Have you gone through a period where all jobs seem to be going bad, and not one seems to be running smoothly? It’s a sign to take a good look at your systems and identify ways to manage and reduce risk.
Start at the beginning: pricing
To reduce risk, try to imagine what could go wrong on a project and write a clear contract to mitigate those potential problems. Start by defining the parameters of the contract, listing inclusions and exclusions. Write detailed descriptions of the work, pointing out differences between your allowances and any contract documents or discussions you had with the client on site. The more detailed and clear you can be in the contract and
Bill of Quantities, the less room there is for misunderstanding.
Include a force majeure clause in the contract, excusing you from fulfilling the contract in the event of unforeseen, extraordinary circumstances beyond your control, such as floods. Additionally, write specific clauses stating the outcome of potential issues, like hitting rock. If you do hit rock the client then knows they have no option but to pay for the additional work.
Take care to review the profit margin on each project before submitting the quote. Make sure the margin, at a minimum, is enough to cover overheads and small mistakes and still leave you with a nett profit. Also, make sure the margin is greater on higher-risk projects. Don’t take on work if there isn’t sufficient profit to justify the risk.
Never take on a project you’re not capable of completing. Make sure you have enough qualified staff to meet the deadlines, and make sure you take out appropriate insurance.
Project handover
One of the most effective ways to reduce risk on a project is with a thorough handover between the sales team and the construction team. The two should spend a few hours dissecting and discussing the project, ensuring all knowledge from the estimating team is passed to the construction team. A well-informed construction team will feel empowered to politely push back at a demanding client trying for free extras. When the construction team understands the decisions of the estimating team it’s more likely to be able to stick to the construction budget, and far more likely to get variations approved.
Planning and managing
Give the construction team time to plan and manage the project. Well-managed jobs tend to make more profit and happier clients.
Draw up a project schedule well before the work starts. The schedule should be updated every few days. It may sound like a lot of work, but doing this strengthens the project-management planing. Map out time-sensitive orders and hold points. Plan how the build will work with other trades. Identify downtime and potential lost time. Plan for work that can be done when an order runs late or wet weather hits. It takes time, but being prepared makes the job run smoothly and increases productivity and profit.
When the project manager has time to manage the quality of the build, it saves time repairing defects at the end of the project. It’s more efficient to catch an issue early and fix it before the task is completed than to ask a subbie to return and repair it. Defects are the single biggest reason project sign-off is not achieved on time. Reduce the defects and you’ll achieve completion much sooner. Every visit to a project to fix a defect eats away at precious profit. Try to reduce defects as they arise. When the project is nearing completion, walk around with the client and make a defects list, then complete that list as soon as possible. Don’t wait for them to ring you a week after you’ve left site.
Trust me, this second option will cost you substantially more.
Clear communication
Another way to reduce risk is to keep the client well informed.
When something goes wrong, a well-informed client is more likely to be reasonable. Start by reading through the contract with them. Explain what’s included and why. Explain why a specific clause is in the contract and how it protects you and the client. As an example, take the rock clause. I always explain to the client that if I allowed a costing to excavate rock the price would be really high. This way the client only pays for it if they have to.
Don’t ever assume the client has read and understood the contract if you haven’t gone through it with them. Most don’t.
Keep the client informed throughout the build as much as possible with weekly meetings and email updates. Use whatever works for both of you, as long as the client is informed of the progress and why the build is at a particular point. A well-informed client will trust you and be more likely to accept a variation when it comes their way.
Track the problems
Finally, it’s important to keep track of problems.
Set up a simple spreadsheet, noting any major and minor problems that caused a financial loss. This will help identify patterns and allow you to change systems to mitigate recurring issues.
Not only is it impossible to plan and price for every extenuating circumstance, but you’d also never win a job if you did. Instead, try to mitigate risks by reducing exposure to them. Identify recurring issues and fix systems to reduce, or better still, remove them, writing clauses and clarifications in the contract to cover you as much as possible.
Take the time to plan and manage each project effectively and keep the dialogue between you and the client as open as possible.