PRODUCTIVITY RATE, before you start an estimate, there should be a sound reasoning and understanding on what factors you shall consider during the execution of the project. These factors must be considered on the labor cost estimate since it 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 condition). These elements shall be rate from low (10%-40%), average (41%-70%), very good (71%-90%) and 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 shall evaluate are employment situation and aggressive construction boom, these factors seem positive but it will lower down your consideration to your productivity percentage since with good business happening around the region the supervisors, skilled workers and management team will be mostly employed and that you will have to hire inexperienced personnel. On the other hand, if the situation of the region’s economy is fairly good then the productive rate you should consider shall be higher since there will be enough supervisors and skilled workers to hire around. Economy affects all of the remaining elements, so this must be considered first.
2. PROJECT TEAM
As stated above, the economy affects all the elements, it means that if the business is good in the region where your project is to be constructed it will be difficult to obtain a good 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 and are you willing to pay for it? You and your management team should consider whether to cut overhead prices and select a cheap local project team who are inexperienced, or are willing to travel your experienced team to fill your needs. These options must be evaluated since you need to add transportation and accommodation costs that go with your traveled 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 or already experienced with this kind of work? What is the site condition? 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 well analyzed since this will affect the items, materials, equipment and personnel you enlist on site as well as your productive 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 it will affect your productivity. Considering that you use your existing equipment but with a history of frequent breakdowns, if it becomes defective during execution work it will cause you delay or worst it might cause an accident.
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 other countries, it will either be in the rainy season or dry season.
6. SUMMARY
Now, we shall evaluate and consider the five elements and apply it on our labor cost estimate. Let us say that the economy in that given region is just fair so we have estimated our economy for 75% and maybe we can hire an adequate project team, so we can say 80% productivity. Assume that some of the scope of work is new to the team and the site is difficult to access, possibly the productive rate is 50%. Your equipment is in good shape and employs average mechanics, your productive rate will be 80%. Then the weather condition is rainy, so possibly the rate is 50%. Let us now group all the percentage and arrive at a total percentageShortcode
| 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, the rate per hour of your staff/worker is Php 62.00, you will divide 67% productive rate on the Php 62.00. The quotient is Php 92.00, this will be the value that you will be using to your labor cost estimate.
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