Currently, forecasting is the missing link in construction firms. It is not a new concept, but one that most of us overlook in our superheated race to project completion.
Forecasting addresses two facts:
• Contractors build multiple projects at any one time
• Qualified craft journeymen and equipment operators are rare
Clients don’t like to hear about other projects competing for the contractor’s attention. However, it is naïve not to openly discuss this. We force the discussion internally in our construction firm by forecasting demand for scarce resources (labor, equipment, supervision and cash) over our numerous projects. When we do so we can better anticipate spikes in that demand. To not do so is to sometimes fail to keep promises and to miss project milestones.
Labor forecasting answers the question, “Are the craft journeymen and/or equipment operators available in our company?” Since construction firms don’t install one job at a time and projects have different sizes, paces, complexities, etc., they unevenly push and pull resources. It is similar to the airline industry in winter-storm situations. What are our priorities? Which planes should take off first? Where are the crews to fly them? All this while the weather is clearing in spots across the country. They use an algorithm to determine the most efficient course of action at any moment.
We don’t have a ready-made algorithm. A management discussion of the forecast on Friday morning substitutes for the algorithm. In this meeting, we assume the planning and forecast are correctly done, so senior management should focus only on scheduling. That is, what jobs need to be pushed forward, what projects delayed and, in exceptional circumstances, when to hire temporary crews to meet a spike in demand.
As a side note, if we built the same number and size of projects continuously, we wouldn’t need a forecasting method. This industry would be easy. An easy profession invites more competition. Let’s count our blessings.
There are three parts to any forecast:
1. Current project demands for the resource
2. Outages/vacations for the resource
3. Proposed/bid projects not yet awarded
In the last decade, the bid/proposal pipeline has emerged as a new forecasting requirement. Clients are negotiating projects longer in time and thus deeper into the project schedule. Subsequently, contractors start projects with less lead time. We must keep tabs on projects not yet awarded. We use a very specific method to accomplish this.
In practical terms, forecasting labor and equipment is where most contractors should focus. Qualified labor is rare and equipment is expensive. Thoughtful forecasting means higher utilization and productivity for both these resources.
In our observations, forecasting is the weakest skill of the trinity of Planning, Forecasting and Scheduling. This is good news in that any weakness, if strengthened, is an opportunity for the largest gain. This is an area of windfall. If you have a weak forecasting process, create and install a better one. You will see gains of time and productivity while experiencing less conflict. (See my book for a full explanation on the process and mechanics; to find it, Google on McGraw Hill’s “Managing a Construction Firm on Just 24 Hours a Day.” Or go to www.stevensci.com)