If you mention tracking performance on a construction site, there will likely be some eye rolling; however, the mention of tracking profitability may elicit a much different response. If more contractors viewed tracking performance as being related to tracking profitability, more contractors may embrace it. It is essential for contractors to track labor and equipment performance (Estimated Unit cost vs. Actual Unit cost, and Estimated Productivity vs. Actual Productivity) on construction projects for two reasons:
- Measure performance trends on their current projects
- Develop accurate historical unit cost and productivity for future estimating purposes
Tracking performance becomes more important when it is used to resolve problems (e.g., delays, disruptions, periods of inefficiency, and cost overruns) or pending issues from the onset of work, as well as disputes.
Even if no claims arise, tracking performance enhances construction administration and ensures performance accountability while also providing data for accurately estimating future bids. Too often, the lack of resources to verify, track, input, and analyze the data prevents contractors from improving their competitiveness and profitability.
Contractors must fully embrace the notion that relevant work activities can and should be tracked and compared against the estimate. Many contractors continue to resist tracking performance despite an array of available technology. Often, even though there may be no debate about the merits of performance tracking, it is difficult to change to the contractor’s established construction estimating, accounting, and operations processes, which are required to facilitate timely and accurate performance tracking.
Here is how to track performance:
- Adopt a tracking system that works in the office and the field.
- A useful system must have buy-in from project supervisors and the full support of senior management from the beginning of the project. The system must integrate and align with the project estimate. The system should monitor labor and equipment hours against installed quantities that are consistent with the way the project was estimated.
- The system should also be capable of tracking the location of work by area within the project. This refined tracking will identify productivity improvements or degradation of labor hours into discrete areas that can then be compared against each other.
- The system should also relate to schedule activities. The activities can incorporate the hours and quantities from the tracking system and serve to provide verifiable, quicker, and more accurate assessments of project cost and schedule status.
- Designate someone as the performance tracker. Generally, job foremen are accountable for recording production data in the field since they are most familiar with the crews. Collecting and inputting the data daily is best, along with a weekly recap and analysis. This allows the daily tracking of actual hours against installed quantities, which can be used for daily planning purposes and schedule verification/updates.
The performance-tracking metrics are used to compare estimated to actual productivity for relevant pay items. This generates timely feedback on the daily productivity of fieldwork, which can be compared against the project estimate to evaluate performance and profitability. The benefit of tracking labor productivity is the instantaneous knowledge of crews’ performance against the bid performance rates. Armed with this knowledge, the project manager can then:
- Make immediate adjustments to processes or labor in the field if productivity and/or schedule expectations are not being met; or
- Issue an immediate notice of a change in conditions if conditions are beyond the contractor’s control.
It is imperative to segregate extra work activities into discrete work scopes (e.g., pending change orders, contentious issues that may result in claims, and claims), because a contractor typically acknowledges through a change order that the change is a complete settlement of certain added work, or work it did not anticipate for which it is entitled to additional compensation and/or time.
Tracking the location of work being performed on a daily basis will further document and establish disrupted work conditions (if needed) in a changed conditions requests.
Equipment efficiencies are affected similarly to labor, because labor and equipment work in unison. Therefore, tracking equipment utilization works in the same manner.
Systematically tracking performance is not just possible—it is essential for improving efficiency and profitability while optimizing performance and minimizing risk.
Dennis R. Jasinski is an associate director in Berkeley Research Group’s Global Construction practice in Atlanta, Georgia. For more information, contact Mr. Jasinski at firstname.lastname@example.org or 678.627.8333.
The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions, position, or policy of Berkeley Research Group, LLC or its other employees and affiliates.