Software Choices, When Less is More

By Sheldon Needle

A well known axiom in the construction software industry is that users often only utilize a small percentage of software capabilities. Other issues aside, you are much better off utilizing software that only has a limited number of features as long as it does the ones you need well. In other words, using 80% of a system that only does 100 things is far better than using 20% of a system that does 300 things.

Unfortunately buyers often get suckered into thinking they need more than they can really handle when vendors show off all their slick features on demos. That’s to be expected but does it make sense for a user to make a choice on those pop and sizzle items or do they need think a little more about what’s really important to them?

An example might be seeing fancy workflow functions for project management when that is not a particular concern for the contractor.

Cost of ownership issues:

Complex software requires more training and more training means greater implementation costs. More complex systems requires more competent employees so there is greater payroll expense. When there is staff turnover, you will need to spend more on training new employees. When there are new releases, changes are greater there will be more bugs and a break in period.

More applications mean more points of integration:

Let’s say you are -medium – large sized contractor and have a need for integrated estimating, project management, CRM, Human Resources and Bid Management. Indeed having a system with all these functions integrated is a great concept. Unfortunately, in many cases, the promise exceeds the results.

This is because the software vendor rarely covers all these applications and if they offer or claim to offer them, with some custom interfaces or 3rd party products, you are going to be responsible to make sure the integration points are appropriate to your business and that they work as advertised. For example some users may think tracking prospects with CRM and having it integrated with their construction system would really be cool.

But think about it. How big a deal is it to enter a prospect who turns into a customer to the job record? CRM is valuable when you are doing extensive sales pipeline analysis or have continuous contacts and transactions going back and forth between the main system and CRM. This is just not something that contractors often do.

Human resource accounting is another example. A true HR system is going to add considerable cost to a system and only very large contractors can justify the expense and complexities of managing a full blown HR application.

Summary

There are many potential applications a contractor may need including: estimating, job cost, document management, scheduling, purchasing, inventory control, payroll fixed assets, equipment and HR. Knowing precisely which are most important to your organization and how and when data is moved between each application is essential to both successful software selection as well as minimizing long term costs of ownership.

Software Selection/Integration Issues for Large Contractors

By Sheldon Needle

When discussing software requirements issues for contractors, it is important to consider the size and scope of operations.

A small – medium sized contractor ($2M – 50M) may get along fine with a basic job cost program, and the essential financial accounting modules of accounts payable, accounts receivable, estimating, general ledger, purchase orders, inventory, basic service management, simple document management and payroll. But a larger contractor $50M+ often will need either more depth in their accounting applications (e.g. multicompany, complex consolidations) and/or require other applications such as Human Resources, Fixed Assets, Equipment Management, collaborative project management, document scanning and vaulting, etc.

A really large contractor ($250M+) may require any or all of the following:

• interfacing to corporation financial reporting systems
• portfolio management of several entities
• integrating with specific industry applications like Primavera P6 for scheduling and cost tracking
• integration with industry specific estimating programs (like Hard Dollar for heavy contractors)
• supply chain management for inventory control and ordering
• quality assurance tracking for materials
• engineering control for bills of material
• greater security features by entity user and application
• strong integration with Outlook for tracing emails and creating alerts
• document imaging and workflow features
• earned value computations
• contract management
• user definable workflows
• realtime key performance indicator dashboards for management

With more applications come more complications as to how each vendor handles all the requirements and what, if any, third party vendors must be brought in to provide everything necessary.

With applications like project management, it is typical that the project management vendor will need to spend time studying the precise requirements (and even help advise on industry best practices) and to then provide a time and cost estimate to modify their software to meet the specific company processes. A typical scenario for creating a custom interface for a project management system to a construction accounting system can involve several months of work and $25-50k or more of expense.

Data can be a two way street

Work Breakdown Structures (WBS) are a way of describing and tagging specific costs assigned to jobs. Depending on which application captures those cost transactions, data may need to be moved between two different systems. For example, if Primavera is used to capture transaction costs it may use an entirely different set ofcost codes than the codes used by the construction application program (Timberline, Viewpoint, Dexter Chaney,Maxwell, Computer Guidance, etc.) . It then becomes necessary to set up a mapping translation between the systems so that data reporting is consistent between the two systems. This is critical for things like earned value computations which companies with government contracts must comply with (as well as others where the contract requires it).

Working with WBS codes and earned value according to job cost schedule budgets requires a higher degree of competence than just performing simple job to complete reports in a typical job cost accounting system.

Summary

Given the scope of applications, more sophisticated accounting requirements and potential multiple points of integration, evaluating construction software for larger contractors can be exponentially more complex than evaluating the needs of smaller ones.

To do the job right often requires expertise in accounting, financial management, project management, supply chain/inventory control, engineering, HR, and risk management. To execute the evaluation and selection of construction software for this category requires a well led committee of experts in each area who have the absolute confidence of management and are fully committed to the project.

Collaborative Project Management Considerations

More and more contractors are involved with construction project management as part of what they do.  Some will be heavily involved in pre-construction doing design or engineering work or helping oversee  these functions. They may also be soliciting and comparing bids from prospective subcontractors.

Once construction actually begins, they will monitor progress on the schedule and costs to date versus expected costs at completion based on the percentage of work that has been done. This may result in over or under billing the job to date which, of course, can have a major impact on working capital. If government work is involved they will have to keep tabs on “earned value” which is measured by comparing costs to date to the total contract amount to assure that they are not going to release funds that have not been “earned” by the contractor based on actual progress.

In addition to tracking actual costs to estimates by time, phase and cost type, phase, construction managers have to deal with documents such as change orders to the job, RFIs and submittals which must be routed for approval.  Ideally software should allow for a specific work-flow process that routes documents from one individual to another via email alerts or reports. Furthermore,  the software  will need to keep track of meeting minutes and comments from various stakeholders in the process as subcontractors, the GC, etc.

Collaborative project management involves more parties and is more complex. In this case, an owner may commission one or more construction projects and contracts with general contractors to deal with hiring subcontractors and taking full responsibility for actual construction.  Since owners are funding the project they are very concerned about things like job progress and tracking costs to date. They also want to provide a platform for end to end project management  where various stakeholders such as with design engineers, architects, mechanical contractors, etc.  will use one software solution  that supports  entering labor and materials cost  data, along with relevant documentation,  on a real time basis and tracking these costs  to budget. A construction software application that includes document vaulting is also desirable to allow scanning and storing documents associated with specific transactions with some kind of indexed subject lookup. This goes toward the paperless office concept that many people want.

An intelligent work-flow process will be needed in these situations such as tracking how many change order dollars were approved for a contract as well as how many are pending along with how many punch list items are unresolved to date and those responsible for it.

The owner will want to allow specific access rights to stakeholders based on their roles but not allow them to see data that is outside their area of responsibility. In this case the software has to support very sophisticated security configurations for various users.

Well designed construction project management software will continue to serve owners for  capital projects, maintenance and preventative maintenance well beyond the initial construction. Sometimes owners want to monitor multiple projects at multiple facilities (e.g. universities or multi-location retailers) and track post construction costs like maintenance or simple renovation costs.

When you should NOT be looking for new software

What could more apple pie than searching for a new construction accounting software solution for your company.

After all, it’s something you think you need and that would help your office get organized, run more productively as well as provide needed management information on a timely basis.

All this is certainly achievable. The problem is most users are not seriously looking. They just don’t realize it until the time comes to write the check   and go through the inevitable pain that comes with converting their data and learning a  new system.

Yes, it is a major commitment even for a small company.

Here are the some of the signposts that companies should keep in mind to find out if they are truly serious about acquiring new construction software.

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Computer Aided Design (CAD) Software in the Construction Industry

In the “old days,” central in most sizable construction companies was a drafting table.  On the drafting table, you drew, by hand, and made blueprints. This was a tedious endeavor requiring at least some training, either schooled or on the job, and some talent.  It was time consuming and you made original drawings often two by three feet or larger that required significant storage space.

Not long ago, Computer Aided Design, or CAD became available.  However, only the most elite construction companies could use this technology.  Not only did the software itself cost thousands of dollars, but the computers necessary to run it could cost well over a hundred thousand dollars.

Eventually, though, the software became affordable to even the smallest companies. Today, CAD software can be purchased for as little as $50 and added to your construction software arsenal. And with computers being so cheap, an additional $500 is all that is needed to set everything up and start using computer software to design construction projects.

It’s not all about cost; it’s about productivity, portability and enhancing the abilities of a builder. CAD software can be considered building software because many companies produce CAD programs that are enhanced for builders. There are two relative classes of CAD programs, which we will generically call high end and low end.  As we will see, high applications tend to be focued on analytical tools. Low-end applications focus on basic blueprints and visual renderings.

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Technology and You When Shopping for a New Construction Software Solution

It’s always been a curiosity to me that prospective buyers of new construction software pay almost no attention to the technology of the program they are about to buy.

They usually have a laser like focus on how the software looks on the screen, what the salesman says about it, and what it costs. While those issues may be important, asking the right questions about technology will tell you an awful lot about the vendor and their commitment to their product and, ultimately, their long term commitment to you as a satisfied customer.

You might ask – does what’s under the hood really matter as long as the car gets me to where I want to go? That’s a legitimate question. Now lets do a little exploring.

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Five Gotchas in Choosing Construction Software

There are five significant areas where users can go off track when evaluating new software options.

Many contractors realize they need help with their office record keeping and paperwork so they start poking around for an upgrade to their office systems.

1. Web searching for the best solution
The first thing just about everyone does today to find information is do a web search for new construction software.

They will type in something like “compare construction software” or “construction accounting” or “project management software,” etc. This will result in pages and pages of links and they will select a couple that catch their eye, based on a slick marketing message or nice logo, and then contact those vendors or search services for information.

This may help them identify some vendors but it has little or nothing to do with qualifying them for their business based on their needs and budget. It’s strictly pot luck if you wind up looking at the right products.

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Construction Accounting Software Meets Builder Needs

Today’s construction projects often involve a multitude of expenditures to a variety of different sources.  There is the cost of labor, supplies, and subcontractors to consider.  Keeping track of costs and being careful not to exceed the project budget is necessary to ensure a profitable outcome.  Construction Management Software makes it possible to keep track of the many expenses, and allows you to successfully complete even a large project without exceeding your bid.

Construction accounting software makes it easier to keep track of direct material purchases.  Direct materials consist of basic building supplies like drywall, wire, pipes, and wood.  Essentially, direct materials are everything purchased for a project.  Sometimes these materials are purchased tax-free or with a builder’s discount.  These items are generally recorded separate of labor costs to ensure accurate profit and loss statements.

Direct labor is another variable that must be kept track of separately.  Labor comes in different forms, each requiring special treatment with regard to taxes.  Some employees are on the payroll while others may be hired on a contractual basis.  Other work might be performed by subcontractors.  Construction software really comes in handy when keeping track of direct labor spending.  Often this software integrates with payroll software to streamline wage calculation and tax withholding.

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Construction Software Buyer Alert – Separating Fact from Sales Hype

If you have spent any time surfing the web for information on construction software, you may have noticed that all the vendors appear to be a good solution for just about anything you want to do.

In fact, most of them are probably are a pretty good solution for 97% of what you want to do. But it’s the last 3% that might just do you in. And that is where buyers can take a big hit.

When it comes to entering job cost transactions and running essential reports, most products are just fine. However, if you have to deal with any of the following, straighten-up and pay attention because these are items that separate the average vendors from the stronger ones. And these are areas that sales literature (or so called “Demo” CDs) will never call to your attention:

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Construction Project Management Software Controls Costs

More than ever, with tightening credit and downward cost pressures, it is important to control costs on construction projects.  Even government and municipal projects have greatly reduced budgets. What may also be important is payment timing has stretched out as well.  All of this combines to create an environment where controlled costs are the rule for survival.

One of the major functions of project management is cost control.  Along with materials, labor and timing, budget and cost are central to the project manager.  Construction software helps project managers control budget cost on a real time basis.  Companies looking to control costs should consult construction management software reviews for the futures we will be discussing.

All construction projects have budgets. The major components of the budgets are the funding and the disbursements. In most cases neither will be a lump sum, broken into parcels. This makes the construction budget dynamic in nature and underscores the importance of timing. A budget can’t have more go out than comes in.  Construction Project Management Software helps because like the actual project, the software can also be dynamic.  As goals and priorities constantly shift, the construction budget will constantly shift. With regular input the Construction Project Management Software will be able to help plan disbursements that are in line with the budget and actual cash on hand.

Another important aspect of budgeting is cost centers. Cost centers are costs that are broken into categories.  By using cost centers, various aspects can be micro managed with greater precision than if they were lumped together.  Many times on a large project, cost centers will have their own manager with budgetary responsibility.  Construction Software allows for the use of cost centers, which are actually an integrated part of the process.  There is no need for cost center data to be put together separately. It’s all part of the same package like having tabs on a spreadsheet program, and yet one tab contains data from all.

Financing is also an aspect of a budget that is important. As has been stated, funds are generally not available in a lump sum.  They may also not be in the form of case but credit or a credit line.   This is critical in project management budgets.  Money must be taken only as needed.  As money is taken, the interest meter begins to run, and the
construction project costs more.  This is probably factored to an extent in the quoting process, but the project manager needs to work to not exceed this budget.  Again this is where the tools in Construction Project Management Software come into play. By managing each task on the project, keeping the Construction Project Management Software input data up to date; the project manager can control the financing costs to a minimum in order to maximize profits.

With Construction Project Management Software all of the activities here can be accomplished in near real time.  This allows the project manager to response to changes and allow for the best and most profitable conclusion possible.