Why Maximizing Productivity Is the Key to Long-Term Construction Cost Reduction
Oops, you did it again. You were moving forward in a major construction project phase, but before you knew it, you went over budget. Cost overruns are far from an abnormal problem to have on a project. So common, in fact, that currently, 98% of projects experience some degree of budget overrun. Nonetheless, it’s never a good situation to be in where you have to explain to other project stakeholders why your project is millions or even billions over budget.
In each phase of a construction project, cutting costs can feel like a complicated balancing act. On the one hand, the goal is to produce a high-quality and performing project, where significant expenses are often needed. Alternatively, budgets are scrutinized more than ever, and construction costs are trending up for certain labor and materials.. Therefore, budget controllers need to be careful about where to and where not to spend–both of which can make a positive or negative impact on your project as a whole.
In fact, you can argue that a building’s true cost is in its lifecycle where more than 70% of a building’s cost is operational (e.g., maintenance and repairs) compared to approximately 20% that is design and construction. Similarly, when looking at construction project phases, generally it’s wise to invest in the front end (e.g., design, planning) and cut towards the tail end of the project.
Therefore, to be truly budget-conscious on a project is less about saving pennies and more about spending time and resources smarter. To learn how to save money in construction overall, below, we’ve highlighted how professionals can be smarter in each project phase for maximum cost-effectiveness.
Lowering Construction Administration Costs
1. Adopt Automation to Improve Efficiency and Reduce Errors
Automation is one way to massively reduce administrative overhead costs. While automation certainly improves efficiency, allowing staff to accomplish more and faster, it also helps to reduce common human error that can add up. The reality is that no matter how good your staff is, automation can help them streamline those issues better with fewer mistakes.
Here are a few ways automation can reduce your administrative expenses and lower construction costs on a whole:
- Budgeting and Accounting. Excel spreadsheets are a thing of the past, not least of all because they’re prone to human error. With a robust system, you can easily see past cycles, overall expenditures, costs per project, and even projected profits.
- Streamline Submittals. Those in the industry know how tedious creating submittals can be and how important accuracy is for success. Automating the process with the help of construction technology eliminates a great deal of the manual time and costs involved.
2. Implement Better Document Management
The construction industry is one with many documentation needs. As mentioned above, no doubt will digitizing your documents and blueprints reduce administrative costs. Furthermore, choosing an effective and collaborative document management system can help you improve efficiency. One major way that implementing a good system decreases your overall expenditures is by adding an extra level of transparency to all your efforts. With a cohesive document management system, you can create robust reports to show exactly where your most significant expenses are, to help you determine where to invest and where to cut costs.
Additionally, a robust document management system can improve your administrative efficiency through:
- Administrative Support. A robust document management system means that your administrative support staff can more easily access, file, and work with any open project they need to in your office. This can save countless hours in finding files and information. It also allows staff to better monitor time-sensitive information, such as when permits need to be pulled.
- Communication. Communication is essential in the construction industry to execute design plans and manage changes. A comprehensive system will allow you to keep all information up to date and centrally located so that any stakeholder in your project can access the information they need when they need it.
3. Keeping Track of Time, Tools and More with Technology
Construction is an industry where little things can add up fast. You can’t do much about the cost of regulations or materials. You only have so much cushion to provide a profit margin, so it’s important to keep an accurate accounting of the small expenses.
Moreover, to lower construction costs, technology can be effectively used to help with:
- Time Management. This can be a difficult thing to monitor, but it’s essential. Taking stock of how long projects take for your staff can tell you where you would be better off delegating and where you need automation to improve the process. It’s important to develop a good system to manage where employees spend their time.
- Tools and Equipment Tracking. Tools can pose a huge expense, especially when they wander off the job. It might not seem like much to lose one or two low-cost items. When you multiply that by job sites and incidents, it becomes a large expenditure.
How to Reduce Construction Costs in the Field
Improving productivity, workflows, communication, and more from the field where construction is being executed can save teams from rework and significant cost overruns. Even the smallest of changes can either make or break you from a financial perspective on a project. Here’s a look at some of the field factors that can impact construction profits the most:
Factor No. 1: Field Productivity
According to Bill Klorman, President of Woodland Hills, CA-based Klorman Construction, even the most minor increase in field productivity can be significant for construction profits.
“Creating as little as 0.25% additional profit on a multimillion-dollar project by increasing productivity a little can become a substantial amount of money—maybe the only profit you will realize,” he says in the Concrete Construction article.
So how is it possible to ensure an efficient job site to stay meet or exceed profit goals? One of the easiest ways to do this is to ensure that construction workers are building and not pencil pushing. For instance, clearly delegate administrative work to others back in the office or appoint a go-to person on site to handle this. Better yet, the right technology platform can help keep all the plans, documents, and templates in one central place, so less time is spent looking for materials, and more time is spent building. Even just consolidating something like pulling a permit or plan from minutes to seconds can add up over a day, week, and month. In terms of managing the labor shortage, start hiring earlier so you can scoop up the experienced, more credible workers while they’re still on the market.
Factor No. 2: Communication
To keep communication streamlined on a project site, make sure everything is performed in one central system and updates can be made in real-time. When this occurs, teams can improve their efficiency, build better and, ultimately, improve construction profits. However, communicating via one central system isn’t always enough—there needs to be buy-in too for this to be a success.
Finally, the quality of communication is also essential, as it’s crucial to building camaraderie, trust, and transparency on a project.
Factor No. 3: Workflows
So how do you ensure that workflows are optimized, so you’re making money on a project? Streamline them.
Invest in automated processes to streamline workflows across the board. Automation has made significant leaps in recent years for construction and its potential is enormous when it comes to traditional time-heavy processes, such as submittals and requests for information (RFIs).
The right software program should be able to streamline most, if not all, tedious workflows. It should also make it easy to track work throughout the construction lifecycle and provide a clear chain of command that incorporates all relevant details that are necessary on a project. Workflows should also be standardized to help teams move at a faster pace with greater ease.
Factor No. 4: Accuracy of Information
So how do things change so that the information coming to a team is accurate? Remember, in the communication portion of this where we discussed the importance of a centralized station in a cloud-based system? It applies here too.
We’ll repeat it: For a successful construction project, the only single source of truth as it pertains to information is the cloud-based one that can show up-to-the-second changes.
How significant could this be to your operations? Consider this: Productivity can increase by as much as 50% by merely implementing a cloud-based platform to control and facilitate information in real time. While many might scoff at the upfront investment necessary to do this, you can’t argue with the productivity increase. When you combine this with accurate, streamlined information, you’re poised to be working on a successful project that builds faster.
How to Save Money in Each Construction Project Phase
Before you’re expecting a line-by-line list of where to cut in each phase of construction, let’s back up a bit. Reducing overall construction costs isn’t solely about cutting costs whenever needed. It involves a more strategic approach to see the full picture of costs in a construction project. Just consider a few of the top reasons for cost overruns:
- Inaccurate project estimates
- Design errors
- Change orders
- Admin errors
- Poor site management
As you can see, most of the major reasons projects go over budget have to do with ineffective communication and management. Although minimizing expenses in certain construction project phases is certainly effective, you’ll see the most ROI if you take the time and resources to manage and control at the front end.
How does your construction workflow stack up? Take our free assessment and find out.
Reducing Construction Costs is a Process
It’s easy to say “cut here” or “cut there,” when attempting to lower construction costs. Nevertheless, to make a real impact in reducing administrative costs, it needs to be part of a larger process. By evaluating systems and processes and identifying inefficiencies and ways to automate and optimize, you’ll find it exponentially easier to melt down expenses, line item by line item.