When word comes in that the project is closed, the bell rings! There is a feeling of satisfaction in knowing that the time spent meeting, designing, engineering, and planning wasn’t spent in vain.
After the initial excitement wears off, however, a second emotion tends to find its way into the hearts of many integration business leaders: fear. This temporarily paralyzing emotion can come over you like a tidal wave, especially on the heels of closing a large project or a bid project. We’ve all had at least one or two projects that looked great on paper but nearly brought us to our knees in terms of cost overruns, scope creep, or on-the-job learning that came at a heavy cost.
What do you need to do to make sure you have costs under control? Every project has its share of unique challenges, but there are three areas to focus on: historical costs, diligent site surveys and design, and capturing all overhead costs.
We’re in the age of big data. We have a lot more information available than ever before about ourselves, our partners, and our customers; however, we’ve long had masses of project data that we forget to make the most of.
Lots of companies look at project-level profitability, but many don’t go far beyond that. With data we have available to us, we should be looking farther into our project profitability to know – down to the last bolt – where money was made and where it was lost.
This requires time and granularity, but you’ll find areas where you leave money on the table if you look at engineering, programming, hard goods, equipment, and other pieces of project performance individually.
Diligent Site Surveys and Design
The second area is one that has improved a lot over the years: Having a good understanding of the installation environment – and a design that’s near certain to work in that environment – is key.
First, there are surprises: Showing up with a ladder when you need a lift or not opening up the ceiling prior to installation only to find asbestos once you start.
Also, the fast-changing technology landscape leads to onsite trial and error with new models of equipment. The more testing, planning, and design that can be done upfront, the better.
Capturing All Overhead Costs
This final area involves failing to consider non-project overhead (or not enough of it). Sometimes companies include a line like G&A or GS&A, but many times they do not.
This needs to be captured directly or indirectly. The people who receive shipments and pack skids to go to jobsites, or the procurement person who enters the contracts and places/tracks equipment orders, are costs that need to be attributed to a project.
Many companies either see these as sunk costs or don’t think about them at all. But these non-field- or non-engineering-related activities are directly attributable to specific projects. Costs should be associated with these items, and there should be revenues associated with these activities in every proposal.
Project Contribution Simulator Tool
As jobs come rolling in, and excitement comes over you, avoid the feeling of fear that sometimes follows. If you focus on understanding your historical costs, being diligent in your site surveys and design, and remembering to factor in non-project-related costs, you’ll be well on your way to smoother projects and greater profits.
NSCA has a tool that can help with this, too: the Project Contribution Simulator. This tool demonstrates how properly burdening labor, spearheading eroding margins, and understanding your true costs of doing business impact your bottom line (operating income). It’s a great tool to play around with to see where your break-even point on a specific project might be.