VK Estimating Solutions

It is my opinion that labour is the most important resource for any project and a proper assessment of labour hours and related costs is essential for the accuracy of any estimate. However, assessing labour hours is not straightforward and the labour effort required for various activities vary hugely, and standardised norms for assessing labour needs are not freely available or widely shared.

For any project, the site needs to be prepared, foundations need to be constructed and all material and equipment need to be fabricated and installed. The cost of this fabrication & installation works can be estimated if all the labour hours required for the project can be calculated. During the estimating process, this is generally done by calculating the direct labour hours for the various estimated quantities from material take-offs (MTOs), using Labour Estimating Norms for ideal working conditions.

[The labour norms are subsequently converted to site specific labour hours using productivity factors and then converted to a total construction cost using an all-in labour rate. This method of calculating construction cost is useful as an in-house estimate in the absence of unit fabrication and installation rates from potential contractors.]

The labour norms are standard time taken by a mixed crew to complete a unit of various types of construction works in an ideal location.

For example:

• Hours per m2 for site preparation
• Hours per m3 for excavation works
• Hours per m3 to install concrete foundations
• Hours per tonne to fabricate and install structural steel
• Hours per joint to weld pipes (of various diameters, thicknesses and materials)
• Hours per meter to erect pipes (for various diameters and thicknesses)
• Hours per meter to install electrical cables (of various sizes)
• Hours per instrument installed in the field (various kinds of instruments)
• Hours per equipment installed (various kinds of equipment)

But the question is, where can an estimator get these labour norm hours?

The various labour estimating norms most prevalent in the Oil & Gas industry are the Gulf Coast, DACE or in-house norms.

In-house Labour Norms

Most estimators use their company’s in-house labour norms for all detailed estimating purposes. These norms are not widely shared with the larger estimating community and are considered proprietary by the individual EPC companies. It is not very clear how these in-house norms were developed by the individual companies and for which location. They could be for a specific country / location where that company mostly executes its projects. They have generally been handed down over the years within the estimating departments of the individual companies.

(In the past, I have used the estimating norms of whichever company I have worked for, and they are all slightly different.)

Gulf Coast Labour Norms

This is a general term used by most estimators to refer to labour hours required to complete an activity in a controlled environment in the Gulf of Mexico which is considered an ideal location. But no specific industry standard Gulf Coast labour estimating norms exist for the Oil & Gas industry. Many estimators use their in-house labour norms but call them Gulf Coast norms for all discussion purposes.

My Understanding

Firstly, referring to the in-house norms as Gulf Coast norms is a bit misleading in my opinion. More importantly, the in-house labour norms as used by the various EPC companies are slightly different, thus making it difficult to easily critique or review detailed estimates, as the norms are not shared outside the company. This creates a black-box scenario for any reviewer who is not part of that company. The labour portion of the overall estimate thus becomes only an opinion of that company’s estimator which sometimes is an acceptable situation for many clients. This estimate is then in future compared against any contractor’s pricing for that scope.

If an alternative is required where a company does not have their own in-house labour estimating norms, the following manhour manuals are a good source to be used as Gulf Coast labour norms.

• Estimator’s Piping Man-Hour Manual, by John S. Page
• Estimator’s Equipment Installation Man-Hour Manual, by John S. Page
• Estimator’s Electrical Man-Hour Manual, by John S. Page

(I have procured the above manuals and have used them for my estimating purposes.)

For estimating civils related works, I have previously used Spons and Richardson for their labour norms. These are UK specific labour norms (not Gulf Coast) to be suitably adjusted for other regions / countries. But for civil works, it is best to use local unit rates from past projects instead of labour norms.

DACE Labour Norms

More recently, the Dutch Association of Cost Engineers (DACE) have compiled labour estimating norms for the process industry. These labour norms can directly be purchased from the DACE website. (I have not used them yet.)

 Note: These are only the norms that I have used in my career as an estimator in the on-shore Oil & Gas industry so far. There are others which I have not used.

In my opinion, if the estimating community wants to make their estimates more transparent, then it would be better to use a more widely available labour estimating norms as a basis. For example, estimators can buy John S. Page’s man-hour manuals and then those estimates can be cross-checked, instead of using in-house norms which are all slightly different and not widely shared.