ConstructionPro Week, Volume: 4 - Issue: 23 - 06/12/2015

Developing An Effective Cost-Control System – Part 1

Introduction

A cost-control system exists for two purposes—to develop meaningful costs for historical record keeping (presumably to aid in future estimating) and to keep track of a job so problems can be identified and corrected while they are still manageable. The success of the first objective depends on the success of the second. The second objective has an immediate impact on a contractor’s ability to manage its jobs, and is the subject of this article.

 

A Timely System

To be effective, a cost control system must be timely, first and foremost. Information that is too old may be useful for history but is useless as a management tool. The basic idea behind setting up a timely cost control system is to capture information that permits the project manager or superintendent (and ultimately, upper management) to notice and investigate a problem while there is still time to correct it. In many contractors’ systems, if the activity is less than a month long, the information is collected too late to have any effect.

 

Many contractors tie every piece of information to the completion of the payroll cycle. For example, suppose the pay week ends on Saturday. The time cards come in on Monday and are entered into the payroll system on Tuesday. Checks are cut on Wednesday and distributed on Thursday. Payroll deposits are made on Friday or the following Monday. Job-cost reports are finally printed on Monday and handed out on Tuesday or Wednesday. This type of reporting cycle greatly inhibits cost tracking and controlling because it takes so long to get information back to the field. There is no opportunity to fix anything that may have caused the costs to go awry. In some cases, this time lapse may even go so far back that the contractor misses timely notice requirements in contract claim provisions.

 

This type of reporting frequently results in field personnel “guessing” about how the hours were allocated, which brings us to the second point—accuracy. If supervisors wait until the time cards are tabulated at the end of the pay week to record their time, it will be too late to use the information. It may not cause a problem if the crew is static. But on most jobs, people move around, so waiting until the end of the week to record the time ensures that at least some of the hours will be charged to the wrong task codes. In other words, the supervisor doesn’t remember that on Tuesday he pulled two people off one crew to do extra work for a change order that hasn’t been authorized yet. So the time gets assigned to something that may be valid but incorrect. In a nutshell, timeliness contributes to accuracy; therefore, timeliness is essential to ensuring that the information is accurate and that it is received with enough time to analyze and use it. To ensure accuracy and timeliness, time cards should be completed and turned in daily. Time and production accomplishments should then be entered for timely analysis of the data.

 

Tricks of the Trade

Using laptop computers and hand-held devices in the field may be the best answer for most contractors. This provides immediate data capture. However, time-card data must also make its way into the payroll system.  If worker hours and tasks are sent by text or email to the office payroll person, this costs time in transferring the information and introduces the potential for data error. Entering data into a spreadsheet and sending the spreadsheet carries some of the same inefficiency and data transfer issues. The best option is to have a timesheet application that can directly transfer the data into the payroll system or otherwise allow import of the data. Directly capturing the time to the payroll system makes it possible to more accurately track time on a daily basis. When considering new software, be sure this capability exists.

 

Additionally, look for a field time-entry system that has data validation. This will further improve the accuracy by making sure job cost codes are correct, the number of hours add up to expected daily/weekly totals, and employee names/IDs are verified for accuracy. These systems should also include an approval step in the workflow to check quality and completeness.

 

More Than Just Equipment

When it comes to accuracy, consider the additional factors involved beyond capturing the data in a timely fashion. Hire supervisors who understand the importance of the data and make a good effort to be accurate. Some jobs are more suited to capturing detail than others, and some people are remarkably good and others remarkably bad about correctly filling out their time cards. This must be factored into each project’s time card set-up.  If a job is being run by a working supervisor who must also order material, do the layout, direct crews and write field memos, expecting that person to also provide accurate time information may be misguided. At best, you can hope that the time records arrive at the last minute to do the payroll and that the total hours per person are correct. Don’t expect that supervisor to handle the time breakdown for three or four tasks per person per day. In this case, it is better to have someone else record the time or do some activity grouping, which we will cover in part two of this article.

 

COMMENTS

Cant wait for part 2
Posted by: LeonB@iosdv.com - Friday, June 12, 2015 4:01 PM


 









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