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12 Tips for Controlling Metal Building Costs

Paul Deffenbaugh, Editorial Director, Posted 08/07/2014

Stratolaunch Hangar

Controlling construction costs starts with the customer and never stops By their very nature, metal building systems are efficient structures that allow building owners, architects and contractors to deliver high-value construction on a precise budget. With all the details of construction worked out prior to start on the job site, little can be improved from a cost standpoint. An erector won't be able to find a valuable shortcut that saves time and material. But contractors and erectors can make mistakes that cost money, and that is where the true savings in construction costs can be found.

In addition, choices about how a contractor operates his or her company can have an indelible imprint on the overall cost of construction. Creating a safe environment for teams that communicate well together is one of the most important attributes for keeping construction costs under control.

Managing a construction business is a bit like weaving a tapestry. Every thread is interconnected with another. If you pull one thread, the whole tapestry unravels. A robust safety program is intimately connected with the quality of your hiring practices, site communication processes and compensation programs. For that reason, identifying 12 tips to control construction costs just means that we're throwing the spotlight on a specific area, but the tangential parts of the business that are in the shadows may be nearly as essential.

 

1. Facilitate communication.

Steve Webster is president of Hampstead, N.H.-based Dutton & Garfield, a general contracting firm that offers design-build, supply-erect, construction management and roofing services, among others. Webster recognizes that managing the job site and the company relies on careful and complete communication. "We have an internal meeting we call the S**t List Review (SLR) and it starts off with work processes, goes into sales process. One list is design-build. Another is small jobs."

The SLR meeting is held once a month among the office management staff and they review where the company stands in each of the major areas. Any major breakdowns, such as a project taking too long, gets reviewed and analyzed.

Regular communication includes using smartphones on site and having weekly job meetings with attendance mandatory for all subs. "We like to have it in the middle of the week so there's a little time during the week to straighten out issues," Webster says.

Dutton & Garfield also takes advantage of industry available resources, such as the toolbox talks that have been put together by the Metal Building Contractors and Erectors Association, which gives crews a script for 52 safety discussions.

 

2. Establish a team.

Communication is simpler if the team has worked together for a long time and knows each other's moves. Sandy Fowler, owner of GF Contractors, Union, Mo., says: "We use the same subs all the time. Everybody knows what the job is. The quicker you get in and get out, the more money the customer saves."

Many long-term contractors, such as Fowler, have employees and subs they've worked with so long that the communication is a well-worn rut. Everyone can anticipate how long it will take for the concrete work and plan accordingly because they know the team.

If there is a problem, it comes back to the first tip: communication. "We stay in touch with everyone so when Joe is done, Mike can come in and do his work," Fowler says.

 

3. Control labor costs.

Fowler also finds advantage in cost control by basing the company in Union, which has a lower cost of living standard than the country average. When his team travels to New England to erect a building, its costs are below the local standards just because his labor costs are lower.

That isn't true for all contractors, of course, and union contractors, who tend to have higher labor costs, can struggle to compete for jobs. However, there is one thing that all productivity experts recognize: the cost of employee turnover can significantly impact overall costs.

Few studies have been done on this in the construction industry, but most studies show that turnover among employees compensated at the level of typical construction workers costs the company between 16 and 20 percent of compensation. For Fowler, keeping crews and subs intact and reducing turnover not only makes communication simpler, it can reduce the cost of labor because he doesn't need to adsorb additional training costs for a new employee.

 

4. Double-check the order.

Every metal building order has a set process that includes the work on the front end by the contractor, internally by the manufacturer, then again on the back end by the contractor. Contractors can't control the well established internal process, which includes order review, engineering, design and manufacturing, but they can establish a review process prior to order that makes sure it's correct.

Often that breakdown is between the sales and estimating teams. Webster says: "I'm on the front line, out there selling and bidding. When it comes to the order, Keith [Wentworth, vice president,] vets out the smaller details I might overlook that need to be in place to make it work."

The sales-to-estimating hand-off is ripe for errors, and double-checking the order can forestall significant cost incursions during construction.

 

5. Check the pieces when they arrive.

During a roundtable discussion at the MBCEA conference in Boston this year, members spent considerable time on this topic. The potential for problems is large and varied. Pieces can be damaged, missing or the wrong color. "Check the pieces when they arrive," Webster says. "Even check all the cartons. Check for damage. Those are the things that can mess up the process and hold you up. Depending on what it is, it can cost a few days or sometimes can take weeks."

 

6. Avoid change orders.

"Building and construction in itself is all about cost control for the contractor," Webster says. "As I think back on where we lose money, the most common answer is on change orders. Sometimes it's because there's a misunderstanding, but in our case, we try to avoid that as much as we can." Webster uses a contingency whenever he can, which allows him to make room in the bid for errors. He explains it to buyers by saying, "We're going to keep track of the stuff you forgot and the stuff I forgot." Smart buyers, he says, understand the need on negotiated bid contracts.

"The longer you're on the job, the less money you make," Webster says.

 

7. Right size the crew.

It seems like a simple thing, but having the right size crew on the job is essential to being profitable and often comes hard bought through experience. The increase in construction time from not having enough workers has a ripple effect throughout the year. The extra week on the job because of a manpower shortage means the company starts the next job late and it loses a week of return on those assets.

Think of it in terms of capacity. A construction company can complete a certain amount of work in a year. Misallocation of crew resources can cause an extension in the job, which means the company worked below capacity during that period. Those increased costs translate to less profit.

 

8. Use the right equipment.

The same effect of not having the right number of people on the job can be achieved with not having the right equipment. Trying to move materials on-site with equipment not designed to handle it means more lost time.

Conversely, having a crane that is way too big wastes money because of the additional rental costs.

 

9. Work safe.

There are a million moral and emotional reasons why a safe work environment is important. The increased costs due to an injury pale in comparison to those other, more important factors. However, too many contractors avoid doing the necessary work to ensure a safe environment, which includes not only providing all the proper equipment but also the essential training on its use.

 

10. Start the punch list early.

The end of any construction job means there are details to finish and resolve before the work is complete. For some companies, managing the punch list carefully is the difference between a profit or loss on the job. Webster says: "We start the punch list a month early. Usually a super on the job does the walkthrough or if I'm the project manager, I might do it. Sometimes the super is there every day and doesn't see the problems. Even during the job, if the owner or inspector points out an issue, we take care of it right away."

 

11. Qualify leads and do job costing.

Neither qualifying leads nor job costing happen on the job site and are out of the control of any superintendent or site manager. But both are esse ntial to controlling the job costs. Too often, contractors don't know what their best jobs are, so they chase leads that don't really provide a strong profit margin for the company. Or, they're geographically undesirable. Or the company doesn't have a realistic chance of landing the project. "If I'm out there chasing work I don't get," Webster says, "that's a real cost; that's dollars out the window."

With the improving economy, contractors are less pinched and more likely to take a discerning look at jobs. Just as important is keeping track of the costs of a job during construction. While lead qualification is a sales process, job costing is an accounting process, and it requires a careful look at where you stand on a job while it's still going on, so you can make adjustments. After the job is over, it is too late to find out that the company is losing money.

 

12. Listen to the customer.

Everything starts with the customer, and failing to keep the owner happy is the surest way to cause problems during construction and ramp up construction costs. "Cost control starts at listening to the customer and understanding what they're looking for so you get the proposal right," says Webster. "That leads to the contract, which leads to you ordering the building correctly." 

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