Margin erosion is currently one of the major factors generating financial strife among many construction firms, according to risk analysts Equifax. Flaws in communication processes and protocols, particularly when dealing with back charges and variations, remain one of the key causes.
Back charges can be incurred for several reasons. These include the need to mitigate or replace defective work or products as well as addressing site safety risks or costs for hire or purchase of equipment not included in the original tender and cost planning.
It is not just the additional cost that generates an issue, though. If the matter is not dealt with effectively and quickly, it can escalate into a contractual issue with associated formal Demands for Payment or even legal action.
The same is true of variations, whether they are lodged by a subcontractor or originate with the client.
Why Time is of the Essence
Senior Site Supervisor for SHAPE Australia Jan Profant explained five days is the standard time required for a response to these kinds of procedural communications.
“Generally, the quicker a response is, the better,” he said.
However, finding, tracking and managing the correspondence involved can be complex, time-consuming and inefficient, thus increasing the risk of losing both productivity and profit on a job.
“There can be a lot of mistakes and miscommunication,” Profant said. “And when you don’t capture changes of scope or changes of time at all, it can be too late once you are onsite to send a change order over.”
The complex nature of many projects only adds to the challenge. For example, if a project has seven floors all being worked on concurrently, each floor will have its own unique issues relating to the job.
And if a subcontractor working on a specific works package needs to communicate about an issue, Profant said, they can’t necessarily take too much time to wait for a reply, due to time pressures around work completion.
“These kinds of things can make or break,” Profant said. “That’s when you can start having to chase money back.”
Tracking Down Email Trails Made Simple
Relying on email alone is not the answer. Emails can be hard to track down or may be captured in a specific person’s laptop email inbox, not accessible to others who need to access them.
SHAPE is now using the Procore Correspondence management tool to manage communications, and according to Profant, there have been multiple benefits in terms of efficiency, visibility and accountability.
“The tool puts everything together so you can find what’s required,” he said.
For instance, if a request for information is needed, after contacting the client and having the request addressed, creating a Variation is simple. There is also a clear communications trail around the required approvals.
“Everything is tied in together,” Profant said.
Transparency Builds Trust
As a professional construction company, SHAPE is committed to being open and transparent with its project communications, and Profant believes the Correspondence Tool to be an asset in this regard.
Matters like advising a client about an upcoming change that will vary costs can be done more efficiently, while communications around indicative costs are simple to track and verify.
“Communication is key everywhere.”– Jan Profant, Senior Site Supervisor for SHAPE Australia
Managing the site and the various subcontractors is also crucial, as is ensuring that all necessary communications around works, contracts and costings are documented.
The stakes are significant—Profant said not doing everything correctly can incur costs ranging from $10,000 to $100,000, expenses that often come out of the builder’s project margin.
“It is a lot of responsibility,” Profant said. “Communication is key everywhere.”
The tool also makes it easier to keep all the other project stakeholders and collaborators, such as the architect, engineering consultants and building certifier, in the loop with matters like design, process or product variations.
The tool enables groups to be created for automating sharing of relevant communications, assigning tasks or tracking contributions, such as mark-ups to design or contract documentation.
It also supports the use of visual information, for instance, photographs of notes from a phone call or a detail of onsite work. As these, along with all other communications, are archived securely in the cloud, they can be retrieved quickly when needed, even months later.
Where multiple RFIs are associated with a specific conversation, being able to track who the information was shared with and who approved the responses can directly contribute to not losing margin on a job, Profant explained.
All Correspondence, Anywhere, Anytime
The mobility of the application is also an advantage because it’s accessible to the whole project team.
“Everyone can log in on their mobile device.”
Before implementing the technology, Profant said it was not uncommon to get bogged down in paperwork.
“This has made our job so much easier,” he added.