Daily P&L is the Only Way  ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

Edgevanta Weekly 🚀 🛣️ 7.19.24 - How to Build Work at the Lowest Cost

Your essential guide to dominating the construction bidding and building world with the latest tech, market trends, and wisdom.

How to Build Work at the Lowest Cost

TL;DR:

• As a highway contractor, obsession over your daily crew labor, equipment, trucking, and material job costs for every project you are involved in leads to happier teams and lower costs.
• If the cost and quantity inaccuracies are not fixed today, it’s near impossible to fix them later. Daily updates are the only way.
• Amazon built a culture of resourcefulness by making desks out of old doors at their first offices in Seattle. Contractors who build a culture and system of people knowing and caring about every dollar that gets spent every day on the job will crush the competition over time.
• Do not be the old-school contractor who won’t share cost information with management for fear of “rates being on the street.” Get over it. If someone tells you daily job P&L reporting isn’t possible, that’s BS.
• Understanding your daily cost means you know what’s going on with your team or company. And they will know that you care, which may be the greatest benefit of all.

The Importance of Cost Management

After I graduated from college, I was assigned to a $50MM widening project as a Field Engineer. We were moving dirt, laying pipe, pouring concrete, spreading stone, and laying blacktop with 8+ crews across 2.1 miles of interstate highway. As a construction-obsessed kid, I felt like I was in heaven.

My main responsibilities were to:

• Review and fix daily crew timesheets and cost reports.
• Ensure we got paid by the State every month for the work we did (using an Access database) across the 250+ pay items on the job.
• Have answers when people asked questions.

Photo Credit: Wagman

A System That Works

Here’s how the system worked:

1. Daily Timesheets: Foremen fill out paper timesheets by 9 PM daily with their crew members' hours, equipment hours, quantities for each pay item, and notes about what they worked on.
2. Data Transfer: The accounting team transfers foreman timesheet data into ERP overnight.
3. Cost Reports: By 4 AM the next morning, daily cost reports showing budget, cost, and gain/loss for each item based on quantities claimed the prior day (labor, equipment, trucking, internal materials) arrive in all of our email inboxes, Foreman included. We knew how much money we made or lost the previous day.
4. Corrections: I fix any mis-claimed quantities and move costs to the correct cost codes as needed, confirming with the owner’s rep on quantities put in place.
5. Review Meetings: Weekly and monthly cost reports reviewed at team meetings.

Engaged Leadership

Every morning by 6 AM, our team received a note with questions about the report from the General Manager. Never accusatory but often filled with questions we knew we should have or find the answers to. The GM was detail-obsessed and set the culture that cost matters. We as a team (PM, Supers, Field Engineers, Foreman) should know what’s going on with the money on the job every day. Some examples:

• If someone charged to a change order code, how are we getting paid for the extra work?
• How does the job ride?
• How is the Owner handling this overrun?
• Will there be a punch list?
• How much longer will Johnny be working in the median?

Finally, every once in a while, we’d get some praise.

Lessons Learned

Here’s what I learned in reviewing these timesheets and cost reports daily:

• Even with the best intentions from field supervision, timesheets are often wrong. Nearly everyone I talk to today is now submitting time electronically, but that doesn’t change the trend.
• It’s hard to change a week’s worth of timesheets. Daily updates are the only way.
• If you are trained to look at cost every day, your decision-making process in crew planning, scheduling, and motivation becomes driven by financial implications. This does not mean safety or quality is overlooked, quite the opposite. But you understand the money.

The Power of Cost Reports

Anyone who met the GM wondered how the heck this guy knew so much about what was going across the company and how he’d developed relationships with all levels of management. His system was brilliant. He used the cost reports as a way to gather intelligence about the jobs, the owners, the teams, and further develop relationships with his people.

Daily cost and unit price quantity management lead to getting paid on time and better cost-to-complete forecasting. If you know how much stuff costs, your estimating review skills will benefit.

This all happened around 15 years ago. If someone can do this with paper timesheets faxed in and a late 90’s ERP system, so can you. Do not listen to anyone who says daily crew cost isn’t technologically possible.

Photo Credit: NIKE

The True Essence of Management

This isn’t really about technology. This is more about the old management adage that “What Gets Measured Gets Managed.” Micro-management has sadly been confused with engaged management and giving a damn. I’ve found that 99% of people in construction, from the craftsperson in the field up to the CFO, want to do a good job, and what’s often lacking is the transparency of things like job costs along with a caring manager providing consistent feedback. People like structure and knowing where they stand. And folks know they are doing a good job when goals are set and performance is openly monitored. A daily P&L is a perfect way to do this.

A cost report is a historical record of performance and a treasure trove of data. The best jobs I’ve ever built were done with an engaged team who cared about and took pride in cost.

The Challenge

So, here’s my challenge to you:

• Get your hands on one job cost report daily.
• Contact the project team to let them know you’re engaged with questions and feedback.
• See what happens.

Keeping it simple this week; no fillers ;)

Stoic Wisdom Quote:

“If a man has good corn or wood, or boards, or pigs, to sell, or can make better chairs or knives, crucibles or church organs, than anybody else, you will find a broad hard-beaten road to his house, though it be in the woods” - Ralph Waldo Emerson

Reflect on this as we embark on another week of bidding and building!

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