Introductions

•Participant introductions
– Name
– Experience in the construction industry
– Current position, company, and project
– Experience using construction cost
management

1-2
 Unit 5 Overview
• Understand how the process of estimating and pricing, from
concept through detailed estimating to change orders.
• Understand how cost reporting can improve the overall success
of a project.
• Know and apply important project cost management principles.
• Know and apply basic management ideas, principles, and skills
that will enable you to immediately manage the crew on your
construction project more effectively.
• Proactively manage project costs.
• Proactively manage various risks/potential delays that could
impact your project.

1-3
 Session List
• Session 1: Introduction to Improving Productivity and Managing
Project Costs
• Session 2: Construction Estimates, Planning and Scheduling
• Session 3: Who Controls Project Costs?
• Session 4: Reporting and Analyzing Actual Costs
• Session 5: Planning for Cost Control
• Session 6: Cost Control Strategies
• Session 7: Quantifying Lost Labor Productivity
• Session 8: Equipment Management for Productivity Improvement
• Session 9: Working with Project Partners
• Session 10: Post-Project Evaluations

1-4
 Learning Objectives
• Identify how contractors obtain work and the
process that leads up to the physical
construction process.
• Recognize the role of the contractor’s staff and
the designers in the pre-construction phases of
the project.
• Indicate how a project is obtained and how that
process relates to the construction of the
project.
1-5
 A New Project
• Why is this project being built?
• What is the scope of our work?
• Who is the “owner”?
• Is our client someone other than the owner?
• Who designed the project?
• How much should it cost?
• Which costs do I have control over?
• How long should it take to build?
1-6
The Construction Process

1-7
 The Pre-Design Phase
• Developing the project budget
– What can the owner afford/finance?
• Developing the schedule
– When will the facility be needed?
• Determining the program (the project’s physical
parameters)
– Amount of area needed/wanted.
– Types of space.
– Building type.
– Starting point for the design.
1-8
 The Design Phase
• Schematic design
– Floor plans, elevations, site plans.
• Design development
– Progression of design; includes structural,
electrical, and mechanical, modeling of
components, including clash detection.
• Construction documents
– Completion of details, production of drawings, and
specifications.
1-9
 The Bid
• Occurs after completion of construction
documents by the designer.
• Could be negotiated, select bidders list, or
public bid.
• Every contractor has his or her own
procedures for compiling the bid.

1-10
 Examine Documents
• A contractor will determine whether to bid the project based
on:
– Size of project
– Type of work
– Geographic location
– Work relationships (owner, architect, engineers)
– Quality of documents
– Schedule
– Special conditions
– Prevailing wage requirements
– Disadvantaged Business Enterprise utilization
– Financial arrangements

1-11
 Estimating Process
• Review and understand construction documents.
• Decision to bid and planning for the estimate.
• Conduct a site visit.
• Develop a subcontractor contact list.
• Complete a quantity take-off.
• Price labor, equipment, materials, subcontractors
and other costs ( including general conditions).
• Determine the bid price.
• Submit the bid.
1-12
 Estimating Process
• SPECIFIC ISSUES FOR CONSIDERATION:
– Bidding time
– Surety bond requirements
– Consistent with company business plans
– Personnel required
– Cost of bidding
– Other projects being bid
– Equipment
– Supervision
– Support staff
– Finances
– Adequacy of company resources

1-13
 Estimating Process
• SPECIFIC ISSUES FOR CONSIDERATION (continued):
– Competition
– Experience with parties to the contact
– Design considerations in the contract
– Conditions in the contract
– Quality of documents
– Labor supply
– Licensing
– Community Relations
– Availability of suppliers and subcontractors
– Time
– Availability of funds
– Special requirements

1-14
 The Rest of the Process
• Owner selection of a contractor
– Indication of award of the contract.
– Notice to proceed.
• The construction phase
– Actual construction of the project.
• Post-construction phase
– Move-in.
– Maintenance and operating instructions.
– Warranty period.
1-15
 Project Delivery Methods
• CM at-Risk: A construction manager is first hired and takes
on the risk of building a project. The designer is later hired
under a separate contract.
• Design-Bid-Build: Separate contracts for constructor and
designer. The building is designed before sent to bid.
• Design-Build: One entity contracted to complete the design
and construction.
• Integrated Project Delivery: A collaborative process that
harnesses the talents and insights of all participants to
reduce waste and optimize the whole project through all
phases of design, fabrication, and construction.
1-16
 Construction Contract Types
• Guaranteed maximum price (GMP)
– A maximum price is guaranteed, both owner and
contractor benefit if costs are minimized.
• Lump-sum basis (LS)
• Time and materials (T&M)
• Actual cost plus a fee
• Unit-price

1-17
 The Project
• Project plans are included
• Project elements:
– Site excavation and grading
– Two bridges
– Two gatehouses
– Office building
– Receiving warehouse
– Foundations and slabs for three warehouses
– Paving and landscaping
1-18
 Session 1 Review

• Pre-Construction Phases
– Pre-design
– Design
– Bid/award
• The Estimating Process
• Project Delivery and Contract Types
• The Project

1-19
 Apply What You Have Learned
Learn some of the history behind your project:
• What was the intended use of the project and how did this
new project start?
• What involvement did your company have in the design
phase, if any?
• How and when was the construction estimate for the project
completed?
• Is there a plan for the project to be LEED certified?
• Did your firm use Building Information Modeling (BIM) in the
pre-construction phases for the project?
Will BIM be used during construction?
1-20
 Looking Forward to Session 2
• Learn about the estimate that was required
for your firm to win the job you are currently
on.
• Bring an engineer’s scale and an architect’s
scale to the next session.

1-21
 Learning Objectives
• Identify and prepare a conceptual estimate.
• Review quantity take-offs.
• Perform take-offs.
• Review the pricing of an estimate and compile an
estimate.
• Complete a subcontractor selection process and
select subcontractors for an estimate.

2-2
 The Conceptual Estimate
• Developed early in project development.
• Limited accuracy.
– Large contingency may be required (depending on
contractor’s database).
• Usually based on simple parameters.
– Such as gross area multiplied by the square foot
cost for similar projects.
• Helps the owner make basic decisions about
moving forward with the project.
2-3
 A Simple Conceptual Estimate
Item Type Area SF Cost Total Cost

Building A Office Building 20,000 $100.00 $2,000,000

Building B 65,000 $65.00 $4,225,000

Warehouse
Site Development 225,000 $2.00 $450,000

Site Utilities 225,000 $1.50 $337,500

Parking Lots 50,000 $2.20 $110,000

Landscaping 90,000 $1.30 $117,000

$7,239,500

Contingency 20% $1,447,900

Total Construction Costs $8,687,400

Figure 2.1

2-4
 Conceptual Estimate Summary Sheet
for the Project

Item Description Area Unit Unit Price Cost

Site Development Entire Site 3,525,000 SF $ .20 $ 705,000
Bridges 2 Each 7,200 SF $ 100.00 $720,000
Site Utilities Entire Site 3,525,000 SF $ .20 $705,000
Truck Access Paving 624,483 SF $ 2.72 $1,698,594
Parking Lots +90,000 SF 141,750 SF $ 2.09 $ 296,258
Landscaping 75,474 SY $ .81 $ 61,134
Gatehouse 1 200 SF $ 150.00 $ 30,000
Gatehouse 2 200 SF $ 150.00 $ 30,000
Building A Receiving Building 35,000 SF $ 33.51 $1,172,850
Building B Warehouse 250,000 SF $ 33.51 $8,377,500
Building C Warehouse 250,000 SF $ 33.51 $8,377,500
Building D Warehouse 250,000 SF $ 33.51 $8,377,500
Office Building 25,000 SF $ 103.43 $2,585,750
Total Cost $ 33,137,086
20% Contingency $6,627,417
Total Budget $ 39,764,503

Completed Form 2.1

2-5
 Creating the Project Budget
Project spread over three years to finance:
• Phase I: Site work; gatehouses; bridges;
Building A for offices; slabs of Buildings B, C,
and D; site asphalt paving and landscaping.
• Phase II: Complete three warehouse buildings.
• Phase III: Construction of new office building,
remodel Building A.

2-6
 Phase I Budget

Figure 2.3

2-7
 Phase II Budget

Figure 2.3 (Continued)

2-8
 Phase III Budget

Figure 2.3 (Continued)

2-9
 The Detailed Estimate
• Identifies assembly elements.
• Detailed take-off of material quantities.
• The more detailed the estimate, the more
accurate the estimate can be.
– As the documents increase in detail, the estimate
increases in detail, and the included contingency
decreases.
– More accurate than the conceptual estimate.
– Little or no contingency is added.
2-10
 The Detailed Estimate
The Detailed Estimate Includes:
• A break down of the work by categories of similar items or as required by the bid
form.
• Quantification of similar elements of work for each category for costing.
• Determination of a construction plan.
• Determination of a construction schedule.
• An estimate of cost of labor, material, equipment, subcontractors and service
providers for each element of each item of work.
• The direct and indirect cost of the work which includes all the cost elements.
• Solicitation and receipt of quotes for materials, services by others and work to be
subcontracted.
• A summary of all elements of costs (labor, material, equipment, subcontractors
and service providers) to determine the total estimated cost of work.
• Analysis of risk the project should bear.
• Determination of a markup to be added to the cost of work to produce a selling or
bid price.

2-11
 Commonly Used Conversion Factors

Figure 2.4

2-12
Relationship of Estimating, Accounting, and Productivity

Figure 2.5

2-13
 Concrete Quantity Take-Off
Item Cost Item Quantity Unit
Grade Beams Form Beam Sides 30,000 SFCA
Reinforcing Steel 23.7 Tons
Place Concrete 611 CY
Chamfer Strips 2,500 LF
Float Top 2,500 SF
Embeds 1,250 Each
Slab-on-Grade Fine Grade 250,000 SF
Compacted Base Course 3,361 CY
Vapor Barrier 282,500 SF
Reinforcing Steel 183.7 Tons
Edge Form 2,500 LF
Screeds 5,000 LF
Expansion Joint 4,861 LF
Finish 250,000 SF
Cure 250,000 SF
Box-Out Columns 108 SF

Completed Form 2.2

2-14
 Concrete Quantity Take-Off
Project Concrete Recap Sheet Labor Material

Man- Unit
Cost code Item Quantity Unit Unit/hr hours Cost/hr Total Labor Cost Total Mat. Total Cost

03 03 03 Grade Beams
03 03 03.01 Form Beam Sides 30,000 SFCA 10 3000 $ 45.00 $ 135,000 $ 0.35 $ 10,500 $ 145,500
03 03 03.02 Reinforcing Steel 23.7 Ton 0.0375 632 $ 50.00 $ 31,600 $ 500.00 $ 11,850 $ 43,450
03 03 03.03 Place Concrete 611 CY 3 204 $ 42.00 $ 8,554 $ 52.00 $ 31,772 $ 40,326
03 03 03.04 Chamfer Strips 2500 LF 200 13 $ 45.00 $ 563 $ 0.10 $ 250 $ 813
03 03 03.05 Float Top 2500 SF 300 8 $ 42.00 $ 350 $ - $ - $ 350
03 03 03.06 Embeds 1250 Ea 3 417 $ 50.00 $ 20,833 $ 17.00 $ 21,250 $ 42,083
Total Grade Beams 4273 $ 196,900 $ 75,622 $ 272,522
03 03 04 Slab-on-Grade
03 03 04.01 Fine Grade 250000 SF 400 625 $ 42.00 $ 26,250 $ - $ - $ 26,250
03 03 04.02 Slab Gravel 3361 CY 5 672 $ 42.00 $ 28,232 $ 10.50 $ 35,291 $ 63,523
03 03 04.03 Vapor Barrier 282500 SF 1000 283 $ 42.00 $ 11,865 $ 0.02 $ 5,650 $ 17,515
03 03 04.04 Reinforcing Steel 183.7 Ton 0.05 3674 $ 50.00 $ 183,700 $ 500.00 $ 91,850 $ 275,550
03 03 04.05 Edge Form 2500 LF 20 125 $ 45.00 $ 5,625 $ 1.00 $ 2,500 $ 8,125
03 03 04.06 Screeds 5000 LF 40 125 $ 45.00 $ 5,625 $ 0.30 $ 1,500 $ 7,125
03 03 04.07 Expansion Joint 9000 LF 40 225 $ 45.00 $ 10,125 $ 0.32 $ 2,880 $ 13,005
03 03 04.08 Place Concrete 4861 CY 2 2431 $ 42.00 $ 102,081 $ 52.00 $ 252,772 $ 354,853
03 03 04.09 Finish 250,000 SF 120 2083 $ 42.00 $ 87,500 $ - $ - $ 87,500
03 03 04.10 Cure 250,000 SF 1000 250 $ 42.00 $ 10,500 $ 0.06 $ 15,000 $ 25,500
03 03 04.11 Box-Out Columns 108 SF 6.5 17 $ 45.00 $ 748 $ 2.50 $ 270 $ 1,018
Total Slab-on-Grade 10509 $ 472,251 $ 407,713 $ 879,964

Pricing for Form 2.2

2-15
 Selecting Subcontract Bids
• Bid analysis is necessary to determine:
– Lowest prices, including full scope.
– No duplications.
– No “holes.”
– Responsible subcontractors.
– Preferred subcontractors (those you have a long-
term relationship with and have used in the past).

2-16
 Combination Bid Analysis

Figure 2.6

2-17
 Subcontractor Selection
Section Description Bidder Price
31 64 00 Piles/Caissons Northwest Caisson $1,220,990
32 12 16 Asphalt Paving Statewide Paving $1,730,000
32 90 00 Landscaping Mulchers, $ 42,000
LGL Sprinkler $ 35,000
03 45 00 P/C Deck Panels PC Precast $ 85,000
05 10 00 Structural Steel Steel Struct, Inc. $ 175,000
05 20 00 Metal Joists Steel Struct, Inc.  
05 30 00 Metal Deck Steel Struct, Inc.  
06 40 00 Arch. Woodwork Chris’s Cabinets $ 7,200
07 20 00 Insulation Quick Insulation $ 35,000
07 50 00 Membrane Roofing Local Roofing $ 89,916
07 60 00 Flashing Local Roofing  
08 31 00 Overhead Doors Door & Window Co. $ 18,000
08 80 00 Glazing/Windows Door & Window Co.  
09 25 00 Gypsum Drywall Universal Finishes $ 7,300
09 65 00 Floor Covering Universal Finishes  
09 90 00 Painting Universal Finishes  
23 00 00 Mechanical Charlie’s Plumbing $ 249,000
26 00 00 Electrical Ellen’s Electrical $ 309,000
  Total Subcontracts   $4,003,406

Completed Form 2.3

2-18
 Session 2 Review
• Conceptual estimates may be based on specific project
areas (measured in SF).
– Conceptual estimates are used to establish the project budget.
– Contingencies allow for the uncertainties at a specific time in
the project design.
• More detailed estimates are prepared as the documents
are completed.
• A take-off of quantities is completed to provide more
detail estimates.
– These quantities are used to estimate labor, material, and
equipment.

2-19
 Session 2 Review
(Continued)

• Subcontractor selection is completed using an

analysis based on the candidates’ capabilities,
scope and price.
• A project plan and schedule are usually
prepared using either a bar chart format or a
critical path method format.
• An updated project plan is needed to help the
supervisor avoid incorrect management
decisions
2-20
 Apply What You Have Learned
• Look at the original estimate for your project.
– How is it organized?
– How is the information condensed for owner’s billings?
– How was the data generated?
– How were subcontractors selected?
– Is there a correlation between subcontractor selection and
subcontractor problems on the job?
– Is the estimate organized into crew activities?

2-21
 Looking Forward to
Session 3

• Become familiar with the type of cost control

system your firm uses.
• Evaluate the cost reporting and control system
on your project

2-22
 Learning Objectives
• Analyze the relationship between the estimated costs
and those reported within the cost control system.
• Define the relationship between cost and the degree
of risk inherent to the project.
• Classify major risks innate to every construction
project.
• Define the individual responsibilities for project team
members relative to project cost control.

3-2
 From Estimate to Construction
• The Construction Estimate:
– Is a carefully measured, quantified, and priced
prediction of the costs, assuming:
• Scope of work does not change from what is represented
on the construction documents.
• Project will be built during a particular time period,
adhering to a specific schedule.
• Site conditions will be as observed or reported.
• Labor crews’ productivity can be predicted based on the
assumption in the contractor’s estimate with consideration
of experience from previous similar projects.

3-3
 Cost Control
• The goal of cost control is to ensure you are
building to the estimated costs.
– Ideally equal to or less than the estimated amount
(at least in most cases).
– Project fee is increased when costs are less than
estimated.
– The goal is to manage costs effectively.

3-4
 Typical Mistakes in Estimates
• Inaccurate calculation of quantity of material (too
high or too low).
• Use of non-qualified or responsive material suppliers.
• Inaccurate prediction of productivity and labor cost.
• Scope gaps not identified between subcontractors.
• Use of non-qualified subcontractors.
• Shortage of equipment or personnel.
• Unanticipated time delays.
• Miss-interpretation of contract clauses.
3-5
 Responsibility for Cost Control
• Estimator
– Responsible for the quality of estimate.
• Project manager
– Responsible for the overall project and primary manager of the
project costs.
• Superintendent
– Responsible for crew productivity and for reporting the actual
amount of work performed by the crews under his or her
direction.

Good communication helps all project team members identify and

understand project challenges.

3-6
 A Role Play in Cost Responsibility

• Roles:
– Project Manager
– Estimator
– Superintendent
• Discuss, maintaining your roles, in groups.
• What resolution did your group reach?

Worksheet 3-1

3-7
 Potential Financial Risks
• Material
– Relatively small risk.
• Labor
– Largest potential risk.
• Equipment
– Tied to productivity estimates for labor.
• Subcontracts
– Could substantially affect total project costs, especially general
conditions and labor productivity.
• Jobsite Overhead (General Condition) Costs
– Extended project schedule will increase these costs.

3-8
 Identifying Cost Risks from
the Construction Documents
• Higher risk areas:
– Significant work areas with multiple crews.
– Complicated/congested work areas.
– Unfamiliar construction processes or systems
– A tight schedule.
– Subcontractor work that may not be on the project’s
schedule.

3-9
 Identifying Cost “Trouble Spots”
on the Project

• Use Figure 3.1 for the project schedule.

• Analyze the project drawings and the schedule
to identify trouble spots in the Project.

Worksheet 3-2

3-10
 Session 3 Review
• The estimate is based on several assumptions
that may change as construction progresses.
• The estimate is based on available information
and should be an accurate prediction of
construction costs.
• All project team members have defined
responsibilities in cost control.

3-11
 Session 3 Review
(Continued)

• Financial risks exist for every project.

– Labor and equipment are usually the most
significant potential risks.
• Project characteristics provide identifiable
potential risks that should be proactively
managed.

3-12
 Apply What You Have Learned

• Identify potential trouble spots for controlling

costs on your current project by reviewing the
estimate and the construction documents.
• Compare the estimate items to the cost
control items. Are they the same?

3-13
 Looking Forward to Session 4

• Become familiar with your firm’s cost control

system.

3-14
 Learning Objectives
• Explain the reasons for implementing cost
controls.
• Review the methods for developing a cost
control system.
• Analyze the cost control process.
• Convert the estimate into cost control items.

4-2
 The Importance of Cost Control
• What is Cost Control?
– Cost control is a systematic analysis of actual
construction costs, including units of measure,
compared with the estimated cost and units,
and the use of that analysis to proactively
manage the actual costs and units to stay
within or near the budget.

4-3
The Contractor’s Accounting System

Figure 4.1

4-4
 Generating Cost Data
• Labor Hours
– Labor is coded to specific activities.
– Cost codes may be organized using MasterFormat
2004 numbers, or developed from a Work
Breakdown Structure.
• Example:
– A labor cost will come from time cards. Cards will
be coded to specific cost items.
– 03 30 02 is cast-in-place concrete.
4-5
Daily Time Sheet for Cast-in-Place Concrete
Work
Date Name Classification 03 30 02-02 03 30 02-03
7/15 Anderson, F.A. Laborer -2 8
Brown, W.R. Laborer -2 8
Carter, I.L. Laborer -2 8
Smith, N.R. Laborer -2 8
Wilson, D.E. Laborer -2 4 4
Hill, J.S. Carpenter 8
Garcia, J.E. Carpenter 8
Smith, H.H. Carpenter 8
7/15 Totals 36 L2 4 L2, 24 C

Figure 4.2

4-6
 Reporting Process
for Labor Hours

Figure 4.5
4-7
Reporting Process for Material Purchases

Figure 4.5
4-8
 Reporting Process for
Company-Owned Equipment

Figure 4.6
4-9
 Analysis of Cost Data
• Information required to examine current
progress.
• The costs to date.
• The production to date.
• The quantity (units) of work completed.
• A comparison of the estimated cost and units
with the current cost and units.

4-10
 Analysis of Cost Data
• Case study: Tim and Tom at Lost Lake
• Bid of $8,320 for installing drywall (taping is a
separate line item)
• 10,667 SF
• 160 labor hours at $52/hr
• 2 installers (Tim and Tom) for 2 weeks

Worksheet 4-1

4-11
 Analysis of Cost Data
(Continued)
• Tim and Tom want to take a day off and go
fishing. To accomplish this they must:
– Complete all work in nine days or less instead of
ten.
– Cover their wages for the last day $832 + $250 in
estimated expenses.
– Use the cost data from Week 1 to forecast their
final costs and determine whether they can go
fishing.
4-12
 Tim and Tom’s
Week 1 Cost Analysis

Monday Tuesday Wednesday Thursday Friday Total

1-June 2-June 3-June 4-June 5-June

Hours 16 16 16 16 16 80

Production 1,050 1,280 1,280 1,050 1,280 5,940

Cost at $52/Hr $832 $832 $832 $832 $832 $4,160

Cost/SF $0.79 $0.66 $0.66 $0.79 $0.66 $0.70

As Per Bid at $819 $998 $998 $819 $998 $4,632

$0.78/SF

Daily Cost $ (13) $166 $166 $ (13) $166 $ 472

Variance

Completed Form 4.1

4-13
 Information from Cost Data
• Their average production cost for Week 1 was
$0.70/SF—better than the $0.78/SF
estimated.
• They achieved $0.66/SF cost per unit on three
days.
• The costs were $472 below what was included
in the estimate for this week.

4-14
 Typical Analysis Information
from Cost Data
• Quantity of work remaining
• Current percentage of work completed
• Current cost variance
• Forecasted unit cost
• Projected cost of remaining work
• Projected variance
• Percent variance

4-15
 Analysis of Tim and Tom’s Cost Data Week 1
(Continued)
• Projected cost remaining
– Quantity remaining x Forecasted unit cost
– 4,727 x $0.70 = $3,308.90
• Projected variance
– Estimated cost – (Current cost + Projected cost remaining)
– $8,320 – ($4,160 + $3,308.90) = $851.10
• Percent variance
– Projected variance/Estimated cost
– $851.10/$8,320 = 10.2%

4-16
 Should Tim and Tom Go Fishing?
• Forecasted time to complete the work:
– 4,727/4 days = 1,182 SF necessary per day. They can
accomplish this.
• Forecasted cost:
– Projected savings of $851.10, which covers their
wages. They will have to finish early to pay for fishing.
– 2½ hours early on Thursday = $260.00
• Decision:
– Go for it!
4-17
 Tim and Tom’s
Week 2 Cost Analysis
Monday Tuesday Wednesday Thursday Total for Week Total
8-June 9-June 10-June 11-June

Hours 16 16 16 11 59 139

Production 1,280 1,280 1,280 887 4,727 10,667

Cost at $52/Hr $832 $832 $832 $572 $3,068 $7,228

Cost/SF $0.65 $0.65 $0.65 $0.64 $0.65 $0.678

As Per Bid at $998 $998 $384 $692 $3,687 $8,320

$0.78/SF

Daily Cost $166 $166 $166 $120 $618 $1,092

Variance

Completed Form 4.3

4-18
 Analysis of Cost Data
Labor Material Total

Cost to Date $12,124.00 $2,928.00 $15,052.00

Quantity (SFCA) to Date 4,320 SFCA

Quantity (SFCA) Remaining 6,480 SFCA

Percent Complete to Date 40% 80%

Estimated Cost to Date $13,093.92 $3,024.00 $16,117.92

Current Variance $969.92 $96.00 $1,065.92

Forecasted Unit Cost (SFCA) $2.81 $.34 $3.15

Estimated Cost/SFCA $3.03 $.35 $3.38

Projected Cost at completion $30,348.00 $3,660.00 $34,008.00

Projected Cost/SFCA $2.81 $.34 $3.15

Projected Variance from original $2,386.80 $120.00 $2,506.80

estimate
Percent Variance 7%

Completed Form 4.4

4-19
 Converting Estimate Items
to Cost Control Items
• Cost control items need to be easily identifiable
and unique.
• The work activity must be unique for reporting
and historical cost data.
• A cost control item shouldn’t be too small (in
cost, quantity, or time).
• A cost control item should align with the firm’s
historical cost control database whenever
possible.
4-20
 Converting Estimate Items
to Cost Control, Gatehouses
Item Unit Labor Per Labor Quantity Unit Price Material Total Cost
hours Hour Cost Cost
Footings 5.4 12 $30.36 $364.32 132 SFCA $0.40 $375.47 $739.79

Walls 10.8 24 $30.36 $728.64 528 SFCA $0.40 $856.53 $1,585.17

Slab 2.7 20 $26.64 $532.80 2.7 CY $60 $261.33 $794.13
19 $1,625.76 $1,493.33 $3,119.09
Balance $1,625.76 $1,528.14 $3,135.00
Wall 541 8 $31.82 $446.64 .541 MBF $400/MBF $273.43 $720.07
Framing 7 $27.44
Roof 266 6 $31.82 $355.56 .266 MBF $800/MBF $349.69 $705.25
Framing 6 $27.44
Floor 85 6 $31.82 $190.92 .01 MBF $800/MBF $176.89 $367.81
Framing
Total $1,793.13

Completed Form 4.5A

4-21
 Converting Project Estimate Items
to Cost Control, Bridge 1

Item Unit Man- Per Hour Labor Quantity Unit Material Total Cost
hours Cost Price Cost
Abutment 40 crew $150.34/ $6,013.60 2107 SFCA .50 $1,053.50 $7,067.
Forms hours crew hour
Abutment 5.3 Ton $4,240.00 5.3 Ton $600 $3,180.00 $7,420.
Rebar
Pour 136 CY 8 crew $169.02/ $1,352.16 136 CY $60 $8,160.00 $9,513.
Abutment hours crew hour
Total $24,000.

Completed Form 4.5B

4-22
 Session 4 Review
• Cost control is a systematic comparison of actual
costs and units with estimated costs and units, the
use of that comparison to manage the costs and
units, keeping them on or near the budget.
• Timely cost and unit comparison enables the
contractor to proactively identify and solve
problems.
• Cost and unit data comes from several sources.

4-23
 Session 4 Review
(Continued)

• Cost and unit data must be organized into

activities to allow comparisons with the
estimate.
• The estimate should be organized into work
activities. Most estimate items are small items
and need to be condensed or combined for
cost and unit control reporting purposes.

4-24
 Apply What You Have Learned
Examine your project’s cost control system and
reporting.
• Do you receive daily cost and production reports?
• Does your cost control system give you the
opportunity to make decisions about managing
the costs and units during the progress of an
activity?
• How does your firm establish cost control items?

4-25
 Looking Forward to Session 5

• Examine how your firm develops its cost

control system.
• Examine how your firm uses its cost control
system to evaluate variances and projections
to complete.

4-26
 Learning Objectives
• Explain planning as a primary tool in cost control.
• Develop the bill of materials.
• Prepare a bill of materials for a portion of the
Project.
• Plan labor crews and production to manage
construction cost.
• Prepare a labor plan for the Project.
• Describe how crew feedback during construction can
improve productivity.
5-2
 Cost Management Plan
• Step 1: Establish a budget.
• Step 2: Identify cost activities and cost control
numbers.
• Step 3: Assign responsibility for daily coding and
reporting cost data.
• Step 4: Determine a method of organizing material
purchases for the cost control system.

5-3
 Cost Management Plan
(Continued)

• Step 5: Make activity-based crew assignments.

• Step 6: Determine a method of analysis and remedial
strategy.
• Step 7: Determine a method for obtaining supervisor
feedback.
• Step 8: Develop a reporting method for determining
the impact of subcontractor actions.

5-4
 Identifying Cost Activities
and Cost Control Numbers
• Description of the activity, from start to finish.
• Quantity of the activity.
• Crew for the activity.
• Hours necessary to complete the activity:
– Composite crew cost per hour
– Average hourly cost per hour
– Cost of each craft per hour

5-5
The Responsibility for Daily Coding and
Reporting Cost Data
• Supervisors supply data.
• The superintendent is responsible for ensuring
accurate data is recorded in the cost control
system.

Goal: Report accurate cost information daily.

5-6
 Method for Organizing
Material Purchases

• Identify:
– The specific materials used in the work activity.
– The material costs for the work activity.
– The vendor and purchase order.
– The order and delivery dates.

5-7
 Sample Bill of Materials

Figure 5.1

5-8
 Crew Assignment Information
• Cost code number.
• Description of activity.
• Quantity of work involved.
• Crew composition.
• Time allowed for the activity.
• Cost of labor for the activity.
• Material required for the activity.

5-9
 Crew Assignment Information
(Continued)

• Necessary equipment and cost.

• Necessary tools and location.
• Subcontractors involved.
• Drawings and other information that will
assist the crew.

5-10
 Bill of Materials for Grade Beam

Bill of Materials
Cost Code: 03 03 02 11
Item Quantity Unit Price Total
BB Form-Ply 10,800 MSF $929 $10,033.00
2x4 21.222 MBF $407 $8,637.35
Ties 27 C $75 $2,025.00
Rebar 8.72 Tons $540 $4,708.80
Concrete 220 CY $56.45 $12,419.00

5-11
 Bill of Materials for Bridge 1
Bill of Materials
Cost Code: 03 03 02 11
Item Quantity Unit Price Total
3/4” Form-Ply 2.11 MSF $929 $1,960.19
4x4 12.4 MBF $858 $10,639.20
Ties 1,050 Ea $4.62 $4,851.00
Rebar 5.3 Tons $540 $2,862.00
Concrete 136 CY $60.93 $8,286.48

Note: 2 abutments (2 x above)

5-12
 Crew Assignment for Grade Beam Work
STP Construction Co.
Work Assignment • Sure Fresh Project • STP Project 01-10
Cost Code: 03 03 02 11
Project Area: Building A Grade Beam

Work Description: Form grade beam at Building A Drawing of Details and Work Area:
Document Reference: Foundation plan, sheet 3; Sections, sheet 6
Quantity of Work: 10.800 SFCA formwork
Crew and Rates: 3 carpenters at $52.00 + 1 laborer at $48.00/Hour
Crew Rate: $204/Hour $1,632/Day
Daily Production: 50 LF/day
Time Allowed: 18 days
Labor Cost: $29,376.00
Material: 10,800 MSF B-B OES; 21.22 MBF 2x4 studs/walers;
2,700 snap ties; 5,400 wedges
Material Location: To be delivered to Building A
Equipment/Equipment Cost: Forklift at $100/day
Tools: 4 skill saws; cut-off saw; 2 drills; form oil sprayer

5-13
 Crew Assignment for Bridge 1
STP Construction Co.
Work Assignment • Project • STP Project 01-10
Cost Code: 03 03 02 11
Project Area: Bridge 1
Work Description: Form abutment, Bridge 1 Drawing of Details and Work Area:
Document Reference: Sheet 8
Quantity of Work: 4,220 SFCA formwork
Crew and Rates: 3 carpenters at $52.00 + 1 laborer at $48.00 +
1 equipment operator at $56.00
Crew Rate: $260/Hour $2,080/Day
Daily Production: 422 SFCA/day
Time Allowed: 10 days
Labor Cost: 20,800.00
Material: 2.11 MSF 3/4” B-B OES; 12.4 MBF 4x4; 1,050 rods/catheads
(rental) at each abutment
Material Location: To be delivered close to each abutment
Equipment/Equipment Cost: 30-ton crane
Tools: 4 skill saws; cut-off saw; 2 drills; form oil sprayer

5-14
 Day-by-Day Projection of Budgeted Costs
29-Nov 30-Nov 1-Dec 2-Dec 3-Dec 6-Dec 7-Dec 8-Dec 9-Dec 10-Dec
Budgeted
Daily Labor $1,544 $1,544 $1,544 $1,544 $1,544 $1,544 $1,544 $1,544 $1,544 $1,544
Cost

Accumulated
Labor Cost
$1,544 $3,088 $4,632 $6,176 $7,720 $9,264 $10,808 $12,352 $13,896 $15,440

Estimated
Daily Quantity
200 200 200 200 200 200 200 200 200 200

Estimated
Accumulated 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000
Quantity

Budgeted
Cost/LF Today
$7.72 $7.72 $7.72 $7.72 $7.72 $7.72 $7.72 $7.72 $7.72 $7.72

Budgeted
Cost/LF $7.72 $7.72 $7.72 $7.72 $7.72 $7.72 $7.72 $7.72 $7.72 $7.72
Accumulated

Figure 5.3
5-15
 4-Day Comparison of Actual Costs with Budgeted Costs
 
29-Nov 30-Nov 1-Dec 2-Dec 3-Dec 6-Dec 7-Dec 8-Dec 9-Dec 10-Dec
Budgeted Daily
Labor Cost $1,544 $1,544 $1,544 $1,544 $1,544 $1,544 $1,544 $1,544 $1,544 $1,544
Actual Daily
Labor Cost $1,544 $1,544 $1,544 $2,448            
Budgeted
Accumulated $1,544 $3,088 $4,632 $6,176 $7,720 $9,264 $10,808 $12,352 $13,896 $15,440
Labor Cost
Actual
Accumulated $1,544 $3,088 $4,632 $7,080            
Labor Cost
Estimated Daily
Quantity 200 200 200 200 200 200 200 200 200 200
Actual Daily
Quantity 160 200 155 230            
Estimated
Accumulated 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000
Quantity
Actual
Accumulated 160 360 515 745            
Quantity
Budgeted
Cost/LF Today $7.72 $7.72 $7.72 $7.72 $7.72 $7.72 $7.72 $7.72 $7.72 $7.72
Actual Cost/LF
           
Today $9.65 $7.72 $9.96 $10.64
Budgeted
Cost/LF
Accumulated $7.72 $7.72 $7.72 $7.72 $7.72 $7.72 $7.72 $7.72 $7.72 $7.72
Actual Cost/
LF            
Accumulated $9.65 $8.58 $8.99 $9.50

Figure 5.4
5-16
 4-Day Comparison of Labor Cost Variances

29-Nov 30-Nov 1-Dec 2-Dec

Quantity to
Complete 1,840 1,640 1,485 1,255

Projected Cost at
Accumulated Rate $19,300.00 $17,160.00 $17,980.00 $10,000

Variance from
Budget $(3,860.00) $(1,720.00) $(2,540.00) $(3,560.00)

Figure 5.5

5-17
 Comparison of Actual Costs with
Budgeted Costs, Lowered Productivity

Figure 5.6

5-18
 Method for Obtaining
Supervisor Feedback
• A superintendent will need to know why a problem
happened to solve it.
• Supervisors need encouragement to supply
information.
• You need to have a system that will offer reliable
information.
• If not verbal, then develop a written report for
supervisors.

5-19
 Determining the Impact
of Subcontractor Actions
• Your planning should include:
– Dates subcontractors must be on the project.
– List of subcontractor activities.
– Creating awareness among supervisors regarding
subcontractor involvement.
– A reporting method for problems.
– A predetermined channel of communication.

5-20
 Session 5 Review

• A cost control plan must:

– Identify cost activities and cost control
numbers.
– Determine/assign the responsibility for daily
coding and cost reporting.
– Establish a method of crew assignment.
– Establish a method of cost analysis.

5-21
 Session 5 Review
(Continued)

• A cost control plan must also:

– Establish a planning process for resolving cost
variances and projecting the cost and units to
complete the work.
– Establish a method for supervisor feedback.
– Establish a method of reporting/managing
subcontractor challenges.

5-22
 Apply What You Have Learned

• Determine how your firm completes cost control planning,

analysis of variances, and projections to complete.
• What are some methods that your firm uses to organize
and report costs?
• Does your firm have a standard method to develop crew
assignments?
• Do you use supervisor/crew feedback to solve challenges
on the job? If not, try asking your supervisors what went
wrong on a problem.

5-23
 Looking Forward to Session 6
• Discuss the control of labor costs.
• Familiarize yourself with the ways that your
firm encourages crew productivity,
efficiency and cost savings.
• Discuss the change order process.

5-24
 Learning Objectives
• Identify strategies for obtaining cost data.
• Describe how to use cost control data in minimizing costs.
• Identify causes of additional costs.
• Analyze a jobsite problem.
• Describe methods for recovering compensation for
additional costs.
• Discuss the use of cost control information in identifying
and analyzing change orders and subcontractor back
charges.
• Isolate change order costs.

6-2
 Implementing Cost Control
• Obtain cost data.
– Organize to compare with estimate.
– Report labor hours and cost.
– Report material cost and quantities.
– Report equipment hours and cost.
– Report subcontractor activity and progress.
– Use feedback to resolve problems.

6-3
 Implementing Cost Control
(Continued)

• Analyze the data.

– Compare actual costs with the estimate.
– Identify reasons for any variance.
• Implement recovery efforts.
– Manage the labor force and crew assignments.
– Implement changes to materials, tools, equipment.
– Find sources of reimbursement, such as change orders
or back charges.

6-4
Cost Control Summary

Figure 6.1

6-5
Accounting for the “Learning Curve”

• Production on the activity starts out slow and then picks

up pace.
• Allocate production to take this into account.
• Expect higher productivity later in project.

Day 1 Day 2 Day 3 Day 4 Day 5

Evenly
1,200 1,200 1,200 1,200 1,200
Distributed
Expected
800 1,200 1,200 1,400 1,400
Production

6-6
Review Questions for Supervisors
• Were the instructions/layout adequate?
• Were the details adequate?
• Was there amount of work as expected?
• Were the shop drawings accurate/adequate?
• Was there enough material?
• Was the material in good condition?
• Was the material in a convenient location?

6-7
 Review Questions for Supervisors
(Continued)

• Did you have the correct tools?

• Did the tools operate properly?
• Did you have enough equipment?
• Was the estimated time sufficient?
• Was the crew properly trained for the task?
• Was the crew sized properly for the task?
• Was the crew’s attitude positive?
• Were the working conditions as expected?
• Were the working conditions adequate?

6-8
Review Questions for Supervisors
(Continued)

• Did subcontractors perform as expected?

• Were the subcontractors on time?
• Were inspections called for in time?
• Were the inspections completed on time?
• Was the work approved by the inspections?
• Is everything ready for tomorrow?

6-9
 Management Responsibilities

• Provide accurate work assignments.

• Analyze crew size, makeup and compatibility.
• Provide adequate equipment and tools.
• Provide adequate working conditions.
• Ensure timely material delivery.
• Correlate the activity with the estimate.

6-10
 Compensation from Owner
• Must have agreement.
• Areas where it might occur:
– Errors and omissions in construction documents.
– Discovery of unknown or latent conditions.
– Direction to complete additional work.
– Requirement to complete additional work to
accommodate a specified product.

6-11
 A Role Play in Problem Analysis

• This role-playing activity examines cost

problems, their impact, and how to analyze
them.
• The roles in the groups will be:
– Project Superintendent
– Crew Supervisor
– Designer’s Representative
– Plumbing Subcontractor
– Electrical Subcontractor

6-12
 Cost Control for
Change Orders

• To develop a cost control account for a change

order:
– Develop a detailed description of the work.
– Develop an estimate for each work area.
– Determine a method for isolating and verifying each
cost.
– Record the change order costs.
– Compare the change order estimate with actual costs.

6-13
 Change Order Estimate for Electrical Work
in Project Gatehouses

Section Item Labor Material Subcontract Total

32 90 00 Fencing $ 600.00 $ 600.00
06 41 00 Cabinets $ 408.00 $1,000.00 $1,408.00
26 00 00 Electrical $9,500.00
26 30 00 Underground Conduit $3,000.00
26 05 23 Wiring $2,500.00
27 51 00 Itercom $2,000.00
25 13 16 Control Panels $2,000.00
Total Cost $11,508.00
15% Profit and Overhead $ 1,726.20
Change Proposal Estimate $13,234.20

Figure 6.12

6-14
 Organizing Change Order Cost Information

• Prepare the change order information for the

Project:
– Describe the work.
– Prepare a cost breakdown for the change.
– Prepare a crew assignment isolating the two kinds
of work for cost control.

Worksheet 6-2

6-15
 Dock Seals Work Assignment
STP Construction Co.
Work Assignment • Project
SCC Project 01-10 Date: ___________________________
Cost Code: 11 16 01, 11 16 03 Project Area: Building A

Work Description 11 16 01: (Change Order 2): Install dock seals at the 5 overhead doors, Building A. 11 16 03: Install
dock bumpers at the 5 overhead doors, Building A. Note: Separate cost for dock seal from door bumper.
Dock seals are Change Order 2.
Document Reference Sheets 3, 5, and 6. Section 11 16 00, loading dock equipment. Shop drawings and submittals from Ted’s
Loading Dock Supply Company.
Quantity of Work 11 16 01: 5 Dock Seals
11 16 03: 5 Dock Bumpers
Crew and Rates 1 Carpenter @ $52.00/hour
1 Laborer @ $48.00/hour
Crew Rate $100.00/Hour $800/Day
Daily Production 1 dock seal; or dock bumper and a portion of the dock seal
Time Allowed 11 16 01: Dock Seal: 8 hours
11 16 03: Dock Bumper: 2 hours
Labor Cost (11 16 01) Dock Seal: $800.00 x 5 = $4,000.00
(11 16 03) Dock Bumper: $200.00 x 5 = $1,000.00
Material Door Seals, Dock Bumpers (Ted’s Loading Dock Supply)
Miscellaneous screws and anchor bolts
Material Location In Building A
Equipment/ Rolling Scaffold, No charge
Equipment Cost
Tools Drill # 106, Rolling Dolly

Form 6.1

6-16
 Dock Seals Change Order

Cost Estimate, Change Order ro Provide Dock Seals

Section Description Quantity Labor Crew/Hr Labor Material Total
Hrs/Ea
11 16 01 Dock Seals 5 8 $100 $800 1500 $11,500

15% Overhead and Profit $1,725

Total Change Order Amount $13,225

Worksheet 6-2

6-17
 Subcontractor Back Charges
• You might want to back charge subcontractors
for:
– Work in their contract that was accomplished by your
crew or by use of your equipment.
– Work in their contract that was accomplished by
another subcontractor.
– The cost of causing delays for other crews (this might
be difficult).
– Rework charges.

6-18
 Subcontractor Back Charges
(Continued)

• Practices to observe:
– Be sure the contractor-subcontractor agreement has a
clause allowing back charges.
– Get agreement from the subcontractor’s supervisor on
charges.
– Keep track of exact charges.
– Present a detailed record of the back charge.

6-19
 Session 6 Review
• Cost data need to be organized to indicate trends in cost
variance.
• It is important to discover why the variance is occurring,
regardless of whether the variance is over or under.
• Management can be responsible for some of the
problems.
It is important to recognize the cause and take action
immediately.
• Understand the scope of work, your work and the change
order process.

6-20
 Apply What You Have Learned
• Examine the challenges and cost overruns on your job:
– Is there a pattern to the causes?
• Look carefully at your scope of work and potential change
orders.
– Is there a comparison made between estimated and actual costs?
– Was there work performed outside of your scope of work?
– Were change orders requested for this additional work?
• What will you do differently on the next project?
– Where did you make money on this project?
– Where did you lose money on this project?
– Why did you make money on this job?

6-21
 Looking Forward to Session 7
• Labor costs will vary more than other costs
on most construction projects, so labor is
the main emphasis of managing cost
variances.
• Familiarize yourself with the ways that your
firm addresses, analyzes and measures
productivity, efficiency and cost savings.

6-22
 Learning Objectives
• Identify six different categories of factors that negatively impact
labor productivity.
• Quantify lost productivity for working overtime.
• Quantify lost productivity due to worker learning.
• Quantify lost productivity due to unreasonable crew size.
• Quantify lost productivity due to the number of crews.
• Quantify lost labor productivity because of weather changes.
• Quantify lost labor productivity due to changes in project
logistics.
• Quantify lost labor productivity due to change and change
orders.

7-2
7-3
 Categories of Factors That Negatively
Impact Productivity (negative impact factors)
• Worker ability to do work.
• Work sequencing (continuity of the work process).
• Environmental factors.
• Disruption of the work process.
• Added support activities.
• Human element.

7-4
 Loss of Labor Productivity (Impact)
Due to Changes and External Events
Examples of construction changes include the
following:
• Schedule changed and work shifted into colder temperatures.
• Contractor required to work overtime due to owner or designer
delays.
• Contractor required to add workers to project to accelerate
schedule.
• Contractor required to do work in an unexpectedly crowded or tight
working area.
• Contractor required to store materials farther from project than
planned, due to unavailability of lay-down areas.
• Contractor required to start-stop, start-stop work process because
design documents or design decisions are unavailable.
7-5
 Loss of Labor Productivity
Construction labor productivity is a complex process and the productivity or
units of output produced per person-hour of effort or input is very sensitive to
many input factors:
•The amount and quality of labor, equipment, materials, weather, and expected working
conditions.
•The quality and completeness of the drawings and specifications.
•The expected actions of the project owner.
The contractor’s labor productivity estimate is predicated upon a reasonable
estimate of each of these factors. This is illustrated in the next slide.
 
 
 
 
 
 
 
 
 
 
 

7-6
 Unexpected Events That Negatively Impact
Site Labor Productivity
(outside of the Construction Supervisor’s control)

• Added work due to change orders.

• Changed job conditions (different weather, soil
conditions, material lay-down areas).
• Incomplete drawings or specifications.
• Late project owner and designer decisions.

7-7
 Unexpected Events That Result in Work
Performed Under Adverse Conditions

• Overtime
• Learning curve
• Temperature, wind, humidity
• Start-stop-start-stop
• Double handling of material
• Morale problems

7-8
 Impact of Overtime on Productivity
• Overtime needed to accelerate the work process.
• Construction is hard, physically-demanding work.
When required to work overtime, the onsite craft
worker is likely to become fatigued and do less
than the normal hourly output.
• Studies conducted by the Business Roundtable,
the National Electrical Contractors Association
(NECA) and various contractor associations and
contractor groups illustrate the loss of
productivity, as shown in the next slide.
7-9
Impact of Overtime on Productivity

7-10
 Impact of Crew Size on Productivity
• Ideal Crew Size
• There normally is an ideal crew size and mix for every work task.
• The construction firm and supervisor should collect data from
past performances of work tasks to estimate productivity lost
when crew size is changed.
• Dilution of Supervision
• Supervision is a critical component of worker productivity.
• Studies have indicated a 15% to 20% possible decrease in
worker productivity if needed supervision is absent.
• When workers or crews are added to the supervisor’s workload,
the supervisor’s inability to be in three places at one time will
result in lower worker productivity.

7-11
Impact of “Learning” on Productivity

7-12
Impact of Work Space on Productivity

• Stacking – Available Work Space

• To make up time crew sizes may be
increased.
• To make up time crews may be brought in
before previous work finished.
• Extra workers or crews in a space reduces
productivity.

7-13
Impact of Work Space on Productivity

7-14
 Impact of “Learning” on Productivity
• Learning Curve of Workers
• Worker output is lower with new, unfamiliar work processes.
• Productivity increases as the worker completes the work
processes more times.
• As proficiency increases, output reaches a steady state.
• Studies have modeled a worker’s ability to produce as a
function of how many times he or she has done a work
process. An example is illustrated in the next slide.
• Given the need to accelerate the work process, the supervisor
could use such “learning data” to quantify extra labor hours to
accomplish the tasks.

7-15
 Impact of Environmental Factors
on Productivity
• Adverse temperature (hot and/or cold).
• Humidity.
• Wind.
• Precipitation.
• Noise.
• Poor lighting.
• Significant variation from the expected would
require the supervisor to attempt to quantify the
impact on worker productivity and adjust
accordingly.
7-16
Impact of Temperature on
Productivity

7-17
 Session 7 Review
Look back over Session 7 and review these key points to
be sure you understand them.
• There are six different categories of factors that negatively
impact labor productivity.
• There is a loss of productivity when a worker is subjected to
conditions that were not expected.
• There has been a considerable amount of research
conducted on measuring lost productivity as a function of
various impact factors.
• Change orders can negatively impact overall project
productivity.

7-18
 Apply what you have Learned
• Learn how your firm uses data on the learning curve
for new work processes.
• Determine how your firm gathers and uses data on
work process disruption.
• Determine how your firm gathers and uses data on
environmental effects.
• Determine how your firm gathers and uses data on
human element productivity impacts.
• Learn what data your firm uses when workers or crews
must be added to the work space.

7-19
 Learning Objectives
• Identify the differences between labor and
equipment.
• Describe a ten-step program of improving
equipment productivity.

8-2
 Ten-Step Equipment Productivity
Improvement Program
1. View equipment as money, not 6. Be attentive to scheduling work
just as equipment or metal. tasks around equipment
2. Plan the logistics of equipment. availability.
3. When determining the best 7. Be attentive to proper equipment
method to do a work task, maintenance.
evaluate the benefits of using 8. Always be attentive to working safe
equipment versus labor. with equipment.
4. Be attentive to the work capacity 9. Be attentive to equipment as
of a machine. having an ownership and an
5. Be attentive to the percentage of operating cost component.
time equipment is working 10. Be prepared to model or consider
versus being idle. the interrelationship of two or
more pieces of equipment working
together.

8-3
 Determining the Hourly Cost of
Owning Equipment
Hourly Cost=
Depreciation + Interest + Maintenance + Repair + Operating + Insurance + PT +Repl. + Prod Loss
Hours of Use

Fixed Costs (Ownership) Variable Costs (Operating)

Depreciation Depreciation
Interest Maintenance
Insurance Repair
Property Tax Operating
Replacement Productivity Loss

8-4
 Modeling the Queuing
or Waiting Line Problem
Secondary work task

Queue
= Arrival units
= Service unit

8-5
 Session 8 Review
• View equipment as money, not just as machinery or metal.
• Plan the logistics of equipment.
• Adequately staff equipment with needed labor support.
• Be attentive to the work capacity of a machine.
• Be attentive to the percentage of time equipment is working versus being
idle or in a “support” state.
• Be attentive to scheduling work tasks around equipment availability.
• Be attentive to proper equipment maintenance.
• Always be attentive to working safely with equipment.
• Remember that equipment has an ownership cost component and an
operating cost component.
• Be prepared to model or consider the interrelationship of two or more
pieces of equipment working together.

8-6
 Apply what you have Learned
• While on your projects, focus on a few pieces you are
using at the project and a few workers.
• Using random samples of their work states, calculate
the amount of time each worker and each machine is
in a non-productive work state.
• If you don’t know the equipment’s hourly cost
(ownership and operating), attempt to determine the
hourly cost of each piece of equipment by use of a
cost estimating book or the US Army Corps of
Engineers publication.
  8-7
 Learning Objectives
• Describe the costs and cost effects associated with project partners.
• Explain how to examine scope statements and specifications to
determine project partners’ responsibilities and the scope of work on
the jobsite.
• Describe how to use the construction schedule to track
subcontractor progress.
• Explain methods of providing information to project partners.
• Describe control of changes and cost-plus subcontractor activities.
• Explain back charging to receive compensation from subcontractors.
• Explain the importance of documentation in working with project
partners.

9-2
The Cost Impact of Project Partners

• Spread the risk.

• Improved schedule.
• Improved expertise.
• Greater capacity.

9-3
The Cost Impact of Project Partners

• Exclusions, non-covered work.

• Additional work required by subcontractor.
• Subcontractor default or bankruptcy.

9-4
Working with Project Partners
During the Bid Period
• Cover the scope of subcontractor bids.
• Pre-Qualify Subcontractors – financial, experience,
personnel and work history.
• Exclude irresponsible/non-responsive subcontractors.
• Carefully analyze subcontractors and their scope of the
work.
• Note: The bid period is short and chaotic.
Estimators try to avoid problems, but some inevitably
slip through.

9-5
 Working with Project Partners
During the Buyout Period
• Include all subcontract work in the project
subcontracts.
• Don’t duplicate scope in subcontracts.
• Include all special clauses and requested
exclusions in subcontracts.
• Write the scope statement so that it can be
understood by field management.

9-6
 Working with Project Partners
During the Buyout Period
(Continued)

• Provide the subcontractor with the following

information:
– List of submittals and shop drawings required, and a
schedule of when they are required.
– Construction schedule showing their work activities
(include them in developing this schedule).
– Notification of the pre-construction meeting.

9-7
 Working with Subcontractors
Before They Start Work
• Meetings
– Notify project partners of all applicable meetings.
– Set expectations for who attends.
– Provide meeting minutes.
– Update on progress and changes.
• Advise on schedule progress.
• Conduct an onsite orientation meeting.

9-8
 Subcontractor Orientation
• Job site storage of material and equipment.
• Location for trailers.
• Jobsite access and parking.
• Jobsite security issues.
• Subcontractor’s schedule.
• Coordination with other work.
• Safety program.
• Introduction to key jobsite personnel and procedures.

9-9
 Subcontractor Orientation
• Topics for Orientation:
– Jobsite access.
– Storage of material.
– Schedule for work.
– Weather protection, if necessary.
– Coordination with other work.
– Safety.
– Jobsite security.
– Cleanup.
– Communication channels.

Worksheet 9-1

9-10
 Subcontractor Orientation
• Subcontracts to examine:
– Structural steel, joist, and deck erection.
– Roofing, roof insulation, and flashing.
– Building electrical.
– Building HVAC.
– Building plumbing.
– Overhead doors.
– Windows/storefront.
– Painting.
Worksheet 9-1 (Continued)

9-11
 Working with Subcontractors
While They Are on the Job
• As the subcontractor starts of work, the superintendent
and subcontractor’s supervisor should discuss:
– Quality of work expected.
– Coordination with other work.
– Your expectations for cleanup (in the contract?).
– Hours of work.
– Special security requirements.
– Safety policies and your safety program.
– Access and equipment usage.

9-12
 Documenting Subcontractors
During the Project
• Document subcontractor activities daily.
• Document material delivery to site.
• Document when subcontractors are not
available.
• Document in daily reports and with
photographs.

9-13
 Analyzing a Subcontractor
Change Proposal

Figure 9.5

9-14
 Working with Subcontractors
Before They Leave the Jobsite

• Review with the subcontractor:

– Their work.
– Acceptance of finishes by other subs.
– Any additional cleaning of work and waste
disposal.
– Any protection of work in place.

9-15
 Working with Subcontractors
Before They Leave the Jobsite
(Continued)

• Review with the subcontractor:

– Delivery of spare materials and parts.
– Delivery of operations and maintenance
materials and instruction.
– Provide any as-built drawings.
– Schedule for any additional work.
– Plan for punch list completion.

9-16
 Project Partner Management
• The building envelope must be complete by
October 7 to allow the 30 working days
guaranteed for the Tenant Improvements
contract.
• Read subcontractor action descriptions.
• Discuss, in groups, what could have been
done to avoid the problems.
Worksheet 9-5

9-17
 Project Partner Management

During During Before the

Subcontractor’s
the Bid Buyout Arrival at the Jobsite

Worksheet 9-5 (Continued)

9-18
 Session 9 Review
• Subcontractor performance can impact
cost by:
– Adding labor costs due to delay or lowering
costs by expediting work.
– Not accomplishing work anticipated.
– Requiring additional work by your crews.
– Defaulting or refusing to do work.

9-19
 Session 9 Review
(Continued)

• Management can reduce the cost impact

from subcontractors:
– During the bid period.
– During the buyout period.
– Before subcontractors start work.
– While the subcontractor is on the job.
– Before the subcontractor leaves the job.

9-20
 Apply What You Have Learned

• On your current project, look at the challenges

involving subcontractors:
– What extra costs were caused by these challenges?
– What portion of your time do you spend working
with subcontractors?
– Could you avoid more problems if you spent some
time communicating your expectations with
subcontractors?

9-21
 Looking Forward to Session 10

• Review how your company analyzes

projects after they are completed.

9-22
 Learning Objectives
• Examine post-project data.
• Analyze post-project cost comparison data.
• Analyze problems that affected schedule and quality.
• Describe ways to implement the lessons learned to manage future
projects.
• Describe communication strategies for relaying information to
other project teams to improve productivity on future projects.
• Analyze a case study and discuss the project’s analysis.
• Review the entire STP unit and its impact.

10-2
 Evaluating the Project
• Did the project recover all the company overhead?
• Did the project recover all its project overhead?
• Did the project make its anticipated fee?
• Which items cost less than anticipated? Why?
– How will you share this with other project teams?
• Which items cost more than estimated? Why?

10-3
 Evaluating the Project (Continued)
• Should items be adjusted for the next estimate or were they
unusual?
• What successful processes/techniques can be used in future
projects?
• Is there something identifiable that could have prevented an
overrun on any items? Is it something that could be done in
the future?
• Were there expectations by the owner, designer, and/or
building inspector that should be anticipated in other
projects?

10-4
 Measures of Project Success
• Fee recovery.
• Meeting schedule.
• Quality.
• Safety.
• Customer satisfaction.

10-5
 Evaluation Analysis
• Evaluation of cost reports should determine:
– Project fee recovery.
– Line item performance compared with the estimate.
– Data update for historical cost data.
– The identification of successful methods for
future cost reduction.
– The identification of work processes to be improved.
– The identification of areas that shouldn’t be
self-performed.
– The evaluation of processes/techniques for
current activities.

10-6
 Actions Following Evaluation
• Update/change historical cost data.
• Company adoption of processes, techniques or
equipment for specific activities.
• Determination of alternatives to those activities
failing to meet budget/expectations.
• Seek or avoid projects with comparable attributes.
• Make personnel decisions.

10-7
 Possible Conclusions
from Evaluation
• Effectiveness of management team.
• Future training needs for jobsite personnel.
• Future use of subcontractors.
• Future use of suppliers and/or products.
• Future pursuit of the type of work and geographical
area.
• Willingness to work with designer on future projects.
• Willingness to work with owner on future projects.

10-8
 Evaluation Communication
• The lessons learned from project
evaluations should be shared with:
– Project supervisors.
– Project team.
– Other project teams.
– Upper management.

10-9
 Session 10 Review
• Formally evaluating the project helps plan
future projects.
• The historical cost database is updated
from project cost records.
• Training should be conducted to share the
lessons learned.
• Personnel decisions can be made.

10-10
 Course Review
Session # SESSION DESCRIPTION
1. Introduction to Improving Productivity & Managing Project Costs
2. Construction Estimates, Planning and Scheduling
3. Who Controls Project Costs?
4. Reporting and Analyzing Actual Costs
5. Planning for Cost Control
6. Cost Control Strategies
7. Quantifying Labor Lost Productivity
8. Equipment Management for Productivity Improvement
9. Working with Project Partners
10. Post-Project Evaluations

10-11
 Concluding Activities
• Post-knowledge Survey
• Participant Registration and Course Evaluation
– Submittal of this form to AGC of America is the only
way your completion of this course is entered into
the AGC’s nationwide database
• Award of certificates

10-12