The Supervisor's Role

This is the third of three articles discussing cash flow—the flow of money into and out of a project. In the first article, we concluded that a positive project cash flow is critical to the success and survival of a company. On the other hand, a negative cash flow at the project level is costly and could eventually lead to financial failure of a company. Last month’s article considered what and how field operations impact cash flow by identifying several areas in which it can be either positively or negatively impacted. The supervisor, however, plays a more direct role in managing those field operations that impact project cash flow.

Documentation is of fundamental importance to many aspects of field operations and plays an important role in improving cash flow. The supervisor should have means of documenting the true cost of all operations, especially change work. If the documentation indicates normal operations are not being achieved productively, the supervisor can focus on the causes for poor performance and offer solutions to improve production.

Documenting the true cost of change work is more difficult than documenting the true cost of normal operations. Often, change items are small compared to normal work items. The change can require small, special orders of materials and special handling of materials, and it can disturb other ongoing operations. Since change work is such a common part of construction operations, the supervisor needs to develop a systematic approach to documenting the true cost of changes.

Of course, accurate reporting of units installed during the billing period often is difficult. Typically, this documentation must be completed days or even several weeks prior to the end of the period. It then becomes an exercise in accurate estimating, rather than just counting. Often, cost items are complex, so some parts will be completed before others. The supervisor must develop skills in accurately estimating the percentage of completed complex work items. Finally, to increase the likelihood that the person approving the payment application is in agreement with the supervisor’s count, the supervisor should get that person out to the job site prior to turning in the application. This allows them to walk the job and agree together on the quantities to be submitted. This can have a very positive effect on quick application approval for payment and lower the risk of an application being bounced due to over-reporting of completed units.

As part two in this series indicated, project closeout can have a large impact on cash flow. The supervisor should begin closing out any work item as soon as it is complete. Whenever equipment is delivered, the supervisor should ensure documentation required for that equipment is received and filed, so it is readily available when needed. When a portion of the installation is energized so that the project can use it—in which case, the owner gets beneficial occupancy of that portion of the system (aka “substantial completion”)—that portion should be turned over to the owner with clear documentation that it has achieved substantial completion. This should trigger initiation of the warranty period on that portion of the system, and it also should enable billing for retention held on that portion of the work. This should be done before the system is turned over to the project because leverage for the negotiation goes down substantially afterward. In this way, retention can be diminished much earlier in the project cycle, having a very positive effect on cash flow.

In using expensive company equipment on the job, the supervisor needs to thoroughly analyze the costs and benefits associated with keeping backup equipment at the job site. It is comforting to have an equipment buffer in case scheduling allows additional crews to work on an activity or in case equipment breaks down. But it also is costly, which may outweigh the benefit.

The supervisor should work to minimize the amount of time equipment is kept on the project. Significant effort can be put into planning work activities requiring expensive equipment and perhaps resequencing activities to minimize down times for equipment when it is not needed and to reduce the overall time equipment must be retained on the job.

In ordering materials, order only what is needed, when it is needed and, preferably, at the end of a billing cycle to allow immediate billing for that material. Also, review the contract to see if preordered materials can be billed out when delivered. This often is allowed for long-lead items subject to certain conditions of storage and insurance. Be sure, if such items are purchased and delivered, they are included in the next billing cycle.

Even though the field supervisor cannot influence all aspects of cash flow, there are many that he or she can influence. A fundamental responsibility of the field supervisor is to maximize the job profitability, and wise management of cash flow at the job site can play a very important part in maximizing the job profit.

ROUNDS is the AGC endowed chair and professor of civil engineering at the University of New Mexico. E-mail him at SEGNER is a professor of construction science at Texas A&M University. Contact him at

About the Author

Bob Segner

Supervision Columnist
Bob Segner is a professor of construction science at Texas A&M University. Contact him at .

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