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Why do Construction Projects Blow Out?

20.07.22 05:45 PM By Karen Parker

Reasons Why Projects Blow Out

Project management 101 has always been about walking a fine line between balancing project time, costs and performance!


Described as the triple constraints, project managers need to interrogate, anticipate and gauge any fallout caused by changes made to one constraint, as well as the impact it will have on the other two.


Unfortunately, today it seems that more and more external factors are making it harder for builders to juggle trade-offs against project deliverables and customer satisfaction, as projects are continuously impacted by rising material costs, skilled labour shortages, inclement weather, logistical problems, scheduling conflicts and diminished trust within the industry, due to media exposure of high profile liquidations.


While there may seem to be a lot of doom and gloom within the construction industry at the moment, there are still plenty of opportunities available that will deliver positive outcomes. You just have to know where to look.


Growth Opportunities

The construction industry delivers 6.2% of New Zealand’s GDP and employs over 250,000 people. While in Australia that number jumps to 9% GDP (or $360B in revenue,) employing 1.162M people. Truly, impressive figures which are anticipated to grow a further 10% by May 2023, driven possibly by respective government investments into infrastructure, health, transport and housing developments.


These investments provide a number of opportunities for business growth and development.


Governments have also announced continued investment into apprenticeship and trainee programs to help combat long term skilled labour shortages. In the short term, businesses should look to encouraging employee retention through career advancement opportunities, promotion of supportive workplace culture, financial incentives such as wage increases or bonuses and work life balance through the introduction of more flexible hours or a reduction in the number of work days per week.   


Businesses can also build and leverage strategic partnerships with other providers.  These partnerships are designed to improve performance through agreed mutual objectives and benefits and can include such examples as establishing project partnerships across multi trade businesses, engaging on-demand labour hire or equipment services, registration as a procurement partner of choice for that specific service, building strong supply chains or mitigating project risks across the partnership.


Obviously the longer the contract, the greater the benefits of the partnership. Long term contracts provide more opportunities to build strong working relationships, find improvements and plan for future investment or collaboration. Having strategic partnerships in place is a great steppingstone to securing multi-project opportunities.


Partnerships are also a great way to help build or restore your company’s reputation.


Increase in Productivity

Sure, there will always be external factors impacting ON your business, but often you can find cost savings by controlling elements with IN your business, such as administration costs, process reviews, production improvements and team capacities.


Building better systems, especially ones that allow for open and inclusive communications between your site teams, back office, suppliers and customers not only deliver better experiences but also help to remove disjointed or delayed information, rework and duplication. Regular updates and open communications ensure timely resolutions are reached, thus removing conflict and anxiety amongst parties or that feeling of being ‘ambushed’.


Being able to streamline data transfers, automate processes, integrate software applications or implement workflows through back-office practices ensures data standardization for analytics, as well as remove workarounds and ‘secret spreadsheets’ caused by siloed departments.


Construction projects are certainly full of meaningful information and statistics; from safety, financial, scope and scheduling data, as well as highlighting unforeseen events or risks that upon investigation can be used to identify opportunities that in turn drive efficiencies. Having access to this real time data also supports you when making critical business or project decisions.


The rise in digital applications has helped to drive further safety, improvements, productivity and efficiencies amongst teams. This relatively low-cost investment is a proven solution that delivers;

  • Information when and where you need it
  • Saves data input time through automation, pre-emptive responses, QR/barcodes, voice to text, GPS and Image annotation
  • Invigorates and encourages staff engagement
  • Reduces your carbon footprint, and
  • Promotes innovation and longevity of your business


Budgeting & Cost tracking

Quoting or establishing project budgets is the foundation of any construction or building business, but it does come with its own set of problems.


When compiling a quote to undertake works, more construction businesses are now providing estimates instead. Estimates are more of a ‘best guess’ or approximation of how much a job might cost, where as a quote is exact and binding - A fixed price agreement. Using estimates, businesses can manage costings as they occur. Armed with this data they can then approach the client to confirm project continuance, scope delivery and standard of quality expected, without being out of pocket.


Preparing your quote starts with your full understanding of the scope of work. Ask yourself - Have you identified all risks (both physical on the worksite, as well as financial to the business?)  Are there are any unrealistic expectations from the outset? Is the work worth undertaking? Are you being driven to work backwards from given drop-dead date? Do you have a defined list of deliverables and project priorities, which have been agreed to by yourself and your client? Are you providing an ongoing warranty for work post hand over?


Compiling a list of qualifications such as what happens when there is a delay caused by weather, costs associated with expediting works across a weekend, increases in material costs, or unavailability of site due to competing priorities of the principal contractor etc should also be considered and document. Be sure to include your list in your final submission, as this will avoid confusion and help to alleviate possible confrontation with the client at a later date.


For times when there are a number of small ‘insubstantial’ risks or the risk cannot be quantified, adding a contingency factor to your quote ensures that you remain profitable.


Creating a winning bid is not just about understanding your scope, but also knowing the difference between markup and margin. Experienced estimator will already know these numbers inside out but will also have historical data and site experience to anticipate some of your unknowns and forecast possible outcomes.


As we navigate the challenges of running a successful construction project, while preparing to run the gauntlet of stretched timelines, budget blow outs and performance issues, just remember that there will always be opportunities for growth. You just need to know where to look.


For our top tips on how to expedite project delivery check out our blog: 9 Ways to Expedite Your Project


Talk to the QicWorks team today about how together we can reduce your project costs with the only operational platform you need for your engineering, construction, fabrication or site installation business.


Are you interested in a particular feature, have an idea or need support, why not drop us a line.


QicWorks removes the need for multiple software applications or paper systems to manage work fronts, safety, resource compliance and job profitability. QicWorks provides accurate real time field data giving you the confidence to make the right decisions. Contact us today see how QicWorks can transform how you do business.

 

The information contained within this blog is of a general nature only. It does not take your specific needs or circumstances into consideration. You should look at your own situation and legislative requirements before making any decisions.

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