Understanding and Managing Project Costs Session 6

1. Understanding and Managing Project CostsSession 6

2. Review of Session 5 • The major elements of a cost control plan are: • Identify cost activities and cost control numbers • Determine/assign responsibility for daily coding and cost reporting • Establish a method of crew assignment • Establish a method of cost analysis An AGC Construction Learning Tool

3. Review of Session 5 (2) • The major elements of a cost control plan are: • Establish remedial strategy for cost variances • Establish a method for crew feedback • Establish a method of reporting subcontractor problems An AGC Construction Learning Tool

4. Labor Cost • Wages • Fringes (medical insurance, pension, training) • Taxes (workers’ comp, unemployment insurance, FICA, Federal unemployment tax • Typically about 1.5 X wages An AGC Construction Learning Tool

5. Labor Cost • Carpenter with wages of $ 20.00 per hour costs $ 29.78 per hour • Carpenter costs $.50 per minute • Daily cost - $ 238.24 • Every delay costs the contractor • 3 carpenters delayed 30 minutes costs $45 • Delay costs not included in estimate An AGC Construction Learning Tool

6. Delays to Construction • Environmental conditions • Management errors • Crew performance • Subcontractor delay • Supplier delay or defective product • Owner/Architect caused delay • Unforeseen delays An AGC Construction Learning Tool

7. Weather Conditions • “Normal” conditions should be anticipated in the estimate • Weather conditions affect costs: • Lower labor productivity • Additional access provisions • Weather protection • Compare additional labor costs to temporary construction for weather protection An AGC Construction Learning Tool

8. Housekeeping • Poor housekeeping decreases labor productivity • It’s also a safety hazard • Housekeeping strategies • Single-source cleaning • Subcontractors required to clean up • Weekly clean-up day An AGC Construction Learning Tool

9. Light, Heat, and Ventilation • Poor light, heat, or ventilation decrease labor productivity • Safety hazards • Light is necessary for accurate measuring, fitting, and installation • Average heat helps the workers optimize productivity • Ventilation helps dry liquid applications An AGC Construction Learning Tool

10. Activity: Weather Impact • Determine extra costs due to weather impact: • Site access roads • Weather protection • Temporary heat costs • Additional labor • Shut-down of work, with accelerated work afterwards An AGC Construction Learning Tool

11. SureFresh Project Schedule An AGC Construction Learning Tool

12. Minneapolis Temperatures An AGC Construction Learning Tool

13. Minneapolis Precipitation An AGC Construction Learning Tool

14. Minneapolis Snowfall An AGC Construction Learning Tool

15. Problem: Wrong crew size • Observations: • Low crew productivity • Too much wasted time • Dissention among the crew • Quality problems • Factors: • Amount and type of work • Material handling necessary • Available tools and equipment • Crew skill level • Appropriate crafts • Crew computability • Environmental conditions An AGC Construction Learning Tool

16. Problem: Wrong Crew Size • Solutions: • Change crew size • Organize crew to subtasks • Shift crew (or part of crew) to other activities • Lay off crew as necessary An AGC Construction Learning Tool

17. Problem: Crew Not Working to its Potential • Observations: • Low productivity • Arguments within crew • Poor crew attitude • Factors • Skill level of crew members • Individual motivation • Craft mix in crew • Personal non-compatibility An AGC Construction Learning Tool

18. Problem: Crew Not Working to its Potential • Solutions: • Fire and hire • Move some crew members to other tasks • Pep talk An AGC Construction Learning Tool

19. Problem: Material not Delivered on Time • Observations • Crew complaints • Wasted time • Factors • Early delivery (relates to jobsite storage) • Check on delivery • Don’t rely on “just-in-time” delivery An AGC Construction Learning Tool

20. Problem: Material Not Delivered on Time • Solutions: • Management involved in ensuring material delivery • Inform supplier of late delivery • Include delivery date in purchase order and purchase agreement An AGC Construction Learning Tool

21. Problem: Insufficient Quantity Delivered • Observations: • Quantity on daily reports • Crew complaints • Wasted time • Factors • Confirm quantities prior to delivery • Supplier problem • Crew misusing material An AGC Construction Learning Tool

22. Problem: Insufficient Quantity Delivered • Solutions: • Management involved in material delivery • Inform supplier of shortage • Be sure instructions to crew are accurate about how to use the material An AGC Construction Learning Tool

23. Problem: Insufficient tools and materials for the task • Observations • Crew complaints • Wasted time • Low productivity • Factors • Tool requirements for task • Location of tools and equipment • Condition of tools and equipment An AGC Construction Learning Tool

24. Problem: Insufficient tools and materials for the task • Solutions • Obtain proper tools and equipment ASAP • Have back-up tools and equipment available when possible • Instruct crew on how tools are intended to be used for the task An AGC Construction Learning Tool

25. Problem: Crew Instructions Inadequate • Observations: • Crew complaints • Slow start time • Low productivity • Factors: • Correlation of instructions with work and crew skills • Crew’s comprehension of instructions An AGC Construction Learning Tool

26. Problem: Crew Instructions Inadequate • Solutions • Get proper instructions to crew ASAP • Develop style of instruction that works with the crew • Determine the most effective way to communicate with your crew An AGC Construction Learning Tool

27. Problem: Construction Documents Inadequate or in Error • Observations • Crew complaints • Slow start time • Low productivity • Poor quality or wrong installation • Factors • Compatibility of documents with the work activity • Comprehension of documents by crew An AGC Construction Learning Tool

28. Problem: Construction Documents Inadequate or in Error • Solutions: • Clarify documents with your crew ASAP • Contact architect/engineer • Review documents before assigning crew An AGC Construction Learning Tool

29. Activity: Material Delivery • Analyze procurement schedule as of June 1 • Use schedule, procurement schedule and “additional information” from PM • What delays are apparent? • What can be done to avoid delay? An AGC Construction Learning Tool

30. Gatehouse 1 Schedule An AGC Construction Learning Tool

31. Procurement Schedule Solution An AGC Construction Learning Tool

32. Owner/Architect Caused Delay • Establish clear line of communication • Understand relationship of inspectors and owner/architect representatives • Establish reporting procedure for conversations, orders, and directives • Immediate determination of costs and responsibilities for any changes An AGC Construction Learning Tool

33. Types of Unforeseen Delay • Weather occurrences • Owner/architect directives • Latent conditions • Accident or safety delay • Inspector caused delay • Civil disturbance/criminal activity An AGC Construction Learning Tool

34. Using on the Job What You Learned Today • Jobsite Assignment: • Examine current labor productivity • If crews aren’t achieving the estimated productivity, why not? • Discuss productivity with foreman and crew • What can be done to increase productivity? • Is there a problem caused by an unknown condition or a change? An AGC Construction Learning Tool

35. Using on the Job What You Learned Today • Read Session 7 • Examine your project and determine what types of costs are caused by subcontractors. An AGC Construction Learning Tool

36. An AGC Construction Learning Tool