Monday, December 8, 2014

Measuring Labor Productivity in Construction

Measuring productivity in any enterprise is critical to success.  If the cost of a project, measured in time, materials, labor and other resources is unknown, or at best murky, pricing the project accurately presents challenges. In construction, which confronts the iron triangle of cost, quality and schedule daily, lack of precision presents all stakeholders with opportunities for graft and risks of loss.  Our antiquated procurement methods - design bid build chief among them - exacerbate these problems.  Dr. Teicholz at Stanford University brilliantly addresses the labor prong of the issue in his most recent article in AECbytes titled Labor-Productivity Declines in the Construction Industry: Causes and Remedies (Another Look).  I linked to the article last week and wanted to share Dr. Teicholz's introduction to the statistics that control the debate. His insights deserve careful analysis by advocates of BIM and IPD in construction and I encourage readers to take a long hard look at the article and think about all the ways the lack of productivity in labor impact and are impacted by defective logistics in construction.  Our inability to deliver personnel and or materials to the site "just in time" as manufacturers do negatively impacts our ability, as an industry, to impact the iron triangle of cost, quality and schedule in a positive manner.  Bill Standish's company, Stangate Management, Inc. is working hard to solve the logistics problem in the Midwest, but much work remains. 

Dr. Teicholz's introduction to the critical statistics, vis a vi labor in construction, is excerpted below. 

The definition of labor productivity at the task level is quite simple: output per work hour, e.g.,50 SF per work hour of wall forms built to a given specification at grade level.  However, when measuring the output of entire industry rather than a task, output is defined in dollars of revenue (for a given base year) per work hour.  There are two US Government agencies that measure the outputs and inputs of almost all industries.  The Census Bureau (CB) focuses primarily on outputs (such as the C30 series of construction industry output) and the dollar value of inputs, while the Bureau of Labor Standards (BLS) focuses on labor inputs and many other measures of labor. The data sets produced by these groups are updated weekly, monthly, annually,and for the Census Bureau, every 5 years in their Economic Census.  BLS does calculate labor productivity for some industries, e.g., manufacturing and all non-farm industries, but does not do so for the construction industry. It requires careful use of the available data to make valid comparisons over time and within different sectors of the construction industry. A third government agency, the Bureau of Economic Analysis (BEA) takes the data collected by other agencies (CB, BLS, and others) to develop GDP, Value Added, Input/Output analyses and other measures of US economic activity. Using the data from these three sources provides many insights into the construction industry.

Here's another LINK to the article.  Print it, read it, analyze it and solve the problems highlighted in it on your next project!

Welcome to the Collaborative Revolution!

James L. Salmon, Esq.
Collaborative Construction
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Cincinnati, Ohio 45202
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