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Technology’s CriticalRole in ConstructionCost ControlLearn how technology can create costefficiency for the construction industry

Technology’s Critical Role in Construction Cost ManagementTable of Contents3Using Software to Streamline Cost Management Workflows and Increase Profits4The Importance of Cost Management in Construction5Common Pain Points in Cost Management8The Need for an Interactive Platform for Cost Management9Challenges to Profit Margins10 Real-Time Data for Cost Management11 Supported WorkflowsBudget Administration and Contract CreationChange OrdersPayment ApplicationsForecasting14 Conclusion2

Using Software to StreamlineCost Management Workflowsand Increase ProfitsAt the core of any successful constructionproject is effective cost management.It is needed at every phase of theproject, from planning and design tochange orders, and to the final signoff on a project’s completion.Construction projects require a largecash flow with a high level of variability,making it difficult to predict total profits.Considering how many activities a generalcontractor manages concurrently everyproject—including ongoing payments towhat can be dozens of subcontractors oneach job—having the right amount of cashon hand is critical. Ultimately, cash flowdepends directly on the work put in place,which is directly tied to the schedule andthe work that teams are getting done.Without proper cost management, projectswill not stay on budget and profits arejeopardized. With the right technology,teams can control costs, ensuring theproject is completed as planned.However, ensuring that team membersparticipate actively in this critical taskisn’t always simple. Cost managementrequires a high level of detail in datamanagement; it requires access for everystakeholder to up-to-date information.When teams work in silos, this becomesimpossible, and less profit is achieved.As construction becomes increasinglycomplex, proper cost managementpractices become critical. This guidewill highlight the importance ofcost management, as well as thecommon pain points found throughoutthis endeavor. Next, the use of aninteractive, real-time digital platformwill be explored, with specificexamples highlighting key workflows.Finally, ways to avoid the pitfalls oftechnology adoption will be discussed.3

Technology’s Critical Role in Construction Cost ManagementThe Importance of CostManagement in ConstructionFrom forecasting material costs tocalculating overhead costs, costmanagement begins during preconstruction and continues until theproject is finalized. Without the rightstrategy in place, cash flow is poorlymanaged and profits are minimalat best, nonexistent at worst.4In construction, the battle to keep costsas low as possible while ensuring qualityand timely completion is constant. Addedto this challenge is the headache projectmanagers face when balancing a myriadof spreadsheets saved across numerouslocations. In many cases, project memberswork in silos, increasing the risk of error,miscommunication, and higher projectcosts down the road. In fact, consultinggiant KPMG estimates that, in 2015, only31% of all construction projects camewithin 10% of their initial budgets.1

Common Pain Pointsin Cost ManagementThe following scenariosillustrate the common challengesconstruction professionals facewhen managing project costs.Challenge: No real-time view of thefinancial health of a project or aninability to see historic cost changes.SolutionLinking all necessary spreadsheets canbe arduous, if not impossible. One smallbudgeting mistake can have a massiveimpact. Rather than having to refer tostatic spreadsheets saved in differentfolders, an integrated cost managementsolution allows teams to centralize allcost activities in the cloud, providing anaccurate view of project costs. Whetherviewed on site or in the office, changesare made instantly, and everyone can viewthe real-time impact of a cost change.With an interactive platform, dataautomatically updates across it, allowingteams to see the impacts of cost changesand visualize risk. Specific details on costitems and activity history to understandhow specific cost items moved throughthe change order process. Additionally,as questions arise during construction,you’ll have the ability to elevate an RFI to apotential change order to track the origin ofchanges easily. With the right tools, this canall happen in real time, ensuring a constantview of the financial health of a project.5

Technology’s Critical Role in Construction Cost ManagementChallengeJuggling multiple change ordersand documentation through theentire approval process.SolutionChange orders are inevitable inconstruction, and properly managingcontractually binding documentation iscritical. With an integrated platform, teamscan seamlessly manage all aspects of thechange order process. Streamlined upstreamand downstream change order workflowscreate clear accountability and ensurecompany-defined processes are completed.Teams can have an at-a-glance view ofall potential change orders—their type,scope, source, status, and cost-relatedimpacts. Cost items can be associated withhierarchical build-ups if required to thePCO, to detail the effects of a change andconnect it to the budget and contracts. With a click, cost items are moved quicklythrough the change process, predefinedmarkup configurations are applied, anddocuments are automatically generatedfor review or e-signature. Throughoutthe entire process, a detailed activitylog is captured for audit purposes.6ChallengeManaging multiple contracts andtracking costs for each trade withlimited visibility into how it impactsthe overall project budget.SolutionAny given project can have dozens ofsubcontractors/suppliers who requireindividual contracts, payment terms, andpayment tracking. Staying on top of multiplespreadsheets and folders to managecontracts and track payment applicationscan waste valuable time. By switching to acomprehensive cloud-based platform, teamscan leverage custom document templatesfor the standardization and auto-generationof contracts and payment documentation.Teams can also easily streamline andmanage incremental payment applicationswith the ability to track both pendingpayments and completed payments againstthe total work to be completed, makingit easy to balance cash flow and makeaccurate forecasts. The data automaticallydisplays in the budget summary view,providing teams with a real-time viewof the project’s financial health.

ChallengeBudget overruns cut directly into profitmargins. Teams need to be able tocorrectly plan allowances, such as generalconditions, across the life of the project.SolutionWith an integrated platform, teams canvisually plan time-based allowances andalign them with the overall project schedule.This type of cost management tool allowsyou to manage budgets and associatedsub-items by adding start and end dates,ratios of time changed, associated unitcosts and more, displayed in a Gantt chart.Challenge:Disconnected job costing and projectmanagement software creates additionalwork caused by duplicate data entry. Thiswastes time and creates a risk that mistakesAn integrated cost management solutioncan also address the following issues: Cost activities being tracked in siloedsystems resulting in a need to relyon others to update information foran accurate view of profitability Poor change management processesthat lead to unreimbursed costs Forecasting with out-of-date informationleading to inaccurate reporting of risk Unpredictable cash flow A cumbersome process to generatereports and check data Limited or no visibility into the statusof change orders or paymentswill be introduced during data entry.SolutionA software platform that integrates yourexisting tools means that the right datawill move freely from ERPs and otherproject management tools into your costmanagement solution. This eliminates theneed for duplicate data entry, removesthe risk of human-generated mistakes,increases transparency to neededinformation, and streamlines workflows.7

Technology’s Critical Role in Construction Cost ManagementThe Need for an InteractivePlatform for Cost ManagementTwo leading indicators measure thesuccess of any construction project1. Time — was the projectcompleted on schedule?2. Cost — was the projectcompleted within budget?One of the greatest risks to successis change orders, which are inevitableon any project. In fact, according toa study by the Independent ProjectAnalysis Group of over 12,000 projects,more than 35% of all constructionprojects will incur a major change.With change ever-present and theneed for accurate cost management atcenter stage, profit margins are at risk.8

Challenges to Profit MarginsResources are limited, and projectsare becoming increasingly complex.Although more information than ever isavailable, gaps in data and challengesaccessing that data present a hazard.From bid to handoff, information isoften fragmented, simply incorrect,or even lost. Using multiple systemsthat don’t talk to each other leavesteams running paper documents backand forth while referencing dozens ofspreadsheets that reside on local drivesand are shared only periodically.In the paper- and spreadsheet-basedmodel, trying to find the right informationwastes time. When information isspread across job sites, a clear or realtime view of the financial health ofthe project isn’t easily attained.These real challenges to profit marginscan be addressed through the use of asingle, interactive platform. Rather thanhaving separate applications for differentteam members, the right technologyoffers a single source of truth.9

Technology’s Critical Role in Construction Cost ManagementReal-Time Data forCost ManagementA key to improving cost management isadopting technology that offers accessto up-to-date data in a single location.A cloud-based platform like AutodeskConstruction Cloud allows constructionteams to work from anywhere at anytime on the same project, with all costactivities managed in one place.Through user-, role-, and company-basedpermission levels, teams can easily controlwho has access to specific information.Suppliers and owners can even be broughtinto the system to increase collaborationand streamline workflows. This allowssuppliers to review their initial contracts,create their schedule of values, review theirpay applications, and view their changeorders directly within the platform.The right technology also allows teams toadapt the system to their specific needs.Find a solution that does more than let youcustomize the budget structure. Look fortechnology that also enables you to: Customize terminology within the system Create custom calculated budget columns toincorporate within the budget summary view Configure multiple projectlevel financial markups Standardize documentation withcustom document templates Save views Customize reportsAdditionally, technology can automaterepetitive processes. With an integratedplatform like Autodesk ConstructionCloud, teams can generate potentialchange orders from RFIs to easily trackthe origin of changes. With the click ofa button, change orders can be movedthrough the approval process, generatingcontracts and documents faster.Finally, by centralizing the managementof all cost activities in the cloud, data isconnected and auto-updated across asingle platform, providing an accurate viewof the project’s financial health in realtime. Cost-related risk is highlighted, andteams are able to forecast more accuratelythrough every stage of the project.The result is that teams achieve a morepredictable cash flow and profitabilityprojections, increasing profit margins.10