Tips on cutting costs in the construction industry

  • The construction industry is no different. This industry is a key contributor to the nation’s development. In fact, since it is one of the most important industries, it is all the more necessary that construction companies take timely and essential measures to stay on track and drive the national economy.

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The term ‘cost-cutting’ is usually looked upon with overriding feelings of doubt, uncertainty, anxiety, and generally as a period of impending hardships. And truth be told, it is a time when insecurity over a company’s financials looms large. Though the management may find it necessary to curb certain unnecessary expenditure, the employees may feel the pinch from overdone measures to bring down costs.

Due to the economic slowdown, industries have been going out of their way to reduce costs to save their fiscal resources, meet their budgetary limitations, and reallocate this money to fund other projects.

The construction industry is no different. This industry is a key contributor to the nation’s development. In fact, since it is one of the most important industries, it is all the more necessary that construction companies take timely and essential measures to stay on track and drive the national economy.

Mentioned ahead are a few tips on lowering costs in the construction sector.

Estimate Your Costs
This is one of the most important considerations in controlling costs and should be taken up from the start of any project. Accuracy is what matters the most as a wrong estimation can lead to more financial blunders in the later stages.

To prevent complications from cropping up later on in the project, I suggest the use of high quality construction estimation software. This software helps by allowing you to make correct estimates, perform virtual takeoffs, manage bid processes, and generate comprehensive reports. Plus, it also helps you develop detailed business proposals.

Tips on cutting costs in the construction industry
(Image credit: https://c2.staticflickr.com/8/7235/7402641060_b54f4a1fa7_z.jpg)

Negotiate and Build Healthy Relationships with Contractors and Suppliers
Use your contacts/network to find contractors and suppliers who are up for negotiating their rates and focus on developing long-term relationships with them. Such contractors and suppliers may be few, but getting them onboard is worth the effort because it opens up the scope for you to do business with them in the future as well.

Since times are tough for everyone in the construction industry, chances are that most suppliers and contractors will be concerned more about the margins they achieve. Negotiating and getting the best rate from them is one of the most common ways of cutting overhead costs for your company.

Avoid Scope for Rework
One of the main reasons construction companies end up losing considerable revenue is due to rework. Apart from that, rework also leads to prolonged schedules, late delivery and increased chances of injuries to workers. In the long term, it can greatly hamper a company’s reputation and mar its chances of attracting new business.

Preventing (or minimizing) rework makes for an effective cost-cutting measure. To avoid rework, make sure you hire the right contractor. You will also need to look into processes such as building information modeling and lean construction techniques to detect and correct mistakes virtually, as well as practices such as including perspectives of owners, and other stakeholders in the planning and construction stages.

Tips on cutting costs in the construction industry
(Image credit: http://media.npr.org/assets/img/2013/05/24/ap13051403350-1-_sq-7e8ee8b48a20446ba0ce7c4d51a73f369ce51b1e.jpg)

Identify and Mitigate Risks and Uncertainties Early
Identification of risks and uncertainties in the early stages of a project goes a long way in bringing related costs under control. It also helps save time. One mistake made commonly during the risk assessment stage is that risks are not allocated cost and time implications, often making it difficult to analyze their impact on the achievement of the objectives.

It is advisable to invest in scientifically developed hi-tech risk assessment systems to mitigate uncertainties and threats to safety during the nascent stage of a project to avoid incurring additional expenses in the future.

Hire Multipurpose Labor
Instead of hiring employees for each and every role, hire staff that you can get more done from. Multitasking is a skill that is very essential in modern times for surviving the economic lull. Achieving optimal productivity from every employee is crucial to business success.

During the hiring process, look for workers who can fit into multiple roles and are adept at managing several tasks at once. Through this strategy, you can get more output with less input.

Deliver on Time
The completion and delivery of a project on time is crucial to cutting costs. More time will only mean more payments to third parties, which in turn will lead to unnecessary and increased costs. Apart from that, it also affects your reputation adversely, which will make your customers defect to your competitors.

Trim the Vehicle Fleet
If you’ve got a large vehicle fleet, you need to analyze its utility, operating cost and power consumption, and determine whether you need to keep all of them, replace them with more updated and efficient ones, or sell them (especially the unused ones). Depending on the result of the analysis, you can take necessary action and cut some costs there too.

Invest in Better Technology
We all know that investing in technology may be for the long term, but it is not going to be a one-time thing. There will always be newer gadgets and equipment that will enable you to do things faster and at lowered costs. You need to invest in such updated and safe machinery. Implementing energy efficient technology may bring with it high initial costs, but it can help you cut them in the long term.

Tips on cutting costs in the construction industry
(Image credit: https://c2.staticflickr.com/6/5123/5342548089_ec204147b2_z.jpg)

Conclusion
With cutting costs becoming the norm in every profit-making organization, one needs to exercise caution and investigate in detail where the money is being spent. Although using modern technology is helpful, one must not forget to think long term and avoid undermining the role of building goodwill for the company. Apart from that, taking timely and well thought out measures will hold construction companies in good stead in difficult times.

Sandra Carter is a Marketing Assistant at Proest.com, an innovative construction estimating solution. She often shares her extensive experience in the construction industry with her writing.

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