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ABSTRACT:
Labor cost is normally the greatest risk factor confronted by both contractors and owners. Monitoring, controlling, and projecting the labor cost is arguably the most arduous task faced by project management staff The recognized keys to successful labor cost control are early problem recognition; timely action; and proving the adequacy of the corrective measures taken. Every skilled craft on every project develops a demonstrated labor efficiency (DLE) that is unique to that particular job. The DLE is an excellent risk management tool.
Key Words: labor cost, labor efficiency, measured mile, cost control, demonstrated labor efficiency (DLE)
Labor cost is perhaps the greatest of all risks faced by the self-performing contractor. A number of factors that affect labor efficiency, and therefore the labor cost, cannot be controlled. Adverse weather, for example, cannot be controlled, and some labor inefficiency may be inevitable. Given the potential magnitude of the labor risk, it is paramount that a contractor manage those aspects of labor efficiency that are within its control. One excellent and powerful risk management tool is the accurate assessment of a self-performing contractor's craft labor demonstrated labor efficiency (DLE), and the effective use of information obtained from DLE computations. Reasonable DLE calculations enable a trained project cost forecaster to predict the probable final expenditure of direct labor workhours and costs related to direct labor hours with uncanny accuracy. Proper use of the DLE can form the basis of forecasting progress schedule variances long before they become visible in critical path method (CPM) schedule updates. Direct labor workhour efficiency variances, produced by identifiable project events or episodes, also can be quantified by the DLE with reasonable accuracy. Since a high percentage of the total job cost is either directly or indirectly related to direct labor workhours, much of the total job cost can be monitored, controlled, and accurately forecast through reasonable demonstrated labor efficiency computations. Despite its power, ready availability, and decades of proven reliability, the DLE is underused as a management tool.
DIRECT LABOR WORKHOUR EFFICIENCY
The term labor efficiency relates to the quantity of direct labor workhours required to install one unit of "in-place" work. More specifically, labor efficiency is calculated by dividing the direct workhours actually expended by the units of work completed...