You bid low and the job is already under way
The job is under way, the bid was too low and every week adds cost to a number no one checks.
The prevention comes before the bid goes out, when operations, the COO, estimating, the PM and the superintendent review the final price together. Once the job is under way, the cost to complete meeting finds the problem. It happens after the books close, on a dedicated day, and it's about help and not blame. Each cause has its own next step. If the estimate missed, estimating fixes the process. If the company miscalculated, it absorbs the cost, and the PM tries to make some of it up on every change order. If something on site is slowing the work, an RFI can speed it up.
Three moves, in order
Step 07: Monthly cadence
Weekly bookkeeping, cost to complete, and one CEO report, on the same days every month.
Learn this part of the job
SPM The Construction CFO publishes this course. It's a separate company from this one, and the course is on its own school site.
Other problems step 07 solves
Other things that go wrong
What owners ask
I bid low on the current project what do I do?
The job is under way, the bid was too low and every week adds cost to a number no one checks. The prevention comes before the bid goes out, when operations, the COO, estimating, the PM and the superintendent review the final price together. Once the job is under way, the cost to complete meeting finds the problem. It happens after the books close, on a dedicated day, and it's about help and not blame. Each cause has its own next step. If the estimate missed, estimating fixes the process. If the company miscalculated, it absorbs the cost, and the PM tries to make some of it up on every change order. If something on site is slowing the work, an RFI can speed it up.
Which part of the system fixes this?
The step is number 07, monthly cadence. Weekly bookkeeping, cost to complete, and one CEO report, on the same days every month. It's drawn from chapter 7 of CONTROL: C.F.O.S. Construction Financial Operating System.
Is this normal for my trade?
Across the 48 trades that publish a figure, net profit at $1M to $5M averages 7% after taxes. If you're well under that and this page describes your month, the two are usually the same story. The published average tells you where the pack is, and your own job costing tells you where you are, which is the number that pays payroll.
Where do I start?
Hold the cost to complete meeting every month, once the books are closed.
Can I fix this without touching anything else?
You can try, and it doesn't hold. Step 07 depends on step 03, overhead calculation and step 04, estimating system and step 05, software and bookkeeping alignment and step 06, project management. Install it ahead of those and it produces numbers the field won't trust, which is worse than the problem you started with.
Wrote CONTROL, the 8 step system behind these figures. More about the author.