All companies attempt to hire experienced personnel. This is especially true when hiring project superintendents, construction managers, and project managers. After all, these folks are your eyes and ears on a job, and in many situations, they “own the project”. In other words, they’re responsible for everything that happens or does not happen on the project.
When interviewing for these positions, you look at their experience in: managing a job, managing people, getting all the necessary permits, getting needed materials to the site, managing safety, managing all subcontractors and so much more. But do you ask them about their performance history in bringing projects to a close, under budget and on time? AKA, do you walk away from the interview knowing they can make a profit on the jobs they manage for you? Probably not.
Most project managers learn how to manage projects by watching their predecessors or seniors. They’re not trained on how to make a profit; and, even if they are, most companies don’t give them the tools to do this. The tools I refer to are “Project Controls”.
What Are Project Controls?
Project controls are simply defined as the processes, data gathering and management necessary to bid and predict the outcome of a project. Breaking this down to simple terms, it’s the process of predicting schedules, all costs (labor, equipment, materials, etc.), and risks, with the desire of showing a profit at the end of the job. They give you the ability to build an Estimate to Complete (ETC) at any point in a project.
These controls are scalable to the size of your firm. Project Controls software is commercially available and can be painfully detailed including cost-loaded schedules. Or, it can simply involve thorough planning, tracking of cost, and your level of effort against budget in Excel spreadsheets. You can bring project controls to your organization by training your current staff or as involved by hiring a Project Controls Specialist with an experienced, proven career in this field.
Can Project Controls Prevent Financial Distress?
In our Construction Finance business, we speak to contractors of all sizes. About half our construction clients come to us due to distressed financial conditions. About 2/3rds of the distress is due to a project or projects that either were not bid properly, were mismanaged, or both, leading to large financial losses.
When we see these issues, we invariably ask about their project controls, only to be told there are none or they ask “What are those?” In the construction factoring space, our biggest concerns are fraud and non-performance issues. We rule out fraud in the underwriting side of the house.
Project performance is something we measure prior to funding and throughout the life of the funding. It’s a requisite for us to know before funding that our client’s performance can and will improve and that they will be around for us to collect. If project controls are in place, we often have an easier time seeing an improved financial position.
To Control Your Business, You Must Control Your Projects
Whether you’re looking for financing or not, all construction contractors want to be profitable and sustainable. Neither are in your grasp unless your management staff can bid and predict the outcome of each project.
Even with these processes in place, things can and will go wrong. It’s the nature of the construction space. Ask yourself this; would you rather predict the shortcomings, and either approach the GC for a change order, or at a minimum, start to control your cost early, or do you just want to wait and find out at the end of the project you’re upside down? We all know the answer here! Take control of your business by controlling the financial destiny of each and every project!
RELATED READING: Top Reasons Construction Companies Fail
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