Why Construction Projects Lose: 5 Causes
Construction is a complex and fascinating industry. We quite literally build the foundations of society. And yet, risky job site factors, razor-thin margins, and tough competitors make it one of the most cut-throat industries in the world. In the U.S, there are over 700,000 construction companies, and they generate over one trillion dollars in annual revenue each year. Opportunity in construction abounds, but when there is an opportunity to win, there is also an opportunity to lose.
We take great pride in our projects, in our buildings, our fixtures and add-ons. There is always particular pride in projects that are deemed “winners” by their company. But what makes a project a winner? And what makes it a loser?
Let’s take a look some common, and maybe some hidden, causes of loss in construction:
- Communication Issues:
- Our friends at Levelset say “In order to solve a problem, you have to know about it first. And generally speaking, the earlier that problems are dealt with, the easier they are to fix. This means that effective communication is a must for any successful company, and when communication breaks down – or when the communication level wasn’t very healthy to begin with – small problems go unnoticed or unattended to, becoming big problems that can have a significant impact.” Oftentimes, it can take days, or unfortunately sometimes even weeks for companies to get information like change orders or RFI’s submitted and approved. In a business where time is money, this can have a significant negative impact on the overall financial health of the business. Contractors must invest in systems that can get information where it needs to go in real time. Field to office communication has been made easier by software that offers what’s called robotic process automation. This can automate the reporting of data so all important stakeholders have information at the touch of a button.
- Inaccurate Project Estimates:
- Digital Builder had this to say: “While many of a project’s stakeholders are eager to get the project’s building started, if you have faulty schedules and budgets to begin with, your project is headed for an overrun from day one. Due to the competitive nature of the bidding process, estimates may suffer from incorrect or incomplete expectations of the scope of work included in the project. In many cases, some projects will also be estimated on a one size fits all basis, with chances of exceeding that initial estimate high.” Estimates and forecasts have long been made based on gut decision or instinct. But it’s time now to take our gut instinct and back it with data-driven forecasts. Many companies are turning to data analytics to help bridge the gap between their gut and reality.
- Material Issues:
- “Material problems are one of the most common issues for contractors. Either material prices are increasing or material is being wasted due to improper storage. Either the site does not have the proper materials necessary to complete a project due to late delivery or the team underestimates the materials needed for the project and fails to order enough. Theft is also a potential issue that could halt a project’s progress. Material problems can absolutely affect a contractors budget in the form of storage costs, disruption of cash flow, and project delays. Make every effort to start your projects on time, coordinate labor and materials, and schedule material deliveries efficiently,” claims Cotney Construction Law. Material cost escalation is often a factor construction companies forget to consider. CFM’s are innovative and smart, but that doesn’t mean they can predict the price of tea in China, or the price of steel in Minnesota! However, there are some predictive technologies being utilized that help contractors plan for such cost variances.
- Poor Productivity:
- As we all know, like any other industry, but especially in construction- time is money. Even with the best budget, the best estimates, and the best materials, your project can still lose if there are not solid productivity measures put in place. To some extent, this can mean hiring the right personnel. But it’s also about quality of work management, supervision, safety, and worker morale. Productivity can be increased by a variety of tactics, including improved communication, more and better training, and positive workplace culture.
- Poor Quality Work:
- Excellent work is the obvious standard for any construction project, but often construction parties end up in a dispute or in court over poor quality work. When certain aspects of a structure are built improperly, this could create safety risks for workers and the public, which could lead to OSHA citations. To ensure that contractors are using high quality labor and subcontractors, companies have started to mobilize “search” technology, so they can discover skilled labor or subs in their area, and to prequalify firms that work for them.
Though there are many possible missteps construction companies can make throughout the project lifecycle, that’s one of the reasons we love construction. It’s high risk, and it’s high reward. Everyone from the field to the office must be on their toes at all times. In an ever-advancing industry, the smallest details can make the difference between winning and losing.
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