Chapter C: E. Knoeppel (9)

In many instances of distribution, the item of _General Expenses_, which includes the expense of storekeeper, time─keeper, bookkeepers, clerks, and such office force as may be required, is rather difficult of disposition. Those items which are usually monthly, may be distributed daily at a rate per day found by dividing the monthly rate by the number of days in the month, or they may be lumped at the end of the month and apportioned to the various operations. If they are distributed from day to day, it is rather difficult to tell just what proportion of them should go to each operation, as the cost of any operation is liable to vary greatly from day to day. If they are left to the end of the month, it is impossible to tell from day to day the exact cost of the work.

_Overhead Expenses_ are another source of difficulty. Under this heading can be placed all salaries which do not ordinarily appear upon the pay─roll, such as the salary of the General Manager of the work, the Chief Engineer, and the officers of the company, and such expenses as office rent, telephone, office furniture, stationery, etc. Just where General Expenses leave off, and Overhead Expenses begin, is rather hard to determine, the line of demarcation varying in almost all cases.

One of the greatest troubles in distribution is caused by overtime of men who are on a daily and monthly basis. Under the same head might be placed _Lost Foreman's Time_──that is, the time which the monthly and daily men are paid for, and which produces no output.

TIME─KEEPER'S NOTEBOOK

A page from a time─keeper's notebook is reproduced in Fig. 3. The necessity for an explanation of such a record is apparent. The work on which this record was made, was a job of rock excavation on which two steam shovels were being used, and the time and output of each shovel were kept separately. The record was made on the 17th of the month.

At the left of the page, within the curved line under the heading "_sh. 2_," we have the names of the shovel crew and the numbers of the pit men. At the side of these names and numbers, is the record of the performance of the shovel of the day previous, the 16th, the shovel runner having given it to the time─keeper while the latter was on his first round on the 17th. Just below the record of the shovel, there are four numbers under a heading _Ditch_. In order to drain the shovel pit, it was necessary to use four men for cutting a ditch, and the time of these men is charged to the shovel. Underneath the record for the No. 2 shovel, is the record of shovel No. 1. It is recorded in exactly the same way as the other record.

In the center of the page, at the top, is the record of the drill gang for each shovel. There were six drills working in gang No. 2; but the record does not show this clearly, as there are two columns of six numbers each, one column being the driller's numbers, and the other being those of the drill helpers. Then there is a column of four numbers representing the muckers. The time─keeper knows, of course, which is which; but if for any reason anyone else than himself had to use the notes in the office, they would be useless. The number under the line is that of the man who carries bits to and from the blacksmith. The name of the fireman of the boiler which furnishes steam to the drills is given, and the number of his helper.

The record of gang No. 1 is given in the same garbled manner, there being 5 drillers, 5 helpers, and 4 muckers in the gang, besides the man carrying bits, the fireman (whose name is given), and his helper. It will be noticed that in neither gang is the name or number of the foreman given, the time─keeper relying upon his memory to make the record complete in the office.

In the upper right─hand corner of the page, is the record of the blasting gang, in front of shovel No. 1. There are 5 men, including the foreman, whose number is given first. Within the ring is shown the number of pounds of powder used on the previous day as reported by the foreman. The record reads "on the 16th, 150 pounds of 30% powder, and 750 pounds of 40%."

Directly below this, midway down the page, is the record of the men working on dump No. 1. The foreman's number heads the list, the numbers of his men following.

Just to the right of the shovel records, and below the record for drill gang No. 2, is the heading "_ng.tr. # 1_;" and the men whose numbers are under this heading are engaged in laying and repairing the narrow─gauge track for the dump trains from shovel No. 1. Just below the middle of the page, is a list of names and numbers utterly unintelligible to anyone but the one who made it. The facts are these: _Donovan_ is the man who looked after the storage of powder; within the bracket, _Nick_ (the time─keeper, not knowing the last name, used his number, as well as the part of the name that he knows) is the blacksmith; and No. 72 is his helper; No. 118 helped the blacksmith for two hours, having been taken from the narrow─gauge track gang. The time─keeper had to depend entirely upon the blacksmith telling him this, or his record would have been incomplete. The next three men whose names appear in this column were engaged upon repairing a 6─inch pipe line; and the next two pairs within brackets, marked No. 2 and No. 1, are the pipe─fitters for the drill gangs and shovels No. 2 and No. 1 respectively.

DISTRIBUTION FROM TIME─KEEPER'S NOTEBOOK

The time─keeper, having taken his notes over the entire job, sends them to the office so that the time may be posted for each man, and the distribution made.

The time─keeper goes over his notes, and picks out the items that are chargeable to drilling. In gang No. 2, there are 6 drillers at 30 cents per hour; 6 helpers, 4 muckers, 1 man carrying bits, and one fireman's helper, all at 17 cents, and one fireman at 25 cents. From the note at the bottom of the page, he knows (although no one else would) that _Lear_ at 20 cents and No. 278 at 17 cents, were also with this gang. This, with the foreman at $3.50 per day, figures to $29.08. These are the charges that go directly to drilling, being the cost of time of the men actually engaged upon that operation and nothing else. But besides this, there must be apportioned to this cost a certain part of the Superintendent's salary, a portion of the labor on the 6─inch water pipe and the whole water system, a portion of the time of the blacksmith, the watchman, the storekeeper, the time─keeper, clerks, the water boy, and numerous other items.

In exactly the same way, the cost of the operation of the steam shovels is figured. For instance, No. 2 has an engineer at $125, a cranesman at $100, and a fireman at $75, a month, and 6 pitmen at 20 cents per hour, making the total charge of crew $19.27. To this the time─keeper added $5.44 as the cost of digging the ditch that drains the shovel pit. To charge this whole amount against the shovel for that day, is manifestly unjust, as the work of draining through this ditch will continue for many days, always facilitating the work of the shovel. The cost of subsequent days' work is lessened, while the cost of this particular day, as given with the $5.44 charge against it, is entirely too high. The spreading of an item of this kind is an extremely difficult matter, but it must be done. The steam─shovel cost must also have its proportional share of the charge for Superintendent, water system, blacksmith, etc.

The charge for narrow─gauge track is $14.86, being the time of one foreman at 20 cents, and 9 men for 8 hours and one man for 6 hours at 17 cents. The charge against No. 1 dump is $8.40, being the time for one foreman at 20 cents, and 5 men for 8 hours at 17 cents. The cost of blasting is figured exactly the same way, and the 900 pounds of powder used entered in the material account charged against the work in front of shovel No. 1.

The headings for the distribution of steam─shovel work, aside from _Drilling_ and _Blasting_, would be _Shovel crew_, _Pit crew_, _Dump crew_, _Laying shovel track_, _Train crew_, and _Laying narrow─gauge track_, all of which in the end can be summarized under _Loading and Transporting_, and the unit─cost of moving a yard of material figured from this summary.

PUNCH─CARDS

The manner in which the time─keeper takes his notes in a notebook has been shown, and the impracticability of many of its phases pointed out. Two punch─cards for use on such work as that mentioned──namely, rock excavation with steam shovels and dump trains──are shown in Figs. 4 and 5. They are the _Steam─Shovel Card_ and the _Train Record_. The shovel card is kept by the shovel runner or the fireman, and the train record is kept by the dinkey runner. Each keeps his own record separately; and, at the end of the day's work, the records must check each other.

The steam─shovel card shows the date, the number of cars loaded per hour, and the total number loaded per day. It also shows the time of starting and stopping the shovel for any reason, the stops for moving up being indicated in a different way from other stops; and thus a record of moves is kept automatically. The time of the shovel crew and the exact number of hours worked by the pit crew, are also shown, together with the cubic feet of coal consumed by the shovel. The causes of delays and the condition of the shovel are written in the blank spaces under their proper heading at the bottom of the card; but with this exception, the entire record is made with the use of an ordinary conductor's punch.

The train card shows the number of trips made by a train each day, the time of leaving the shovel on any trip being shown to the nearest 5 minutes. The number of cars hauled by all the trains during any hour must check with the number of cars loaded, as shown on the shovel card. The train card, besides showing the date, shows the total number of cars hauled (the total of all cards must check the total cars as shown by the steam─shovel record), the cubic feet of coal consumed, the average yardage per car, the haul in stations of 100 feet, the number of the dinkey engine, and a report of its condition, whether it be good, fair, or bad. This card is signed with the dinkey runner's name.

It will be seen that the record is very much more complete than that taken by the time─keeper, and is more reliable as to methods, being made while the work is going on; and the greater part of it is checked by having two records made separately, instead of taking a verbal report from the shovel runner the following day as in the example previously shown.

Neither the train record nor shovel card, however, show any distribution of time, but are really performance records. The pipe and steamfitter's card reproduced in Fig. 6 gives an excellent example of how the time is taken and the distribution automatically made all at one time.

The classifications of labor are: Shovel, Channeller, Drills, Dinkey, and Trains, Pump, Tank, General Water System, and Blacksmith, being lettered, it will be noticed, from _A_ to _H_ at the head of the column. Each card provides space for the record of the foreman and 14 men. These eight classifications will probably cover all the work that the pipe and steamfitters are called upon to do; but if not, there are two extra lines on which can be written any classifications out of the ordinary.

There will be certain men assigned to certain regular work, as in the case previously quoted under the head of the Time─Keeper's Notebook, where there were two pipemen for each drill outfit. If these men spend their entire day of eight hours doing nothing but looking after the water supply for the drills, a punch mark would be made above the number of each of them on the card and opposite the figure 8, which represents the hours worked. To the left of the eight, and in the same line, and also in the vertical column opposite the word _Drills_, another punch mark will be made. Again, opposite the letter _C_, which is the key for the classification of drills, and in the column assigned to each man, and below his name, another punch mark will be made. This gives the workman full time, showing that he worked eight hours on drill water supply and nothing else. Suppose the foreman worked three hours on the general water system, three hours on the pumping station, and two hours directing the repair of the water tank. There would then be on the record a punch mark in his column opposite 3, 6, and 8; at the left of 3 in the column headed _G_, another punch will appear; at the left of 6 in the column _E_, another punch will be found, and still another at the left of 8 in the column _F_. In the column under the foreman's name, punch marks would be made opposite _E_, _F_, and _G_, showing that he worked on these three classifications.

In the same way, the time and occupation of each man under this foreman can be indicated, no matter how many changes he may make in his work during the day. The time, however, is recorded only to the nearest hour.

Provision is made in the lower left─hand corner, for the punching of the date; and along the lower edge is the place for the recording of the number of hours used in thawing the pipes, etc., and in providing protection for them. This latter record was found necessary, because the work on which these cards were used was done in an extremely cold locality and continued throughout the entire year.

When the records are made in the field and are sent in to the office to be transferred to permanent records, it is not necessary for the man who made the record to be at hand to interpret his notes, as there is absolutely no opportunity given him to allow his note taking to vary in the least from day to day, the record being absolutely automatic.

PROCESS COST SUBDIVISION

While the object of the regular distribution of cost is the obtaining of unit─costs, there is another cost analysis which may be called a refinement of the cost─keeping system, and which, if properly used, can bring about a marked reduction in all costs. While this will be discussed more fully in the chapter upon _Reduction of Cost_, it is a form of time─keeping, and so will be touched upon here. On more or less rough construction work, it seems rather absurd to attempt to reduce the various processes of any operation to such a fineness that they may be timed to minutes and even to seconds. Conditions vary so greatly, the character of the work being done changes so much from time to time, and the personnel of the organization is sometimes shifted so much, that it seems impossible to reduce performance to any satisfactory basis which may be used as a standard. Nevertheless, without attempting to reach such a basis, careful watching and timing of the different parts of the work will result in much better performance and increased profits, as can be clearly shown.

Take, for instance, a driller working with a steam drill in fairly even rock, with no marked obstacles in his way and with very little mucking to do. Notice the exact time at which his tripod is in place and the drill ready to work. The driller places his bit in the drill, turns on the steam, and the drill starts. Note the time of starting the drill; note the time when the drill stops, the bit having gone down its full length; and do the same with each subsequent bit, noting carefully the exact time consumed in changing. When the last bit is down its full length and the hole is finished, note the time required to take out the bit, move the weights, loosen the tripod, and make everything ready for the moving. Then note just how many men are required to move the drill, and just how long it takes them to do it; and finally, how long it takes the driller to get his drill again in working order and started.

It will be found that a large majority of drillers take entirely too much time in the changing of bits, and that almost invariably there are too many men helping to move a drill, and that they take too long for it. Another source of delay is preparing the drill for work after it has been moved. It is perhaps just as well to take plenty of time for this, in order to get the drill properly set and adjusted before starting it; but the loss of time between the adjustment and the starting may be said to be about the same as that lost in changing bits, if not a little more.

When the driller takes too long in changing bits, it is largely his own fault, and he should be watched more carefully by the foreman, and, if necessary, instructed. If time is wasted in the moving of the drill, it is the fault of the foreman alone. By a careful timing and balancing of the various processes in drilling, the most competent men can easily be picked out.

In the case of concreting, the minutes lost in the handling of a batch of material from the stock pile to its final position as concrete, often amount to a great deal. Suppose on a small job a half─yard mixer is being used, and it averages for 8 hours 30 batches per hour, or 120 yards per day. If it is possible to reduce the time of each batch 15 seconds, the output of the plant will be increased over 14 per cent; or, figured on a basis of 120 yards, there will be an increase of 17 yards, which──at, say, $5.00 per yard──would mean a handsome increase in the daily profits. And still, 15 seconds seems to be almost too trivial a matter for which to spend time and perhaps a little extra money in the way of time─keeping.

Starting with the unmixed material in the stock pile, notice how long it takes the men to load their wheelbarrows with sand and stone; then the time that the material remains in the wheelbarrow, both at the beginning and stopping end of the trip to the mixer; and also the time in transit. If the material is dumped into measuring boxes, note the time that it remains in the boxes. If it is dumped directly from the wheelbarrows into the mixer, it is necessary to take the time of mixing from when the first wheelbarrow was dumped until the batch is dumped. The mixer may be said to be the governor of the whole operation; for the men handling unmixed material can handle it no faster than the mixer takes it, and the men handling the mixed concrete can get it no faster than the mixer furnishes it to them. For this reason the observation of the operation of the mixer should be made with special care. It is not our intention to tell how, or to give advice concerning the mixing of concrete; but it is desired to show how, if any time is to be saved, it will be through the saving of seconds in each operation.

If the mixed concrete is to be dumped as a batch into the hopper or hoist, the question of time saving is much simpler than if portions of the batch have to be dumped into wheelbarrows. If, however, it is necessary to dump into wheelbarrows, a basis for the time necessary to empty the mixer can be found only by careful timing and noting the action of the men during the timing.

The time between the filling and the emptying of the wheelbarrow of concrete, will of course vary greatly according to the haul; but here again, careful timing and observation will soon establish a basis from which the most economical manner of distributing the concrete can be made; and exactly the same thing is true of the return of the empty barrels.

All of this may seem to be a digression from the subject of cost getting; but in fact it is merely a discussion of a very refined form of cost getting, and a branch of the subject which has perhaps been given too little attention. When the daily output of a job is up to or above the average, everything looks bright, and no one who is responsible feels overburdened with care. If, however the output falls too low, some glaring cause is at once sought, and the fall of output blamed to some unforeseen circumstance or accident. This is all very well, as accidents affecting output cannot be entirely avoided, and unforeseen conditions will make great differences in performance; but the careful analysis of process cost subdivision will bring about results that will astonish those "practical men" who think that they have got their unit─costs down to the lowest point simply because their output is generally large and everyone on the work seems to be working to his top notch.

OUTPUT

The reason for compiling the data for which the time─keeper is responsible, is that, from the analysis of the distribution made, the contractor is able to tell what work is being done with profit; and, if any particular operation shows loss, the analysis will help more than anything else to discover the reason for the loss. In figuring his profit on any work, the contractor must figure on a unit─cost basis, exactly the same as he figures when he prepares his bid. In order to do this, he must have an exact measurement of output. In many classes of work, this measurement is extremely simple; but in others no little ingenuity is required to devise a scheme which will give the information wanted exactly and without requiring much work.

The payment for work is based upon the engineer's estimate. The _monthly estimate_ is usually more or less a guess, made simply for the purpose of paying the contractor approximately according to what he has done. The monthly estimate is generally a pretty fair approximation of the exact amount of work done; and the _final estimate_ covers everything included in the contract that has not already been taken care of.

The contractor's measurements of work done each day should agree quite closely with the engineer's estimate; but, if the work is difficult to measure, the contractor has many times more opportunity of making errors in his measurement by going over it daily than the engineer has who only goes over it once. A careful consideration of the differences in the amount of estimates will sometimes show the contractor how his estimates can be made to balance with those of any particular corps of engineers, and he can govern his daily measurement accordingly.

There are few measurements in the field which can be reduced to a unit, or rather which can be counted directly. Linear measurements are easy enough to get; the measurement of area is a little more difficult; while the measurements of volume, especially in rough work, are often extremely difficult to make in a satisfactory manner. Measurement by weight is often found to be of great advantage, if proper facilities can be arranged for weighing.

The measurement of drill output is extremely simple. The holes for any one day's work can be marked as they are finished, and, at the end of the day, all measured; or they can be measured as finished, and their depth taken, and hence the entire day's work is easily determined. This, of course, is a linear measurement; and in the same class would fall such work as laying track, ballasting, grading with a road machine, and the measurement of the work of track and wheel scrapers.

The measurement of quantities whose units are areas is only a little more difficult. Paving, for instance, is very easily measured, the distance from curb to curb generally being constant, and so really reducing the measuring to a linear measurement──that is, the length of the section of pavement laid. Brick laying, while really a cubical measurement, is taken in the same way, the area of the face of the wall laid being taken, and multiplied by the standard number of bricks to any given thickness of wall. This really reduces the measurement for brick laying to a unit─basis, the unit being one brick. Painting and plastering are measured in the same way; and so also is roofing. On road work, plowing and sprinkling are estimated per unit─area; and in quarry work, channeling is so estimated.

The determination of volume on construction work is liable to be very difficult. Take, for instance, the output of a steam shovel cutting through rock. The walls of the cut will be very irregular both in line and in slope, no matter how skilfully the shovel is operated; and the face of the cut is liable to be even more irregular. No absolutely exact measurement can be made; and for this reason it is common practice to estimate the contents of the cars rather than attempt to estimate the size of the pit excavation during any one day. Generally the size of the pit is roughly measured, and the yardage figured from this measurement. It is also figured from the number of cars loaded, and, if carefully done and the estimate of the volume of the cars loaded is correct, both figures should balance at the end of the month with the monthly estimate, which, on account of the large volume measured, can practically ignore such irregularity as would affect the other two measurements. In earth excavation, the measurement is much simpler, because the pit is more regular and the cars can be fully loaded.

There are natural working units that lend great simplicity to calculations of cost──such, for example, as a floor panel in a building, a column, a bridge panel, a pier of masonry, etc.

Another unit of measurement is often obtained through the percentage of a total or of another unit, such as the amount of sand in a yard of concrete. Knowing the mix, a percentage of the total yardage of concrete will be the amount of sand that has been moved.

Care should be taken properly to subdivide the units of measurement. The ordinary unit of concrete work is the cubic yard or the cubic foot. The mistake is frequently made, of estimating the cost of forms and of reinforcement only in terms of the cubic yards of concrete. The cost of forms should be estimated also by the number of feet, board measure. Reinforcing steel should be estimated by the pound.

One difficult kind of work to obtain costs on by the regular method, is the laying of cut stone. A very simple way to obtain this is to paint on each stone a number, and let the time─keeper get the dimensions of the stone after it has been cut, before it has been placed in the wall. Then the stone layer simply records the number of each stone as it is laid.

A check on the measurement of the quantity of the work done is frequently obtained by the measurement of the quantity of the work left undone or of the material remaining in the stock piles.

COST SHOWING

The object of cost keeping is to furnish accurate and early information to those in authority, both as to where they stand financially on the work, and what necessities or opportunities there are for improvement in economy.

In order to accomplish the object of cost keeping, it is necessary that there be some efficient method of cost showing; and it is essential that the system of cost showing, in combination with the system of cost keeping, shall meet the following specifications:

1. It shall be accurate.

2. It shall be simple.

3. It shall be easy to study.

4. It shall be easy to compile.

5. It shall be capable of being compiled in a very short time after the receipt of the original figures.

It needs no argument to prove that the cost─showing system should be accurate. If it be full of errors, its usefulness is entirely obviated; and 1 per cent of error in it will do a great deal more than 1 per cent of damage to its efficiency, in assisting the manager to increase the efficiency of the work. There is, however, a limit to the desirable precision of such an affair. The cost of putting in ties on a certain railroad for a certain month, for instance, may have been 7.2143 cents. If the last two figures are interesting from the statistician's point of view, they are utterly useless to a practical manager. If the previous month's performance has been, we shall say, 6.94 cents per tie, this month's figures will have shown an increase in cost of O.27 cent, which is approximately 3.9 per cent of the previous month's figure. In other words, the tie─placing efficiency has decreased 3.9 per cent. It is very questionable whether the figure 4 per cent, although not quite so precise, would not be rather more useful to the manager than the figure 3.9 per cent; and, personally, the authors would favor the briefer work. The degree of refinement to which these records should be carried, is, in the last analysis, a matter for the individual judgment of the manager himself. The student should bear in mind the folly of unnecessarily elaborate figures.

The second specification, that the cost─showing system shall be simple, is almost as important as the first. If it be not simple, the chances for inaccuracy will be tremendously multiplied. It will take more work to carry it on; and the straightening─out of errors and discrepancies will be so difficult, and will require so much of the time of persons in authority, as to leave them no opportunity to do their other work. Plainly, it should not be necessary for a manager to do a lot of detailed work on cost─keeping or cost─showing systems himself.

Specifications Nos. 3 and 4 are more or less included in specification No. 2. Specification No. 5, however, is also of great importance. Information that is stale is about as useless as no information at all. If you tell a foreman on Monday that the work of his gang for the week ending ten days before was not up to the mark, he will not have much respect for your cost─keeping system; he will certainly not remember sufficiently well the causes that produced his bad work, to remedy them; or he will be able to pick out of the haze of history enough excuses to let himself out of the responsibility of his bad work, and to put his manager at sea as to where this foreman and his gang really stand. It is therefore of prime importance that the arrangement for showing the manager what his costs are, with the salient conditions affecting such costs, shall be so rapid as to be "red─hot" all the time.

The commonest arrangement of cost showing──and the only one ordinarily found at the present day on most contract work──is an abstract prepared on a piece of yellow paper by the time─keeper for the inspection of the manager each morning; and this has so few disadvantages that it would be very satisfactory, were it not that it is impossible from it to compare at a glance the work done, let us say yesterday, with that done previously. It is, however, far better than any other system which lacks any of the essentials indicated above.

USE OF CHARTS

The best method that has so far been devised is by the use of charts showing to scale the different unit─costs for the various days in the month. Such charts are illustrated in Figs. 7 and 8. They are from the records of the Construction Service Company. One of these (Fig. 7) indicates the cost of channeling rock. It will be seen from the line _A_, that during this month the number of square feet channeled varied from 75 to 375, and that the labor cost varied from a maximum of 62 cents to a minimum of 8 cents. On the 8th, the morning crew did not work, because, as it happened, of severe weather, which accounted for the low output on that day. On the 24th, the night shift allowed the pipes to freeze up. It may be mentioned that the foreman of the night shift, whose name appears in brackets on the chart, has since turned his attention to other fields of industry than channeling. On the 28th, the channeler had reached a point where the cut was frequently filled up by earth that slid in from the side and caused such a large amount of sludge as to cushion the blows of the blade; and the chart shows on that day a high cost, due to the cleaning away of this earth.

The chart illustrated in Fig. 8 is that for steam─shovel work on the same contract of the Construction Service Company. Line _A_ indicates the approximate number of yards moved per day. Line _B_ shows the pay─roll, ranging from $165 to $310 per day, and including a percentage for incidentals; while line _C_ represents the values of the _B_ quantity divided by the _A_ quantity, and gives the unit─cost in labor per yard for excavating and moving rock. It will be noted that the Sundays are skipped. These came on the 5th, 12th, 19th, and 26th of the month. There were some men employed on each of these Sundays; but their time was so distributed over the rest of the month as not to show for the Sundays, as the steam shovels did not work on that day.

These charts are of a size to be filed in one of the standard loose─leaf books, and their range is from zero to about 12; thus it is possible to show any quantity to scale for any day in the month. This company has not found it of advantage to plot more than 4 lines on any one chart.

Charts such as these may be marked each morning by the time─keeper upon a tracing prepared for this purpose; and at the end of the month the lines connecting the points may be inked in, and the chart blue─printed and the blue─print filed in a convenient place for immediate reference.

There are several ways of working out the unit─cost from the figures, such for example as:

1. Performance per time unit

2. Performance per dollar;

3. Cost per unit of performance.

The first of these is not, properly speaking, a cost statement, although it is a function of a cost statement and for certain purposes is more convenient. The number of feet of rock drilled per drill hour, is a very convenient form for record.

When drilling under conditions of snow and ice, more muckers have to be employed than at other times. If the cost of mucking is included in the cost of drilling, as it frequently is, the true index of how well the drills are getting on is the number of feet per drill hour, rather than the cost of the operation to the contractor.

The second method is the reciprocal of the third. Other systems will suggest themselves by virtue of the peculiar requirements of each case in practice.

=Checking by Charts.= A great advantage of the chart system of cost showing, is that it acts as an automatic check upon the cost─keeping system in general. As indicated earlier in this volume, it occasionally happens that a punch─card is not turned in, or the time─keeper fails to get certain data. This is immediately discoverable by the gap on the chart, and thus the chart acts as a check on the cost─getting department. This will not entirely obviate the necessity for inspection to ascertain whether the time─cards are properly kept and the work is properly done.

The showing of costs should be made _daily_ for the men immediately identified with the field work; they should be made _weekly_ for the general manager, and _monthly_ for the home office. These monthly office reports are sometimes valuable in the planning of the financial arrangements for the work. On a job involving, say, a pay─roll of $5,000 a week, with monthly estimates, early information as to performance over the month is of very great value.

Showing the men certain charts and records will serve to increase their interest in their work, but this should not be overdone. It is as well that the men should not know the actual cost of their work to the contractor in dollars and cents. If, on the contract price, the contractor is making a handsome profit, the men want more money. If the contractor is not making a handsome profit, the men are apt to think that they are on a losing job, and become discouraged accordingly. The economy of the contractor's work should be private information, since it might do him considerable damage by becoming known to competing contractors. The charts showing the performance per unit of time, however, are not subject to the restrictions above mentioned.

COST KEEPING

In the foregoing there has been nothing that is a part of the regular bookkeeping, with the exception that part of the time─keeper's records are necessary to the bookkeeper. It should be appreciated at the start, that the bookkeeper's work is of great importance, that it cannot be superseded by a cost─keeping system, and that it should not be divided up with the cost─keeping system. The scoffers at cost analysis are inclined to take the ground that a bookkeeper, a cost─keeper, a cost─analysis engineer, are more or less clumsy substitutes for managerial intelligence; and they point to the proposition that in the last analysis it should be easy to let the office boy run the job with a textbook at one elbow and a calculating machine at the other.

It is insisted upon at the start, that cost keeping is as important as bookkeeping, but that it has an entirely different function; and in applying cost keeping to construction work, it is very important that a distinct line of demarcation be drawn between the two branches.

Another error that is frequently made by antiquarian students, men who are studying old methods of engineering and construction rather than those of to─day, is that a cost─keeping system is assumed to be complete by the man who runs it, when he knows how many feet of hole his drillers are able to average per hour, per day, or per week. The cost analyst will point to the fact that in the literature of the subject many false statements are made as to the costs of certain items of work, and will show that no allowance has been made for depreciation, repairs, etc., not to say profit, interest on the contractor's money, and a host of other things. The student is warned that a proper cost─keeping system must of necessity take into consideration _all_ the items of cost on the job; and, further, it should take them into account with such detail that it will be a real, living help to a man in estimating future costs on similar work.

Now, as a general thing, the essential similarity of items has been lost sight of when these items are parts of work which is not generally dissimilar. For example, the item of earthwork in the construction of a large dam may be very similar in its essential cost to, and may be of the greatest use in assisting a contractor or engineer to figure the cost of, earthwork under similar climatic conditions on a railroad embankment; yet those who are most interested in the subject are inclined to classify dams as an entirely different sort of structure from railroads. The designing of a dam is a different matter from the design of a railroad; but to build one will often involve the same kind of tools, the same kind of machinery, the same kind of men, the same kind of "horse sense," and the same general principles of construction, as to build the other. Therefore, if his costs are properly subdivided and intelligently kept on one kind of construction, the contractor or engineer will be materially aided, not only in estimating the cost of the work upon the other, but in being in close touch with his work after he has started.

Every construction organization ought to have a schedule of standard items which may be called _ledger accounts_; and its books ought to be kept in such a manner that the records of the total and of the unit─amounts for these items on past work and on current work may be immediately available for the benefit of its officers. No two contractors will have the same arrangement for distributing cost; no two will have the same items for the accounts; but there are certain fundamental items that will come into use on almost every large piece of work, and some of them have a peculiar significance, and should be treated with special care.

=Estimates on Ledger Items.= In making estimates it is important to have this list in sight, in order that important items may not be omitted. Such a list, which will cover a large portion of the ordinary charges, is here given:

1. GANG LABOR:

(_a_) Hourly rate;
(_b_) Monthly rate.

The men who work by the month are apt to have to spend a good deal of non─productive time, on account of weather conditions, etc.; while the men who are on an hourly basis, as a general thing, do some profitable work whenever they are paid. It is feasible to figure a good deal more closely on the cost of work for those men who have practically no lost time to be taken care of, as _emergencies_ or _incidentals_. It will be noted, also, that the cost and the time of hourly and daily men can be figured and charted day by day; whereas it is impossible to know exactly what the charges will be for labor that is paid by the month, until the end of the month. In order to make report charts showing cost as completely as possible, it is a frequent practice to add a certain percentage to the cost of the known items, to cover the so─called _lost foremen's time_; and to make at the end of the month a correction of a greater or less size, in order to make the cost─keeping end tally with the bookkeeping end of the work.

2. GENERAL LABOR, ETC. This item will comprise the labor of the men who have something to do with more than a few parts of the work. A watchman's time is not spent in drilling, or on a steam shovel while it is running. Nevertheless a proportionate part of his salary should be divided among the different branches of the work. Sometimes this will be a very small item, sometimes a large item. For example, if a steam shovel is excavating 30,000 yards of material per month, the watchman's unit─charge to excavation may be very small; but if the shovel is tied up for nearly the whole month, the charge per unit for watchman's time may be alarmingly high. This is one reason why unit─cost and total cost should always go together. A blacksmith's time, part of which is spent in sharpening drills, need not be all chargeable to drilling, because he may spend a good deal of time in repairing the steam shovel or fixing hand tools, etc.

3. OVERHEAD LABOR. Clerks, bookkeepers, messengers, office force, and General Manager are ordinarily included among the items of _overhead charge_, as well as salaries of general officers.

4. OVERHEAD MATERIALS. In this classification, there are included stationery, office furniture, supplies, etc. When the office furniture is disposed of upon the completion of the work, its value should be credited upon this item.

5. OVERHEAD INCIDENTALS. These may include various items, such as telephone, office rent, telegraph messages, express charges on incidentals not directly connected with plant, etc.

6. PREPARATORY COSTS. These include the cost of getting ready to do the work, and, depending upon the nature of the job, may include any or all of the following items:

(_a_) Temporary roads;
(_b_) Temporary trestles;
(_c_) Clearing and grubbing;
(_d_) Snow removal and drainage;
(_e_) Traveling expenses to job;
(_f_) Preliminary estimates, calculations, and surveys;
(_g_) Freight and handling of materials to and from job;
(_h_) Freight on preliminary supplies;
(_i_) Handling of preliminary supplies;
(_j_) Licenses and premiums on bonds, etc.
(_k_) Legal expenses;
(_l_) Loss on initial operations;
(_m_) Right of way and cost of site;
(_n_) Sheds, storehouses, and other temporary buildings;
(_o_) Tools, less final value.

7. SUPPLIES. These are chargeable F. O. B. the job, or at the railroad station nearest to the work. They include all supplies for carrying on the work, as distinct from _material_, including explosives, coal, oil, waste, etc., and may include a _charge for water_.

8. INTEREST AND DEPRECIATION ON PLANT. This item is variously estimated by different people, and may vary greatly. It is impossible to establish an absolute rule; but on the average contractor's plant, it may be stated that 1/10 of 1 per cent per working day is a very fair general average figure. The average steam shovel, for example, will work perhaps 200 days, under favorable weather conditions; and on this basis the interest and depreciation charge will be 20 per cent per year, and is not far from a fair figure. Some contractors allow 33 per cent per year on such material as road machinery, including crushers, steam rollers, etc. This is a little high, provided that a reasonable charge is made for repairs.

9. REPAIRS TO PLANT. How much money it takes to keep the equipment in proper condition for performing efficient work, is a question on which the limits of space prevent a detailed discussion. On such a machine as a standard─gauge steam locomotive in constant operation to the limit of its capacity, repairs may run as high as 20 per cent per year; and on a rock drill the repairs may be 50 per cent or more per year.

10. RENT, STUMPAGE, ETC. The item of _rent_ includes the rental of ground and the storage buildings, if any, outside of the office expenses. _Stumpage_ is the cost of standing timber, the purchaser being privileged to leave the stump after cutting down the tree.

11. MATERIALS OF CONSTRUCTION. These are chargeable F. O. B. the job, or at the railroad station nearest to the work.

12. HANDLING OF SUPPLIES.

13. FREIGHT, when not included in item No. 11 or No. 7.

14. UNLOADING, HAULING AND STORING MATERIALS AND SUPPLIES.

15. RE─HANDLING MATERIALS AND SUPPLIES.

16. INTEREST ON CASH CAPITAL EXCLUSIVE OF PLANT.

17. TAXES AND INSURANCE ON PROPERTY (including boilers).

18. ACCIDENTAL INSURANCE, to protect workmen and the public.

19. ADVERTISING, MEDICAL EXPENSE, AND CHARITY.

20. DISCOUNTS ON BONDS, WARRANTS, OR NOTES.

21. CONTINGENCY LABOR.

22. CONTINGENCY MATERIALS.

23. CONTINGENCY SUPPLIES.

24. COST OF FINDING AND RECOVERING LOST FREIGHT AND SUPPLIES.

25. PROFIT.

COST REDUCTION

The ultimate aim of cost analysis is economic efficiency; and any system or method of cost analysis which does not result in the lessening of the total cost per unit of work performed, must necessarily be a failure.

After the costs on work have been partially analyzed, it becomes the province of the engineer to introduce methods and devices whereby the expense of obtaining the various data may be more than offset in the general economy of the work. It was long ago realized that shop practice could be economized by methods of systematization; and we have an early instance of the appreciation of this fact in the story of the struggles and methods re─sorted to by James Watt in the construction of the early steam engines. The troubles arising from incompetent workmen, drunkenness, and the necessity of doing work in different parts of the country far removed from headquarters, were as real then as they are now, with this disadvantage, that in the eighteenth century the press, the telephone, and the professional schools had not reached a development admitting of intelligent coöperation in the attack upon this problem.

Within the last score of years it has been found that cost─analysis applied to shop work problems gives most amazing results. When the piece─work system was introduced, it was believed that the final solution of the problem had been attained. The men were then placed upon the footing of contractors. A man got so much pay for accomplishing so much work; and it was most clearly to his interest to accomplish the maximum of work in order to get the maximum of pay. It was immediately evident that the good men would soon show such a contrast to the poor men on the work as to inspire a constant rivalry, thereby resulting in a very much higher output. In order that the desire to accomplish more work should not interfere with the quality of the work, all materials were systematically and rigidly inspected.

For a good many years the piece─work system flourished, and it is still flourishing as compared with its predecessors. It is vigorously fought by trades unions and by the less able among the men. It is tolerated by those of mediocre ability, and it is heartily endorsed by the most skilful. In order to remove the resistance of labor unions, a modification of the piece─rate system, known as the _bonus system_, has been devised. It will be described in a subsequent paragraph.

Remarkable development has been achieved in the shop by the most brilliant work on the part of the men who have applied cost analysis, favored by the fact that in the shop one has conditions of work which are practically invariable from day to day. It is possible, then, to compare the work done per unit of time in the morning, with the work done per unit of time in the afternoon, or for each hour in the day, and thus to determine the effect of fatigue of the operators upon their efficiency and the effect of such specific influences as the character of artificial light, the grade of steel in tools, and even the economic value of providing reading rooms, white─enameled lavatories, and recreation for the operatives. To cost analysis has been largely due the development of the special high─speed steels and an amazing number of improvements in machinery, entirely aside from the stimulus and education of the workmen.

In field work, however, comparatively little has been accomplished in the world at large along these lines, not because the opportunity is lacking, but because certain of the difficulties appeal more glaringly to the pioneer in the field, and offer some peculiar discouragements. The conditions are not uniform from day to day. The locus of the work is changing, the weather is variable, and a very large number of external agencies will be continually interfering with the scheduled regularity of the work. The method or process whereby a piece of work can be done more economically, may be instituted at just the time when some apparently trivial variation of the weather, or breakdown in a water system, or interruption in train service, may produce an entirely opposite effect which will more than nullify the advantages obtained from the improved process or method, and will sometimes cover a period of a good many days and possibly weeks, making it appear that the improved method is not only a failure but a dragon in disguise.

Field work is constantly presenting obstacles and difficulties which have to be met and fought, calling for emergency judgment on the part of the men in charge and on the part of all the men on the work to a greater or less extent; and here alone is one of the chief reasons why a contractor comes to depend almost exclusively upon the personality of his superintendent or foreman, to the exclusion of systematic analysis.

It is abundantly demonstrable that when results are properly charted, and when a careful record is kept of the causes of interruption and the extent of the accidental obstacles, the problem becomes much simplified. It is astonishing how intimately a manager may come into touch in a short time with the obstacles to his work, and with the most efficient methods for their removal, by means of proper reports and cost analysis, and especially by the intelligent use of charts.