Too often construction companies fall into the trap of only establishing a new project master record in their construction project management software after they have won the business. It makes more sense to do it after you decide to bid on the work and it should really be a part of your project management processes.

Formal Approval

In fact the controls should be in place before that. Companies need to have in place a formal review process taking into account the project roles and responsibilities that says "OK Mr Development Manager you have got $100,000 for getting new business – but if you want to spend more than $5,000 of your budget, then first you need formal approval from senior management."

Due Diligence

This would then require "ticking the boxes" on a number of issues as part of due diligence before the company even created the new project master record.

If your managers are looking at a lot of new opportunities and if there are no project management processes in place, then the cost of assessing all of these opportunities can amount to a major expense. Large organisations can spend between $20,000 and $30,000 in the evaluation of a single opportunity.

Establish the Project Master record

By creating a project master record and establishing labour orders for the project then the staff working on the tender process can reflect the time spent on estimating and preparing to win the business on their timesheets.

But it's not just the estimating that takes up their time, it's all the other project management processes that go on. Is the land suitable, what are the planning constraints, what are the limitations of what we want to do? But if you have a specific project that includes all the steps in the process to be followed then you can record the other expenses along with the labour costs associated with the bid.

Integrated Risk Management

If your construction project management software includes an integrated Risk Management system then it can assist the project management processes by providing for project roles and responsibilities to be assigned, costs to be applied to risks and to enable alerts that will help following up. The project costing reports would then include a complete costing basis from which it can calculate the final forecast cost.

It could take up to five years before this whole exercise results in an actual project – but this makes it even more important to track all of these costs, because the project is effectively just accumulating losses each and every financial year until its starts to produce an income.

If you win the bid, then it's a simple matter to change the status of the project to active and proceed with the normal project management processes involved in project startup.

Projects under consideration are not assets

However if the project is not going to proceed then the actual development costs to date should be written off. Lost bid projects are not an asset – they cannot be realised and when things get tight then the business will discover which of its assets are real and which are not.

Projects also have marketing information stored on them which is useful for future analysis. This will provide details on what generated the original inquiry, and why they won or lost the business. All the more reason for ensuring your project management processes establish a construction project when you bid and don't wait until you win it.