Close-Out Profit Leaks Part 1

July 19, 2004

How to Stop the Project Close-Out Profit Leaks!

By: John Zink


The PHCC Educational Foundation conducted its third “Essentials of PHC Project Management” course in Fort Worth, Texas a few weeks ago. The attendees included project managers, estimators and owners from p-h-c firms; ranging in volume size from 3 to 30 million per year.

The attendees learned about jobsite management, how to identify lost labor time, how to increase labor productivity, how to conduct a turnover meeting, how to negotiate with the G.C.’s rep., how to recover all their costs on change orders, how to produce a meaningful schedule, how to manage their time, how to get foremen to do paperwork, how to set up a pre-fab shop, and how to manage with numbers instead of feelings.

Another topic covered is how to avoid having a great job go bad because of a poor project close-out,. Below is a sampling of the information that was covered on this topic during the last “Essentials” class. Read on to get a feel for the kinds of great tips and tools you can pick up at one of the Foundation’s courses.

Effective Project Close-Outs

Most contractors have seen jobs that were problem free for 90% of the project go sour as problem after problem plagued the close-out process. Many profitable jobs have turned into losers as crews lingered to finish up work or G.C.’s issued their second and then their third “final” punchlist. With proper planning, documentation and managers who know how to handle crews and the G.C., you can ensure that you will not see your profits bleed away at the end of your projects.

Work Expands to Fill the Time Available
As a great project is nearing completion, sometimes an attitude of relaxation can settle upon the field crews and the project manager. The foreman knows that the crews are way under their projected hours, so why push hard? “There are only a few things left to finish up and they’ll take care of themselves.”

Unfortunately, without the goal of being off the jobsite as quickly as possible, work from your crews may pace itself to fill the available time left on a project. Labor savings evaporate in the last weeks of the project and if an unexpected difficulty arises, suddenly that fat job can turn into a loser.

Work expanding to fill the time available is a known human condition. It even has a name: Parkinson’s Law. It is not something to get mad about, UNLESS you have taken responsibility for training your project managers and foremen to manage and avoid it.

During work on the project, your PM and foremen/superintendents should know how long each phase should be taking and should be checking DAILY how actual installations are going versus projections. As the project nears completion, the foreman needs to have a very clear concept of exactly what is left to do and how long it will take to complete the work. If this sounds like a punchlist, you are right on target.

Check part two of this article for tips on how you can use punchlists to get off the jobsite AND get your final payment more quickly.


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