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Poor productivity can spell disaster for a construction project. Unfortunately, traditional measures of productivity are applied after the fact, so they do little to help contractors spot issues during a job — while there’s still time to do something about it.

To help contractors monitor productivity during jobs, ASTM International (formerly, the American Society for Testing and Materials) developed its Job Productivity Measurement (JPM) standard. Adopted in 2010, the standard enables contractors to measure productivity throughout a job and address productivity issues as they arise. It also alerts contractors to changes in productivity rates, serving as an “early warning system” for potential productivity problems down the road.

Output vs. outcomes

Rather than focus on output — such as the amount of concrete poured — JPM looks at outcomes. Output measures the amount of effort expended or materials installed, with little regard for the quality of the results. It obscures unproductive activities, such as repairs, rework or out-of-sequence work.

JPM, on the other hand, analyzes work performed relative to actual construction put in place — that is, work product that’s acceptable to the customer. By measuring outcomes based on the transfer of value to the customer, JPM offers a more accurate picture of productivity in terms of actual progress toward contract completion.

It also provides a more reliable method of measuring percentage of completion. By tying it to construction put in place, JPM allows a contractor to make progress billings based on value provided, regardless of the amount of cost incurred, which can improve cash flow. This method tracks nicely with upcoming changes to accounting rules, which tie revenue recognition to the completion of performance obligations.

Putting systems in place

To make JPM work, you must have systems in place to measure, in ASTM International’s words, “observed completion of the project as accepted by the customer.” You need to break down the contract into tasks, assign cost codes to each task and create a budget that assigns labor hours to each activity that contributes to the finished product.

In addition, when relying on regular reports from workers in the field, you must track the observed percentage of completion for all activities (typically, weekly). Then, you need to compare those results against the actual hours devoted to each activity.

Measuring productivity in “real time”

Errors, repairs, rework and inefficient processes hurt a construction company’s productivity. Rather than discover these issues in a “postmortem,” consider implementing JPM. By providing ongoing feedback on problems that hurt productivity, it gives you an opportunity to correct problems during the course of a job — enhancing your performance, cash flow and, ultimately, your profitability.

© 2014

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