Measuring Productivity in Construction: Improving Business Performance

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Measuring Productivity in Construction Improving
Business Performance

• Harvey M. Bernstein
• Vice President, Industry Analytics Alliances
• McGraw-Hill Construction

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Productivity as Defined Today
construction contract expenditures in constant
dollars (output) divided by man-hours worked
(input).
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Problems Measuring Productivity

• Macro data does not provide a clear or consistent
  picture of industry productivity
• Best indicator of productivity is accomplished at
  the project level but it is difficult to
  aggregate all project information
• Variation by contractor and delivery approach is
  significant
• Delivery approach variances up to 17 (CURT)
• Owners, AEC firms, and BPMs lack agreement on
  what metrics are most important to quantify
  measuring performance

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U.S. Productivity Gap (1964-2003)
Non-Farm
Construction
Reference Paul Teicholz, Ph.D., Professor
(Research) Emeritus, Dept. of Civil and
Environmental Engineering, Stanford University
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Canada Total Factor Productivity in the Business
and Construction Sectors, 1961-2001
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Who needs to know how to measure productivity and
have access to an Industry Performance Rating
System?

• The thousands of firms who must wisely evaluate
  and select GCs, Subs, AE firms, BPMs, Products,
  and Distributors.

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Who will benefit from an Industry Performance
Rating System?

• Owners to select the best AEC firms
• GCs and Design firms to promote their rankings
• Distributors -to represent the best BPMs and BPMs
  who want to partner with the best Distributors
• Firms -to expand thru partnering or buying Firms
• Lenders -to minimize risks of construction
  lending
• Insurance firms -seeking an objective,
  third-party source of contractor and project
  ratings
• Government Agencies -for cost estimating and
  project cost comparisons

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What about labors influence?

• Multiple studies show productive work (direct
  work) accounts for only about 1/3 of workers time
• Work site communications are inadequate
• Material handling time has to be reduced
• Waiting time has to be reduced through better
  integration/scheduling with suppliers
• Track/manage productivity at the project level to
  establish a benchmark for future improvements

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Labor Rates
Reference Paul Teicholz, Ph.D., Professor
(Research) Emeritus, Dept. of Civil and
Environmental Engineering, Stanford University
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Keys to Effectiveness

• Effective use of subcontractor and labor
• Level of craft training
• Familiarity with means and methods
• Effectiveness of supervision/project management
• Influence of wages
• Union vs Non-union
• Common work culture (safety)

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Safety as an example

• First items on every agenda
• Part of corporate culture
• Recognizes that a safe work site is also an
  efficient work site

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Higher Wage Rates Do They Drive Productivity?
Source Construction Labor Research Council,
March 2004.
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Productivity Is Not Constant in a Complex Industry
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Combining Multiple Factors in Measuring
Productivity
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Unit Cost Comparison

• Building Type Cost/s.f. Cost/s.f. 2003 Cost
  1965-2003
  1966 2003 Adjusted
  to Decrease
• 1996
• Warehouse 4.30 21.00 3.70 (14.0)
• Retail 13.00 63.33 11.15 (14.3)
• Office 18.50 91.00 16.02 (13.4)
• Multifamily Residential 9.10 45.50
  8.09 (11.1)
• Weighted Average (12.3)

Source Haskell, 2005
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Quality and Content Enhancements

• Category 40-year Cost Impact
• Fire and Life Safety 3.1
• Seismic and Windstorm Resistance 1.6
• Life-cycle Cost Expectancy, Quality 3.3
• Sustainability, Environmental Quality 2.7
• Impact Fees, Offsite Improvements 1.2
• Accessibility Compliance (ADA) 1.3
• Enhanced Security Features 1.0
• Improved Energy Efficiency 2.8
• Indoor Air Quality, Mold, Asbestos 1.6
• Total 18.6

Source Haskell, 2005
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Summary - Output Approach

• Unit Cost Decrease 12.3
• Quality and Content Increase 18.6
• Total Productivity Increase 33.2

Source Haskell, 2005
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Summary - Input Approach

• Labor Productivity Increase 15.3
• Materials Cost Decrease 21.1
• Capital Equipment Increase (4.0)
• Aggregate Productivity Increase 32.4
  

Source Haskell, 2005
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Haskell Conclusions

• Output Approach 33.2
• Input Approach 32.4
• Rounded 33.0 0.78/year
• All other U.S. Industry 1.75/year

Source Haskell, 2005
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Impact of CAD Activities

• CURT studies show 3D CAD provides 7 percent (and
  up) improvement in labor productivity

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Change impact management

• Any deviation from construction plan drives poor
  productivity

?

• Disruption is the major impact

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Industry Thoughts on Measuring Productivity

• Get industry buy-in on the criteria used.
• Find surrogates for data that will indicate
  performance and enable some form of comparison.
• Measurement rankings drive performance (e.g., ENR
  rankings are used by clients when viewing
  potential contractors).
• Safety drives productivity and is a fundamental
  indicator of quality and should be a factor in
  measuring performance.
• A quality team is indispensable to good
  performance and should be considered.

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Potential Areas for Productivity Increases

• Information Technology
• Project Delivery
• Automation and Prefabrication
• Workforce Development
• Materials

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Benefits of Developing a Measurement and
Performance Rating System for the Construction
Industry

• new innovative products
• improved efficiency
• Improved performance
• Improved competitiveness
• higher profits
• increased market share