CONSTRUCTION BUSINESS MODEL
PROJECT MANAGER VS. PRODUCTION MANAGER
There will be a crossroad, at some point, when every contractor must evaluate the direction of the business in order to begin the growth of the company. This crossroad will define the company’s management, and how current and future projects are being contracted and completed. This article will help define the differences between two models, Project Management and Production Management, to better understand each and explain the benefits and pitfalls in detail.
The Project Manager model, by name, indicates the management function. The Project Manager is, in whole, the responsible individual for procuring the work, bidding, manpower, subbing, cost management, purchasing, etc. Most companies will not financially be able to provide any additional help, such as, secretarial, estimating or purchasing. This leaves the Project Manager in a problematic position. In scale, the Project Manager must solicit work by advertising, using bid rooms or other methods of securing projects to bid on. Finding time to bid the projects, knowing the capture rates can be as low as 1 in 10 can place our Project Manager in position of not managing current work in progress. The Project Manager is left with two possible occurrences:
1) A job without proper management could become problematic overnight. This situation is avoidable through good planning and support from executive management.
2) Severe changes in workloads, going from high levels to low levels, or no work at all. While the Project Manager was unable to sell or bid projects during the high work load period due to managing the work, the “Peak and Valley” syndrome will dominate.
This is not to say all Project Managers operate in such a manner. These scenarios exist and work well, provided the executive management plays a role in defining the needs and having the capability to cope during the valley segments. The Project Manager must be able to manage time very well and keep compliant with schedules and manpower requirements to meet production goals.
In cases where changes or weather effect production, the Project Manager must be able to reverse course and look ahead to limit project overlap. Resources can become stretched or non-existent, causing further issues if not planned in advance. The Project Manager must be able to communicate clearly to management, installers, subs and GC to limit issues and keep pace of the workload. The Project Manager copes with many hats to manage his/her segment of the business like a contractor with only the obligation to make a profit on each job bid and completed, and not the financial obligation.
The Production Manager Business model, in general, manages success from production to profit. This business model separates the business into distinctive categories; executive management, estimating and production. The estimator’s responsibility is to sell work for the company. They bid, price cost and remain focused on providing a constant stream of work. The production department will handle all construction details. This includes project management, labor and materials. The most important step in project management at this stage is turn over from estimating. The estimator must provide detailed material lists, labor requirements and design information. The Production Manager will then be able to plan the project and schedule labor and materials. The Production Manager is more efficient in facilitating the construction process and can handle multiple projects by utilizing a site foreman to manage day to day job activity. Material management can be provided through the Production Manager however, there is a point when the Material Manager works in conjunction the Production Manager. Their combined efforts facilitate package orders and day to day materials to the job site, while buying at the best possible pricing, which is great for the bottom line. Supply houses are infamous for overcharging and errors that can cause unanticipated cost overruns. This can be avoided through diligent material management.
In summary, each business model has benefits to operating a contracting company. Some firms start out with Project Management and later move to Production Management during growth. The Project Manager, estimator and purchasing are extremely important areas to consider in a contracting business. Each function has specific needs which must be met in order to work efficiently. The business owner must review with great diligence, the benefits and pitfalls when organizing a construction company.
By Ron Soltis, Jr. - President, Enlightenment Companies
