H-A

Stephen C. Wexler
President

Systematic Associates, Inc.

123 Highland Avenue
Needham, Massachusetts 02194

THE INTEGRATION OF LABOR COST DISTRIBUTION [LCD]

8 NETWORK SCHEDULING

OVERVIEW OF THE PROBLEM recent CPM advances, a breakdown to

enable a tie in is easy to facilitate.
My experience over the years as a contractor 2. As Related to Labor Cost Distribution -
and then consultant has shown that contractors are many of the manual cost distributions.
generally eager to improve the efficiency of their in effect, are not very accurate as to
operations - particularly as profit margins have recording accurate payroll dollars by
gotten so much tighter. There seem to be certain work category. Also reporting quantities
elements inherent in our industry that seem to defy completed each week seems to be laborious,
solution to these problems. One issue is that the and our industry seems to operate at a
construction jobs are so dynamic and variable that fire brigade level all too often.
many of us simply give up in designing labor cost
systems and scheduling systems to be able to track
our projects. The fact is that systems are rea- FUNDAMENTALS OF THE LCD FOR INTEGRATION
sonably easy to develop. There are those firms
in the country which have developed systems to I consider the fundamentals of a proper labor
incorporate labor cost distribution and network cost distribution, the first of which I designed
scheduling. However, generally, these systems are in 1964, is the payroll time card by day by crew,
so tailored to that particular firm that they are broken down by code. From this time card, the
not at all adaptable to other firms. tradesman is paid, and the items he worked on are
recorded in hours, and later converted to cost.
OVERVIEW OF THE STATE OF THE ART The quantities of a general contractor's work need
to be recorded by marking up a set of prints in the
Suffice it to say that over the years, the field. If the job and quantities are large enough,
software has reached a point of sophistication to the reports on formwork should reflect retainage
enable a variety of different costing reports, for stripping, framing of those forms that were
generally structured with respect to requisitioning stripped, etc., if one wants to get a reasonably
and/or monitoring time progress. Also available accurate reading each week from which he can make
are graphic systems that are computer-generated and decisions to take corrective actions where neces-
networks that now include lead-lag overlapping sary. With a proper master cost coding list by
relationships so that one can delineate the job the company and by properly cost-coding the esti-
schedule as it realistically will be built. I have mate, one can incorporate back charges and change
observed the most sophisticated software systems orders. A three-digit coding system, which is
in the country and see that, while costing asso- fundamentally simple and allows the delineation of
ciated with scheduling systems has also gotten subcontractors as "S" numbers, the General 100
somewhat sophisticated, I have not as yet seen the through 600 series for general contractor items;
routine that incorporates the general contractor's 700 series for back charge items; 800 series for
labor cost distribution breakdown. change orders or modifications; and 900 series for
corrections provide a scheme consistent with CPM,
SOURCE OF THE PROBLEM where CPM coding is generally numeric. A number-
ing system should be consistent both throughout the
The problem seems to be twofold: company and throughout the various reports and
charges, including all delivery slips so that
1. As Related to Network Scheduling - those materials can be properly cost-coded. Cost reports
that are planning networks generally do should be broken down to show projected gains and
not reflect durations that reflect the losses on both material and labor items, with sub-
contractor's estimate for the work item. totals by each category of the 100 series.
In part, the reason is that the networks
are not broken down consistent with the FUNDAMENTALS OF THE CPM FOR INTEGRATION
contractor's breakdown as per his esti-
mate. This seems to be a difficult match The integration of Labor Cost Distribution
to achieve, and yet with the use of sub- network scheduling new reduced to developing a plan
networks, logical groupings, and other before developing the CPM as to bridging a gap and

H.A. 1
determining the level of detail of the CPM so that The next step is for the construction organi-
it will serve the purpose of both time monitoring zation to back the entire procedure up to include
and cost monitoring from the estimate. The first the previous phase. In this regard, the estimator
focus is to look at the network plan from the ought to be developing a prebid network schedule
standpoint of time rmnitoring and structuring items for many reasons. First, he is able to clearly
accordingly; for example, Form Reinforce and Pour see time frames, the General Conditions, items,
Foundation - North Side. After the overall network and other both weather-susceptible and long-range
logic is planned, one then goes back and breaks cost items that will affect the estimate. Second-
down each item with a small subnetwork or subnet- arily, he is able to evaluate the interface between
work list, including all the cost-coded items, both the time scheduling of the CPM and the cost re-
labor and material, that are represented by that porting, which is going to be a reflection of his
activity. The logic for the Labor Cost Distribu- estimate. As the estimate is conducted, it should
tion subnetwork need not be "logical" as it merely be conducted from the traditional standpoint,
is serving as a vehicle to reflect dollars within taking the job off both in the manner in which it
the time frame of the more major time activity. will be built and its individual component parts,
As long as the CPM network major activities are i.e., taking the linear foot of Chamfer strip as a
structured with durations of generally less than separate item from the foundation wall forms,
20 or 25 days, the subnetworks will be reflective although the time schedule will incorporate both.
enough of the cost of work in progress. After the contractor has secured the bid success-
fully, he is in a position to cost-code the esti-
mate - first from a Labor Cost Distribution stand-
point, working within the organization's master
cost code list.
THE STEPS TOWARDS THE ULTIMATE GOAL
The next step is to further develop the pre-
bid CPM into a complete network schedule for the
I believe that our industry should strive for
the ultimate goal of integrating Labor Cost Dis- project. Then would be to break appropriate CPM
tribution and Network Scheduling. By the ultimate activities down into subnetworks from the stand-
goal, I reference the procedures involved in the point of the labor cost interface. After then
overall integrated system as being effective at developing an appropriate numbering scheme for the
the time of bid. subnetwork, the project manager can go back to the
estimate and cost code the network a second time
To arrive at this point, it is necessary to from the subnetworks in the network schedule.
intermesh the Labor Cost Distribution System and
the Network Scheduling System. The true test of The last step is, after computerization of
any integrated system is that the parts can stand the network schedule to cost load the subnetworks,
alone and provide meaning. Those integrated with the cost being an accurate reflection of pro-
systems that I have seen do not support the parts. ductivity. Time-scheduling is referenced in days,
In other words, the integrated systems which I have with the common denominator being mandays or crew-
seen, with the costing or the labor cost distribu- days, with the tie-in relative to the cost estimate
tion part separated out, there is not sufficient being an assigned dollar value for the crewdays,
detail to accurately track the contractor's costs equipment and materials.
per unit time of meaningful measure. By meaning-
ful measure, I reference that the results are
received before the particular operation is accom-
plished, such that management can make a decision, SUMMARY
after seeing the results. to change the course of
events. I believe the predominant difficulty is that
we consider ourselves contractors, which is not the
The first step is then to develop a very com- business we are engaged in. We are management
prehensive Labor Cost Distribution system, which firms operating within the construction industry
is based upon the grass roots; the grass roots and need to first manage ourselves. We place a
being the source of the raw data, namely the time lot of emphasis in our business in purchasing,
card and quantity report. The construction orga- estimating and other areas, and glance over
nization should approach Network Scheduling in the scheduling and cost control. I believe each firm
same way, such that from a time standpoint, they needs to develop its own system. The system design
can accurately determine how the job is progressing is simplistic in that the initial effort for the
with reporting techniques in a timely fashion so initial project is kept on a simplistic basis and
that management is able to effect change. expanded on throughout the job and throughout other
jobs. The software for much of this currently
Once the construction organization has exists, or at least exists in a form that can be
achieved two independent systems, it is then modified. The system generated by the computer
appropriate - and I think mandatory in this day is merely a reflection of the quality of the system
and age - to integrate the two by the usage of components and design, which, in all cases, need
subnetworks (in the case of the network schedule to first be structured manually - by a proper need
to enable greater detail) and for the Labor Cost analysis.
Distribution, using a macro technique of major
groupings. Once this is achieved, management is To solve the problem is to understand the
able to track time independently, cost indepen- problem. To understand the problem is to first
dently, and both time and cost together. identify the problem.

H.4.2