Going over-budget is a no-no at S.N. Peck Builder in Chicago, but up until 2005 it happened quite frequently on the company's custom residential renovation projects. “There were some specific areas where we were going over-budget quite regularly,” says Barbara Rose (above, right), CEO for the 50-employee company, which also encompasses a handyman franchise. “For example, we would continually go over-budget on drywall, which is actually a pretty straightforward cost when you're bidding on a project.”
Rose determined that the “custom” aspect of S.N. Peck's business created the bulk of the cost overruns. “Our customers are constantly making changes, which leads to higher expenses on our part,” says Rose, who in September 2005 instituted a new internal process to help control the spiraling costs. Unfortunately, most of the overruns were not evident until the end of the project or later, when the finance department figured the job-specific profit.
Fed up with the results, Rose and her team created a checklist that the sales and estimating department uses before a project is even quoted. The checklist, which covers site conditions (and how they might affect the job and its related costs), contract stipulations, change-order clauses, and other aspects that could affect budget, is then reviewed by the estimator, salesperson, project manager, and director of production one to three weeks before contract signing. At the meeting, the group also nails down any last-minute decisions, reviews an open-item list, and includes any estimates that have not been contracted for yet (subcontracting work, for example).
“Together they do a thorough review of the quote and all related data to make sure everything is on target before they even start,” says Rose, who points out that roughly one-third of S.N. Peck's annual income is generated through change orders. “The bigger the job, the more there are. It's why customers hire architects and firms like ours, but these ‘works in progress' can get hairy.”
MIDPROJECT DEBRIEFING About six to eight weeks into the project, the project team huddles again to see how things are going, and to make sure the original plans are on track or to adjust to any changes or new requirements. Conducted by the estimator, the midproject debriefing includes the salesperson and project manager who examine what's working and what's not working, review unexpected site conditions, and discuss information gleaned from outside contractors — such as architects or designers — since the project started.
“It's not a lengthy meeting, but it's very useful for us,” says Rose, who adds that the meetings have resulted in some key revelations, such as confusion over drawings or specifications, or a lack of clarity on the customer's part. “Sometimes we think we've explained something clearly, only to find out that the customer really didn't get it.”
The meetings also help S.N. Peck take a more proactive approach on future projects. In fact, the company is currently working on a new customer handout that will include an “open list” (showing when it's time to select door hardware, for example) and details about the remodeling process and what clients can expect from it. “We want to help them visualize how the home is going to look,” Rose says, “so we get them thinking about simple things, like where they'll want their electrical outlets and whether they want three-way light switches.”
HITS AND MISSES According to Rose, the new internal process replaces a “case study” format that the company introduced in 2004 and dismissed a year later after realizing it was too time-intensive and difficult to administer. The process involved the company's human resources team, accounting department, estimators, project managers, and foremen — all of whom were hands-on with every aspect of every job. “It was just too many people to get together for meetings,” Rose says.
Just over a year after implementing the new process, Rose says the company is meeting budget targets and fostering teamwork and communication across departments. “All the jobs that are in process are on target, which is exactly what we wanted,” says Rose, who expects to continue honing the new system over the next year. “There's more ground to cover, particularly when it comes to the interaction between production and the office, but we'll get there.”
Bridget McCrea is a freelance writer based in Dunedin, Fla.