Jun 2005


By Bill Allen

This is the third article in the nine-part Tech Talk series.

A working project plan generally assumes one of four levels of sophistication:

? A simple stand-alone budget that represents an initial projection and game plan. A budget that represents a finalized estimate based on actual bids. A budget that allows comparison to actual to-date numbers and estimated-cost-at-completion projections. A flexible budget that considers fixed and variable costs and dynamically "corrects" itself based on ongoing performance and absorption.

Sometimes project plans progress throughout each of these levels. The NAHB Chart of Accounts is one way to begin mapping out a project's basic framework of projected costs and how they will be allocated. (NAHB members can download a free copy of the Chart of Accounts, or request a copy by sending an e-mail to From there, a builder must consider direct costs likely to be associated with the project.

Software products can provide various levels of project planning sophistication like those outlined above. A relatively simple spreadsheet may suffice for planning and feasibility purposes. A budgeting system that incorporates actual bids and to-date numbers requires integration with an accounting system. Alternately, users must manually re-enter data from a separate accounting system.

The advantage to stand-alone products such as DealBuilder is their flexibility and relative simplicity. Users can set up as many project plans as needed, replicate them, expand or contract the cost centers or accounts, set up constants and formulas, and produce a summarized pro forma for interested parties like lenders and investors. A large, integrated system such as that from J.D. Edwards builds the project plan off the project database, charts of accounts, supporting schedules, and company structure.

Integrated systems offer virtually limitless flexibility. Unfortunately, they're very expensive to license and maintain. A product like DealBuilder can be installed for as little as a couple thousand dollars. A product like J.D. Edwards' Project Management package can run as high as six figures.

Project planning should involve demographic analysis as well as project overhead budgeting, and cash flow and warranty reserve projection. "Industry average" costs of sales can be found in publications such as NAHB's Cost of Doing Business Study. In addition, you need to nail down non-formula related factors like market potential, absorption, and product pricing.

Good market research is vital for project planning, especially if you intend to build a different product and/or build in a different location or price range. Companies such as the Meyers' Group, Metro/Study, and Market Perspectives Group offer online subscribers detailed reports on market trends for most metropolitan areas of the U.S. These firms also track sales versus existing inventory for various price ranges. First American Real Estate, which profiles the resale market, is another potential resource for market research.

In addition, municipalities can furnish facts about future infrastructure for communities, confirming where growth is planned. Accessing information and services (electronic permitting, zoning requests, etc.) on municipal Web sites and on chamber of commerce sites can save you lots of time and trips to city hall.

Thinking through the due diligence steps required to get a project ready to build and estimating the associated costs and timing is crucial to project planning. Not surprisingly, that upfront work becomes more complex for projects involving land acquisition and development and/or phase development. Simple, stand-alone products like Microsoft© Project do a fine job of tracking due diligence tasks. However, Project is a generalized tool, not an industry-specific scheduling product. Primavera Schedule Project Planner, another stand-alone product, is more adapted to the construction industry.

Many back-office systems such as the True Line Homebuilder System, Timberline Office, Mark Systems Integrated Homebuilder Management System, and Newstar Real Estate Management Suite offer budgeting and job costing capability for land development contracting. Because they're completely integrated to purchasing, payables, and general ledger functions, these systems can be effective stepping stones from stand-alone products.

Note: Various software products are mentioned throughout the Tech Talk series. The intent is not to recommend these products as being right for you, but to identify some fairly known players and to note a few new ones. My apologies to vendors who aren't mentioned - the omission was not intentional. Bill Allen is a member of NAHB's Business Management & Information Technology Committee and is president of W.A. Allen Consulting ( The Redmond, Washington, company provides information technology consulting services and process management assistance to the home building industry. Contact Bill at 425-885-4489 or via e-mail at

For more information about this item, please contact William Heslop at 800-368-5242 x8472 or via e-mail at

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