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Pricing the right construction projects

What construction projects should you be pricing?


Some contractors are like some actors. They sign up for every project that crosses their desk.
This often means that the estimating team works long hours and price estimates are rushed. Little thought is put into ways to make the price more attractive to the client.
When pricing is rushed it could result in errors with the price, which could mean that the price is too high, so the company doesn’t win the work anyway. It could also result in the contractor not winning the project. Often it takes more than just having the lowest price to be awarded a construction project.
In addition, contractors may end up winning the wrong project – one which they don’t have the resources or expertise to complete successfully.
Contractors should focus on pricing the right project, then put all their thought and effort into submitting a winning bid.

What is the right construction project for your company?

Construction projects vary hugely in size, type, location, risks, and clients. Not all projects may be suitable for your company right now. In fact, some construction projects are best avoided if they’re excessively risky or the client is difficult.
Picking the wrong project can be disastrous, while the right project can lead to bigger and better projects later. It’s important to understand the project fully when pricing it and be selective about which projects you price.
It’s also important to consider the pricing or bidding procedures.  If there are multiple contractors pricing the project, your chances of winning the project may be slim.
Sometimes there are competitors who have strong relationships with the client, have more expertise in the type of work, or that are already operating in the area. These competitors will have an advantage over your company, and it may be difficult to win the project.
Try to pick construction projects that are winnable. Don’t waste time pricing projects that will be nearly impossible to win.

Conclusion – win the right construction projects

All the above points would seem obvious, yet, it’s surprising how often they aren’t considered by contractors as they get caught up in the excitement and possibilities of pricing a new project. After all, what could go wrong?
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Panasonic’s outdoor “green” cooler

JAPAN: Panasonic has launched an evaporative cooler in Japan, which relies on an ultra fine mist to reduce temperatures in outdoor environments.

The Green air conditioner sprays an extremely fine mist with a particle size of about 10μm. This is said to ensure that the water mist evaporates quickly, reducing the feeling of wetness and achieving an efficient temperature drop.

Also, by generating a swirling air flow during mist spraying, a dome-shaped cooling space with a diameter of about 2m, which is less susceptible to crosswinds. It is said that the temperature can be reduced by up to 7ºC.

It is also equipped with a remote monitoring and control system that can automatically control the spray according to local weather forecast data.

Units have already been installed at Odaiba Rainbow Park, a popular tourist spot that overlooks Rainbow Bridge and the sandy beach facing Tokyo Bay and at Shimbashi Station in Minato-ku, Tokyo.

Are You Tired of Losing Money on Your Construction Projects?

​Is your Construction project making money or losing money?


Several years ago, our monthly cost reports on one construction project showed we were losing money on concrete materials. The matter remained unresolved and the losses mounted. Furthermore, our progress was often held up due to a lack of cement.

With a little research, I found that we had paid $500,000 extra for cement – effectively we had paid $500,000 for cement we hadn’t used! Further investigation revealed that the drivers of the cement trucks were discharging, and selling 30% of each load of cement before they ever reached the project.

Over several months the cement truck drivers had stolen half a million dollars of cement. This resulted in a shortage of cement because the project wasn’t receiving all the cement they were supposed to get, which delayed the project.

The above example illustrates the importance of monthly cost reports. Without them, these problems could have gone undetected. Forever.

But, cost reports are useful in other ways. For example, one company I worked at built several cooling towers, and each time we lost money. No matter how we priced or planned these projects we always lost money. We never seemed to have the right price or construction methods. We eventually decided we couldn’t make money on these projects and avoided pricing them again.

Sometimes we have to accept that we’re not particularly good at some construction projects and we should leave these projects to other contractors.

​Why are construction project cost reports vital?

​Monthly cost reports are useful for a number of reasons:

  1. They can uncover theft and fraud on the project.
  2. They could highlight when materials are being wasted.
  3. Cost reports provide a check that all work and materials have been correctly claimed by the client.
  4. They highlight problems with productivity – when people and equipment aren’t being used efficiently.
  5. Losses could indicate that the project has grown in scope and that the additional work hasn’t been claimed.
  6. Knowing a project is losing money allows company management to put in place mitigating actions to ensure there’s sufficient finance to cover for the impacts on the company’s cash flow, finances, and profitability.
  7. Cost reports provide feedback to the estimating department. It allows estimators to increase or decrease rates when they price the next projects. Decreasing rates may improve the chance of winning another project while increasing rates could prevent future losses.
  8. Cost reports also provide valuable ratios which can be used to check estimates for future projects. We gathered several important ratios for project overheads, equipment costs and labor costs, which provided quick checks on our prices, enabling us to uncover errors in our prices before we submitted them.
  9. Project cost reports provide targets for the project team to aim for. It’s an indication of how well the team is managing the project. Sure, there are sometimes projects that are badly priced, or which hit unexpected snags, so they don’t make money. But then the team needs to justify the losses and the reasons for the losses. But often a project that’s losing money is a project that has other problems.

Heat pump industry talks up higher capacity technology potential

Ongoing innovation to expand the capacity of heat pump technology for both industrial and commercial use can help realise European demand for waste-less heating and cooling, manufacturers have argued.

The claims have been made by the European Heat Pump Association (EHPA) during a special event earlier this month that brought together industry, civil society, and policy makers. The event discussed the role that heat pump technologies can play to address challenges in realising lower carbon buildings and functions around the EU.

A key theme of the discussion was the need for new policy approaches in Europe to consider their capacity and higher temperature heat pumps for addressing significant challenges to rethinking building design and functions.

The EPHA argued that these technologies, based on their growing use in sectors such as the dairy industry, reflected how heat pumps can reduce the footprint of energy-intensive industries.

Eric Delforge, chair of the associations working group for industrial and commercial heat pumps, argued during the event that waste-less cooling or heat generation could now be viably demonstrated in production processes through larger scale technologies.

Mr Delforge added that “bold policymakers” were required across the EU to push for greater consideration of heat pumps in energy intensive industries in a similar manner to how more efficient fridges and lightbulbs were once advocated.

Dr Paul Rübig, an MEP representing the European People’s Party, argued during the event that cooling and heating were widely recognised to be the most significant contributors of carbon emissions in the EU and required drastic new approaches in technology and political thinking.

He said, “The best energy is the one that is not consumed. Therefore, technologies should be promoted that further increase the energy efficiency of industry and households.”

A second iteration of the EPHA’s brochure on the opportunities for larger scale heat pump adoption in Europe was due to be released by the middle of next month, the organisation said.

The UK government is meanwhile in the process of determining what role gas and electric technologies will play in trying to transform its buildings to meet ambitions to realise lower and zero carbon buildings over the next three decades.

Production Management: Objectives and Features

Production management is a process of planning, organizing, directing and controlling the activities of the production function in an organization to achieve the goals of an organization.

production management of the plant

Production management is the management of an organization’s production systems, which converts inputs into the desired product and services. A production system takes given inputs which include raw material, people, machines, tools, building, technology, cash, information and other resources whereas the outputs include the product and services.

Production management is the study (practices) of planning, designing, and production systems and subsystems to achieve the organization goals.

E.S. Buffa defines production management as, “Production management deals with decision making related to production processes so that the resulting goods or services are produced according to specifications, in the amount and by the schedule demanded and out of minimum cost.”

Objectives of Production Management:

The four objectives of the production management is ‘to produce goods services of right quality and quantity at the right time and right manufacturing cost.’

1. Right Quality:
The quality of the product is established based on the customer needs in the market. The right quality is not necessarily the best quality of the product. It is determined by the cost of the product and the technical characteristics as suited to the specific requirements of the customers in the market environment.

2. Right Quantity:
The manufacturing organization should produce the products in the right number. If they are produced more than demand the capital will block up in the form of inventory and if the quantity is produced in short of demand, leads to a shortage of products.

3. Right Time:
Timeliness of delivery of the product to the consumer or wholesaler is one of the critical parameters to judge the effectiveness of the production department. So, the production department has to make the optimal utilization of input resources to achieve its desired objectives.

4. Right Manufacturing Cost:
Manufacturing costs are incurred before the product is manufactured and released into the market. Hence, all attempts should be made to the duce the products at a pre-established cost, to reduce the variation between the actual and the standard (pre-established) cost.

Features of Production management:

Some of the key features of production management are as follows.

  1. Production management deals with processes. It is not possible for a single person to perform the function of production management. Production management includes some staff such as supervisors, materials managers and store managers or anyone who manage staff, equipment, or materials.
  2. The management term in broad interpretation includes the design of the system and performance of all the activities mandatory to operate the system, that encompasses the directions to staff and acquiring material and equipment.
  3. The term highlights the fact that to manage the production of the organization’s final products; there are many subsystems as parts of the production system. For example, the cost accounting department in a manufacturing company is part of the production system.
  4. The goal of production management is to minimize costs, for most of the organizations. It also helps to improve the efficiency and productivity of the production system.

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