Stochastic Manpower Requirements Model: Research Needed to Address Craft Labor Issues

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1 Stochastic Manpower Requirements Model: Research Needed to Address Craft Labor Issues Charles O. Skipper 1, Stefanie Brandenburg 2, and Lansford C. Bell 3 1. Vice Chairman, Finance and Administration, Storm Eye Institute, Medical University of South Carolina, Charleston, SC Visiting Professor, Department of Civil Engineering, Clemson University, Clemson, SC Professor, Department of Civil Engineering, Clemson University, Clemson, SC Abstract The supply of adequately trained and led craft workers poses a serious challenge for the expected growth of infrastructure projects and energy plant construction in the immediate and more distant future. Research studies and publications over the past 25 years consistently indicate that craft labor is the biggest expense on industrial construction projects, including infrastructure and energy related construction projects. These same studies have concluded that construction cost effectiveness depends on the proper supply of well trained, motivated, and experienced people. Despite this fact, the construction industry has focused scant attention to the issues involved in creating a high quality craft labor force. With the expected funds coming from United States Government stimulus packages to catch up on long neglected infrastructure projects, as well as the publicprivate venture opportunities under way to build infrastructure and/or energy plants and other sources for the nation s continued growth and development, it is time to address the craft labor challenge. Research is needed that will offer a methodology or model for the identification of inputs to the complex issue of craft labor needs, to create schedules to address these needs through tools and techniques, and to produce the desired craft labor outputs. Inputs would include areas such as manpower sources, training needs, recruitment strategies, supply chain management, identification of technical skill requirements, leadership 1

2 programs, and similar items. This data could be modeled into a stochastic craft labor scheduling process that would utilize specific tools and techniques. The outputs from the process would result in identification of the most cost effective manpower staffing plans, the most cost effective combination of on-site or off-site fabrication programs, use of recommended best practices, identification of the most effective technical training programs, and proposals to produce training and development programs that generate competent craft leadership personnel. In order for the US Construction Industry to be up to the challenge of the coming wave of infrastructure and energy plant construction projects, emphasis needs to be placed now on the stochastic modeling of manpower requirements. Keywords: Leadership, Construction, Crafts, Modeling Overview The period of 2008 to present has demonstrated how quickly long held convictions about the construction industry and craft labor can change. In a very short time span, the continuous talk of a shortage of craft labor has given way to widespread unemployment in that sector. The election of President Obama and congressional passing of a stimulus Bill that included $40 Billion for transportation infrastructure appears to have changed the discussion, for now (Parsons 2009). The shovel ready projects are not moving as quickly as promised, but clearly this spending will ultimately generate some jobs for those involved in the construction industry. Although there is no clear consensus at this time, there is also much talk about significant national investment in costly high speed rail projects. President Obama has pledged $8 Billion in immediate spending, and an additional $5 Billion spread over 5 years, starting in 2010 (Parsons 2009). The expansions of postponed and overdue airport runway projects are also in the news. Finally, on the energy front there is discussion about significant investment in green energy, to include wind, solar, and hydroelectric. Many consider Nuclear power to be green, since it emits no carbon dioxide and the volume of greenhouse gas emissions prevented by current nuclear plants, as compared with that same amount of electricity 2

3 being produced by fossil fueled plants, is equivalent to removing 96% of the passenger cars from America s highways (Flint 2008). Currently there are 32 nuclear plants that have submitted applications for, or are pending submission of, construction and operating licenses (COLs) in the United States (Jacoby 2009). Several US Senators have called for the construction of 100 new nuclear plants by 2030 to significantly reduce carbon emissions while producing enough electricity to keep up with America s growing needs (Burr 2009). One of the common requirements that these initiatives share is a need for adequate numbers of trained, competent, and well led craft labor. The construction industry s skilled labor shortage has been well documented in the literature and many attempts have been made to address the supply side of the problem (Brandenburg 2004). In the 1980 s, the Construction Industry Cost Effectiveness Project researched many of the issues facing the industry and identified under trained supervisors and de-motivated workers as two of the major problems causing reduced productivity and monetary losses (CICE 1983). Other studies to determine the root cause of the craft labor shortage have found that changes in vocational education, technology, and a shift to open shop contracting are just a few of the causes (Chini 1999, Maloney 1995). Haphazard or independent attempts at addressing the shortage have included training programs, incentives for workers, and the use of foreign or non-traditional workers. The National Center for Construction Education and Research (NCCER) is one of the most widely recognized providers of standardized construction training materials and resources (Bennett 2003.) A two-tiered approach developed at the University of Texas at Austin is a more comprehensive approach that focuses resources on the development of highly skilled craft workers (Castañeda-Maza 2002) and highly trained front-line supervisors (Brandenburg 2006). A few short years ago there were numerous studies that explained the approaching shortage of trained craft labor (CII 2003, Chini 1999, Coia 1997, Grogan 2000, Maloney 1995, Federle 1993). However, the short term outlook for craft labor availability has become more positive for several reasons. First, many retirement eligible craft workers 3

4 are delaying retirement due to the significant loss of value in their retirement savings as a result of the drop in the stock market. Second, the severe drop in total construction spending (May, 2009 was down 11.7 % from May, 2008) has resulted in a lesser need for craft labor (Davis 2009). Despite these transient conditions, the long term trends for craft labor are still negative (Fiori 2003, Brandenburg 2004). With the reduced need for craft labor during the economic downturn, many workers will leave construction for other industries - often permanently. Also, during slow times, fewer younger workers will begin apprenticeship or community college programs that would train them to be skilled craft workers. When the economy rebounds and the demand for construction craft labor increases again, the craft labor pool will have contracted even more and the shortage of skilled laborers will be even greater. Most Americans are confident that the economy will rebound; if not immediately, in a few years (Karabell, 2009). When that happens we will be faced with the same craft labor situation, or worse, that we had in 2008 a shortage of well trained, well led, and experienced craft labor. The History of Craft Requirements Development Traditionally craft labor issues have been approached from a local perspective. If there is a need for skilled craft labor in a specific field - nuclear, automotive, aviation, etc. - then local companies or communities band together to provide training programs. Training programs may be offered at the employing organization while others may be offered at local community colleges. Some craft labor is also able to transition from Military service where they receive valuable training and experience. In those areas where union labor is available, the unions provide their own programs. Overall the approach to training has been somewhat minimalist, and certainly haphazard. Identification of craft manpower numbers, skills, training needs, etc. (i.e. requirements development) has also been approached as a local issue since for the most part craft labor does not easily migrate. This has contributed to a less than comprehensive approach to creating a more sophisticated approach to craft requirements development. This minimalist approach is interesting in view of the fact that it is widely accepted that the two largest expenses on infrastructure projects are materials and craft labor. These two expenses are inevitably 4

5 linked, since poorly trained and poor performing crafts have a negative impact on the efficiency with which materials are utilized. A key issue is the actual effectiveness of craft labor on the job site, as determined by craft leadership. Many studies over the past 25 years have repeatedly indicated that construction cost effectiveness depends on the training, supervision, motivation, commitment, and leadership of people on the job (Skipper 2008). Likewise it has been reported that the best construction project managers are the best leaders and there are specific causal influences that produce those leaders (Skipper ,2 ). Regardless of the above points, these past efforts to call attention to or put research emphasis toward craft labor issues have not resulted in widely accepted or well established tools that can be used throughout the construction industry. The Construction Industry Institute (CII) is one organization that has attempted to develop best practices with regards to workforce management, but the information is proprietary and limited to member companies. There is little information in the literature to suggest that there are generally accepted practices in the construction industry with regards to workforce development or management (Brandenburg 2004, Pappas 2003). Current and Future Requirements As briefly mentioned in the overview, it appears there will be a surge of significant spending on infrastructure projects for at least the next several years. This spending will generate employment of significant numbers of craft labor. In the nuclear industry there are 32 nuclear plants pending construction and operating licenses (COLs). The nine year construction and start up process will create an average of 1400 to 1800 construction jobs, with permanent requirements of 400 to 700 people to keep the plant in operation (NEI 2009). These workers cannot be hired off-the-street, as they require substantial training/skills and must meet strict background requirements. In the green energy area, $86 Billion of Federal funding is targeted for initiatives in solar and wind power (ENS 2009). It is estimated that this investment will generate between 500,000 to 1.7 million green energy jobs with a large percentage of those as craft labor jobs (Buckwater-Poza 5

6 2009). In the infrastructure area, President Obama has proposed in his latest budget the creation of an infrastructure bank. That bank would start with $5 Billion in 2010, and receive a total of $25.2 Billion by 2019 (Lambert 2009). All of these initiatives may not come to fruition, at least not in the near term. The ability of Congress to continue high levels of deficit spending may be curtailed. There may not be adequate local and regional funding available to support many of the power or transportation initiatives. Environmental issues and access rights may also limit the ability to build high speed rail, or energy plants, or power transmission lines, at least in the time frames being proposed. For example, fourteen conservation groups and a Colorado county have sued the federal government over 6000 proposed miles of energy transmission corridors that would develop electricity transmission and distribution facilities on Federal public land in 11 western states (Straub 2009). These types of conflicts between those concerned about the environment and those attempting to upgrade power and infrastructure facilities are predictable and will result in litigation that delay or even block intended construction projects. Nevertheless, the need for new construction is genuine and the requirement for well-trained and well-led craft labor appears to be on the increase. The question at this point is how the increased demand for skilled craft labor will be met. Will the focus continue to be short term and local only, or will a more substantial approach be developed that incorporates all of the complex issues and challenges associated with the construction industry in the US? This paper argues that the time is now to conduct University level research and move craft labor planning and management forward. A Stochastic Modeling Path Forward This paper proposes that research is needed that will offer a methodology or model that can be used to assist with the many complex issues related to craft labor. This model is in the preliminary stages of development and it is acknowledged that the model may not be comprehensive. The objective of this paper to identify the need for University 6

7 research into the topics related to construction craft labor and to offer a methodology to address those issues. We propose that the craft labor research can be broken down into a 2-phased approach; Development of the Workforce Readiness Index (WRI) and the Stochastic Labor Requirements Model. The Workforce Readiness Index (WRI) is intended to represent the workforce development strategies that have been considered and developed for a project, industry, community, or region (Figure 1). It would be developed using a process similar to that of the CII Project Definition Rating Index (PDRI) (CII 1999). The major components of the WRI would be evaluated using a rating system to determine if all of the inputs for a well trained, led and managed workforce have been identified. Each input would be given a formal definition with subcategories as needed and users would rate the degree to which the input had been formally identified, with a 1 representing complete identification and documentation and 5 representing little or no identification. A series of weights would be applied to each of the inputs or input categories and a score could be generated suggesting the readiness of the project or region with regards to craft labor issues. This index would then provide information for use in the development of the Stochastic Labor Requirements Model for a project, region, or industry. 7

8 Sources Incentives Labor Projections Craft Labor Availability Leadership Training Skill Level Current Needs Skills of Management Craft Labor Leadership & Management Workforce Readiness Index Supervisor Training Technical Skills Training Craft Training Leadership Skills Training Attraction and Retention Reward System Craft Labor Productivity Off-site Prefab. Image Wages Amenities Advertising Enterprise Environmental Factors Regulatory Issues Union/ non-union Supply Chain Integration Equip./ Tool Requirements Current Labor Pool Local Unemployment Figure 1: The Workforce Readiness Index Some of the questions that must be identified and quantified for each of the components include: Craft Labor Availability. What are the sources of skilled craft labor? Are the available craft labor assets trained or untrained? What are the different skilled crafts needed; by technical skill (welder, electrician, equipment operator) and by numbers (craft hours per month of project)? 8

9 Craft Labor Leadership and Management. Are project managers and superintendents trained in craft labor issues? Are craft team leaders trained to lead and manage their personnel? Are programs in place to provide recurring training in the use of automated planning tools, dispute resolution, and other needed leadership skills? Are programs available to provide supervisor training in quality control, quality assurance, supply chain management, and safety? Craft Labor Productivity. Are there strategies in place to determine the optimum use of on-site or off-site construction and prefabrication? Is there an identified approach to handle environmental and regulatory issues so they do not impede the effectiveness of craft labor output? Have manpower levels been integrated with supply chain management? Have equipment and tool requirements been submitted to stochastic modeling to preclude labor ineffectiveness due to shortages or breakdowns? Craft Training. Are training programs available in the local areas that meet the requirements? Can new training programs be initiated or existing training programs be revised? Is the training universal, or does it provide a certification program? Is leadership or management skills training available? Enterprise Environmental Factors. What is the labor market in the local area; skilled or unskilled, unionized or nonunionized, plentiful or limited? What institutions exist in the area to provide needed training programs? What are the prevailing standards for wages and benefits in the region? Craft Attraction and Retention. Are plans developed to recruit craft labor from local high schools, community colleges, and related industries? Are programs in place to advertise jobs to skilled workers in other geographic areas than are employed in industries that are being downsized (textiles, automotive)? Are there initiatives to reach out to military veterans who may have exact or related technical skills and who are open to relocation? Are studies available that will generate solid retention strategies for the best craft performers (pay, benefits, child care, college loan forgiveness, retirement planning)? Is there a reward system that encourages high levels of team performance? 9

10 The Stochastic Labor Requirements model would involve a series of inputs such as those in Figure 2 as well as others, including the WRI to generate a number of outputs creating a comprehensive plan for the development of a well-trained, skilled, and well-led construction workforce. Workforce Readiness Index Life Cycle Labor Requirements Craft Leveling Strategies Organizational Process Assets Project Mgmt Methodology Expert Judgment INPUT STOCHASTIC LABOR REQUIREMENTS MODEL OUTPUT Labor Attraction and Retention Plan Labor and Schedule Integration Plan Labor Training and Productivity Plan CII Best Practices Implementation Plan Project Management Information Systems Environmental, Regulatory, and Political Impact Plan Figure 2: Stochastic Labor Requirements Model The inputs of the model would include the WRI as well as the following: Craft Leveling Strategies. Systems should be developed to level craft manpower requirements over the life of the project with the critical path of the construction schedule to minimize inefficiencies Craft manpower requirements are leveled with craft equipment and support requirements. Organizational Process Assets. Organizations/industries/regions have a wellestablished and successful human resources plan for craft labor. Collective bargaining agreements are in force. Lessons Learned reports from previous 10

11 related construction projects are utilized and distributed. Templates and checklists are available that indicate craft productivity results and expectations. Project Management Methodology. A well developed company (or industry or regional) plan provides guidelines as to how projects are managed and craft labor is supervised. The plan also includes provisions for continuous improvement of craft labor effectiveness. Expert Judgment. There are identified and experienced personnel who can participate in craft labor planning issues. These experts should represent all levels of the organization as well as all the specialties of craft labor that will be employed on the project. Project Management Information Systems. The software programs available for the analysis of data should be up to date and should include training for all users of the software. Craft labor and supervisors should have some use of portable information systems as well as automated inventory reporting systems. The Model itself could be developed as a unique new product. It could also be adapted from another application. For example, the Center for Naval Analysis (CNA) has examined a complexity based model known as Agent Based Models (ABMs). The strength of ABMs is in its ability to simulate real interactions between individuals and groups, while allowing for a wide variety of feedback (Burke, 2003). If ABMs offer a solid approach for the complexities of modeling manpower requirements for the US Navy, then it can be envisioned that a model can be found that will provide some rigor to the challenge of modeling construction craft manpower requirements. The Stochastic Labor Requirements Model would then generate the following outputs: Life Cycle Labor Requirements Analysis. Labor Recruiting and Retention Plan. Labor and Schedule Integration Plan. Labor Training and Productivity Plan. CII Best Practices Implementation Plan. Environmental, Regulatory, and Political Impact Plan. 11

12 These outputs would provide the framework for the comprehensive development of a skilled, well-trained, well-led construction workforce. It is anticipated that this model can be applied at the local project level, organizational level, community or regional level, and the industry level. Conclusion This paper states that there is a long overdue need to address construction industry craft issues in a deliberate, well researched, and engineering study manner. The issues related to employment of adequate numbers of trained and motivated craft labor can be best resolved through a detailed modeling approach. This approach would consist of identification of inputs to the research, use of identified modeling tools and techniques for analysis, and result in the outputs of specific plans. These plans would generate a much more detailed approach than has been used in the past to address sourcing, employing, and effectively utilizing craft labor on large construction projects. The need for adequate numbers of well led and competent craft personnel is well recognized by the leadership of the construction industry. The question remains as to whether those leaders also recognize the need to apply resources to study the problem and find modern solutions. References Bennett, D Speech to the Gulf Coast User s Conferences on June 16, 2003 in Houston, Texas. Brandenburg, S.G The Tier I Workforce Management Strategy. Dissertation. The University of Texas at Austin. Brandenburg, S.G., C.T. Haas, and K. Byrom Strategic Management of Human Resources in Construction. ASCE Journal of Management in Engineering. Vol. 22 (2) pp

13 Buckwater-Poza, R Report. Clean Energy Economy Creates 1.7 million Jobs. Posted June 18, 2009 at 11:29am. Burke, D. D., and Hodari, A.K Using Complexity for Manpower Modeling: A Feasibility Study. Center For Naval Analysis, Alexandria, Virginia, October, Burr, T Bennett: U.S. Needs 100 More Nuclear Power Plants, The Salt Lake Tribune, June 22, Castañeda-Maza, J Workers Skills and Receptiveness to Operate Under the Tier II Construction Management Strategy. Dissertation. The University of Texas at Austin. Chini, A.R., B. Brown, and E. Drummond Causes of the Construction Skilled Labor Shortage and Proposed Solutions. ASCE. Proceedings of the 35 th Annual Conference. Coia, A The Labor Shortage Within. Construction Business Review. Vol 7(1). Davis, M., Holland, L., and Tremblay, J May 2009 Construction at $964 Billion Annual Rate, US Census Bureau News, Washington, DC, July 1, Federle, M.O., J.E. Rowings, and T.S. DeVany Model of Career Choice for Craftwork. ASCE Journal of Construction Engineering and Management. Vol. 119(1). Fiori, C.M What s wrong with Working in Construction? How Image and Diversity Issues are affecting the Shortage of Skilled Labor. ASCE Construction Research Congress. Honolulu, HI. March. 13

14 Flint, A Statement of Alex Flint, Senior Vice President, Governmental affairs, Nuclear Energy Institute, before the Select Congressional Committee On Energy Independence And Global Warming, March 12, Grogan, T The Dilemma of Good Times: More Work, Fewer Workers. Engineering News Record. Vol. 245(17). Green Billions Fertilize the U.S. Economic Stimulus Package Environment News Service. Feb. 20, Jacoby, J The Coming Nuclear Renaissance, The Boston Globe, Boston, Massachusetts, March29, Karabell, Z The Biggest Thing to Fear is Fear; American consumers are in better shape than you think. Newsweek. Vol No. 11. March, 16. Lambert, L Obama Budget has $5Billion For Infrastructure Bank, Reuters News Service, February 26, Maloney, W.F. and J.M. McFillen Job Characteristics: Union- Nonunion Differences. ASCE Journal of Construction Engineering and Management. Vol. 121(1). More Construction for the Money: Summary Report of the Construction Industry Cost Effectiveness Project The Business Round Table. Nuclear Energy Institute (NEI), Nuclear Energy, Powering America s Future, NEI, Washington, DC, July, Pappas, M Evaluating Innovative Construction Management Methods. ASCE Construction Research Congress. Honolulu, HI. March. 14

15 Parsons, J Optimism In Transportation Sector As Stimulus Provides Stability, Engineering News-Record, July 1, Skipper, C., Bell, L., Brandenberg, S Craft Leadership Development and the Nuclear Industry, Proceedings of Construction Research Congress (CRC) of ASCE, Lake Tahoe, California, October, 2008, Skipper, C., Bell, L Assessment with 360º Evaluations of Leadership Behavior in Construction Project Managers Journal of Management in Engineering (ASCE), April 2006 Skipper, C., Bell, L Influences Impacting Leadership Development, Journal of Management in Engineering (ASCE), April 2006 Straub, N Groups Sue U.S. Over Energy-Transmission Corridors on Public Lands, The New York Times, New York, NY, July 8, The Shortage of Skilled Craft Workers in the U.S Construction Industry Institute. Publication RS

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