A construction estimating department CAN become so much more competitive, only if the circle of construction life is tracked. From our perspective, the circle of estimating life tracks the estimated cost and then compares it to the actual cost as determined from the construction accounting department. That type of construction cost analysis helps any contractor become so much more competitive in a variety of ways.
For instance, any contractor must look at their hit ratio on win or lose of bids or quotes. If a contractor has a 50% successful bid hit ratio, the first question must be asked, "Are you making money with such a HIGH hit ratio or losing for example 15% profit? Likewise, if you are making money at the bids you are winning, then the question begs to be asked, "What is your hit ratio or is it for example as little as 3% ?" Those two comments are probably the most important question for ANY type contractor in any trade or specialty.
Ironically, one of the most important beneficiaries of accounting Job Cost analysis would actually be the construction estimating department. For example, the construction estimating determines that a slab on grade should COST $25,000 for all the material, labor, equipment &/or subcontract. Project Management schedules, performs, or buys out all the parts for the slab on grade. Invoices and or payroll are received (or labor performed) and paid for. So then a
budget to actual job cost report is created and the variance is discussed by all the departments, but most importantly the construction estimating department. The main focus of cost analysis comparison is: did the actual cost exceed/or cost less than the estimated cost. Whatever the answer is, the construction ESTIMATING department must make the appropriate adjustment (if any) for future estimates. The comparison can also be a cost per unit of measure like square foot instead of a lump sum cost comparison. Over time, system historical costs will probably guide you well. So in this slab example, the system estimated cost of all the parts comes to say $3.00 SF, BUT the construction accounting department may report that the actual cost was $3.25/SF, or maybe $2.85/SF for example. That type of reporting is ESSENTIAL on becoming much more competitive while improving profitability and / or the success of your bid hit ratios. That is an area of construction operations management that is often sadly overlooked.
Thanks for visiting AskTheEstimator.com
Filed under Job Cost by 
So often, companies want to have the ability to produce budget to actual job cost reports WITHOUT involving an accounting department. Very RARELY that can be done because project management operations would require a complete manual tracking process. That action would completely burden project manager's time management. The optimal way would be to have the project management department tightly integrated with the accounting department. There are so many benefits for any company to integrate both the construction management and construction accounting departments.
The construction estimating department creates the estimated anticipated cost and then applies a markup to determine the selling price, bid, or quote. Estimating also recaps the very detailed estimate into a manageable series of job cost codes (approx 50- 250 master job cost codes on average) that may be used if the job is awarded to your company. Then, project managers, purchasing managers, or production managers, buyout (or schedule self-perform labor) the job and eventually receive invoices to pay (approval) per the respective purchase order/subcontract, as well as per the job cost code. (self-performed field labor reporting aka: time cards, are also tracked per the respective job cost code) Then the construction accounting department PAYS the approved invoices and / or approved payroll which creates the ACTUAL job cost data. That complete process is an effort to compare the estimated job cost versus the ACTUAL job cost. As said earlier, the only EFFECTIVE way to produce Budget to Actual Job Cost Reports is to pay invoices by using a construction estimating software program or construction estimating process, AS WELL AS a construction job cost accounting software program.
For example: if you are an electrical contractor, the job cost code for 2×4 lighting fixtures can be code 12345; so all ESTIMATED COST of the materials, labor & equipment can go into that code as the job cost budget estimate. Likewise, the same would be for the ACTUAL cost of the materials, labor & equipment can go into that code as the job ACTUAL cost when the construction accounting department pays job invoices. So here is the flow how both BUDGET and ACTUAL data could be gathered. Budget code would include the 2×4 fixture, the conduit, the wire, the terminations etc., all going to budget code 12345. Now, as material is being delivered (2×4 fixtures, wire, conduit, etc) it is coded as ACTUAL job cost code 12345. As ACTUAL labor time (timecard) is being recorded not only to the job number but also to the job cost code activity, or task 2×4 fixtures 12345. The labor and equipment time would/could also be for setting the 2×4 fixture, running wire, running conduit, etc in one Job Cost Code. OR, if you are a concrete contractor the job cost code for a slab on grade can be 12345, or if you are a masonry contractor the job cost code for CMU exterior walls is 12345, so hopefully you get the picture here.
Thanks Again for visiting AskTheEstimator.com
Filed under Job Cost by
So often in the construction industries, companies rush to buy construction software solutions, regardless of what the actual software is intended for. In the construction estimating software pursuit, you always have to first determine what your construction estimating process is. That will ultimately help you determine what features of a program you actually need.
Likewise, for the construction project or program management software search. It really is just like the construction estimating software pursuit; you must think of who you are representing as a company. There are really huge software differences based on the different corporate hat you may be wearing such as: owners or owner’s representative, government agencies, general contractors, developers, specialty contractors, program managers or construction management firms. Software that is tailored to a specific type of construction management is critical since one size never fits all. Once you determine who you are representing, you then determine what construction management features are needed based on that representation.
Thanks Again for visiting AskTheEstimator.com
Filed under Blog, Construction Estimating Software by