Mike Holt Business Newlsetter Series
Mike Holt

During these unusual times, when schedules are crazy and some of us are being asked to stay at home, we wanted to remind you that you can use your downtime as an opportunity for learning, so you’re ready to make the most amount of money with the least amount of effort after things get back to normal. We will continue to send you excerpts from our textbooks, and links to free resources over the next several weeks and hope you enjoy learning from them.

This newsletter is #12 in the electrical estimating series where I explain how to determine the material cost, labor cost, and calculate direct job costs, overhead and profit. Estimating is a skill that can make or break a career or a company, and you need to understand the estimating and bidding processes so that your business remains profitable and that you have the knowledge to anticipate and avoid losses - which in some cases might mean not taking the job

The following content is extracted from Mike Holt's Guide to Electrical Estimating.

Understanding Labor Units - Part 2

What is a Labor Unit?

A labor unit represents the approximate amount of time required to install an electrical product, component, or piece of equipment. Labor units are based on the assumption that a skilled electrician is completing the task under a “specific” set of installation conditions and that the appropriate tools and supervision are available.

Typical Project
The following typical project considerations should be used for the purposes of estimating using labor units:

  • Building Size and Shape. Up to three floors above street level, 20,000 to 100,000 square feet per floor, with a rectangular or square floor plan.
  • Construction and Work Schedule. Standard workday, 40 hours per workweek, daylight shift, project timeline with no scheduled overtime, and no more than 100 qualified electricians on the job.
  • Location. In or near a metropolitan area, outside of a controlled access area, and a single building, facility, or activity.
  • System. Electrical service by the utility, new listed material, and not more than 20 feet above a solid floor.

Typical Site Conditions
The following typical site considerations should be used for the purposes of estimating using labor units:

  • Adequate security for material and tool storage
  • All electrical material furnished by the electrical contractor
  • All new material and new construction
  • Materials are readily available with minimal lead time for special items
  • Complete drawings, and specifications are provided with engineering and a well-coordinated design,
  • High reach, lift, and/or excavation equipment is supplied by others
  • Standard building type, design, and construction
  • Few interruptions or delays
  • Minimal quantity and magnitude of change orders
  • Minimum temperature of 35ºF, maximum temperature of 88ºF, and 50 percent relative humidity
  • Optimal project management and coordination of all trades involved
  • Overall job progress based on a realistic predetermined project schedule
  • Sufficient supply of skilled labor and qualified journeymen electricians

Labor units must be adjusted for management skill and for any variable conditions on the jobsite. The methods of adjusting labor units are discussed later in this chapter.

How Labor Units Are Expressed
Labor units are expressed in hours using the decimal form with the following letter codes: “E”—each, “C”—hundreds, or “M”—thousands. The reason labor hours are expressed in decimal form is that the hours can be added in a manner similar to dollars and cents, rather than having to add hours and minutes individually.

For example, the labor to install a receptacle is listed as 18/C, which means that 100 receptacles are expected to be installed in 18 hours or 0.18 hours per receptacle (18 hours/100). We can convert 0.18 hours per receptacle into minutes as follows; 60 minutes x 0.18 hours each = 11 minutes.

Author’s Comment: It might appear that 11 minutes to install a duplex receptacle is way too much time, and you will never win a job if you use labor units, but that is really not the case.

• • •

We'd love to hear from you about this series, and the ways you're using it. Send us your comments and feedback by clicking on Post a Comment below. Look out for the next part in this series a month from now, and please share with your colleagues.

This content is extracted from Mike Holt's Guide to Electrical Estimating textbook. If you have enjoyed this newsletter, you can get the full content in Mike's Electrical Estimating DVD Library here.

Comments
  • I really enjoy reading your articles. Appreciate it very much!!

    Paul  May 20 2020, 8:13 pm EDT
    Reply to this comment

  • I get a lot out of most your newsletters but as a life long (42 years now) estimator/PM and 10 year business owner, I particularly enjoy the estimating series articles. This article shared the info about what a normal labor unit consists of per basic installation parameters. What would be awesome for everyone if this is followed up with what is NOT included in a basic labor unit. Especially for the purposes of pricing change orders to contract projects. Things like supervision, engineering, layout, excessive material handling, after hours or accelerated schedule factors,etc. I think this would really be helpful to the younger/fresher estimators out there who struggle with the high cost of change order work in an age when we see AIA documentation limiting overhead AND profit to as little as 5% overall while just about every available published facts paper points to an overhead of 20-25% for the average electrical contractor.

    Steven Leuck  March 25 2020, 11:20 pm EDT
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