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Project Management
11 min read

Foundations of Construction Project Management for SMBs

The CrewCost Team
Published Feb 12, 2024

No matter the size, every job requires careful planning and management to execute successfully. But in an industry with so many moving parts that’s not always an easy task.

Here, we’ll take you step by step through how some of the biggest players in the construction industry approach construction project management, and how to apply those key principles to your own business.

Key Takeaways

  • Effective project management in construction helps you and your team stay organized, navigate complex jobs, manage costs, and hit deadlines.
  • Each job moves through five project management phases: Initiation, planning, execution, handover, and the warranty period.
  • Being intentional with planning, resource allocation, and risk management is crucial to ensuring every job is successful, profitable, and completed safely.
  • Start with the end in mind — each day should see forward progress and anticipation of the next days or weeks to come.

The Iron Triangle of Construction Project Management

There aren’t many industries as complicated as construction. From managing materials and labor to keeping stakeholders happy, there’s a lot to juggle. Without a solid plan and process in place, staying organized, on schedule, and maintaining quality control is nearly impossible. Everything is connected – which means if one aspect of a job goes off the rails, others are more likely to follow.

This is what we call the iron triangle of project management in construction.

iron triangle of project management in construction

The three points of the triangle represent cost, scope, and schedule. You always start in equilibrium, where cost, scope, and schedule are balanced. Any changes made to improve one though will likely require adjustments to the others, which can lead to imbalances if you’re not careful. Where we often see jobs fail is in the planning stage. Even with a detailed outline of how you’ll balance a job’s cost, scope, and schedule, poor planning at the front end will make that balance hard to realize.

Take change orders, for example. Oftentimes, teams fully consider cost and scope, but forget to take into account how a change order can affect the schedule. Balancing all three points of the triangle is the goal. Once you’ve achieved that balance, the project team should work hard to maintain it, even as change orders are incorporated.

Now let’s dive into the five main phases of construction project management and how they play into the iron triangle.

The 5 Phases of Construction Project Management

The construction process will always follow five “phases” as a job progresses from initial negotiations to final walkthroughs. Depending on the job, these phases might not be entirely separate from one another – for example, there’s often no clear line between planning and execution.

5 phases of construction project management

Once you’ve been awarded a contract, it’s time to start laying the groundwork. We call this the project initiation phase:

1. Project Initiation Phase

Before you can even start planning for a new job, you have to assemble the right team. Depending on who the project owner can bring in, you might be tasked with finding architects, engineers, or subcontractors.

Key Roles in a Construction Project Team

Across most jobs, you’ll be working with a similar set of key players and stakeholders. Here’s a quick look at the people you’ll be communicating and collaborating with both on and off the job site.

  • Owner/Client Representative: This is the individual or entity commissioning the construction project. They’re the ones who lay out project goals, provide the necessary approvals, and communicate their vision to the project team. Owners play a pivotal role in decision-making, budget approval, and overall project success.
  • Project Manager (PM): The Project Manager is the leader responsible for overall project coordination, planning, and execution. They oversee projects from initiation to completion, ensuring it stays on schedule and within budget. The PM also serves as the primary point of contact for the client and manages communication with all stakeholders.
  • Site Superintendent: The Site Superintendent oversees on-site construction activities. They manage day-to-day operations, coordinate subcontractors, and make sure work is conducted safely and according to plans. They play a critical role in maintaining quality and efficiency during the construction phase.
  • Architect/Design Professional: Architects and design professionals are responsible for creating the project’s architectural and structural construction plans. They work closely with the client and construction team to ensure that the design aligns with the project’s goals, regulations, and standards.

2. Planning Phase

Once you’ve drafted your team, it’s time to draw a roadmap. Here is where you’ll consider the project’s scope as set by the owner and design team during the design phase, perform feasibility studies, and set expectations around cost and schedule. This is also the time to start breaking down the job into smaller milestones, taking care to outline how you’ll manage communications, risk management, and resource allocation throughout the project lifecycle.

Two of the biggest pieces of the planning phase are bidding and scheduling. We’ll link to other resources that dive deeper into each of these topics, but for now, let’s briefly talk about each of them and how they play into project management overall.

The Construction Bidding Process

It’s hard to overstate the importance of the bidding process. How you bid lays the foundation for project execution, and it can greatly affect your ability to manage profitability and schedule. While there’s a ton to cover on this process (which we get more in-depth on here), there are three main parts of effective bidding:

Pursuing and Qualifying Work – As a general contractor, you want to be strategic about selecting projects that align with your unique strengths, along with the capabilities of the subcontractors in your network. You can’t do a good job if you don’t have the right team members on board. Beyond the project requirements, you also need to be aware of the potential relationship dynamics with the owner and architect, because effective collaboration can make or break your success. At the end of the day, it’s not about winning every contract; it’s about selecting the right projects that set you up for success. 

most profitable construction jobs for your firm

Estimating and Crafting a Winning Proposal – A good cost estimate isn’t just about the finances, it’s also about diving deeper into the logistics and potential challenges within the construction process. Once you find the right job to pursue, take the time to get familiar with it so you can help educate the owner on the specific roadblocks that might come up. Of course, this can also help reinforce why you’re the best choice for the job.

Subcontractor Solicitation and Procurement – Now it’s time to assemble the dream team of subs and vendors – the unsung heroes who will help you not only secure the bid but stay on budget and meet deadlines. Your ability to recruit a skilled and reliable network of subcontractors is critical; they are the cornerstone of a project’s success.

👉🏼 Read our guide to subcontractor management in the bidding process.

The Construction Scheduling Process

The construction schedule is key to your project management plan. When done well, you can finish the job before the original completion date and set yourself up for more profit and better relationships with owners and subs. There are two key tools in your toolbelt when it comes to scheduling: using the critical path method and mastering the work breakdown structure.

Critical path method (CPM) – The critical path method identifies the most important sequence of tasks in your construction project and lays out 1) the order they must be done in and 2) the time it takes to do each one. The critical path will be your North Star, guiding many decisions made onsite and helping keep the project on track. Be aware though, that there is a danger in getting too detailed. The goal of this method is to schedule your project in enough detail that each milestone will be an accurate indicator of progress. This way, any potential bottlenecks get the attention that they deserve. Just be mindful that you also want to build in some flexibility to re-sequence any activities not on the critical path if any of them face specific delays.

Work breakdown structure (WBS) – The work breakdown structure splits the giant web of tasks involved in a project down into smaller, more manageable components. When done correctly, it can help teams determine how to best allocate resources, plan their schedules and communicate with stakeholders.

👉🏻 Read more about how to make the most of the preconstruction phase.

3. Execution Phase

After all that planning, you can finally break ground. Here is where you’ll put all of your plans and project management processes into action – from assigning resources to setting up tracking systems. At the same time as you’re executing the job, it’s important to set up monitoring systems to measure progress and performance. With a good monitoring system in place, you’ll be able to proactively address and plan for potential issues — like weather-related delays or material or labor shortages — before they derail your progress.

Construction Project Budget

At this point in the project, you should be working from a project budget informed by your estimating efforts. Hopefully, your contract allows for a healthy margin and your profitability on the job can rely on how well you hold to your budget. Your budget is your target spend for the job and should be monitored on a weekly basis.

The easiest to measure for performance will be your subcontracts. You want your subcontract amounts to come in below what you had budgeted. If there are any change orders on those subcontracts, they should be counteracted by change orders on your client contract. The client change order should cover the cost of the change plus a healthier margin than your original contract to cover the risks of changing the plan while it’s in motion. Building workflows to track upstream and downstream change orders is critical.

General conditions costs should be monitored more closely. This way, you’ll be able to consider the rate of your spending as it relates to your total budget, and find ways to lower that rate (or at least to ensure you have the funds needed to get to the end of the job).

Change orders should generally improve your profitability if they’re marked up at a rate higher than your original contract. The key to ensuring profitability on change orders is similar to your typical budgeting: try not to authorize more in spending than what you can request in funding. Of course, you need to cover any subcontractor costs, but don’t forget to include your own general conditions. If the completion date pushes out, then you need to make sure you have the general conditions to cover the extra time. Lastly, don’t forget to capture any costs of rework or delays.

Ultimately, you’ll have to compare your actual margins with what you had targeted. Hopefully, you’ll have been tracking costs at a detailed enough level to know which lines in your budget helped your bottom line and which ones hurt it. For example, did you underestimate a subcontract? Maybe the subcontracted amount was healthy but they got paid on change orders that you couldn’t collect from the Owner. How well did you track delays like weather or design errors and omissions, and how well did you negotiate your contract to ensure you’d be adequately compensated. Each project has something to teach us, so make sure you’re reviewing your project costs to learn those lessons. Daily reports are a helpful document to refer back to for these lessons learned.

4. Project Closeout Phase

Once construction is wrapped up, it’s time to close out the job and hand it back over to the owner. In this stage, you’ll work with the authorities who have jurisdiction, the owner, and the design team to complete any final inspections and resolve any remaining issues before the owner is able to take occupancy. The closeout phase leaves a lasting impression on the owner and construction professionals who perfect the closeout phase differentiate themselves from the pack.

5. Warranty Period

After formally completing an entire project, you move into the warranty period, which can vary in length by state. Unless any issues pop up, you’re officially off-the-hook for any liabilities after this period ends.

🔎 Dive Deeper: Why Spend Time With Project Controls?

Contract Types and Project Delivery Methods

There are several different contract types you’ll encounter in construction, and each one has unique ramifications on how you manage the project. These are the five main contract types you’ll see:

Each of these contract types is often dictated by the project delivery method. For example, a lump sum contract normally implies a design-bid-build delivery, whereas a guaranteed maximum price control is generally paired with a construction manager at risk job. And while they’re less common, you may also encounter other types of project delivery methods like design and build or integrated project delivery. The important thing is to make sure you understand the incentives and the risks built into each contract type so you can optimize for them (or avoid them altogether).

👉🏼 Check out our full guide to construction contract types.

Key Elements of Successful Project Management in Construction

How well each of the five construction project management phases goes will largely depend on how well you’re able to nail down a few key elements. In our experience, successful project management in construction revolves around the iron triangle. As you’re planning a new job, every step you take will tie back to managing cost, scope, or schedule in some way.

Start with your project scope, then build from there. Under this umbrella, you’ll set job milestones, identify job deliverables, and start building a tentative schedule. Starting with the end of the job in mind (e.g. outlining ahead of time what inspections you’ll need) will help you avoid a mad dash at the end.

👉🏼 Learn more about how to write an effective scope of work. 

Once you’ve defined your project scope, there are three areas you’ll want to tidy up and revisit as the project progresses: planning and scheduling, resource management, and risk management.

Project Planning and Scheduling

Let’s revisit planning and scheduling for just a minute. A thoughtful project schedule is important, particularly as it relates to the sequence of work. Just be sure to leave room for potential setbacks or changes. While an architect’s drawing can give you an idea of where you need to go, planning and scheduling will help you chart each step you need to take to get there. Carefully outlining all aspects of the job, including scope, timeline, and communications will help you not only stay on track, but stay flexible when unexpected delays strike.

For general contractors in particular, a logistics plan is essential. This is your roadmap for all of the temporary aspects of a job, and includes things like where labor will park, where you’ll lay down materials, and how you’ll set up heavy equipment.

Resource Allocation and Management

In construction, your most important resource is your people. The perfect team might not exist, but choosing the right people will take you far on any job. When filling out your team (including subcontractors), we’d recommend taking these considerations into account:

  • Experience, or lack thereof. If a team member or project stakeholder is experienced in one area and lacks experience in another, how will you compensate for that?
  • Strengths, and how they complement the rest of your team. Some people might be great at paperwork, and less proficient on a construction site – or vice versa. A good mix of strengths can help you fill in any gaps as needed.
  • Teamwork. Can someone collaborate and work well with a group? What can you do to better align incentives across all of the stakeholders?

Along with building the right team and scheduling them accordingly, smart resource allocation and management also means considering:

  • Contingency. If you find that you’ve already used up the resources you’ve allocated, this ‘rainy day fund’ can help you bridge the gap without blowing your profit.
  • Equipment and material availability. Back in 2020, everything was in short supply, causing jobs to drag on endlessly. While things might be more stable today, it’s always a good idea to plan ahead. Keeping a long lead items list for bespoke products, equipment, and any items you expect to have to wait for will help you stay organized and schedule work accordingly. On the equipment side, proper planning means making sure any rented equipment is available, and any owned equipment is maintained and not already scheduled for another job.

Construction Project Management Tools

Ask your subcontractor about their must-have tools and you’ll get a long list of their favorite laser levels, power drills, and tool belts for moving their gear around the job site.  As a project manager though, you’ll need a different toolkit to set yourself up for success. After talking to dozens of PMs, it’s clear that two of the most important ones are construction management software, along with accounting and financial management software.

Of course, these two are closely related – and what happens in one always impacts the other.

Construction Project Management Software

Good communication is the groundwork of good project management. And instead of playing telephone with a team of dozens, construction project management software makes it easy to distribute all of the emails, phone calls, RFIs, change orders, daily logs, and more to the right stakeholders, so action items can be taken care of swiftly and effectively. A good construction management software is something you’ll use every day, so it needs to be easy to use, built for mobile use, and reduce the number of mundane tasks (like emailing reminders to stakeholders) you need to do every day. This way, you can spend less time on distractions, and more time moving jobs along.

Accounting and Financial Management Software

A key part of project management is budget management. With the right systems in place, you can control costs, rather than simply reporting on them after closeout. Being proactive in cost controls like subcontracts and purchase orders allows you to manage and forecast committed costs against your budget – with the ultimate goal of getting ahead of problems before it’s too late to fix them.

construction accounting software vs construction project management software

Integrating Construction Management and Financial Management Tools

When changes inevitably happen on the job site, the right construction management software makes it easy to capture that information and move forward decisively. Similarly, when cost impacts happen, construction accounting software allows you to absorb and learn from that data and documentation in real time.

One hand washes over the other – and the more tightly these two systems are integrated together, the easier it will be for you to make better decisions and keep projects moving forward.

Good Project Management is the Foundation of Profitability

No matter how long you’ve been in business, you know that bad project management can be the death knell for your construction firm. From poor document management to incomplete punch lists lost in someone’s notebook, a messy process means a messy job. The more you can streamline your work, the easier it will be to create more consistent profit for your business.

👉🏻 Keep Reading: Common Construction Management Issues and How to Navigate Them

The CrewCost Team

The CrewCost Team consists of men and women who have worked in the construction industry as project managers, general contractors, sub contractors and more. They share their decades of experience on our blog as a way to help other contractors grow healthier and more profitable businesses.

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