Construction Biz Wiz

There is no magical, mythical way to produce a construction cost estimate that translates to a profitable project. It takes skill and practice… in fact, it demands best practices. Given the importance of cost effectiveness and performance in this economy, Estimating Today featured an article that focused on the “myths that specifically involve cost estimating and cost controls.”

One aspect the article explains is “the problem does not lie in the estimating methodologies, per se, but rather the improper application of the estimate.”

The article explains that the investment in good project practices is cost effective and worth the investment … either choosing to have an in-house capability to implement best practices or by employing an independent contractor. The article adds: “Estimate accuracy depends upon the level of engineering and project planning completed, as well as the method employed for developing the estimate.”

Of course, it can be argued that it all starts with the right bid … the right numbers to win the work and to make a profit. Antiquated methods of scale, paper, roller wheel, spreadsheets, etc. do not position estimators with appropriate tools to do their job effectively. Investing in a comprehensive yet easy-to-use takeoff and estimating software solution can avail your company with powerful resources to accomplish best practices in a timely and efficient manner.

If you’re wondering how to compare products and determine the features that are critical for your business, your processes, etc., then download this free article, “Choosing Construction Estimating Software That’s Worth Your Investment.”

To read the Estimating Today magazine article, “A New Approach for Communicating Cost Estimating Best Practices: Debunking the Common Myths,” authored by Stephen Bransfield, Ph.D., John Owoyemi, PMP, and Brian Fogarty of Booz Allen Hamilton (Washington, D.C.), in its entirety at the magazine’s web site, click here.

You’re probably familiar with the English proverb, “Measure twice, cut once.” You surely know how critical it is to measure something properly and accurately. But when it comes to business processes, do you do it? And how often? What metrics do you use? 

Today’s highly effective contractors are reviewing last year’s key performance indicators (KPIs) and establishing this year’s metrics. They’re identifying business processes that need to be corrected and developing ways to improve the way they work. Cost estimating is a process that always deserves fine-tuning. But do you know what needs fixing? And do you know when it’s fixed?

Maxwell Systems has teamed with Software Advice to develop a construction estimating benchmark report. The report will help you and your company identify your estimating weaknesses and strengths.

For example:

• Are you part of the 40% that over-estimate bids “most of the time?”
• Do you turn around bids in less than 5 days, the market average?*
• Are you in the minority still using pen and paper or Excel spreadsheets?
• Are you part of the elite 10% of companies that win 90% of the projects you bid on?*

See how you stack up against your competition by participating in our estimating benchmark survey. Visit http://software-advice.polldaddy.com/s/construction-estimating-benchmark-survey.

Participants can receive a free copy of the benchmark report to be published later this quarter.

“The ability to maintain your business’s standards is one of the best indicators of long-term success. Business owners can be under pressure to lower their standards for two main reasons: when conditions are abnormally bad or when they’re abnormally good.”

That’s the take on maintaining quality as presented in an article published by American Express OPEN Forum, an online community of business owners.

Business owners often lower the quality of their offerings if company’s revenues and profits are low, thinking that it’s a survival method and things will turn around. The opposite scenario draws the same owner reaction. If experiencing a flood of work and interest, owners don’t want to turn down business and opportunities for increased revenue, and so cut corners and lower quality standards to meet the demand.

Have you compromised quality? For example:

• Purchased subpar materials?
• Took shortcuts with methods, processes, plans?
• Lowered customer service by reducing personnel?
• Employed less experienced workers to cut costs on labor?

Maybe you saw a short-term boost to cash flow by lowering standards, but the long-term effect could damage or sink your business. Your customers will feel the impact of poor products and service. Plus you’re sending a message to your competitors, customers, and employees that you care less, choose not to compete, and can’t produce quality the way you used to. Compromising quality is a sure way to lose. Do not concede to the pressures to lower your standards, whether times are good or bad. Maintaining (or enhancing quality) is the way to succeed and stay competitive.  

To read the source article for this blog post, read this OPEN Form item, authored by Mike Periu.

Even during the tough construction market of recent years, Maxwell Systems continued to take its quality offering very seriously. The company has invested in developing an innovative solution from the ground up on Microsoft’s .NET and SQL technology; invested in resources to service and support customers with convenient and reliable tools and information; and made an investment in its development capacity to continue delivering product offerings and updates at an accelerated pace. All of these efforts are to solidify Maxwell Systems’ ability to best meet the needs of contractors and be the ideal technology partner to construction businesses across the industry’s sectors. To learn more about Maxwell Systems and how you can evaluate vendors to be your technology partner, you’re invited to download this free eBook: 7 Reasons for Partner Fit.

How have you demonstrated your company’s quality standards? Invested in software for business management? Demanded your material producers, subcontractors, and employees maintain certain standards on projects?

According to an article recently published in AGC’s Constructor magazine: “Contractors are taking more extensive measures to protect themselves from the risk of subcontractor and supplier defaults. As the construction industry continues to falter in a poor economy, an increasing number of subcontractors and suppliers are merging, defaulting or simply going under. Consequently, contractors are paying much closer attention to—and spending more money on—managing subcontractors.”

As the article explains, in many cases, the subcontractors are not to blame as they face scarce work available and slim profit margins, which cause overly eager subs to accept work that turns out to cost them money. And that’s a slippery slope toward default.

One expert reveals that in the case of subcontractor defaults and failures, the “ripple effect is typically 2.5 times the bond price” and emphasizes how important it is for contractors to have a plan in the case, explaining that “if the general contractor has to come in due to sub failure, there are expenses for things like materials, job scheduling and delays [that can’t be replaced] for as-is cost.”

Concerned general contractors use subcontractor default insurance and are enforcing stringent subcontractor prequalification criteria and a detailed review process, which may include audited financial statements for several years and strong balance sheets. More GCs are also scrutinizing subcontractors’ past performance and financial capacity for job completion. This due diligence often demands more time and overhead expense, but the article shares opinions of some construction executives who feel it’s surely worth the effort. 

Value of Software

Of course, many contractors are also investing in software to help ease the burden of managing subcontracts and minimize risk throughout the process. At Maxwell Systems we see contractors using the capabilities in our complete, all-in-one solution to streamline document workflow and more easily ensure subcontractors have liability, workers compensation, and correct bonding in force during jobs, as well as have an easy way to track and hold retainage.

And because the solution can be used to manage the entire project lifecycle, the benefits are experienced by the whole team. For example, the controller is able to ensure that invoices are applied to correct cost codes, that a contractor does not overbill, and that subcontractors are not paid if insurance, license, or bonding information is not up-to-date. Plus the project manager can easily know which subcontractors are assigned to which work, understand what the committed cost is on a phase of work, and efficiently track original contract versus revised scope of work for each subcontractor.

Download our free article, “All for One and One for All” and read more about how a complete software solution can help with managing subcontractors and minimize risk.

To read the Constructor magazine article, authored by Angelle Bergeron, in its entirety at AGC’s web site, click here.