Despite the construction industry’s reluctance, technology tools have finally made their way into almost everyone’s companies. Just as the nail gun has replaced the hammer as a more effective tool, these software “tools” have made subcontractors more efficient in conducting business. The first two software tools to be adopted in the industry—estimating and accounting systems—have been successfully integrated into subcontractors’ businesses. Now, the industry is looking at the piece that fits between estimating and accounting—project management.

Let’s examine what makes all three pieces of the puzzle vital to a subcontractor. We’ll start with estimating systems. The purpose of estimating software is to accomplish two things—to make it easier for an estimator to take-off a potential job, and to make his take-offs more in line with his actual costs. This means getting the bid as tight as possible to win the contract, but not so tight that the subcontractor risks losing money on the project. Everyone can see the benefit in that, right? If your company has a software tool that allows you to get more jobs and make more money on the jobs you get, you’re going to be highly motivated to use this tool to increase your competitive edge. So far, that’s exactly what’s happened with estimating software. It has moved into the industry at a rapid pace and many companies now feel as though they’d never go back to the old way of doing things. This tool has definitely increased competitive edge, but to what extent?

Believe it or not, there are limitations on the value that a good estimating program can add to your business. Let’s take this scenario to prove it. “ABC Electrical Contractors” just bought the best estimating program on the market, and is winning more jobs than ever. They’re able to squeak out low bids, but have enough margin to cover themselves in case of the unexpected. They’re winning so many jobs that they now have to increase their staff to accommodate all their new work. But the Estimator has reached his limits on how many jobs he can take-off. At that point, the estimating program has reached its maximum efficiency for ABC. Its profitability growth potential has been curbed by the fact that the Estimator can only do so much, no matter how good the system is. If ABC were to hire another Estimator, they would have to purchase another license and start from scratch.

Let’s turn our attention to the next software tool that has made its way into the subcontracting industry—accounting software. It’s fairly easy to identify why accounting software is so important to a subcontractor. Gone are the days when everything had to be figured out using calculators, manual ledgers and a well organized filing system. Today, your accounting system is a tool that acts as your electronic filing cabinet, calculator, back-up and organizer all in one. The amount of time a good accounting system saves your company is almost as valuable as the peace of mind it gives you in knowing the status of cash flow at all times. But peace of mind aside, the true profitability of an accounting system lies in the time savings it provides by automating the processes of accounting instead of having to do everything manually. Payables and receivables are automatically stored, tracked and reconciled in a fraction of the time it used to take to do it manually. But not to minimize the benefit of a good accounting system, this software tool also tops out in its value to a company. Once maximum time savings on individual tasks has been achieved, the “profitability” of the accounting system has reached its peak. No matter how good an accounting system you have, it will never generate more work or increase efficiency of your labor out in the field—the place where you make your profits.

That’s where the third piece of the puzzle fits in—project management software. The subcontractor’s project management tool should focus on two things—ensuring that you’re making the most effective use of your labor out in the field, and making sure you are initiating the proper paperwork to get paid for all of the work you actually perform, not just the work you bid. Subcontractors need to track daily activities, generate and log RFIs, change orders, submittals and other crucial correspondence, track milestones and productivity levels and remain proactive in your communication with the GC.

Traditionally, the subcontractor has been in a defensive position when it comes to being paid for changes. You have to scramble to find back-up to argue for payment on work you’ve already performed. This puts you at a disadvantage and lowers your negotiating power considerably. That’s why many subcontractors end up settling for 50 cents on the dollar when negotiating changes at the end of the project. Good project management software links all potential change orders with all other documents that relate to the extra work such as an RFI answer or verbal field directives. Good project management software also standardizes best project management practices throughout your company, so everyone and every job is managed the same way with all information stored safely in a database so your vital project information doesn’t walk away even if your project manager does. Subcontractors make or lose their profits on their labor. What better tool to increase profitability than a system that makes it EASY for project managers to do the tasks that they SHOULD be doing on a regular basis throughout the project.

Project management software for subcontractors benefits your company in two ways—by cutting down the time it takes for project managers to do the things they should be doing, and by making it less likely that issues that affect your profits fall through the cracks by reducing your risk. You can perform more work with the same amount of people. This increase in productivity grows exponentially and has no limit because it interacts directly with what leads to your bottom line profits—your labor.

With such a powerful tool to directly increase profits, why aren’t all subcontractors using project management software? Mainly because most of the systems that have been developed so far have been for GCs, whose project management needs differ significantly from yours. GCs don’t actually perform most of the work on construction projects, so why would a project management system written for them benefit you? The fact of the matter is that project management software is just moving into the subcontracting industry, but you have to be choosy. Make sure that whatever system you decide on fits your needs for your company and trade. Another thing to look for is a system that can link your remote jobsites to your office or home. This gives you the ability to check on or update project status from anywhere.

Just as with your other software systems, do your homework. These are powerful tools that affect your performance and your future success. They require a commitment and willingness to change the way things have traditionally been done, which can sometimes be a tough sell. Subcontractors are notoriously resistant to change. But you have to think long term here. Buy-in is a must because no matter how great a system you choose, you’ll only reap the benefits if your people are using it. The more systems you try, the more likely you are to find the right project management tool that will benefit your company, make you more competitive and safeguard your profits into the future.

For more information, please visit wswift@esubinc.com or www.esubinc.com.