Last week, we talked about our upcoming Project Boot Camp series (there’s still time to sign up for an individual seat if you hurry!) We talked about the first three topics from Boot Camp, Understanding Scope, Scheduling Basics and Daily Reporting. If you missed it, you can read that post here.
Now that you’re all caught up, let’s dive into the construction basics we’ll be talking about in much more detail in the second session of Project Boot Camp, starting with the aspect of a project that most contractors dread, not realizing it is the single most important profit-protection tool at their disposal.
We are often met with disbelief when we tell our clients that the Punchlist is their single biggest money making tool, but it’s a fact.
Often when we receive the punchlist, we just go to work on the items listed. It’s often late in the project, and we’re ready to finish the job, and it’s easy to skip the essential first step of this process – a process that should really start early in the life of the project.
We need to review the punchlist, item by item, and categorize each item. Some of them will represent work that is your responsibility, fair and square. In fact, we teach that if you were to regularly receive punch lists with no items that are yours, you’re likely spending too long on the details. A couple of items are a normal part of the process.
However, there will also be items on the punchlist that you are entitled to change orders for: trade damage, items that were never in your scope, owner changes – all items for which you should receive compensation, in terms of money and time, for your efforts.
It’s because of steady management of this process that Jason can make the hard-to-believe claim of his career in project management without ever finishing a job late or over budget. That doesn’t mean that he always finished before the initially planned date of completion or the day one budget. It means he negotiated for the time and money he needed, preemptively.
We often liken the lifecycle of any project to the functioning of a machine. If it’s running ‘in control,’ making changes to the process should be like flipping switches or turning dials. In a well-built system, whenever profit or productivity start to slip, you should be able to look at your ‘dashboard,’ see which dials need to turn or switches need to flip, and make the tweaks that put the whole system back into control.
This system, however, doesn’t come about on its own. The core of running a machine like this is understanding your efforts and your outcomes. We talked a bit about this when we discussed daily reporting last week. The better you can track what effort is going in to your work and what products are coming out, the more easily you can flip the switches to hone in on the results you want.
We create an estimate at the beginning of a job, and then we often use that estimate to judge our productivity. Are we making more or less money than we estimated we would? If our estimating process is solidly in control, this method works, but when we experience breakdowns in that process (unforeseen conditions, work that is atypical for us, etc) then we’re left knowing that we’re not making our goals and not having a lot of information as to why.
It’s important that we track our effort and outcomes, along with percent completion of the project. Often, when we first start working with a client, we’ll discover that they are tracking effort on a job versus an estimated total without any regard for percent completion on the job. If you’ve spent 60% of the expected effort on the job and it’s only 20% complete, there’s a problem that should be analyzed as soon as possible. However, often in a system like this, we don’t realize that there’s a problem until we go over that 100% mark, at which point it’s often much too late to save your margins on the job.
By tracking effort and outcome, along with some estimate of completion rate, you can make certain to flag a mismatch as early as possible. That way, whether the impact is due to your system or some impact you hadn’t previously identified, you can flip the right switches to protect your profit.
We talked last week about using the information in your daily logs to understand your productivity. In those logs, we should be tracking the effort going in to your project, and the outcome of that effort. There’s value to this strategy beyond the simple data collection aspect.
When we flag an out of scope work item or a change, it can be easy to quantify. We use our normal estimating process to figure out how much the new item will cost, and put in the change proposal (hopefully before starting work on the changed items.) However, what about impacts?
If there’s another trade working in the area where we need to be, access issues or other impacts that slow us down that are outside of our control, we are entitled to compensation for that, in time, money or both factors. However, it can be hard to pin down the actual dollar amount of that impact.
This is where the daily part of that daily reporting becomes so important. If we’ve been logging our efforts since day one of the job, when we weren’t yet being impacted, we can use simple math to understand exactly how significantly we’re being impacted and what the dollar amount of that impact will be. If we can communicate that impact up the chain, we can avoid the nasty surprise of the bill for that impact at the end of the project.
If you’re interested in learning more about the subjects from today’s post, you can sign up for a single seat in our upcoming Project Boot Camp with ABC or contact us today to talk about setting up a session of our Boot Camp that is geared specifically to your team.