Tight margins and operating profits have made it difficult for most contractors to increase the cash level on their balance sheet and build up the strong working capital and equity position that banks and bonding companies hold in high regard. To win bids in this environment, contractors must look for ways to gain efficiencies on projects as well as in the office.  

Decrease Downtime in the Field
Proper planning is the number one way to improve jobsite efficiency. Each week, the project manager should be in the field meeting with the foreman for a status update and to review the weekly plan. Each morning, the foreman should meet with the crew to go over the daily plan. Proper planning and regular meetings also help solidify subcontractor scheduling, ensure material delivery is timely and reduce the number of calls to the office. 

Track and Monitor Internal Job Costs
Companies must know actual costs for every manhour and hour of equipment usage or bids will not be precise. Project managers and foremen must follow a system with proper cost coding and budget comparisons at least weekly. The burden, equipment costs and indirect overhead costs should be analyzed and updated at least quarterly. A company that knows its true costs can bid future projects more accurately. 

Schedule Manpower and Equipment Efficiently

The jobsite foreman and the company scheduler need to have a streamlined week-to-week process in place so the correct field personnel and equipment are in place. This will help keep unproductive labor in the field to a minimum and keep the job moving forward as planned. 

Monitor Equipment Costs and Utilization
Idle equipment on the jobsite is a true expense and must be considered a job cost. Tracking equipment use along with proper scheduling will lead to better efficiency and lower project costs. It also will help management make decisions on equipment fleet purchases, sales and rentals. 

Follow a Purchase Order and Invoice Approval Process
All purchase orders should be issued and in place prior to the hand-off meeting with the foreman. There also should be a streamlined system for invoice approval by the project manager and transmittal to accounting for payment. A good system will lead to less downtime in the field, with foremen knowing all material vendors and quantities. It also will lead to office efficiencies by not having to track down, re-issue and account for missing purchase orders or unapproved invoices. 

Implement a Change Order Process
Everyone from management to field personnel must follow a standard change order process. Without one, costs may not be recouped or profit may be left on the table if the estimate for the change order is not correct. 

Standardize Subcontractor Agreements and Prequalification Requirements
With the number of subcontractors going under during the last few years, it is crucial for all companies to have a good prequalification and agreement process in place to ensure the subcontractor can complete the job in the manner for which it was bid. Having a subcontractor fail during a project can lead to a large amount of additional costs.  

Use Electronic Devices in the Field
Companies are increasingly using electronic devices to communicate with the office, remit payroll, submit jobsite photos and read drawings. Technology can help increase efficiencies by cutting down on travel time between the office and jobsite, allowing for immediate knowledge of changes to plans and scope, and approving expenditures at the click of a button. 

Focus on Job Close-Out 
Most profit fade can be tied to the last 5 percent to 10 percent of the job. It is key for the original jobsite foreman and project manager to be involved with the project until it is 100 percent complete, meaning the last check has cleared. Moving foreman or project managers to another job prior to closing can be detrimental and costly.

Share the Profit With Employees
Consider implementing a profit sharing program with key management and foremen. The foremen who are on the jobsite daily are the greatest way to keep a job running efficiently. If they have additional incentive, companies may see a better gross margin on the project. 


Paul Esche isvice president of Harding, Shymanski & Company, P.S.C. For more information, email pesche@hsccpa.com.