# Perform Cost Analysis to Cut Maintenance Expenses

If your site needs non-routine maintenance and repair work, you must decide between either using your own staff or hiring outside contractors. Some managers think that it’s always cheaper to use their site staff, but that’s not necessarily so. There are costs associated with using your staff just as there are with hiring outside contractors. If you do a comparative analysis of these costs, you may find that it’s more efficient to hire an outside contractor for a particular job.

If your site needs non-routine maintenance and repair work, you must decide between either using your own staff or hiring outside contractors. Some managers think that it’s always cheaper to use their site staff, but that’s not necessarily so. There are costs associated with using your staff just as there are with hiring outside contractors. If you do a comparative analysis of these costs, you may find that it’s more efficient to hire an outside contractor for a particular job.

To make more efficient staffing choices for maintenance and repair jobs, do a cost analysis for each job before deciding between using site staff and hiring an outside contractor. The analysis compares the cost of using your staff with the cost of using an outside contractor. To help you rein in your maintenance costs, here’s a rundown on how to perform a cost analysis of maintenance work.

## Cost Analysis Spots Inefficiencies

A cost analysis can help you spot inefficiencies in how you staff maintenance and repair jobs. For example, a handyman at one of your sites spends four hours repairing the trash compactor. If the handyman otherwise has a full workload, this means he didn’t execute four hours of his regular work. To make up for lost time, the handyman may end up doing his regular work less carefully or working overtime at a greater expense.

Hiring extra full-time staffers so that your regular staff can do the unusual repair jobs can also be inefficient. These extra staffers might not always have a full workload. To justify their salaries, they may take longer than necessary to do repairs, or they may overstaff a job just to appear busy, such as when two staffers might work on a job when only one is needed.

If you calculate what your company pays for your site staff’s work, you may find that it’s more efficient to limit your own staff to routine work and hire outside contractors for major or irregular time-consuming jobs.

## Calculate Hourly Labor Costs

To begin a cost analysis, figure out how much your company pays each maintenance staffer for one hour’s work. That’s not just the staffers’ hourly salaries. It’s their salaries plus payroll taxes and employee benefits, such as insurance premiums and pension contributions.

A simple way to estimate a particular staffer’s payroll costs over and above salary is to come up with a company-wide “markup” that’s expressed as a percentage of salary. To calculate the markup, divide your total annual payroll costs over and above salary by the total annual amount you spend on salaries.

For example, XYZ Management spent $250,000 on payroll costs such as taxes and benefits. However, overall, it spent $1 million on employees’ salaries. Its markup for payroll costs is 25 percent ($250,000 divided by $1,000,000).

After you calculate the percentage markup, calculate the hourly payroll cost in addition to each staffer’s salary. To do this, multiply the hourly salary by the percentage markup. Then calculate the total hourly labor cost by adding the hourly payroll cost to the hourly salary.

For example, a handyman staffer’s hourly salary is $12. The markup for payroll costs is 25 percent. The hourly payroll cost for the handyman is $3 ($12 x 25 percent). The total hourly labor cost for handyman is $15 ($12 + $3).

## Analyze Staffing Costs for a Job

To calculate how much it will cost for your staff to handle a particular job, first ask your maintenance supervisor which staff members would work on the job and how long it will take them to complete it. If staffers have done this type of work before and your company has time sheets and work orders that show how long it takes to do the work, it should be relatively easy to get this information.

Make sure you include the costs, if any, of supervising the work. This is a cost you may easily overlook, yet it could really add up. For example, suppose a site needs repairs made to its trash compactor. Last year a handyman made similar repairs to the trash compactor at another site you manage. It took him four hours to complete the repairs. And the building manager spent two hours supervising the work.

If you have no written records of the time staffers have spent doing the same type of work, ask the maintenance supervisor for an estimate based on his or her recollection of prior work. If staffers have never done this type of work, ask the maintenance supervisor for an estimate based on the complexity of the work.

To calculate the total labor cost for the job, figure out the labor cost for each staffer who will work on the job. Then add the individual costs to get the total labor cost for the work.

**Example:** The hourly labor cost for a handyman staffer is $15. He’ll need four hours to complete the work. The total cost for the handyman’s work is $60 ($15 x 4). The hourly labor cost for the supervisor is $25. He’ll spend two hours supervising the handyman. The total cost for supervisor’s work is $50 ($25 x 2). The total labor cost for the work is $110 ($60 + $50).

## Get Estimates from Contractors

Once you’ve analyzed the cost for your staff to handle a maintenance job, find out how much local contractors would charge for doing the same job. Calculate the total labor cost for each contractor.

For example, a contractor estimates it can complete the job in two hours using one employee. It charges $20 per hour for labor. The total labor cost estimate for ABC Contractor is $40 ($20 x 2).

## Compare Cost Estimates

Compare the cost estimate for using your site staff with estimates from outside contractors. This should give you an idea of how efficient it would be for your site staff to do the job. If using outside contractors is consistently cheaper, you should carefully consider whether to stop using your site staff for unusual repair jobs.

Even if the cost to use your site staff is less than or close to the cost of using outside contractors, you may still want to choose to use outside contractors for other reasons. For instance, site staffers may lack the expertise of an outside contractor. If repairs aren’t done right the first time, you may have to make more costly repairs later. And outside contractors may have insurance coverage related to specialized repair work. If your site incurs additional expenses resulting from a poor repair job done by an outside contractor with insurance coverage, you’ll have a “deep pocket” to sue to recover your costs. That won’t be the case if you use your own staff.