PlanGrid Construction Productivity Blog
How Construction Profits Are Made (Or Lost) in the Field  

How Construction Profits Are Made (Or Lost) in the Field  

How well the field performs directly affects your bottom line. Here’s why.

For any construction company, a successful project is more than just a quality end project—it’s meeting profit goals as well. And for many projects, often the latter challenge is a much more difficult one to achieve than the former. According to KPMG, only 31% of all projects came within 10% of the budget in the past three years.

Yes, there are always estimates and budgets as a project begins that are based on a variety of factors, but there can be problems with these from the start. For one, teams tend to think best-case-scenarios with initial budgets, and then begin to grow more worried about staying on budget as the project progresses and various targets become more difficult to hit. For many companies, just making any profit at all can be considered a success, let alone the profits that were previously forecasted.

The good news is that even what’s seemingly a marginal increase in profit can make a big difference—especially on a multi-million dollar commercial project where the stakes (and money) are high. But like anything, you have to work at it—and it all starts with your efforts on site in the field.

Improving productivity, workflows, communication and more from the field where construction is being executed can save teams from rework and significant cost overruns. Even the smallest of changes can either make or break you from a financial perspective on a project. Here’s a look at some of the field factors that can impact construction profits the most:

Factor No. 1: Field Productivity

How Money Is Lost

Pop quiz: What’s the largest non-material cost on any project?

The answer: Labor.

Yes, it’s costly to staff a worksite, but it can be even more expensive if there’s a lack of efficiency and effectiveness on a project site.
One way companies can lose money on projects is not being able to staff a project adequately. As you know, there’s a current skilled trades labor shortage, so it’s often a lot easier said than done when it comes to staffing. As a result, it’s common for some companies to revert to paying overtime to the workers they do have on a project, which isn’t always a good long-term option. This is mainly because studies have demonstrated up to a 10% decrease in productivity for every 10 hours per week that’s added to a worker’s timesheet. Aside from this drop in productivity, there’s also obviously the cost of paying overtime wages to consider. The combination, to put it mildly, isn’t always ideal if you want to hit your profit goals on a project.

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Another big productivity stopper is wasted time. This can happen in a few different ways, whether it’s workers being overwhelmed by administrative work, workers unable to find the right tools promptly or poor material delivery coordination. It’s estimated that construction workers waste about 35% of their time on non-productive activities each week, which may add up to cost the construction industry a combined $177 billion in lost profits a year. Even for workers that pride themselves on efficiency and time management, the lack of a streamlined job site is a productivity and profit killer.

How Money Is Made

According to Bill Klorman, President of Woodland Hills, CA-based Klorman Construction, even the most minor increase in field productivity can be significant for construction profits.

“Creating as little as 0.25% additional profit on a multimillion-dollar project by increasing productivity a little can become a substantial amount of money—maybe the only profit you will realize,” he says in the Concrete Construction article

So how is it possible to ensure an efficient jobsite to stay meet or exceed profit goals? One of the easiest ways to do this is to ensure that construction workers are building and not pencil pushing. For instance, clearly delegate administrative work to others back in the office or appoint a go-to person on site to handle this. Better yet, the right technology platform can help keep all the plans, documents and templates in one central place, so less time is spent looking for materials, and more time is spent building. Even just consolidating something like pulling a permit or plan from minutes to seconds can add up over a day, week and month. In terms of managing the labor shortage, start hiring earlier so you can scoop up the experienced, more credible workers while they’re still on the market.

Factor No. 2: Communication

How Money Is Lost

When you’re losing money on a project, usually the issues can all be traced back to lapses in communication. Let’s face it—there are a lot of stakeholders involved in every project, and everyone needs to be kept up to speed on things for a successful outcome. Yet, you’d be surprised how many project teams still rely heavily on paper and other outdated communication processes, including email and non-collaborative tools like Excel.

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At best, a miscommunication can lead to wasted time. At worst, it can lead to work that’s incorrect, which wastes both time and money—and on top of this can leave you with one unhappy owner.

How Money Is Made

To keep communication streamlined on a project site, make sure everything is performed in one central system and updates can be made in real-time. When this occurs, teams can improve their efficiency, build better and, ultimately, improve construction profits. However, communicating via one central system isn’t always enough—there needs to be buy-in too for this to be a success.
Finally, the quality of communication is also essential, as it’s crucial to building camaraderie, trust and transparency on a project.

Looking to build collaboration on a jobsite? Check out, “The Ultimate Guide to Building Collaboration in Construction.”

Factor No. 3: Workflows

How Money Is Lost

How does your information and data flow in the field? This is a significant factor to address, especially right after we talked about the importance of communication—as usually, these two go hand-in-hand.

One big warning sign of a poor workflow is not having any standard practice to begin with. When there’s a lack of standard practice, processes are often implemented on either a team or individual basis, which essentially silos information and creates disconnect on the project. Combine this with the fact that many construction companies still rely on manual processes, and it’s often a recipe for disaster. If information is manually processed, there’s a much higher risk of it being incorrect or missing—and even the smallest bit of information can lead to project errors, which can be laborious and intensive to repair.

How Money Is Made

So how do you ensure that workflows are optimized, so you’re making money on a project? Streamline them.

Invest in automated processes to streamline workflows across the board. Automation has made significant leaps in recent years for construction and its potential is enormous when it comes to traditional time-heavy processes, such as submittals and requests for information (RFIs).

The right software program should be able to streamline most, if not all, tedious workflows. It should also make it easy to track work throughout the construction lifecycle and provide a clear chain of command that incorporates all relevant details that are necessary on a project. Workflows should also be standardized to help teams move at a faster pace with greater ease.

Factor No. 4: Accuracy of Information

How Money Is Lost

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We’ll cap this list of profit killers with an important factor: inaccurate information. When there is wrong project information, it’s bound to trickle down to the project level in the form of poorly run projects and likely mistakes.

So how is inaccurate information spread? It often comes from a non-credible source or via an outdated system of communication that isn’t keeping data updated and accurate in real-time. In other cases, it may be a situation where the communication platform is not fully integrated within the project team, or there’s confusion among members about where to access the right information.

How Money Is Made

So how do things change so that the information coming to a team is accurate? Remember, in the communication portion of this where we discussed the importance of a centralized station in a cloud-based system? It applies here too.

We’ll repeat it: For a successful construction project, the only single source of truth as it pertains to information is the cloud-based one that can show up-to-the-second changes.

How significant could this be to your operations? Consider this: Productivity can increase by as much as 50% by merely implementing a cloud-based platform to control and facilitate information in real time. While many might scoff at the upfront investment necessary to do this, you can’t argue with the productivity increase. When you combine this with accurate, streamlined information, you’re poised to be working on a successful project that builds faster.

Unlocking More Construction Profits Starts in the Field

Like we said in the opening, one of the main goals for any construction company should be to deliver a quality end product. This doesn’t just open the door to future building projects with the owner, but it’s great for a company’s building resume. But ultimately, construction companies are in business to make money, and hitting—or exceeding—profit goals on projects is vital to sustaining a business.

Is your company addressing the four above factors to improve construction profits? Do it, and you’ll likely see a noticeable improvement in your bottom line. Fail to correct shortcomings, and you’ll be fighting an uphill battle on every project that you work on.

Grace Ellis

As a Content Marketing Manager at PlanGrid, Grace is the managing editor for the PlanGrid Construction Productivity Blog. With over eight years of experience in marketing, communications and PR for technology companies, she is specialized in high-quality content creation across both traditional and digital media platforms.