Considering the difficulties of the economy, the bottom line has become more important than ever. Every cost matters when it comes to saving money and delivering a quality product. Project estimates have to be ideal for the owner and the profit and supply costs have to be reasonable for the contractor.
But it’s easier said than done to appease both audiences with a competitive estimate that adequately captures all foreseeable costs. Here is a list of 10 items that, if executed effectively, could reduce the number of unexpected costs in a project and maintain the budget for contractor and owner alike.
1) Avoid Using Spreadsheets
Spreadsheets have become firmly engrained in business practices, just like PowerPoint. And, just like with PowerPoint, they aren’t the answer to effective business practices. Spreadsheets leave too much potential for mistakes between data input, formula, and simple human error.
Software applications do exist that eliminate the potential for errors. While it may be an added expense at the start, it will pay for itself by removing the grief and headache associated with data entry. If you find a process requires a spreadsheet, odds are there is a software application out there that does it better.
2) Hold to the Project Estimation Cost
When it comes to winning a project bid, the estimate can turn the tides of victory your way. But it is also the key to your success when the project begins. Once a contract is won, the contractor typically begins ordering all materials, equipment, and paperwork needed to see the job through. This is a recipe for failure as it can easily result in supply shortages and overages as well as job delays.
While you should avoid using spreadsheets, as mentioned before, you also shouldn’t rush the data entry process. Do it right the first time and it’ll pay off in the end.
3) Create a Process Checklist
The key to being thorough is to have a keen understanding of the steps involved in completing a process. Don’t leave everything in your head to be remembered at a later date, because odds are that you might forget something when the time comes. Create a checklist of items to go through prior to starting a job.
4) Know Where Everything is Stored
Data files have an annoying tendency to disappear after you save and close them. As a project owner, nothing is more frustrating than needing information and the contractor not knowing where it is being stored. While this problem seems simple and easily avoidable, it happens quite often for some reason.
Create an effective means of storing data that won’t keep owners waiting for data and you scrambling to find it. Whether this is simply a more organized folder hierarchy for data or a more comprehensive data storage solution, increase data availability and reduce disorganization.
5) Make Use of Historical Data for Forecasting
Once you’ve established effective data storage procedures, you’ll be able to access that data for years to come. When on a project several years from now, you’ll be able to look back on the data and increase the accuracy of project financials for future bids. Forecasting is an invaluable business practice as it enables businesses to gain insight into what factors on a project affect cost and schedule estimates.
6) Reflect Actual Costs & Changes in Estimations
Odds are that if you’ve used spreadsheets before, then you’ve likely fallen victim to the nightmare of project costs exceeding the original estimate. When an estimate is updated, that change should be reflected across the entire project.
Unfortunately, many contractors make the mistake of only updating estimates in one area. Make sure all changes are made in every part of a project so that when you reach the end of a schedule you aren’t suddenly in a financial bind.
7) Factor in Escalations and Inflation
Some projects can be completed in as little as a month, whereas others can take upwards of several years. When making project estimates, you must factor in inflation. How will costs change between the start of the project and the end? Depending on the material, this will vary drastically. But if you do your homework on such things, you won’t encounter any surprises when you’re well into a project.
8) Bring on the Right People
Jobs have to happen quickly; it’s a simple way of the world. And if there’s one thing that can put a project behind deadline quickly, that would be wasting time by performing sub-par work. Take the time to train your workers to do a job correctly and efficiently.
9) Embrace the Partnering Process
No project only ever has one way of doing it. How you approach a job is dependent on the resources you’re able to leverage. Building the right partnerships with subcontractors, owners, general contractors, and other external entities can make all the difference between project success and failure. Creating relationships means you’ll be able to ensure a higher quality of subcontractor work and products for the job. Resist the temptation to make partnerships about the best prices; instead, focus on who will do the best job.
10) Give the Right People the Right Roles
Workers will likely have spent countless years refining their skills to be good at certain tasks. Draw upon the experience and skills of your team members, partners, and workers as they will likely help you resolve issues quickly. The best projects are guided by exceptional teams that are willing to put individuals into roles suited to their skills.
Achieving the perfect estimate is no easy thing to master. Each of the suggestions above will merely help you work toward expecting the unexpected. How you adhere to each suggestion and integrate it into your company values will ultimately influence the success you’ll achieve.