Direct construction costs are the largest cost classification for home builders. They typically represent 55%-62% of a home price. If builders want to earn superior profits compared with competitors, they should start by lowering these percentages.
Here are 25 Proven Ways to Control and Reduce Direct Construction Costs whether you build two homes a year or 2,000:
1. Develop target direct construction cost budgets.
2. Improve working drawings.
3. Design and specify each home for the target customer.
4. Rethink standard specifications.
5. Don’t overdo standard features.
6. Change construction specifications by story.
7. Redesign or eliminate plans that generate low gross profits.
8. Use a purchase order system.
9. Issue a complete construction start package.
10. Improve estimating and purchasing.
11. Develop and enforce scopes of work.
12. Value engineer plans.
13. Work with trades to eliminate inefficiencies.
14. Conduct “as-built audits”
15. Control cost variances.
16. Keep the contract in trade contractors.
17. Question the engineers.
18. Improve negotiating techniques.
19. Break up turnkey trades.
20. Improve material inventory control.
21. Standardize construction processes.
22. Use quality checklists.
23. Maintain clean jobsites.
24. Eliminate dry runs.
25. Become the builder of choice.
The following has been excerpted from The Cost of Doing Business Study, 2010 Edition by NAHB Business Management & Information Technology. Copyright © 2010 by NAHB BuilderBooks.