Software solutions for construction cost management

Software solutions for construction cost management

Within any construction project, there are budgets and penalties for cost overruns. Alastair Currie speaks to Andrew Skudder, CEO of RIB CCS, about his company’s BuildSmart construction cost management and ERP software, which provides an unmatched level of real-time control.

Andrew Skudder, CEO of RIB CCS

How does BuildSmart differ from other programmes out there?

AS BuildSmart was developed by software developer and founder Peter Cheney, more than 30 years ago, in the old DOS (HB87) environment. The major transition from there occurred in the early 2000s with the advent of the Windows platform and the offering of a web-based solution.

From inception, Peter’s objective was to build a fit-for-purpose construction financial management solution, based on his extensive experience in the construction industry. His objective has evolved with next-generation updates. Today, this ensures that construction companies, led by key players like quantity surveyors and project managers, can track all their costs, after estimates have been done, through the life cycle of a project. The core BuildSmart areas covered are labour costs, materials, plant and equipment, and subcontractors.

Most similar financial systems treat a supplier as a supplier. BuildSmart defines this into two distinctive categories: 1) materials, plant and equipment suppliers, and 2) subcontractors. This distinction allows for the subcontractors to be managed on a certification basis, tracking all advances and retentions, rather than on a simple order and invoice process as is used for normal suppliers.

In what way does it provide a competitive advantage for contractors?

BuildSmart provides a major competitive advantage due to its ability to link directly with a project’s initial estimate and ongoing valuations. This allows contract procurement to be linked directly to the estimate’s materials at both a quantity and unit price level, ensuring budget controls are built into the process from the start.

BuildSmart also makes use of live accruals, meaning any cost that may not have been fully processed by finance can still be reflected as an accrual to the contract. This approach means that accurate actual versus allowable reporting can be done, without having to wait for the completion of the financial process.

Cutting down on this reporting cycle empowers project teams to identify and act on any deviations in a timely manner.

BuildSmart works seamlessly with Candy, RIB CCS’s estimating and project cost control solution

Does BuildSmart provide a coherent/secure platform for PPP projects?

From a project programme perspective, BuildSmart on its own is not a standalone solution. However, as part of RIB CCS’s overarching MTWO 5D BIM enterprise construction cloud software, there are tangible benefits where BuildSmart can integrate from a financial perspective in terms of real-time costing.

As a cloud-based platform, MTWO provides a collaborative and coherent environment where public and private stakeholders can operate. However, the primary user of BuildSmart and MTWO is the contractor employed to deliver the project. Then from an owner perspective, MTWO enables an accurate report on progress against budget and programme status.

How are subcontractors managed?

Within BuildSmart, subcontractors are managed via the dedicated subcontractor certification process. The certification process makes allowance for the work completed to date as well as for claims for other contractual obligations such as escalations, materials on-site, advances and retentions. In addition, contra charges are also handled correctly to ensure the correct output VAT is calculated. An example would be the supply of materials by the contractor to the subcontractor, such as the provision of electrical cabling. The contra cost plus output VAT is deducted from the final payment due to the subcontractor. And although no actual money is exchanged, in terms of accounting practices, the contractor is still able to provide the subcontractor with a full tax invoice for the contra charges.

How effective is BuildSmart in managing/minimising cost overruns?

Due to the fact that approvers have full visibility of their allowable quantities and costs during the entire procurement process, BuildSmart is able to flag and prevent cost overruns prior to any commitment being made to a supplier. In the event that the allowables do need to be exceeded, users who have this authority will need to be involved in the approval process.

A dispute process is also built into the subcontractor certification process to track any discrepancies between the subcontractor’s claim and what has been certified, potentially due to poor workmanship or other reasons.

Are public sector infrastructure clients using RIB solutions?

Worldwide, the RIB Group’s suite is used extensively by government departments and SOEs responsible for infrastructure implementation. For example, in Germany, which is the home of the RIB Group – RIB CCS’s holding company – prime SOE examples include Die Autobahn and Deutsche Bahn, the equivalent of Sanral and Transnet in South Africa. They both employ legacy solutions called iTWO and its successor, MTWO, with which BuildSmart can be integrated.

These SOEs use RIB’s software suites to determine their budgets, manage their contractors and subcontractors, and monitor progress and costs within their portfolio of projects.

There’s a definite business case for integrated platforms like MTWO, together with financial tools like BuildSmart, for employment within the South African public space.

Is it one of the solutions for combating corruption/wasteful expenditure?

RIB’s software solutions ensure that all information encapsulated is freely available to all designated users, so there’s a high degree of transparency and traceability. This results in better governance and tighter control of procurement management. In BuildSmart, for example, when purchasing against a resource list, linked to the original estimate, controls can be set to ensure quantities, rates and the total allowable for the items are not exceeded.

And in closing?

The overwhelming feedback from contractors is that BuildSmart provides them with a high degree of financial control. It’s also revealing to note that virtually all of our clients who came on board more than 20 years ago are still BuildSmart users and are commercially successful.