Prepare for Profitability
Updated: Apr 19, 2020
About the author: Don Archibeque is a Project Executive with Planifi, bringing more than 25 years of experience in construction and A/E (architecture and engineering) Project Management, as well as associated professional managerial services.
Architecture and Engineering (A/E) projects require collaboration to reach a successful end result. As the design lead, your firm may be responsible for much more than just your own work. Whether those responsibilities are spelled out in contract language or simply based upon client expectations, misalignment can drain profitability and time away from your projects. Keep an eye on these four areas and improve your practices to increase profitability across your firm.
The cost of money
A good understanding of how the money works will go a long way towards maximizing project profits. Your project teams should know how money works on A/E projects and how to move it around based upon the demands of each project.
At first glance, it may seem strange that a design professional needs to know how projects are financed from an owner, construction, sub-contractor, and design perspectives. However, this context is critical to optimal project delivery. Has each party borrowed money for operating expenses while the work is completed and billed? Will your sub-contractors expect immediate payment or are they willing to get paid when you get paid? How does interest affect your profitability? Is your professional insurance high priced and is that consuming your profit?
Clear answers to these questions may reveal previously unrecognized profit sinks and time wasters on your projects. Implement good business practices along with your design processes and watch your profits grow.
Your team may create a flawless design, but there’s no guarantee that it will be constructed in the same way. It’s common for budget and time constraints to erode your design intent. Cheaper versions of the materials you recommended, skipping crucial reinforcement, or insulation steps can all result in a lower quality end result. Who has the client selected as their contractor? What is their reputation?
When design directions aren’t followed, structures will not perform as indicated. Finger pointing ensues and lots of time is wasted in sorting things out. The answer is proactive training of your client and contractor regarding substitutions and value engineering. Why? All of this finger-pointing and back-and-forth consumes considerable time, and that consumes your profit. Proactively manage client expectations and be sure everyone is on the same page heading into construction.
Track project profitability with real-time actuals from Deltek – Visual Planning
Whether you’re subcontracting work to another design professional or overseeing the construction of a bridge, you could be held liable for the work done by sub-contractors executing their scope of work. Review and understand the contract language for each project. Depending upon the agreement, you may be legally responsible for the sub-contractor’s mistakes and oversights, as if the work was your own. Minimize risk exposure by verifying all licensure and make sure every contractor has adequate expertise with their relevant responsibilities and scope of work. Also, be sure they are properly insured to avoid potential issues down the road.
Alternative Project Delivery
Alternative project delivery use continues to gain popularity in both the public and private sectors in the U.S. and abroad. New project delivery methods are considered great for the owner, but how about for the design professional?
The design-build project delivery system provides single-point responsibility to the clients for both design and construction. The design-builder is both the architect/engineer and contractor of the project. They also serve as a single contact for guaranteed performance on quality, cost, and delivery schedule.
On the surface, a single point of contact sounds like a much simpler method for project delivery. However, in practice, opportunities for confusion remain. How does the review process differ on this design-build project versus another? Who is responsible for deliverables and when? When does ownership transition? Again, early identification of the risks, complete communication, and contract review are critical to successful project delivery. Regardless of your firm’s role on a design-build project, be sure to understand these key points to maximize profitability.
Are you aligned with the client and contractor on what is required for materials? Have you worked with these sub-contractors before or do you need to discuss payment terms? These are just a couple questions you need to ask before kicking off a project. Small misunderstandings can turn into time consuming litigation at the first sign of trouble. Proactive risk management and communication are the best tools in your belt for avoiding costly problems and increasing profitability.
Improve profitability and utilization with Visual Planning – schedule a call today!