Amid reports of expected growth in the construction industry, business owners and executive teams continue
to focus on controlling costs and estabilishing internal operations to
successfully navigate the economic recovery, Global Construction writes.
The recession of 2008 resulted in construction firms slashing costs and rightsizing their companies,
while struggling to maintain cash flow and retain key project personnel.
Expectations are that backlogs will increase during 2014 and a renewed focus on
job selection, appropriate allocation of resources and utilisation of new technology will help companies
successfully manage growth.
Focus on Profitability
During the recession, construction firms were forced to
operate under an environment of survival. The overriding focus was cost
reduction and lean production. Companies were happy to accept projects that
resulted in minimal margins in order to keep the doors open and retain key
project personnel.
As the economy strengthens, construction firms need to
re-think their approach to the market and focus resources to projects that will
provide an acceptable return. As the quantity of opportunities continues to
increase, so will the quality of projects available for firms. It is critical
for executive teams to define an acceptable return in their market and require
that new opportunities meet a stated gross profit percentage.
Estimation and project
management teams should spend time on projects that fit within the
strategic vision of the company without the distraction of low margin jobs that
expose the company to performance risks.
Construction firms can further reduce uncertainty by bidding
on and securing work that fits the company’s unique talents or specialty and by
confining opportunities to known geographical regions and markets.
The impact of technology
An unavoidable consideration for any construction firm is
the use of technology for effective
estimation,
The proper use of BIM collaboration, cloud computing and
mobile data, can be a major asset that allows companies to maintain ideal cost
structure by delaying or replacing personnel costs and maintaining the
company’s ability to achieve proper gross profit margins. Construction firms
should focus on solutions that will allow for timely, accurate information to
ensure that bids are correctly calculated and to efficiently manage production.
Timely information can help advert excess remediation costs
should a major problem surface. Construction executives should not only
consider the internal benefits of technology, but also the impact on their
ability to secure work based on their client’s technology requirements.
Effective use of technology depends on the buy-in of the executive team and
customising the solution to meet the needs of decision makers.
Although there are positive signs of economic recovery and increased activity in the marketplace, there
are no guarantees of growth. A construction industry benefit is that production
cannot be performed overseas or ignored for extended periods of time. The
recession and subsequent delay in construction starts indicates that a recovery
is necessary. Companies who have a system in place to secure profitable work,
appropriately invest resources in the company and utilise new technology will
be in the best position to capitalize on the economic recovery.
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