Construction’s biggest cost is the one nobody is measuring. Here’s the empirical case.
The Premise
Every project from a $20M turnaround to a multi-billion-dollar capital build runs on a number that never makes the dashboard:
The percentage of paid hours that actually convert into installed work.
Call it wrench time. Tool time. Direct work. After thirty years inside mega-project execution, I’ve come to call it something else the Utilization Deficit. It’s the structural, recurring, quantifiable gap between what owners pay for and what gets built. It’s also the thesis I spent the last two years putting into a book.
This is not a productivity essay. Productivity asks: how fast does a tradesperson swing a hammer? The Utilization Deficit asks the harder question:
How often does the hammer ever leave the toolbox in the first place?
In fifty years of empirical data hundreds of thousands of observations across dozens of countries, the answer has been remarkably consistent. And remarkably ignored.
Exhibit A: The 32% Number Isn’t New. It’s the Baseline.
A study of US power plant projects in the 1970s found that only about 32% of daily construction activity was direct work, roughly 28% went to support tasks, and about 40% was wasted or idle time .
That study is half a century old. The number has barely moved.
Modern wrench-time benchmarking puts the industry average at 25–35%, with best-in-class organizations targeting 55–65% . The Construction Industry Institute’s Phase V research demonstrated that wrench time can be increased by an average of about 15 percentage points using activity analysis methods alone without adding a single craft hour.
Translation: The average job site is operating at roughly half the capacity its headcount and payroll already imply.
You’re not short on people. You’re short on the people you’ve already hired.
Exhibit B: 200,000 Observations Tell the Same Story
The Insight-AWP Time on Tools database, drawn from tens of thousands of observations across very large projects in Western Canada, the US Gulf Coast, and Western Europe approaching 200,000 data points confirms the same band. The geography changes. The contractors change. The technology changes.
The percentage doesn’t.
That’s what makes the Utilization Deficit a structural phenomenon, not a project-specific failure and why I dedicated an entire chapter to its persistence across eras and geographies. If your wrench time matches a 1976 boiler retrofit, the variable isn’t the workforce. It’s the system inside which the workforce is asked to operate.
Exhibit C: The Megaproject Tax
McKinsey Global Institute’s Reinventing Construction analysis put hard numbers on what every operations leader feels in their gut:
• 98% of megaprojects suffer cost overruns of more than 30%, and 77% are at least 40% late .
• In the United States, the construction sector’s labor productivity is lower today than it was in 1968 .
• Globally, construction labor-productivity growth has averaged about 1% per year over the past two decades, against 3.6% in manufacturing .
• If construction productivity caught up with the broader economy, the sector’s value-added would rise by an estimated $1.6 trillion about 2% of global GDP .
Every one of those overruns is, at its core, a Utilization Deficit problem with a different surname. Permits. Materials. Engineering. Scope. They all manifest as the same observable: paid crews not converting hours into installed quantities.
When 98 of 100 megaprojects overrun and the productivity needle hasn’t moved in 80 years, that’s not a string of bad luck. That’s a system performing exactly as designed.
Exhibit D: The Energy Infrastructure Pattern
A 2025 Boston University study covering 662 energy infrastructure projects across 83 countries, totalling $1.358 trillion in investment, found that more than three-fifths experienced cost overruns particularly on projects exceeding 1,561 MW in capacity .
The same study identified a non-linear failure mode most schedule risk models still don’t price: once construction time delay exceeds 87.5%, the cost escalation rate significantly increases .
Translation: there’s a cliff edge. Projects don’t degrade linearly they hit a threshold where utilization collapses and cost escalation accelerates. The Utilization Deficit doesn’t just bleed margin. Past a certain point, it compounds.
What the Industry Got Wrong
Orthodoxy says: if productivity is low, push the crew harder, add supervision, tighten reporting cadence.
The data says the opposite. A worker measured at 28% wrench time isn’t lazy. They’re a capable person trapped inside an inefficient system. Pre-stage the materials, sequence the permits, eliminate the travel dead time, fix the tool crib bottleneck and the same person delivers 50% more installed work without moving any faster.
This is the white space. The gap between scheduled and actual. The hours that hit a timesheet but never a deliverable. This is what owners are paying for and almost universally failing to measure.
I’ve spent three decades watching organizations confuse activity with output, and reporting cadence with control. The white space is where that confusion compounds and it’s the chapter of the book I argued hardest to lead with.
The Carrying Cost Nobody Reports
Here’s the math that should be on every steering committee agenda:
If your project is running at 30% utilization, your effective workforce is roughly one-third of your nominal workforce. A 300-person crew is performing the work of 100 productive workers. The other 200 aren’t absent. They’re present, paid, badged on, and unable to convert hours into installed quantities because the system around them won’t let them.
At a fully burdened craft rate of $100–150/hour on a major capital project, every percentage point of utilization deficit translates to seven-figure carrying costs per month — costs that never appear on a variance report because they were baked into the baseline.
You’re not over-budget. You were never on-budget. The estimate just assumed a productivity rate that empirical data has been refuting for fifty years.
The Carrying Cost Nobody Reports
Here’s the math that should be on every steering committee agenda:
If your project is running at 30% utilization, your effective workforce is roughly one-third of your nominal workforce. A 300-person crew is performing the work of 100 productive workers. The other 200 aren’t absent. They’re present, paid, badged on, and unable to convert hours into installed quantities because the system around them won’t let them.
At a fully burdened craft rate of $100–150/hour on a major capital project, every percentage point of utilization deficit translates to seven-figure carrying costs per month costs that never appear on a variance report because they were baked into the baseline.
You’re not over-budget. You were never on-budget. The estimate just assumed a productivity rate that empirical data has been refuting for fifty years.
The Bottom Line
The empirical record is unambiguous. Across fifty years, hundreds of thousands of observations, dozens of countries, every major project class:
Construction routinely converts 25–35% of paid hours into installed work, while planning baselines assume 55–65%.
That gap has a name. It has a cost. It has a fix.
Ignoring it is the most expensive decision the industry keeps making and the one I wrote a book to put on the table.
Sources
• Griffis & Farr (2000), citing 1970s US power plant productivity study
• Construction Industry Institute, Phase V Research, IR 252-2a Guide to Activity Analysis
• Insight-AWP Time on Tools historical database
• McKinsey Global Institute (2017), Reinventing Construction
• McKinsey & Company (2015), The Construction Productivity Imperative
• McKinsey & Company (2024), Delivering on Construction Productivity Is No Longer Optional
• Boston University Institute for Global Sustainability (2025), Beyond Economies of Scale: Learning from Construction Cost Overrun Risks and Time Delays in Global Energy Infrastructure Projects
Kyle Mussmacher is a 30-year construction operations professional and the author of The Utilization Deficit (2026), available on Amazon in Kindle, paperback, and hardcover. He writes on resource utilization, mega-project execution, and white space management at constructionresourceutilization.com.