Decorative people must know: the project loss of 11 subjective reasons, 76 kinds of waste on the site!

The profit and loss of a project, the basis or cost management, and the so-called direct cost of the project is nothing more than labor costs, materials fees, machinery royalties, other direct fees, and indirect project management fees, these costs account for about 80% of the total cost of the construction enterprise, so the direct cost of the project department determines the cost of the construction enterprise, determines the profit and loss of the construction enterprise.

01

No cost control objectives or no execution at all

For the vast majority of loss-making project departments, there is no total cost control target, some although there is but not strictly enforced so that the project department’s cost is out of control.

After the project starts, a project department makes a cost forecast of the project and determines the project cost, classification cost, and total cost target. When the project is completed, variable expenses such as labor, materials, fuel, spare parts, and project overheads are all overspent, except for fixed expenses (including management fees paid, depreciation of fixed assets, overhaul fees) and other items that have not exceeded the estimated costs.

The most important of these is the overspending of materials and accessories, which are more than 50% more costly than estimated. Even taking into account the increased cost of the change design and calculating the budgeted cost of the change increase as a cost, the actual cost is more than 30% higher than the estimated cost.

Why are fixed fees under control while variable fees are not? The problem is that the overall goal of cost control is not strictly enforced, and the control of itemized engineering cost and classification cost is not implemented, resulting in total cost overrun.

02

Materials, components system is not complete

Over-purchase

In the loss-making project department, the purchase of materials, accessories (hereinafter referred to as materials) unplanned phenomenon abounds. If an experienced materials officer performs procurement tasks, the quantity of materials procured is not too large and does not result in too much loss or waste. Some project departments, especially the loss-making project department material personnel have no experience to talk about, procurement materials are very casual, over-quota purchase habits, the number of procurement is all based on the feeling, the result is bound to be the backlog of materials, overspending.

“Artificial price-fixing”

In the material procurement stage, the high price and the quality of some materials are not up to standard, which is another factor in the loss of engineering projects.

Due to the development of the market economy, the price of materials is changing, no matter what experienced material personnel is difficult to grasp relatively reasonable price information, coupled with the sales of materials units (hereinafter referred to as vendors) to use rebates, benefits and other to attract procurement personnel so that the project department difficult to buy relatively reasonable prices of materials, improve the material costs of engineering projects. If individual procurement personnel intentionally cheat and deliberately raise the price of materials to profit from it, the loss of the project department will be even greater.

In addition, due to the reduction of credit rating and cash flow needs of some enterprises, so that sellers are very concerned about whether to buy materials in cash so that cash and non-cash purchase of materials prices are significantly different.

At its highest, the difference is more than 10%. The project department because of financial constraints, or procurement staff will not calculate the cost of funds in the procurement process and eventually purchased high-priced materials, thereby increasing the cost of the project.

“Quality is not up to standard”

Moreover, because some procurement staff knows little about the quality standards of materials, the purchase of some materials that do not meet the quality standards has increased the actual quantity of materials consumed, resulting in cost overruns.

The sending and receiving system is nothing

In the material acceptance, storage, storage stage, some project departments do not have a send and receive system, materials procurement personnel to buy materials no acceptance, more no physical accounts, so there is no storage and storage;

In particular, sand, brick, and other materials, some project departments from beginning to end without a dedicated department to manage the purchase of consumption;

“Do not send according to the quota”

In the material consumption stage, most of the loss-making project department does not according to the quota of materials, construction personnel to how much, resulting in more materials are either wasted on the site or by the site personnel secretly sold.

Many of the recycled waste is left unmanageable, such as unauthorized disposal of the remaining steel and stainless steel on the site, and the recovered material is divided privately.

03

The contracting measures do not match

Some project department, in the contracting program to specify how many tasks to complete how many wages, but the consumption of materials and equipment use, maintenance there is no clear requirements, the formation of contractors do not cover materials, package profits, and losses, and finally the task is completed, but material costs overrun, equipment performance decreased, the entire project loss.

Some project departments in the contracting program to clarify the unit of the number of materials and equipment included in the cost, but the price of materials than the contracting program of materials, resulting in contract abortion;

Some project departments, although the contracting scheme is reasonable, the pricing is not timely, or can not be cashed following the contracting plan, so that the contract can not go on.

04

There is a vulnerability in the subcontracting project

For the labor subcontracting team, there is no strict quota distribution system, resulting in the arbitrary use of materials, resulting in material overspending;

Repeated pricing of the amount of work in part of the subcontracting team’s construction process, resulting in the allocation of more funds for the project;

The price of subcontracting works is very arbitrary, did not re-calculate according to quota and budget standards, only casually set a proportion of withdrawal management fees on everything, the final withdrawal of management fees is not enough to compensate for the cost of bidding expenses;

Without considering the winning bid price, subcontract the project at a price higher than the winning bid price (not the reason for the low winning bid price), resulting in a huge loss;

The heavy use of subcontracting teams, resulting in over-allocation, sub-contracting team arrears, and other phenomena continue to occur;

Hanging on to several external units, only symbolically to charge a little management fee, and finally hang on to the unit to go, all the after-care costs (such as duration, quality, attached units in the name of the project department to purchase materials owed by the purchase of goods, etc.) are all borne by the project department attached.

05

Serious quality problems

The project department with serious losses has almost all of them have more serious quality problems, which lead to the phenomenon of repeated construction such as rework, repair, pushback, and so on.

These phenomena lead to an increase in the number of invalid works, increased investment in manpower, materials, equipment, and ultimately increased cost expenditure.

06

The utilization rate of construction equipment is not high

Some project departments undertake the project in mind countless, to ensure uninterrupted construction, blindly purchase or transfer a large number of equipment from other projects standby, and even purchase some of the projects that do not need equipment, resulting in long-term equipment deactivation.

Not only occupied valuable cash, so that the construction of production of people, money, goods can not be in place in time or increase the financial expenses, but also increased depreciation and equipment maintenance expenses, resulting in a sharp increase in the cost of the project department.

07

The construction arrangement is unreasonable

Can not reasonably allocate human, material, equipment, and other resources, resulting in waste of workers;

Construction arrangements are unreasonable, can be completed one step, the actual two, three to complete, resulting in rework;

Construction order is reversed, adding a lot of ineffective humans, material, and financial inputs, resulting in a significant increase in costs and so on.

08

There are more safety incidents

In the loss-making project department, most of the project department has experienced different degrees of safety incidents.

Minor injuries affect employees to work, increase labor costs, serious injuries not only affect employees to work, increase labor costs, but also need to spend medical expenses, increase indirect expenses.

Deaths not only increase the huge pension expenses, directly increase the cost expenditure, but also may affect the mood of employees, reduce productivity.

09

Indirect fee control is weak

The problem is almost always present in the loss-making project department, most notably office, travel, transportation, and business entertainment.

Office expenses have no plan, who want to buy what, high-end office supplies to buy at will, mobile phone costs are staggering;

10

Financial management confusion

All loss-making project departments, none of their financial management there is no confusion. This is reflected in:

There is no complete financial management system

Some loss-making project departments of all revenue and expenditure business by individual leadership and finance, planning, materials, and other personnel, not rely on the system to determine expenditure, rely on supervision to restrain expenditure, resulting in all expenditures without planning, project profit and loss is unknown.

“Fund management confusion”

Open several bank deposit accounts, but not timely check the clean-up, bank receipts, and payment vouchers are not recorded in time, white bars do not enter the account and top cash, the result is that materials can not be deposited in time, personal arrears can not be cleaned up in time, bank deposits and cash accounts do not match, huge costs hidden in bank deposits and cash balances, resulting in pre-project profit or loss of the whole project.

The confirmation of claims and debts is inaccurate and the settlement is not timely

Some project departments sell goods and subcontracting units, both in the creditor to record the advance payment and project payment, but also in the debt side to record the payment and project payment due, but in the settlement due to poor accounting or not carefully check, and finally overpaid the purchase price and project money, resulting in losses.

Some project departments corresponding to the collection of funds do not timely clean-up, after the arrears of the unit no money, bankruptcy or beyond the recovery period, resulting in receivables can not be recovered, resulting in losses.

“Inaccurate calculation of revenue and cost”

Some project departments do not know how to calculate the project settlement income, the contract amount is calculated as the value of income, and then calculate the profit and loss, the formation of the former profit and loss;

Take the allocation as the pricing income, so that the project department’s profit and loss in each period are not true, if the construction unit owes a large amount, then the project department will form a false loss.

Some project departments do not know how to calculate costs, should be included in the cost of the leakage, such as unreferenced fixed asset depreciation and employee benefits, taxes due, pension insurance premiums, medical insurance premiums, unemployment insurance premiums, housing provident fund, and superior management fees, has been used but has not yet paid materials, wages due to unpaid workers, resulting in false costs, profits and losses.

Some project departments do not carry forward costs according to the provisions, the cost should be borne by the later stage into the cost in advance, or the cost should be borne by the current period to the later stage, affecting the authenticity of the cost.

Accounting Basic Work Difference

Audit accounting vouchers are not serious, not careful, the formalities of vouchers are incomplete, the basis for reimbursement is not sufficient, the register is not timely.

Account use errors, accounting data records are not true, inaccurate, lose the significance of accounting, affecting cost calculation.

11

Contract management is chaotic

In the loss-making project department, most project departments do not have the awareness of contract management, the purchase of goods, hiring personnel, service delivery, subcontracting projects, contract engineering, and other contract knowledge is very little, contract management confusion.

Sign a contract with the other party only lowercase amount, if the other party tamper with the lowercase amount to the court, because of insufficient evidence of the enterprise and lost the case;

With the other side to sign only the quantity has no unit price, only the unit price has no quantity or only the quantity, the unit price has no total price of the contract, resulting in a continuous lawsuit, seriously affecting the credibility of the enterprise.

12

76 kinds of waste on the site

The duration of the work

1. Improper scheduling of construction processes, resulting in waiting during construction, or stoppage of work to be expected.

2. There is a lack of awareness of the overall work content of the field personnel.

3. Construction teams are in their respective roles and lack overall coordination.

4. The command or instruction is unclear.

5. Failure to properly supervise tools, materials, equipment, etc. should be placed in certain premises.

6. Overtime work should not be caused by overtime construction.

7. Work at each stage has not been reviewed for the availability of suitable tools and equipment, such as hydroelectric pipelines.

8. Poor supervision of employees, loose work, low efficiency.

9. There is a shortage of technical staff and experienced construction staff.

10. There are too many workers without construction experience.

11. The process is cumbersome and requires too many reports and application forms.

12. Indulge in bad habits of chatting, leaving work, and wasting time.

13. Lack of supervision, process convergence can not keep up, resulting in a construction gap period.

14. Employees’ execution is not keeping up.

15. The problem is that the cause cannot be identified immediately, resulting in missed work.

16. Non-standard construction, the quality of the project is not up to standard, resulting in rework.

17. Poor communication with the supervisor, frequent work stoppages, and rectification.

The material

18. The regulation is lax and the entry materials do not meet the requirements.

19. Material collection is irregular, stone, wood finishes, and other main material waste or loss.

20. Materials are stacked at will, without considering construction and processing convenience.

21. Stone expertise is not enough, the drawings do not understand, the bill of materials.

22. Due to broken drawings, difficult to understand, wrong, resulting in processing errors.

23. The technical floor is ambiguous and there are no clear requirements for technical indicators.

24. Manufacturers of production and processing deployment is unreasonable

25. Materials and usage for each process are not checked (standards and variance analysis).

26. Field managers do not have sufficient knowledge of the value of materials.

Lack of discipline and connivance in careless or inappropriate work.

28. Damage to materials is caused during handling.

29. Processing standards or specifications are not updated promptly, resulting in the non-use of processed materials.

30. During the construction process, construction irregularities lead to waste of materials.

31. Inappropriate materials, such as too good or too poor, are permitted.

32. Problems that prevent those responsible for the accident from being traced cannot be corrected.

33. There was too much material to receive, but no return was made.

34. The correct material was not received and the wrong material was used.

35. Treat reusable materials as waste.

36. Production does not stop immediately when irregular materials are produced.

37. The cracking and breakage of pipelines and lines, such as water, electricity, and compressed air, were not checked.

38. The use of bad materials as good products flows into the process.

39. There is a lack of effective systems to prevent the outflow of materials, loss, or theft.

“Mechanics”

40. The overall scheduling plan is lacking and the available machines are underutilized.

41. Neglect to inspect the machine to keep it in good condition and avoid failure.

42. Not regularly checked.

43. There is a lack of regular cleaning and maintenance.

Venue Space

44. Inappropriate discharge and storage of materials.

45. Insufficient attention was paid to the transportation plan of the material from the factory to the site.

46. Misalgetation of machinery and equipment.

47. Walkways cannot be kept clean and tools littered.

The waste has not been scrapped.

49. The material supply service’s site transportation and space can meet actual needs.

50. Infrequently used machines and equipment take up a lot of space.

51. Insufficient lighting, black spots, dead ends.

52. The unit is poorly furnished and cannot be kept organized.

53. The workplace does not have the materials needed, warehouse and workplace regardless.

54. The importance of things being cleaned up has not been taken seriously.

55. Untrained and supervised items to be returned and located when they are used up.

56. Regular (daily, weekly, monthly) clean-up, not sustainable.

Accidents

57. Accident prevention is not recognized as part of the work.

58. Security is not in place.

59. Hazard marks were not marked as required and kept clean and readable.

60. Good safety operating procedures are not in place and cannot be implemented for long periods.

61. Lack of necessary safety assembly: such as gloves, hard hats, etc.

Personnel, management

Personnel costs

Unconscionable business hospitality.

63. There is no clear standard system of awards and penalties.

64. Increased direct and indirect costs resulting from personnel changes.

65. The construction site is not overstaffed.

Project management

There are no clear criteria for the cost of living in the project department.

67. Office supplies management is in disarray.

The procurement of goods is opaque.

69. Lax management of staff travel and transportation costs.

70. Living area planning is unscientific, with trivial and cost-added costs.

On-site management

71. Small production tools and appliances such as welding rods and wires are wasteful.

72. The site’s hydroelectric lines were in disarray, affecting construction.

73. Security work is not in place and there are many hidden dangers.

Departmental cooperation

Lack of communication and cooperation with other managers or departments.

75. Corporate policy implementation is not in place.

76. Departments and teams shirk responsibilities with each other.

The reasons for a project cost loss are many, there are many countermeasures to turn a profit, we need to work on the leak, timely discovery, timely correction, the project management work in practice, so that the project turns a profit, improve the economic efficiency of enterprises.