Even if subcontractors do a lot of the physical labor for general contractors, those contractors play a vital role in managing schedules and timelines for their teams of subcontractors. A key part of this is utilizing project-cost accounting to manage and forecast the overall project budgets at the highest level. However, even while working at lofty heights, it’s essential that electrical or mechanical subcontractors don’t neglect to manage and forecast the budget at finite detail levels. This is where managing construction cost codes are most important for an electrical or mechanical subcontractor versus a general contractor.
These all-important construction cost codes track specific labor activities, and at first glance, it may seem like too much complexity and detail for a general contractor. However, for electrical or mechanical subcontractors, it’s essential to move past those concerns. Labor is their biggest detriment on profit, which makes budgeting, analysis, and forecasting down to cost code level key factors in turning a profit. So, what can electrical and mechanical subcontractors utilize construction cost codes to manage their overall costs? Let’s take a look.
Table of Contents
Work Breakdown Structure
The first entity you want to look at is a work breakdown structure (WBS). The easiest way to define this is a methodology that helps break down your larger projects into a series of smaller deliverables. This is a boon for construction companies at any level because it helps break down larger projects into a series of smaller tasks. The work package, in this case, represents the list of tasks or “to-dos” to produce a specific unit of work. Along with that, the “to-dos” are tracked labor activities that can be assigned specific construction cost codes for tracking purposes. This means that every single task has a cost associated with it, so you can adjust accordingly.
Key Elements Of Construction Cost Codes and Job Costing
A work breakdown structure is a great starting point for managing construction cost codes, but what are the different elements of said structure? Let’s take a closer look.
Systems and Phases – These are key for electrical and mechanical subcontractors working on large commercial projects, systems, and phases. In this context, a system can be a larger project like a building, and a phase serves as a floor or level of said process. Also, multiple buildings can be part of a larger project, like a work campus.
Cost Codes – “Construction cost codes,” in this context is an accounting term that describes labor activity. Employees of electrical and mechanical contractors mark down the specific type of work completed during the day. The foreman or employee then tracks labor hours on time cards. Subcontractors use construction cost codes to track productivity and project expenses. The more simplified you can keep things, the easier it will be to manage your costs.
Job Costing – All the construction cost codes and labor activities do not live in a vacuum. The information is critical for job costing. Job costing is how a contractor collects real-time cost and labor-activity information associated with a specific project. Project managers use these methods to track actual costs against estimates by those individual cost codes for each project phase. This will help them figure out ways projects went over budget in explicit detail—by both phase and by cost codes.
Project Management Systems and Construction Cost Codes
Developing a work breakdown structure and construction cost codes are necessary for electrical and mechanical subcontractors even more than your general contractors. It all starts with labor activities. This means work breakdown structures and cost codes for a project get the most use from people who are actually working on a project, like mechanical and electrical subcontractors. This is compared to general contractors, who are more focused on coordinating multiple projects. Electrical and mechanical contractors need project-management software specifically intended for subcontractors. This is an essential distinction to make because many construction management systems are designed for general contractors, lacking labor tracking capabilities.
Any estimates or project forecasts electrical and mechanical contractors use are reliant on accurate labor data. So, any tools that you use for this purpose need to report labor hours expended and materials installed by cost code. This lets the foreman log this information through daily reports or time cards.
With labor hours linked to construction cost codes, project managers can use this to track their actual hours against estimated hours, as well as overall efficiency for their crew. If the crew is not performing to standard, they can do a deep dive to determine why. Was it a poor estimate? Is it crew composition? Don’t rely on gut instinct, look at the figures.
In addition, you want to make sure any charts or spreadsheets you make for construction cost codes are compliant with the overall CSI MasterFormat. This is a standard used throughout the construction industry in order to provide specifications for contract documents, construction cost codes included. Project management software is particularly useful in this arena as it can be updated and adjusted as standards change, rather than working with paper templates.
When you have a solid management plan for construction cost codes as an electrical or mechanical subcontractor, this gives your team true data on project health. Say goodbye to those last-minute surprises. Tracking costs through construction cost codes in real-time allows electrical and mechanical subcontractors to discover potential cost issues early.
However, whether we’re talking about construction cost accounting or construction cost codes, your success is limited by the quality of project cost management software that you use. To take things to the next level, you can use a construction project management software like eSUB. eSUB is the perfect software to help improve your overall efficiency. Our ability to compare bids and actuals will make sure that you’re putting together accurate estimates, and our cloud technology means you can put your construction job costing spreadsheet on a platform that all your team players can access at any time.
FAQs for Managing Construction Cost Codes for Subcontractors
1. What are construction cost codes, and why are they important for subcontractors?
- Construction cost codes are specific codes used to track labor activities and expenses on construction projects. They are crucial for subcontractors because they help break down project costs at a granular level, allowing for better budgeting, analysis, and forecasting. Subcontractors heavily rely on labor, making cost codes essential for managing profitability.
2. How can subcontractors create a work breakdown structure (WBS) for managing construction cost codes?
- A work breakdown structure (WBS) is a method used to break down large projects into smaller, manageable tasks. Subcontractors can create a WBS by identifying the different systems and phases within a project. For example, a system could be a building, and a phase could be a floor or level. Each task within these phases can be assigned specific construction cost codes for tracking purposes.
3. What are some key elements of construction cost codes and job costing for subcontractors?
- Construction cost codes represent labor activities and are used to track productivity and project expenses. Job costing involves collecting real-time cost and labor-activity data for a specific project. Subcontractors use cost codes to track actual costs against estimates by individual cost codes for each project phase, helping them identify where projects may have gone over budget in detail.
4. How do project management systems and construction cost codes benefit subcontractors?
- Project management systems and construction cost codes are especially beneficial for subcontractors. They allow subcontractors to track labor hours, materials installed, and efficiency by cost code. This data helps project managers compare actual hours to estimated hours, identify performance issues, and make data-driven decisions. Project management software ensures compliance with industry standards like the CSI MasterFormat and provides real-time cost tracking.
5. What project management software is recommended for subcontractors to manage construction cost codes effectively?
- eSUB is recommended as a construction project management software for subcontractors. It allows subcontractors to compare bids and actuals, ensuring accurate estimates. Its cloud technology enables easy access for team members, making it a valuable tool for efficient cost management and tracking.
6. How can managing construction cost codes benefit subcontractors in terms of project health and cost control?
- Managing construction cost codes provides subcontractors with real-time data on project health. By tracking costs at a detailed level, subcontractors can identify potential cost issues early and avoid last-minute surprises. It allows for better cost control, accurate budgeting, and improved profitability.