The schedule slipped and the cost never showed up
Update cost to complete for the new end date every month.
A job bid for ten weeks that now takes sixteen has six more weeks of supervision, equipment, and temporary facilities that no one put in the forecast. The PM reports the job as on budget because the costs so far are under the estimate, and the overrun is still coming. By the time cost to date shows the problem, it's too late to bill a delay or adjust the job. Your WIP reports a profit you won't keep.
Three moves, in order
What CFOS does about it
In CFOS the PM enters the cost to complete each month and it's approved, so the extended weeks have to be priced by someone and reviewed by someone. The job cost updates every hour by cost code against the budget, and the WIP schedule shows the effect on over and under billing. Dailies record the crew, equipment, and photos, which gives you the record of why the schedule moved. Equipment is charged to the job each day it's on a daily, so extra equipment days show on the job as they happen.
Who owns this: Controller.
At $20M, three or four large jobs a month late can erase a quarter of profit. The WIP schedule still reports that profit. The cost to complete for the new date fixes that.
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Step 07: Monthly cadence
Weekly bookkeeping, cost to complete, and one CEO report, on the same days every month.
Other problems step 07 solves
Other things that go wrong
What owners ask
Cost of schedule delays construction?
Update cost to complete for the new end date every month. A job bid for ten weeks that now takes sixteen has six more weeks of supervision, equipment, and temporary facilities that no one put in the forecast. The PM reports the job as on budget because the costs so far are under the estimate, and the overrun is still coming. By the time cost to date shows the problem, it's too late to bill a delay or adjust the job. Your WIP reports a profit you won't keep.
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% before 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?
Add the current expected finish date to your month end cost to complete form, next to the original finish date.
How do I find out what a schedule delay cost?
Compare the extra weeks on the job to your weekly cost for supervision, equipment, and temporary items. Add any crew time lost to waiting. The dailies give you the days, and your cost codes give you the weekly rates.
Why doesn't a late job appear in cost to date?
Cost to date only records what has been spent. The extra weeks haven't been spent yet, so the job looks fine until they are. Only a cost to complete that reflects the new finish date shows the problem early.
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.