Masonry Magazine April 2001 Page. 26
Determining the man-hours actually earned (budgeted)
Determining the man-hours actually earned (budgeted) for a task can be a bit trickier particularly when in the middle of a project. At the end of a job, the ratio is comparatively easy to determine by simply dividing the original lump-sum budgeted cost (assuming no change orders) by the actual number that is determined from field records and payroll. However, during the course of a project, billings and payments are commonly spread out over several months. In this case, it's common practice is to arrive at a percentage of work completed (i.e. is the actual work in the field 20%, 50%, or 80% complete) for each line-item for that billing period.
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PLUG 'N PLAY
Let's look at an example. Let's say your total job budget for carpentry labor is $10,000 and through the first billing period (normally the first to last day of the month), you determine the carpentry work for the project is 50% complete. This would put your budgeted value for the carpentry at $5,000. Now, you review your actual cost-to-date for that labor. Lo and behold, you show a total outlay for that period $6,300. You divide the budgeted value ($5,000) by the actual amount spent ($6,300) and you arrive at a ratio (rounded-off) of .79... a bad omen (being under one). Now of course, this is a simple example (one you could likely do in your head), but when combined with perhaps 10, 50, or even 100 other billing line-items, one can see how this simple check & balance (perhaps as an added column to your billing spreadsheet?) might make for cheap insurance and an indicator of possible productivity concerns.
THE IMPORTANCE OF ACCURACY (AND EXPERIENCE)
But though helpful, these ratios will only be of tangible use when both the percentage-complete (which will determine your budgeted cost or "earned" amount) and the actual cost (from your records) are truly representative of the work performed. If one or both of these ascertains are skewed, the results are pretty-much meaningless. Arriving at these numbers on the fly is no simple task... and no place for amateurs. It's quite common for other more judgmental factors to creep in to skew these numbers (see examples below), so only experienced and skilled construction project managers and estimators can even hope to come reasonably close. Therefore, lesson #2 would be: hire and pay for the best people. The extra $10,000 - $15,000 you cough up now in salary will more than cover revenue generated down the road.
CHANGES IN SCOPE OF WORK
Ok, so far so good. But what happens when our pristine budget number and carefully calculated percentages are altered due to change orders? Well, don't panic. The process is essentially the same but with an added step. When a change occurs, select the billing line-item that best (Continued on page 28)
26 MASONRY APRIL, 2001