3 Project Management Solutions to boost Construction Margins

May 21, 2018 1:15:41 AM
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3 ways ERP can help you maintain sound margins and perform profitable construction projects

Maintaining already tiny profit margins in construction projects is a never-ending challenge for construction companies. Modern technology and efficient process and relationship management can help you solidify your margins. Let’s take a look at three process improvements and corresponding capabilities in ERP solutions optimized for the needs of architecture, engineering, and construction (AEC) companies that can make a difference.

#1: Implement controlled, transparent change order management

Construction bids are not static. They evolve as construction companies and their clients negotiate. When your estimate features the slim margins that are typical in the construction industry, there may be very little room to revise costs unless you can control the changes in what will eventually be built.

Sometimes, clients may challenge your assumptions or question the cost of project elements such as elevator installation in a new building. In the public sector, they may have the right to review your margins and make them part of the negotiation.

You want to maintain healthy margins as much as you can and also give clients what they want. When you adjust time and materials in your estimate, doing so should be part of a documented, structured change order process. You need to remain in control of the resulting versions of your bid and never lose sight of the work breakdown structure (WBS). Without efficient change order management, negotiations can easily become contentious and fragmented. You then run the risk of incurring client dissatisfaction, committing to an unprofitable project, or diluting team efforts with rework and recovery caused by lacking change control. 

Today’s AEC-optimized ERP systems can greatly simplify the steps of managing your estimates through several iterations and making sure they remain financially sound. They help you calculate the financials of project changes quickly and accurately, and keep the data evidence for the WBS within reach. When your construction software and ERP are in the cloud, it becomes easier yet to let project leads and business stakeholders collaborate on bids or to share information with clients and suppliers in secure, dedicated workspaces. 

#2: Track and manage all important relationships

Construction companies often have to satisfy multiple clients on a single project. In public-sector projects, you may need to justify your costs and negotiate project deliverables and schedules for the same project with, for instance, the port authority, the city, the county, and the state’s environmental regulator. Commercial projects may involve partnerships of developers, investors, and anchor tenants.

All these stakeholders have their own accountabilities and objectives, and each of them needs to approve the final bid and sign off on the resulting contract. You need to document their agreements and commitments. Even better if you can also keep a record of their communications and processes. Margins are one of the first things to become endangered if you deliver a bid that meets the diffused requirements of multiple clients.

The customer relationship management (CRM) component in today’s leading ERP solutions lets you document and track all client stakeholders involved with a bid and project, along with any pertinent information and files. Modern cloud ERP also transcends the traditional segmentation of ERP and CRM functionality. No need for an integration project – you can simply configure them to suit your workflows.

#3: Enable data-driven project management and accounting

Construction project leads can’t maintain sound margins and manage subcontractors, suppliers, labor, equipment, and materials if they can’t see project financials. Too often, they are only aware of the contract, but not the current project performance. They are thus underserved by the processes and technologies in many construction companies, but they’re not the only ones.

Executives and business managers juggle the project portfolio and make decisions about an organization’s goals and investments. They also maintain the relationships with their counterparts at the subcontractors and suppliers without which the company could not function. Each project requires agreements with these business partners on the scope, cost, margins, schedule, and other details. Construction executives also need to be able to evaluate the value of these intercompany relationships for the business in various shared-value contexts.

The data and decision-making requirements of these roles are often partly met by spreadsheets and other documents. In-depth business or project financial reporting can be difficult to perform and may require IT to help locate and analyze information. These tasks along with the associated negotiations and contracts can become more efficient when an ERP system with the right AEC capabilities provides a centralized, complete reference and enables reliable project accounting.

To learn more improving your project finance and construction margins, download our whitepaper      » Download The Whitepaper

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About Author
Luciano Cunha

Luciano Cunha

Chief Executive Officer (CEO) For Luciano, being responsible for To-Increase’s global sales and marketing means unleashing the company’s insight, innovation, and creativity to tell our story and help customers achieve their goals. On the road much of the time, he travels the world to meet with customers, understand their challenges and ambitions, and find the most effective ways to help them advance. Luciano develops and mentors our marketing and sales team, and creates strategies to help the To-Increase worldwide partner channel thrive and grow.
Making Customer Needs the Main Business Driver Luciano and his team have daily conversations with the To-Increase research and development organization to bring customers’ requirements and concerns into the road maps and design of our solutions. Luciano brings his insight to the marketing group to make sure the company’s communications resonate with customers and speak directly to their experience.
“I’m awed by customers’ innovative spirit in taking business management technology past its limits and by their generosity in letting us participate and empower them. I hope to transform our organization to become even more customer-centric than we are today. That means making more resources available to spend productive time with both our customers and partners, so we can ensure that we place into customer businesses effective solutions that fit the evolutionary stage of their operation and the way their people and processes work.”
Empowering a Global Channel
Because To-Increase only sells through partners, readying the channel to be successful in helping customers is a business-critical effort. Luciano aims to meet partners where their interests are. Partners who consider the relationship with To-Increase strategic can rely on our industry specialists to work with them as they plan their growth and serve customers. If partners prefer a less collaborative relationship, they still receive the rich To-Increase expertise and resources to ensure they win the business, perform a successful deployment, and retain a satisfied customer. In working with partners and their customers, Luciano brings to bear his experience of many years of creating successful, customer-focused business development and marketing strategies in many of the world’s countries and regions.
Enabling Customer Success in Challenging Business Environments
Looking into the near future, Luciano expects that customers will continue to expect To-Increase to help them make business sense of unfolding trends and technologies. For example, the internet of things (IoT) will thoroughly revolutionize manufacturing, engineering, and supply chains. Big data will be meaningful and valuable when decision-makers can use technology solutions to transform it into actionable business intelligence that supports key roles and business processes. Mobility will help companies become digital enterprises and move business processes forward from any location, at any time. Team To-Increase harnesses innovation to help customers translate the promise of these technologies into business results.
Before his current role, Luciano for several years was one of To-Increase’s global industry directors, responsible for our industry solutions. His experience also spans more than 17 years in IT and manufacturing management roles. These positions took him into various areas at IBM Brazil, serving as product manager for several software development companies, and included working in senior management at a manufacturing organization in the U.S.
Luciano is married with two young children. Away from work, he enjoys participating in a soccer class together with his son and daughter as well as taking relaxing walks in natural environments with his family.

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