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PicardConsult LLCA leader in labor productivity measurement and analysis

Labor Productivity

Measurement and

Analysis on

Heavy Construction

Projects

PicardConsult LLC Next
http://www.picardconsult.com/http://www.picardconsult.com/


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PicardConsult LLC A leader in labor productivity measurement and analysis

PicardConsult LLC

Our purpose is to help project management achieve their goal of completing

their project as early, cost-effectively, and safely as possible.

Dr. Hans Picard

PicardConsult LLC

Welcome!

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Contents

The Productivity Challenge 3

The Opportunity 4

The Approach: Measure Workforce Activity 5

Key Performance Measures 6

Where Are Labor Dollars Spent? 7

Continuous Improvement 8

Sample Results 9

Best Practices (Part I) 10

Best Practices (Part II) 11

Summary 12

Conclusions 13

For More Information 14

Click a chapter title to advance to that page



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The Productivity Challenge

For decades, the trend of construction labor productivity

has remained stagnant in comparison to all non-farm

productivity (see the figure at right).

The high costs associated with budget and schedule

overruns in the heavy construction industry can often

be traced to low worker productivity. Labor cost is less

predictable and runs a greater chance of overruns thaneither equipment or material costs. As labor costs can

amount to 50 percent or more of construction project

costs, management of the work process presents the

greatest opportunity to reduce project cost.

Improving labor productivity results in reduced labor

costs, faster job completion time, and direct savings

at the bottom line. Conversely, cost overruns are the

result of low productivity, more workers, and longer

completion times.

250.00%

200.00%

150.00%

100.00%

50.00%

0.00%1969 1968 1972 1976 1980 1988 1992 1996 2000

Construction & Non-Farm Labor Productivity Index (1964-2003)Constant $ of contracts/workhours of hourly workers Sources: US Dept. of Commerce, Bureau of Labor Statistics

Construction Productivity Index

(1964 = 100%)

Non-Farm Productivity Index(1964 = 100%)

In the last 40 years, construction productivity has

lagged behind productivity in other industries.

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The Opportunity

Significant gains can be realized by enabling craft workers to become more efficient, and by enabling project managers

and field supervision to execute effectively. Ignoring these potential gains represents a lost opportunity.

The best way to improve labor productivity is to examine the work process from the workers perspective. How can

assigned tasks be completed more easily, efficiently, and safely? The goals are to enable:

Craft labor to spend maximum time workinginstead of walking or waiting

Field management to provide all the tools, materials, and guidance when and where craft labor need them

This approach serves craft labor as customers of the management system.

4

PicardConsult LLC worked with Dynegy on

a successful project of continuous process

improvement at the Baldwin Energy Complex in2010. This is an excerpt of a video on that project.

Used by permission. See www.dynegy.comfor more

information.

t Click on the video to play a short video about Dynegys take on

the opportunity to enhance efficiency in large construction projects.

http://www.picardconsult.com/http://www.picardconsult.com/http://www.dynegy.com/http://www.dynegy.com/http://www.picardconsult.com/http://www.picardconsult.com/


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The Approach: Measure Workforce Activity

While typical project reports show progress and results compared to estimates, and are after the fact, they are usuallyproduced too late to provide timely information that can be used to adjust the work process. Useful data about the

effectiveness of field management and contract labor productivity requires a system of data collection, storage,

and information retrieval that measures and assesses the actual work process. To meet this need, PicardConsult LLC

commissioned development of a contractor performance measurement system that was designed to meet these specific

requirements. PicardConsult LLC then implemented this system on its construction and major maintenance outage projects.

Not surprisingly, measurable differences were found between the labor productivity of various contractors and projects.

A critical component of this system is daily measurement reports, which enable management to drill down and analyze the

actual labor activities performed to a granular level. Using this near-real time information, management and supervision

can take prompt corrective action, when required. Daily measurement provides the necessary insight into daily variation in

the work process, as shown in the figure.

The focus on measuring work process performance

provides a link between field managements

decisions and productive or value-added labor.

These highly visible links not only raise awareness,

but speak loudly and clearly to indicate

opportunities for improvement of the work

process.

90

85

80

75

7065

60

55

50

45

40

1/3/02 1/11/02 1/21/02 1/29/02 2/6/02 2/14/02 2/22/02 3/4/02 3/12/02 3/20/02 3/28/02

Average 60.4%

StdDev 5.2%

DW% Near real-time measurement of direct work (productive

labor utilization) enables adjustments to improve the

work process.

DW%isDirec

tWorkPercent



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Key Performance Measures

The following key performance indices (KPIs), related to

the utilization of the craft workforce, are critical to project

success:

Labor utilization:This is shown in the previous slide.

It is the percent value-added, non-value-added, or

wasted time.



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success:



wasted time.

Field supervision effectiveness. This is the percentof the time that superintendents and foremen are

available to their crews in work areas.



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success:



wasted time.

Field supervision effectiveness. This is the percentof the time that superintendents and foremen are

available to their crews in work areas.

Craft accountability.This is categorized by trade. It

is the percent of time craft labor are observed/not

observed in their assigned work areas.



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Where Are Labor Dollars Spent?

Productive labor utilization is a major variable in construction labor productivity. Other important variables that effect laborproductivity are efficiency and quality of work, both of which are linked to craft skills and field supervisions expertise.

Labor Productivity = Productive Labor Utilization x Efficiency x Quality of Work

The metric Productive Labor Utilization brings to light an

important variable of the labor productivity formula. With

a given workforce, the greater the productive labor

utilization, the less labor-hours are used to complete the

project. Work is accomplished in less time and at lowercost, getting more done for less. PicardConsult LLC

experience confirms that work process measurement

and analysis improves results at relatively low cost.

The figure shows an example result of productive labor

utilization measurement. It shows the proportions of

various labor activities observed and recorded at random

intervals over an extended period of project execution.Many labor dollars are spent in non-productive activity

due to various delays, interferences or roadblocks.

There is, in fact, a hidden cost of labor: the unproductive

labor dollars spent.

Work expands to fill the time and spend the

budgeted labor dollars available for its completion.

Dr. Picards version of Parkinsons Law


Roll over this frame to find the

total productive,

indirect, and lost work...


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Continuous Improvement

Eliminating the hidden cost of labor is a continuous

process of gradual improvement. Awareness is raised

through continuous assessment of the work process.

Depending on the incentive offered, prompt action is

taken to improve it.

Labor productivity improves gradually as more labor-

hours are spent in value-adding activities. Progressive

labor-hour reduction is a natural result of an increasingly

more efficient construction work process. This in turn

results from the growing maturity of field management

practices, as shown in the table.

8

MaturityLevel

4

3

2

1

70% -80%

60% - 70%

50% - 60%

40% - 50%

ProductiveUtilization

Progressive ConstructionWork Process Management

Complete, planned work scopes; competitive estimates; just-in-timeleanmanpower scheduling; self-sufficientwork areas; trained, proactive fieldsupervision; craft briefings; project stakeholders fully aligned to targets;continuous improvement

Customer-contractor joint planning and collaboration; labor productivity

benchmarking, metrics and incentives; gain-sharing; buy-in by projectstakeholders; quick corrective action

Labor productivity improvement is considered in pre-planning; most toolsand materials pre-staged; some improvements made during projectexecution

Project is managed by the contract, just-in- case manpower; if problems,hire more; work process performance/productivity data not consideredrelevant

Labor Productivity Linked with Management Practice



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Sample Results

The figure shows how the productive labor utilizationincreased at a major midwestern power plant Clean

Air project. The project installed selective catalytic

reduction (SCR) for nitrogen oxides emission control,

then flue gas desulfurization (FGD) scrubbers for

sulfur oxides emission control. The project involved a

workforce of over 200 crafts.

A streamlined work process has minimal non-value-

added activity, such as walking, or waste, such as

waiting, and enables labor to complete tasks in less

time. Comparing labor utilization over the course of

the multi-year Clean Air construction project shows the

share of direct labor cost that was productive. A relative

labor dollar savings of 22 percent is made available

through continuous improvement of the work process.

Contractor Labor Use

(proportions of monthly $1,093,625 labor spend)

$1,000,000

$800,000

$600,000

$400,000

$200,000

$02002 20072005 - 2006

Productive $638,728 $828,321 $874,900Indirect $285,630 $144,866 $131,325

Wasted $169,267 $120,438 $87,490

Productive

Indirect

Wasted

Productive work increased from 58% to 80% via adoption of

this continuous improvement approach on a power Clean Air

construction project.

9

58%

76%

80%


How was this result achieved?

Click to reveal the answer


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Sample Results

The figure shows how the productive labor utilizationincreased at a major midwestern power plant Clean

Air project. The project installed selective catalytic

reduction (SCR) for nitrogen oxides emission control,

then flue gas desulfurization (FGD) scrubbers for

sulfur oxides emission control. The project involved a

workforce of over 200 crafts.

A streamlined work process has minimal non-value-

added activity, such as walking, or waste, such as

waiting, and enables labor to complete tasks in less

time. Comparing labor utilization over the course of

the multi-year Clean Air construction project shows the

share of direct labor cost that was productive. A relative

labor dollar savings of 22 percent is made available

through continuous improvement of the work process.

Contractor Labor Use

(proportions of monthly $1,093,625 labor spend)

$1,000,000

$800,000

$600,000

$400,000

$200,000

$02002 20072005 - 2006

Productive $638,728 $828,321 $874,900Indirect $285,630 $144,866 $131,325

Wasted $169,267 $120,438 $87,490

Productive

Indirect

Wasted

Productive work increased from 58% to 80% via adoption of

this continuous improvement approach on a power Clean Air

construction project.

9

58%

76%

80%


The following best practices promote a productive

change in the construction work process.


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Best Practices (Part I)

PicardConsult LLC suggests that project managers apply proven best practices to

systematically improve project performance, project control, and labor productivity.

Project management and contractors have some or substantial control over areas

in which these practices can be used. Working together to implement these best

practices can significantly reduce project cost and duration.

Measure Labor Utilization.Collect data daily by random observation; analyze

and report the data the same day.



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Create Lean, Self-Sufficient Work Areas and Point-of-Use Logistics. Maximize

craft productive activity by eliminating the need to travel away from the

workface or wait for foreman support, supplies, tools, or information.



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Constantly Balance Crew Size with Actual Workload. Use just-in-time staffing

to provide just the right numbers of crafts on the job to achieve a target

productive level of labor utilization.



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Constantly Balance Crew Size with Actual Workload. Use just-in-time staffing

to provide just the right numbers of crafts on the job to achieve a target

productive level of labor utilization.

Provide Foremen with 1-3 day Look-ahead Schedules.This enables foremento anticipate roadblocks that could cause delays. This should also include plan

B tasks when scheduled tasks cannot be performed.



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Best Practices (Part II)

Maximize Foremen Availability to Crews

in Work Areas.The figure shows that higher

foreman availability translates into higher

productivity. Locate foremans desks in the work

area and equip crafts with two-way radios to

obtain tools and materials, thus maximizing

foreman workface time.

100.0%

90.0%

80.0%

70.0%

60.0%

50.0%

65.0% 70.0% 75.0% 80.0% 85.0% 90.0%

FMAv

DW

R

2

= 0.4324

Direct Work vs Foreman AvailablityFGD Projects 2006 - 2007



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Institute Continuous Improvement. Set

realistic yet demanding targets; raise the bar on

each succeeding project to drive continuous

improvement.

100.0%

90.0%

80.0%

70.0%

60.0%

50.0%

65.0% 70.0% 75.0% 80.0% 85.0% 90.0%

FMAv

DW

R

2

= 0.4324




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Institute Continuous Improvement. Set

realistic yet demanding targets; raise the bar on

each succeeding project to drive continuous

improvement.

Management Support Essential. Contractually

establish a cooperative relationship in which the

results of improvement benefit the contractor,

crafts, and owner.

100.0%

90.0%

80.0%

70.0%

60.0%

50.0%

65.0% 70.0% 75.0% 80.0% 85.0% 90.0%

FMAv

DW

R

2

= 0.4324




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Summary

To promote labor productivity on heavy construction projectsand save time and money, improve the work process. Use best

practices based on these approaches:

Approach construction project execution as a production

work process

Distinguish what craft activities add value to the work

process, and what activity is unproductive or wasteful

Define needed improvement areas to increase efficiency of

the work process

Institute continuous improvement of the work process



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Summary




work process




the work process


Collect real-time labor utilization data at the points where

the work is done

Use statistical methods to analyze the level and variation of labor performance

Identify and quantify labor productivity constraints and areas of opportunity

Determine the lean workforce size, in balance with actual workloads



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Summary




work process




the work process


Collect real-time labor utilization data at the points where

the work is done

Use statistical methods to analyze the level and variation of labor performance

Identify and quantify labor productivity constraints and areas of opportunity

Determine the lean workforce size, in balance with actual workloads

Introduce new visibility and accountability in project performance management and field supervision

Provide daily contractor/craft reports and trend labor utilization data

Monitor productive labor utilization against estimate-independent benchmarks

Present real-time data that enables project managers and field supervision to proactively address problems



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Conclusions

13

With relatively little, but consistent effort, construction projects can be

completed using less labor than conventionally estimated by minimizing

wasted resources and maximizing benefits in the process.

Dr. Hans Picard

PicardConsult LLC



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About PicardConsult LLC

PicardConsult LLC is a leader in labor productivity measurement and analysis. With its

robust Work Process Analytics Deming/Six Sigma-based technology, PicardConsult

LLC provides clients real-time craft and foreman utilization metrics to support timely,

fact-based decision making. Productivity improves as the utilization of the craft

workforce and the effectiveness of trades foremen improves.

Quantifying and reducing non-productive craft activity, such as excessive waiting

or walking, which is often associated with heavy engineering construction and

maintenance, boosts productivity and can generate labor cost savings of 20 to 30

percent, or more, through continuous process improvement.

PicardConsult LLC has established a reputation of delivering results for more than 30

years by assisting managers to do more with less. Picard Consult LLC offers on-site

training in data collection, treatment, analysis, and reporting.

Clients include Kansas City Power & Light, Tennessee Valley Authority (T VA), The

Southern Companies, Cinergy/Duke Energy, Dynegy Midwest, Corn Products

International, and Cameco Corporation.

PicardConsult LLC is led by Dr. Hans Picard, Mine Eng., ScD Metallurgy, MBA.



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PicardConsult LLCA leader in labor productivitymeasurement and analysis

For More Information

For more information, contact

PicardConsult LLC

PO Box 1046

Tryon, NC 28782 USA

828-859-3129 office

828-859-3169 fax

[email protected]

PicardConsult.com

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