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Project Cost & Revenue Opportunities

As we know, there are two ways of enhancing profitability on projects: cost reduction and revenue enhancement. Cost reduction is challenging and there are limits to it that are driven by the project scope, schedule, contract requirements and constraints. Rev,enue enhancement is a largely a function of contract type and project delivery method. Extracting increased profitability on fixed price contracts is difficult, especially on infrastructure construction contracts. On these contracts, the general contractor (or prime contractor) must deliver the project as specified in the plans and specifications. On construction management (CM-at-Risk) contracts, the "open-book" accounting provides for a different approach that may enable increased revenue (and reduced cost risk) until a guaranteed maximum price (GMP) is established.

Technology, software and systems integration projects provide interesting opportunities for revenue enhancement. In general, the more technically complex a project is, the greater the likelihood of favorable revenue pathways for the prime contractor. Here is a handy checklist:

· Define test procedures as specifically as possible before the contract is signed.

· Find ambiguities in the contract before preliminary design documents are submitted.

· Submit clear and well-written RFIs (Requests-for-Information) and make sure that you provide back-up.

· Verify delays, especially during design document review.

· Identify methods to increase customer "lock-in" by offering customization of features and capabilities.

· Identify post-integration services which would be desirable to end users or make their jobs easier.

· Identify risks associated with existing systems which you will need to interface with.

· Consider improvements in graphics and user interfaces, which could be translated into scope variations (or change orders).

· Standardize processes.

· Reduce coordination costs.

· Streamline the handling of documentation.


#costcontrol #projectmanagement #changeorders

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