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The tender, the budget and the forecast
There are two ways to increase our profits.
- Maximise the amount we get paid.
- Reduce our costs to a minimum.
Today we will focus on controlling our costs.
Tender
We start with the tender. I recommend building up a tender using a schedule of planned resources. The tender should be split into people, plant and materials. This means we can easily identify the amount we have allocated to each.
Budget
Once the project has been awarded, we need to put the tender aside and put together a budget. We may have one team who price jobs and another team who manage the works. It is essential that the project team have their own budget. A budget that they have built up and that they own. This means they will need to provide reasons for any over-spends.
We should have more information about the job at this stage. We may have firm prices from suppliers. We may have placed orders for plant or materials. We may know which gang we are going to use. The project team may wish to try a different method of working. The budget is set once at this stage and never changes.
Forecast
Once the work starts, we can carry out regular forecasts. Again, we review the cost of people, plant and materials. The works may have been delayed. The latest forecast should always be in line with our latest programme. Even if we have been delayed, we should try to reduce costs where possible. We can off-hire equipment if it is cost-effective to do so. Even if we are looking to claim for our delays, it will help our case if we can mitigate costs. I recommend updating the forecast every month.
If we update our forecast every month, we can include it in our monthly reporting. Every month we can check the latest forecast, so we always have an accurate report. We will know if our costs are increasing. This means we can put in place a cost reduction plan. We can also review whether we can try to recover these additional costs from our client.
That’s all for today.
See you next week.
Helping contractors deliver profits on construction projects
Sign up to the newsletter. Every week, you'll get actionable tips to help boost the profits of your construction company.
If you want to increase your profits you need to be able to solve every problem. There are nine basic tools that every contractor needs to make money. In today’s issue, I want to go through the nine tools. Tools 1 to 3 help you manage your tenders. 1. Decision Making Tool- Ensure you price the right opportunities that are going to make money. Every construction contractor needs a way of quickly deciding whether or not to price a tender. You need to make sure you don’t end up with a series of...
If your works have been delayed you may have incurred additional costs. To recover this money, you need to put together a claim for prolongation costs. The first step is to prepare a programme showing the actual or anticipated effect of the events. Then, you can see the extension of time you are entitled to. This will provide protection against damages. The programme also needs to support your claim to recover additional costs. The costs you need to recover can be split between prolonged...
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