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| PRODUCTION Production is a simple title for a very complex process when it comes to Concrete Construction. The common thought is that you plug the right Equipment, Materials and Man Power and “Voila” the Bid is complete... Well folks it ain’t that simple in the construction world. And the folks you are competing with are looking in every corner for an edge. The secret is to provide the best possible product with not only the best price but knowing it is the best price with the right costs in your plan. |
| The competition, you know him, that guy that you would like to emulate. Let’s look at some of the characteristics. Solid estimate, Knows where the cost are. And much more important knows where the profit is. Never runs out of cash. Never runs out of people, and of course never runs out of patience. |
| “Start with the end in mind”. |
| What profit do we want on this project? Let’s look at two projects. |
| One; It is going to be a pain in the ass to work with this contractor and he pays slow and is clueless when it comes to coordinating the other trades. In fact he recognizes how incompetent he is by putting a clause in your contract telling you it is your responsibility to coordinate with every one else. So you need a job or you don’t. You need to put a number together that is consistent with your means and methods recognizing the cost and cash flow issues and understanding the prospect of collecting the retainage at the end of the project. |
| Two; You have a long time customer that is always fair with you on both good jobs and bad ones. You know what to expect and are looking forward to working on his team on projects today and in the future. Both of you get along but as most contractors he is looking for the best deal and must go out to the general population (you know those incompetent bastards, the competition) on every new project. Cash has never been a problem and you generally get the retainage you deserve once projects are complete. |
| The easy answer is to go with the guy that you know and keep your number low enough to keep the other bastards away. The right answer is to measure and bid with the facts in mind and the numbers to back up your position. |
| Boy we never did that before. |
| Labor Costing What does a team hour cost? I am not going to embarrass you or others by asking the question to often. But most will take the base and add workman’s comp. and over head with out considering the supervision cost associated with the specific project. They use the same man-hour rate for every project big or small. (Wrong.) |
| Labor Rate This is the selling price you need to cover the use of your men in a given circumstance. |
| Operation Costs Those costs of operating your company on a specific project before profit and cash costs are considered. |
| Financial Costs Those additional costs associated with serving the project and customer based on his payment history and the prospect you have of realizing a profit. Yes, if the guy is a real jerk, than if you price him with these costs you are not as likely to get his work. So, is that such a bad outcome? Or you recognize before you start that you are going to take a bath and are prepared with your bank and perhaps your brother in law to bail you out when you are cash poor due to the customer’s propensity not to pay. |
| The Plan The plan takes the real cost for labor adding the equipment cost and material costs as they are anticipated over the duration of the project. This provides the information needed to determine the total project price, margin and return taking in to account all labor, direct material and equipment, and financial costs. When used as intended you can price projects and compare on an even field the return for any project regardless contractor characteristics or payment history. It also provides you with a view of your investment in the project in the form of Cash or Accounts Payable that must be met to maintain your position with Vendors and the Bank. While the above is pretty basic for the largest of concrete contractors with plenty of cash on their balance sheet it is critical for the medium or starting contractor to know what cash is needed so that the ups and downs of the financial end of the project are known before signing on the lower right hand corner of the contract. Production Production is an element of following through with the Plan. Production now becomes the execution of many small tasks outlined on the plan. The crews are identified; the material is scheduled for delivery only when it is needed. Equipment, owned or leased, is identified with appropriate durations including mobilization and demobilization. The cash required is known and the supervision understands the scope and timing of the project including anticipated down time for the time of year you intend to build the structure. (The cost of building between November first and January first is far different than the period September first and November first. Think of the holidays not to mention the weather.) While all of this does not eliminate the fundamental risk associated with a concrete construction projects it does provide you with the control levers that you can use to reduce the impact of these risks as work progresses and issues arise. Contact us if you wish to have a system customized for your company and the projects you pursue. |