Construction Labor: Costs and Unions

Module 6.1Halpin Chapter 13, and Others

October 29, 2002

November 3, 2002 Maxwell 2

RAT #06-01-1 Take out a piece of paper, put your

name on it, and … … What is a CPFF Contract and what

are they used for? (take 2-minutes) Turn in … …

November 3, 2002 Maxwell 3

Purpose To expose students to some facts

about the relationships between labor and management and how it will impact them.

To provide a basis for understanding how labor costs are determined and charged against projects.

November 3, 2002 Maxwell 4

Learning Objectives Students must be able to outline the

overall history and impact of Labor Unions in general and upon construction in particular.

Students should be able to compute labor rates and costs from given data and circumstances.

November 3, 2002 Maxwell 5

Labor is THE Major Resource

Labor Productivity Labor Costs Labor Laws Labor Organizations

November 3, 2002 Maxwell 6

Labor Legislation Table 13.1 – Goes from Sherman

Antitrust Act (1890) to Civil Rights Act (1964)

Formation of AF of L (1886) to the Consolidation of AFL-CIO (1955)

November 3, 2002 Maxwell 8

A Short History … 1890: Sherman Antitrust Act used to break

up Unions – Pinkertons hired as private armies by Corporations to bust strikes.

1932: Norris-LaGuardia Act (anti-injunction) prevented courts from protecting Corporations from the formation of Unions.

1931: Davis-Bacon Act forced Corporations to pay “prevailing” wage on Federal Projects.

1938: Fair Labor Standards Act forced Corporations to pay a minimum wage.

November 3, 2002 Maxwell 10

A Short History … 1935: Wagner Act – National Labor

Relations Act established a list of unfair labor practices by employers. (Table 13.2)

1947: Taft-Hartley Act curbed union abuses resulting from WW II labor shortages. (Table 13.3)

Look at the details in Tables 13.2 and 13.3 and contrast the results.

November 3, 2002 Maxwell 11

Texas “Right to Work Law”

November 3, 2002 Maxwell 12

Exercise # 6.1.1 Take out a sheet of paper and

write you name and team. Individually, If you have been

employed in Texas, what was the job and the hourly rate?

As a team, generate a single list. As a class, let’s discuss the effect

of the “right to work” law on you.

November 3, 2002 Maxwell 13

Other Legislation Protects Individuals from abuses

by Labor and Management Provides improved oversight over

union elections Provides increased government

over record keeping and finances Protects union members from

racial and sexual discrimination

November 3, 2002 Maxwell 14

How is Labor Organized? Organized by Industry – Congress

of Industrial Organizations (CIO): United Auto Workers, United Mine Workers

Organized By Craft: American Federation of Labor: Iron Workers, Bricklayers, etc.

The AFL-CIO formed in 1955.

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Construction Unions

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Local Unions Local Union Business Manager – Employee of

the Union. Responsible for ensuring a pool of skilled workers available, etc. (Ideally!)

Shop Steward – Your employee usually elected by fellow workers to provide a working interface between them and the local union and the company supervisors. (Ideally!)

If you have the right political skills and everyone (including yourself) is honest and fair, you can work this arrangement to your advantage. (Sweetheart Unions)

November 3, 2002 Maxwell 17

Jurisdictional Disputes and/or Enforcement of Work Rules

This is a big problem as seen by construction management because it determines WHO does the work. This in turn may dictate how the work is done.

Labor sees this as a way to protect the jobs of members.

Source of many blatant union and company abuses. MBTA Example T.C. Cage BBNP example.

November 3, 2002 Maxwell 18

RAT #06-01-2 Take out a sheet of paper, put your

name on it, and … … Take 2-minutes to describe the

impact of the Texas “Right to Work” Law.

Pass to the aisle and front in 30 seconds.

November 3, 2002 Maxwell 19

Labor Costs Labor Costs fall into four general categories.

Direct: those costs that actually go into the product. Includes the employee’s share of insurance, pension, taxes, etc.

Fringe Benefits: includes: insurance (employer’s share of, health, life, disability, unemployment, etc.), pension (401k, etc.), vacation, holidays, sick leave, “personal days”, etc.

Taxes: Employer’s share of FICA, unemployment, worker’s compensation insurance, pension, etc.

Indirect: Includes training, subsistence, travel, etc., termination expenses.

This is an example of how complex the math can get for non-exempt personnel.

Question: Who is “exempt” from the protection of the “wages and hours” law?

Why does it matter?How are these numbers usually demagogued?

November 3, 2002 Maxwell 21

Exercise # 6.1.2 Depending on the actual

percentages and what they apply to, it may be cheaper to pay premium time for a reduced work staff that to hire extra workers at straight time.

Can you come up with an example?

November 3, 2002 Maxwell 23

Example of How to Use This in a Consulting Environment.

Labor Cost is the critical factor in Consulting.

The largest component is “exempt” personnel.

What follows is and interesting example of “the arithmetic” of consulting.

November 3, 2002 Maxwell 24

Overhead (a.k.a., Indirect Cost) Calculation

“Dead Time”

November 3, 2002 Maxwell 25

Revenue Required to Maintain the Company.

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Contracting and Negotiating Numbers

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What Happens When You Don’t Generate Backlog.

November 3, 2002 Maxwell 28

Affect of Overrun on Fee

November 3, 2002 Maxwell 29

PAT #6.1.4 Take out a sheet of paper, write you name

and team. You are the Project Manager. Your billing rate to the client is $150/hour. If the direct salary multiplier (includes:

overhead, fringe benefits, etc.) is 3.00 and you worked 50 hours last week, what was your gross (before taxes, etc.) pay?

Turn in your answer after 1-minute of think time.

November 3, 2002 Maxwell 30

Module Assessment Please take 1-minute to write down

the “muddiest” topic on a sheet of paper and pass it to the front.