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By Josh Newland
July 17, 2016
Construction is a very risky, low-margin business, with the potential for a lot of stress. So why, you may ask, do people go into construction management?
As best as I can tell, it’s because we love to build; we love to create. Construction is one of the most tangible professions in the world where you can end each day looking at a structure that wouldn't exist without your efforts. Luckily for construction managers, software can help.
Today’s construction management software allows you to focus more on what you love by reducing risk and eliminating many of the issues that you spend the day firefighting. What this all boils down to is more successful projects, happier people, reduced costs, and greater profits.
At the end of the day we're all in business to make money, and making a lower than planned fee is not a good way to make money. There are numerous problems that can arise during a construction project that can eat away at your fee, but many of them can be mitigated with software. The remainder of this article will focus on the following key sources of fee erosion and how software can help eliminate them:
Reducing the number of change orders you're proceeding on where your client hasn't fully approved the cost
Reducing unrecoverable change orders or time and material tags that weren't submitted in a timely fashion
Reducing rework caused by contractors having incomplete information such as out-of-date drawings and specifications
Lowering the risk of going over budget on general conditions and general requirements
Reducing schedule delays that are attributed to the construction team
Enabling proactive forecasting to identify and address potential fee erosion sources
They are a fact of life in every construction project. If you're managing the change order process with spreadsheets and email, there is a serious lack of visibility and accountability between you and your client and you and your contractors.
Using a collaborative, web based system, every potential change order is tracked and the logs are automatically updated with the ball in court and current status. Reminders are automatically sent and with mobile device functionality, there should never be a time and material tag issued in the field that doesn't immediately make it into the log.
No more crumpled notes in someone's pocket that never make it into the system when it takes 15 seconds to create the record from your phone. All of these processes provide more visibility and accountability, reduce the turnaround time on approvals, and ensure there aren't any potential changes in progress that you're unaware of.
When you're managing drawings and specs in a paper process, it is nearly impossible to ensure that everyone on site not only has the most recent drawings and specs in hand, but also has the corresponding RFIs and other as-built markups within them.
With software, you can have one person cloud the drawing, link the RFI or sketch, and instantly publish the information to hundreds of team members on the web and their mobile devices. No one has an excuse to be working off of outdated documents. And think about the man hours saved that are typically spent distributing this information.
For a general contractor, it's all about the General Conditions. Especially if your project is lump sum, or the General Conditions are lump sum, this is where a general contractor can really make or break his fee. It's a fairly standard process for a project manager to complete at least a monthly forecast to pinpoint the project's estimated cost at completion and projected fee. If you're managing this in a spreadsheet, you're having to reference two or three other reports and manually key in data just to get to the point of being able to start the forecast. If you're doing this from a static report that's generated and sent to you from your accounting team, you can't immediately update anything that is incorrect, outdated, or coded incorrectly, and you definitely can't drill down into the values.
What you need is a system that updates your budget and your forecast automatically, and provides drill down and hyperlinking capability to every record that makes up every number. When it's this easy, you may even find yourself updating your forecast more often and being able to see more proactively if there's a problem you need to get ahead of.
While many contractors require their project managers to update the estimated cost at completion each month, very few have their project managers update month over month cash flow projections and then compare actual to expected expenses. This type of forecasting can highlight many potential issues if the actual expenses vary significantly from the expected, and performing this type of forecast can be accomplished more easily with construction software rather than Excel.
Proper forecasting will allow you to stay ahead of potential issues, ensure you make your fee, and provide more accurate reporting to the main office so your company can make more informed decisions.
Construction is a risky, low margin business, filled with talented people who love to build. When you leverage the power of modern construction management software, you can focus more on what you love about your job while enabling the success of everyone involved.
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