1. Establish a realistic finish date to help the owner make informed business decisionsWhether the building is residential, commercial, or industrial, the finish date is an important factor for owners, and may form the basis of personal, business and financial decisions.
Unfortunately, some owners may not realize the complexities of their project and have unrealistic expectations about their project’s finish date. This is why for contractors, establishing a realistic finish date is a vital step in managing expectations and helping the client achieve success with their project.
2. Shorten the schedule with concurrent tasksCreating a schedule allows the contractor to plan various construction tasks and set up deadlines for their completion. During this exercise, the contractor will identify interdependent tasks. Some of these tasks may float, meaning that they can be performed within a larger time window than the task will take. Others when taken in sequence create the shortest possible construction duration, known as the “critical path“. Each critical path activity must finish before the next one starts, which is why setting achievable timelines for these tasks is key to planning a realistic finish date for the project.
Having established the critical path, the contractor should be able to program tasks that don’t depend on one another, or do not affect critical path and may run concurrently. This technique is a great strategy for ensuring that non-critical path tasks do not end up impacting the schedule.
3. Help manage cash flowOne of the most common reasons for construction project failures is financial mismanagement. During operations, the contractor receives payments from the project owner according to an established payment schedule. Meanwhile, the contractor must also compensate their staff, subcontractors, vendors and suppliers.
Because of the lag in time between the contractor’s payments and their receipt of the owner’s money, some contractors find it challenging to continue funding construction activities. Further, as the owners typically retain 10% of the payments until completion, contractors do not receive the full amount due right away. This means that contractors are often facing a negative cash flow before the final payment, which includes the final progress payment and the retainage.
To keep the project afloat, many contractors have to rely on their own working capital or pay interest on their line of credit to sustain their cash flow and keep making payments on time. Even those who use their own funds are technically losing the opportunity to invest the money elsewhere.
In light of these challenges, contractors must approach scheduling as a valuable tool in cash flow management. Payment dates are important factors to consider when establishing various activities. For example, completion deadlines for activities off the critical path have a degree of leeway, and often have alternative “early” and “late” completion dates. Adhering to the earlier dates forces the contractor to spend money as early as possible; conversely, going with the late dates allows the contractor to make payments later. Ideally, the activities and the spending would be somewhere in between the early and late dates.
4. Helps the owner verify paymentsMost progress payments to the contractor are made on a monthly basis in accordance with the Schedule of Values (SOV). In this scenario, the project is broken up by individual work items, which are then assigned a dollar value. Together, the work items reflect the contract price of the project. Each month, the contractor bills the client based on the amount of work completed relative to the SOV. Alternatively, the payment schedule may follow the project’s milestones – the completion of vital tasks, such as the structure or the envelope. In either scenario, a construction-schedule allows the owner to keep better track of the progress payments and control their cash flow.
5. Keep track of changesMost construction projects deviate from the approved design to some degree. The modifications may stem from the client’s design changes, a design flaw, or an unforeseen condition. In any scenario, changes to the contract’s price, schedule, or budget may affect the finish date; this is notably true when the task in question falls on the critical path.
Having a thorough construction-schedule will help the contractor find a strategy to reduce the time delays in the event of changes. If fast-tracking, or concurrent scheduling, is not an option, the contractor may attempt to “crash” the schedule.
Crashing typically entails allocating more resources to the critical path activities. Alternatively, the contractor may advise sacrificing parts of the scope or forgoing certain design requirements. Ultimately, the method aims to attain the most time savings at the lowest possible cost.
In conclusionEffective scheduling is an important step toward keeping a project on time and on budget. It helps the owner and the contractor plan their finances, and allows the contractor to track and speed up the construction activities.
If you are planning a construction project, consider hiring a professional to guide your team. A company offering construction project management services can prepare a schedule and evaluate your contractor’s scheduling efforts.