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Time is Money: Creating Profit from Construction Schedules
By Brian Wasserman
We all know the phrase “Time is money,” but have you ever stopped to figure out how much it costs when a job runs late? Say a $1 million project is scheduled to last 50 days. That’s $20,000 per day. If the project runs 10% over (that’s just five extra days!), it will cost an additional $100,000 (five days times $20,000 per day). On most jobs, that would represent the job’s entire profit! And there’s also the opportunity cost—what’s lost from not working on other projects because we’re working on this one.
Creating a construction schedule isn’t especially difficult. Most contractors know the key steps in their head. The task (to use a scheduling term) is to get everyone on the same page by communicating expectations before the project moves forward.
Creating a construction schedule involves seven steps. This process, when thought through and written out, will create a document that will save both time and money. The steps are:
- Create a list of tasks (activities)
- Arrange the tasks in the order in which they happen
- Determine the durations of each activity
- Identify the task relationships
- Assign required resources
- Determine start and finish dates for each task
- Determine the critical path
First, create a list of activities. How many tasks are needed in order to create an effective schedule is a function of who will use the schedule, how the schedule will be updated, and how long the entire project will last. A small home remodel project might have 20 items, while a major commercial project often has 400. Each subcontract trade and each phase of the job will need at least one activity. The rule of thumb in construction is that activities will not take less than a day nor more than two weeks. Inspections and billing dates are often included in the schedule
Arranging activities is usually simple common sense. While tasks may overlap, there is an order in which the work is performed. Therefore, after creating the list of tasks needed for the job, arrange them in a “start to finish” order. However, owners often make special requests that require flexibility from the contractor. Seasonal conditions may also determine activity order.
To determine activity durations, use an “average case” logic. It’s unrealistic to expect crews to work at 100% capability each and every day of the job, but at the same time, it is also poor planning to expect work to progress slowly. Most experienced contractors intuitively know durations. However, for contractors who are unsure or who want verification, there are several sources for determining activity durations. One of the best is the RS Means series of books and CD’s, which lists each activity’s material costs along with an average production rate and labor cost.
There are several task relationship types. The most common is F/S—finish the first activity before starting the second activity. (Editor’s note: Some software programs refer to this as F/S, while others use S/F. Check your software for clarification.) Another is S/S—start the two activities at the same time. In addition to naming the relationships between activities, it’s helpful to use the concept of lag time. If two activities have a S/S relationship, the second activity might start two days after the first one starts, meaning it has two days of lag time.
Assigning resources determines subcontractors, equipment, and the crew workload on the job site. Here the contractor can determine whether to hire additional lead carpenters, temporary laborers, allow overtime, or stretch out the activities so the current crews are able to handle the work load. It’s vital to review a summary of all jobs that will be performed during any given time period to ensure proper resource management.
The sixth step is to calculate the start and finish dates for each activity. Using software at this point is extremely helpful. (Editor’s note: Master Builder has a built-in scheduling program.) Only the project start date needs to be entered and the program will calculate all other dates based on the relationships. Lacking a software program, the next best tool is to use post-it notes on a marker board. The display of a completed schedule might either be a bar chart (Gannt) view, a calendar view, or a PERT chart view.
Finally, determine which activities can move a few days, either earlier or later. These activities are said to have “float.” Activities that have no float are on the critical path and need to be watched carefully, since any delay to these activities will delay the project’s end date.
A proper scheduling process will allow feedback from all the stakeholders, including the owner, the subs, the estimator, the foreman or superintendent, and the project manager. There will likely be some heated discussion, but it will force everyone to think through the entire project, from beginning to end, before the notice to proceed is issued.
Brian Wasserman is an assistant professor in the Construction Management Department at Minnesota State University in Mankato MN, where he teaches estimating and scheduling. He is also a Certified Implementation Specialist working with Master Builder.
Copyright © 2006 Profit Press, Inc. Reprinted with permission.
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