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Blended Rates

Chris McKayAgrium

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Situation

noob

owned

•Us and our Path

•What is a Blended Rate?

•How to calculate and use

•Analysis and follow up

•Key points to take home

•Questions

What I’ll Cover

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Us and Our Path

Us and Our Path

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Same Tools and ProcessesSimilar Methods and Practices

Why a blended rate?

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What is a blended rate?

Average $/hr

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At its most basic:Sun Mon Tue Wed Thu Fri Sat

             

             

             

             

             

             

             

             

             

             

Overtime  

Regular Time  

One Blended Rate

Do Stuff?

Do Stuff?

Do Stuff?

In Straight, Over, and Double time Journeymen only Equipment used at an hourly rate Escalation Shift differential

“Directly attributable to the work; preferably charged hourly.”

Out Travel time Subsistence/LOA Supervision Standby time Productivity

“Not directly attributable to the work”

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Makeup of Blended Rates

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Pipefitter Example

Blended Rateo Use Journeyman RT & OT

rates onlyo 5% escalation/yearo 30% on nights ($x/hr

premium)

Overhead Travel time Subsistence/LOA Supervision Standby time

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Exchanger Wash Example

Blended Rateo 3 Journeymen per crewo HP Pumpo Lanceso Widgets for lanceso 5% escalation / yearo 50% on nights ($y/hr

premium)

Overhead Travel time Subsistence/LOA Supervision Standby time Radios Chemical charges

The Blended Rate Table

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Examples in use

Keep it Simple!

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Gut Check

• Example: Vendor X (support vendor)o Planned:

1,500 planned MH’s $50/hr blended rate $75,000 expected

o Requested: 2,240 MH’s $108,000

• We added about $10k to O/H WO for Stand-by

• The rest is found work related (we could cut manpower levels early if no found work)

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Examples after use

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Analysis

Planned:

• Blended Rate

• Hours

• Cost

Actual:

• Blended Rate

• Hours

• Cost

Planned:

• $50/ hr

• 10,000

• $500,000

Actual:

• $40/hr

• 12,000

• 480,000

Planned Hours 3,185Estimated Cost $219,765Blended Rate Calculated $73/hrBlended Rate Used for Planning $69/hr  

Actual Hours 3,336Actual Cost $241,339Actual Blended Rate $78.72  

Hours Deviation + 4%Cost Deviation + 10%Actual vs. Planning Blended Rate + 14%Actual vs. Calculated Blended Rate

+8%

Analysis

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- Used mix of Jman and apprentices in blended rate: we got all JMAN!

- 100% JMAN would have resulted in an $80/hr blended rate.

- More work was done pre-TA than expected on straight time.

- Hours were fine. Will still do pre-TA review with trade.

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Overwhelmed by Details?

Too Much Too Little

Simple and Repeatable!

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Keep in mind….

There are different ways to do this:

• Develop a system that works for you.

• Document it.

• Analyze and adjust.

• Update documents.

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Where we ended up:

• Started with basic knowledge, but no focus

• Realized deficiencies

• Rolled topic into our community of practice

• Recognized similarities

• Understood requirements & differences

• Documented method and templates

• Successful use

• Iterative improvement

o Create a blended rate for planning & budgeting.o Carefully choose what is in the blended rate.o Benefit from post-TA analysis.o Don’t underestimate the value of documenting your

knowledge!

Key Points to Take Home

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Double Click on the icons to view a draft document describing blended rates, and an Excel template to calculate them.

Blended Rate Excel Template

Sample Blended Rate Method (Draft)

Produced by:

Chris McKayAgrium

Chris.McKay@agrium.com