Managing costs in the construction industry

25 November, 2020

It is a fundamental and obvious rule that businesses improve their performance by understanding where they incur costs.  Accurately costing bids, supporting projects that will deliver revenue and cancelling those that are unprofitable helps to drive efficiencies. These are all critical considerations for companies in the construction industry, especially during the current crisis. 

picture of idle cranes and a construction development in the Docklands area

However, cost control measures in the construction industry are hampered by several specific complications. 

Unit Cost

Owing to the unique nature of many builds, companies in the sector can find it difficult to analyse precise unit costs. It could be the unit cost of a single apartment in a multi-residential unit, a house in a suburban estate, or a major construction project. The one-off nature of builds is further compounded by the difficulties that arise as a result of manual invoice processing and subcontractors working across different projects.

Rising Costs

The cost of building is continuing to rise in Ireland. So-called “soft costs” now account for 52% of the cost of constructing a house, according to the Society of Chartered Surveyors of Ireland. These costs are more difficult to allocate to specific builds, and examples include financing, marketing and professional fees.

COVID-19

Costing challenges have been further exacerbated by the disruption COVID-19 has caused in the sector. By implementing the new health and safety guidelines recommended by NPHET, such as social distancing and split shifts, construction companies are incurring significant extra costs. This is further complicated by the fact that these types of costs are new to the industry, and as such, there are no established ways for recording or handling the extra expense incurred. 

Three key actions for controlling costs

There are three key actions that construction companies can implement now to assist them in keeping control of their costs: 

Introduce business intelligence technology 

Through the implementation of a system based PO process, expenditure can be linked directly to budget holders to ensure accountability for cost overruns. 

Reduce manual processing 

Implementing OCR technology to read paper invoices and receipts can alleviate manual processing. This increases efficiency and frees staff for value-added work. OCR can be further complemented by Robotic Process Automation (RPA), which can remove the need for manual interaction in a repetitive process. 

Implement reporting tools

The use of efficient and effective reporting tools, such as dashboards, can be used to analyse the data collected throughout the course of a project for more informed decision making

We are here to help you

We transform construction-based finance functions, to provide senior construction stakeholders with the tools they need to tackle their cost control challenges. We perform a deep dive assessment of current practices, followed by a programme for remediation, supported by a business case for change. If you want to prioritise quick wins and digital solutions to help you get essential insights, contact us today.  

Contact us

Amy Ball

Partner, PwC Ireland (Republic of)

Tel: +353 1 792 5836

Colm O'Callaghan

Partner, PwC Ireland (Republic of)

Tel: +353 1 792 6126

Cora McLoughlin

Director, PwC Ireland (Republic of)

Tel: +353 1 792 5496

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