Profit happens to be the mobile aspect of any business and it is likewise cross-functional.
Watch the costs and the profits will take care of themselves
Construction is an expensive business. Running a construction business is not cheap; It requires a significant capital investment. In construction, you possibly cannot cut corners because this mostly would mean spending more money in the long run. Did you know that eight out of ten projects experience cost overrun? As a construction manager, you are probably all too familiar with this reality. As a result, you are looking for any edge you can get when it comes to finding cost savings.
You have no doubt turned over a lot of stones to find ways to increase your bottom line, or at least avoid dipping into the red. But it is possible to look so hard for new savings ideas that you overlook some surprisingly simple actions that you can take to save money in a way that would not force you to compromise on project quality.
Now, how do we reduce operating costs? For the most part, rising material costs are out of your control. The only solution that construction companies have at their disposal is to find smarter ways to manage materials. By tightening the belt on construction waste and inefficiencies, construction managers can better balance the budget for materials. Here are some strategies to cut cost tremendously.
1. Participate in all stages of planning
OK, so you are not an engineer. That does not mean you should not be present for that stage of the construction planning process. Even if you do not understand every technical detail, you have insights into what is doable and what is not.
Do not forget: it is your project.
Construction managers should be involved at each stage for a project. Involvement is one of the most effective ways to save money, and one of the simplest. Poor planning is a sure way to ensure cost and time overruns.
2. Embrace Prefabrication
In order to operate more efficiently and reduce waste, construction companies should consider prefabrication. The use of traditionally sourced construction materials results in a lot of waste. When using a prefabricated component for building, there is no waste as the material is designed offsite by a separate company. Designs are carefully coordinated in advance so you only what is needed is purchased and used.
An added benefit of offsite building is that it also reduces the cost of labour for your company–further offsetting the rising material costs in construction. Generally, it costs far less to transport partial assemblies from a manufacturing company than to hire workers to move raw resources to a construction site. Lower labour costs can help you balance out escalating materials costs. Even as your company increases productivity on projects, the cost associated with labour decrease, thanks to prefabricated materials. More importantly, if you are experiencing a labour shortage, the use of prefab items reduces the need for more labour.
3. Plan with 3D/4D/5D/6D/7D/8D
BIM is the perfect combination of graphics technology and construction design. However, BIM goes a lot further than computer-aided design (CAD). With BIM technology you gain a more comprehensive visualization of construction projects at every stage in the process. This includes conceptual design, operation, construction logistics, etc. Every step involved with a design can be evaluated using BIM so you know exactly what the end result will be.
For example, with BIM if your customer wants to make a change to a design, the technology automatically updates the amount of materials needed for the redesign. With the right integration, this can also calculate the exact material costs in construction associated with the design change. This improves your ability to estimate exactly how much materials you need to complete a project. As with lean construction, this helps your company streamline the number of materials used in the construction. You can also use BIM to complement prefabrication to enhance both processes. Ultimately, with BIM less material waste saves you money, which is a win for construction companies.
4. Construction Field Management Software
Technology is everywhere these days including on the jobsites. Finding a way to daily reporting into your abilities to manage a project is a step in the right direction for your company. There seem to be thousands of varying construction field management software products on the market, so finding the best solution for your company can be challenging.
What you are looking for in software is a solution that works for all applicable parties including general contractors, design teams and property owners. Open access to all parties via cloud storage and sharing throughout the project is essential. For example, you want to choose Tracecost that lets everyone access shop drawings from the comfort of their home, office or even in the most remote jobsites. This connectivity is the goal of this type of software.
Other features you want your software to include is the ability to support a number of operating systems including Mac OS and Windows 8. That way everyone involved in the project will be able to utilize the benefits of the software. Furthermore, you want to keep things simple. If you go with a complex software solution, will your labourers and owners, who may not have the same experience as designers, be able to use the program? Probably not, which will reduce the usability of the software. Ensure you choose an option that is accessible and easy to use–for everyone on the team.
In regards to reducing material costs in construction, field management software keeps everyone on the same proverbial page. This ensures material waste can be reduced thanks to the ease of communication regarding projects in the completion process. If a construction project manager has a question about the size of a room or the type of materials used in a certain space, all they have to do is access the updated design plan via field software. If the architect and owner have made a last-minute change, this information will be readily available to the site manager.
Without coordination, rework happens all too often, and it is a huge waste of materials. Another potential benefit of construction field management software is the ability for your labourers to do more in less time. They are not wasting time on the site trying to find the answer to a question that can easily be answered with construction management software. More importantly, labourers are not spending time with rework due to mistakes or changes to a design that were not communicated. In turn, reduced labour costs also offset material costs in construction.
5. Figure out how much you’re worth
When should you hire a contractor, and when should you do the job yourself? It is a tricky question, and you can easily overspend on both sides. Finding the right balance comes down to determining just what is the value of your time.
Calculate the number of hours you work on a project in a given week, as well as how much revenue your work brings in each week. Divide that by hours worked, and you have a general idea of how much your time is worth per hour. If it is $50 per hour, you are better off hiring a contractor for $400 to do a job that would take you a couple days to finish.
6. Improve Office Staff Management Simple changes to office staff management can help significantly reduce costs. For example, cross-training your employees may lessen the need for temporary employees. Because of how expensive it is to bring on and train new hires, it may be cheaper to maintain permanent full-time or part-time workers for a set of tasks rather than use temps. Does your business have an off or slow season where you see significantly reduced project requests? Encouraging your administrative staff to take vacation time or reduced hours during these periods can also help you save on unnecessary on-site office expenses.
All construction companies incur costs to remain operational. However, to stay competitive, new ways of doing business have to be adopted, implemented, and promoted.
Cost reduction cannot be resolved with a set of tools or ideas, but with a holistic approach that addresses shortcomings in construction business practices. It involves considering each activity as part of a business system and not merely an isolated part that needs to be addressed. In doing this, steps are taken from early in the design phase to other far-reaching areas that affect the day-to-day operation of a construction business, project planning, execution, project delivery, and operation.
Tell us something you did that saved you a lot of money in our comments section?
We all learn through trial and error. Over the course of your career as a construction manager, you have likely ended up saving you money in a way you did not expect. Let us know about that experience, or share your other cost savings tips in the comments below.