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Words of Wisdom From Our Clients

At Hausman, we’re always happy to share the success of our clients. The following article by Paul Brussow, Executive Vice President of Rider Levett Bucknall and Project Management Service Line Manager in North America, appeared in the Summer 2018 issue of Advisor, the Construction Management Association of America’s quarterly publication. Advisor covers all segments of CM, including best practices, education, safety, legislation, legal, technology, and more.

 

Following—and Forecasting—The Money: Financial Modeling for Project Managers

With construction costs comprising between 60% and 85% of the budget for commercial developments, the need to efficiently oversee and balance resources is a top priority. Key to this challenge is the project manager (PM), who synthesizes data on costs, materials, and time to maintain the integrity and momentum of the job.

An independent project management team can serve the owner as well as other stakeholders—including architects and contractors—by prudently shepherding the schedule and proactively monitoring costs. In order to extract the full value a manager can bring to a project, it’s wise to have them on board at the earliest stage of design. To wait until there’s a problem affecting design and construction before consulting with a PM wastes valuable time when a project is at its most vulnerable point.

Performance and Precision

It’s essential for PMs to have reliable, up-to-date information on which to base their counsel and recommendations to owners. While sophisticated software programs have simplified data collection, it’s the degree of skillful interpretation and application brought by project managers that is often the telling factor in the successful delivery of a job.

Computerized project management can take many forms, from using off the-shelf software to working with clients to develop exclusive programs that address specific issues. The common goal is to streamline the process of project management, while also achieving the highest levels of flexibility and integration.

One program I have found effective ties the financial modeling of a project into one robust software package that provides clients with a real-time picture of their budget, expenditures, and financial risks. By linking six key functions—contract management, invoice management, project forecasting, change management, cash flow management, and executive reporting—into a single system, clients are able to make informed, timely decisions about the direction of complex projects.

Among the dynamic forecasting features that are particularly helpful in effective modeling:

• Inclusive vendor interaction: Large projects typically have an extensive consortium of consultants and vendors, each generating its own stream of transactions. It’s critical to manage the execution of each individual contract against the overall construction budget.

• Big-picture view of change orders: Change orders are a time-consuming reality of construction; typically, by the time they are agreed upon, drawn up, and ordered, up to three months may pass, putting progress at risk. Programs that can forecast fiscal impacts at the time change decisions are made and track their implementation enable owners to have an accurate budget in real time.

• A calendar for cash: To assist in financial reporting, benchmarks and milestones are used to track and forecast the cash flow of a project.

• Currency conversion: A new development is located in Dubai, financed with US dollars, EU consultants are on board, and materials are ordered from Asia—international construction projects pose unique payment problems.

The ability to seamlessly resolve complicated currency scenarios is a must for accurate modeling. Coupling these capabilities with a construction-cost management tool that allows accurate estimates and bills of quantities to be prepared from diverse information sources, (including BIM models, 2D and 3D CAD drawings, illustrations, schedules, and other project documentation) rounds out the package.

In the same way that BIM and CAD models are facilitating re-use and integration, a computer application that takes a modular approach to build a working cost model of a project offers tremendous flexibility.

Complete costings can be prepared from minimal project information, and can be continually improved and refined as the project design is further developed. The cost model makes it easy to analyze alternative scenarios, helping clients to spend less money and delivering more efficient, cost-conscious, and environmentally sustainable results.

The right software can bring clarity and economy to the increasingly complex task of construction management, and contribute to the science—and art—of modern architecture while advancing the central role of the project manager.