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Separating projects that are in advance versus arrears, really uncovers true profit potential.
How often are these Urban Myths mentioned, what we call: “The Elephant in the Room” issues?
“I’m OK, I’m making money!”
Well, have a separate look at the positives and negatives, not just the bottom line, there are some hidden cost issues!
“As long as the customers don’t complain, I’m happy!”
But biting into your project contingency incurs serious delay costs.
The common mistake, is not recognising the difference between CONTRACT time, and CONSTRUCTION time. The difference, CONTINGENCY time, is a DELAY COST to the firm if used.
“Reallocating resources should fix the problem…”
Not really, there is yet another overhead of rearranging BOTH projects, as well as the original DELAY cost of dealing with the impact of the project that was in arrears in the first place.
Consider the following situation, illustrating a number of projects doing well (positive, in advance) for the Base and Fixing PHASES. Meantime quite a number of projects are well in arrears in Frame, Lockup, and worse, in the Completion PHASE.
It is important that Business capitalises on the projects doing well (in advance, and staying in advance) whilst sorting out the issues of those in arrears.
FYI: Each coloured item represents just ONE PHASE for just ONE PROJECT. The “days of VAR-REV” axis represents the number of cumulative DAYS that all PROJECTS are either in advance or arrears, either side of the ‘zero’ (on budget) horizontal axis.
With the ‘Elephant in the room’ identified, the delinquent PROJECTS in that PHASE, can be looked up on buildMGR, any trends or causes researched, and the problem rectified for the future. Example below, shows the 29 days arrears status of a project in the ‘COMPLETION’ PHASE.
There are 94 days of CONTINGENCY left in the contract, so the customer is not aware (yet) of any project delays, even though CONSTRUCTION is already 114 days cumulatively in arrears (late).
The firm may have escaped PENALTY costs with the customer, but profits are being eroded. The Construction Firm’s resources are being tied up by these delinquent jobs. Hiring costs of equipment like scaffolding, security fencing, toilets, are continuing, and expensive Supervisor staff are being consumed on these jobs rather than new ones. These are the real ‘delay costs’.