Steve Means is no stranger to the challenges of construction cost management. It’s something he’s thought a great deal about as an owner managing big, complex projects for 17 years. Having held the position of Deloitte Principal Consultant, Means’ purview has included overseeing the firm’s capital assets business, spanning its engineering, construction operations, maintenance, and asset management offerings. Means spends most of his time helping clients deliver large-scale projects more efficiently and with less risk.
Over his three decades in the industry, Means has seen it all. In a conversation with Procore, he shared some clear-eyed advice for project teams and finance leaders alike, including these five steps to help control project costs.
Step 1: Recognize that real-time financial insights are where the industry is headed
You can’t keep costs in check without checking in on costs. Being able to provide and leverage real-time financial insights has become a strategy many firms are deploying to gain a competitive edge.
In fact, the trend is toward real-time financial visibility becoming table-stakes — Means says he’s seen it considered, even emphasized, more often in bid tabs. As client demand for more actionable data insights increases, it will become something finance leaders must embrace.
Above all, he emphasizes, is the importance of being able to put all of your data into one place so you can actually do something with it.
“Right now you’ve got a scheduling tool over here, you got a cost tool over here, you got things in somebody’s desk drawer and on clipboards. Really bringing all that data back to a centralized place and being able to analyze it in real time is something we have to lean into,” says Means.
The industry often struggles to do exactly that, and laments the widespread use of manual processes in light of emerging technologies like machine learning, artificial intelligence, Internet of Things, and automation.
Step 2: Benchmark cost management fundamentals
Means pulls no punches with his assessment of a typical construction project estimate.
“I don’t think we estimate very well as an industry,” he says bluntly.
He says a combination of real-time analytics and good old-fashioned project discipline works best when it comes to managing cost, and managing a project in general. Also critical is having a top-down strategy that allows firms to do real-time progress monitoring, real-time reporting, and time-risk cost.
In this industry “twenty years ago [we had] really experienced people and not a lot of technology and not a lot of data. Now we have reams and reams of data, and in a lot of cases less experienced people and we can’t really make sense of that data,” says Means. “So moving to the next level of being able to collect real-time data and analyze it so it tells us what’s really going on so we can actually impact change and drive a project’s success is really where the industry is headed.”
Step 3: Get back to real cost management
Controlling project costs requires what Means calls “real cost management,” which encapsulates getting a handle on things like final design, quantity take off, and establishing the basis of an estimate. Next is taking those quantities and applying labor rates, materials, and performance factors.
But, maybe even more important, is moving as an industry from a reactive to a proactive cost management approach.
“We’ll spend a month putting together the monthly report, which is backwards looking, very manual, and nobody trusts it,” says Means.
When that’s all the visibility project teams have, it’s very difficult to make smart decisions on how to drive the project forward.
Instead, Means argues that “real cost management” implies that teams use real-time data to steer the project in a smart, forward-looking way.
“We need to get to a place of collecting data in real time, getting daily progress, running a batch overnight and leaders come in the next morning and use that information to drive project performance as opposed to managing cost in an Excel file that’s, at best, loosely related to the schedule,” explains Means.
Step 4: Build a team culture of accountability
Culture is a key element for any successful construction firm, but Means says he views culture as driven by accountability, and that if we don’t give people good processes and tools, we’re setting them up for failure.
Oftentimes leaders have to choose between holding teams accountable to expectations they weren’t equipped to meet, or letting things slide because they acknowledge the expectations were unfair.
“Both of these strategies are wrong,” says Means. “We’ve just gotten used to the fact that projects go over budget and it’s fine. Well, obviously it’s not fine.”
Instead, the industry needs to move towards an end-to-end process of trusting their estimate and planning to do cost control in a real way. Then updating based on real-time progress.
Step 5: Set your business up for real-time insights
Equipping your business with the ability to capitalize on real-time, data-driven insights requires a combination of people, process, and technology.
Real-time data and real-time insights are both necessary for making the best possible decisions, but getting them requires progressing the job every day. That means keeping all information in one place, and providing teams — internal and external — with unfettered, clear communication loops that facilitate collaboration around the challenges of the day and how to overcome them.
“With everything on one platform, we can collaborate there, we can progress the job in real time, we can come to the table and discuss any challenges,” Means says. “When I say one platform I don’t mean the contractor uses a system and generates a series of papers and then hands them to an owner.”
Construction has come a long way when it comes to more effectively collecting and utilizing data, but there’s still much progress to be made. Means says the industry needs to get to a place of more daily insights and a better understanding of what’s going on in the project, with less of a focus on rearward reporting and more emphasis on real-time data driving progress on the project.
For further reading, find out why you need to quantify the risks hiding in your project management system (Jobsite link coming soon) or how to narrow the gap between your field and office teams.