Integrated Change/Project Accounting Quadruples Contractor's Growth Potential. Stevens Group designed change management that seamlessly integrates with Solomon's other features.

"My business was maxxed out in the old system at $50 million in revenues because if I had tried to add more projects I would have been unable to control the losses caused by changes falling through the cracks," Petty said. "With change management integrated with accounting, I am now confident that I could scale up my business to $200 or $300 million while maintaining complete control".

The most challenging task for the firm has long been managing the many changes that are typically made to a project after the original budget has been approved". A $5 million project could easily have 100 significant changes during the construction process," Petty said. "Tracking these projects is critical to making a profit". But this is difficult to do with a traditional job costing system. The biggest problem is that there may be a significant amount of time from when the change first arises until it is finalized. For example, the owner may say that they want an additional bathroom. Our project manager will go out and get quotes from the various trades involved such as carpenters, plumbers, etc. Then we will present the quotes back to the client. At that point they may tell us to go ahead; but up to then none of this information can be entered into job costing because it is all tentative.

In the past, Petty said, tracking these changes was the most difficult part of project management. "Every project manager used to keep their own change information on a series of spreadsheets," Petty said. "The fact that everybody had their own system was a big part of the problem. It was impossible to track what they were doing or ensure that items weren't accidentally deleted or overlooked. Another problem was that the spreadsheets were independent of our project accounting system so all of the information in them had to be manually entered into the other system, increasing the risk of data entry errors that could really hurt us. Having our project managers manually reenter data took up a lot of time, which significantly added to our labor costs. Another problem with the previous approach was that it didn't address the fact that each of the changes typically required that multiple contracts be written or revised. All of these contracts needed to be prepared manually. Another issue with the old system was that it took quite a while for a change to filter all the way through the system. We often had to tell the subcontractor to start work on a project without any paperwork that made them very nervous. In fact, it often made me nervous that we were unwittingly committing ourselves to take on a major change without having written approval by the client, because there was no practical way for me to keep track of it."

Petty began searching for a program that would incorporate change management, project accounting and financial accounting. He spent about 18 months reading trade journals, searching the Internet and attending trade shows without any luck. He did find several programs that automated the change management process but none of them had a tight interface with a project and financial accounting system. Then he heard about Solomon, which has very strong project accounting and financial accounting features. Solomon put him in touch with the Stevens Group, a consulting and development group in Southern California. "Stevens said that they could customize Solomon to provide an integrated change management system at a fraction of the cost of developing software from scratch," Petty said. "Another advantage of this approach is that the financial and project accounting functionality was much better than what I could obtain with custom-built software. And I would have the advantage that everything but our customization would be maintained by the developer at a much lower cost."

Likewise the information on the changes automatically updates the budgets in the project accounting system, eliminating the need for duplicate data entry. If the owner decides not to go ahead with some of the changes, this can also be entered and they will be removed. The new software also handles changes that involve charges from one contractor to another. For example, Petty might backcharge the drywall subcontractor for damage that they did to the plumbing. Or, a change might be charged to an internal fund. The important thing is that management now has the assurance that every change is entered into the system and that nothing can fall through the cracks because an audit trail is maintained on each PCO. There is also a formalized process that ensures that contracts are not issued to subcontractors to begin work on a change until written approval has been received from the client. The client can easily summarize and review the exposure for changes in process.

Petty said. "I estimate that wey save perhaps 40 hours on a $5 million dollar job which adds up to perhaps $3,000 in savings per job for these highly skilled and paid performers. That may not seem like a lot but when you consider that we operate on about a 4% margin; the savings have a big impact. Far greater, but much more difficult to quantify, savings come from virtually eliminating changes that fall through the cracks where we may have to pick up the costs because we never got the owner's approval or never tracked the change at all. But the biggest advantage is the impact of improved control on our business. With our old methods if we had tried to grow, the losses would have been huge because our system was too chaotic. Now, I feel confident that we could easily hire more project managers and increase our revenue to several hundred million dollars without worrying about losing control."