All in Agreement
Ever considered the number of actual hours a field supervisor spends managing a change from inception to completion? What does a field supervisor actually do to complete a change? Does a $1,000 change cost less to supervise than a $4,000 change? On average, how often is your supervision budget met or exceeded?
Subcontractors commonly complain that their field supervision costs regularly exceed budget with or without changes. Consider there was a time of higher margins and lower production rates when subcontractors didn’t care if their supervision budget was exceeded because the overall job made money. Today, subcontractors bid jobs at lower margins and higher production rates, and a percentage of labor to determine field supervision hours. Hence, most jobs are bid with less than enough field supervision hours.
Since most subcontractors are starting jobs with low margins, high production rates and not enough money in their field supervision budget. it is more critical than ever to have more than enough supervision time in each change priced.
How Many Hours?
Those who normally price changes don’t often consider the variables that should be considered when determining the number of supervision hours that should be included in each change. For example:
- Quality of plans and specifications
- Level of cooperation from GC
- Availability of information.
These are just a few general variables that may increase or decrease supervision hours since every job is different and the people on every job vary.
In addition, the person(s) pricing a change should consider what a field supervisor actually does when a change occurs. In other words, what does a field supervisor actually do to complete a change? (Consider creating your own supervision check list or use the following list and apply hours to each task.) In this case, we are considering a change involving drywall and framing:
Field Supervisors Role and Responsibility
- Review and understand change
- Coordinate with GC/ other trades
- Procure layout information
- Schedules work
- Procures received material
- Procures received tools/equipment
- Procures framing labor
- Procures drywall hanging labor
- Procures taping labor
- Procures schedules, multiple cleanups
- Coordinates multiple inspections
- EWA or time card management
Some subcontractors have project managers order material for changes that could be charged for if included in the field supervisor’s role. In any case, the twelve tasks listed above happen in some way, shape or form. A very important consideration is the fact that for every hour a supervisor manages a change, he is not managing the original base contract.
When you consider what a field supervisor actually does from inception to completion of a change and then add a difficulty factor as a result of poor plans, lack of information or a general contractor who doesn’t want to be involved, you can be sure your supervision hours for any change will be higher. To be clear, “every job develops a unique positive or negative culture” that should be considered when pricing a change.
Project Managers Think - And Think Critically
A phenomenon occurs when you take a person from the field that has run work for a long time and then promote him to a project manager. They will forget how much time it actually takes to supervise a change. Their counterparts (the project manager) who have never worked in the field continues to do what they were taught when they started and this is usually to apply a percentage for supervision based on labor hours.
In either case, consider for a moment the possibility that project managers have lost sight of the goal or have forgotten why they are managing a project. What have they become, what are their goals and why are they managing a job? In the case of pricing changes, their goal, their reason for managing a job, is to price changes properly, accurately and profitably, and have the ability to sell any change that is disputed.
All jobs are different and all changes are different. Project managers should be trained to look at each individual change based on the job they are on and the complexity of the change to accurately determine the number of field supervision hours each change will require.
Is it possible to have a $1,000 change and $400 of it attributed to field supervision? Of course it is when complexity and variables are considered. Am I saying that 10, 15 or 20 percent of labor is not enough money for field supervision? Well, let me ask you, on average are you meeting or exceeding your field supervision budget?
Owners Don't Know
Consider whether or not it is important for you to know how much money you spent on supervision for $300,000 worth of change order work? Now consider whether or not it’s important to know how much money you spent on labor, material, tools and equipment for that same $300,000 in change order work?
In most situations, owners/subcontractors don’t know because changes are not accounted for; meaning they have no idea how much was spent and neither do project managers.
Most interesting is when a general contractor disputes a change because it appears to be priced too high and the subcontractor and general then begin a negotiation, which ends with the subcontractor lowering their price without knowing how much the change actually cost. This is called “negotiating against thyself” and it’s done more often than not due to a lack of information. I have no doubt that if subcontractors knew what their costs were to perform a change, it would be unlikely they would lower their price unless they had the room to do so.
An owner/subcontractor and project manager should be able to look at a job cost and see how well or how badly the supervision budget is on the original base contract or how well or badly the supervision budget is doing on change order work.
Let’s take a $1 million job with $300,000 in added work for a total contract amount of $1.3 million. Labor was 65 percent of the total contract amount or $845,000. Of the $845,000, the field supervision budget was 10 percent or $84,500. This math would tell us that about $20,000 was spent on change order field supervision and $64,500 was spent on original base contract field supervision.
Everything sounds logical until you consider that the field supervisor spent roughly 30 percent of his time managing changes rather than managing the original base contract and if accurately calculated, you might find that the field supervisor spent 40 to 50 percent of his time managing changes, meaning it’s likely the supervision budget was exceeded by 10 to 20 percent. Plus the fact that each hour a field supervisor spends on a change is an hour he is not managing the base contract.
Always using a percentage of labor to determine field supervision hours for changes has become a convenient time saving habit that is almost laughable. However, field supervisors aren’t laughing because they go into every job these days with not enough or barely enough field supervision hours. Let me ask again: Are you meeting or exceeding your supervision budget?
I’m writing this article while on a trip to Europe and am currently in Sicily, Italy, in the small beach town of Cefalu. I have to say that the Sicilian people have mastered the art of managing chaos on construction projects and chaos in general by yelling, pointing, honking or stomping their feet until they get what they want. Maybe field supervisors should try those things in an effort to get an adequate number of supervision hours? Now for another Cappuccino or maybe a Bellini.