Construction Labor: Costs and Unions

1. Construction Labor: Costs and Unions Module 6.1 Halpin Chapter 13, and Others October 29, 2002

2. RAT #06-01-1 • Take out a piece of paper, put your name on it, and … … • What is a CPFF Contract and what are they used for? (take 2-minutes) • Turn in … … Maxwell

3. Purpose • To expose students to some facts about the relationships between labor and management and how it will impact them. • To provide a basis for understanding how labor costs are determined and charged against projects. Maxwell

4. Learning Objectives • Students must be able to outline the overall history and impact of Labor Unions in general and upon construction in particular. • Students should be able to compute labor rates and costs from given data and circumstances. Maxwell

5. Labor is THE Major Resource • Labor Productivity • Labor Costs • Labor Laws • Labor Organizations Maxwell

6. Labor Legislation • Table 13.1 – Goes from Sherman Antitrust Act (1890) to Civil Rights Act (1964) • Formation of AF of L (1886) to the Consolidation of AFL-CIO (1955) Maxwell

8. A Short History … • 1890: Sherman Antitrust Act used to break up Unions – Pinkertons hired as private armies by Corporations to bust strikes. • 1932: Norris-LaGuardia Act (anti-injunction) prevented courts from protecting Corporations from the formation of Unions. • 1931: Davis-Bacon Act forced Corporations to pay “prevailing” wage on Federal Projects. • 1938: Fair Labor Standards Act forced Corporations to pay a minimum wage. Maxwell

10. A Short History … • 1935: Wagner Act – National Labor Relations Act established a list of unfair labor practices by employers. (Table 13.2) • 1947: Taft-Hartley Act curbed union abuses resulting from WW II labor shortages. (Table 13.3) • Look at the details in Tables 13.2 and 13.3 and contrast the results. Maxwell

11. Texas “Right to Work Law” Maxwell

12. Exercise # 6.1.1 • Take out a sheet of paper and write you name and team. • Individually, If you have been employed in Texas, what was the job and the hourly rate? • As a team, generate a single list. • As a class, let’s discuss the effect of the “right to work” law on you. Maxwell

13. Other Legislation • Protects Individuals from abuses by Labor and Management • Provides improved oversight over union elections • Provides increased government over record keeping and finances • Protects union members from racial and sexual discrimination Maxwell

14. How is Labor Organized? • Organized by Industry – Congress of Industrial Organizations (CIO): United Auto Workers, United Mine Workers • Organized By Craft: American Federation of Labor: Iron Workers, Bricklayers, etc. • The AFL-CIO formed in 1955. Maxwell

15. Construction Unions Maxwell

16. Local Unions • Local Union Business Manager – Employee of the Union. Responsible for ensuring a pool of skilled workers available, etc. (Ideally!) • Shop Steward – Your employee usually elected by fellow workers to provide a working interface between them and the local union and the company supervisors. (Ideally!) • If you have the right political skills and everyone (including yourself) is honest and fair, you can work this arrangement to your advantage. (Sweetheart Unions) Maxwell

17. Jurisdictional Disputes and/or Enforcement of Work Rules • This is a big problem as seen by construction management because it determines WHO does the work. This in turn may dictate how the work is done. • Labor sees this as a way to protect the jobs of members. • Source of many blatant union and company abuses. • MBTA Example • T.C. Cage BBNP example. Maxwell

18. RAT #06-01-2 • Take out a sheet of paper, put your name on it, and … … • Take 2-minutes to describe the impact of the Texas “Right to Work” Law. • Pass to the aisle and front in 30 seconds. Maxwell

19. Labor Costs • Labor Costs fall into four general categories. • Direct: those costs that actually go into the product. Includes the employee’s share of insurance, pension, taxes, etc. • Fringe Benefits: includes: insurance (employer’s share of, health, life, disability, unemployment, etc.), pension (401k, etc.), vacation, holidays, sick leave, “personal days”, etc. • Taxes: Employer’s share of FICA, unemployment, worker’s compensation insurance, pension, etc. • Indirect: Includes training, subsistence, travel, etc., termination expenses. Maxwell

20. This is an example of how complex the math can get for non-exempt personnel. Question: Who is “exempt” from the protection of the “wages and hours” law? Why does it matter? How are these numbers usually demagogued?

21. Exercise # 6.1.2 • Depending on the actual percentages and what they apply to, it may be cheaper to pay premium time for a reduced work staff that to hire extra workers at straight time. • Can you come up with an example? Maxwell

22. Example of How to Use This in a Consulting Environment. • Labor Cost is the critical factor in Consulting. • The largest component is “exempt” personnel. • What follows is and interesting example of “the arithmetic” of consulting. Maxwell

23. Overhead (a.k.a., Indirect Cost) Calculation “Dead Time” Maxwell

24. Revenue Required to Maintain the Company. Maxwell

25. Contracting and Negotiating Numbers Maxwell

26. What Happens When You Don’t Generate Backlog. Maxwell

27. Affect of Overrun on Fee Maxwell

28. PAT #6.1.4 • Take out a sheet of paper, write you name and team. • You are the Project Manager. • Your billing rate to the client is $150/hour. • If the direct salary multiplier (includes: overhead, fringe benefits, etc.) is 3.00 and you worked 50 hours last week, what was your gross (before taxes, etc.) pay? • Turn in your answer after 1-minute of think time. Maxwell

29. Module Assessment • Please take 1-minute to write down the “muddiest” topic on a sheet of paper and pass it to the front. Maxwell