Where Has All My Labor Gone? – The Mystery of Non-billable Labor for AEC Firms

You know you have spent your whole workweek devoted to a specific project, but you’re only showing 35 hours being billed/charged to the project. Where did the value of those 5 hours go? In many cases, these missing hours can be attributed to non-billable labor, and many AEC firms overlook the importance of documenting how this time is spent. However, accurately accounting for non-billable labor is extremely important to track accurate project performance.

How Can My AEC Firm Track Non-billable Labor?

If your AEC firm utilizes Deltek Vision, then tracking non-billable labor is relatively simple. Before we get started, it is important to make a distinction between the labor we are billing clients and the labor that contributes to the cost of our project. With cost in this case being the “burn” or “retail” value of this labor. Within Vision, users are able to remove the labor from both the invoice and the project ledger in two ways:

1. A non-billable labor code under billing configuration
2. A zero billing rate attached to a person, code or category in the billing tables

Keep in mind that best practice states that the only time we would use either of the above is if the labor is invoiced and costed through a Unit for activities such as surveying or lab testing.

What Are Reasons for Non-billable Labor?

There are several possible scenarios that would warrant not invoicing a client for time charged to a project such as:

1. On-the-job training
2. Rework
3. Discounts

While all of these are valid reasons, the costs associated with this effort should be included in the project sub ledger. This is missed opportunity cost or potential lost revenue. If labor cost is nullified using any of the above, the true performance of the project becomes misstated. When reviewing project financial reports the missing cost is not there to net against revenue thereby creating a false and overstated profit amount.

What Happens to Non-billable Labor?

Ah ha, the Million Dollar question and you won’t even need to phone a friend. There are actually at least two ways to accomplish removing time from an invoice while ensuring it remains as cost for project metric measurement:

1. Write-off the hours/cost in Interactive Billing. This removes it from the invoice, but appears on the billing status in the Project Detail Report. This allows missed opportunity cost to be valued into the overall project profitability or more commonly known as a loss.
2. Allow the labor hours/cost to be included on the invoice. Then using an Add-On, create a discount to remove the amount. This will provide your client with the visibility of the benefit you are providing them. Additionally, it will ultimately be reflected accurately in project reporting since the overall impact is a reduction in revenue.

Following these simple rules will create accurate reporting and prevent any misunderstanding in regards to the projects true performance.