Business Process Innovation

Big Projects use Cost Controls – Why don’t You?

The use of project cost controls solutions is becoming pretty widespread these days amongst bigger construction organizations that execute on capital projects. For any big, billion dollar project (or any number near that), it’s understood that proper planning, cost controls and detailed progress reporting will be followed on that size of project. They have to. There’s just too much risk otherwise. Even 10 years ago, however, it wasn’t necessarily the case. There have been many bad years and a poor track record from the “project cost overrun” point of view in the world of big projects. So bad that people have got quite used to hearing about the colossal project cost overruns – you know the ones, the $3-billion project that ballooned into an $8-billion dollar project like it’s just a part of life. People have got so used to it that they’re often amazed to hear about these big projects that are actually running on budget and on schedule. The reality is, however, that projects which do actually run on budget are becoming more common. The big disasters still happen from time to time, but it’s becoming more and more infrequent. And that’s largely a result of: better planning, better controls, better information and better tools to get all that with. For a $1-billion project to go over-budget by even a modest 10% – that’s an enormous amount of money. Even for big companies & governments. They simply can’t afford to NOT use a cost controls solution. Unfortunately, this adoption of cost controls hasn’t trickled down to the typical mid-sized organization.  For this tier of company – the ones that are running $10-million to $100-million projects – they still mostly use spreadsheets and paper-based

Innovation is Essential – How One Company Did it, Part I

In our first blog in this series, we talked about the necessity of introducing innovation into your business - to improve efficiency, profitability - to stay competitive. Companies that don’t evaluate how they are doing business, and where they need to improve, are being left behind. Introducing innovation doesn’t have to be overwhelming or complex, and doesn’t have to result in spending a whole lot of money – in fact, the best ways to innovate are to look for ways to simplify and streamline your existing business processes. In this second blog, we’re going to show you how one of our customers, Company A, started to do just that. Company A took a look at a key process – their project cost management - analyzed how they were managing their project costs, how they wanted to manage their project costs and what kind of information they wanted from their project cost management system...and what changes they could make to improve this process. And in future blogs, we’ll see how Company A uncovers inefficiencies in their process, and the result of improvements that they made. Company A has been in business for a number of years, and has been running labor and materials projects that have been fairly similar in nature. They’ve been successful in that key respect that many small business owners benchmark success by – there was cash in the bank at the end of the month. So, all in all, their projects were running profitably – but the question is....how much more profitable could they be? How much more cash-flow could be generated from their projects? Were there trends developing that would signal areas to improve efficiency, shore up the bottom line? As

Innovation Is Essential

No matter the size of your business, innovation is essential.  Looking for ways to bring innovation into your business can offer huge returns – cost savings due to greater efficiency, faster growth due to better decision making, improved retention of talented staff, and a number of other benefits.  In a study performed by the Association of Canadian Community Colleges (“ACCC”) “Colleges and Institutes and Canada’s SMEs (Small to Medium-Sized Enterprises): A Partnership for Innovation”, we find the following statement, “The capacity and ability to innovate is a critical determinant for productivity and growth.”  And critical it is.  In these economic times, where every business has had to take another look at how it does business just to stay in business – incorporating innovation into your business is even more essential. But for the small to mid-size enterprise, injecting new innovative processes into your business can be a challenging objective. When you’re flat-out busy just trying to get business done; how do you go about taking a step back to think about innovative ways to improve and grow - and ensure you survive?  Where do you start? The good news is that innovation doesn’t have to mean abandoning what you are doing to bring in a revolutionary new process. You can achieve great things in smaller incremental steps. As stated further in the ACCC study, “Innovation is defined as applying new ideas in a way that produces new value for the organization.  New ideas do not mean 'new to the world'.  New ideas mean 'new to the organization'.” It can be as simple as this:  take one existing process and find small ways to improve it.  As you’ll see, the benefits reaped from that one decision can

Why Resource Classes Matter – Billing Rates

4castplus offers the capability for you to categorize your Labor, Equipment and Materials resources into what are called resource classes. This capability is an extremely powerful control and reporting mechanism that enables you to achieve two key objectives: To standardize billing rates To organize resources into strategic groupings for reporting and vendor negotiations To get a handle on how you would make best use of resource classes in your organization, I’ll give you a few examples below. I’ll break out the discussion into two areas: Billing and Reporting to give you some ideas as to how they’d be used in either scenario.  There’s a lot of overlap between the two usages and most organizations can make use of both – even if you have no billable resources in your projects. For this post, I’ll focus in on the Billing side. Billing Having a standard set of project billing rates is a key part of the business of generating revenue from billable resources.  Establishing the rates themselves, however, is only one part of the whole picture.  Resource Classes in 4castplus are there to help bring some structure to simplify the often complex management of Billing Rates. In a nutshell, resource classes are a convenient way to group resources together that have the same billing rate. Each actual resource grouped under the same Class may have a unique Cost Rate (what the cost is to you), but using a Resource Class, you can bill them out at the same Billing rate. For instance, when negotiating with customers on a project bid, you’ll probably share your charge-out (billing) rates with them; and on your rate sheet that you send to your customer, you’ll most likely specify the type

History is a Great Negotiating Tool

Establishing a starting-point and benchmark for costing out new projects is greatly simplified if you have good information to start with. When negotiating prices with subcontractors or suppliers, it helps to have good historical trend and benchmark data to support your negotiating position (at the very least to know what things have cost in the past, and how those costs have changed over time). Looking back on past projects and reporting on, for example, the average cost you’ve paid for a particular material over the past year or two; can be incredibly empowering during negotiations. A further advantage is being able to side-by-side compare costing items such as average material rates and total amounts purchased - by Supplier and even by Project. Additionally, Side-by-side comparisons of subcontractors, in terms of both rate and productivity, will give you further sway in future contract negotiations with those and other contractors. Vendors will often up their rates without much of an announcement and also add in their own contingency factors somewhere in their bid to make up for historical losses. Rate increases are obviously a normal course of business and are often justified. But, if over time, consistent rate increases are sneaking in without your notice, then you’ll have little or no position to negotiate a better rate if you don’t have good historical reporting and trending tools to position yourself with. Looking at it from a slightly different angle – if you’re a Contractor and you’re bidding on projects, it’s vital to know how your charge-out rates have played out over time to give yourself maximum credibility in your customer’s eyes. It also positions you with a good strategy of how, when, and how much to increase your