Member Article

Effectively Manage Subcontractor Cost Increases

With their services costing more than than ever before, keeping a grip on your subcontractor costs is vital.

Planning permission approvals are on the rise – particularly in the housing sector, which saw more approvals in the year to March 2015 (261,000) granted than at any point since before the recession. Good news, you might think, for the construction sector. But thanks to skills shortages caused by company contractions during the downturn and a scarcity of materials, rising costs mean that not all of these permissions are likely to turn into completed projects.

The rise in both costs and the number of available projects has meant that construction subcontractors can be more picky about - and charge more for - the jobs they take on. In July, it was reported that some clients are even having to offer incentives for firms to bid for work, paying losing bidders for some of their outlay on tendering.

Construction firms therefore need to be clear on the amount of resources they have available to spend on subcontractor costs. Clarity on these budgets can help negotiate the best prices possible with subcontractors, whilst crucially providing a clear picture of the amount of work that they can take on. There is no point accepting jobs if you will struggle to find the labour to complete them, or if you have to pay so much on subcontractor costs that you will end up making a loss.

Technology can help companies monitor spend on subcontractor costs during the progression of an individual scheme. Twenty years ago, it wasn’t until the end of a project that a construction firm would have a full picture of how much it needed to pay its contractors. Now, software allows costs to be tracked at all points of the project, and for potential overspends to be identified at an early stage. Taking action to stop subcontractor costs spiralling can mean the difference between making a profit and losing your shirt.

But using the real time information available at the click of a button can also help firms to take immediate action to realise longer-term efficiencies across the business – not just on a site-by-site basis. Being smarter with your existing subcontractor costs helps to increase efficiencies while providing a better idea of how much you can afford – and how much you can expect to pay - on your next project.

Another benefit of using approaches to subcontractor costs is the ease with which managers can now access progress against agreed contractual outputs. Upon completion of a project, this data can be used to calculate where further efficiencies can be generated on future projects. Having a joined-up view of the progress of a project from bidding process to completion allows the embedding of smarter - thus cheaper - working practices.

By automating and streamlining processes through the use of technology, organisations are now able to save money by being more efficient with their available resources. Taking unnecessary waste out of your ever-growing subcontractor costs is vital not just on an individual project. It should help transform management processes to leave your firm in a much healthier position to win future work in an increasingly competitive marketplace.

TAKEAWAYS:

• Learn how technology can help your construction firm keep a firmer grip of subcontractor costs.
• Discover how data can help reveal efficiencies that can be made within your construction business.
• Managing subcontractor costs is much easier using real time data.
• Find out how subcontractor costs match against the contractually agreed outputs using construction technology.
• Transform your management processes and reduce subcontractor costs through the use of technology.

Uncover more ways to Maintain profitability by managing fluctuating resource in the contracting industry. Download your eGuide today.

This was posted in Bdaily's Members' News section by Wes Simmons .