How Much Money Is Your Construction Project Losing Today?

If you are managing a construction project, or are a construction business owner, there are many ways for you to lose money every hour, let alone every day. Construction projects are full of risks; they require careful coordination, and there are many physical assets that need to be tracked. If you want to minimize the money you could potentially lose on your construction project, these are three areas you should focus on:

 

1. Risk management sleepers

Risk is a big part of any construction project, so a lot of project management is risk management. When you use accurate estimates for your work breakdown structure, and when you build your schedule with careful consideration of almost limitless variables, you can eliminate the potential for many risks. For every risk that you mitigate or eliminate, your chances of losing money are low. But there are some more hidden risks in your project contracts that can often cost you money under the radar.

If the objective of your contract is to reduce all risks, this will result in unilateral contracts with your partners. This, in turn, will create conflicting relationships right from the beginning of your projects. Insisting on oppressive compensation, guarantee and payment arrangements will increase project costs and create contracts that may not be enforceable. One way to siphon money out of these tactics is through defensive project actions on parts of the parties that the contract is stacked against. Those on the unfair side of the contract will review any minor changes to the specifications for schedule changes, look for opportunities to use change orders and request reimbursement for delays.


When you avoid losing money by following good procurement procedures, managing the schedule and taking care of physical assets, you end up with other bonuses such as less stress and better project results.

Every little detail that is not accurate in the design documents will also become points of contention. All this adversity has not only direct costs, but also indirect costs. The time and resources to deal with the changes, claims and overhaul will quietly drain your wallet. It is far better to structure fair contracts and assign risks to those who are in the best position to manage it.

When it comes to managing your own risk, a neglected aspect of the contracts is the insurance on the property. When the project owner carries the property or risk cover builders, contractors and subcontractors should consider having their own installation float to cover damage to equipment and supplies from the moment where they acquire them until signed by the owner. This type of insurance cover allows you to be reimbursed for damage or loss of materials and equipment during your move, storage or installation.


2. Time of flight

There are countless ways for you to lose money every day because of a bad schedule. The sad thing is that you are often not aware of it until the project is finished and you look at the performance.

One of the main culprits is the incomplete breakdown of the workflow. This occurs in many ways. If the sequence of work misses the necessary steps for the tasks, not only will the activity itself be delayed, but all the successive activities that are based on its completion will also face delays.

Which is almost as bad as the missing tasks are hidden tasks. When a calendar shows that an activity needs four jobs when it needs six, planners probably did not accurately allocate resources and time. You will lose money in this case when the lack of resources delays the completion of the activity, or when the dependent activities are delayed or short of resources.

As pointed out by Bob Muir, PE, in his article "Additional Reading for CIEG 486-010 Construction Methods - Management," proactive schedule control is a must if you want to avoid multiple avenues of lost money. If a project manager, superintendent, or other people responsible for the project results are in responsive mode, then the events are behind the project. This leads to a schedule that is constantly changed and updated to account for chaos, which causes even the simplest things to have major effects on the project results.

Responsive projects will have lower productivity, compromised delivery, resource constraints, multiple and frequent range changes, and will be more vulnerable to climate change and site conditions.

 

3. Tools, Materials and Equipment More and more legs

The theft of tools, equipment and materials is a multi-million dollar problem for construction, according to a LoJack Corporation study. Equipment theft attracts a lot of attention because of the dollar amounts involved on a per-incident basis, but the overall losses of theft of smaller items like tools and materials are potentially even larger account given much of it is never reported or even represented.

Whenever you order materials because the original order has passed before the workers have completed the task, does not necessarily mean that you have a problem with the estimate. It is possible that you have a problem with the flight.

Lost and damaged equipment, tools and materials are a reality. You usually count for material waste when estimating, but you are not usually thinking of materials left unprotected in time, or stolen materials. You also do not consider stolen tools and equipment as you assemble your annual operating budget.

Any unexpected losses from theft or recklessness represent operating capital or profits that slip through your fingers. Loss control like these requires systems and processes that take into account tools, materials and equipment throughout their expected utility. It is also helpful to have regular reminders for people about the importance of protecting business assets to prevent theft and loss of other causes.

When you avoid losing money by following good procurement procedures, managing the schedule and taking care of physical assets, you end up with other bonuses such as less stress and better project results.

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