Civil Construction Cost Management: Getting Back to Basics

CivilConstructionCostManagement:Getting BacktoBasics

Inthebestoftimesrunningacivilconstructionbusinessischallenging. AmongVaricon’scustomerswearehearingmore andmorethatcivilcontractorsareincreasinglyuncertainaboutthehealthoftheindustry–privateandgovernment contractorscuttingbudgets,morecontractorstenderingforlesswork,costsresignandmarginsbeingsqueezed.

Itisstillpossibletonotonlysurvive,buttothrive. Ourindustryiscyclical–thisisnottherstdowncycle,itwon’tbethe lastanditwon’tlastforever

Despiteshort-termchallenges,IBISWorldpredictsgrowthof2.5%forAustralia’scivilconstructionindustryforthenextve years.Itispossibleforcontractorstopositionthemselvesforlong-termsuccesswiththerightcostmanagementstrategies

Nowisthetimetogetbacktocostmanagementbasicsthatweshouldbedoinginbothgoodtimesandbadtimes. The differenceisthatisahotmarketit’seasiertogetawaywithwastefulpractices. Inthisarticlewewillsharesomesimple civilconstructioncostmanagementtipsthatcanhelpyoumaintainyourmarginsandgettotheothersidewithahealthy leanbusiness.

Tip1:Ensureyourbusinessstructurealignswithyourwork

Ifyouhavethewrongbusinessstructure,youwillstruggletobecompetitiveagainstothercontractorswiththeright structure. Typicallysmalljobsrequirelesssupportresources(loweroverheads),andlargerjobsrequiremoresupport resources(higheroverheads). Oftenthiswillbeamajorfactorinwhatopportunitiesyougoafter. Insomecasesyoumay needtodosomerestructuringtoensureyouhaveacompetitivecostbase,whilehavingtherightresourcesforeffective projectdelivery

AMcKinseystudyfoundthatcompanieswhosestructuresvaryaccordingtoprojectscalearemoreecientandprotable. Apropercoststructurehelpsensureyouremaincompetitive,particularlywhentenderingfornewprojects..

Constructiontenderingispredominantlydeterminedbasedonprice,soifitcostsyoumoretodeliverprojectsthanyour ouwillbeatadisadvantage.

Tip2:Playtoyourstrengths

Asthesayinggoes,“jackofalltrades,masterofnone”.

Ifthereisanichethatyourbusinessexcelsin,youcangetacompetitiveadvantagebyfocusinginit. Bymasteringa smallerniche,itispossibletogetveryecientanddrivedownyourcosts. Youmayalsobeabletodelivervaluetoyour customersotherthanlowestprice(eg,uniquesolution,shorterdeliverytime,etc)thatcanimproveyourtenderranking.

Tip3:Knowwhatyou’resigningupfor

Thedevilisinthedetails. Whenconsideringarequestfortender,ensureyoucheckthecontractterms. Ifthetermsare unfavourabletothecontractor,youroptionsaretomakeprovisioninyourpricing,declareanexclusioninyourproposal(it maynotbeaccepted)ordecidetonotrespond. Sometimethelattercanbethebestoption!

AhandynalcheckistouploadthetenderdocumentsintoChatGPTandaskittogiveyouanassessment. Note,donotrely onthisasyourprimarycheck–sometimesithallucinates!

Tip4:Ensureyouhavepropergovernancesystemsinplace

Intheabsenceofpropergovernancesystems,youarealmostcertainlyspendinginawastefulway. Youcaneasilyblow yourbudgetwithunnecessarypurchases,purchasesfrommoreexpensivesuppliersandovertimecosts.

Manyofourcustomersstartedwithuswithoutapurchaseordersysteminplace. Thisisasimplesafeguardforyouto ensurethat(a)thepurchaseisnecessaryintherstplace,(b)thebestpriceisobtainedand(c)itisapprovedatthe appropriatelevel. Thisprocessalonecanreduceyourcostssubstantiallywithminimaladditionaleffort.

Avoidableovertimecanhaveahugeimpactonyourprojectbudget. Havinganeffectivesysteminplacetominimise overtime,andensureanyovertimeworkedisproperlyimprovedwillsignicantlyreduceyourprojectcosts.

Tip5:Haveanorganisedsystemformanagingyourproject

Halfthebattleisbeforeprojectaward. Therestisinprojectexecution.

Havinganeffectivesystemforprojectdeliveryensuresthatyouaredeliveringinacosteffectivemanner,thatcostoverruns areidentiedearly,Variationsfromscopeareidentiedandclaimed,andthatrevenueslippageisavoided.

ThiscanbemanagedbywelldesignedExceltemplates,orusingadedicatedconstructioncostmanagementsolutionlike Varicon.

Ifyoudon’thavethetimetocreateasysteminExcel,oryouwouldbenetfromimplementingindustrybestpractice structure,getintouchwithustodiscussyourcostmanagementneeds!

StreamliningProcesseswithVariconatVictoria’sleading Sportsfieldbuilder:JoslynGroup

Asaleaderintheirindustry,JoslynGrouprecognisedtheneedtostreamlinetheircostmanagementprocessesand improvevisibilityintotheirindividualprojectcosts.Seekingasolutiontoenhancetheiroperations,JoslynGroup engagedVaricontoreducecostsandimprovevisibilityintotheirnancialperformance.

Author:JamesBaker

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