Construction Management: Understanding Cost Control - The ...

Cost control in construction is the process by which managers keep expenses under control by managing labor, material, and overhead costs to ... TheMotleyFool AboutTheBlueprint ReviewMethodology AdvertiserDisclosure Wemayreceivecompensationfromsomepartnersandadvertiserswhoseproductsappearhere.That’showwemakemoney.Compensationmayimpactwhereproductsareplacedonoursite,buteditorialopinions,scores,andreviewsareindependentfromtheadvertisingsideofTheBlueprintandourobjectivityisanintegralpartofwhoweare.Ourcommitmenttoyouiscompletehonesty:wewillneverallowadvertiserstoinfluenceouropinionofproductsthatappearonthissite. Enteryouremailaddress: Search OurTopPicks Accounting AccountEdgePro AccountEdgeProhasalltheaccountingfeaturesagrowingbusinessneeds,combiningthereliabilityofadesktopapplicationwiththeflexibilityofamobileappforthoseneedingon-the-goaccess. 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ConstructionManagement Thisguidewillhelpyoufindsomeofthebestconstructionsoftwareplatformsoutthere,andprovideeverythingyouneedtoknowaboutwhichsolutionsarebestsuitedforyourbusiness. BrowseAll SignupforTheBlueprint'sNewsletter Gettrustworthyadvicetohelpyourbusinessgrow. Enteryouremailaddress: Subscribe Therewasanerrorsigningup.Pleaseverifythattheemailisvalidandtryagain. Therewasaproblemconnecting.Pleasetryagain. Thankyouforsigningup.You’llbegettingourbestadvicesoon! Advice&Resources Alternatives Lookingforadifferentsetoffeaturesorlowerpricepoint?Checkoutthesealternativeoptionsforpopularsoftwaresolutions. Beginner'sGuides Ourcomprehensiveguidesserveasanintroductiontobasicconceptsthatyoucanincorporateintoyourlargerbusinessstrategy. BestOf We'vetested,evaluatedandcuratedthebestsoftwaresolutionsforyourspecificbusinessneeds. CaseStudies&Interviews Learnhowrealbusinessesarestayingrelevantandprofitable(andareevengrowing)inaworldthatfacesnewchallengeseveryday. Comparisons Tryingtodecidebetweentwopopularsoftwareoptions?Seehowyourchoicesperformwhenevaluatedside-by-side. HowTos Ourexpertstakeyouthroughstep-by-stepprocesses,providingtipsandtrickstohelpyouavoidcommonpitfallsalongtheway. News Learnhowthelatestnewsandinformationfromaroundtheworldcanimpactyouandyourbusiness. ProductReviews Unbiased,expertreviewsonthebestsoftwareandbankingproductsforyourbusiness. QuickAnswers Shortontime,highoncuriosity?Getclear,conciseanswerstocommonbusinessandsoftwarequestions. SoftwareFeatures Notsurehowtouseaparticulartoolinyoursoftwaresolution?Learnhowusingoursoftware-specificfeaturewalk-throughsandhowtos. BrowsebyTopic Lookingforthebesttips,tricks,andguidestohelpyouaccelerateyourbusiness?Useourresearchlibrarybelowtogetactionable,first-handadvice. Accounting Construction COVID-19 EmailMarketing FieldService HumanResources ITSecurity ITSM Marketing ProjectManagement RealEstate RemoteWork SmallBusiness WomeninBusiness Searchforsoftwareandbusinesstopics: AdvertiserDisclosure Wemayreceivecompensationfromsomepartnersandadvertiserswhoseproductsappearhere.That’showwemakemoney.Compensationmayimpactwhereproductsareplacedonoursite,buteditorialopinions,scores,andreviewsareindependentfromtheadvertisingsideofTheBlueprintandourobjectivityisanintegralpartofwhoweare.Ourcommitmenttoyouiscompletehonesty:wewillneverallowadvertiserstoinfluenceouropinionofproductsthatappearonthissite. UnderstandingCostControlintheConstructionIndustry Costcontrolinconstructionisthedifferencebetweenmakingaprofitandabsorbingalossinmanycases.Thisguidebreaksdownwhatcostcontrolisandhowtoimproveyourownprocesses. 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Updated September4,2020 SaveasPDF Constructionprojectsarenotoriousforexceedingtheirbudgets,butit'sstilleye-poppingtoseetheactualfigures.Arecentstudyfoundthatjust25%ofprojectscamewithin10%ofthebudgetintheprecedingthreeyears.Thatmeansthatthreeoutoffourprojectswillnotonlyexceedthebudget,butdosobydoubledigitsintermsofpercentage.That'spositivelydemoralizingforanyconstructionmanagerhopingtogettheircostsundercontrol.Yes,it'snoteasytomeetyourbudgetifyourunaconstructionfirm.Butit'snotimpossible.Withjustafewchangestoyourcostcontrolprocesses,youcanplaceyourselfinthat25%.Costcontrolisakeypartofconstructionmanagement—ifyoudon’tdoitright,yourprojectswillbeinconstantchaos.Here’swhatcostcontrolisallabout,andhowtodoitrightinyourconstructionfirm.Overview:Whatiscostcontrolinconstruction?Costcontrolinconstructionistheprocessbywhichmanagerskeepexpensesundercontrolbymanaginglabor,material,andoverheadcoststoensurethattheprojectfinishesonbudget.Costcontrolreliesonsoundestimatesandconstantmonitoringoverthecourseofaproject.Withoutcostcontrol,aprojectquicklyburnsthroughitsbudgetandleavestheconstructionfirmwithverylittleprofitorevenaloss.Asaresult,goodcostcontrolisamustforanyconstructionbusinessthatwantstobesuccessful.8methodsforconstructioncostcontrolIt’sOKifyouhaven’tmasteredcostcontrol—notmanypeopleintheconstructionindustryhave.It’sadifficultskill,andevenifyouaren’tperfectatit,youcantakesomeconcretestepsusingprovencostcontroltechniquesonyournextproject.Hereareeightcostcontrolmethodsthatwillhaveanimmediateimpact.1.ThoroughestimatesAllofthecostcontroltechniquesintheworldwillfailifyoudon'tdotheproperworkwhenplanningtheproject.Yourcostestimatesandcostcontrolbudgetplanningmustbethorough—youcannotrushthroughthisphaseoftheprojectandexpectnottopaydearlyforit.Lookthroughtotalexpendituresinpastprojectsandcomeupwithrealisticestimatesonlabor,materials,equipment,overhead,permits,andanyothercostsyou'realmostcertaintoencounter.Resisttheurgetobeoptimisticwhennoevidencesupportsit—it'smuchbettertohaveanunexpectedsavingsthantograpplewithanoverrunbudget.Quicktip:Don'tmakeestimatesinavacuum—getaquickgutcheckfromyourteam.Haveeachpersoninvolvedinyourprojecttakealookattheestimate.Theymayimmediatelyspotaproblemyoudidn'tnotice.2.StrongcommunicationThebetteryoucommunicatewithyourteam,andviceversa,themorelikelyyouaretostayonbudget.Ifyourteamunderstandswhattheyneedtodoandwhen,andyouprovidethemwiththeresourcestheyneedwhentheyneedthem,youcanavoidbustingthebudget.Andwithanopenlineofcommunication,youcancomeupwithwaystodealwithcostlycrisesastheyarise.Haveeveryoneusethesamecommunicationappontheirmobiledevicestoensurethateveryoneisonthesamepage.Quicktip:Designatesomeresponsibilitiestoyourcrewforcommunication.Forexample,stipulatethatyourworkerscommunicatewhattheyaccomplishedthatdaytotheforemanatacertaintimeeachday.Byensuringregularcommunicationaboutimportanttasks,youensurethatyouarekeptapprisedofanythingyouneedtoknowwhenitcomestocosts.3.DailyreportsandcontinuousupdatesAsacorollarytothat,haveyourteamprovideyouwithdailyreportsonwhatishappeningatthejobsiteandcontinuouslyupdatetheplan.Thatway,youcanspotcoststhatarestartingtogetoutofcontrolorpotentialdisruptionsintheconstructionschedule,givingyoutheopportunitytotakeactiontomitigatetheissue.Throughconstantmonitoring,youwillreducethechancesofnastysurpriseswhenitcomestimetoreviewyourbudgetattheendoftheproject.Quicktip:Ensurethedailyreportshaveenoughdetail.Manytimes,dailyreportsjusthaveabroaddescriptionoftheactivitiesoftheday.Theyneedtohavemoredetail,likespecificactions,equipmentusage,howmuchofanymaterialswereused,man-hoursexpended,andsoon.4.BackupplansIfsomethingdoeshappenthatthreatensyourbudget,likeabackhoebreakingdownorasubcontractorpullingoutoftheproject,youshouldhaveabackupplaninplace.Whileyou’redoingplanningfortheproject,spotpotentialriskssuchastheonesmentionedaboveanddrawupaplanthatspellsoutexactlywhatyouwilldotopreventanyfurthercostincreases.Forexample,youmighthaveanotherbackhoeonstandbyjustincase,oryoucouldfindanotherelectricianif,aftertalkingtoyourcurrentelectrician,shecan’tguaranteeheravailabilityoncertaindateswhenyoumightneedher.Quicktip:Consultwithyourteamonwhatthechiefriskstoyourprojectare.Chancesare,theyknowofpotentialproblemsthatyouaren'tawareof.Askthemforhelpindraftingthebackupplanaswell.5.TrustedsubcontractorsAsnotedabove,subcontractorsaren'tyouremployeesandthereforeareacommonsourceofdelaysandcostincreases.Theymaybeunavailablewhenyouneedthem,ortheymaynotcompleteworkuptoyourstandards,oryoumayrunintosimplecommunicationissues.Eitherway,youshouldhaveacadreoftrustedsubcontractorsthatyoucanturntoratherthanconstantlylookfornewonesatthelastminutewhenyouneedtheminthemiddleofaproject.Quicktip:Ratethesubcontractorsaftereachprojectandkeeptrackoftheirperformance.Bykeepingadatabaseofthesesubcontractors,youhavesomethingyoucancheckwhenpreparingforyournextproject.6.LimitedchangeordersChangeordersareoneofthebiggestcostdriversinconstruction.Generalcontractorsoftenhavetoconstantlymakecostlychangestotheprojectattherequestoftheclient.Bylimitingchangeordersinyourcontracttoemergenciesoryourownerrors,you'lllimitthedamagetoyourbottomline.Youmaysignificantlyslashcostsinfutureprojectsthroughthismethodalone.Quicktip:Alotofchangeorderscanbeeliminatedorminimizedbypreparingathoroughandclearstatementofwork.Coordinatecloselywithyourclientatthestartoftheprojecttomanageexpectationsasfaraschangeorders.7.Post-projectevaluationWhetheryoustayedonbudgetornot,youshouldconductapost-projectreviewofhowwellyoucontrolledcostsonceyouwrapupaproject.Gettogetherwithkeystakeholdersandgoovertheinitialbudgetcomparedtofinalexpenditures.Discusswhatwentrightandwhatdidn't,andwhatadjustmentsshouldbemadeonthenextproject.Quicktip:Takeadeepdiveintothedata.Generatemultiplereportsfromdifferentangles.Forexample,lookintostatsonchangeorders,equipmentusage,andlabor.Byexaminingeveryaspectofyourproject,you'llcomeupwithmorenuancedinsightslikelytohelpyouwithfutureprojects.8.ConstructionmanagementsoftwareCostcontrolinconstructionisbasicallyimpossiblewithsimplespreadsheets,unlessyou'reworkingonaverysmallproject.Otherwise,youneedconstructionmanagementsoftwaretomanagecosts.Andnotonlycanthissoftwarehelpyoukeepupwithfinances,itcanalsogenerateconstructiondailyreports,assistyouwithconstructionplanningandscheduling,streamlineconstructionworkflow,organizebidding,anddoahostofothertasksthatconstructionmanagersneed.Quicktip:Tryafewsoftwareoptionsoutfirstbeforeyousettleonone.Justbecauseaplatformishighlyrevieweddoesn’tmeanit’srightforyourbusiness.It’stimetooverhaulyourcostcontrolprocessConstructionprojectmanagementishardenoughwheneverythingisgoingright.Whenyourcostsareexplodingmidwaythroughaproject,thejobispositivelyoverwhelming.Ifyoufindthateveryprojectendswithcostsbeingwayhigherthanwhatyouplannedattheoutset,it’stimetodoacompleteoverhaulofyourconstructioncostmanagement.Gatherthedata,meetwithyourteam,andbrainstormwhyconstructionprojectcostskeepballooningandwhatyoucandotomanagethembetter.Doyouneedamorethoroughconstructiontimeline?Couldconstructioninprogressaccountinghelp?Aretherecoststhathappenineveryprojectthatyoukeepforgettingtoincludeintheplanningstage?Aretherecommonincidentsonthejobsitecausingcostincreasesyoucouldminimize?Theanswersareoutthere—you'vejustgottofindthem.Andonceyoudo,greaterprofitsareinstore. 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OurTopConstructionManagementSoftwarePartners Sage300 VisitSage300CRE Sage300Constructionispowerfulsoftwarethathandlesallaspectsofconstruction,butithassomesignificantdownsides.Thisreviewbreaksdownthesoftwareandhowtoknowifit’srightforyou. CoConstruct VisitCoConstruct CoConstructiseasy-to-useyetfeature-packedsoftwareforhomebuildersandremodelers.Thisreviewwillhelpyouunderstandwhatthesoftwaredoesandwhetherit’srightforyou. PlanGrid VisitPlanGrid PlanGridorganizesblueprints,drawings,andotherdocumentsandmakesiteasytomarkupandsharethemfromthecloud.Thisreviewwilltellyouwhatfeaturesitoffersandifit’srightforyou. Raken VisitRaken Rakenisprojecttrackinganddailyreportingsoftwareforconstructionmanagerswhowanttoeffectivelymonitorthejobsite.ThisreviewbreaksdownwhatRakendoesandwhowillbenefitfromit. TheTop25TaxDeductionsYourBusinessCanTake—And5YouCan’t Areyoupayingmoreintaxesthanyouneedto?Everydollarmakesadifference,andyoucansavemoreofthembytakingALLthetaxdeductionsavailabletoyourbusiness.Inthis12-pagereport,we'veoutlinedthetop25businesstaxdeductionsyoucouldbetaking(and5towatchoutfor)!Enteryouremailtogetthisfreereport,“TheTop25TaxDeductionsYourBusinessCanTake–And5YouCan’t.” Enteryouremailaddress: GetFreeReport Therewasanerrorsigningup.Pleaseverifythattheemailisvalidandtryagain. Therewasaproblemconnecting.Pleasetryagain. Easilysavethisreporttoyourcomputerorprintitatanytime. TheTop25BusinessTaxDeductions TheBestConstructionManagementSoftwareof2021 Thisguidewillhelpyoufindsomeofthebestconstructionsoftwareplatformsoutthere,andprovideeverythingyouneedtoknowaboutwhichsolutionsarebestsuitedforyourbusiness. Checkoutthebestreviews» ConstructionArticles WhatDoesaMechanicalContractorDo? Mechanicalcontractingincludestaskssuchasplumbing,electrical,andrefrigeration.Herewebreakdownamechanicalcontractor'srolesandresponsibilities. ByDPTaylor HowtoEstimateaConstructionProject Aconstructionprojectestimateisvitaltokeepingaprojectfromgoingoverbudget.Thisguideexplainshowtocreateanaccurateestimatefromthestart. ByDPTaylor ABeginner'sGuidetoConstructionChangeOrders Achangeorderrequestallowsyoutomodifyaconstructionproject,whichwillmostlikelyleadtodelaysandcostoverruns.Learnhowtosubmitachangeorder. ByDPTaylor SIGNUPFORTHEBLUEPRINT'SNEWSLETTER Gettrustworthyadvicetohelpyourbusinessgrow. Enteryouremailaddress: Subscribe Therewasanerrorsigningup.Pleaseverifythattheemailisvalidandtryagain. Therewasaproblemconnecting.Pleasetryagain. Thankyouforsubscribing!