Essay 1-2 pages Cost & estimating

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Lecture5-LaborandEquipment.pdf

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3/2/2021

Labor and Equipment

Lecture 5

Labor  Estimating labor involves determining

 how long it will take to do the work involved

 what labor types will be required, and at what pay rates.

 The unit of time for estimating labor is the hour.

 Labor hour

 One worker for one hour

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Factors Affecting Labor Estimate -1

 Wage Increase

 For large projects that take years to build allowances must be made for pay increase

 Availability and Productivity of trained workers

 When there is a lot of work available and workers are scarce, labor costs will most likely go up

BCN 5618 4

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Factors Affecting Labor Estimate - 2  Climatic Conditions- Any weather extremes

will slow down work and may require additional precautions

 Too hot, cold, snow, windy

 Working Conditions

 Restricted/little working space, limited storage space, and difficult delivery situations affect productivity

 Actual amount of work time per hour

 Overtime

 Others (cleanup time, breaks)

Breakdown of a Typical Craftworker’s Hour

Waiting 29%

Traveling 13%

Instructions 8%

Tools & materials 7%

Late starts/early quits 6%

Personal breaks 5%

Direct work 32%

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Best Source

 The best source for the estimator to determine labor productivity is to check the company’s past project records and then consult with the general superintendent

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Unions

 May set:

 Wage rates

 Wage premiums for shift work, holidays, weekends, and overtime

 Fringe benefits including pension, health insurance, vacation, holidays, and sick leave

Unions

 May set:

 Shift times, lunch breaks, and breaks

 Working conditions

 Travel and subsistence allowances

 Hiring procedures

 Rejecting workers

 Preference in rehiring past employee

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Unions

 May set:

 Use of union personnel from other neighboring unions

 Requiring all labor to be union members and subcontractors to use union labor

 Procedures for dispute resolution

Closed or Union Shop vs Open Shop

 Closed Shop

 Employer will not hire any non union member

 Union Shop

 Employer can hire nonunion workers, but they must join the union

 Open Shop

 Employer can hire any individual qualified to perform the job

 Less restrictive than union

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Union vs non-union  Average productivity for a union worker is lower

than that of equally qualified nonunion worker, because of work rule, lost time due to labor disputes, nonworking job stewards, and paid break periods.

 Associated General Contractors of America (AGC) and National Constructors Association (NCA) represent contractors in negotiation with local unions. Associated Builders and Contractors (ABC) represents open shop contractors.

Fair Labor Standards Act

 Requires employees must be paid

 at least the Federal minimum wage

 $7.25 as 2019 (current dispute to $15: yr 2020)

 one and a half times the regular pay for hour worked in excess of 40 hours per work week

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Fair Labor Standards Act

 Employees exempt from minimum wage and overtime:

 Executive

 Administrative

 Professional

 Outside sales employees

Pricing Labor

Quantity of work

Labor Cost = ---------------------- x Cost per hour

Productivity

Cost per hour = Base hourly cost + Payroll burden

Base Hourly Cost:

Union Scale (union contractors/contracts)

Nonunion Scale (open shop)

Prevailing Wages in the Area (federal projects)

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Published Productivity Rates

Figure 7.1

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Payroll Burden Items - 1

 Fringe Benefits

 vacation pay, employer paid health and welfare costs, pension costs, and training.

 Workers’ Compensation Insurance

 Fixed Overhead-

 Federal and State Unemployment Costs

 Social Security Taxes (FICA)

Payroll Burden Items - 2

 Special Costs:

 Overtime Premium Pay

 Transportation (mileage or transportation)

 Travel Time

 Shortened Shift Time (6 am to 1 pm and 1 pm to 8 pm)

 Area Premium Pay (unfavorable working conditions)

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“Bona Fide” Fringe Benefits

 Excludes:

 Use of a vehicle

 Thanksgiving turkey

 Christmas bonus

 Workers’ compensation insurance

 Unemployment compensation

 Social security and Medicare contributions

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Burdened Hourly Wage Rate

Burdened wage rate = Wages + Benefits Billable hours

 Billable hours exclude:

 Vacation

 Holidays

 Sick leave

 Other unbillable time

Pricing Labor

Labor cost = Adjusted labor hours x Weighted average burdened wage rate

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Standard Crews

Figure 7.3

Equipment

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Equipment

 Site clearing, development of access,

shaping of the site, foundation excavation,

and hoisting and handling materials all

involve the use of a large number of highly

efficient and versatile equipment

 The proper selection of these equipment and

the length of time they will have to be used

are an essential part of the estimator’s work

Equipment Costs

 Operating costs

 Fuel

 Lubrication

 Filters

 Tires

 Repairs

 Ownership costs

 Depreciation

 Interest

 Insurance

 Taxes

 Storage

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Depreciation & Interest

 Cost = P(1+i)ni Fi

(1+i)n - 1 (1+i)n - 1

where:

P = Purchase price

F = Salvage value

i = Interest rate

n = Useful life

Insurance, Taxes, and Storage

 Cost = Annual cost / Hours per year

 Based upon current bills or historical costs

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Fuel Cost

Fuel cost = hp rating × Power utilization × Use factor × Consumption rate × Fuel cost

 Consumption rate:

 Diesel 0.04-0.06 gallons per hp per hour

 Gas 0.06-0.07 gallons per hp per hour

Lubrication & Filters

 Oil

 Labor

 Filters

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Tires

 Depreciation = Cost / Useful life

 Repair

 Typically 15% of depreciation

Repairs

 Percentage of equipment cost spread over useful life

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Equipment - 2

 The construction equipment used on a

project may be owned, leased, or rented

by a contractor.

 The cost of contractor-provided

equipment to a project must be passed

on to the client in the form of equipment

charges that are included within a bid.

EQUIPMENT LEASING

 A lease normally involves a long period of time, usually approximating the economic life.

 With a lease, the depreciation and interest components are replaced completely by the lease payments. Other fixed costs (taxes, licenses, permits, insurance, parking and storage) still remain. Operating costs are also lessee's responsibility and will be handled the same as for owned equipment.

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EQUIPMENT RENTAL

 Rental is the ideal option for short-term equipment need. The rates per unit time are higher than for leasing.

 Under most rental agreements, all fixed costs are included within the rental fee.

 Maintenance and repair normally are rental agency responsibilities, as would be tires.

 Fuel, oil and lubrication costs generally will be the only operating costs (other than the operator himself) to be paid by the renter.

Buy, Lease, or Rent

 Availability of cash for down payment or outright purchase

 current interest rates on loans or installment purchase plans

 current rental and lease rates

 income tax benefits

 expected usage of the equipment

 the expected life of the equipment

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Ownership

 Ownership of the equipment can be an

economic drain if the equipment is

underutilized, becomes obsolescent, or

is subject to frequent breakdown as so

often happens when kept too long.

Leasing versus Buying

 Benefits:

 Flexibility

 Reduces risk

 Easier than financing

 Disadvantages

 More costly

 No ownership

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Leasing versus Buying

 Should be based upon cost

 Used for long-term equipment needs

Renting versus Buying

 Should be based upon cost

 Should be rented when needed for a short time

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Mobilization

 Cost to:

 Transportation to and from jobsite

 Setup

Selecting Equipment

 Volume of work to be performed. The size of the job will influence both individual size and numbers of production units.

 Job conditions. Each equipment best suited for certain job conditions.

 Current Inventory of Equipment. The contractor will attempt to use any available owned or on-hand leased equipment.

 Project Schedule. Required job completion date may force use of larger numbers of sizes of equipment.

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Loaders

 Used for earthmoving and loading.

 Can be used as integrated tool carriers.

 Available in many sizes and configurations.

 “Easily” maintained

 Operator “friendly”

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Backhoe Loaders

 Very common piece of equipment

 Many subcontractors own/lease

 Very versatile

 Easily transported

 “Low” maintenance costs

 Operator “friendly”

 Easily rented

Other Equipment

 Dump trucks

 Various hauling operations.

 Compactors

 to consolidates soils in fills, road bases, etc.

 Excavator

 Used primarily for digging but can be used for demolition with attachments.

 Motor grader

 Shaping of subgrades, shoulders, ditches, and backslopes;

maintenance of construction roads.

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Cranes

 Cranes have been one of the most important and widely used pieces of erection equipment since they were first invented.

 Every construction job should be looked at on an individual basis before a crane is selected. All variables should be considered.

Mobile Cranes

 Can travel freely throughout the job site and on the highway.

 Do not have to follow a pre- determined path.

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Mobile Cranes

 They are best suited for rural areas, where movement is necessary.

 Not well suited for city construction because they have to step back to lift loads over the top of buildings. Usually there is no room for this in a dense city environment.

Latticed Boom Cranes

 Have high production rates, easy operation, and have a large range of potential uses to the owner

 Typically used to:

 load sand and gravel at concrete batching plants

 load and unload ships

 demolish buildings

 Usually mounted to truck or crawler base

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Lattic

Telescoping Cantilevered Boom Cranes

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Telescoping Cantilevered Boom Cranes

 Commonly referred to as cherry pickers, zoom booms, or hydraulic cranes.

 Can be mounted on any type of carrier or base.

 Made of several sections that fit into one another

 Virtually no erection and dismantling is needed, saving labor costs.

Tower Cranes

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Tower Cranes

 Are best suited for city construction

 Work well in confined spaces and have virtually no height limit in the buildings that they can build.

 Can operate in higher wind conditions than mobile cranes.

Crane Related Accidents

 Accidents on construction sites that are related to crane and rigging equipment:

 electrocution

 overturning

 overloading

 falls

 dropping loads

 Most of these accidents are preventable with a proper safety program and training.

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Equipment Productivity

Factors affecting rate of production of a

piece of equipment:

 site conditions

 the nature of material being processed

 the condition of equipment

 operator ability.

Determining Productivity

 Equipment productivity can be measured in two ways:

 On-site: It is measured over a sufficient period to establish

reasonably accurate figures.

 Off-site: It is estimated based on productivity data that has

been generated from past company experience or which has

been made available from manufacturer. Manufacturer's

productivity rates are based on ideal conditions. Such rates

should be multiplied by a numerical efficiency factor.