Unit costs, productivity and labour

Quantities say how much work there is; productivity says how long it takes; unit costs say what it costs. The three are linked by simple arithmetic, and that arithmetic sits at the centre of estimating, scheduling and cost control. A construction manager who can build up a unit cost from a crew, a productivity rate and material prices can check a subcontractor's quote, estimate the cost of a change, decide whether overtime will really save time, and judge whether a crew is on track. This lesson covers unit costs, crew rates and labour burden, productivity rates and durations, equipment production and truck matching, and the effects of overtime and crowding on output.

Unit costs

A unit cost is the cost of one unit of work: dollars per cubic metre of concrete placed, per square foot of drywall hung, per linear metre of pipe laid. It is calculated by dividing a total cost by the quantity it produced, or built up from its parts: labour, equipment and materials per unit. Unit costs make comparison possible: a crew that placed 85 m³ of concrete for $3,400 of labour achieved $40 per m³, which can be compared with the estimate, with other jobs and with other crews.

Unit costs are only comparable when their scope is the same. A drywall price per square metre may include hanging only, or hanging and taping, or hanging, taping and sanding to a specified level of finish. A concrete price may include the concrete only, or placing and finishing, or pumping. Write down what each unit cost includes, and check scope before comparing two numbers.

Crew rates and labour burden

Work is done by crews, groups of workers with a typical mix of trades, such as a foreman, three carpenters and a labourer for formwork. The crew rate is the cost per hour of the whole crew. Each worker's hourly cost to the employer is more than the wage on the pay slip: the employer also pays payroll taxes, workers' compensation premiums, benefits and other costs. These additions, expressed as a percentage of wages, are the labour burden.

In Canada, typical burden items include the employer's share of Canada Pension Plan (or Quebec Pension Plan) contributions and Employment Insurance premiums, provincial workers' compensation premiums (which vary widely by trade and province), vacation pay and statutory holiday pay required by provincial employment standards, union benefits and pension contributions where applicable, and any provincial payroll or health taxes. On unionized work, the collective agreement sets wages and contributions in detail.

Burden commonly adds 25 to 50 % or more to base wages, depending on the trade, the jurisdiction, and whether the work is unionized. Estimators should use their company's actual figures; an estimate that prices labour at base wage will be badly short.

Productivity rates

Productivity can be expressed in two equivalent ways: output per unit of time, such as 6.5 m² of formwork per crew-hour, or time per unit of output, such as 0.15 crew-hours per m² or 0.77 labour-hours per m². Estimating references and company databases use both. Labour-hours (or worker-hours) count every person in the crew; crew-hours count the crew as one unit. A five-person crew working one hour provides one crew-hour and five labour-hours.

Productivity rates from references are averages for typical conditions. Real productivity depends on the complexity of the work, repetition, access, weather, the skill and motivation of the crew, supervision, and the availability of materials, equipment and information. A good estimator adjusts published rates for the conditions of the job and, better still, uses records from the company's own past projects, which is why accurate time reporting by cost code is so valuable.

Building up a unit price

A complete unit price combines labour, equipment and material costs per unit, then adds overhead and profit. Building one up line by line shows where the money goes and makes the price easy to adjust when one input changes, such as a material price increase or a slower productivity rate.

The same structure works in square feet: 125 mm is about 5 in, and $80.72 per m² is $80.72 ÷ 10.7639 = $7.50 per ft². Prices vary enormously by region and year, so the numbers in this table are for practising the method, not for estimating real work.

Equipment production

Equipment production is estimated from the machine's capacity per cycle, the number of cycles per hour, and factors for how full each load is and how much of each hour is productive. For an excavator or loader, the cycle includes digging, swinging, dumping and returning. The fill factor, or bucket factor, adjusts for how full the bucket is in a given material: near 1.0 in loose sand, lower in hard clay or blasted rock. The job efficiency factor allows for delays; a common assumption is a 50-minute productive hour, an efficiency of 50 ÷ 60 = 0.83.

Here Q is production per hour, q is the heaped bucket capacity, F is the fill factor, t_c is the cycle time in seconds and E is the efficiency. Production calculated from bucket volumes is in loose volume; divide by (1 + swell) to convert to bank volume, which is how excavation is usually measured and paid.

The truck-matching logic applies to any paired operation: pump and concrete trucks (Lesson 5), crane and steel delivery, paver and asphalt trucks. The slower element sets the pace, and the cost of idle time on the more expensive element usually decides which one to oversupply.

Overtime, crowding and other productivity losses

Schedules often tempt managers to add hours or people. The arithmetic of Lesson 2 says that doubling the crew halves the time, but real productivity per worker falls when crews are crowded, when work runs long hours for weeks, when crews are stacked on top of other trades or when materials and information are late. Industry studies of extended overtime have generally found that productivity per hour declines as weekly hours rise and as overtime continues for longer periods, so that the extra hours produce less than their share of output while costing a premium rate.

These numbers are illustrative, but the pattern is real: overtime is useful for short bursts and specific bottlenecks, and becomes expensive and ineffective when it is used for long periods. Claims for lost productivity caused by changes and delays rely on the same arithmetic, comparing actual unit rates with planned or unimpacted ones.

Tracking productivity on site

Productivity is tracked by recording hours by cost code and quantities installed, then comparing actual unit rates with the estimate. If a crew has used 60 % of the budgeted hours but installed only 45 % of the quantity, the projected final hours are the budget times 60 ÷ 45, a 33 % overrun unless performance improves. The earlier such variances are found, the more options the team has: more supervision, a different method, better material staging or a change claim if the cause is outside the contractor's control.