Complex multi-facility construction projects and tight deadlines create unique procurement challenges. Managing diverse cost streams from subcontractors and tools to insurance requires comprehensive oversight. The customer needed a partner that could overcome these complexities and chose PGRX to identify savings and ensure the future financial health of the project.
$14M+
Corrective Actions Identified
$4.2M
Cash Recoveries Realized
$2B+
Auditable Spend
Challenge: Preventing Excessive Cost and Markup Chaos Amongst Many Moving Pieces
Construction demands extensive planning and organization from initial contracts and blueprints through groundbreaking and beyond. As the project progresses, substitutions and change orders are common due to material shortages or time restrictions. And costs are not limited to just materials, there is equipment, labor, and insurance requirements that may vary by location. With all that complexity it is easy to see how excessive markups could occur, or the wrong tools could be billed. The customer’s construction project spanned multiple years and facilities that included many kinds of costs.
Solution: Building a Program of Success with Contract Compliance Audit Reviews
The company wanted to streamline contract management to ensure they were getting the most value out of their spend and minimizing errors. Starting in 2017, they worked with PGRX to ensure Contract Compliance, conducting 10-15 audits annually. Leveraging our AI-powered Contract Insights engine, the PRGX Contract Management Services team helped ensure adherence to contract terms with Contract Compliance, maximize value with Contract Optimization, and proactively manage and mitigate risks with Continuous Monitoring. Through comprehensive contract reviews, anomaly detection, manager education, and implementing a pre-payment audit program, the company achieved nearly 0.8% savings on project costs, including $14M of future savings and $4.2M of cash recoveries.
Through our comprehensive review, we identified several key billing issues:
- Excessive subcontractor markups
- Change orders billed above cost
- Unallowable insurance charges
- Self-performed labor overbillings
- Invalid sales tax billings
- Excessive related party billing markups
- Incorrectly billed small tools and consumables
To ensure long-term success, we implemented two critical improvements:
- Comprehensive training for construction managers to prevent future errors
- Continuous pre-payment audit program to catch discrepancies before invoice payment
Streamline Your Construction Projects with PRGX Contract Management
The PRGX Contract Management team is ready to help you simplify the most complex construction projects by applying their five decades of experience and AI-powered technology. Just in the past 3 years, PRGX has audited more than 200 projects and $27 billion in construction costs with a 2.5% to 1% average savings. Chat with an expert or book a demo today!
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