The Case for Job Costing Supervision

[Cole]

Supervision: To job cost or not to job cost, that is the question. Contractors throughout the country repeatedly wonder if a supervisor?s wages are a direct or overhead expense.

In a study recently conducted, contractors agree that they routinely do not include enough dollars for general conditions in their estimates. Perhaps it is because they feel the customer will not pay for supervision and management or that the supervisor is not actually working directly on the job.

However, if there were no supervisor or project manager, imagine how much the job would actually cost. With no one at the helm of the job, creating the schedules, communicating to the customer, and making sure all the materials and crew are on the right job at the right time, the costs of every job would skyrocket.

Therefore, it is important to make sure that both the estimating process and the job costing process include a method to charge the cost of supervision to each job. Yet, these costs are not overhead costs. If a contractor?s volume doubled, the number of supervisors would double. This means that supervision is a variable cost, or a cost that fluctuates with the volume of work. And that means that it should be considered a direct cost, or a cost that should be directly charged to a job.

The rebuttal to this case is common: since the supervisor is typically salaried, does not fill out a time card, and works on many different jobs, it will be impossible to job cost the supervisor?s time. While this point of view is understandable, the need to track the total costs of any job outweighs this argument.

What do you guys think?

[Rich]

I'm in agreement. We have a code in our cost controls for Salaried Staff - we do a full length schedule for who is going to be required every month on the job..from 60 to 2 or whatever. We pretty much run an open book job so the owner sees everything anyway.
On some jobs we'll have a General Superintendent or Operations Manager that will be covering 2-3 jobs - we split their costs between all the jobs they work on.. that includes their car, fuel, expenses, etc..