Job Estimates, Realistic Job Pricing
The first thing to understand is that you have to be realistic in order to put together a price.
by Len Hijuelos
we discussed pricing, and one of the points we tried to make was the importance of labor costs and how difficult that is to quantify. Basically, what the job costs you revolves around production, that is, how much a worker can produce in a given period of time. I hate to disillusion you, but there are no magic numbers out there that you can use.
The first thing to understand is that you have to be realistic in order to put together a price. What, in actuality, can I expect a worker to produce in my particular operation, whether it be painting walls, trim, doors or whatever?
The first thing to realize is that no one worker is going to keep up the same pace hour after hour, day after day — there will always be peaks and valleys. In fact, in an 8-hour day, depending on the operation and means of application, it is generally accepted that you will be achieving, at a maximum, 61⁄2 to 7 hours of production. The other hour to hour-and-a-half is non-productive time, for which you are paying.
Numerous studies have been made of the factors that influence production or the lack thereof. I’ve listed a few that I have come to accept as having an impact on our own company’s productivity.
At the top of my list is an assessment of our particular capabilities. What are our strong points and what are our weak points? How efficient are we in organizing our work force and maximizing our production?
To achieve any benefit in making this evaluation, you have to be completely realistic in your assessment. Over the years, I have heard some rather outlandish stories regarding production. My impression was that these people really did not know what their production rates, and therefore their costs, were, and probably would not be around very long. Unfortunately, I was usually right.
Many factors affecting production result from the type of job. Some jobs lend themselves to high production: minimal use of colors, opportunity to use spray equipment effectively, and easy accessibility to the work areas. Conversely, some jobs are on the low production side with numerous colors, accent colors, slower application methods, and difficult accessibility to the work areas. These factors can usually be recognized and evaluated when pricing the job.
Another very important consideration in determining production factors is the number of floors with which you will be dealing and how the upper floors will be accessed, that is, whether you will be dealing with elevators, stairs or exterior hoists. Height and means of accessibility are very critical factors. On a twenty-or-so-story building, with limited means of accessibility, on average you can probably expect five to six hours of production in an eight-hour day.
Another factor to assess is what kind of working environment you provide for your workers. Are you providing an atmosphere that is conducive to work satisfaction and well-being? Some companies enjoy a good relationship with their employees and usually experience good productivity. Other companies, for whatever reason, do not have good relationships, which usually results in a group of malcontents with attitudes rather than a harmonious team. This work environment usually has production at the low end of the scale. Are employees offered the opportunity for training in new equipment and materials to ensure they are familiar with new developments? These types of assessments may be somewhat intangible, but they do have an impact on productivity.
For some reason, certain areas of the country seem to be more productive than others in the construction industry. I ran across a study of labor productivity some time back, and using 1.00 as a base line, surveys in various parts of the country varied from .75 to 1.10, with .88 being the median. No conclusions were given in the study, but I suspect it indicates that the difference is a better-trained, more skilled work force in those areas with the higher productivity rating, probably because of good apprenticeship programs or other types of entry-level training. This type of study would indicate that you should be aware of your workers’ skills and think about instituting some company training programs.
I don’t mean to suggest that a contractor try to consider all of these factors for every bid or proposal, but it might be beneficial to periodically reflect on the impact some of these may have on your business.
Len Hijuelos can be reached by e-mail.