Why construction projects blow out


1st May, 2021

Why do construction projects blow out?

One of the biggest challenges faced by the construction industry are projects that stretch timelines and budgets – but why is this?

Issues affecting the construction industry tend to be interlinked. Businesses in this sector are too often relying on manual or disconnected management tools that can bring many challenges affecting the workforce, project management and client experiences.

The net result is an industry that’s generally relied upon to have both cost and timeline blowouts. For individual businesses, this can erode trust, future business prospects and that all-important profit margin.

Trans-Tasman construction: Sizing up the opportunity for efficiency

In New Zealand, construction is the fifth largest sector in the economy, generating 6.2 percent of Gross Domestic Product (GDP).

It employs over 250,000 people in residential, heavy and civil construction, and construction services.

Before COVID-19, there was strong growth in employment in the construction sector. Moving forward, the success of local businesses will play a key role in economic recovery.

Construction is the third largest industry in Australia for the number of people it employs, with nine percent of all jobs in construction. And it’s expected to grow by 10 percent or nearly 120,000 jobs by May 2023.

Despite these strengths, project delays and cost overruns are common. Productivity is an ongoing challenge.

Productivity problems: Addressing the need for better systems

A 2020 construction industry factsheet from Back to Basics covers six notable challenges construction businesses face in delivering their services, including the issue of time and budget blowouts.

‘Delays beyond original schedule are a common practice. Large projects typically take 20 percent longer to finish than scheduled.

‘When constructing a typical home, the builder is most likely to go 10.6 percent over the budget of the entire cost (because of the “things that can’t be categorised”).’

The document also suggests that this propensity to go over time and budget would indicate the industry has productivity problems – and there’s evidence to support that, too.

‘When it comes to productivity, construction still “lags behind” other key Australian sectors, including agriculture and healthcare.

‘PlanGrid states that over 14 hours per week are spent on dealing with conflict resolution and rework that drift away from high priority tasks.’

Does this sound familiar? If these challenges remind you of your own operations, perhaps now is the time to address productivity issues at the source: people, processes and your current systems.

Improving productivity in construction

There are always going to be external factors that can impact the timeliness of a job, with the weather being a major one for many construction sites. But there are also plenty of other factors that can be controlled.

A recent MYOB report, ‘Deliver construction projects on time and budget’ lists five critical steps to get you on the right track:

1. Connect teams and increase collaboration

Fragmented teams contribute significantly to a variety of issues, including on-site and office teams taking an almost adversarial approach to communication, collaboration and information sharing.

2. Solve issues faster with real-time visibility

Siloing of departments and disjointed systems mean information is buried. Accessing a true understanding of the state of the project can require hours – or days – of manual data management, as some teams collate information into hard-to-read spreadsheets or disparate tools.

3. Keep clients constantly up to date

Without timely updates, clients are ambushed by timing and budget issues that have already spiralled out of control.

4. Accurately estimate and forecast project costs

With so many factors at play, larger construction projects can be at risk of inaccurate budgeting. While expert and experienced team members can help guide this process, nothing can replace real data.

READ MORE: Budget vs. forecast: 3 key differences

5. Automate and streamline to keep costs down

Many construction teams use multiple software systems, alongside spreadsheets and other manual options, to manage different aspects of their work. That doesn’t just create complicated workflows, it’s also a recipe for unnecessary manual work, errors, delays and rework.

Rebuild a reputation around timely delivery

Construction projects that run over time and budget are a common challenge faced by many construction companies. But it doesn’t have to be the case for you.

By unlocking the power of data insights with the use of the appropriate business management platform for construction, you can gain the timely information, automation and integration you need to set yourself apart from competitors.

See how businesses like yours effectively manages their projects with cloud ERP.