h = $360.00
Laborer — 5 h at $22.00/h = $110.00
Total labor cost for 100 ft2 = $470.00
Weather adjustment 1.05
Job complexity 1.04
Crew experience 0.95
Management 1.00
Labor cost per ft2 = $470.00 100 ft2 = $4.70 ft2
Adjusted unit cost = 4 70 ¥ 1 05 ¥ 1 04 ¥ 0 95 ¥ 1 00 =  $4 88/ ft2

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