How to Correctly Manage Project Cost Data

What you think you know & why it's likely inaccurate

by David Swider
March 12, 2019

“It ain’t what you don’t know that gets you into trouble; it’s what you know for sure that ain’t so.” Whoever came up with this quote (often attributed to Mark Twain, but its true origin is much debated) must have had the construction industry front of mind. 

Exhibit A: Studies reveal that 98 percent of capital projects experience cost overruns. The blame for this statistic is commonly placed on project execution, when in fact, faulty execution may be only the tip of the iceberg. All too often, contractors base decisions on outdated, incomplete or invalid data with the unfortunate assumption that it’s accurate.

As it turns out, this can be very risky. Just think how quickly costs and productivity rates change during a project. They rapidly become outdated, and using stale information could mean the difference in thousands of dollars in material or labor costs, as well as weeks of delays. If contractors aren’t vigilantly monitoring and updating this type of information, their projects can swiftly derail.

For a real wake-up call, consider how your documents are typically stored on projects and, consequently, the limitations of the information you’re actually working with. Most contractors have multiple project storage locations for different types of work and documentation, with access often limited and file structures so disparate that even the best sleuths couldn’t locate a specific piece of information.

Without integrated tools, what you think you know becomes increasingly difficult to confirm. How often are you having to remember where a similar scope was or what project it was even for? The conversation likely sounds similar to this:

“Hey, Jim, what was that project with a standing-seam metal roof, and where’s the data on it? It’s in whose favorite folder? On what drive?” At least two people are spending valuable time emailing or making calls to answer those questions; a third person needs to get involved if administrative privileges or access licenses are required; and tack on a fourth person if a trip to a storage unit or remote location is required.

Not only is this approach time consuming, but it makes it incredibly difficult to gather the correct information and solid data for a project. But, advances in technology are streamlining operations for contractors of all sizes. Now, you can use a variety of software to ensure that the information you have is valid, useful and accurate.

Tapping Historical Knowledge

One way innovative contractors are validating their data is by looking at both their past and present projects with a new lens. They’re starting at the very beginning stages of projects, making sure they’re building with the right assumptions (based on insights from past projects) and using them as benchmarks, or a library of knowledge. Technology can allow you to leverage the past for future estimates and budgets.

With the proper software solution, these platforms can capture insights and learnings from prior projects, and you can use the stored data to make informed decisions on current projects.

For example, one scheduling and planning tool allows an artificial intelligence engine to suggest relevant benchmarks, and the planner has the choice to adopt those benchmarks as the basis of the plan. By utilizing a firm’s historical experience, the project plan is better calibrated for success.

Firms may need to answer questions such as: Why does crew X achieve this production rate while crew Y achieves that production rate? While there may be conditional circumstances for the different production rates, companies who leverage benchmark data make more informed planning decisions.

Some may think that projects are too unique to benchmark. Differing project conditions leave them believing it is impossible to compare past job activities to current project planning. However, the issue is not that the conditions are different, but rather, that those people do not have easy access to the comparative project data.

In fact, most people are surprised at how many similarities there are between projects, and they find there are valuable lessons that can be learned from the data. The key is to stop living in a world where the information is scattered all over the place and create a central point where you can get a clear view of all of your information.

Complementing spreadsheets

The issues mentioned so far are compounded by contractors who believe their current software is working fine or who insist you’ll have to rip the spreadsheets from their hands because they contain secret formulas perfected over decades. Maybe their software was enough when they made the purchase 3 years ago, but consider how much technology has changed in that time.

Many say, “New technology is difficult.” But more often than not, that simply isn’t so. These companies usually try to get new software to exactly mirror their existing and inefficient workflows and software. They’ll ask, “Can you make your software look like our spreadsheet?” However, the intention is to make technology and the workflow processes related to it better than (not similar to) the old spreadsheet and leverage the information traditionally captured in those spreadsheets.

To help ensure they are working from better data, some contractors opt for systems that integrate data from multiple sources and tools, giving a much deeper view into what is taking place across every aspect of every project. This underscores the need to get all data in the hands of folks who need it, when they need it—in a way that’s easily readable. Then, they can be sure what they know is so.

Making Data Accessible

Remember those magical, proprietary spreadsheets with the secret formulas? Everyone has one, and it’s risky. First of all, usually only a small group of people benefits from and has access to them, limiting information sharing and learning. And, these spreadsheets aren’t perfect. Have you ever had to find a formula nestled in a cost item estimate with hundreds or thousands of cost items? Have you ever spent hours looking for penny corrections?

Members of the firms I meet with every day often aren’t even aware of the newest updates and full capabilities of the software they have in place. Those new updates and software functionalities need to integrate with existing spreadsheets, resulting in data on those line items that is sharable, accessible and visible to everyone on a project.

It’s this ability to connect the data that is so critical. Successful companies have a technology strategy in place and want to see a working, connected solution that offers the ability to capitalize on information across their entire systems—a connected view that assists in accurately predicting profits and projecting outcomes.

So, next time, before you answer the question, “How confident are you in those numbers?,” consider the words that may or may not belong to Mark Twain, and make sure what you “know” is accurate.

Original Article