Table of ContentsLiterature Review......................................................................................................... Introduction............................................................................................................... Definition of Productivity........................................................................................... Problems Associated With Collecting Production Data.............................................. Uniqueness of Construction Projects...................................................................... Varied Locations..................................................................................................... Dependence on the Economy................................................................................ Labor...................................................................................................................... Risk of Worker Accidents........................................................................................ The Work Breakdown Structure................................................................................. The Data "Life Cycle"................................................................................................ Quantity Take-off................................................................................................... Cost of the work and final pricing.......................................................................... "Clean-Up" of the Bid and Transfer to Project Team..............................................

Literature ReviewIntroduction As in most industries that manufacture or fabricate goods, production is one of the most frequently discussed topics in the construction industry. The reason for its importance is that it directly translates into a contractors cost and ultimately into profits or losses on a job. Also, for a contractor to improve, production must be measured.1 Therefore, it is important for a contractor to collect and analyze production rates in order to manage costs and schedule control on a project. It is equally important to archive this accumulated information and use it as an aid in the bidding of future work.

Definition of Productivity The general definition of productivity is often given as a ratio of output divided by input.2 In the construction industry, productivity is defined in a narrower context of labor work hours divided by work-in-place (i.e., 0.25 wkhrs/s.f. of forms). This ratio is commonly referred to as the unit rate and, more appropriately, addresses task-level labor productivity.

Problems Associated With Collecting Production Data The construction industry is a unique business that deals with unique problems. Other industries have the good fortune of being able to change their environment by locating, designing and laying out their facility with the sole intent of making a product in the most cost efficient1 H. Randolph Thomas and Donald F. Kramer. The Manual of Construction Productivity Measurement and Performance Evaluation. Construction Industry Institute, May 1988, Source Document 35, 1. 2 H. Randolph Thomas and Donald F. Kramer. The Manual of Construction Productivity Measurement and Performance Evaluation. Construction Industry Institute, May 1988, Source Document 35, ix.

manner. The construction industry does not have that luxury. Due to this fact, contractors are faced with a variety of conditions that affect production. The following is a partial list of industry related factors that impact production.

Uniqueness of Construction Projects Each project has its singular aspects. On the commercial building side, owners and designers place a high value on one-of-kind design. On the public heavy highway side, roads and bridges are designed to "fit" and benefit a given environment. Whether it is a thoroughfare through an undeveloped area or total reconstruction and widening of an interchange in a heavily populated area, each has its own distinctiveness. There are minimal benefits derived from learning-curve models or techniques that are used successfully in other industries that do not undertake continually unique projects.

Varied Locations The construction process takes place at the project site. This equates to all resources (labor, equipment, materials, supplies, and subcontractors) having to be transported to the site. Also, depending on the location, materials may not be locally available. There may be a limited work force, and, due to the cost of transporting equipment, resources remain idle at the site. Construction is one of a few industries in which the product is built in an open environment. The work is subject to various temperatures, precipitation, wind, and so on. Each of these conditions affects labor and equipment production. In addition, there are environmental constraints on performing certain types of construction activities (i.e. Texas Department of Transportation, TxDot, has ambient temperature restrictions on the placing of concrete). This forces contractors to perform the work at different times or, when adverse weather develops, stop work altogether at an undesirable time.

Dependence on the Economy Like all industries, construction is greatly affected by the economy. Federal and state governments often use monetary policy, fiscal policy, or tax laws to regulate construction activities. These dramatic swings in policy can create drastic changes. Projects to bid and build may be plentiful one year and the next year there may be only a few. These fluctuations affect a contractors workload. If a firms workload decreases quickly, the firm is not likely to lay off workers at the same rate. On the other hand, in good times, a contractor may not have the skilled workers to efficiently complete the backlog. The end result in both extremes is idle or nonproductive work.

Labor The construction industry is a labor-intense industry. This dependence on a significant amount of labor creates problems of high cost, uncertainty of available skilled workers, and supervision. During times of economic growth, contractors are competing with other industries for qualified labor. All these concerns relate to the variability of labor output.

Risk of Worker Accidents The construction process has historically had the worst disability frequency rate of all industries. The worker is in a state of high physical risk. As a result, workers tend to protect themselves by working a less- than-optimal productivity rate. Some of the factors influencing productivity listed above deal with the industry as a whole, but most deal with site specific conditions and challenges

The Work Breakdown Structure For a contractor to improve, production must be measured. To collect this production data a system needs to be created that is able to deal with task level labor productions along with

categorizing work activities and capturing influences affecting production. The Work Breakdown Structure is a technique that tackles these issues. In the not so distant past, the primary reason contractors collected labor hours was to have a platform in which to report hours to the payroll department with the purpose of paying laborers. This system eventually evolved into time being charged to particular activities. With estimated costs being budgeted to those activities, a project manager could see if and where he was making or losing money. The system was very general and one dimensional in nature by primarily tracking only cost- Also, when archived as historical data and used in assisting in bidding future projects, the process was poor in filtering similar projects and work activities. Therefore, when looking at the data, good conditions and productions were combined with poor conditions and productions. This can have an adverse affect on the bidding process. For example, a "clean" concrete paving job meriting higher productions may seem too aggressive when compared with the historical data. Hence, the estimate is based on slower productions, generating higher estimated costs, and, therefore, a less than competitive bid. The Work Breakdown Structure (WBS) is designed to deal with the above shortcomings, plus address other matters in project management. The WBS is designed to provide a consistent, logical, and accessible structure for work activities. Additionally, the framework of the system takes advantage of the sorting and filtering capabilities of current spreadsheet and scheduling software. The WBS consists of three components along with a template that further assists in cataloging and identifying work activities. The structure is comprised of ten alphabetical characters. The following is an illustration of the format. Numbers are used to identify only the spaces and are not used in the coding itself. See figure 1 for the VVBS structure.

Figure 1: Work Breakdown Structure

The Project identification is a unique two-character combination to distinguish it from other projects in the district or company. Spaces 3 and 4 are used to name work packages. A work package is a well-defined scope of work that terminates in a deliverable product. Each package may vary in size, but each must be a measurable and controllable unit of work to be performed. 3A work package is a non-standard piece of the structure designed to allow the project team to combine combinations of products and processes on a particular site. As an example, on a project that requires phase construction, the two-character combination can be used to identify bridge structure work for that particular phase. It is also given to a foreman who is responsible for the construction of that particular work activity. The package contains a list of labor, equipment, materials, subcontractors, and supplies, as determined at bid time, which will be needed to complete the work. Production rates and budgeted costs are included in the work package. These first four spaces used for project identification and work packages are mostly used in project execution and control. With a resource-loaded schedule, it is possible for the project team to filter and group different types of work. The team can analyze labor, equipment, materials, subcontractors, and supply requirements for a particular work package. Within that sort, budgeted costs and work3 Kenneth K. Humhrays, Jelens Cost and Optimizaton Engineering, 3rd ed., American Association of Cost Engineers, McGraw-Hill, Inc. 1983, 471

hours can be scrutinized. In addition to the benefits on a project level, projects can be combined in the area to create a district schedule. At this level, area management can better utilize crews and equipment between projects. They can address conflicts that may arise when two projects schedule the same piece of equipment or crews at the same time. The next six columns are used to classify the work in a standard manner. The first four characters are used in describing the product and the next two are used for the process. To complete the Work Breakdown Structure, a template is added to the product-process. The template is designed, in a standardized format, to capture practical and useful information about the scope and difficulty of the code. These applications include, but are not limited to, standard take-off, progress measurements, and performance analysis and measurements. Unlike the other part of the structure that is determined during the estimating and pre-project planning stages of a project, the template is attached after the completion of the product. Its use is in estimating where completed projects can be filtered in the comparison of "most similar" information when bidding future projects.

The Data "Life Cycle" The problem with most coding systems is that they are designed for one particular function. They may be used for cost accounting, scheduling purposes, inventory control, or any other function requiring the need for specific information. They are one-dimensional and designed to address one level of management or department. The Work Breakdown Structure is a system that addresses many sectors of a company. In a construction company, the WBS is designed to complete the construction cycle (i.e.-, estimating,

construction, and historical information) and attend to the information needs of estimators, operation managers, project managers, foremen, financial managers, and accountants. In the estimating stage of a project, a standard Work Breakdown Structure allows for an easy method of comparing similar work activities with completed work activities. In addition, the WBS identifies and presents in a logical manner the work activities associated with the construction of a product. Also, due to its flexibility, it allows for expansion and coding of out of the ordinary work. In the construction stage of a project, the WBS shows its greatest value. It permits the project team to manage the project from the task-level to the project manager level. With work packages being scheduled activities, the project team can optimize the allocation of resources needed to complete the product. Additionally, cash flow, vendor commitments, projections, performance measurements, and other project components can be monitored and managed. The "roll up" or "tree" format of the structure allows information to be captured from a detailed to a more general level. After the "sell of a project, information is gathered for historical referencing. The project team completes the templates on the WBS and the data is collected. The information retained involves labor, equipment, materials, subcontractors, and supplies. Actual and budgeted (estimated) costs and quantities are collected for each resource- In addition, and of most importance, work hours are collected for labor. The construction estimate A cost estimate may be defined as a compilation of all the costs of the elements of a project or effort included within an agreed upon project scope.4 To a contractor this is the cost that will4 Kenneth K. Humphreys, Jelens Cost and Optimization Engineering, 3rd ed, American Association of Cost Engineers, McGraw-Hill, Inc., 1983, 363

most likely be incurred to complete the project as defined in the documents. In the public bridge and highway industry, the estimates are detailed and the contracts are generally unit price. Also, the projects are competitively bid and the projects are awarded to the lowest responsibility bidder.

Quantity Take-off As mentioned, a detailed estimate tries to identify all factors that contribute to the cost of a project. The first step in the process is to do a quantity take-off. The take-off is a measurement of the quantities of the work to be performed. Also, it should be organized in phases or areas to help in creating a schedule for the project. For example, the takeoff for a bridge abutment would be as follows: 1. The excavation required constructing the abutment to the required elevations. Unit of measure is cubic yards (cy). 2. The amount of drill shafts per size. Unit of measure is linear feet (lf) for each diameter of shaft. 3. The amount of concrete for drill shafts. Unit of measure is cubic yards (cy). 4. The reinforcing steel required for the structure. Unit of measure is pounds (lbs). 5. The contact area of forms needed for the bearing area, back wall, and wing walls. Unit of measure is square feet (sf). 6. The quantity of concrete for the components formed. Unit of measure is cubic yards (cy). 7. The amount of backfill material required after forms are wrecked and the concrete cures.

Unit measure is cubic yards (cy). If the bridge abutment example were in phases and / or the project contained more than one bridge, the take-off would be organized to reflect those conditions. Resource Allocation and productivity The next step in the process is to assign resources to the work activities or processes. As mentioned, those resources are labor, equipment, materials, subcontractors, and suppliers. In the abutment example, several of the resources are already assigned by virtue of the takeoff. That is, the materials needed for the structure are identified and quantified (re-bar, concrete, and backfill). The same is true for suppliers (forms) and subcontractos (tie re-bar and drill shafts). The assigning of labor and equipment to an activity is not as easy as the process described above. Like anything, there are many ways to perform a task and under certain conditions some methods might be more cost efficient than others. In the abutment example, there are many ways to excavate the structure and form the abutment. The difficulty lies in determining the best method and crew mixture to perform the task. In conjunction with assigning resources to an activity, production rates need to be established. This determination of resources and productivity usually comes from three areas. The first area is from the expertise of the estimator. The second source is from filed personnel that have performed similar work. The third is from historical data. As a result, the final crew and productivity is founded on all three sources.

Cost of the work and final pricing Once resources and productivity are assigned, the cost of an activity can be found. Vendors will give quotes on materials and suppliers. Labor costs will be determined. Their cost will include the best hourly wage plus burden (taxes, insurance, vacation, fringes). Equipment cots are establishes and are generally separated between ownership and operating. Equipment ownership includes depreciation, insurance, licenses, taxes, and other costs not dependent on the running of the machine. Equipment operating consists of fuel, lube, repairs, maintenance, and consumables. The costing of work activities, as described above, are referred to as direct costs. Besides these costs there are indirect costs. Indirect costs in construction are all costs which do not become a final part of the installation, but are required for the orderly completion of the project. Those costs are field management and supervision, field administration, payment and performance bounds, job site offices / trailers, office utility expanses, and other costs not related to the actual work activities in the construction of the project. Most of these costs are dependent on the total duration of the project. For most construction companies, corporate and district overhead are typically treated as general overhead and are costed as a percent of the project costs. General overhead is not specifically applicable to any given job or project. The above procedures are used for estimating the contractors cost to construct a project. The amount charged to the owner for completing a project is the price. The price incorporates direct costs, indirect costs, general overhead expenses, contingencies and profit. With all costs and profits identified and determined for a project, the proposal is completed. On a unit price proposal, this amounts to applying to all the bid items. This pricing can either be balanced or unbalanced.

"Clean-Up" of the Bid and Transfer to Project Team When unit price proposals are submitted to the owner, the low bidder is determined based on the total estimated amount- The successful bidder begins the execution of the project by "cleaningup" the estimate. The objective of this procedure is to establish a balanced budget for the project. In this process subcontractors, vendors and material suppliers used at bid time are identified and substituted into the final estimate. Also, any "scratch pad" adjustments to arrive at the final price are reflected in the final estimate. The final estimate, with the addition of profit and overhead, should balance to the price on the submitted proposal. Besides cost balancing in the "clean-up," the assigning of the product and process components of the Work Breakdown Structure are made. Since the estimator is most familiar with the project and how it was conceived to be built at bid time, this responsibility rests with him. With the estimate balanced and WBS assigned, the project team takes over the next steps in project execution. This transfer is done through the use of computers. The estimate, at this point a budget, is electronically transferred to a companys accounting system and project control system. In the case of ABC Construction, the estimate is transferred to a customized database that acts as a hub between the accounting and project control system. This system allows for a two-way link between actual and budgeted costs, revenues, work hours, materials, subcontract, vendors, and schedule. The appendix is an example of the process just described on an actual Texas Department of Transportation project.

References 1. Humphrays, K., English, L., 1993, Project and Cost Engineers Handbook, Marcel Dekker, Inc. 2. Thomas, H., Kramer, D., 1988, The Manual of construction Productivity Measurement and Performance Evaluation, Construction Industry Institute 3. H. Randolph Thomas and Donald F. Kramer. The Manual of Construction Productivity Measurement and Performance Evaluation. Construction Industry Institute, May 1988, Source Document 35, 1. 4. Kenneth K. Humphreys, Jelens Cost and Optimization Engineering, 3rd ed, American Association of Cost Engineers, McGraw-Hill, Inc., 1983, 363 5. Alfeld, L., 1988. Construction Productivity on site measurement and management, McGraw-Hill Book Company 6. Drewin, F., 1982. Construction Productivity, Elsevier.