Cost Control is Crucial, but so is Project Management

By Bilal Mahmood,
Product Manager – BuildSoft; Constellation HomeBuilder Systems Corp.

While too few builders have appropriate measures and processes in place to track and manage the cost side of their business, too many of those who do put the appropriate measures in place, are focusing on just one of the two key operational dimensions of the building business.

All too often tract home builders put a 6-month building period, when planning for their project carrying costs - 4 months of construction and 2 months for weather and miscellaneous delays - and stop there, leaving all thought towards proactive timeline management aside.

Now imagine such a situation, only involving custom homes, where each house is completely different from any other house built before. Whether the builder pays a superintendent to worry about the details, or does the job him/herself, delays cost money. If the builder is in a unique cost-plus situation where even carrying costs are the home buyer’s responsibility, the builder’s reputation is still on the line. I sold more homes through referrals than I ever did to buyers who came in as a result of other marketing efforts. Our reputation and delivery was our greatest marketing tool.

Generally, builders ‘fire fight’ every morning, and rely daily on the schedules of subcontractors and vendors, rather than having suppliers working to the builder’s schedule. Although this is generally not true at the start of the project, it is a stark reality halfway through the project, despite the fact that the builder is the client. At this point in time, any subcontractors involved in multiple work stages (e.g. rough-in and finish), can start to dictate when they need to be paid for prior work done, before they will come to the site again. The added communication and administration burden only adds to the builder’s woes, making the job seem harder than it is.

Subcontractors, being piece workers, are paid per job rather than per hour. So once they start a job, they generally do not move to the next job until they finish the one they are on – going back to finish something left unfinished is generally not to their benefit. Why travel to the same job site twice, when you will get paid only once?

As a result, if the subcontractor shows up at the jobsite, ready for work, only to find that the vendor has not delivered the materials yet, or the trade for the previous work stage has not finished up yet, the builder will invariably lose the workers to another job site, and will not have them back on site till much after the site is ready for the trade. The builder has to wait in queue now.

Once the builder loses control of the timeline of one work stage, the related work stages all get affected, and from this point on it’s a vicious cycle of waiting on subcontractors and vendors every morning, and recalculating the ripple effects of each lost day – many builders find such recalculation to be too tedious to perform anyways.

As these time lapses aggregate, the project schedule slips by a lot more than had been originally budgeted for. The builder starts to not feel in control of the project, and may even blame the trades, when it is his/her fault for not having appropriate management systems in place.

There are several integrated solutions available to help solve these types of problems. I am very familiar with BuildSoft, so I will use it as an example. BuildSoft provides visual tools to build up your job schedule, and all the inter-relationships between work stages and tasks, allowing you to easily prepare the job schedule in advance, and provide initial timelines to suppliers and trades. Once the job starts, the project management component reminds you to send out Purchase Orders and Work Orders in advance, as well as send timely reminders for trades to show up when they are needed, and when the site is ready for them. When an invoice arrives, the accounting module’s integration with the project management system ensures that you never pay before the work is done. Most importantly, when a work stage slips out of synch with the original timeline, affected work stages are updated automatically, and trades and vendors can be informed immediately of schedule changes. The daily agenda of action items is pushed up to the user, allowing the builder to keep things flowing as per his schedule.

This allows for a forward-looking approach towards time management, allowing the builder to retain control of the project, and eventually the cash cycle of his/her business.

About the author:

In a prior career, Bilal Mahmood worked in a Marketing & Sales role, as well as in an Information Systems role for an International real estate developer’s Canadian Home Building operations. After bringing production and custom home projects to market at Best Homes Canada, and performing information systems implementations at their Canadian and Dubai operations, Bilal joined Constellation HomeBuilder Systems, a division of Constellation Software Inc., and the largest home construction software company. Bilal holds a Software Engineering degree and an MBA from the Schulich School of Business at York University in Toronto, ON.

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