When it comes to predicting labor costs in construction, the results vary widely. There are many reasons for this and this blog will take a look at some of the most prevalent. In order to truly begin to accurately predict labor cost, your team must first fully understand the scope of the project as well as their capabilities. Even when that is achieved, other factors must be understood as well as their impact. For instance, what is the impact of a material delay? How about scheduling issues? ALl of these things must be captured and assessed in order to understand their net effect and allow you and your team to pivot.
1: Break Down Your Estimate To An Appropriate Level
In order to begin to work on accurately projecting final labor costs, it's imperative to break down your estimate to an appropriate level to identify how "done" a specific piece of the project is. Take a multiple level office building. You may currently have a bank of hours that you assign to labor codes. How do you know the True Percent Complete of each task? At best it is a guess and it is wildly inaccurate. If you are using your accounting system to tell you what is "done", unfortunately, you are even worse off. To truly begin to accurately understand what "done" really means, you must be able to visually see what work has been "done" and what work is left to do. Don't know where to begin? Reach out to WEM® and we can help with that process.
Identify, Capture and Review Distractions
Jobsite distractions are the single biggest culprit for the variation in labor costs from project to project. These distractions are one of the main reasons that we make 40% margin on one project and lose 20% on the next. In order to account for this, we need to do 3 things. Identify and capture the distractions. This can be done using Short Interval Scheduling or SIS®. Utilizing this tool, we schedule our team for work to be completed and they identify and capture the obstacles/distractions that prevent them from completing that work. These distractions are all logged inside of a single platform. Once that information is identified and captured, the final step is to review that data with the project team weekly in order to pivot away from.
2: Use The Right Tool To Analyze All Data
Once you've broken down your estimate into visible pieces, it's time to put that process to work for you. Each week, take inventory of the 'work" that has been completed. Do this visually. This is key. If you expect 6 offices to be completed in a certain area in a given week, walk the job to see how much of that is actually completed. Once confirmed and you have your percentage of completion, you must use the correct tool like JPAC® to analyze the data and give you an accurate labor cost projection.
Accurate labor costing is no longer a pipe dream It just takes careful planning as well as use of the right tools. WEM® software is dedicated to helping contractors achieve these kind of results on all of their projects. Our mission is simple: Productive Labor, Profitable Projects, Predictable Results.