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The purpose of this document is to provide guidance in the development and application of Labour Norms for
estimating. In parallel to the development of these Labour Norms, consideration has been given to the
application of, location (productivity) factors, indirect costs, overheads, profit & risk, condition factors and / or
efficiency factors.
Therefore the user should have a common understanding of the terminology used in this process to ensure
clarity in (understanding) with regard to what is included in Labour Norms, labour rates and those items that
should be captured as derived costs (applying factors and % uplifts).
This document will address Labour Norms and labour rates separately; this document does NOT address
contract forms or those elements that are specifically excluded from the Labour Norms and / or labour rates.
The preambles (scope description) and qualifications (condition factors when special working conditions apply)
to the Labour Norms are intended to provide the basis for completeness and consistency in estimates. The
preambles and qualifications are applicable for all types of installation work.
The Labour Norms levels are based on North West Europe (factor = 1.0 location /productivity), to prepare the
Labour Norms for other locations; location (productivity) factors can be applied.
The Labour Norms are deemed to be all-inclusive; reference is made to the pre-ambles of the relevant
disciplines where the scope of an individual norm is explained.
Only in exceptional circumstances (special working conditions), a multiplier (correction factor) may be applied
to the Labour Norm.
The Labour Norms can also be adjusted by an efficiency factor related to the volume of work that is
expected / executed.
Note: For the definition of productivity and efficiency refer to par. 9.0 Productivity and Efficiency
The Labour Norms are based on normal working time, where overtime operations are deemed necessary; this
can result in decreased productivity (efficiency loss). When overtime is scheduled for a longer period of time
(for example to meet specific planning requirements), the Labour Norms require a productivity factor correction
for inefficiency caused by long working hours (inefficiency = worked hours / calculated Labour Norms for a
specific activity).
Note: For the definition of productivity and efficiency refer to par. 9.0 Productivity and Efficiency
Direct costs are costs for materials, labour (including working foreman) and allowances that can be assigned to
specific activities, including the set of tools and equipment required to execute the work.
Indirect costs are costs occurring during the execution of the work that cannot be assigned directly to specific
activities; for example supervision
4.2 Overhead
Overhead costs are costs in the indirect sphere, relevant to the implementation of the work. This entry
is considered to include costs connected to using supervisory, executive and coordinating staff. At the
same time in this entry are incorporated the costs linked to the required approval, drawing- and
calculating work for the implementation, as-built, management, work preparation, permits, reports,
material management, quality control and project controls. Initial safety introduction for mobilizing direct
labour is included in the overhead.
The following scheme gives an overview of how the direct hours, direct labour costs and indirect costs are
applied and the total costs are derived.
Includes:
General allowance
Job preparation allowance
Personal care allowance
Extra man allowance
Moving time allowance
Height 13.2
Congestion 13.8
TOTAL COSTS
The units of measurement to be used shall be as stated within the Labour Norms and as defined within the
preambles.
For a work item that’s “Unit of Measure” is defined in meters (m) length, the measurement shall be the length
measured along the central axis of the items.
All items of work are measured net as fixed in position and no allowance is made in the quantities for cut and
waste.
7.0 Validity
The Labour Norms assume that the activities can be carried out under normal conditions. These ‘normal
conditions’ are described in the sections below. For activities that are carried out under unusual conditions,
condition factors may be used. (i.e. to condition the activity to reflect the “abnormal condition”).
The Labour Norms are applicable for “reasonable” scope of work (day filling) within a discipline, for example
when there is a situation where there is only 1 flange connection and no other mechanical work or just 1 m2 of
painting the Labour Norms do NOT apply and the estimate should be based on reimbursable man hours for
that particular job.
8.0 Conditions
The Labour Norms can only be realised if the following conditions are met:
Good professionalism
Good work preparation
Good project organisation
Good instruction and supervision of assembly personnel
Timely access to workplace, to sufficient good quality materials, tools, drawings, etc.
Normal weather conditions
Productivity
Labour productivity is the amount of goods and services that a labourer produces in a given amount of time
(labour norm), also referred to as the measured time required to execute a specified amount of work.
Productivity is defined as "the ratio of a volume measure of output to a volume measure of input".
Productivity is dependent on a number of factors:
Type of work
Discipline
Location
Often these factors are included in the labour norm and thus become a local labour norm, and the basis for
execution. For estimating purposes it is assumed that the “productivity factor” is 1.0
Efficiency
Worker efficiency is measured in physical terms. Efficiency is measured as "the ratio of planned volume of
output to the actual volume of output" The Labour Norms can also be adjusted by an efficiency factor related to
the volume of work that is expected / executed.
The measured Labour Norms are primarily determined on the basis of the working methods and
safety / environmental requirements as well as on national labour studies; the average Labour Norms are so
obtained from this.
The Labour Norms are based on the most efficient execution of the task. Meaning applying the best
working practices, using the correct tools, the minimum occupation needed and having a minimal
disturbance during the execution. Therefore the Labour Norms are only applicable for all work that is
executed under normal circumstances, with experienced labourers, having a normal performance, using
the correct tools and applying the best working method.
Labour Norms are expressed in man-hours, required for direct personnel. A Labour Norm is no duration
time it is an indication of the effort. The duration time is the period between the start of the
implementation and the end of a task or more tasks. For the calculation of the duration time the number
of labourers needs to be taken into account.
11.4 Housekeeping
Orientation at the workplace and reading drawings and / or consulting instructions
Completing or laying down materials and equipment
Clearing up materials and equipment at the workplace
Moving workbenches, ladders, one-man scaffolding, welding sets, etc.
When carrying out activities at the construction site disruptions (as mentioned above) will invariably occur. The
nature and extent of these are closely related to the phase, which the project is in, for example carcass work or
finishing, and the phase of the installation. The Labour Norms make a distinction between carrying out activities
in a workshop and in the field. The conditions that are considered normal and / or usually the case in the
workshops or at sites are incorporated in the Labour Norms.
In case conditions are significantly different, this document provides guidance as to how to condition the
Labour Norms.
When making estimates it should be ascertained whether the work construction site conditions meet the
principles on which the Labour Norms are based. If that is not the case corrections have to be made to the
relevant Labour Norms i.e. exceptional circumstances might apply.
If a specific condition is met, a correction factor of 1.25 may be applied to the Labour Norms.
13.8 Congestion
In congested areas (extreme high density), which are therefore difficult accessible, a correction factor
of 1.10 may be applied to the Labour Norm.
The Labour Norms are excluding activities that are not directly related to the work the so call-derived costs,
these activities can be split into project-linked activities and activities not directly related to the execution of the
work.
14.2 Activities not directly related to the execution of the work (indirect costs)
These activities may include the following:
Placing and removing site facilities, i.e. site clearance, connecting container shed,
disconnecting, equipping and clearing office
Equipping and clearing warehouse / workshop, i.e. connecting and removing lighting, placing
racks, storing materials, setting up machines, preparing return materials and machines for
shipping
Arranging canteens or catering facilities
Indirect costs (see explanation earlier in this section)
Project team meeting(s), i.e. examining the project before its start (assist in preparing work
estimate), meetings at head / branch offices
Loading / unloading materials and tools including transport of lorries to and from the storage
area
Processing as-built details
Completion and follow up, provisional acceptance, finalizing punch list, final acceptance
Transport at the construction site, including heavy transport or large quantities from storage to
workplace and vice versa
Fire watch is excluded from the Labour Norms; no factor and / or percentage can be applied to the Labour
Norms for that activity. Fire watch is identified and added to the estimate separately.
Waiting time is a period of time that the contractor cannot work according to the standard work procedures.
Waiting time is an avoidable delay and is by definition a period of time that is not required for the task
completion.
The execution of activities are based on Labour Norms, a number of waiting time categories have been defined
to be able to register and to analyse waiting time effectively.
This could be either waiting times as a result of disturbances or hours needed for extra activities as a result of
these disturbances, examples of waiting times are:
General General imperfections in the organization of the job.
The harmonization and / or planning between activities or sequence of activities
are incomplete. This applies exclusively for the activity where above aspects are
applicable.
Errors in work Errors or obscurities in work instructions of job preparation.
instructions Examples are: missing drawings and / or setting instructions, incomplete
measures, e.g. work-instructions do not include that bearings must be
exchanged when revising a pump, although this was known in advance.
It does not include: wasted time for looking for the work location although layouts
are presence etc.
Work interruption as Work interruptions as a result of a more urgent task.
a result of an urgent To restart an activity, which has been interrupted by a more urgent task, requires
task additional moving and probable job preparation activities.
Incomplete materials Incomplete materials supply by Owner.
supply Examples are: parts unexpectedly not available in stores (bulk) small parts, or
ordered material not available in warehouse, or wrong (or bad quality) material
has been delivered.
Incomplete tools Missing or broken auxiliary equipment and tools.
supply The auxiliary equipment and tools provided by the Owner have not been
supplied in time or is broken.
Waiting for This concerns both the agreed formal release, as well as the delay because
production. others are not yet finished with preparatory activities, or that equipment is not yet
cooled sufficiently yet (or still contains product) .
Therefore: equipment is later available than agreed.
Errors in the Errors in previous repairs. In principle this is the extra time, needed, because a
execution of previous repair is not executed correctly. For example: bolt connections which
previous repairs have not been treated with a lubricant, take extra time to disassemble.
It does not include: correcting mistakes made by the fitter himself during the job.
Training and This is the time needed to attend special training or additional safety training
instructions requested by Owner.
Accident, calamity, Examples are: accidents, alarm and other cases of force majeure that obstructs
force majeure the normal progress of the work.
Disaster drill This is the time needed to attend the fire drills or test alarms the contractor is
obliged to attend.
Work-permits delay Waiting time for too late approval of work permit.
The labour rate is the rate that is applied to calculate the direct labour costs from the net available working
hours (based on the Labour Norms) corrected with location / productivity factor and / or condition factors where
applicable. The labour rate should include all items to cover all contractors’ direct labour costs (see Appendix 1.
Direct Labour rate). The basic labour rate plus additional costs, and can also be a weighted average of the
contractor’s construction crew.
In addition to these total direct labour costs, the indirect costs (site facilities, overhead and / or profit and risk)
are added, these elements can differ for each site, discipline and contract.
Indirect costs are usually calculated on top off the direct labour costs.
The total indirect cost may also be added to labour rates.
Overtime and shifted hours are usually developed based upon legal regulations for each country.
Below is an indication of correction factors that may be applied for overtime or shift time.
Correction factors may only be used when the specific conditions, as described in this document, are
applicable. Below is a calculation example demonstrating how to apply multipliers (correction factors) to Labour
Norms. In this example, the calculated man-hours using the Labour Norms are 21 man-hours.
These factors must be applied according below example and may not be multiplied.
Corrected Labour Norms = Calculated Labour Norm x (1+ (CFa - 1)+( CFb - 1))
= 21 man-hours x (1+ (0.1+0.7))
= 37.8 man-hours
Date: Revision:
Yes No
Rate type Direct rate
All-in rate
a. Total labour costs per year (gross wage incl. all social charges) Euro € -
Computer applications € -
Internal reproduction costs € -
Industrial clothing € -
Tools € -
Starting material € -
Consumer material € -
Commuter traffic € -
Workshop allowance € -
Gasses, welding allowance € -
PQR / welder qualification € -
Glue instructions € -
Course / training € -
Representation material € -
€ -
e. Total € - Euro € -
Assumption is here that there is an estimate for a job that delivered 100 man-hours and productive/ non
productive progress is made against that job, a further explanation/ example of the calculation of productivity
factor can be found below:
Productivity:
When a job is estimated to be 100 man-hours and is completed with an actual of 100 man-hours the
productivity is 1.0
When a job is estimated to be 100 man-hours and is completed with an actual of 50 man-hours the productivity
is 2.0
When a job is estimated to be 100 man-hours and is completed with an actual of 200 man-hours the
productivity is 0.5
When the same job is estimated but working circumstance warrant the application of an efficiency factor (e.g.
repeatability), the following example is a further explanation/example of the calculation of efficiency:
Efficiency:
Assumption, when the amount of man-hours (norm) to exchange a valve is 100 man-hours/each, this is
considering all work in preparation and completion of that operation to be included (refer to the pre-amble for
the scope of work of that particular job)
The normal estimate would be 10 valves x norm 100 man-hours 1.000 man-hours
When an efficiency factor can be applied to the norm for example 0.75.
This will result in an estimate that is 10 valves x efficiency factor 0,75 x norms 100 man-hours
750 man-hours
As result of applying this efficiency factor the estimate is 250 man-hours lower, against which the productivity
can now be measured see above productivity.