Construction costs in the US have been escalating for months now, and it’s so far the contractors who are carrying the weight of absorbing these price increases. This, according to a recent study by the Associated General Contractors, who went on to point out that recent tariffs on non-US foreign materials have further intensified the issue.
The Pain of Higher Construction Costs
"Excel just wasn’t designed to do some of the heavy lifting that companies need to do in finance.” So says Paul Hammerman, a business applications analyst at Forrester Research Inc. Despite that generally accepted fact, spreadsheets continue to be widely used as the default tool of choice for managing the finances of construction projects large and small. Most individuals that find themselves in this situation however, would enthusiastically agree that the use of spreadsheets for this level of complexity requires a ridiculous amount of meaningless effort for very little return. Far too much effort is put into getting the data into the spreadsheet – and all the formulas straightened out – that little time is actually spent analyzing that data.
Time-phasing the project budget is as core to project controls on construction projects as pasta is to Italian food. Or hockey is to a Canadian winter. Time-phasing is so central to project controls, that in 4castplus there are five different time-phasing plans that can be setup on a single project. Actually, there are 10 – but in this article we’re mostly going to talk about one really important one.
The recent announcement by the Alberta government to invest $1B in grants and loan guarantees to partially upgrade its bitumen, is great news for the Alberta energy industry. As a landlocked province with no access to tidewater for access to diverse markets, and no pipeline to transport its bitumen, Alberta is not getting full value for its products. It’s the government’s hope and expectation that this will incentivize a further $5B in private investment to build and improve the local upgrader infrastructure.
It’s not uncommon for organizations to consider the idea of using their ERP as a one-stop-solution for all their technology needs – even when it comes to managing the many-layered complexities of cost management on major projects. It’s an appealing idea: everything in one place, under the tight control and scrutiny of the finance department. The challenge with this of course, is that the target users of an ERP are in the finance department, not those who are managing the day-to-day operations of a large construction project.
Construction projects have many moving parts and a colossal amount of data to carefully manage in order to keep the project running to plan. Not only that, but there are numerous different types of users that need to work collaboratively in real-time. Such as: Project managers, project controls, engineers, field staff at the jobsite, subcontractors, project owners and others, that all need to work together, sharing data and workflows, to seamlessly bring a project to a successful conclusion.
Cash moves at a different pace than activities. Maybe that seems obvious, or maybe you’re not sure what I’m talking about; but it’s an important distinction to understand in construction project management.
Project Management = More Than You Think
Any organization that executes on major projects will know the importance of gathering information on how far along they are on a project. In other words, evaluating Percent Complete. Evaluating that by activity, by phase, by project, etc. At 4castplus, we refer to this as a "Progress Measurement" and it serves as a critical function for calculating analytics such as Earned Value Management (EVM) metrics. Measuring progress however, is a tricky thing to do; and can cause companies to not bother with it if they don’t have a good system and process in place. This is unfortunate as it is a vital part of project management and project controls on major projects. Without it, you’re flying in the dark.