Large contractors should be no more than 5%, and preferably well less. Smaller contractors, especially those whose average job runs less than two weeks, are probably in the right neighborhood if their indirect labor runs in the 5% to 10% range.

Common tasks that should be tracked and treated as indirect labor are:

•   On-the-clock drive time
•   Planning and coordinating
•   Meetings
•   Equipment maintenance
•   Preparation in the yard prior to heading to the job
•   Paperwork
•   Working around the yard and shop
•   Waiting on and handling material or equipment deliveries

(The last item should be eliminated by planning, coordination, and communication.)

You might be wondering how bad your indirect labor could be. All we can share is what we've uncovered at some of clients' businesses after getting the proper tracking system in place.

30% - that's right - 30% of their field time was spent not putting in work.

To throw gasoline on that fire, their 30% did not include the cost of working inefficiently or lazily. Those are completely different issues and costs. And they went on top of the 30%.

The 30% we found were hours the crews assigned to indirect labor tasks. Even if 10% was a perfectly appropriate number for these contractors - and in some cases it was - that still meant one out of every five hours was wasted.