Variations play a major role in the construction industry and in many instances not having proper control of these variations lead to cost and budget overruns. Variations not correctly managed and captured could spell certain gloom for any contractor, large or small in size and these, inevitably will impact the contract and could possibly have dire consequences in regard to the relations between the contractor and consultants. Which in turn could lead to disputes, and in an industry that is already adversarial in nature, it’s a scenario that we are unfortunately accustomed to. Keep reading to find out how to manage variations and ensure you maintain profit margins on your engineering and construction projects.
The ability to immediately identify variances with the required accuracy and detail to take action hinges on 10 critical components:
- Pricing new items that have not previously been priced or identified, and have the ability to differentiate which is original scope and which are variations.
- Changing the status of the Variation, has it been approved, unapproved or waiting approval. All these statuses could and would be viewed by management to make the correct commercial call. Automated reports to validate the differences between original scope and change.
- Allocate Variation Codes to identify new bill items which are possible scope changes or contract instructions.
- Identify new resources on the procurement list and update the buying list accordingly.
- Projected cost integration with the planning schedule to effectively reconcile consumption of resources in real time.
- The organisation of the projected cost model must include cost and activity codes to facilitate the required comparison.
- Linking Indirects or Preliminary items that are directly related to the variations is very important when dealing with “Extensions of time” claims.
- The projected cost model must have the facility to action cost and time re-calculation based on actual rate and quantity performance, identify what is actually happening on site and forecast revised final costs.
- The information and data source relating to actual cost must be web-based to enable input of real-time costs from wherever that cost information is captured.
- Cost value Reconciliation is possible due to matching coding structures between all software packages.
CCS BuildSmart is web-based to provide actual plus accrued cost by contract in real-time from site, plant yard, head office – wherever cost is incurred. Organizing the income statement by contract, plant and overheads allows data capture and reporting appropriate to each area. Actual and accrued costs are managed in a single SQL database and reported by activity and cost code for immediate and detailed comparison with projected cost at a precise point in time.
CCS Candy provides that projected cost, at each point in time, by using a tight integration between estimating and planning that is unique in the industry. Candy goes “beyond estimating” to produce a living cost/time model with which to manage cost, and recalculate cost to completion, throughout the life of a project. Using the same activity and cost code structure, an immediate and detailed comparison can be made with a drill-down capability to identify the source of any variance.