There is a persistent battle in the construction industry for contractors to stay competitive and at the same time, boost their profit margins. From a contractor’s viewpoint, it can maintain that labor productivity is the number one most significant dynamic factor in producing cost savings and boosting profits. Labor productivity can be affected by many factors. Some of these factors can be controlled by the contractor, while others, such as weather, cannot.
The construction industry embodies one of the principal segments of the U.S. economy with an overall worth exceeding $500 billion per year. Since labor costs normally make up about one-third to one-half of the construction costs, it’s imperative to examine the factors influencing labor productivity. Contractors in labor-intensive work could experience even bigger profits from observing and enhancing their construction crew productivity. Previous research has demonstrated that the typical construction tradesperson spends 33 percent of his/her time performing noncontributory work and another 33 percent on necessary but nonproductive work including reading plans and erecting scaffolding.
This signals that just 33 percent of the tradesperson’s time is devoted to performing work that produces income for the contractor. Measuring the impact on productivity will allow the contractor to achieve more control over profitability, adjust to speeded-up scheduling, and meet the upsurge in demand brought upon the construction industry.
Generally speaking, labor productivity denotes the measurement or unit of work that is finished for a specific period of time. A contractor usually bids a scope of work based upon clear assumptions about labor costs and labor productivity. A compensable loss in terms of labor productivity occurs when the contractor expends more hours to finish a given unit of work than it would have used without the intervening cause.
In a Construction Briefings article by Kathleen Harmon, the author lists the top seven factors affecting labor productivity losses on a construction project.
Keep in mind that these points are simply a snapshot of some of the issues and they may change depending on market conditions or the geographical location of the construction project.
Hostile weather is a substantial source of lost productivity on a construction project. The parties’ contract commonly will deal with where the contractor is allowed additional time for “unusually severe weather” and the kind of proof that may be necessary for submitting a claim. The lost productivity may also include those days when the contractor encounters adverse weather, but also when delays instigated by the owner force the project schedule into weather conditions that affect performance.
Out of sequence work
The contractor may be entitled to seek additional compensation when its work is impacted by needing to change its anticipated method of performance or sequence of work. When its work is impacted by having to change its anticipated method of performance or sequence of work, the contractor may be entitled to seek additional compensation for labor productivity losses. When a contractor needs to modify its work plan due to owner interferences or delays, it can experience labor productivity losses having to work around the unforeseeable event.
Crowding or stacking of trades
Just like out of sequence work, a contractor may be affected by several trade contractors working in an area that was not otherwise expected. Such crowding and stacking of trades can have a huge impact on labor productivity and courts have even acknowledged a loss of efficiency experienced by a mechanical subcontractor when the general contractor sped up the work leading to overcrowding on the project, an increase in manhours and absence of materials.
Fatigue and an increase in absenteeism due to scheduled overtime work can have an enormous effect on labor productivity losses. Again, the primary reason must be compensable, and these types of impacts are recoverable.
Restricted site access
Since the contractor is commonly entitled to control its own means and methods of performance, restricted site access can also meaningfully affect labor productivity. This could include real access to the site along with anticipated use of particular laydown areas.
Unavailability of manpower
The lack of skilled labor has a direct impact on the schedule, every so often causing the contractor to speed up its work to overcome the delays related to maintaining a steady workforce. In view of the traditional contract language placing the risk of labor on the contractor, it’s difficult to prove and recover added compensation owing to the unavailability of manpower. But it’s still a real problem in certain areas.
A contractor may be able to recover for the combined impact of multiple changes on a project. This is sometimes called the “ripple effect” of having numerous changes on the project.
While these seven factors affecting productivity losses are critical, there can be any number of other such factors that also come into play. This could include . . .
Morale and attitude. Research has established that the morale and attitude of contract workers can seriously undermine productivity and can lead to a number of other critical concerns if not managed properly. It’s been reported that the self-assurance and discipline of a contract worker can also be lessened as a result of a variety of issues including disagreements, differences of opinion, undue health and safety hazards, poor worksite conditions, contract modifications and an unkempt workspace.
Absenteeism and turnover. High turnover and absenteeism on construction projects have been associated with losses in both money and time. Moreover, research implies projects that have a shortage of manual labor will usually be affected more than others. Replacement workers could also severely get in the way of productivity, as such workers may be unaccustomed with the worksite, meaning your other workers may have to stop work to show them what to do, which can cause several added days of lost work.
With the right management team in place, a contractor can see that most of these causes are before the fact. Their job should be to pinpoint the events and circumstances leading up to any loss of productivity. They need to record both the cause and the outcome in their daily reports and other essential project documents. It will be enormously important to identify these reasons for interruptions that are beyond reasonable control versus any inefficiencies caused by the owner or other outside parties.
Okay, how about the tools that might be utilized to nip productivity losses in the bud before they become serious problems.
Most contractors are by now significantly alert of the prerequisite to maintain a skilled workforce. But locating and retaining experienced workers can be a chore given the cyclical character of construction. An emphasis on retaining employees and reducing turnovers is one sure-fire way to build and preserve an experienced workforce. By dealing with employees fairly, you’ll likely discover employees more driven to do quality work and stay loyal to the firm.
Beginning at the bidding stage, hunt for projects that fit the size and intricacy of your workforce. For active projects, offer suitable access to the job site, a safe work setting and appropriate equipment. Field equipment should involve high-quality tools and machinery, personal protective equipment and vehicles. Office employees attach importance to agreeable surroundings, up-to-date technology, convenient working hours and flexibility to handle life outside the office.
Employ technological resources
By definition, labor productivity is clearly altered by an advance in technology. The productivity levels for the construction industry have plunged considerably behind most every other sector. The construction industry is also spending less than 1 percent of its ten trillion-dollar revenue on IT. Do you see the connection? For the construction industry to pull alongside its close relatives, it must adapt to today’s technology.
A prime example: Via the employment of project management software, companies can track their work faster than ever.
Project management software can accommodate construction documents including Plans, Change Orders, RFIs or daily reports in one principal location. Employees need not waste time recording things in several locations or better yet not documenting them at all as opposed to spending hours attempting to discover what prior work they completed. With hours saved on these plain day-to-day tasks, project management software can help free up time and boost the team’s productivity rates, in some instances up to 25 percent.
Okay, you’ve produced a fool-proof construction plan, but this doesn’t mean you’ve fully solved the productivity problem. That’s because poor or insufficient communication is one of the chief reasons for the lack of productivity in nearly every industry. For construction especially, it can have a huge negative influence. Steady, effective communication between office and jobsite management and workers will help prevent mistakes and allow everyone to agree to deadlines. Focusing on a project management system, designed around workflows, can boost communication among all stakeholders by supplying real-time updates to the jobsite.
Companies need not simply improve communications among employees, but they also must communicate the significance of productivity. Invest in training supervisors and lend a hand in their understanding appropriate communication procedures. Offer ideas on how to boost productivity and create incentives to help them reach their goals.
A certain amount of indirect labor or overhead is critical to run any business profitably, but right-sizing this is central to managing a successful business. Similar to the importance of retaining experienced field staff, holding on to qualified staff to deal with tasks such as accounting, HR, bidding, etc. are vital.
Especially for small firm owners, you might be confronted with hitting upon just the right balance of delegating these tasks or simply doing them yourself. Other non-productive activities, such as re-work, can often be slashed by proper training.
Invest in training and demand more job experience
It might be considered a cliché by some, but a company’s most cherished resource is its employees. So, if you need your employees to perform to their peak potential, you need to invest in them. Offering a state-of-the-art training program will make your employees more well-informed and thus, more important to your company. Moreover, the skills they acquire will help make them more successful on the jobsite.
Today’s employees must also be more comfortable with the most recent technologies and be able to teach their teams as well. Hiring qualified managers to supervise your employees during times of change is critical. Ultimately, when you have well-equipped employees, it’s predictable that productivity will increase as well.
Safety before anything
When it comes to safety on the jobsite, as the adage goes, there’s always room for improvement. If you want to sustain you firm’s productivity at the highest levels, you need to do what’s essential to avoid injuries on the jobsite. According to OSHA, one in every ten construction workers incurs an injury every year. And according to the National Safety Council, job-related injuries could cause companies to lose a total of 100,000,000 or more production days in a given year.
You should invest in an instructive safety program and train your employees relating to your company’s safety measures and techniques. Creating an understanding and appreciation of safety will gain their trust, boost their confidence about the safety equipment they’re using daily and, in the long run, drive your productivity levels even higher.
There are any number of other “tools” that can help you to cut productivity losses, including the use of prefabricated buildings, offering employee recognition programs, moving toward shorter contracts, updating inventory, managing seasonal hiring, delegating tasks, covering the costs of commuting, limiting overtime, and scheduling access to limited equipment, among others.
If your plans include the hiring of new employees, don’t hesitate to give us a call. The staff at PDDM Solutions are experts in hiring professional construction personnel at every level of your organization.