Construction Needs Effective Cost Management

In today’s construction environment, cost overruns have become expected, and for good reason. The statistics don’t lie: in the last 70 years, 85% of projects were over budget. The causes of this overspending are myriad, including design mistakes, rework, and scope changes. Today, having an effective cost management system in construction is more important than ever.

Cost management is a set of processes that help keep a project on budget. Managing costs can be one of the most significant obstacles on a project. Identifying why cost management is so important can help us understand why contractors are looking for software solutions to help them keep them in line.

Outdated methods aren’t working anymore

The use of spreadsheets and email to track costs and communicate project changes is becoming more problematic as the demand for real-time, accurate information in the field increases. These outdated systems create data silos, where information isn’t easily shared with everyone. The widespread availability of internet and cloud-based cost management programs and apps make communication both easier and faster. 

Contractors need increasingly accurate estimates

As competition for projects increases, in part due to the rising number of contractors, estimates need to be more accurate. An estimator’s goal is to accurately predict a project’s costs before the work starts. If the estimate is too low, the company could end up with reduced profits. And if it is too high, there’s the potential to lose the job to a competitor. The ability to assemble, analyze, and learn from past data helps contractors improve the accuracy of their estimates. With improved accuracy they can better predict their costs and profitability.

Manual calculations lead to errors

It’s estimated that the human error rate for manual data entry and calculations is somewhere between 18-40%. This means that up to half of all data entered could be incorrect from the beginning. Manual systems often require that the same data be entered multiple times, only increasing the chances that the team is working off wrong numbers. By automating processes and communicating to all team members from a single source of information, the chances that mistakes will be made are reduced. In addition, cost management software is also able to calculate and track customized key performance indicators (KPIs) so contractors can stay on top of profitability and productivity.

Projects are proceeding faster than ever

Today’s projects are fast paced, and teams need quick access to current cost reports and labor and productivity calculations. Instead of waiting for other team members to provide the required information, they need to know immediately where they stand against the project’s budget and productivity benchmarks, so they can redistribute manpower or add extra resources. A centralized cost management system will allow them to access the information they need from wherever they are, in the office, the field, or on the road.

Today’s cost management solutions give contractors the information they need, when they need it, wherever they are. The speed of construction and the competition for work require that all contractors have a tight grasp on their costs and productivity. All-in-one project and cost management platforms can provide them with the tools they need to stay informed.