Delivering a project well within the original budget is a hallmark of construction success. But it’s also one of the largest hurdles that teams have to face. Industry data shows that construction projects go over budget all the time, and a study by KPMG found that only 31% of projects came within 10% of budget.
One of the biggest reasons behind the less-than-stellar budget track record? The lack of the right data and organizational tools that keep a project’s financials in check.
Stakeholders often view and manage information in silos. Not only is this practice inefficient, but it’s riddled with missing or outdated data, unreliable response times, and convoluted processes involving various vendors, systems, and products.
What’s more, the lack of accurate and real-time data when it comes to budget, costs, and projections can cause delays and affect stakeholders’ ability to make informed decisions quickly.
Research by Deloitte indicates that E&C companies are facing higher cost pressures, particularly in the age of COVID-19. With projects being canceled, delayed, or moved, tracking your resources and budget is more important than ever.
Let’s take a closer look at the dangers of not staying on top of your construction cost data, and what you should do to get on the right track.
The Perils of Disconnected Cost Data
Failing to connect the dots when it comes to your construction data leads to a loss of control over your costs, profits, and resources.
When your processes are inefficient and disconnected, you’re more prone to miscommunication and delays, which may ultimately lead to profit-killing miscalculations, incorrect budget allocations, and inaccurate forecasts.
Unfortunately, many organizations are still using analog tools and processes to manage their project financials. Excel is quite common in construction, but it’s one of the most inefficient applications you can use.
For starters, Excel lacks a system of checks and balances that can catch human error. Unlike construction tools that run in the cloud, Excel doesn’t provide templates or systems that are made specifically for construction projects.
What’s more, Excel sheets typically “live” on the user’s device and need to be emailed to various stakeholders, who would then edit the document on their end. Aside from raising serious security issues, this type of workflow can lead to major headaches, especially if there are multiple people involved. When different stakeholders have their own version of a file, it’s much more difficult to reconcile construction cost data into one document that has everyone on the same page.
Simply put, Excel — along with analog tools — pave the way for disconnected cost data. And this can lead to an array of risks, such as:
Not having real time access to financial health. Inefficient tools don’t give you the ability to view a project’s financial health or historical costs. If you don’t know where a project’s financials stand at any given time, you may end up making the wrong budgetary decisions.
Inefficiencies with multiple change orders and documentation through the whole approval process. Change orders — which are a fact of life in construction — can be tedious to manage and track if you don’t have a system that connects all your cost data.
Difficulties in managing multiple contracts and tracking costs for each trade. If you have several specialty contractors working on a project, managing each contractor’s contract, terms, and payments can be difficult. Having a system that keeps your construction cost data connected gives you visibility into how contracts and costs impact the overall project.
The Foundation of Successful Connected Cost Data: Common Data Environment
The best way to avoid the above-mentioned issues? Adopt a cost management solution with a common data environment (CDE) — one that lets you view data in real-time and allows multiple team members to collaborate on the same platform.
The right solution will enable your construction teams to fully understand a project’s financial situation, so they can make the proper budget decisions that lead to a healthier bottom line. A good construction cost and project management system also improves visibility and transparency, so teams can collaborate more effectively and come up with better outcomes.
Here’s how a CDE can help you achieve that.
It serves as a single source of truth
When it comes to construction data costs, a CDE gives teams one centralized system for all construction costs.
When you have a single source of truth, it’s no longer necessary to pass documents around or work separately. A CDE serves as the single and only hub for information, so stakeholders can rest easy knowing that the data they have is accurate and is the same for everyone. This is critical, especially when dealing with a large team. In order for projects to be delivered on time and on budget, everyone should be working off the same information. A CDE provides just that.
Another benefit is accessibility. A CDE is cloud-based, making it easy for teams to get their hands on cost data whenever and wherever they need it.
A CDE makes effective collaboration possible
Excel can be a nightmare for large construction teams. The lack of real time data, checks and balances, and security — coupled with the danger of having multiple versions of a file lying around — create workflows that are riddled with inefficiencies. This can spell disaster when you’re dealing with financial information.
That’s why it’s far more effective to use a common data environment that allows multiple team members to function and collaborate on one platform.
This is particularly true when a project is fully underway. Changes happen quickly and to keep up with everything, you need a solution that offers cost visibility into the entire project lifecycle — from preconstruction through design, construction and operations.
That same solution should also keep teams connected and in touch with the necessary data. So whether they’re in the office or at the jobsite, everyone should have access to the same information in real time.
A connected cost management platform helps team members streamline upstream and downstream change order workflows. There’s more visibility all around, which creates accountability and prevents information or action steps from slipping through the cracks.
This helps project teams control costs and see to it that all changes are accounted for. In doing so, they can maintain a positive cash flow, reduce risk, and maximize profits.
Keeping your software tightly integrated
Construction projects require the use of various software and tools. Having a common data environment like Autodesk Construction Cloud provides an open API so you can connect all the applications that you’re using.
Tightly-integrated systems can do wonders for your team’s efficiency. Software integrations eliminate the need for double-entry and manual work, which means things get done faster and there’s less room for error.
A standardized system with room to be flexible
Cost management requirements are different for every project. While tools like Excel allow you to customize fields and equations, the software’s native functionality isn’t always intuitive.
Meanwhile, a well-functioning CDE offers tools to customize budget codes and structures — all while providing standardized templates for contracts, pay applications, or change orders.
The bottom line? A CDE lends itself well to multiple needs and workflows, making it ideal for managing construction cost data and construction projects in general.
Gain Control of Your Costs
The first step to taking control of your construction cost data is to equip your teams with tools that make it easy to do so. By replacing analog software like Excel with a modern cost management solution with a CDE, you and your team members will be able to collaborate better, save time, and improve project profitability.
To learn more about how you can achieve this, download Autodesk’s Simplified Construction Cost Management guide, a resource that sheds light on the cost management challenges that teams should overcome and how they can mitigate risk using a common data platform.