The global economy has been destabilized by pandemic-triggered inflation and market changes, while supply chain issues are exacerbated by fluctuating material and shipping costs. The retirement of an aging workforce is quickly reducing the number of skilled workers, contributing to labor shortages and vendor scarcity. Climate change emphasizes the worldwide need to build with an eye for the future - adding sustainability and green building constraints to the ever-increasing complexity of construction.
On top of all this, stakeholder expectations are higher than ever.
With so many factors affecting cost planning and control in construction, solid project margins are harder than ever to achieve. Still, the worldwide demand for large-scale construction of housing and infrastructure is rapidly increasing, while the number of available contractors and builders stagnates.
Shifting expectations for project profitability and success are also at play, as stakeholders are no longer willing to settle for the “Golden Triangle” - a reference to acceptable quality, cost, and time to completion - let alone the ‘pick two’ approach which was touted as standard, in times past.
Historically, project success was largely determined by financial performance. Even late delivery could often be excused by the bottom line; after all, if the project maintained profitability, it could still be deemed a success - hence, the enduring emphasis on the advantages of cost control in construction.
Though project financials are definitely a leading indicator of project performance, high-level metrics may not always equate to project health - or the overall performance and resilience of a construction team. There are many critical metrics affecting project success, and examining them can reveal more comprehensive and accurate insight into project performance - as well as ongoing opportunities for improvement.
To put it into perspective, using traditional project budget and time-to-completion as your construction company’s defining metrics for project performance is like assessing the quality of a map based on whether or not a traveler arrived. Traveling from Point A to Point B is essential - but surviving the trip doesn’t necessarily equate to success. Did the map take the best route? Did it avoid unnecessary roadblocks or risks? Were time or resources wasted along the way?
Key Performance Indicators (KPIs) are like checkpoints on a map. Applied correctly, they support the advantages of cost control in construction, by providing actionable insights that help optimize and improve measures to control costs - as well as the overall performance and profitability of the entire construction team.
Tracking construction KPIs can also help general contractors assess their construction business performance, and build company health long-term, by providing benchmarks for success that are tracked while completing project goals. While not all metrics are created equal, considering the bigger picture can help your construction company hone in on areas of opportunity.
To maximize impact, KPIs for construction cost control should be carefully defined to meet your project or organization’s specific goals. Ongoing tracking and assessment is a responsibility critical to your project's success.
Most large-scale construction projects involve a Project Controls Manager (PCM) - also referred to occasionally as a Cost Control Manager (CCM) - who works as part of the Project Control Team. The PCM works closely with the Construction Project Manager and the Project Management Team, focusing on the construction project cost breakdown and other financial aspects which may impact overall cost and profitability.
A successful PCM proactively identifies any financial issues or challenges that may impede successful project delivery, recommends short and long term solutions, and ensures that communication occurs in a timely manner.
The PCM’s role is critical to effective cost planning and control in construction, and oversees project expenditures, cost and cash-flow forecasting, cost trends, and change order compliance - as well as providing reports on financial status throughout the project lifecycle. The PCM works in conjunction with the Construction Project Manager to gain understanding of the project contract, scope of work, approved project budget, and all expenses assigned to the project.
The project control team and PCM assume most of the responsibility for controlling construction and labor costs - and their responsibility continues to increase as factors affecting cost in today’s construction environment grow more complex. The development of accurate and effective construction KPIs can help PCMs and their teams maximize the advantages of cost management and cost control in construction, while increasing project performance.