In the construction industry, having a firm understanding of cost control strategies for contractors is crucial to delivering projects on time and within budget while keeping the firm profitable.
However, this goal can become challenging when considering threats such as labor shortages, rising materials costs, inability to get specific materials, and other unforeseen setbacks. These issues require a proactive approach to planning and executing projects, and the following eight tips offer some potential solutions.
1) Develop Comprehensive Project Plans
A thorough understanding of the project and its requirements will allow you to estimate costs, timing, personnel needs, and more appropriately. Working through and assembling a comprehensive project plan helps you anticipate and identify potential risks and work on mitigation and backup strategies.
As part of your project plan, design a strict change order process. Any changes to the original project plan can immediately impact costs, and usually not in a positive way. Change orders should require meticulous review before being approved.
2) Improve the Accuracy of Your Estimates
When it comes to cost control strategies for contractors, use whatever resources you can get, including software and other technology, to help you assemble accurate estimates for your projects. You must estimate the amount and type of labor, materials, permits, and necessary equipment to complete the project. Depending on the types of materials used, the project timeline, and the economy, you may also need to account for projected price increases.
The more effort and information you put into your estimate, the more likely you will remain within the project budget and wind up with a successful project and a happy client.
3) Prioritize Clear Communication
Miscommunications, lack of clarity, and not staying in touch with the project team and other stakeholders can cause you to discover problems after the fact. This issue can increase project costs, lead to disputes, and affect the customer's satisfaction or perception of your team's ability to complete the project effectively.
For these reasons, it is essential to maintain an open dialogue among your team, project management, subcontractors, and other stakeholders. The goal is to make it easy for employees and subcontractors to communicate via text, phone calls, or email to check in and report updates or concerns. This strategy can help align everyone's expectations and bring prompt attention to issues before they become more significant problems.
4) Implement Daily Monitoring and Reporting
Develop a working environment that includes daily updates and work reports from your team and subcontractors. With the right amount of detail, these reports can catch problems like potential cost overruns, project disruptions, and other issues in the early stages. Getting status reports daily gives you an early warning and the chance to address problems before they spiral out of control.
Daily project monitoring need not take much time or effort to add value. You can integrate a quick morning huddle and use standardized reports and photographs of each day's finished work. Daily site diaries or logs kept by site supervisors and standardized checklists make it easier to tick off completed activities and track progress. You can also designate one person as the safety officer, such as the site manager, to perform a daily worksite walk-through. They can verify safety protocols are followed while raising awareness of potential safety hazards.
5) Be Strategic with Scheduling
You can potentially reduce costs by developing timetables that plan out labor hours, equipment rental and other expenses over the life of the project. This method can help you incur costs only when needed. Optimizing how and when you use project resources can also reduce project downtime, keeping project phases running smoothly.
6) Formulate Your Plan B
Cost control is easier to manage during problematic situations if you have already thought through your contingency plans. Dealing with significant threats for construction companies, such as unforeseen setbacks, may incur more costs, but planning ahead may allow you to still keep within the overall project budget. This task falls under risk assessment and should be part of your early project-planning phase. Incorporating backup strategies can also keep the project moving and minimize costly delays.
7) Make Use of Technology
Many companies have developed construction management software packages with the types of features that can save time and money. They are typically geared toward cost control strategies for contractors since this is a common and ongoing issue due to the nature of the work.
Adopting this and other advanced technologies can streamline your work processes, reduce the amount of labor needed for specific administrative tasks, and improve real-time communication regarding the project status. Additionally, using software to manage all of the project data can increase the level of data accuracy and prevent calculation errors that could become costly.
Consider technology such as Building Information Modeling (BIM) if it fits your project needs. This techie tool helps while planning the project because it aids in visualizing the process and outcome. It can also improve collaboration between the contractor, subcontractors, and client. Other tech, such as drones and automatic data collection sensors onsite, can further enhance project planning and minimize errors to control costs.
8) Practice Continuous Improvement
Encourage your staff to obtain regular and continuous improvement in their skills and knowledge. This strategy benefits projects and reduces costs because team members will stay updated on the latest best practices for the industry. Ongoing staff training, education, and improvement can also enhance overall project efficiency and reduce the rate of errors.
While the effects on cost control may not seem as directly evident, with continuous learning and business process improvement, look for better cost control to come from:
- Waste reduction
- Improved forecasting and planning
- Enhanced productivity
- Fewer incidences of reworking
- Improved vendor relationships
- Proactive and better-informed problem-solving
- Improved safety
Control Costs With a Multi-Pronged Approach
In construction, mastering the complexities of cost control is not a choice; it's a necessity. The above strategies can contribute to an overall improved approach to managing planned costs and proactively minimizing unplanned expenditures.
Controlling costs also means using materials you can count on to deliver quality results consistently. For projects such as cement deck resurfacing that need to perform well over time as well as provide aesthetic appeal, choose Life Deck cement products. Your work product will shine, and your clients will thank you.