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Construction Software- From Start to Finish
Four steps to help
you understand your
technology options
BY ADAM PLETSCH
There is nothing more frustrating – or indeed more devastating
to your bottom line – than
underestimating the ultimate
cost of a job. After all, there’s no going
back to the customer to raise the price at
that point. You’re stuck with it.
A recent study performed by independent
research firm Decipher for
Intuit Construction Building Solutions
confirms that many contractors are
undercharging their customers. One
out of every two contractors, in fact,
admitted that they commonly fail to
include in their estimates certain general-
condition costs such as supervision,
phone calls and temporary power.
That’s probably why 65 per cent of
respondents point to greater profitability
and 57 per cent to more accurate
estimating as areas where they really
need to pull up their socks.
But such problems represent only a
small sampling of what can go wrong
during a construction job. You have to
be accurate with your man-hour and
materials estimates, stay on top of
subcontractor costs, ensure that
important information about job
changes, rates and other financial figures
is all shared among the many
stakeholders. Most of all, you have to
track everything constantly and accurately,
or else your $400,000 profit
could turn into a $600,000 loss.
There are many vendors out there
vying for the opportunity to outfit your
firm with the software you need to
ensure that you are making accurate
bids – doing a professional job and
saving time and effort by using what
you’ve learned on the last job to do the
next one even better.
Step one: takeoffs
If there is any excavation involved in a
job, you likely need takeoff software. It is
designed to help you determine, for
example, how many square feet of
paving you have to do, or how many
cubic yards of fill you’ll need for a job. It
must all be prepared before you’re ready
to actually put a bid or estimate together.
Of course, you can do takeoffs without the software ; people who are
meticulous and do them by hand can
get very accurate numbers. It just takes
a long time. According to InSite Software
Inc., a vendor of such systems,
doing a takeoff manually can take five
to 10 times longer.
“If you take a bunch of contractors,
put them together and ask ‘What is
your bid?’ you’ll find the estimates
from general contracting for labour in
installing a door or putting in a square
of roofing will be very close,” says Steve
Warfle, product manager with the
Rush, N.Y.-based InSite. The big variability
will be exposed when it comes
to determining something like the
earthwork that’s required. A large
dump truck might hold 15 cubic yards
of dirt, and it’s not uncommon to have
a small site project incorporate 30,000
or 40,000 cubic yards of it. This can
often be the biggest variable expense
on a project. It also offers an estimator
the greatest occasion for making an
expensive blunder.
Step two: estimating and bidding
Contractors who take information from
a product like InSite’s often put it into
systems from estimating and bidding
specialists such as Heavy Construction
Systems Specialists (HCSS), HardDollar
Corp. or Bid2Win Software Inc.
According to Paul McKeon, president
of Bid2Win Software Inc. of
Portsmouth, N.H., one benefit of
Bid2Win 2005 is that it allows contractors to standardize their estimating
and bidding processes.
“I tell folks all the time that an estimate
is really a forecast for profit and if
you’re not getting detailed in terms of
that estimate, you’re not doing a good
job of forecasting profitability,” says
McKeon.
Users of Bid2Win can get into as
much or as little detail as they want
when breaking down pay items that they
will bid to a specific authority, using
crews, with production, and using integrated
subcontractor- and vendor-management
systems. The system allows the
coordination of quotes received from
subcontractors and vendors for any big
job that is being put together.
Beyond this, Bid2Win also integrates
with project-management software.
So, for example, if a contractor is
successful on a bid, in a matter of seconds
it could push all that bid’s information
off to any of the standard
scheduling or project management
tools, such as Microsoft Project or any
of the Primavera systems.
McKeon says any contractor buying
estimating and bidding software
should be keeping the path to integration
with project management clear.
HCSS is another provider of estimating
and bidding software. It offers
four categories of software based on
contractor size, priced accordingly. But
HCSS is adding a range of other applications
as well, including a job-control
and project-management package.
“We’re trying to provide all the tools
necessary for a contractor and the operations
side of their business,” says John
Davis, vice-president of sales and one of
the owners of Houston-based HCSS.
HCSS knows its primary strengths
are in estimating/bidding and Davis
says if users want to use just that software,
HCSS will interface well to whatever
accounting system, scheduling
software or takeoff system they have.
“We do integrate into any other
products that they may be using as
well, so what we’re trying to do is fill
some voids with some of the products
that we have,” he explains.
Step three: project management
There are many project-management
systems to choose from, including the
aforementioned Microsoft, Primavera
and Meridian Systems.
Another option is WennSoft, which
offers: the Service Management Series,
for dispatching, scheduling, quotes,
order and billing status, customer work
histories and inventory usage; Job
Cost, for tracking contract information,
project-change orders, subcontracts,
forecasts, forecast revisions
committed purchase orders and other
events; and the Equipment Management
Series, for integrating equipment
management, service, management
and financial reporting.
Jim Wenninger, president of
WennSoft, of New Berlin, Wisc., says
his company became a software vendor
when it couldn’t find good software
to run its own business. It decided,
through either “dumb luck or a great
insight,” to build it on top of Great
Plains Software’s platform. When
Microsoft bought Great Plains and its
enterprise resource planning (ERP)
system a few years ago, a certain
awareness of WennSoft at sales presentations
(due to familiarity with Great
Plains) became built-in.
WennSoft, like HCSS, believes in
providing more, rather than fewer
application choices to contractors.
Wenninger says in the 1990s and early 2000s, customers assumed they
would be able to buy “all kinds of
parts” to build a system which — as
long as all technology was based on
Windows — would work straight out of
the box. “Well, they found out it didn’t,”
he says. Wenninger says contractors
tell him they want one solution for
many things. They want it to be
responsible for all financial, project management,
purchasing and inventory
activity. It also should be able to
handle tracking fixed assets, charging
for equipment, knowing where equipment
is and when it needs to be maintained
and how to service it.
Step four: job cost accounting
During the bidding process, a contractor
is estimating what it will take to get
the job. Once he gets the job, he can
take the bid and – ideally, not always –
dump his estimate into the job-cost
budget. For example, the contractor
can then estimate how many cubic
yards of dirt he will need to move over
how many man-hours, with which
pieces of equipment, costing how
much and taking how many hours. As
the job progresses, he can compare
what actually happens against what he
thought would happen (his estimate).
“That’s where we come in,” says
Fred Ode, president of Foundation
Software. “[A contractor] could make
money on a job and think the estimate
was great, but the problem was that he
made more money on some aspects of
the job and actually lost money on
other aspects.With this knowledge and
information, that will help him do better
business in the future.”
He compares what job-costing
accounting does to what a golfer learns
from a bad golf shot. He gets immediate
feedback that he either chose the
wrong club or didn’t allow for the wind,
and can use this information the next
time. “But it’s too late for that shot.”
There is a human element, though.
The challenge – as it often is when using
a software package – is maintaining
good data so everyone can learn from
each other’s mistakes. The superintendent,
foreman and field people must
actually report information in a manner
that makes sense to the estimating or
bidding department, Ode says. “You
have to motivate them to do it, they
have to want to do it, and that’s the
biggest challenge from our perspective.”
Toronto-based CMiC also provides
accounting software to contractors,
although Bassem Hamdy, the company’s
director of product management
and marketing, describes the software
as “construction ERP (Enterprise
Resource Planning).” It facilitates a
connection with all internal departments
within a construction company
and allows communication and management
between all stakeholders –
such as vendors or a material suppliers,
subcontractors, or partners such
as architectural firms.
CMiC has three main product lines:
CMiC Enterprise, which is traditional
back-office accounting; CMiC Financials,
“your boring, basic, general-ledger,
accounts-payable, accounts-receivable”;
and CMiC Project Management, which
opens up the project-costing world to
the back-office accountant.
Hamdy says CMiC’s key product is
CMiC Project Management, which is
designed to take a job from the point
where a business developer learns
about it through a contractor relationship.
The project is then set up as a bid
project and integrated into bid and
procurement software (from CMiC),
which allows contractors to create
invitations to bid. Subcontractors can
come online to the contractor’s Web
site and enter their own bids, download
drawings, or do online takeoffs. “Estimators literally choose online
which bidders they want – and with
the press of one button comes the creation
of legal-verbiage contracts and,
of course, in the back office accounting,
the actual commitment.”
CMiC’s accounting/project management
can receive its data from any
major estimating package, such as
HCSS or Timberline, “or the Number
One estimating package on the market,
Excel,” Hamdy says with a laugh.
Andy Burg, operations technology
consultant at Cincinnati-based Messer
Construction Co., a CMiC customer
with about US$500 million in revenues
and more than 600 employees, says the
life cycle of the project – apart from
takeoff and the estimate – is handled
by its CMiC software package.
Once Messer is awarded a project,
the senior project executive responsible
begins the process by creating the
proper information in CMiC. The next
person in line, the project manager,
builds upon this information, pulling
the estimate in from its Messer’s Timberline
estimating software. A jobcost
structure is created, jobs are purchased
and subcontractors are
managed through the system. Its project
managers also maintain their cost
reports, order billings and subcontract
change orders through this module,
so that “at any minute when
somebody asks them a question,” they
know that they can rely on information
coming out of the system.
“In the past, we’ve had other software
for project management; you had
to maintain your changes there,” says
Burg. “Once a month, you took that
information and put it in the accounting
software, and you tried to make
them balance so that you were reporting
back to our corporation what you
were showing on your other software.
There was a lot of redundant information,
a lot of time spent. This obviously
streamlines the process.”
Burg says the biggest benefit from
collaboration between CMIC and other
software is the way it becomes integrated
with Messer’s accounting system.
That allows subcontractors to see the
status of their payments and lets owners
review billings and owner cost reports.
Messer even stores digital images in
its system, which Burg calls the “virtual
file cabinet,” and which allows managers
the freedom to leave the job site.
“In the past we’ve been tied to the
information that’s in the [actual] file
cabinet. With CMiC, if we’re at home or
anywhere out of the office, we can
access the information, which is a
huge benefit — because that’s sharing
information to all team members and
you can access it anywhere.”
Whether a contractor decides to try
the “best-of-breed” method, buying the
best applications from several vendors
and putting them together, or going to
one or two vendors to put together a
whole system, two things are clear. The
fewer steps you have to take, the less
time you will waste entering and reentering
information; and the more
accurate your data is, the fewer mistakes
you will make during takeoffs,
estimating and bidding, project management
and job-cost accounting.
Adam Pletsch is a freelance writer
based in Toronto. He has an extensive
background in writing about industrial
software.
Great White Lag
According to Bassem Hamdy,
CMiC’s director of product management
and marketing, Canadian construction
firms are lagging behind
U.S. ones in their rate of implementation
of software systems that perform accounting
tasks.
“The Americans are eliminating
general expenses, overhead, by
implementing these types of systems.
The Canadians are tending to
add overhead, the margins are
decreasing. Our construction costs
are going up because of that.”
Checklist
Choosing a software package for use in the construction industry isn’t easy.
Here are seven important factors you might want to keep in mind during
the selection process.
1. Decide if you want to buy from one or many vendors. Choosing best of
breed means choosing many vendors’ systems, putting them together and
integrating them. This can lead to a lot of customization work. But it can
also lead to you getting exactly the system you wanted. The alternative is to
go to one or two vendors and choosing a system that handles many more
applications.
2. Figure out if you need technology built upon Microsoft’s .NET platform, for
example. It might help long-term, when you upgrade later or clamp on more
applications. Then again, it might not.
3. Similarly, contractors should ask what databases are supported by/built
upon which software programs. For large companies with huge IT infrastructures,
this, as well as the previous point, are critical considerations.
4. Don’t buy your software for the wrong reasons, such as: “Our president
knows a guy there and can get us a deal”; “My brother-in-law’s company
implemented it and it seems (from half a continent away) to be going okay”;
or, “We’ve been upgrading on it for years, and it’ll be easier to just stick with it
than having to learn something brand-new.”
5. Talk to customers who are using the software you’re considering and grill
them on the good, the bad and the ugly application features. Make sure you
compare apples to apples: reference customers should be of a similar size to
yours and hopefully similar in business model.
6. Find out what kind of support is included in your software purchase. If your
employees are not as computer-literate as most, you may need access to 24/7
support, and you may need it for longer than another contractor would.
7. Make sure you know what you want from your software before you go out
and get it. And be persistent; talk to as many vendors as it takes. This is a far
better approach than scoping out several ill-fitting packages, hearing the
pitches and trying to pick out the best of a bad lot.
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