Construction projects often take months, or even years. With the initial bid being submitted months before the project even starts, it can be hard to anticipate changes in cost over the duration of a project. In fact, according to KPMG, only 31% of all construction projects came within 10% of the expected budget over the last 3 years.
There are a lot of unpredictable events that happen during a project. Owners might want to make changes to the design mid-build,affecting project scope. Or material delivery can be slow and prices can increase (especially today) seemingly at random. And there’s only so much a contractor can do to prevent bad weather from delaying a build. Whatever the reason, cost overruns on projects seem to be a common bond that general contractors share.
This common bond, however, also creates an opportunity for contractors to distance themselves from their competitors. Even with a high level of unpredictability, there are steps that general contractors can take to minimize the chance of cost overruns on their projects, especially when it comes to their team’s communication and productivity.
3 tips to help avoid cost overruns on your next project
1. Focus on communication with project owners
The most common reason for disputes always boils down to poor communication with project owners. One of the best ways to minimize cost overruns is to make sure lines of communication with the project owner are open and frequently used. Construction projects have hundreds, sometimes thousands of moving parts, and a single miscommunication between the owner and contractor can have a costly ripple effect by the time it reaches the workers on site.
It doesn’t even need to be a miscommunication. The length of time it takes for a change in design or scope to make its way to the team doing the work on site leaves plenty of opportunities for mistakes along the way, which leads to disputes and inevitable schedule delays.
While collaboration and communication has improved significantly with new technologies, that improvement has mostly been within an organization, and not necessarily with key stakeholders. According to KPMG, 82% of project owners feel they need more collaboration with their contractors. This disconnect has resulted in 69% of owners blaming underperforming projects on poor contractor performance.
As the contractor, it’s in your best interest to maintain strong communication with clients through the entire project lifecycle. This can include:
- Creating a clear chain of command – Document every project role, each stakeholder’s name and contact information, and each person’s responsibilities. Sharing this information with all stakeholders will help to ensure information is getting to the right people. This also provides transparency from the owner to the jobsite and will save everyone time in the long run.
- Creating consistent communications – By using a consistent method of communication between contractors, architects, and owners, you enable seamless collaboration and improve internal records of all changes to your projects. This also makes it easier to document all communication, which can be referenced to help clarify any confusion.
- Actively encouraging collaboration – No one likes working with someone looming over their shoulder, but effective communication is a two way street. One of the easiest ways to avoid costly delays is to include project owners in conversations throughout the project. Gathering their opinions along the way can help eliminate confusion in the long run, and help your team achieve better outcomes.
2. Make it a priority to better track your workforce
Schedule slippage can be deadly to a proposed project budget. According to Autodesk and Dodge Data and Analytics, 66% of general contractors are carrying added costs because of schedule slippage, pointing to a problem with their workforce planning.
Construction timelines are typically tight. The less time it takes to build, the less it costs (in theory). These tight timelines require project tasks and dependencies to be done on schedule. If you don’t know where your people are, or how long they’re going to be on a project, you can quickly lose control of your deliverables, resulting in delays that ultimately come out of your, the contractor’s, pocket.
Tools like Bridgit Bench can help contractors not only stay on top of their workforce allocations, they can also use project Gantt charts to better understand how their workforce allocations ramp up and down depending on which phase the project is in.
James McHugh Construction, a trailblazer in the construction industry, are currently using Bridgit Bench to track their workforce all the way from estimating to warranty. Take it from Ray Cisco, the VP of Operations at McHugh:
“I had someone at the head of HR say, ‘I never know where anybody is’ and it was so easy to say ’Hey, here you go. Now you can view it whenever you want, because now you know exactly where they’re at.’”
To read more of McHugh’s transition from spreadsheets to Bridgit Bench, read their success story here.
3. Become data oriented
Poor project data, mostly as a result of poor tracking, can quickly lead to cost overruns. A report by Autodesk and the Field Management Institute shows that 52% of rework is caused by poor project data.
A great way to get started is by collecting all the data that’s coming off of a jobsite and putting it into a centralized location. When it comes time to analyze project performance, you can study the data to better understand where things went wrong and start recognizing patterns so you can avoid them in the future.
Creating a centralized location for project and workforce data also helps to:
- Improve the integrity of your organization’s data and ensures it’s always up to date
- Streamline data analysis to help identify trends and repeat past successes
- Improve transparency for all stakeholders (including owners)
- Reference historical data to lessen the impact of project changes and delays
In addition to the benefits listed above, centralizing your project and workforce data also helps to improve collaborative efforts by creating a single source of truth that everyone can work from.