Looking For Better Estimates? Know Your Labor Costs!

Words: Kevin Camarata, Founder and CEO of Camarata Masonry Systems
Photos: ciricvelibor, mihailomilovanovic

While all estimators focus on the accuracy of their material takeoffs (and rightfully so), there is a huge component that is overlooked which has an equally important impact on the profitability of the job; knowing your labor costs. I am assuming that most contractors know their material and equipment costs at bid time via supplier quotations or pre-arranged pricing. This certainly has been complicated by COVID, the war in Ukraine, and all of the supply chain abnormalities associated with them, but at least you can begin with a fixed number and plug in the estimated escalation. Also, while important, miscellaneous supplies represent a smaller portion of the overall cost, and I have not focused on them in this article. That leaves labor. About half of a masonry project’s cost is labor, but most contractors don’t really know what their current labor costs are. They have no mechanism to track costs accurately. Believe it or not, many contractors only track overall total job cost and compare that to their total estimated cost. Sometimes, this comparison takes place after the job is finished, at which point it is too late. Occasionally, there will be a cost comparison during the progress of the job based upon how much has been spent and a rough guess at the current completion percentage. This comparison may have the labor and other costs separated, but there is no definition of where the labor dollars have been spent. This rough process is made more difficult by the many different types of masonry units on a job, each having its own completion percentage and all contributing to the total project completion percentage.  

The ultimate goal of all good contractors is to know, as closely as possible, what their real labor costs are. It does not matter what your costs were ten years ago. The only thing that matters is what your costs are today, coupled with a reasonable projection of what they will be when you are executing the job sometime in the future. How do you define those costs? When we first began, I was the superintendent, warehouse foreman, and truck driver; as is the case with many small contractors. I looked over every estimate and made sure that I was satisfied with the wages, benefits, payroll taxes, insurance, the divisions of production units, the crew sizes, and the crew production. Then, when visiting the job every week, I checked to make sure all of these things were in line with our estimate. I knew what we were paying people, the crew size, and the daily production. Essentially, I knew if we were making the estimated costs just about every day, but what happens when you get larger and you can’t physically be on each job daily or weekly? What happens when the job is so large and complicated that it is impossible for one person to easily see all of the crew and the production?

The answer is that you must have a method of accurately quantifying your labor costs in such a way that it is the equivalent of you standing on the job every day looking at the entire crew.  This will require a ‘system’ (software/program either purchased, written in-house, or a combination of both) that will allow you to separate tasks in a similar fashion to how you estimated the job.  It will require careful site tracking by your supervision as to how many people were assigned to a task and how many units of each type were put in place every day.  This information is uploaded or reported to the system either directly or by an in-house administrator.  

Careful attention must be placed on segregating tasks accurately. By way of example, clean-up labor cannot be intermixed with brick installation, or it will distort the brick cost and clean-up tracking. Even if a laborer’s time is spent on more than one definable and trackable task in a day, it must be separated and accurately reported. A laborer may spend part of his time screwing on wall ties and part of his time on the clean-up crew. The onsite supervision must account for this and report it as it occurred. Too many trackable tasks will generally result in bad data as the onsite supervision can only track so much, and certain tasks are not easily defined. By way of example, you would certainly wish to track soldier brick production separate from stretcher brick production and can do so when there is enough soldier brick to occupy a significant portion of the mason’s day. However, you cannot accurately track it if you have one row of soldier brick in a large wall of field brick. You have to make the decision to combine units in your cost tracking system (that may have been estimated with different production rates) when tracking them independently is virtually impossible. Typically, when you do this, the wall that is made up of a very small portion of a different unit still provides you with good cost information because its effect is de minimis. The goal is to attain accurate data, and improper tracking and reporting provide bad data.

There is no question that this will require a considerable amount of training and constant reinforcement as the onsite supervision has a difficult job already, especially in today’s environment with the safety and coordination demands placed upon him/her by the upstream clients. But, if done correctly, the outcome is that you will know your actual cost per unit type and in every identifiable labor category, and you will be able to build a database that you can reference when estimating a similar project in the near future. You will be able to accurately determine your overall percentage complete, even with many different unit types on the job. Knowing your overall percentage complete will allow you to carefully analyze all of your time-related support functions (operator, mortar mixer, sawman, etc.) and see if they are in line. The entire process enables you to project forward if the job continues in a similar fashion as to what your overall cost will be. It provides you with the tool to identify if something is trending in the wrong direction in time to do something about it. Most importantly, you will know what your labor costs are and can build your estimates with real-time data.