Cost codes in the construction Industry: What are they and why are they important?

Being a contractor is no easy job. Between managing employees and keeping track of complicated tasks, staying organized on the job site can be difficult. One essential element of staying contained in construction is understanding cost codes – without them, construction projects can quickly devolve into chaos! In this blog post, we’ll explain precisely what cost codes are and how they might help you manage your next building project. Read on for all the need-to-know info about cost codes in the construction industry!

 

What are construction cost codes?

Construction cost codes are a system of categorizing the costs associated with construction projects. They provide an organized structure for tracking and managing expenses related to building materials, labor, equipment, overhead costs, and other related items. Cost codes are also known as CCS (cost control systems) or CPC’s (cost per code). By using these codes, project managers can easily track expenditures from start to finish and ensure that no item is unaccounted for in their budget. Additionally, contractors can use them to accurately bill clients for the work they have completed on the job site. With this categorization system in place, it becomes easier to identify areas where money could be saved or allocated more efficiently during a project’s lifetime.

 

Benefits of using construction cost codes

  1. Construction cost codes help to keep track of expenses during a project.
  2. They can be used to compare different projects and find areas of potential savings.
  3. Cost codes can help you negotiate better prices with suppliers.
  4. They can also help you manage your budget more effectively.
  5. In some cases, construction cost codes may even be required by law.

Cost codes provide an efficient and organized way to track project expenses as they occur, enabling businesses to identify areas of overspending or inefficiency quickly. This information is critical for companies seeking to increase profitability and ensure that projects remain within budget.

 

How do cost codes help identify profitability?

Cost codes are powerful tools for businesses to identify their most profitable activities. Organizations gain valuable insights into which activities generate the most significant returns on investment by assigning a cost code to each activity and tracking the associated costs. Cost coding also provides data about areas where profitability could be improved by making changes in processes or operations, allowing companies to make informed decisions about allocating resources and maximizing profits. With accurate cost coding data, businesses have the information they need to focus their efforts on projects that will yield maximum return on investment.

 

How do construction cost codes help identify overspending?

Construction cost codes are an invaluable tool for businesses seeking to identify and address overspending. By assigning a unique code to each activity related to a construction project, companies can track and analyze expenses associated with the project in great detail. This allows them to easily pinpoint areas where costs exceed budgeted amounts or have become excessive relative to other activities on the job site. With this data, they can take corrective action, such as reallocating resources or renegotiating contracts to reduce spending and maximize profits. Construction cost codes also provide valuable insights into how best to allocate resources so that projects stay within budget while still achieving desired outcomes.

 

How do cost codes enable real-time cost tracking?

Construction cost codes are an invaluable tool for businesses to track project costs in real-time. By assigning a unique code to each activity related to a construction project, companies can easily monitor expenses associated with the job and identify areas of overspending or inefficiency. With accurate cost coding data, they can make informed decisions about allocating resources and maximizing returns on investment. Additionally, construction cost codes provide valuable insights into ways that processes or operations could be improved, so projects stay within budget while still achieving desired outcomes. As such, construction cost codes enable organizations to keep their projects on track by providing them with up-to-date information about the actual costs of their activities at any given time.

 

How do construction cost codes help standardize data?

Construction cost codes are a powerful tool that helps standardize data used in the construction industry. By providing a standardized system of codes and numbers, those working in the field can quickly and accurately process vast amounts of information. These codes help to streamline operations by allowing organizations to easily categorize, organize, and track all costs associated with a construction project. They also support data analysis and reporting by providing an easier way to compare costs across multiple projects or within the same project over time. Additionally, these codes provide transparency into costs for contractors and clients alike, so everyone involved can make informed decisions about budgeting and scheduling. Having this “big picture” view of all related costs helps ensure that each project is completed on time and under budget. The use of construction cost coding is invaluable for any organization that wants to reduce waste while ensuring accuracy in their data collection process.

 

How many cost codes does a construction company need?

The exact number of cost codes a construction company needs depends on the size and complexity of their projects. Generally speaking, a large construction project requires up to 100 or more cost codes to accurately track expenses, while a less complex project may require as few as 5-10 codes. 

In most cases, contractors will start with a minimal number of cost codes and then add more as needed if they find that their tracking system is too limited. Contractors need to use distinct and accurate cost codes to maintain a clear overview of their financial situation and ensure that any losses are identified early before they become more serious. Furthermore, additional detail in cost accounts can make it easier for companies to identify areas where they could potentially increase efficiency or cut costs. 

Ultimately, by creating an effective system of cost coding that is tailored to their operations, contractors can maintain a better understanding of their overall financial performance throughout their projects.

 

How to design and implement an excellent cost-coding system?

Designing and implementing a good cost-coding system is essential for organizations that need to track and manage costs. The first step in developing a cost-coding system is to determine the purpose and objectives of the system. A well-designed coding system should allow for accurate cost tracing and capture data from multiple sources to provide valuable information about how costs are allocated across different areas of the organization. 

Once the purpose and objectives have been identified, it is important to define the characteristics of each cost code. This includes the category, item number, supplier name, location, contact person, or project name. Establishing clear rules for assigning new cost codes is essential so employees don’t set duplicate codes or create inconsistent character lengths. Additionally, it may be beneficial to add descriptions associated with each code to help employees better understand the purpose of each one. 

Cost codes should be kept as simple as possible while providing enough detail necessary for effective reporting. It is also important to consider other departmental requirements when setting up a coding structure. For instance, coding structures may need to comply with specific accounting regulations or industry standards if they will be used in financial statements or external reporting documents like tax returns. 

Not to mention, it is crucial that all stakeholders have an understanding of the cost coding system before it’s implemented so that everyone understands how it works and can provide feedback on any potential issues or improvements before launch. Furthermore, establishing proper training procedures can ensure that everyone knows how to use the cost-coding system properly; this could include providing detailed instructions on how codes are assigned and creating written policies outlining acceptable uses for various codes within specific contexts. Finally, once the cost-coding system has been implemented, ongoing review processes should be established to monitor usage rates and accuracy levels over time and make changes where necessary.

 

Construction cost code examples

Construction cost code examples aid the process of allocating costs and timeframes associated with construction projects. Cost codes are typically composed of a numerical designation and an accompanying description, which allows managers to quickly identify what the costs relate to. They can be used for labor, materials, equipment rentals, subcontractors, overhead costs, and taxes. 

When using cost coding systems, it is vital to keep a consistent structure across all project areas for easy tracking. A typical example would be assigning a series of four-digit codes that designate each specific area, such as labor (codes beginning with 1), materials (codes starting with 2), or equipment rental (codes beginning with 3). Using these codes can help streamline the budgeting process by creating visibility into where money is spent in relation to each activity within the project. It also helps prevent situations where different departments request funding multiple times for the same item or task. 

Additionally, when paired with software management tools such as enterprise resource planning (ERP) systems, cost codes create an additional layer of accountability by allowing teams to track expenses more efficiently. This added transparency helps facilitate decision-making processes while providing data-driven insights into areas that require further attention during construction projects.

 

Is there a standard construction cost codes list?

The answer is yes – while each company may have its unique system in place, many industry-standard lists can be used as a starting point. These lists provide definitions for each code and what they represent, making it easier for everyone involved to understand how much should be spent on certain materials or labor. One of the most popular standard construction cost code lists is provided by Construction Specification Institute (CSI) called MasterFormat. By having this framework in place, contractors can save time and money while minimizing errors when dealing with complex financial information.

 

Standard construction cost codes list

The list has been separated into these divisions:

00: Procurement and contracting requirements

01: General requirements

02: Existing conditions

03: Concrete

04: MasonryMetals

06: Woods, plastics, and composites

07: Thermal and moisture protection

08: Openings

09: Finishes

10: Specialties

11: Equipment

12: Furnishings

13: Special construction

14: Conveying equipment

21: Fire suppression

22: Plumbing

23: HVAC

25: Integrated automation

26: Electrical

27: Communications

28: Electronic safety and security

31: Earthwork

32: Exterior improvements

33: Utilities

34: Transportation

35: Waterways and marine construction

40: Process interconnections

41: Material processing and equipment handling

42: Process heating, cooling, and drying equipment

43: Process gas and liquid handling, purification, and storing equipment

44: Pollution control equipment

45: Industry-specific manufacturing equipment

46: Water and wastewater management

48: Electrical power generation

 

A brief history of MasterFormat

The MasterFormat is a system of construction cost codes used by the industry for over 50 years. It was initially developed in 1963 by the Construction Specifications Institute (CSI) and Construction Specifications Canada (CSC). The purpose of this system was to provide an organized structure for tracking and managing expenses related to building materials, labor, equipment, overhead costs, and other related items. Over the past five decades, it has become one of the most widely accepted standards in construction accounting. This system provides contractors with a comprehensive framework for categorizing their costs into specific categories depending on their type of work or project size. In addition to providing an efficient way to track expenses associated with projects from start to finish, it also helps improve communication between all parties involved in the project by providing explicit definitions for each cost code and what they represent. As such, MasterFormat continues to be widely used today as an essential tool for improving efficiency during any given construction project’s lifetime.

 

Conclusion 

Cost codes are an essential part of the construction industry, and they help to keep track of expenses and can be used to improve project management. While they may seem confusing at first, understanding how cost codes work is important for anyone in the construction industry. With a bit of practice, you’ll be able to master cost coding and use it to your advantage on future projects.

 

Manage cost codes better with Bauwise construction management software

Managing cost codes during construction projects can be complex and time-consuming without the right technology. Bauwise is the answer. Our software simplifies, automates, and streamlines tasks related to tracking and managing project cost codes — all within an accessible, easy-to-use suite of solutions. We strive to bring efficiency to every construction job site and ensure that costs are correctly tracked, no matter how big or small the project. With Bauwise’s construction cost code management solutions, you’ll never lose sight of your budgeting goals, no matter what changes the project faces along the way. So don’t delay – get started today with us on your construction cost code journey!

 

 

 

 

 

 

 

How can contractors manage costs more efficiently with Bauwise to survive in a falling construction market?

It’s no secret that the construction industry is facing challenges. Costs are rising, while at the same time, the market is becoming more competitive. To survive in such a challenging environment, contractors must be as efficient as possible with their costs.

Enter Bauwise – a project management tool that enables contractors to manage their costs better and improve their bottom line. With Bauwise, contractors can streamline operations and avoid many cost overruns plaguing construction projects. In this blog post, we’ll look at how Bauwise can help contractors manage their costs more efficiently and improve their chances of surviving in a falling construction market.

 

Table of Contents

  1. Real-time construction cost tracking
  2. Construction cost reports
  3. Committed and outstanding budget
  4. The real-time balance between budget and actuals
  5. Cash Flow management
  6. Construction time tracking abilities
  7. Precise change order management
  8. Automated cost forecasting
  9. Overview of project financial changes
  10. Identify possible budget overruns
  11. Conclusion

 

1.  Real-time construction cost tracking 

Real-time construction cost tracking is essential for contractors to stay on budget and remain competitive in today’s rapidly changing market. With Bauwise, contractors can track project costs in real-time to identify areas where excessive spending may occur. Not only does this allow contractors to make more informed decisions about their spending, but it also allows them to adjust their budgets as needed to ensure they stay within their allocated costs. By utilizing Bauwise, contractors can gain insight into every aspect of their project costs to reduce costs and increase profitability, leading them to further success.

 

2.  Construction cost reports

Another way that Bauwise helps contractors manage their costs more efficiently is by providing detailed cost reports. These reports allow contractors to get an accurate picture of where their money is going and how much is being spent on each project, which can help them identify any potential problems or areas for improvement. They provide insight into current and past expenses, enabling contractors to make more informed decisions regarding budgeting and financial planning. Additionally, the reporting capabilities of Bauwise allow contractors to keep track of their actual costs versus their budgeted costs, so they can ensure they’re not overspending.

 

3.  Committed and outstanding budget 

A clear and detailed overview of the committed and outstanding budget is essential for contractors to manage costs more efficiently in a falling construction market. This allows contractors to keep track of all the money they have already spent on a project and the amount they are still obligated to pay, which provides them with additional insight into their spending habits. Get an overview of such metrics as total project and labor expenses and specific breakdowns of costs by category. With this feature, contractors can be confident that they are staying within their budget and can make adjustments as needed to save money.

 

4.  The real-time balance between budget and actuals 

Using Bauwise, contractors can stay on top of their project’s financials in real-time. The platform provides a clear view of the budget and actual costs incurred for each project phase. This allows them to quickly identify discrepancies between the two and adjust as needed to help manage costs more efficiently. The balance between the budget and actuals is essential when surviving a falling construction market.

 

5.  Cash Flow management

Cash flow management is an important tool for contractors, as it helps them to ensure they have enough money to cover the costs of their projects. With construction cash flow management, contractors can track income and expenses in real-time, receive alerts when they are at risk of running out of funds, and stay on top of their budget. Such transparency and visibility of financial matters help them remain competitive and make more informed decisions when managing money.

 

6.  Construction time tracking abilities

Construction time tracking is essential for contractors to help them manage their projects more efficiently and stay on top of costs. With construction time tracking, contractors can easily keep track of the hours worked by their employees, subcontractors, and suppliers. This allows them to monitor labor costs and ensure that all resources are utilized effectively. Additionally, it helps contractors identify areas where they can save money or better use existing resources.

 

7.  Precise change order management

Construction change order management is an essential tool for contractors to help them manage their costs more efficiently. It helps ensure that any changes made during a project are documented and tracked correctly, which can prevent costly mistakes from occurring. Change orders also give contractors visibility into the financials of their projects, allowing them to stay on top of costs while ensuring they remain within budget. With construction change order management, contractors can better anticipate future expenses and plan accordingly in a falling construction market.

 

8.  Automated cost forecasting 

Automated construction cost forecasting with Bauwise is a powerful tool to help contractors remain competitive in a falling construction market. With automated cost forecasts, contractors can quickly and accurately predict future costs and plan for potential issues that may arise during their projects. This allows them to stay within their budget while still being able to make the most of their resources. Automated cost forecasting gives contractors visibility into future expenses so they can adjust their plans accordingly. By utilizing automated construction cost forecasting tools, contractors can ensure that they remain on track with their budgets and make more informed decisions when it comes to managing project costs.

 

9.  Overview of project financial changes 

Project managers have a huge advantage when managing costs efficiently with Bauwise. The platform provides project managers with real-time data on the budget and actuals for each phase of the project, giving them an up-to-date understanding of how the project is progressing. Additionally, they can use project forecasting and construction time tracking features to help manage costs more effectively. With these tools, they can quickly identify discrepancies between their budgets and actuals and adjust accordingly to ensure that all resources are utilized optimally. This gives them greater control over their projects’ financial progress.

 

10.  Identify possible budget overruns 

With Bauwise, contractors can quickly identify possible budget overruns before they happen. By using the platform’s real-time data on budgets and actuals for each project phase, contractors can quickly detect discrepancies between their predicted expenses and actual costs. Additionally, Bauwise’s cost forecasting and construction cost tracking features allow contractors to stay on top of changes in the budget and act accordingly. This helps them control costs, remain competitive in a falling construction market, and use their resources better.

 

Conclusion

In summary, Bauwise construction management software is a powerful tool to assist contractors in managing their costs more efficiently to survive the falling market. It provides valuable features such as real-time cost tracking, committed and outstanding budget, cash flow management, change order management, and project financial overviews. The automated cost forecasting function helps identify possible budget overruns so you can take corrective action before it’s too late. Bauwise also offers construction time tracking abilities that allow you to stay on top of progress for all projects you are working on. Combined, these features provide the trustworthiness needed for transparent proceedings between owner and contractor. Ultimately, this aids business success and sustainability amid challenging economic climates. With its comprehensive suite of productivity tools, Bauwise is the complete one-stop solution for any contractor looking for a pragmatic way to reduce costs and keep projects profitable. Take advantage of this powerful software and try out Bauwise construction management software today!

Everything to Know About a Construction Contract (2023 Official Guide)

Writing a construction contract is an important step in any building project. It’s essential to ensure that everyone involved knows their roles and responsibilities, as well as the timeline of completion. A written agreement helps prevent misunderstandings or conflicts by setting clear expectations for all parties. But how do you write such a contract? What should be included? And who should sign off on it?

These are all questions we will answer here today! We’ll provide insight into what exactly goes into writing a construction contract and offer tips for drafting one that best serves your needs.

 

Table of Contents

What is a Construction Contract?

Types of Construction Contracts

  1. Lump Sum Contracts
  2. Cost-Plus Contracts
  3. Unit Price Contracts
  4. Time and Materials
  5. Guaranteed Maximum Price

Why Do You Need a Construction Contract?

What Should Be Included in a Construction Contract?

How to Draft a Construction Contract?

Construction Contract Template

Who Should Sign the Construction Contract?

What Happens if There Is a Breach of Contract?

Frequently Asked Questions

  1. What is the difference between a contract and a proposal?
  2. What is the difference between a construction contract and a building contract?
  3. What is a subcontractor clause?
  4. What is the most important thing to remember when writing a contract?

The Secret Ingredient

 

What is a Construction Contract?

A construction contract sets out the scope of work, payment details, timeline, and important information related to the project.

The contract should include all relevant information, such as who will be responsible for what tasks during the project, how much each party will be paid for their services when payments are due, and any special requirements needed to complete the job. The contract should specify any warranties or guarantees that may apply to materials used in the construction process.

 

Types of Construction Contracts

Construction contracts are a vital part of any construction project. They define the scope of work, payment terms, and other important details that both parties must agree upon before work can begin. Several types of construction contracts are available to builders and developers, depending on their needs. Knowing the contracts available can help ensure your construction projects are completed on time and within budget.

 

1.    Lump Sum Contracts

A lump sum contract is a construction agreement in which the contractor agrees to complete all work for a fixed price. This means that no matter how much time or materials are needed, the contractor cannot ask for more money from the client. It also means that both parties must agree upon any changes made during the project before taking effect.

Lump sum contracts are often used when there is an exact scope of work and can be accurately estimated beforehand. This allows both parties to agree on a single price without worrying about additional costs. The contractor typically provides an itemized list of services, materials, and associated prices, so clients know what they’re paying for upfront.

 

Advantages

The main advantage of this type of contract is that it allows both parties to agree on an exact cost before any work begins. This helps eliminate potential disputes over costs later and reduces financial risk for both sides. It also provides predictability when budgeting, allowing contractors to plan their finances more accurately.

 

Disadvantages

One disadvantage of lump sum contracts is that they can be difficult to estimate correctly at the start due to unforeseen circumstances or problems that may arise during construction. Suppose changes need to be made during construction. In that case, these will likely incur additional costs, which could end up being higher than originally estimated by either party – resulting in disagreements over who should pay for them. Sometimes, a contractor underestimates their costs and loses money on a project because they have agreed upon a fixed price beforehand without considering any unexpected expenses or delays.

 

2.    Cost-Plus Contracts

Cost-plus contracts are construction contracts that reimburse costs incurred during the project and a set amount of profit. This type of contract is often used when there is uncertainty about the cost and scope of work to be completed. It gives both parties more flexibility in budgeting and planning for the project.

Under this type of agreement, contractors are paid based on their actual costs plus an agreed-upon percentage or fixed fee for overhead and profit. The contractor must provide detailed documentation showing all expenses associated with the job before they can receive payment from the owner. The owner also has some control over how much money is spent by setting limits on certain items, such as materials or labor hours.

 

Advantages

One advantage of Cost-Plus Contracts is that they give contractors more control over their budgeting since they are only required to pay for actual costs incurred during the project. These contracts can help protect against unexpected increases in material or labor costs by allowing contractors to pass on those extra charges directly to clients instead of having them eat into profits. It assures clients that projects will be completed within a certain timeframe without going over budget due to unforeseen circumstances.

 

Disadvantages

The main disadvantage associated with Cost-Plus Contracts is that there may be less incentive for contractors to keep costs down if they know they will receive an additional fee regardless. These contracts require extensive record-keeping for both parties involved (contractor and client) to ensure accuracy throughout the project, which could lead to delays or disputes if records are incomplete or inaccurate at any point in time. Finally, depending on how much money has been allocated towards overhead fees upfront, it could limit funds available later in case unexpected issues arise during construction resulting in higher-than-expected overall costs being passed onto clients at the completion stage.

 

3.    Unit Price Contracts

Unit Price Contracts are construction contracts used to determine the cost of materials and labor for a project. This type of contract sets out the unit price for each item or service, such as the cost per square foot of concrete or hour for electricians. The total cost is multiplied by the unit price by the quantity needed.

Unit Price Contracts can be beneficial in certain circumstances, particularly when there is uncertainty about how much material will be required or how long it will take to complete a job. They also provide flexibility, allowing changes to be made during construction without renegotiating an entire contract.

 

Advantages

One advantage of using unit price contracts is that they provide more flexibility than other types, such as lump sum contracts. With unit price contracts, builders can adjust their budget according to material price changes or labor costs without renegotiating the agreement. They also allow for easier tracking and monitoring since each item has its own cost. It makes identifying discrepancies between estimated and actual costs easier, which can help reduce waste and improve efficiency overall.

 

Disadvantages

While Unit Price Contracts have many benefits, they also come with some drawbacks. For example, suppose unforeseen conditions arise that require additional materials or services not included in the original agreement. In that case, extra costs may need to be negotiated after work has begun, which could lead to delays and increased expenses for both parties involved. These contracts often lack detailed specifications. There may be ambiguity around what exactly needs to be done which could result in misunderstandings leading to further issues between contractor and client.

 

4.    Time and Materials

Time and materials contracts are construction contracts based on the time it takes to complete a project and the materials’ cost. This type of contract allows for flexibility in budgeting and scheduling since no fixed price or timeline is associated with the project.

Under this agreement, contractors typically bill their clients separately for labor and material costs. Labor costs are usually calculated by multiplying an hourly rate by the hours worked. Materials are billed at their current market value plus applicable taxes or fees. The total cost is divided between labor and materials to determine each party’s share.

Subcontractors may also be involved in time and materials contracts if they provide specialized services that cannot be provided by the primary contractor alone. In these cases, subcontractors will typically charge their rates for labor and mark up prices for any necessary supplies or equipment needed to complete their portion of the work on the project.

 

Advantages

The main advantage of using Time and Materials contracts is that they allow contractors to accurately estimate costs based on actual time spent working on projects rather than making estimates based on the hours or materials needed. This can help reduce overall costs since contractors only pay for what they use instead of overestimating the resources needed, which could lead to overspending. This type of contract also gives clients more flexibility since changes can be made during work without needing approval from all parties involved for them to take effect.

 

Disadvantages

Time and materials contracts can have several disadvantages for the contractor and the client. One major disadvantage is that the client may face uncertainty regarding project costs and budgeting, as the contractor’s expenses and labor hours are not fixed and can change during the project. The contractor may face challenges in tracking and managing expenses and labor hours, which can be cumbersome. Furthermore, the lack of clear boundaries in terms of labor hours and expenses can lead to a lack of motivation for efficient work among the contractor’s laborers. The client may also risk cost overruns if the contractor cannot efficiently manage their labor hours.

 

5.    Guaranteed Maximum Price

A Guaranteed Maximum Price (GMP) is an agreement between the owner and contractor that sets a maximum price for the project, regardless of any additional costs incurred during its completion. The GMP also outlines how those costs will be shared between the two parties.

The guaranteed maximum price ensures that the builder will not exceed the budget and provides a reliable estimate of the total cost for a construction project.

 

Advantages

One of the primary advantages of a GMP contract is that it helps to reduce financial risk for both parties. The contractor agrees to complete the project within a certain price, and the owner knows how much they will pay for the completed work. This eliminates any surprises or unexpected costs that may arise during construction. Additionally, since all costs are known upfront, budgeting and planning become easier for both parties involved in the project.

Another advantage of GMP contracts is that they incentivize contractors to complete projects on time and under budget. Since contractors are guaranteed a set amount regardless of actual costs incurred, they have the incentive to find ways to save money while still delivering quality results on schedule. This can be beneficial not only financially but also in terms of customer satisfaction as well as long-term relationships between owners and contractors.

 

Disadvantages

It’s important to note that while GMPs provide some protection against unexpected costs, they do not cover everything. To avoid potential issues, it is essential to thoroughly review contracts before signing them off on behalf of either party involved. Contractors should ensure sufficient insurance coverage before beginning projects involving guaranteed maximum prices.

 

Why Do You Need a Construction Contract?

It serves as a legally binding agreement between the two parties involved in the project, outlining their roles and responsibilities, as well as any potential risks associated with it.

The primary purpose of a construction contract is to protect both parties from potential disputes or misunderstandings during the course of a project. The contract should clearly define each party’s rights and obligations, including who will be responsible for providing materials, labor costs, insurance coverage, payment schedules, and other details related to completing the job successfully. This helps avoid costly delays due to miscommunication or disagreements between contractors and clients over expectations or timelines.

An up-to-date written record of your contractual agreements provides peace of mind knowing you have legal protection if either side fails to fulfill their end of the bargain according to agreed-upon terms outlined in your contract documents. Without this important safeguard in place, you could find yourself facing costly litigation down the line, which could easily derail even your most successful projects before completion.

 

What Should Be Included in a Construction Contract?

It should include all relevant information about the project, such as the scope of work, timeline, payment details, insurance requirements, dispute resolution process, and other special provisions.

 

Scope of Work

This section should detail what type of work will be done on the project, including materials and labor required. The scope should also specify who is responsible for each task associated with the job.

 

Timeline

A timeline that states when certain tasks must be completed or payments are due should be included. This helps ensure that everyone involved in the project understands their obligations and can plan accordingly.

 

Payment Details

Payment details should clearly state how much money will need to be paid for each completion stage or at specific milestones throughout the project’s duration. This includes specifying if there are any additional fees or penalties for late payments or missed deadlines.

 

Insurance Requirements

All parties involved in a construction contract must have adequate insurance coverage to protect against potential risks associated with building projects, such as property damage or personal injury claims from workers onsite. Insurance requirements may vary depending on local laws, so checking these before signing any contracts is important.

 

Dispute Resolution Process

Disputes between contractors and clients can arise during construction projects, so it’s important to have an agreed-upon dispute resolution process outlined in your contract beforehand. This could involve mediation services provided by an independent third party or arbitration proceedings conducted through legal channels if necessary.

Special provisions can include anything not covered under standard clauses within your contract, such as indemnification agreements protecting one party from liability related to another’s actions during a job site visit. These provisions must also adhere to applicable construction contract laws to remain valid and enforceable.

A construction contract should include the following:

  • The project details.
  • The responsibilities and obligations of both parties.
  • Payment terms.
  • Any other relevant information.

Knowing how to draft a construction contract is essential for protecting all involved.

 

How to Draft a Construction Contract?

When drafting a construction contract, it’s important to be clear and concise. Start by outlining the project details, including the scope of work, timeline for completion, materials needed, payment terms, and any other pertinent information. Make sure that both parties are in agreement with all terms before signing.

 

Outline Party Responsibilities

Next, outline the responsibilities of each party involved in the project. This should include who is responsible for obtaining permits or inspections if necessary and who will provide labor and materials for the job. It’s also important to specify what happens if either party fails to fulfill their obligations under the contract.

 

Include Dispute Resolution and Liability Protection Provisions

Including dispute resolution and liability protection provisions will add security in case something goes wrong during or after construction is completed. This can help protect both parties from costly legal battles down the line should an issue arise related to performance or payment issues associated with a project gone awry.

 

Signature Page

Finally, you must create a signature page where all parties involved can sign off on the agreement once they have thoroughly read its contents and agree upon its terms without reservation or hesitation. Doing so helps ensure everyone understands their rights and obligations under this legally binding document before committing themselves fully to such an arrangement.

A construction contract is a legally binding document that outlines the responsibilities of all parties involved in a construction project. It’s important to draft an accurate and comprehensive contract to ensure everyone understands their roles and obligations.

 

Construction Contract Template

If you don’t feel comfortable writing out an entire custom-made contract from scratch, plenty of pre-made templates are available online, which can provide helpful guidance when creating one yourself. Many even come with instructions, making them easy to use immediately without having to do much research beforehand either. Remember that while these templates might save some time, they must be tailored specifically to fit your needs before being finalized and signed by both parties involved (which could require additional effort).

Bauwise offers the perfect solution for builders and developers. You can create, store, and manage all your contracts from one central location. Save hours of time and actively compare contracts with project budgets.

 

Who Should Sign the Construction Contract?

The parties involved in a construction project should sign the contract once they have agreed on all terms and conditions. Before signing, each party must read the document thoroughly to ensure everyone understands their obligations and rights. The primary parties who should sign the contract are:

 

  1. The Owner

This is typically an individual or company that has hired a contractor to complete work on their property. They will be responsible for providing payment to the contractor upon completion of the job and any other expenses, such as materials or subcontractors.

 

  1. The Contractor

This is usually an individual or company the owner has hired to perform specific tasks related to construction projects. They are responsible for completing all work according to specifications outlined in the contract and ensuring that all safety regulations are met during its execution.

 

  1. Subcontractors

Any subcontractors working on a project must also sign the contract with both parties mentioned above. These individuals or companies may be performing specialized tasks such as electrical wiring, plumbing installation, etc., so they must clearly understand their responsibilities before beginning site work.

 

  1. Witnesses/Notary Publics

Depending on local laws and regulations, witnesses may need to be present when signing contracts between two parties (especially if one cannot physically attend). In some cases, having a notary’s public witness signatures can help protect against potential legal disputes by verifying the identities of those involved in signing documents like this one.

Everyone involved in a construction project must sign off on its terms and conditions before starting any work. Failure to do so could lead to costly disputes later down the line, which could delay progress significantly and cost more money than expected initially.

Ensuring that all parties involved in the construction project are properly identified and agree to the contract terms before signing is important.

 

What Happens if There Is a Breach of Contract?

A breach of contract occurs when one party fails to fulfill its obligations as outlined in the agreement. This can be a minor infraction, such as failing to deliver materials on time, or a major violation, such as not paying for services rendered. In either case, all parties must understand what happens if there is a breach of contract and how they can protect themselves from potential legal action.

 

Determine the Consequences

The first step in determining the consequences of a breach of contract is to review the language used in the agreement. The terms should clearly outline any remedies available for non-performance or other breaches by either party. If this language does not exist, state law may guide how damages are determined and collected.

 

Monetary Damages May Be Awarded

In some cases, monetary damages may be awarded to compensate for losses suffered due to the breach of contract. These damages could include lost profits or additional costs incurred because of delays caused by the breaching party’s failure to perform their duties under the agreement. Additionally, punitive damages may be sought if it can be proven that willful misconduct occurred during negotiations or performance under the contract. Specific

 

Performance Required

Another remedy available for breach of contracts is specific performance – an order requiring one party to fulfill its contractual obligations despite having breached them previously. This type of relief typically applies when money cannot adequately compensate for losses suffered due to non-performance and serves as an incentive for both parties involved in future agreements involving similar circumstances and expectations regarding performance standards and timelines set forth within those agreements.

 

Canceling the Project

Rescission (or cancellation) is another option available when dealing with breaches of contracts; this allows both parties involved in an agreement to cancel out any rights granted under the said agreement without further obligation from either side once it has been determined that one side failed substantially to comply with its contractual duties or otherwise acted wrongfully against another contracting partner’s interests while performing under said agreement.

If a breach of contract occurs, both parties must take steps to remedy the situation. It is important to understand the consequences that may arise and how they can be resolved to avoid any future issues.

 

Frequently Asked Questions

 

  1. What is the difference between a contract and a proposal?

A contract is a legally binding agreement between two parties, while a proposal is an offer to agree. A contract typically includes details such as the terms and conditions, performance requirements, payment amounts, and other specifics related to the agreement. Contracts are often used in business transactions to protect both parties involved in the transaction from any potential risks or losses associated with it.

A proposal is an offer made by one party to another for consideration. It outlines specific details about what will be provided by one party in exchange for something else from the other party. A proposal can also include information on how much money will be exchanged and when payments should be made. Unlike contracts, proposals do not create legally binding obligations until they are accepted by both parties involved.

 

  1. What is the difference between a construction contract and a building contract?

Construction and building contracts are two types of agreements used in the construction industry. A construction contract is an agreement between a contractor and a client to build or remodel a structure, while a building contract is an agreement between two parties to sell or purchase real estate.

A construction contract outlines the details of the project, including materials, labor costs, timeline, payment terms, and other requirements related to the job. It also includes provisions for resolving disputes should they arise during work. Under this agreement, the contractor typically provides design consultation, material procurement, and installation services. Examples include residential homebuilding projects or commercial office buildings.

Building contracts involve buying or selling property rather than constructing it from scratch. These documents outline all aspects of the ownership transfer, such as title searches, financing options, and closing costs associated with purchasing real estate. They may also include clauses regarding maintenance responsibilities after the sale transaction, like who will pay for repairs if something breaks down in future years due to wear and tear on the property over time. Examples include land purchases for development purposes or existing homes sold by one party to another interested in owning them outright without any further modifications needed before occupancy begins (i.e. no renovation required).

 

  1. What is a subcontractor clause?

A subcontractor clause is a legal document that outlines the terms and conditions of a contract between two parties. It typically involves an agreement between a contractor (the party hiring the subcontractor) and the subcontractor (the party being hired). The clause outlines both parties’ responsibilities, including payment amounts, deadlines, the scope of work, insurance requirements, and other important details.

 

  1. What is the most important thing to remember when writing a contract?

When writing a contract, it is important to remember that the document should be clear and concise. All parties involved in the agreement must understand what they agree to and how any potential disputes will be handled. It is also essential to include all relevant information, such as payment terms, deadlines, and any other details that may affect the outcome of the agreement.

 

The Secret Ingredient

Now that you know how to write a construction contract, what do you need to continue to produce successful contracts and grow your business? Bauwise is the secret ingredient for thousands of builders and developers when it comes to successful construction management. With its comprehensive suite of features, Bauwise offers a powerful and easy-to-use platform for builders and developers nationwide.

Bauwise helps you manage all your construction contracts and track your financials in one place. You can easily manage budgets, project costs, labor expenses, and other related items. The software provides real-time analytics so that you can make informed decisions quickly, and it integrates seamlessly with different accounting systems.

Try Bauwise for free.

19 Best Practices To Improve Change Order Management in 2023

Change orders

You love them, you hate them.

But whether you’re a contractor, construction manager, project manager, or owner—you can’t avoid them. Change orders are simply a part of doing business in the construction industry.

While they may be inevitable, that doesn’t mean we must accept the status quo regarding managing change orders. In fact, there’s a lot we can do to improve change order management and increase efficiency throughout the process.

 

Table of Contents

What is a Change Order?

Why Should You Use A Change Order?

  1. Provide a Clear and Structured Process
  2. Control Scope Creep
  3. Avoid Disputes and Disagreements
  4. Maintain Trust and Confidence
  5. Keep Project On Track
  6. Provide A Legal Record

Best Practices For Change Order Management

  1. Set Proper Expectations With Clients
  2. Review All Plans
  3. Plan With Capital Partners
  4. Define What Is Not In The Contract
  5. Choose Familiar Tools
  6. Deploy Smaller Releases
  7. Ensure Sufficient Budget
  8. Document From the Beginning
  9. Be Simple and Straightforward
  10. Use Data-Driven Risk Assessment
  11. Set Communication Procedures
  12. Leverage Your Change Order Policy
  13. Don’t Procrastinate
  14. Treat ITIL As Guidelines, Not Hard-And-Fast Rules
  15. Prevent Changes At Contract Execution
  16. Plan For Change Throughout The Project Life Cycle
  17. Outline Rates, Overhead and Profit
  18. Review the Original and New Contract
  19. Resolve Quickly

 

What is a Change Order?

A change order is a document that outlines modifications to an existing contract or agreement between a project owner and contractor. These modifications can include additions or deletions to the scope of work, project schedule changes, or cost changes. Change orders are commonly used in the construction industry to account for unforeseen changes or circumstances not included in the original contract.

This document specifies the changes to the contract, along with any potential impacts on the project’s schedule or cost. It will also specify who is responsible for the additional work or cost associated with the change. The change order will be reviewed and approved by all parties involved in the project, including the owner, contractor, and any relevant subcontractors.

Once a change order is approved, it becomes a legally binding document that outlines the updated terms of the contract. This ensures that all parties involved in the project are aware of the changes and are in agreement about how they will be handled. Change orders are essential for managing construction projects and ensuring their timely and budget-conscious completion.

 

Why Should You Use A Change Order?

As a project manager, you are responsible for ensuring that your project is completed on time and within budget. However, even the best-laid plans can be disrupted by unforeseen challenges or changes in the project. In these situations, it is important to have a process in place for managing and documenting changes to the project. This is where a change order comes in.

 

1. Provide a Clear and Structured Process

One of the key benefits of using a change order is that it provides a clear and structured process for managing changes to the project. This can help ensure that any changes are made smoothly and efficiently without disrupting the project’s overall progress. To ensure that all team members are informed about any changes, project managers can establish clear communication protocols using change orders so that they can review and approve changes on time.

 

2. Control Scope Creep

Another benefit of using a change order is that it can help prevent scope creep. Scope creep refers to the gradual expansion of the scope of a project without a corresponding increase in resources or time. This can lead to delays, cost overruns, and other problems. By using a change order to manage and document changes to the project, project managers can help ensure that the scope of the project remains within the agreed-upon boundaries and avoid scope creep.

 

3. Avoid Disputes and Disagreements

Using a change order can help avoid disputes and disagreements between the parties involved in the project. If the scope of the project is not clearly defined, it can lead to misunderstandings and conflicting expectations. In order to avoid disputes and disagreements, project managers can use a change order to document and manage changes to a project.

 

4. Maintain Trust and Confidence

Maintaining confidence and trust among the project participants can be facilitated by the use of a change order. By providing clear and transparent communication about changes, project managers can demonstrate their commitment to transparency and open communication, which can help build trust and foster collaboration among team members. In addition, through the use of change orders, project managers can provide a clear and auditable record of all changes made to the project, which can help maintain trust and confidence among all parties involved.

 

5. Keep Project On Track

A change order helps keep a project on track by providing a clear and structured process for managing and documenting changes to the project. Using this method will allow any changes to be made smoothly and efficiently without hindering the overall progress of the project. Project managers can establish a clear timeline for reviewing and approving changes using a change order and set clear communication protocols to keep everyone in the loop.

 

6. Provide A Legal Record

The change order documents and outlines modifications to an existing contract or agreement between the project owner and contractor. Once approved, this document becomes a legally binding agreement, ensuring that all participants are in agreement about how the changes will be handled.

 

Best Practices For Change Order Management

 

1. Set Proper Expectations With Clients

Customers should be aware of the changes and their associated costs. Prompt billing is important to prevent any unexpected additional expenses for clients. Open communication between the business and customers can help ensure that all expectations are clearly communicated and understood before any changes are implemented.

Additionally, having a clear timeline for when changes will be completed can help set reasonable expectations with customers regarding when their projects will be completed. Regular check-ins with customers throughout the change order process can also ensure that all parties involved remain on the same page throughout the project.

 

2. Review All Plans

Whenever a process is being improved to be more effective, it is important to review all plans in order to anticipate potential issues. This allows the change order management process to better serve the customer, as any problems can be addressed in advance, avoiding costly delays down the line that could result from not doing sufficient due diligence.

The significance of reviewing the contract in relation to making the process more effective and owner-centric is that it allows both parties to be aware of their rights and expectations, thus avoiding any misunderstandings or unexpected expenses. By making sure all details are covered in the contract, both parties can be assured that the job will be done correctly and according to the agreed-upon terms. Reviewing contracts also ensures that any contractors hired have the necessary skills and equipment to complete their work properly.

 

3.    Plan With Capital Partners

One best practice for using a change order when working with capital partners is to involve these partners in the change order process. This means keeping them informed about any changes to the project and seeking their input and approval before making any modifications to the contract or agreement. This way, all project changes can be recorded clearly, which will help prevent disputes and protect all parties’ interests.

To ensure that all parties are aware of potential changes and their associated costs, contractors should plan for change orders at the beginning of a project.

Planning also helps reduce the risk of unexpected delays and costly overruns and establish a clear timeline for when approvals might be necessary. By taking these steps early in the process, contractors can stay better informed about their obligations under the contract and be better prepared for changes that may arise later.

 

4. Define What Is Not In The Contract

It is important to define what is not in the contract for change orders to clarify and avoid misunderstandings. This can help ensure that both parties have a clear understanding of the scope of the project and the expectations for the final product.

One of the key reasons why defining what is not in the contract is important is that it can help prevent scope creep. The process by which the scope of a project gradually expands without an accompanying increase in resources or time is known as scope creep. As a result, delays, cost overruns, and other problems can occur. It is important for project managers to define what is not included in the contract so that the project scope stays within the agreed-upon limits.

A contract that defines what is not included helps to avoid disputes between the parties because it explains what is not included. This can help prevent surprises during change order management, allowing owners to control their budgets and timelines better.

 

5. Choose Familiar Tools

When choosing familiar tools for a change order, select tools that are easy to use and understand. Providing all involved parties with this support or training can help ensure that all tools are used effectively and efficiently without requiring extensive training.

Make sure to choose tools that are compatible with the systems and processes already in place within the organization. This can help ensure that the change order process is integrated seamlessly into the overall project management workflow without causing disruptions or conflicts.

In addition, it is important to choose tools that provide robust and secure data management capabilities. This is critical for ensuring that all changes made to the project are accurately documented and securely stored and that the privacy and confidentiality of all parties involved in the project are protected.

 

6. Deploy Smaller Releases

It is generally considered best practice to deploy smaller releases for change orders in order to minimize risk and maximize flexibility. There are several reasons why this is important.

Smaller releases allow for more frequent feedback and iteration. By releasing smaller updates more frequently, project managers can gather feedback from users and stakeholders more quickly and make any necessary adjustments based on that feedback. Keeping the project on track and meeting the requirements of users can be ensured through this method.

Smaller releases allow for more granular testing and quality assurance. Project managers can test and verify each update more thoroughly, ensuring that any bugs or defects are caught and fixed before they can cause significant problems. Having this process can help ensure that the final product is high quality and meets users’ expectations.

Smaller releases allow for more flexibility and adaptability. This allows project managers to respond more quickly to changes in the project, such as changes in the scope, requirements, or resources. Even when unexpected challenges arise, this can help keep the project on track.

 

7. Ensure Sufficient Budget

It is important to ensure a sufficient budget when making the process more effective and owner-centric to maintain both the project and the organization’s financial stability. Without budget or contingency, additional funding from an equity source may be needed for any change orders that arise. It is essential to ensure that a sufficient budget is available in order to make the necessary changes requested.

In the absence of a sufficient budget, the changes may not be able to be completed, resulting in delays and other problems. Having a sufficient budget can accurately assess the costs associated with the change order, avoiding overspending and other problems.

 

8. Document From the Beginning

When documenting a change order from the beginning, it is important to establish clear and consistent formatting and terminology. This can help ensure that all change orders are easy to read and understand and provide a clear and concise overview of the proposed changes.

Be sure to include detailed information about the scope of the changes, the reasons for the changes, and the expected impact of the changes on the project. By doing so, all parties involved in the project will be fully informed about the changes and can make informed decisions about whether to approve the change order.

At the beginning of the change order, it is important to provide a clear and concise summary of the changes. This can provide a quick overview of the proposed changes and help ensure that all parties involved in the project have a clear understanding of the proposed changes.

 

9. Be Simple and Straightforward

Change management is an important process for any organization as it helps to reduce incidents, minimize disruptions, and ensure that changes are made in a coordinated and effective manner. It provides a central point of truth and allows teams to automate processes so they can operate more quickly and efficiently. Change management also helps organizations evaluate the impact of changes before they are implemented, maintain data integrity during changes, track the progress of changes, communicate with stakeholders about the implementation of those changes, and contribute to the safety and success of operations. As such, change management is integral to any organization’s overall continuous improvement strategy.

 

10. Use Data-Driven Risk Assessment

Data-driven risk assessment is a systematic approach to identifying, assessing, and managing the risks associated with change management. It involves the use of data to assess potential risks associated with changes and then making decisions on how rigorous the approval process should be based on that risk assessment. Data-driven risk assessment can help organizations make informed decisions that are in line with their culture, risk tolerance, and regulatory requirements. With data-driven risk assessment, organizations can establish standard changes that can be automated and monitor performance over time in order to gain insights into how well their change management processes are working.

 

11. Set Communication Procedures

When setting communication procedures for change orders, consider establishing clear and consistent channels for communication between all parties involved in the project. Any changes to the project can be communicated to all team members in this way, allowing them to give feedback and input.

Another best practice is to establish a timeline for reviewing and approving change orders. The project’s overall progress can be maintained without interruption by making any necessary changes smoothly and efficiently. By establishing this timeline, project managers can make sure that all project participants are on the same page and that the project stays on track.

It is important to establish clear and concise communication protocols for sharing information about the changes with all parties involved in the project. As a result, all team members will be fully informed about the proposed changes and will be able to provide feedback and input.

 

12. Leverage Your Change Order Policy

A change order policy is a document that outlines the changes to be made to a contract. It helps set clear expectations with subcontractors and is important for ensuring effective change orders. A standardized template should be used and included in the contract language to help ensure that all parties understand their roles and responsibilities when it comes to changes. Additionally, communications surrounding change orders must be planned in advance, so workers are aware of any updates or alterations. Leveraging these best practices helps ensure that negotiations are handled effectively and allows owners to have more control over their projects by creating better contracts at the outset rather than relying on remedial measures later down the line.

 

13. Don’t Procrastinate

It is important not to procrastinate when trying to make a process more effective and owner-centric because delays in submitting a change order request (COR) can lead to high costs and angry owners. Submitting CORs during optimal times, such as peak work hours, gives the recipient more of an opportunity to read the request promptly, which can help minimize potential delays or misunderstandings. Project owners can avoid unpleasant surprises and costly delays by planning ahead and submitting CORs in a timely manner.

 

14. Treat ITIL As Guidelines, Not Hard-And-Fast Rules

To treat ITIL (information technology infrastructure library) as guidelines rather than hard-and-fast rules for change orders in construction, project managers should first understand the principles and best practices outlined in the ITIL framework. These principles and best practices can provide a foundation for managing change orders in construction, but they should not be viewed as strict rules that must be followed without deviation.

Instead, project managers should consider how the principles and best practices outlined in ITIL can be adapted and applied to their construction project’s specific needs and challenges. This may involve tailoring the change management process to fit the project’s unique requirements or developing custom tools and processes to support change management.

Additionally, project managers should encourage collaboration and input from all relevant stakeholders, including the project owner, the contractor, and other team members. This can help ensure that the change management process is tailored to the needs of the project and that all parties are aligned and in agreement about the changes being made.

 

15. Prevent Changes At Contract Execution

It is important to prevent changes at contract execution in order to minimize the chances of unforeseen consequences. Changes can lead to unexpected costs and delays, which can have a detrimental effect on the outcome of the project. Additionally, changes made after contract execution can lead to disputes between stakeholders and create additional hurdles that must be overcome in order for the project to be completed successfully. By preventing any modifications before signing a contract, all parties involved will have an understanding of what is included in the agreement and avoid potential disagreements or misunderstandings down the line.

 

16. Plan For Change Throughout The Project Life Cycle

It is important to plan for change throughout the project life cycle in order to minimize disruption and maximize efficiency. Change is inevitable in the construction industry, and having a clear plan for managing changes and communicating expectations with all stakeholders early on can help avoid disputes. Since change orders can have an immediate and long-term impact on the timeline, budget, and overall success of the project, it is important to plan for them throughout the project lifecycle.

 

17.Outline Rates, Overhead and Profit

It is important for the contractor to outline their hourly rates, overhead and profit in the contract in order to provide transparency about what costs will be incurred for change orders and how much profit will be made. This helps the client understand how much each change order will cost them and gives them a clear picture of what is expected from both parties throughout the project. Establishing these details beforehand also aids in trust between the owner and contractor; if there is a history of delay on the project, having clear expectations outlined up-front can help set realistic goals for completion dates.

 

18. Review the Original and New Contract

Owners should familiarize themselves with the original contract before making any changes to ensure that all modifications comply with existing agreements. A clause allowing for revisions to the scope of work and pricing should be included in all construction contracts, known as a “changes in the work” clause. In addition, all custom contracts should include a strict policy stating that only written change orders will be binding and that no oral modifications will be effective.

All change order requests must be initiated by one party and proceed through stages such as a proposal, written change order, and finally, contractor execution of changed work if accepted by both parties involved. If changes are not reduced to writing, they can still be legally binding on the parties involved according to their own contractual procedures or verbal agreements outside those particular procedures if accepted by both parties involved.

Having written, signed change orders is essential for avoiding disputes over changes made between the two parties later on. This makes it easier to track all changes made during construction projects more effectively while also keeping owners informed of any costs associated with modifications accepted during this process. In addition, written change orders help ensure that owners are aware of the services they are receiving every step of the way, in compliance with the original terms agreed upon by both parties.

 

19. Resolve Quickly

It is important to resolve change orders quickly in the construction industry for several reasons.

First, change orders can have an impact on the timeline of a project. If a change order is not resolved quickly, it can cause delays, leading to increased costs and potentially even project failure. By resolving change orders quickly, project managers can help keep the project on track and avoid costly delays.

Second, change orders can also have an impact on a budget of a project. It is possible to incur additional costs or even cost overruns if a change order is not resolved quickly. Project managers can help control costs and avoid budget overruns by resolving change orders quickly.

Third, change orders can also affect the quality of the project. In the absence of a quick resolution to change order, misunderstandings and miscommunications can lead to errors or deficiencies in the final product. A project manager can help ensure a high standard of quality by resolving change orders as quickly as possible.

Resolving change orders quickly is critical for the success of a construction project. By addressing changes promptly and efficiently, project managers can help keep the project on track, control costs, and ensure high-quality results.

 

Taking The Next Step

A successful change order management process is essential for ensuring that your construction projects run smoothly. Following these guidelines will improve communication between all involved parties and ensure that changes go as planned. If you’re looking to make a significant impact on your construction projects, check out Bauwise, the leader in construction management software. Whether you are managing change orders, forecasts, expenses or invoices, Bauwise can help keep your financials under control. Contact us today to see how your company can benefit.

10 Strategies to Manage Multiple Construction Projects Effectively

Managing multiple construction projects requires several strategic decisions. In this write-up, we have disclosed ten strategies that project managers and contractors can use to achieve this endeavor with superlative success.

If you are a novice project manager or contractor, you might have been tempted to take on multiple projects at some point. And why shouldn’t you? The global construction industry is expected to reach 14.4 trillion in 2030, and when you have the option to be a part of this growing sector, there is no doubt that you should milk the cow right now.

But do you know what is the prime challenge that contractors (or project managers) face when committing to multiple projects? It is to manage, strategize and constantly track these multiple construction projects effectively and efficiently.

Merely pocketing multiple projects is not enough; you also need to ensure that all the projects are carried out with perfection.

 

Why? Because your reputation and future business depend on it!

Once you have been contractually bound by multiple construction projects, there is no backing off. You are in the kitchen sink now.

However, managing multiple construction projects shouldn’t be challenging when you have the right guidance. In this write-up, we shall touch base on various strategies to help you effectively manage multiple construction projects.

 

Table of Contents

Strategies That Will Help You Manage Multiple Construction Projects Effectively

1. Make use of technology wherever possible

2. Focus on financial management

3. Manage compliance and safety concerns

4. Centralize all constructions projects

5. Delegate as much as you can

6. Plan, organize, and prioritize

7. Have a bird’s eye view of all projects

8. Communication with subcontractors

9. Carefully scrutinize resource requirement

10. Be honest and open

Why Do People Fail at Managing Multiple Projects?

Points to Remember When Managing Multiple Construction Projects

 

Strategies That Will Help You Manage Multiple Construction Projects Effectively

10 Strategies to Manage Multiple Construction Projects Effectively.

Image source

From workforce management to cost allocation and from using the right construction management software to risk management, various things must be planned properly. Use the below-mentioned strategies if you want to know how to manage multiple construction projects effectively:

 

1. Make use of technology wherever possible

Technology has facilitated a tremendous shift in the landscape of the construction industry. You might have come across various software programs or mobile applications that can manage many facets of the construction and construction sector.

If you feel that some errands are being handled ineffectively, feel free to seek assistance from technology. When it is used correctly, technology may make it possible to have a construction environment that is more precise, streamlined, and collaborative. Most significantly, the technology available today may provide you with a solution to manage your construction company that is both efficient and economical.

 

How technology can assist in multiple construction projects

Working on many construction projects at once may cause complications. However, with the correct software and tools, tasks like scheduling, managing, and tracking can be accomplished easily. Using these technologies will make it simpler for you to manage several construction projects:

a)     Time management software

In managing various projects, software for time management plays an important role. Billing is simplified when it is known when and where the staff was and what cost code they were working on. This information may also be utilized in combination with daily reports to understand better what took place on a project site. You may also use it to monitor the project’s progress and determine whether it is within its allotted budget and time frame.

b)     Project management software

Using software designed specifically for project management is an excellent method to improve one’s ability to handle several projects. In contrast to the traditional procedures for managing projects, project management software will save all the information in a single place.

Therefore, all correspondence, daily reports, requests for information, change orders, time cards, resources, drawings or designs, etc., are stored in the same place. Project managers need instant access to such records to ascertain the current state and manage all projects simultaneously.

c)     Mobile technology

The use of mobile technology in construction management is quite helpful, particularly in situations in which there are many projects. The use of mobile technology makes it simpler for workers in the field to stay linked to the office, which ultimately increases the visibility of the project. Because of the increased visibility, managing many projects has become much simpler.

It is much simpler for project managers to track what is happening on every site and where the workers and equipment are located. The office can more easily enhance scheduling when they have access to this information that is readily accessible.

 

2. Focus on financial management

You may be responsible for obtaining money, handling bids, and project budgets during the finance stages. Your obligations in determining whether or not the project will be profitable are constantly shifting while it is in progress. The project managers or contractors may even be forced to provide investors with monthly or quarterly updates on the project’s status.

The financial data for construction projects are normally stored in spreadsheets. However, this makes construction project planning and financial monitoring difficult. Construction management software simplifies the process by removing the difficulty of drawing actionable insights from financial data. This is accomplished by arranging significant information about each project into understandable and shareable interfaces.

The construction financial management software gives you the ability to:

  • Examine and keep track of bids coming from a variety of places.
  • Make an estimate of the expenses of construction for each of your projects.
  • Reports that are up-to-date and highly graphic should be shared with important stakeholders.

Such software offers the necessary supervision for each stage of the construction project that you are working on. Because unplanned expenses and alterations made at the eleventh hour may significantly affect construction budgets, you must have access to the real-time information you want to maintain your current trajectory.

 

3. Manage compliance and safety concerns

Once construction has commenced on the project, the risk level rises. When employees arrive at a construction site, health and safety immediately become top priorities.

Streamlining compliance and safety management is necessary to raise responsibility and reduce risk. Project stakeholders need access to real-time safety information to prevent financial and personally devastating errors.

When you manage a construction company, it might seem overwhelming to monitor each project’s compliance and safety requirements. Communicating with many of the project’s subcontractors is necessary to collect information from the inspections, walkthroughs, and incident reports.

The information relevant to each construction project is compiled into a single dashboard using software designed for project management. Forms, checklists, and compliance reports may be shared with particular groups of team members, enabling you to monitor completion in a single spot. This sharing feature also enables you to collaborate more effectively.

The project managers will also be able to send needed papers directly to the mobile devices of the team members who are out in the field if the relevant forms are centralized. Construction project management software facilitates monitoring, making everyone responsible for their actions every time. You no longer necessary to track down subcontractors to have them complete or deliver a form.

 

4. Centralize all constructions projects

Centralization can be immensely helpful when managing multiple construction projects.

Putting your desk in a central location means:

  • Consolidating your project data into a single location.
  • Bringing together all of your team members to work on the same platform.
  • Identifying a specific route of communication.
  • The process of integrating your tools and applications.
  • Centralized administration of all of your initiatives.

When you can manage all of your projects in a single location, you can do the following:

  • Find deadlines that disagree with one another and prevent resources from duplicating by visualizing your projects together on the same platform. This will make it much easier to see deadlines that conflict with one another and avoid duplicating resources.
  • Define your priorities more precisely: If you have a solid knowledge of the bigger picture, defining your priorities will be much simpler.
  • Get rid of the overwhelming amount of information you have by managing your data in a single repository, which will simplify the project management process.

How can you bring everything to your workstation together?

  • Invest in a dependable operating system for work.

Choosing the correct platform might make it much easier for you to coordinate the many aspects of project management.

 

5. Delegate as much as you can

When you have multiple projects to manage, you cannot expect yourself to be present at all sites every time. You need to delegate certain tasks to take the load off your shoulders.

You must be able to delegate tasks to your team to successfully manage the rising amount of work that comes with juggling many projects simultaneously.

Project managers should always make an effort to improve their planning abilities regardless of where they are in their professional careers. To manage others successfully, you must have a strong ability to assign responsibilities to the right people.

This is of the utmost importance since a project manager cannot possibly do everything simultaneously when overseeing multiple projects. It is necessary to be able to instruct others on the processes you use and learning when and what to let go of is part of that process.

Communication is essential, and you should often ask for updates on the project’s progress to monitor the aspects of it that you no longer manage.

When you have faith that your team can complete the tasks at hand, you can shift your focus from one project to another without experiencing a sense of being overburdened.

 

6. Plan, organize, and prioritize

10 Strategies to Manage Multiple Construction Projects Effectively.

Image source

Plan

Without a solid plan, you will never be able to manage multiple construction projects efficiently. The quality of the plan determines the overall quality of the project. This is important to keep in mind while working on multiple projects.

Establishing a comprehensive strategy for any project, your team, and any stakeholders involved in the undertaking is necessary. This will guarantee that everyone is operating from the same playbook.

This covers the management of risks and resources, as well as the monitoring of time, the planning of capacity, communications, and a variety of other contingency plans. In a perfect world, we would plan in this manner continuously, and it ought to be standard procedure throughout the project.

The most effective method for doing this is to schedule meetings weekly or biweekly to address any problems that may arise and to work together to generate solutions. Those who have previously worked in the IT industry may find it simple to adapt a planning methodology such as Agile to the construction industry. In this industry, tasks are planned in sprints that occur every two weeks, and the importance of each task is determined by the number of points assigned.

Organize

You may easily get overwhelmed when working on multiple projects simultaneously. Organizing is essential to achieving success when managing multiple projects. You can streamline everything at each construction site with an organized work environment for yourself and your team.

It is crucial to arrange things like construction and project papers in a common way throughout your business so that there is no misunderstanding when attempting to access certain documents. This will prevent any miscommunication that may occur.

Another crucial aspect of organizing is focusing on your team, duties, and responsibilities.

Prioritize

You may manage more than one project simultaneously as a construction project manager, so you must learn to prioritize. It would allow you to focus on the most important project first and then move on to the others.

Use construction management software to develop a task list specific to each project if you need help prioritizing the many jobs.

Focus on tasks needing immediate attention and later move to the less urgent ones. After you have compiled a list of all the important jobs, you can go on to assign resources and hours of work to each one.

You may effectively prioritize your activities by using the same method repeatedly, even though the projects you’re working on tend to be highly unique and distinct from one another. The procedure will become less difficult and more time efficient if you use your construction management software and follow a uniform pattern for each job.

 

7. Have a bird’s eye view of all projects

Nothing is more frustrating than wasting precious time scrambling to uncover critical project information due to a lack of visibility or a lack of a cohesive structure across all your projects. It will be much easier to transition from one project to the next if you keep the same convention across all your projects.

However, visibility is not limited to just that point. Because of the advancements in technology that have been made in recent years, it is now much simpler for managers to get specific information about what is happening across all of their projects.

This is particularly true when using software designed specifically for the administration of construction projects. Technology is only getting started in the construction industry, which is a terrific way to increase productivity and profitability.

 

8. Communication with subcontractors

An endless stream of calls may sidetrack even the most organized project manager. It is essential to have effective communication if you are in charge of coordinating the work of subcontractors, who are external professionals and businesses that contribute to your project.

Some approaches may be taken to ensure that it will take only a portion of the day. Before beginning work on a project:

  • You should schedule frequent meetings with your subcontractor in which you may talk about upcoming work and any roadblocks.
  • You should choose one principal method of communication, ideally an online communicator, so you may check your messages whenever you have a spare moment in your schedule.
  • Pick a single mode of communication to convey the most important information, and be certain that everyone knows that it is reserved only for times of crisis.
  • Assign an employee, based on your WBS, to contact your subcontractors at least one week before the day on which their work is scheduled to begin to ensure that everything runs smoothly.

 

9. Carefully scrutinize resource requirements

Estimates are often made for resources and time durations associated with each activity. The work activities outlined for a project are exhaustive. Therefore, the sum of the resources necessary for the different activities constitutes the total resources required.

Estimates of the resources needed for each activity may be used to determine which resources will be required during the project’s duration. Therefore, potential bottlenecks may be recognized, and modifications can be made to the schedule, the allocation of resources, or the technology to minimize difficulties.

The limits imposed by the availability of certain resources may be incorporated into various formal scheduling processes. For instance, it may be impossible to carry out certain actions at a given moment due to the absence of necessary equipment or an essential team member. Space is considered to be a resource of its own.

In most cases, a planner will ensure that just one event is scheduled simultaneously at the same venue.

 

10. Be honest and open

It is essential not to hide anything and always tell the truth to your clients. To be a successful construction project manager, one of the most important skills you may have to develop is the ability to connect professionally and personally with people.

Things will go wrong occasionally, and as the project construction manager, you will make mistakes. This is quite natural, and you shouldn’t let it go to your head or affect your feelings about anything. Always maintain a sincere and open relationship with your staff and customers. This is the most essential thing.

For instance, if one of your team members has committed an error, and that error has caused a certain project’s progression to be slowed down, it is essential to keep your customer informed and let them know about the problem.

If one of your team members falls short of their individual goals in the firm, you should be confident to tell them the truth. Have a conversation with them and talk about how the two of you can collaborate to guarantee that they achieve their long-term goals.

 

Why Do People Fail at Managing Multiple Projects?

10 Strategies to Manage Multiple Construction Projects Effectively.

Image source

Even if you plan and have everything ready, it will not always result in the timely or successful completion of all projects. Managing numerous projects at once is a difficult task. The issues arising from managing several projects are analogous to a hidden world where top standards are followed.

 

Ineffective communication

The importance of communication cannot be overstated since it may determine the success or failure of a project. Many projects fail due to improper or inefficient communication between teammates or with the client.

You must convey to your staff exactly what needs to be done to avoid spending much more time and money on the tasks that need to be completed. The project’s stakeholders will only interfere with the efficient administration of the project if you convey the project’s current condition to them.

 

Insufficient trust

If you do not establish confidence in the project, you jeopardize its completion. This also relates to the practice of delegating. Sometimes projects fail because the team loses confidence in their manager or vice versa.

The individuals with whom you are collaborating will get the impression that you do not trust them if you do not share the duties of the project with them. Regardless of whether or not that is the case, you are hurting morale and putting the completion of your initiatives in danger.

 

Lack of definable roles and responsibilities

If your team needs to know who is responsible for what, the pandemonium results are the same whether you’re working on one project or many. However, some projects lack clarity of roles and responsibilities, so they fail.

The completion of a project should be as smooth as the operation of a machine, with each team member carrying out their duties like gears that mesh together to propel the project ahead. Things will become stuck in a rut very quickly if they are unaware of their jobs and the responsibilities that come with them.

 

Poor planning

If you do not put the work in before beginning the execution of the project plan, you will be required to put the work in when you begin the execution of the plan. That’s a certain way to get into trouble.

You are responsible for ensuring that every project you oversee has an in-depth plan. On top of that, you need to have a strategy for overseeing all other projects simultaneously. That’s a lot of preparation, but you must try something else if it costs you money and wastes your time.

 

Points to Remember When Managing Multiple Construction Projects

 

1. Supervise

First of all, you need to ensure that there is adequate time for you to supervise the construction project. Next, you must ensure that your team has enough time to deliver quality output within the stipulated deadline. This is crucial as failure can land you in a sticky situation.

 

2. Do not overcommit

While signing a construction project, contemplate carefully whether you are not over-committing yourself. Also, touch base on the number of labor force you will require for the successful execution of the construction project.

The problem starts when the contractor starts the construction project before considering the shortage of workers and supplies. This results in the extension of stipulated deadlines and dissatisfied project owners.

The desire that most individuals have to contribute in whatever manner they can to the success of the teams they support is normal. Everyone has a secret desire to save the day, but it’s crucial to remember that you can only accomplish so much, given your skills and resources. Always refer to your job list and the order of importance in which things need to be done to assess whether or not you can reorganize things to assist someone else.

If you are given the order to do something by a superior, it is imperative that you speak with them and possibly ask them what they would want for you to drop to work on what they are asking you to accomplish. If you are given the order to do something, you must do something.

 

3. Stop multitasking

This could make less sense than you’d expect, particularly taking into account the fact that this post is about managing numerous projects at the same time. Nevertheless, several studies have shown that concentrating on one item at a time is more effective than attempting to do many tasks simultaneously.

This is most likely because when you devote your concentration to a single job at a time, you have a greater chance of entering a condition known as flow, enabling you to perform the work more quickly and with greater accuracy.

 

4. Set realistic deadlines

Even though the timetable for any individual construction project might vary widely, it is essential that all of the deadlines that are established and agreed upon by the various stakeholders be attainable.

Before you communicate a deadline for your project, it is a good idea to think about adding extra time to the timetable, as this will help you cope with unanticipated delays. Your process should be aligned with the timeframe that has been provided to prevent overruns and undue strain.

When working on many construction projects simultaneously, it is a good idea to establish priorities since each project will be at a different stage at a different time. When it comes to unexpected holdups, it’s always helpful to have a backup plan or contingency strategy ready. Having a realistic timeframe for the project can help you save money on the total cost of labor.

 

Are You Ready to Manage Multiple Construction Projects Now?

Managing numerous projects at once is not a simple undertaking, but it is one that all project managers will eventually have to master at some time in their careers. To be successful, one has to have discipline, the ability to manage their time effectively, and the ongoing motivation to be organized.

One mustn’t get disheartened, particularly when it seems that more items are being added to the list than are being removed. Take a step back, get some exercise and clean air, and remind yourself that this line of work will never be without its share of highs and lows.

Technology is your greatest buddy, whether amid a serious struggle or when you’ve reached the point when you’ve had enough of doing things the hard way. You’ll thank us in the future for recommending that you put in the effort to find management software tailored to your firm’s specific requirements.

 

7 tips how to earn more profit with online payment applications
Illustrating online payment application workflow and benefits

7 tips how to earn more profit with online payment applications

  1. Workflow – Simple and flexible, yet regulated
  2. Systematic archiving
  3. Opportunity to focus on the content of the payment application
  4. A new level of cost forecasting accuracy
  5. Immediately manage the expenses incurred on behalf of the contract partner
  6. A unified system of guarantees
  7. Allocate invoice with just one click

 

1. Simple and flexible, yet regulated workflows

The flow is started by the General Contractor who fills in the data for the first payment application and appoints involved parties. This application is then sent to the Subcontractor for review and confirmation. Following payment applications can be started either by General Contractor or Subcontractor. 

If one party has drawn up the payment application, the other party will receive a notification about it; simultaneous preparation of the payment application by two parties is excluded. Also, it is not possible to draw up the next payment application until the previous payment application has been approved by both parties. 

 

2. Systemic archiving

When processing payment applications for completed works, there are very often situations where the payment applications “disappear” in correspondence and are therefore not processed in time, or payment applications that have already been signed cannot be found because they were not saved in the right place during the procedure.

The online payment application functionality offers a solution for that!

By using the online payment application functionality, all payment applications are located in one place; it is easy to see if the payment application has been opened, changed and who needs to perform the next action. For every activity that one party performs, the other party receives a notification. In addition to managing the procedural process it is possible to digitally sign payment applications. Using the online payment application functionality, there is no need to exchange payment applications by e-mail.

 

3. Opportunity to focus on the content of the payment application

In general, when checking payment applications, presented in classic Excel format, the Project Manager,devotes at least as much time to the mathematical checksas to the content of the payment application. Typical questions that the Project Manager goes through with each Payment application are following::

Have the calculation formulas been changed?

Are the calculation formulas still present or have they been overwritten with numerical values?

Has the previous payment application volume been correctly transferred from the prior payment application?

Is the payment application sum correct?

Does the amount to be paid correspond to reality?

Using the Bauwise online payment application functionality, the formulas are firmly in place and there is no need for additional checking – focus on the content of the payment application, not checking the formulas.

 

4. A new level of cost forecasting accuracy

All work changes and additional works agreedwith the Subcontractor during the confirmation process of the payment application are automatically reflected in the cost estimate. Why is this necessary?

Analyzing the financial management of various construction projects, it is possible to conclude – if the work changes and additional worksagreed with the Subcontractor are not immediately reflected in the cost estimate, then in most cases the additional cost is discovered in the final phase of the project. By comparing the profit statements of construction projects, it can be concluded:

  • Projects where the online payment application functionality is implemented have a very stable profit line throughout the project;
  • Projects where the online payment application functionality is not implemented have a stable profit line in the initial phase of the project, but in the last months of the project, the profit decreases significantly.

Example chart. Based on reference projects data.

Bauwise’s online payment application functionality ensures that the cost estimate of the construction works corresponds to reality.

Online payment application vs Excel

 

5. Immediately manage the expenses incurred on behalf of the contract partner

More and more agreements are made with Subcontractors, where the final price of the work is agreed upon, but the materials are purchased by the General contractor and their cost is deducted from the contract cost. The complexity of such an arrangement lies in the management of deductible expenses and the time-consuming nature of managing them. It very often happens that the deductible expenses do not reach the Subcontractor’s payment application on time and therefore the General contractor’s expenses for the construction work are higher than they should be according to the agreement. 

By using Bauwise online payment application functionality and the invoice approval cycle, it is possible to immediately set the invoice as a deduction for the Subcontractor’s payment application when approving the invoice. In that case, when creating the next payment application, the amount to be deducted has been automatically added to the payment application.By using the Bauwise online payment application functionality, you won’t miss a single expense.


6. Unified system of retainagess

In today’s contractual relations between the General contractor and the Subcontractor, performance and warranty period retainages are used more and more. The implementation of these retainages, however, often turns out to be a serious headache for both project staff and accountants – each contract partner shows the guarantee held in the payment application/invoice in their own way, there is no joint system. This in turn leads to unexpected surprises in cost accounting. The retainage is often completely forgotten. The use of the online payment application functionality makes it possible to set the percentages of both the performance and the warranty period retainage by entering the information once in the contract data., These retainage are then automatically taken into account in payment applications and this ensures that no retainages are left unaccounted for. In addition, this system helps to have a joint system of retainages across project partners, which in turn increases the accuracy of the cost estimate.

7. Allocate invoice with just one click

Classical invoice allocation means that a project identifier, contract number and job code needs to be entered for each invoice line. This means that if there are 10 lines in the document, then 10 expense lines must be created, i.e. the project identifier, contract number and work code must be specified 10 times.

In the online payment application functionality, each work line of the Subcontractor has a cost code corresponding to the budget, which allows you to allocate the linked invoice with the push of a button.

9 Tips to Increase Your Profit and Save Time through Construction Job Costing

For every successful construction company, accurate job costing is a must. Without an efficient job tracking process, your business is like a ship lost at sea. The earlier you identify your risks and deviations from the budget, the more time you have to adjust course and get back on track. Many avoidable problems in business arise due to lack of good processes – job costing is one powerful tool to prevent losing money and time.

Here’s how construction job costing can help you increase profit and free up time:

  1. Make sure you give your project managers the right budget
  2. Accurately track subcontractor commitments and contracts
  3. Monitor purchase invoices carefully
  4. Handle client change orders with efficiency
  5. Manage the knock-on effect of change orders on subcontractors
  6. Carry out regular forecasting
  7. Make sure you’re using the right formula (margin vs. markup)
  8. Predict completion accurately
  9. Time is everything so spend it wisely

 

1. Make sure you give your project managers the right budget

Often when estimating job costs, a firm will calculate the direct cost and add markup or margin. The budget with margin is then passed to the project managers along with an indication of how much he or she can spend from it. However, with the budget plus margin subconsciously in mind, our brains will often justify overspending as long as it doesn’t break the subtotal of the total estimate. Unfortunately, however, these projects will eat up non-direct and profit. If, on the other hand, the project manager sees only the allowed spending budget, they will be more motivated to hit the target – this is even more effective when the goal is linked to a reward system.  You’ll then find that your project managers are doing whatever it takes to stick to the budget or even improve upon it.

 

2. Accurately track subcontractor commitments and contracts

One important aspect of job costing is to identify how much of the budget is already committed. In bigger construction projects, there are a lot of subcontractors and suppliers. The first rule is not to start work without a written agreement. It might be tempting to tie a subcontractor in with the intention of later negotiating the scope of the work as well as better prices. However, not having a fixed agreement regarding work to be carried out is a slippery slope and often leads to losing both time and money. Having a contract in place ensures the subcontractor has assumed responsibility for the job and reduces the risk in terms of finalizing the project. Any construction job costing software should allow agreed commitments to be added and then automatically update the forecast to show the potential risk or extra earnings.

 

3. Monitor purchase invoices carefully

If you have agreed the price for a particular job, you also need to ensure that the subcontractor is not invoicing you for more than originally quoted. The easiest way to do this is to use the pay application and track the progress claims online. This process will prevent project managers hiding costs on the budget line where the profit margin is higher. It is also sometimes the case that subcontractors may manipulate the figures, either by accident or design. A good job costing system will help to avoid these pitfalls.

 

4. Handle client change orders with efficiency

Client change orders can be a blessing or a curse. They’re a critical juncture that can provide opportunities but are often difficult to track or predict. While change orders can be a turning point where the unprofitable project becomes a profitable project, they can also work the other way and turn a profitable project into one that loses money if poorly managed. When all’s said and done, the main question at the management meeting will be: have we gained or lost money from the change order? An excellent job costing software can show you exactly how much profit you earned from change orders. But more importantly, it can show you overall trends in relation to change orders.

 

5. Manage the knock-on effect of change orders on subcontractors

So now we have identified some ways to track the variations on the client side. But how these changes will affect the subcontractors or suppliers is an even more complicated question.  If a general contractor is a leading force in the negotiation of change orders with your subcontractors, it is absolutely critical that these change orders are accurately tracked – if not, you are leaving yourself open to a world of problems. The main concern behind change orders is how much extra money the client will be paying and how much of that will go to the subcontractors. A good system will make a huge difference when it comes to managing this.

 

6. Carry out regular forecasting

What do we mean by forecasting? It means that the project manager will add new information and their best estimates of what may affect the budget into a job costing system. Everything in the universe is continuously moving, and projects are no different. Just as when you drive along the road the GPS will continuously update itself to show you when to turn, the same should apply to a construction job. As you progress, you need to adjust the budget to ensure you make the right turns when needed. Proper job tracking software allows project managers to update the forecast on a regular basis for tasks that haven’t got a concrete commitment, while forecasts are automatically updated when commitments or purchase orders are entered into the system.

 

7. Make sure you’re using the right formula (margin vs. markup)

There are many companies who confuse the margin and markup. That’s not to say one is better than the other, but it’s important to understand that cost + markup is not the profit margin. For example, if you buy something for $100 and add 20% markup it equals $120 – but if you calculate the gross profit you get $100/$120 = 16.666%. If you want to add the margin it needs to be calculated correctly. For example, if you add 20% margin your revenue should be $125. If you’re not sure, it’s important to look up the correct formula for your business and check the numbers are accurate. Bauwise job costing software uses margin calculations, not markup calculations.  Don’t lose money by using the wrong formula.

 

8. Predict completion accurately

What can we do with information about expenses when we don’t know how far along we are with our job? There are many methods for calculating the completion of a construction projectbased on revenue, on costs or observational completion. However you calculate it, it should show you whether your costs and income are in line with the completion. This is critical for understanding the true picture of a construction job.

 

9. Time is everything so spend it wisely

Time is the most precious asset we have. We can lose money and earn it back but we can never recover lost time. Managing your job costing process in Excel or some other complicated system will definitely lose you time. Not having the right information at the right time will also lose you money. Time equals money so you need to spend it even more wisely.

 

One extra tip: Learn to say NO to things that don’t matter. You can’t do two things at the same time. If you say YES to one thing you are saying no to something else. Choosing to say YES to the right things and NO to everything else will help you reach your goals, increase your profit and free up time.

Bauwise is a construction job costing software what can help you with efficiency and earn more profit.

Please let us know how you have benefited from the job costing system and feel free to share this post if you have found it useful.

5 must have software for general contractors in 2019

The internet is offering dozens of software options for the construction industry and particularly for general contractors. On the one hand, there is a number of big players such as Procore or Jonas Construction, that is mainly focused on large companies and offers “all-inclusive” construction management software. On the other hand, there are a lot of standalone/entry-level tools, that fills the gap for general contractors that outgrow paper or Excel-based work process and are not ready or don’t want to invest in expensive, complicated, “all in one” large scale systems. Also, some general contractors already have some software in place and don’t see a need to replace it. They made a decision to use specialized software to automate different processes and feels more flexible to choose software that works best for their needs.

Here is the short list of the software for general contractors:

  1. Estimating software
  2. Budget tracking & construction cost management software
  3. Project planning & scheduling software
  4. Document & drawing management software
  5. Daily reporting software

Actually, it’s not so important what choose, the most important does it solves your pains in the easiest possible way and helps your business be more profitable. We made internet research and choose 5 must have standalone/entry-level software for general contractors in 2019. In this article, you can also see other great alternatives for your consideration. This is the main categories and top selections so far:

Takeoff & estimating – STACK takeoff & estimating software

  • STACK is online takeoff and estimating software. It helps general contractors to speed up the bidding process and avoid costly errors. STACK has a great market response from customers on SoftwareAdvice and Capterra.
  • Most general contractors getting their works by bidding on construction projects. Some general contractors creating bids based on self-performed estimates while others rely on subcontractor bids. In both scenarios STACK takeoff & estimating software can help you. For example, you can double-check your subcontractor bids.
  • Major benefits of STACK software based on customers responses is easiness of use and speed. The software helps to do accurate & fast quantity takeoffs and calculate detailed material and labor estimates. All data are saved in the cloud and your team can collaborate online (so all plans and related information is online – you can access it from anywhere, anytime). With STACK you can create professional looking bids straight from the system. Also, it has integration with Excel, prebuilt reports and material base.
  • Other alternatives: ProEst, Sage Estimating, Cubit 9, Square Takeoff, Clear Estimates, PlanSwift, B2W

 

 

Budget tracking & construction cost management – Bauwise software

  • Bauwise is cloud-based budget tracking & cost control software designed for general contractors. A number of them are using it daily to track original budget vs costs from accounting, profitability and control costs to avoid budget overrun.
  • Worldwide markets are quite different in terms of general contractors and construction accounting. Bauwise is the best fit for general contractors that have no or little amount of own stuff and all or most of the works gives away to subcontractors. It will also best serves for companies that are advanced in construction accounting and focuses to manage construction projects costs efficiently.
  • Beside core functions, such as budget tracking, Bauwise is a great tool for cash flow planning, it has online cost approval workflow, portfolio reporting, and great features to manage your subcontractor contracts. Customers highlighting that Bauwise has a nice user interface and it’s natural to use for construction professionals.
  • Other alternatives: Google Sheets, Microsoft Excel Online, SmartSheet

 

 

Project planning & scheduling – TeamGantt software

  • TeamGantt is an online solution for project planning & scheduling. This software is a good choice for general contractors that are looking for a simple solution to professionally plan project on the Gantt chart and assign tasks to the team members. TeamGantt has a lot of positive reviews from customers on SoftwareAdvice and Capterra, you can check it out.
  • It’s important to mention to mention that planning defining what is to be done and how, and scheduling is answering the question when it should be done. TeamGantt will answer these questions for you in the fastest and simplest way.
  • TeamGantt has a lovely and intuitive user interface, it allows to change task dates, duration and rearrange them with a drag & drop on a Gantt chart, you can also create dependencies and plan resources. With a TeamGantt it’s easy to assign tasks to your team members, upload files to tasks and collaborate with your colleagues online. You can see how many tasks are assigned to you and your team. TeamGantt equipped with a mobile app that allows collaborating with your team straight from the phone.
  • Other alternatives: GenieBelt, GanttPRO, Microsoft Project

 

 

Document & drawing management – PlanGrid software

  • PlanGrid cloud-based document & drawing management software gives a construction team access from anywhere to project drawings and related documents, such as specs, submittals, RFI responses, schedules or installation instructions. It’s a great tool to share project information across all the team and collaborate in real time. PlanGrid customers left a lot of good responses about this software on SoftwareAdvice and Capterra.
  • Document and drawing management is definitely a priority for most construction companies. The market is offering different DMS, but the construction industry has own specifics, so specialized tools as PlanGrid usually works the best for them.
  • PlanGrid includes industry-specific features, such as comfortable sheets & revisions management, markups handling, a great feature is that any document can be added as a custom hyperlink to your plans. With PlanGrid you can also notify teammates or ask for updates by mentioning their names in comments. Beside drawings and documents management, the system offers the ability to assign tasks and track them on the mobile phone, also with PlanGrid you can create nice field reports and attach photos and other documents.
  • Other alternatives: Bauhub, Skysite, Folderit, PlanRadar, eFileCabinet

 

 

Daily reporting – Raken software

  • Raken is a cloud-based daily reporting software which allows you to know what’s happening on your job site no matter where you are. It helps to track projects daily progress and what is even more relevant to general contractors, it enables to collect and manage subcontractor daily reports. Raken has a nice market response from customers on SoftwareAdvice and Capterra.
  • Daily reporting is very important for the construction industry. Besides the ability to track daily progress, it also allows you to report another field related information, such as safety incidents. Paper reporting is going to the past, so it’s time to look around for online tools, and you can confidently start with Raken software.
  • Raken construction daily report software will help superintends to create branded, professional daily reports including photos, videos, voice messages and weather conditions. Raken also allows simply track hours in the field, create and assign tasks to the users and analyze your project progress via dashboard & visual reports. Super Daily feature is specially designed to collect subcontractors daily reports and easily present it for project stakeholders.
  • Other alternatives: CDR, Fieldactive, iNeoSyte, Fieldlens

 

 

So this was our list of must-have software for general contractors, and now it is your turn to let us know which software is the best fit for you.

5 tips for construction software project management

A proper construction software project management is vital when new software is implemented and it might be a hard and long-lasting process, especially when software project management best practices are not followed. When it comes to the implementation of new construction software, you need to have in mind even more factors that can affect the implementation process. For example, the timing and seasoning play a significant role while there is a high season and low season in Construction. Functionality scope, different needs of your team members are also questions that you need to deal with. In this post, we will share 5 simple tips for construction software project management and make this process smooth and successful.

 

5 simple tips for construction software project management:

  1. Choose a Project manager (product owner)
  2. Choose the right timing for the implementation phase
  3. Take smaller bites at the time
  4. Agree on a software usage process and stick to it
  5. Be consistent

 

1. Choose a Project manager (product owner)

In construction software project management a project manager or so-called product owner is the first thing you need to decide. A construction software product owner is a person who is personally responsible for the implementation of the new Construction Management Software. The best person would be someone who understands not only the software solution and its functions, but knows the business and the needs from different roles in the construction business. A construction software project manager should communicate with the tool provider and help the internal team with questions and problem-solving. We have seen many times, that too many people are involved in making the decision on how to use the new tool. Too many different opinions create delays and to organize a meeting with the full team can be “Mission Impossible.” This doesn’t mean that you should not rely on Project managers opinion or exclude them from the process, that would be a mistake. It only means, that best practice is to have a manageable project team for the Implementation and a great balance between actual need and nice to have ideas. A suitable product owner should be able to manage all these challenges.

2. Choose the right timing for the implementation phase

In construction, there are low and high seasons when people are the busiest. For e.g. in the summertime, the project team has the most active period and in the wintertime, people are on vacations. The time is never right for construction software project management, but you as the project manager can still choose the most suitable time if you plan it in advance. When trying to implement new software during the highest season, it might be a fast way to failure. A poorly executed process will not give expected results. Another challenge is to try to transfer all historical data to the new system before starting. This is one reason why people procrastinate, while the idea of manually transferring past information seems to be a significant amount of work. Instead, you can start using the new Construction tool with new beginning projects and projects that will not end soon. This way has some disadvantages either, but much more advantages and saves time and your money also.

3. Take smaller bites at the time. Understand the company most important needs and split the implementation into parts

It is common that peoples think that more complex and more expensive construction software is, better it is. In fact, it can be exactly the opposite. Large scale and highly complex software implementation and project management is riskier, takes longer, peoples hardly learn it, and what is most disappointing – a significant number of functions remains not used. Think of your own experience – how much software functions do you usually use? For sure, it depends, but usually, we stick on some reasonable amount of main features. So how to apply these principles while managing a construction software in a quite complex construction business with many processes? Well, how you would eat the elephant? Peace by pease, right? So, first of all, decide what the most important and critical needs/functions in your construction company are. And implement only these main functions in the beginning. Do it with Agile principles, step by step, piece by piece. Sometimes it can even mean to implement several different software solutions that does exactly what you need now and in the amount that you can “eat” at once. Remember the 20/80 rule, 20% from the construction system will give 80% of effects. Try to do less and implement your new tool peace by peace, and you will avoid high scale failures.

4. Agree on a software usage process and stick to it

Often you can use one software product in multiple ways. In construction software project management it is necessary to find the best usage process of the new construction software, write it down, agree on it with the team, and stick to it. To adopt a unified process can be a bit harder for existing employees, whit their own habits, but it will be much faster to teach new employees and makes life easier in the end. Even the management meetings will be smoother while everyone is working on the same process and speak the “same language”. After implementation of new software, take time to review how people are using the Software solution and if they are not using it as agreed, talk to them. Try to find out why they are not using it as agreed, do they have different need or expectation or they just don’t know how to use it. The success of implementation depends on how effectively software is used in a daily life.

5. Be consistent

One of the most crucial thing in construction software project management is to be consistent and push it until everyone on your team gets it. People are used to their old habits; change is not easy for them and sometimes even scary. We all feel that the “old good way” was better and more comfortable and we often don’t have enough time to learn something new. Usually, none of the software is built to make someone’s life harder, or at least it shouldn’t be this way. It’s just a very human, that to get used to a new way of doing things is a difficult task for our brain until it becomes a habit. So be consistent until everyone feels it as a habit, then you can say that your implementation project was successful.

Drones in construction: why to invest?

If you run a construction business, why you should hurry to invest in drones today? Read examples where drones in construction are used and what is an industry trend. Journalist Clay Dillow, in the Fortune article, provided interesting statistics and insights on the prospects of using drones in the construction industry. That encouraged me to make some research on how the construction companies are adopting this technology today. So what is the construction industry trend?

 

INDUSTRY TREND

Goldman Sachs research says that the fastest growth opportunity for drones comes from businesses and civil governments. Researchers expect that businesses and civil governments will spend $13 billion on drones between 2016 and 2020. Herewith, John Patterson in the article “An Aerial View of the Future – Drones in Construction” visually represents the charts which shows which industries are the largest adopters of drones according to PwC and how much of the market they control. The construction industry is included in the infrastructure sector and is between the largest drone adopters (infrastructure – 35,5% percent of the market, second largest in agriculture sector – 25,5%). On the other hand, it seems that there are no fully reliable data on how much exactly construction companies are spending for the drones today. However, proves come itself. E.g. Constructiondive portal announce interesting fact that drone manufacturer DJI is selling 1,000 drones with Skycatch imaging technology to Komatsu (Japanese construction equipment giant). DJI said that the map data will be used for Komatsu Smart Construction’s new data service, which will allow for robotic earth-moving equipment to correctly dig, bulldoze and grade land autonomously, reported DroneLife.

Overall, I would say that the facts speak for themselves – the construction sector is investing in drones and definitely not because it’s a fancy toy. Where drones are used or supposed to be used in the construction industry?

 

LAND SURVEYS & SITE MODELING

It is obvious that drones in the construction industry are widely used to do the land survey and to create maps. They do the surveying process faster than traditional ways. Drones accurately collect a huge amount of data about the relief of the land, including detailed surface characteristics, and becomes a solid data source for a BIM software and 3D modeling.

Using drones’ collected data and adopting specific software, companies are creating high-quality 3D maps. Take a look at the video bellow, where Hoverscape explains how their clients use drone-collected data. The company claims that their maps are up to 15 times higher resolution than Google Earth and that the software enables to analyze surveyed area with a great accuracy. Well, looks pretty nice.

TRACKING OF BUILDING PROGRESS
Another popular area where drones are used in the construction industry is a building progress tracking. Despite various explanations (and some are really complex!), I would probably highlight two main perspectives to track building progress – from the contractor viewpoint and the client. Construction companies are using drones regularly to track the progress of the construction, analyzing drone created photos, maps, and 3D models. Using different software they can track construction specific details, such as compliance with a project, planned materials usage, scheduled works progress and etc.
On the other hand, most of the clients want to track building progress also. If they are not able to visit the construction site often, drones are a great option to provide building progress information. They are not only making great quality pictures or videos (even live stream!) but also they are doing it from the positions that can’t be seen from the ground. Just look at this video to get the point.
SITE MONITORING, SAFETY, AND SECURITY
Drones have necessary “qualification” to be “employed as managers’ eyes” to monitor not only construction progress on different construction areas or sites but also they help to monitor safety standards, workers performance and the use of the construction materials. As some articles point out, drones can help project managers to track different job sites and see whether the team have work and are they productive enough.
 
Also, a very important part is to make sure that all safety requirements are met. E.g. using drone you can make a quick survey of whether all workers wear helmets and other necessary equipment, is the scaffolding structures looks solid enough, have all construction parts attached correctly and so on. If something rises concerns – immediate actions could be taken. Even if an accident would happen, the quality recordings help to analyze the situation.
 
Drones can also be used as anti-theft protection. According to National Equipment Register (NER) annual estimates of the cost of equipment theft in US vary from about $300 million to $1 billion, with most estimates in the range of $400 million. That estimate is for equipment only (wow!) and do not include tools and building materials. Drones are doing a great job monitoring job sites and ensuring security. E.g. in one article it was said that using drone it is possible to make a calculation on how many soil or gravel was excavated from the quarry just by flying over and processing the data. Collected information can be sent for analysis and control, so any deviation is caught immediately.
INSPECTIONS
Inspections are an inseparable part of the constructions. And it looks, that using drones in this area is a big step forward. Imagine if you are going to renovate the 12-floor apartment and you need to analyze carefully what kind of outer wall cracks are on the 10th floor? Or if you need to do yearly inspection of the huge warehouse that your company has recently build? These are situations where drones jump in. It saves time, money and the most important – it saves construction workers from unnecessary risky works and helps easily to get to the places where access in traditional ways would be way complicated.
Drones also do thermal imaging of the buildings. It is explained in the video bellow, what was inspection findings after drone deployed infrared thermographic survey. Inspection has been done when the client reported about water entering office space.
The software that analyzes drones data also allows to mark and create a report of areas of concern during inspections (not only creating photos but also attaching records of GPS coordinates and other data). Look at this video bellow, how the drone was used for inspection on the wall that is around 600 m. long and 20 m. high – imagine doing it old way 🙂
Other cases of use of drones in construction
There are much more areas in the construction where drones become an irreplaceable tool. E.g. drones’ collected data is helping designers and architects to analyze view from feature building. Using drone data they can create a better building and ensure it has the best view from every single point. Drone’s created videos and photos also can be used as a selling point – high-quality video and photo information from your construction sites is a great material that can be used in sales. With relatively small costs (it is not always necessary to have an expensive drone) it is possible to present your business in an innovative way. Besides that, some construction companies already are using drones as a part of their offers and that is definitely adding them extra points to win more business.
Resume
Despite the fact that drones are not on every construction site yet, it is clear that the use of drones in construction is growing and will grow further. Taking into account a wide range of areas where drones already adopted in the construction today, also considering expensive workforce, safety regulations, rising security issues and the fact that commercial drones experiencing a high competition vs “hobbyists” drones and prices are more affordable than a few years ago, drones become an interesting and valuable investment. Maybe it is a right time to add it to your construction budget?
* Main photo by Sorasak on Unsplash