PRODUCTIVITY RATE: Before you start an estimate, there should be sound reasoning and understanding of the factors you shall consider during the execution of the project. These factors must be accounted for in the labor cost estimate since they will significantly affect the project. There are usually five elements that affect productivity rate: economy, project team, scope of work/site conditions, key equipment, and weather conditions. These elements shall be rated from low (10%-40%), average (41%-70%), very good (71%-90%), to excellent (91%-100%). We will discuss each element below and how we will apply the percentage factors to our estimate.
1. ECONOMY
Consider the current state of the area where your project is to be constructed. One category you should evaluate is the employment situation and the aggressive construction boom. These factors may seem positive, but they will lower your productivity percentage since, with good business happening around the region, supervisors, skilled workers, and the management team will mostly be employed elsewhere, forcing you to hire inexperienced personnel. On the other hand, if the region’s economy is fairly good, then the productivity rate you should consider will be higher since there will be enough supervisors and skilled workers available for hire. The economy affects all other elements, so this must be considered first.
2. PROJECT TEAM
As stated above, the economy affects all elements. This means that if business is good in the region where your project is to be constructed, it will be difficult to obtain a well-experienced team. The asking salary will be high since the demand is high, unless the supply of workers is also high. The prevailing wage rate should also be considered—are you willing to pay for it? You and your management team should decide whether to cut overhead costs and select an inexpensive, inexperienced local project team, or to bring in your experienced team to meet your needs. These options must be evaluated, as you will need to add transportation and accommodation costs for your traveling project team..
3. SCOPE OF WORK / SITE CONDITION
What is the project scope? Will it involve civil, structural, and electro-mechanical works? What equipment do you need? Is your team familiar with or already experienced in this kind of work? What are the site conditions? Is it muddy or dry? Will it be far and difficult to access? What is the project duration? Can you meet the tight schedule? These are the usual items you should consider and thoroughly analyze since they will affect the items, materials, equipment, and personnel you enlist on site, as well as your productivity rate.
4. KEY EQUIPMENT
Are you going to buy or rent new equipment for the project? If you already have the equipment you need, is it in good shape, or does it need maintenance? The condition and usability of the equipment must be evaluated since they will affect your productivity. If you use your existing equipment but it has a history of frequent breakdowns, it could become defective during execution, causing delays or, worse, potentially leading to accidents.
5. WEATHER
Be sure to check the previous weather conditions of that certain region from the month the project will start up to the month it will end. Unless the project is in another country, it will either be in the rainy season or the dry season.
6. SUMMARY
Now, let’s evaluate and consider the five elements and apply them to our labor cost estimate. Let’s assume that the economy in the given region is fair, so we have estimated our economy at 75%, and perhaps we can hire an adequate project team, so we can say 80% productivity. Assuming some of the scope of work is new to the team and the site is difficult to access, possibly the productivity rate is 50%. Your equipment is in good shape and employs average mechanics, so your productivity rate will be 80%. Then, considering the rainy weather condition, the rate could be 50%. Let’s now group all the percentages and arrive at a total percentage.
Shortcode
| ITEM | PRODUCTIVE RATE |
|---|---|
| 1. Economy | 75 |
| 2. Project Team | 80 |
| 3. SOW / Site Condition | 50 |
| 4. Equipment | 80 |
| 5. Weather | 50 |
| TOTAL | 335 |
Since there are five elements involved, we will divide the total percentage by the number of elements to arrive at an average productivity rate:
335 ÷ 5 = 67 percent average productive rate
We can use the average percentage on the man-hour that we are using. For example, if the rate per hour of your staff/worker is Php 62.00, you will divide the 67% productive rate into Php 62.00. The quotient is Php 92.00, and this will be the value that you will use for your labor cost estimate.
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