Job Cost Codes
The Estimator’s Report Card
Job Cost Accounting provides contractors with the ability to track actual costs versus estimated costs. The process is quite simple; divide the project into tasks for ease of implementation and interim analysis of actual costs and budgets. You can start by having field personnel report labor and material expenditure by a task code. This process of assigning task codes is commonly referred to as Job Costing, and the account numbers that are assigned to each item are the Job Cost Codes.
Cost code accounting is typically a function of management; therefore, the process of collecting the data in the field should be the foreman’s duty. If a foreman is instructed to keep cost records, he or she should be given cost code numbers distinct for the required breakdown of the job.
A contractor should be prepared to accept the fact that cost code accounting involves the expense of obtaining data and maintaining records. You need to determine before you begin whether the process is cost effective and make a commitment to use the data and implement the process. If your not going to use it, don’t do it!
This brings us to the actual Cost Codes list. Don’t complicate this task. A long and complicate list will require more work collecting the data running the risk of inaccurate results. Keep it simple – typically a contractor can keep their cost code list under ten coded items.
Here is a typical example of some commonly used cost codes and items they are assigned to:
Cost Code Description
100 Branch Conduit
200 Feeder Conduit
300 Wire Installation
400 Fixture Fit-Up
500 Device Fit-Up
600 Low-Voltage Systems Fit-Up
700 Equipment Fit-Up
The wealth of information generated by Job Costing is invaluable to a project manager and estimator. Knowing the collected job cost data and how it compares to the estimated costs is worth more to an estimator than all the data gathered from other sources. Such knowledge takes the mystery out of labor units or material buying levels, and enables the estimator to adjust units for final cost estimates.
For many estimators, determining labor costs for a project is much more difficult than estimating material costs. If you know the quantity of material for a project, you can easily extend the material costs; but on the other hand the labor is subject to many variables. Since labor is typically where most estimates go wrong, job costing is critical to this phase of estimating.
Job Costing is an estimator’s report card.
How close was the estimate to actual costs. With Job Cost Accounting the estimator now has the tools to make intelligent adjustments to get an A+ on every estimate!
There are two methods of estimating labor • unit pricing and labor units. Unit pricing is only as good as your experience using them, whereas a labor unit is more scientific.
Hours vs Dollars Labor in both hours and dollars are used in estimating. The trend, however, is toward using the labor unit. Time studies and labor unit tables are in hours. Overall costs of labor are checked in man-hours or man-days. Changes in labor rates do not require revisions of tables that are actually based on time units.
The development of labor units is so involved that contractors are sometimes at a loss to know where to begin. The procedure not only is difficult but to be properly carried out involves considerable work. In an effort to save expense, contractors have foremen keep records of installations. They segregate the costs on sections of an installation, which will serve in checking the estimated labor or material units. Actual results are compared to the company units or published labor tables, such as Electrical Resources, Means or NECA. The NECA Labor Units are one of the best of its kind ever published. Estimators who have no data of their own, and who are not familiar with methods of preparing labor data, cannot interpret such information supplied with published units without cost code accounting from their company.
Labor units are a benchmark, a starting point.
To properly implement their purpose, contractors use job-costing records to compare the company’s productivity to the estimated labor and establish calculated variances. Those variances are then used to adjust the Labor Unit.
Compare similar type jobs. For example, you might compare 2 office buildings or 2 hospital projects, but not an office building to a hospital project. When using the NECA Tables, use the Levels as the comparator. The percent of variance is the factoring needed to correct the Labor Unit. This customization makes the estimate your companies estimate and is no longer generic so to fit the competitor across town.