November 2023
by Ryan Craaybeek, Director, Solutions Consulting at Contruent
Construction company executives and managers like you have long grappled with the challenge of effectively managing project costs, which are frequently subject to influences both within and outside the project. The unpredictable nature of these costs has often led to outcomes that can be detrimental to the project and your construction company.
Factor in the escalating price tag of today’s capital projects, and it’s no wonder the need for greater accuracy, expanded visibility and more stringent control over budgets and expenditures has intensified.
Adopting advanced cost management tools makes it possible to anticipate, plan for and rein in the effects of all these influences on project costs. Three in particular deliver on these:
- Cloud-based platforms that open up remote access to current project information and foster collaboration
- Cost-tracking systems that help keep a close eye on expenses to ensure alignment with the budget
- Real-time reporting dashboards that aggregate and visually summarize real-time cost-related metrics
We’ll cover what makes these cost-management tools effective and what you gain from them.
Cloud-Based Platforms: Facilitating Accessibility and Collaboration
We all know the limitations of traditional physical document storage and their legacy computer-based counterparts: confusion over the location of siloed cost data and documents, inadequate or no access to them and uncertainty over their accuracy. And there are the ramifications: wasted time searching for information, hampered collaboration and decision-making and unnecessary expenses that can cut into profits.
How do you head off or minimize the likelihood of these ramifications? And how do you make confident decisions if the validity or availability of the information is in question?
For companies looking to transition away from these systems, adopting a cloud-based platform is essential for centralizing project cost documentation and making it accessible.
Cloud technology is the difference maker. With its ability to consolidate endless amounts of information, the platform becomes a virtual repository of real-time project cost data and documentation. This is a big plus given the proliferation of required paperwork capital projects generate.
Access (with the right permissions) becomes straightforward. The only thing needed is an internet-connected mobile device, jobsite tablet or remote office laptop — and all that project cost information is at your fingertips.
Centralization and access are only half the battle, though. Being able to navigate to what you’re looking for and manage it is the other half. An advanced cloud-based platform facilitates the creation of structure within it — including establishing file naming standards, assigning categories to cost-related documents (change orders, invoices, receipts, contracts, estimates, etc.), and delegating document- or category-specific viewing and markup permissions.
With order comes control. More time and effort can be devoted to analyzing cost management data and implementing control measures rather than foraging for information or reconciling incompatible data (because time is money).
Cloud-based platforms do more than connect teams and stakeholders to cost-control data; they connect everyone to each other.
What makes this functionality so crucial to cost control is that poor communication is often cited as a key culprit in cost overruns. These platforms remedy this by doubling as an interactive hub to drive the communication that fuels collaboration.
With simultaneous access to real-time cost data, those now-interconnected teams can exchange well-informed questions and insights that support collective decision making to keep costs in check.
Cost-Tracking Systems: Ensuring Accuracy and Accountability
Cost control is really about ensuring costs adhere to the planned budget. That can seem near impossible without a precise way to keep tabs on them, though. Cost-tracking systems that automate this process provide real-time visibility into expenses so they can be better managed against the budget.
What do they allow you to do?
- From the get-go, they monitor every project expenditure, from hard (direct, tangible) costs, including labor, materials, building systems and landscaping, to soft (indirect, intangible) costs, including permit fees, taxes, design costs, trailer and equipment rentals, and legal fees.
- As expenditures are incurred or fluctuate, real-time updates from the cost-tracking system help managers stay on top of spending patterns, potential overruns and fluctuations that may require a second look and corrective action.
- By leveraging historical and current spending data, the system can prepare more accurate forecasts of future expenses. Managers can better anticipate and prepare for projected cost deviations by adjusting spending or reallocating budgets.
- Of course, managers also need to know how well the project complies with regulations and client cost requirements. Cost-tracking systems provide an audit trail showing accountability in adhering to those standards.
Decision-makers are on the hook for the cost-control choices they make and the actions they take. Having transparency into accurate budget allocation, a real-time understanding of spending behavior and better cost predictability strengthens their own accountability for the outcomes of those decisions.
Real-Time Reporting Dashboards: Enhancing Visibility and Control
A challenge for many construction managers is correctly and accurately interpreting their project data. What does it all mean? How can the important be culled from the irrelevant? How can that data be used to help make the right decisions at the right time?
Real-time reporting dashboards have come to their rescue.
Often found in construction project management software, these visualization tools summarize all project data — including cost-related metrics like cost performance index (CPI) and cost variance (CV) — into straightforward graphic formats. Think charts, diagrams and graphs that are recognizable and don’t require intensive training to understand. Even if someone isn’t a “visual” person per se, just a quick view of how costs look can be enough to be confidently in the know.
Dashboards often have built-in flexibility to be modified to support effective, timely decision-making. Change colors to represent specific metrics or tasks. Tailor dashboards to reflect only specified metrics. Create dashboards unique to each job role that needs select information to gauge performance and progress.
Bringing cost data visibility front and center like this makes dashboards a reliable tool for managing project costs effectively. High-level observations allow you to determine at a glance whether costs are on target, if there are detectable cost-related patterns to note or if a visual alert indicates something needs attention.
Drill-down capabilities help you answer questions like: How are current costs comparing with estimated costs? What could be causing a metric to trend in a particular direction? If something isn’t adhering to the budgeted cost, by how much, and what adjustments should be made to prevent or mitigate cost overruns?
Control What Used to Be Uncontrollable
With so much at stake and so much financially invested in the success of a capital project, having visibility into accurate cost data on which to base cost-control decisions is a must. Embracing these advanced tools is a solid step in the right direction.
Contruent supports cost management with software tools that put you in control of your project budget and expenditures — so you can deliver projects faster and more efficiently. Explore your options at Contruent.com.