Construction projects are paid by the job, but a contractor pays his employees by the hour. The faster an employee works, the more money the contractor clears from the project. Efficiency and productivity are directly related to your workforce’s training, experience and motivation. Consider these factors when bidding so that you can profit from the job instead of losing money. Estimating man-hour productivity for the next project requires tracking the productivity of your crew on past jobs. Learn to estimate productivity properly to maximize profits and make your business grow.
Review your original contract. Look at the amount charged for the entire project.
Subtract the price of materials, supplies and equipment from the total price of the contract. The remaining amount is the estimated labor cost.
Divide the estimated labor cost by the total number of man-hours allotted for the project. This amount is the estimated labor cost per hour.
Look at payroll records to obtain the total amount of labor paid out during the project. Divide this number by the total number of man-hours spent on the project to get the actual per-hour labor cost.
Compare the estimated per-hour labor cost to the actual per-hour labor cost. Productivity is increased if the estimated per-hour labor cost is higher than the actual cost. Productivity is decreased if the actual cost is higher than the estimate.
Review your labor management procedures to increase your productivity. Adjust your estimating process to better fit your workforce’s capabilities.
Productivity equals profit. It is essential that you perfect this process; failure to properly estimate productivity can sink a company.