Low margins can literally exterminate a company. And margins are negatively affected each time one of your projects goes over budget. Either you take the hit to your profits, or you make a customer unhappy by passing along cost overruns to them – a consequence of which could be losing a customer you worked hard to acquire in the first place. Managing construction budgets is critical and a big challenge for nearly all construction companies. According to an April, 2021 Digital Builderarticle, the vast majority of construction projects end up over budget.
Following are four ways GCs can control construction costs to reduce the risk of busting the project budget.
- Identify overrun causes to avoid – The most common causes of project overruns and higher insurance premiums include:
- Errors in planning, estimating and setting budgets to begin with.
- Project design errors and deficiencies that require corrective work during construction.
- Change orders with new requirements, specifications or designs.
- Admin errors – invoicing, accounting and delivery monitoring – caused by lack of collaboration and being out of the loop on project progress.
- Poor construction site management, such as quality control and delays caused by lack of equipment maintenance.
- Choosing subcontractors that are not qualified.
Once you identify the causes of your cost overruns, you can take steps to correct them. The use of productivity software, for instance Autodesk Build, may be one answer.
What is connected construction? Find out in the latest free Applied Software eBook download, “The Importance of a Common Data Environment.”
- Upgrade from using spreadsheets – Although your company may have used the decades-old technology of spreadsheets forever to manage your project data, that is not your only option. Considering the duplication of effort, human errors from manual data input, as well as the fact that Excel is not a construction tool so much as it is a data manipulation tool, it’s safe to say it is no longer your best for construction cost accounting. You can replace the inefficiencies inherent in spreadsheet usage by switching to the mobile app of Autodesk Build. If you’re not sure you want to ditch Excel, following are considerations Autodesk suggests when deciding if Excel can handle the complexities of your projects:
- Your company has a lot of construction data (the more data you have, the more overwhelming it can be to handle in Excel).
- You want to control who can see and edit data (difficult with Excel).
- You need real-time field updates on your projects (not possible to track without saving multiple versions of an Excel file).
- You need your systems and software to share and analyze data (not seamless with Excel).
- Leverage technology to reduce risk – Major expenses on a construction project can result from defects, disputes, subcontractor default, property damage, contract non-compliance penalties, and accidents. These risks can be mitigated by using software tools found in Autodesk Construction Cloud (ACC).
- Use cost codes – Cost codes help you organize your costs by project, job and task. Standard industry codes (SIC), for example, have been widely used for decades. You can generate your own custom cost codes to suit individual project needs. Using cost codes, your company can account for every expense on a project – activities, employees, equipment, and tasks. The important thing to remember is that your codes need to be standardized, consistent, repeatable, scalable, and strategic. Thus, the costs they represent can be organized, measured and tracked.
Cost control is streamlined and efficient when you utilize the cloud and the construction-specific portfolio of products available in ACC. Built on a unified platform and using a common data environment, ACC helps connect teams and workflows during the entire building lifecycle.
Learn about the promise of connected construction in the latest free Applied Software eBook, “The Importance of a Common Data Environment.”