Ten Fixable Causes For Low Productivity and Project Cost Overruns
Project Cost Overrun: Low Estimate or Unfavorable Job Site Productivity
When project labor costs overrun the initial estimate of costs, there are two obvious possible reasons; either the project estimate was too low, or project labor productivity achieved was less than that that should have been achieved. More than likely the reason is a combination of both; an overly aggressive estimate of labor productivity and low productivity relative to what could have or should have been achieved.
In a long career of consulting on hundreds if not thousands of projects it has been my experience that significant overruns (or underruns) are typically not the result of an inaccurate estimate. Instead, it is the labor productivity achieved or not achieved at the project that is the reason a contractor either makes big money or losses big money on a project. Based on my experience on all types of projects throughout a large geographic area, I have made a list of ten common reasons why labor costs have overrun the budget.
Late Starts Early Quits
The eight hour work day has 480 minutes in it. All too often one observes late starts, extended breaks, extended lunch breaks, and early quits. This is not to say that the craft worker should be pounding nails or placing material as soon as the work day starts. A short safety meeting, and a controlled tool box planning meeting yield positive results. However, the meetings must have a structured agenda, and the meeting time controlled. Similarly workers should have time at the end of the work day to clean up, button up the job, and ready the next day’s planned work. However, putting tools down at 3:00pm when the work day ends at 3:30pm makes no sense. Minutes matter; a ten minute late start, ten minutes extended break in the morning, and extended ten minute lunch, and ten minutes of unnecessary early finish adds up to 40 minutes. That is almost ten percent of the work day lost. Most importantly, the firm should have well published guidelines as to how to start the work day and finish the work day. Without a published policy, workers tend to say to their supervisor “my last supervisor did not make me do this”; they play one supervisor against the other. One cannot take the position that every job is different. Consistency leads to the ability to monitor and evaluate.
Transitioning to Work Methods
Less visible but equally troublesome as to labor hour overruns is the lack of transitioning well from one work task to another. It is common for a construction crew to finish a work task during the work day and have to move on to another work task. Unfortunately the transition to the follow up work task is not smooth. All too often there is not a good plan to start up a new work method. Too many workers or too few workers may be present to make the transition. I was present when the photograph on the right was taken. After a prior work task was done in the morning, the crew of workers attempted to start a new work task. As I recall, it took over an hour for the crew to get the in a ready position to start the task. The crew size was such that nearly 8 of the 12workers present did very little during this set up process. It is very difficult to attain the productivity assumed in the estimate for a work method with this type of work start.
More time should be spent by the management team in developing and executing a plan for transitioning from one work task to another work task that is part of the overall project. It is my observation that many supervisors and their crew members often don’t start work methods efficiently.
Matching of Crew Size to Needed Crew Size for Work Being Performed
By the very nature of the way the project estimate is prepared, there are not enough labor hours in the estimate relative to how the supervisor builds the project. No, I am not suggesting that the estimator does not have enough craft hours in the budget for specific work tasks. He likely does. The problem is that the estimate is prepared by estimating individual work tasks with little to no attention as to how other tasks are going on at the same time. The supervisor has to deal with staffing needs for the entire job whereas the estimator prepares the total labor hours by summing how many craft hours are needed for individual work tasks.
It is critical that the supervisor should always be looking ahead and determining how many workers will be needed. While he likely cannot hire and fire workers every day, he may be able to reschedule work tasks to better match the number of workers needed to the number available on a given day.
Lack of Proper Ratio of Supervision
Productivity is very dependent on having the proper amount of supervision and leadership for a work crew. If too little supervision is provided, workers will be non-productive due to lack of direction and focus. On the other hand, if unnecessary supervision is present, it will not be cost effective.
The number and type of craft workers that are required to do a specific work task may be in part determined by work rules. However, when it comes to the number and type of supervision that is provided for a number of craft workers, the contractor can use his or her own discretion. Some of the issues to consider when determining the amount and type of supervision needed for a specific work task include the skills and experience of the workers doing the work, the relative cost of the work, the productivity variability of the work, how critical the work is in regard to dictating the project duration, and if the work is such that worker safety is of concern. The point is that the amount and type of supervision needed to assist craft workers should be analyzed as a function of project duration such that it can be adjusted as needed to enable optimal craft productivity.
Work Activity in Too Many Locations
A good general rule of thumb is that if one spreads themselves too thin, one fails to achieve great success at anything. Often when trying to do too many things at the same time, one finds frustration, lack of progress, and non-performance. The same can generally said of the construction process.
It is my observation that labor cost overruns tend to occur on projects when one observes the contractor performing work tasks at several distant locations at the same project at the same time. While it may be necessary to perform work on several floors of a multi story new project at the same time, or to work at several locations on a highway project at the same time, overall productivity is typlically less than when the workers can start and complete work in a concentrated area and then move on another work area.
One of the reasons why productivity suffers when work is being performed at multi locations is the difficulty of providing adequate supervision and inspection. Another reason is the logistics may lead to material and equipment availability issues.
Start-Stop, Start-Stop of Work Methods
I find that the productivity for doing a work task is typically best when the work can start and continue on uninterrupted to completion. Starting work, leaving it undone, and coming back to it leads to a remobilization of the work process, the need for the workers to get reacquainted with the work, possibly new workers to do the work, and an overall lack of continuity and focus.
The cause of start-stop, start-stop work activities can be many, not all of which are the fault of the supervisor or contractor. It may be that design changes, another contractor having uncompleted their work, or project owner late decision making may be the cause. However, whatever the cause, productivity is typically negatively impacted. The contractor should attempt to plan work such that there is minimal need to go back and finish previously started work. If the cause is outside the control and responsibility of the contractor, documentation should be made such that the entity causing the issue can be held accountable.
Workers Out of Work; Waiting for a New Assignment
While there may be exceptions, I find that most construction craftsmen will work productively and hard when they are assigned meaningful work that they understand and know how to perform. However, it is when the craft worker is done with a work task and does not know what to do next that leads to non-productive work time.
The nature of construction work is such that craftsman will typically finish an assigned work task prior to the close of the work day. The ratio of the number of supervisors to craft workers is such that the supervisor cannot always be present when a worker or a crew of workers completes a work task. As such, it is crucial that the craft worker be informed of what to do when they complete a work task or a work task is interrupted due to unexpected events. My studies indicate that it is common to find ten or more percent of work time being non-productive due to workers completing a work task and waiting on their supervisor to tell them what to do next. It is not enough to tell a worker or crew what to do, it is equally important to inform them what to do when they get done; i.e; a secondary task.
Lack of Urgency and Prioritizing
When one walks an in-progress construction site, one views craft workers performing needed work by using equipment and tools to place permanent materials for a building, a road, a bridge, etc. It is an exciting process to view the many work activities going on at the same time during the construction process.
However, on most projects, it is difficult to observe any sense of urgency or priority when it comes to what work activities are more important than others as to the project goals of schedule duration and project cost. For example, when observing an in-process project with a half dozen work activities being performed by craft workers concurrently, without having knowledge or the Critical Path Schedule, it is difficult to pick out which crew is working on a critical path work activity; i.e. an activity that is in part determining the project duration. The point to be made is that it is typically impossible for the contractor to promote a high degree of urgency to every activity going on at a project each and every day. There is just to much work to be performed and to many days. Therefore, it is at least important to instill a degree or urgency to work that is most important; I refer to this as focusing on the vital work activities. Work should be prioritized and communicated to the workers such that there is a degree of urgency.
Redo Work and Punch List Work
The key to a productive project is doing work once. However, it is rare to find a project that doesn’t have a need for some redo work during the project or punch list work at the completion of the project. Redo work and punch list work are so common in the construction process that the terms redo work and punch list are even in most construction dictionaries. Typically there are no hours in the construction estimate/budget for redo work or punch list work. As such, any craft hours performing redo work or punch list work come right out of anticipated profits.
Instead of accepting these common construction productivity defects, the construction firm should be proactive to reduce or eliminate redo work and punch list work. As a start, the firm must first investigate the cause of redo work and/or punch list work. Included in the causes are poor worker instructions, inadequate worker training, unsupervised work, inadequate tools or materials to do the work; and on occasion, the need to do redo or punch list work in that the initial work was harmed by others to include personnel from other contractors or project owner occupants. Once the cause is determined, the cause can be addressed. The goal should be zero defects or zero occurrences of redo work and punch list work.
Added Work and Change Order Work
I have yet to be involved with a significant sized construction project that didn’t have at least some change order work that had to be performed. The change order work may entail the need to use a different work method, added or deducted work, or a change in the quantity of work that must be performed.
Change order work is often viewed by the contractor as an opportunity in that it may allow for a higher profit margin than base bid work owing to the fact that the contractor likely will not have to compete against other bidders for the work. In fact change order work can be profitable. However, the fact remains that change order work can upset the apple cart in regard to changing the sequence and work process for previously planned base bid contract work. Change order work may require a dilution of crew sizes and crew make-up. Change order work can change the sequencing of base bid work to include having workers performing work at too many locations at the same time. Change order work can also dilute the availability of needed supervision for all the work that is ongoing at the same time.
The end result is that the contractor should be in a position to document any productivity impact that may be the result of the cause and effect of change order work. To the extent possible the added cost associated with the productivity impact should be included in the cost of doing the change order work.
The construction bidding process is very competitive. The result is that profit margins of the contractor are very thin and are very sensitive to the craft productivity achieved on a project. My studies tell me that as little as a five percent difference in the actual craft productivity achieved relative to the estimated productivity can double the planned profits in the bid or can wipe out the planned profits in the bid. Clearly, the focus of the successful contractor should be on craft productivity. Part of this focus should be on what distracts from productivity. In this article, I have summarized my findings and observations of common reasons why productivity is not achieved. The intent is to focus the contractor’s attention to preventing these common causes for low productivity. Only then can the contractor achieve the profit that the firm clearly deserves from taking risk and performing the hard work associated with the construction of the buildings, roads, bridges and other projects they construct.