Keep Your Project Above Water — Proactively Manage Your Profit

Labor Costs ‘Creepage’ Can Sink You!

Projects can get under water quickly if you are not paying attention. Usually the main reason a project gets off track is because labor costs creep ahead of the current completion level of the project.data-backup-recovery

There are many causes for this; here are a few of the most common:

  • Estimates which omit something or are optimistic on unit costs
  • Change orders for extra work that is unbillable
  • Inefficient performance level of suppliers or other team members
  • Poor project management in the field

How to Stay Afloat

Once you have identified the reason for your profit starting to sink, you can make adjustments. Be sure to track these adjustments so (a) you know if your actions are effective, and (b) for historical value in future estimating.

So how do you determine what changes to make and why?

Well, it all begins with a project budget centered on the bid amount. Base your reporting workflow around analyzing current costs and progress of the project against the original schedule and cost estimates. Comparing original estimates vs. actuals, throughout the project, is critical.  Sage Estimating software can help you keep on top of things!

Truly understanding and quantifying costs and work performed allows better analysis and course adjustments as the project proceeds. Establish a commonality of language and standardized data between the field and accounting office, so all team members can be on the same page and there is defined accountability for accuracy.

Here are a few tasks that will help keep your head above water:

  • Generate daily reports on equipment and labor costs
  • Track project completion on a daily basis, and report it
  • Create a system to track committed job costs
  • Generate a job profitability report every month
  • Make a plan for adjustments, such as crew size, equipment, and schedules

You can plan all you want, but in the field, the plan usually changes at the drop of a hat. That is just the nature of construction projects. The key to management and profit control is to be able to make adjustments as changes come about. Assess efficiency, have critical team members tracking and communicating, and identify problems quickly to make adjustments.

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