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Features Industry Insight Tips & Advice Ultimate Guide

Is Construction Software Worth the Investment?

Construction software isn’t cheap, and when it comes to calculating the ROI, it can be difficult to see the upside. Even though it may not be obvious, there are some real, hard benefits to purchasing a construction-specific software solution.

The importance of investing in construction software

Many construction companies start out using general accounting software, like QuickBooks, to manage their finances. Usually, these solutions are effective for a while, but then the business gets busy, hires more workers, and soon outgrows the tool. During this phase, important job and budget cost tracking is often done using spreadsheets, which are prone to errors and don’t always have the most up-to-date information.

As a company continues to grow, they often look to invest in construction-specific software that will help them manage finances and projects within the same software. Investing in all-in-one construction software is important because it:

  • Provides one source for information, data, and project file storage, both in the field and in the office. This improves communication and increases collaboration.
  • Connects the field to the office, eliminating costly data silos, where information isn’t shared across teams.
  • Improves data accuracy by eliminating error-prone spreadsheets.
  • Improves accessibility by providing information for multiple hardware options, from laptops, smartphones, tablets, and desktops.
  • Allows teams to know what resources they have and when – which helps with forecasting.

Why you might not want to purchase software

There are many reasons contractors and suppliers don’t want to purchase new software. It can be difficult to make a change, especially when the current system is “working.” Many workers fear change, even if it will make their jobs easier or quicker. Fear of the unknown keeps many from making any kind of change, even a good one.

Changing software costs money. There’s no way around it, there’s a financial cost to any software system. While it’s important to know how much the software will cost, it’s also important to assess the potential benefits of a new system. These benefits aren’t always obvious and can be difficult to measure. They include reduced stress levels, more accurate information, and increased productivity.

In the short run, employees will be less efficient than they have been. This can be attributed to the training time needed to educate employees and decreased efficiency due to learning a new skill. However, employees will get better as time progresses, continuing to improve their efficiency, and changes in your processes can add to that efficiency.

Why you should invest in construction software

Investing in an all-in-one, project management and accounting, software solution will provide several benefits:

It will streamline and improve your current processes.

When a company is using general accounting software that isn’t specific to the construction industry, employees must often create new processes to track and report on data in the way that project managers or management want it reported. However, by using a solution specific to the industry, many of these processes can be streamlined or even eliminated. This increases employee efficiency and saves time and money.

It will increase productivity.

Employees have only one place to look for the information and documents they need, reducing lost time. Also, with increased accuracy, employees can rely on the information they receive, reducing time spent checking for errors. Data entry errors have cost companies millions of dollars.

Companies will need to hire fewer employees.

With improved efficiency and productivity, workers can be reassigned to other tasks, or a company may find there’s no need to hire additional workers to handle additional workflow. This saves time searching for, hiring, and onboarding new employees.

It improves industry compliance.

Construction companies have additional compliance requirements that other companies don’t. They must comply with hiring standards, contractor insurance requirements, safety requirements, as well as federal and state government pay requirements. An all-in-one construction software solution provides these companies with the tools they need to ensure compliance in all their activities.

It connects the field to the office.

One of the biggest communication breakdowns occurs between the job site and the office. Sharing data between workers in these two locations is key to completing projects in a timely and cost-efficient manner. By purchasing one software that integrates both field and office communication and data, you can save the time and headaches that occur because of miscommunication.

Helps you save more time by providing you with the latest tools.

It provides new tools, like automation and artificial intelligence, to help project teams streamline their projects and mitigate risks before they happen. Automation reduces workload by performing common tasks without human intervention. Artificial intelligence, or AI, helps project teams to predict costs and other risks before they occur so they can address them and potentially prevent them. For example, it can analyze activities and learn which ones cause the most delay or create the most risk and remind users when these tasks will be performed.

An all-in-one construction software solution, like Premier, allows companies to streamline their processes, quickly share information between the field and office, ensure compliance with industry and government standards, and take advantage of new tools like automation and artificial intelligence. To learn more about how Premier can take your construction company to the next level, schedule a demo today.

Author Biography:

Dawn Killough is a construction writer with over 20 years of experience with construction payments, from the perspectives of subcontractors and general contractors. Dawn has held roles such as a staff accountant, green building advisor, project assistant, and contract administrator.  Her work for general contractors, design firms, and subcontractors has even led to the publication of blogs on several construction tech websites and her book, Green Building Design 101.

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Features Industry Insight Tips & Advice Ultimate Guide

The Ultimate Guide to Forecasting in Construction Software

Knowing your numbers is critical in the construction industry. Understanding how much a previous job truly cost is part of accurately estimating and landing new, profitable projects. But, just as vital is knowing how a current project is running and where it will end up, allowing for adjustments and planning. For this type of nimbleness, construction contractors need to understand forecasting.

What is forecasting? How does it help? And how can a firm perform forecasting properly? Keep reading to learn more about this important tactic (and feature) in this ultimate guide to forecasting in construction. 

What is Forecasting?

Forecasting is the process of analyzing and interpreting the current trajectory of a construction project. This process takes into account the budget, actual costs, upcoming or projected costs, current and expected change orders, and other values that will determine the final cost of the project at completion. 

Among others, the forecasting process yields two important data points: the estimate at completion (EAC) and the estimate to completion (ETC). 

Estimate at Completion (EAC)

The estimate at completion for any project details how much the project will cost the contractor or developer when the project wraps. This estimate includes all of the values involved in the project, including actual costs, projected costs, expected change orders, and other fees. 

This is a report that should be run and reviewed on a monthly basis to ensure there are no surprises or significant changes to waylay the project’s success.

Estimate to Completion (ETC)

The estimate to completion is a forecasting data point that explains how much money is expected to be left over from the project’s budget at completion. This value is essentially the difference between the budget and the EAC. 

While subtracting the EAC from the budget may appear to be a simple equation, that’s not the case. If the EAC isn’t as precise as possible and accounts for all of the commitments moving forward through the project (actual and proposed), the ETC may be useless. At this point, the contractor is opening themselves up to expensive overruns and shrunken profit margins, and they might not even know these expenses are coming. 

Why is Forecasting Important?

The ways that accurate forecasting is important are many, but let’s use an analogy. Consider you have a flight to make and you’ve budgeted enough time to get to the airport. And although you know the way, you set your GPS to track your progress. The GPS details what time you’ll arrive at your current pace and route, allowing you to determine how much time you’ll have left once you arrive. If a traffic jam or detour is in the future, the GPS adjusts the route and gives you the newest data, helping you to ensure you remain on time.

Forecasting is essentially the same as using a GPS with the exception that you get to choose the route when a roadblock occurs. Still, accurate forecasting can explain how much that detail may cost, and where the budget will land.

Other Benefits of Forecasting

Beyond being able to remain nimble and informed as described above, there are other significant benefits to accurate forecasting. 

Forecasting Creates Accountability

Firms should be running and reviewing forecasting reports on a monthly basis. Upon review and comparison to past months, major changes that have taken place in the budget or proposed changes moving forward will be apparent. Senior staff can then ask project managers why these changes occurred or why they may be necessary.

While this might seem like punishment, it’s anything but. Understanding how a project management team thinks allows the firm to implement training or protocols that may enrich their management team moving forward, helping keep future projects on budget. On the other hand, it also gives management the ability to recognize their staff for their foresight, allowing them to place employees in roles that best play to their strengths.

Forecasting Allows for Contingency Conservation

Every project has contingencies built into the budget for unforeseeable or unavoidable events. Generally speaking, those contingencies are around 10 percent of the total estimated cost. And while this is money meant for “emergencies,” managing the project allows the contractor to conserve their contingency budget.

Early and Frequent Communication

One of the most beneficial aspects of forecasting for contractors is the ability to clearly communicate early and often. With accurate forecasting reports, contractors are often able to see issues with the budget—or timeline, to some degree—well before the problem comes to fruition rather than that problem springing up at the last second when the contractors’ backs are against the wall.

With this understanding of the budget and its projected health, contractors are able to discuss issues with the customer. This may give the customer enough time to make a change and adjust the budget or scope accordingly, keeping the project on track and allowing for a timely delivery. 

Better Budgeting and Estimating

Very few successful construction firms handle one job at a time. They’re typically running multiple projects, all at different stages. Some are wrapping up, some are in process, and some may only be in the estimating or proposal stage. While the traditional use for forecasting is to keep the current project on track by staying ahead, it can also help with other projects in the pipeline.

The proper use of forecasting keeps contractors and developers up to date on the latest data on a monthly basis. If they’re reviewing how their current projects are doing, they’ll be able to plan and estimate other similar projects more accurately and efficiently. In use with job costing reports, being aware of trends in forecasting will ensure the contractor is able to provide the best estimate possible for their business and allow for better, more accurate budgeting for their customers. 

How Construction Management Software Can Help with Forecasting

Let’s be honest: the reason that most contractors that don’t forecast choose not to use this tool is that it’s hard. There is a lot of data entry, updating, reviewing, and corroboration that has to occur to forecast properly. And, should one data point be a bit out of line, the report’s credibility becomes suspect, meaning it’s not as helpful as a tool as one might think.

Just think of all the items that a forecasting report might require:

  • Actual costs of each line item
  • Data from the correct fiscal period
  • Which invoices apply to each cost item (and invoices that have multiple cost items)
  • Actual, pending, and outstanding commitment amounts
  • Unforeseen or unaccounted items

Luckily, construction management software can help ease this incredibly complex burden. 

Premier Construction Software automates the forecasting process. The system automatically populates most of the critical data that accurate forecasting requires, meaning users don’t need to transfer budget items, double-check accuracy, or even collect all of the data required. The system will automatically pluck items from individual reports and integrate them into the forecasting report.

Premier will automatically enter, track, or calculate values such as:

  • Original budget
  • Change orders (both actual and proposed)
  • Commitments (actual, proposed, projected, outstanding, and uncommitted actuals)
  • The budget utilized and project budgets

Along with those values, Premier allows users to update or input data that might not currently exist within the system. Items like anticipated costs for which the system does not account are easy to add, with customizable categories for simple organization. Also, any actions that need to occur such as budget transfers or internal change orders (workflows implemented for accountability when transferring budget items) are incredibly simple to add and track. 

Premier users also have the benefit of customizing third-party access. Users can allow customers, lenders, bonding partners, or subcontractors to access the system for up-to-date forecasting information. 

Forecasting Automation is a Powerful Tool That Every Firm Needs

The automation and customization make Premier Construction Software’s forecasting feature incredibly powerful. Users can make more informed decisions that keep projects on track and on budget by using the latest information available. This type of informed, nimble decision-making will lead to better profitability, growth, and happier customers—the goals of any construction firm. 

Author Biography:

Tom Scalisi has over 15 years of experience working in the trades. Since moving to full-time freelance writing, he has developed a passion for helping construction companies grow. He enjoys teaching contractors how technology can streamline their businesses and educating them about their rights during payment disputes. 

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Tips & Advice Trends & Technology

Inefficiency Costs in Construction

It doesn’t matter which industry you work in, inefficiency is a profit killer. Doing things twice, taking too long to accomplish a goal, or paying too much to get something done are all sure ways to beat up a company’s wallet. For that reason, most companies aim to streamline their processes and improve efficiency. Unfortunately, that’s a tall order for the inefficiency costs in construction. 

What causes inefficiencies in construction?

Inefficiencies typically start with a lack of information, but they can take many forms. The following are some of the largest contributors to inefficiency costs in construction.

Poor Planning

There are many moving parts on a construction project: project owners, general contractors, subs, suppliers, designers, engineers, inspectors, financing lenders, and more. Getting all of those parties to play nicely and on time with each other is truly an art, especially when it comes to scheduling. 

One scheduling snafu can cause massive issues, especially if it involves a materials delivery or a specialty sub that can’t make it back to the site in the near future.

Poor Communication

One of the most significant issues causing inefficiencies in construction is poor communication. Job site confusion, questions about certain aspects of the project, unclear scopes of work, and even changes in designs aren’t always handled quickly and efficiently. Instead, questions compile and delays build, costing the contractor, subs, and project owners precious time and money.

Let’s look at a likely situation: A specified type of flooring isn’t available, and the flooring sub needs to know what to do. Instead of taking the efficient route and sending an RFI to the designer, he tells the GC he needs an answer before ordering. The GC is juggling 15 things at one time and gets distracted by something on the job. He never delivers the message. 

By the time the subcontractor needs to be on-site and laying floors, he’s already behind schedule because he was waiting on an answer and couldn’t order the floor. 

Lack of Skilled Labor and Training 

The construction industry’s need for skilled labor is well documented, but understanding how much this lack costs the industry isn’t so cut and dry. Without a crew of men and women that a company can rely on, projects take longer than necessary. Also, these crews’ inexperience means they might not recognize when they’re working inefficiently.

A lack of training can contribute to the issue. Whether it’s a new system or technique, or even just basic safety, not training staff in how to do a particular aspect of the job will cost a business. In the best case, they learn by trial and error. In the worst cases, injuries can occur. In either case, things are running inefficiently.

And, consider the amount of time and resources it takes to recruit the folks to help run the business as smoothly as possible. What could the company do with those resources, otherwise?

Aversion to Technology

One aspect that separates the construction industry from just about every other business is its unwillingness to adopt new technology. While most industries have moved toward automation and streamlined processes thanks to the latest technology, construction holds fast to its old ways. 

Take drawing management, for example. If a company is still using paper plans, they need to be sure they’re using the latest, most updated set of drawings. Someone needs to print the plans and get them to the job site, costing money in supplies (paper and ink) as well as travel time and vehicle cost (gas, wear and tear).

Instead, a drawing management system allows GCs and project managers to check for the latest plans via a mobile device from the job site. And, anyone else who needs to see those plans will also have instant access, allowing them to make decisions or change course whenever necessary. 

What Inefficiencies Can Cost a Construction Company

When you consider the wide range of inefficiencies that exist and what can cause them, it doesn’t take much to imagine they make a huge impact on the bottom line. 

While some situations are unavoidable, issues caused by poor communication are estimated to cost construction workers almost two full days of work each week. Multiply those two hours by everyone on the project, and it becomes painfully obvious that time is money. 

And, if you consider how much time call-backs cost, as well as time spent on fixing avoidable errors caused by miscommunication, the numbers get worse. It’s estimated that all of these inefficiencies are costing the construction industry around $177 billion each year. 

There is a Solution

Most of the issues that cause inefficiencies are the result of poor communication or missing information. The good news is there is a simple way to improve communication and collect data in one spot—utilizing and ERP-based construction management software.

Automation

ERP software can streamline a business’s day-to-day tasks. By automating some of the more mundane and error-prone manual tasks, the team can focus their attention on creative solutions to unique problems. Whether it be tracking revisions, ensuring everyone’s compliances are up to date or giving everyone on the job an easier way to pay or get paid, automation can be the answer.

Better Decisions

It’s tough to make a good decision without all the information available, and construction management software can help. By centralizing all the data collection with an ERP, decision-makers will have the latest data and information available. This allows them to make smarter, more informed decisions to limit inefficiencies and keep the company and project on track. 

Drawing Management

Drawing management is also critical to ensure everyone is literally on the same page. Revisions and changes are instantly available to everyone on the job. If there are any questions or an RFI is necessary, creating and managing those documents using the ERP software is easy. Automated workflows ensure everyone who needs to receive these documents does, improving communication.

Cloud-based Access

Finally, construction management software can ensure that all of the important data, reports, drawings, invoices, and other documents are available at the users’ fingertips. Cloud-based software allows access from anywhere and on any device with access to the internet. Coupled with real-time updates, cloud storage ensures everyone is working with the same data at all times. 

Better Reporting

Last but not least, ERP-based construction management software helps businesses look at their past practices and forecast their futures. With automatically updated reports like job costing and budgets, and key performance indicators, the company will have an easier time hunting down inefficiencies and improving its practices.

Check out Premier Construction Software to see if it fits your company’s strategies and goals.  Our construction management and accounting software provide teams with the tools they need to take advantage of these technologies. Schedule a demo by contacting us today.

We’re more than just construction financial software. We’re built to help your business. 

Author Biography:

Dawn Killough is a construction writer with over 20 years of experience with construction payments, from the perspectives of subcontractors and general contractors. Dawn has held roles such as a staff accountant, green building advisor, project assistant, and contract administrator.  Her work for general contractors, design firms, and subcontractors has even led to the publication of blogs on several construction tech websites and her book, Green Building Design 101

 

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Features Industry Insight Tips & Advice

Construction Forecasting: Developing and Maintaining a Project Budget

In 2015, KPMG reported that 31% of construction projects come within 10% of the budget. And it seems the bigger the project, the worse the financial uncertainty. In 2016, McKinsey reported that 80% of large projects go over budget. The research shows that contractors and owners are struggling to maintain their budgets throughout their projects. Forecasting costs has only become even more difficult in the last couple of years, due to the global pandemic and supply chain issues. 

Knowing how to build a project budget and manage it over the life of a project is a skill that can be learned.

Here are some tips we have gathered to help.  

Developing a project budget 

Developing a project budget begins with a clear and complete scope of work. You must have a clear picture of what needs to be done and when it needs to be done before you can price the work. Talk to the owner about their project and get as many details as possible about the work and their schedule. 

Using the description gathered from the project owner, develop a breakdown of the work that needs to be completed, also called a work breakdown structure or WBS. A WBS breaks the work down into small, manageable, quantifiable scopes of work. For example, installing drywall. A WBS helps in both budgeting and scheduling work because each task and can be quantified for cost and time. 

Based on your conversations with the project owner, you should be able to establish milestones in the schedule that have to be met. These may include equipment delivery dates or occupancy. Establish key performance indicators (KPIs) that let you know if you are meeting both the owner’s and your own milestones. For example, you may have profit goals or productivity targets that you must meet for the project to be successful. Defining these ahead of time will help you assess the project’s success as it progresses, not just at the end. 

When developing the project schedule and budget, provide an optimistic view, a pessimistic view, and a most likely scenario. Leave some room for changes and added work. By analyzing these three schedules and budgets, you can assess the probability that you will meet your goals ahead of time and start to plan for potential issues before they come up. 

Maintaining the project budget 

A project budget should be a living document that changes as the project progresses. Added work, scope changes, and schedule delays often affect the schedule as a project moves on. Project managers can use several methods to forecast costs to complete the work. They include using a work breakdown structure, using Excel formats, third-party templates, and construction software. 

Some contractors use the list or work breakdown structure method to estimate their projects and forecast future costs. This technique involves listing all the work that needs to be performed and breaking it down into manageable tasks, like WBS. Then each of these tasks is budgeted, scheduled, and tracked throughout the project. While this technique may work for smaller simpler projects, it can easily get unmanageable on larger construction projects. 

The next step up from a written list is using Excel templates to manage costs, schedules, and other information. Excel spreadsheets have been used to track costs, schedules, daily reports, budgets, and much more. If you have not developed your own forms, many are available on the internet. The problem with excel spreadsheets is that they are not connected, and not tailored to construction. 

Some companies rely on templates and use them to track all correspondence and data for their projects. These templates are created by third-party companies and not customized for a specific project or scope. Again, they are not connected, and the data is not centrally located. 

The most modern way to track and maintain a project budget is using construction software. Today’s software is available in ERP (Enterprise Resource Planning) and all-in-one solutions that combine project management, actual costs, commitments, unanticipated costs, budgets, and communication together, where everything is in one place. They tie together estimating, job costing, timekeeping, communication, and financials. Using this information, project managers can more effectively forecast productivity and costs, providing a more accurate picture of where they will finish on the job and ensuring they are not caught with any surprises. They can review historical information and easily dive into the month-to-month variances to better understand the current budget and estimate at completion. 

Keys to better forecasting

  1. Get real-time data

When project managers try to forecast monthly, they often make mistakes if the accounting and job costing is not integrated into one software solution. Working with multiple software applications makes it difficult to compile the data taking several days or even weeks, leaving the Project Manager no choice but to base their forecasts on lagging information. Worst of all, they cannot trust the data to make accurate and informed decisions.  

Today’s financial construction software offers real-time data that automatically calculates the estimate at completion. This way you can easily compare your original estimate, current estimate, and estimate at completion. Software solutions offer great lock features allowing you to freeze the original estimate and forecasting period, forcing your team to properly enter any change orders in the correct period to record any movement on the job. This way, each month you can easily review the variances and see why the budget has moved.  

  1. Communicate

There is no substitute for continuous communication between contractors, owners, and design team members. When everyone is on the same page there are fewer hidden costs. Software solutions offer simple, integrated ways for team members to communicate in real-time about issues, change orders, and any concerns. With software introducing new and faster ways to approve and electronically sign off on commitments, ap invoices, and change orders, it ensures the estimate at completion is up to date and accurate. Members can easily approve, mark-up, decline, or reject key documents instantly. The ability to see what is outstanding and ensure you have your internal processes optimized to provide open, instant feedback, makes forecasting much simpler and more accurate. 

  1. Integrate systems

It’s time to say goodbye to disconnected excel spreadsheets. With real-time data, it makes it easy for a project manager to easily adjust the EAC using anticipated costs and make more informed decisions as to where the budget will end up. 

When systems are separated from each other due to the lack of software integration, time can be lost spent pulling information from multiple sources and compiling it into comprehensive reports. Teams need integrated data at their fingertips so they can act proactively view actual costs, commitments, change orders, pending items, etc. Using an ERP or all-in-one software financial construction solution provides project managers a macro and micro-overview of the budget as they can easily drill down into all the details waiting for other departments to provide information or for spreadsheets to be updated. 

  1. Automate

Saving time saves money. The more teams can automate daily data-entry tasks, the more time they can spend actively managing the work and proactively reviewing the high-risk itemsSo much time is being wasted on chasing down subcontractors, manually approving AP invoices, trying to collect signatures, and rekeying data from emails. An inefficient system makes it difficult for PMs to find the time to properly forecast. With proper construction financial software, the most time-consuming and complex tasks can be automated to save you valuable time and ensure you can scale the business without having to add more overhead. Best of all, you can start trusting your data and gain better financial control of your jobs and business.  

If you are ready to step up your forecasting game, look no further than Premier Construction Software. We have an easy-to-use financial construction software solution that will help manage your project from beginning to completion.  Get in touch with our team to schedule a demo today!Author Biography:

Dawn Killough is a construction writer with over 20 years of experience with construction payments, from the perspectives of subcontractors and general contractors. Dawn has held roles such as a staff accountant, green building advisor, project assistant, and contract administrator.  Her work for general contractors, design firms, and subcontractors has even led to the publication of blogs on several construction tech websites and her book, Green Building Design 101.

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Tips & Advice

KPIs Project Managers Should Be Tracking

Everyone wants to be successful, but how do you know what success looks like to your company? Many companies use KPIs—that is, Key Performance Indicators—to outline expectations and define what they consider measures of success.

So, what exactly is a KPI? According to Construction Financial Management Association (CFMA), KPIs are “vital signals that help indicate if your business is functioning according to plan” and can be further understood by breaking down each word in the acronym:

  • Key: An important or vital aspect. It means you have to prioritize. However, it doesn’t mean you can leave everything on the list and just shift the order of priorities. Everything you measure can’t be considered a key metric. Start with a manageable number. We typically see organizations effectively use 3-7 KPIs. (CFMA)
  • Performance: The manner in which something operates, functions, or behaves. Just like an engine’s performance can be measured by more than its miles per gallon, a company’s performance needs to look beyond profit metrics. (CFMA)
  • Indicator: A sign that gives information about and draws attention to a condition. This is usually a number, percent, or color code that quickly conveys favorable or non-favorable status. (CFMA)

From a construction standpoint, KPIs help gauge the success of a project and to assess performance against strategic and operational goals. KPIs are typically established and agreed upon at the beginning of a project in order to solidify responsibilities and to ensure everyone understands what’s expected of them. Factual data is essential in order to build value and achieve sustainable growth.

To effectively analyze project performance, it’s necessary to prioritize which KPIs will be weighted most heavily, as well as which will most accurately reflect the status and health of a project. While many of us are quick to rely on financials as the leading indicators of success, it’s important to understand that success can’t always be measured strictly within a quantitative framework and there are other essential construction KPIs that need to be considered as well.

Hard numbers and facts are often what precipitate and drive change. Without relevant and timely data, it is difficult to gauge how companies are faring.

So which KPIs should project managers be tracking? Below are five critical categories to consider when developing your construction project KPIs:

1. Safety

People working in construction site. Young men at work in new house inside apartment building. Latino manual worker helping injured co-worker after accident on duty

Arguably now more than ever, worker safety needs to be a top priority for construction companies. Safety incidents can lead to costly project delays, increased insurance premiums, or other unexpected costs—and, therefore, investing in worker safety will save you money in both the short- and long-term.

Safety KPIs may include:

  • Safety/incident rate
  • Number of safety meetings/communications
  • Number of accidents per supplier
  • Number of time-loss claims
  • Number of serious injury claims

2. Quality, Reliability & Environment

Keeping a pulse on these is critical to ensuring a project stays on-track and within budget as it reduces the likelihood for changes, rework and holds businesses accountable to the environment. Quality KPIs will also help you evaluate how the project has progressed if it’s passing required inspections, if the work is being done to satisfaction and if you can rely on this performance for the long-term.

Quality KPIs may include:

  • Number of errors/defects & callbacks
  • Time to rectify defects
  • Incident reports
  • Total cost of rework
  • Number of total site inspections
  • Number of passed site inspections
  • Community complaints
  • Corporate social responsibility policy
  • Consultant-contractor construction coordination
  • The quality and performance of the building at substantial completion
  • The quality and performance of the building at the end of the 1- year warranty
  • Reliability – Percentage of projects (by number and value) that are “on budget” and “on schedule” at substantial completion.
  • Building energy use
  • Construction waste diverted

3. Performance

Performance metrics help measure worker, equipment and economic productivity and how the project and business are developing. By paying attention to how much time and effort is required to complete each portion of the project, teams can reallocate resources to the areas that need them most to keep the project on time and within scope.

Performance KPIs may include:

  • Average revenue per hour worked
  • Percent of wasted time (equipment and labor)
  • Amount of waste/recycling per job
  • Economic performance
  • Characteristics of businesses
  • Productivity measured in terms of GDP contributed per worker
  • Business Size & Formation

4. People/Employees

Two male engineer looking commercial building structure, blur image

In addition to tracking employee performance, it’s important to also measure their development and satisfaction. Happy workers are more likely to perform better, and to stay with the company longer. Not only does employee satisfaction lead to improved quality of work, it reduces the likelihood of churn and therefore also saves on hiring and training costs.

Employee KPIs may include:

  • Turnover rate
  • Worker satisfaction
  • Training completion rate
  • Workforce
  • Education
  • Youth/Gender/Diversity
  • Wages
  • Unionization
  • Qualification

5. Budget & Forecast

Knowing how and where a project’s budget is being spent is one of the most important roles of a project manager. It’s also crucial for them to be able to identify and understand any deviation from the budget in order to improve future planning and job costing, in addition to limiting waste and reducing inefficiencies.

Budget KPIs may include:

  • Budget variance
  • Cost Performance Index
  • Line items in budget
  • Project Pipeline – Total value of proposed projects
  • Total Number of Building Permits Available
  • Capital expenditures
  • Cost to build
  • Interest rates
  • Product price
  • R&D spending
  • Total NUMBER of projects within +/- 5% of the tender price: • Total VALUE of projects within +/- 5% of the tender price
  • Total NUMBER & VALUE of projects that were completed on or before the predicted date:

How to Choose the Right KPIs for Your Project

Measuring, reporting and tracking KPIs can be a complex endeavor. KPIs need to be introduced deliberately and in small steps. Ensure the set of KPIs provide tangible data that can help construction businesses understand their company, industry and the market better. While action not data drives improvement, KPIs cannot tell businesses what the “right” thing to do might be but they can help illuminate and uncover new or poorly understood factors that can help inform decisions.

Because every project and business is different, KPIs should be developed on a project-by-project basis. When developing future KPIs, a good place to start is by examining past projects to reflect upon successes and failures. As the saying goes, “hindsight is 20/20” and evaluating past mistakes gives you the opportunity to plan better for the future.

Manage construction projects with the job dashboard in Premier

Remember that while financial KPIs are most commonly used to measure success, there are other critical KPI categories that also need to be considered to fully understand your project and to provide you with the information needed to improve operational efficiency.

Conclusion

Every construction project has a number of moving parts and KPIs that need to be monitored closely, and we’re here to help you keep track of the information that matters. Today, technology and the practices that exploit them are becoming a greater factor in competitiveness and profitability. The degree to which businesses invest in R&D is an indicator of how ready they are to adopt new technologies and how resilient thy might be to unforeseen events.

To learn how our all-in-one, cloud-based construction management software can ensure your project’s processes are clearly defined and optimized through automation, click here.

 

Author Biography:

Kathryn Dressler is a content strategist with more than 10 years of experience across the spectrum of marketing services, including blogging, social media, public relations, copywriting and editorial services.