Ass 2 Step 3

Step 3:

....this is what I have so far.... no much but FRUSTRATION and A 2 DAY MIGRAINE!!

This step has been very frustrating for me as I haven't been able to find anything associated with costing in the Financials.  This is a major construction company so I can understand the issue with not having one specific "product" to deliver, such as a beauty product, gas, shoes etc.  Their products are the projects that they deliver and these vary dramatically in size, scale, time, location, technology, resources and cost.

I guess that they only have one product and one customer therefore for each "item" or project.

I have found this step HARD and its baffles me, but after now recovering from a 2 day migraine for the stress of reading about it all and going around in circles and feeling like a failure I will try again.  Late I know but....

What I have done is look at 3 projects, in 3 different sectors :

1. Beal High School
2. Crossrail C350 - Pudding Mill lane Portal, and
3. Heathrow Energy Infrastructure Project

Beal High School project

SELLING PRICE: £1.6M

Crossrail C350 Project

SELLING PRICE: £87M

Heathrow Energy Project

SELLING PRICE: £35M

VARIABLE PRICE:
The variable price in these projects could be changes in resources cost from first quoted and when purchased for use; additional expenses from time project creep, expenses from broken equipment and resource breakage as well as personnel resources expenses if additional time is require for construction or additional resources for expertise required. No project will ever run smoothly or to plan.

CONTRIBUTION MARGIN:
The contribution margins for each of these project will be different depending upon the chagnes to the project or the variable costs.  If a project is contructed with a numabe rof issues and project creep, then the contibution margin of that project will be less due to the higher variable costs.  With these projecta as discussed above ti deals iwth resource espenses and time factors.  There also might be statutory fines for example in Australia when accidentally cutting gas lines, telephone or electicity lines.  For projects that  run over multiple years, such as many of Morgan Sindall's, then cost of resources and inflation cna have a darmatic impact upon the variable cost of the project and thus the contribution margin.

DIFFERENT CONTRIBUTION MARGINS:
Major construction companies, such as Morgan Sindall, will be aware of the variable prices and issues that may result for construction of large projects.  These will or could be included in quotes when they future project costs.  Different contribution margins might also be different due to shorter projects and less issues in projects.

WHY NOT HIGHEST CONTRIBUTION MARGIN:
The companies want to provide value for money so although they are competing for tender in most  instances, they do not want to out-price themselves in the market as they want the business.

RESOURCE CONSTRAINTS:
Resource constraint in this instance may be physical personnel and construction crews.  There may only be a certain number of employees a contract company has to complete a project.  This also may mean all contractors cannot work on the project at the same time.  Certain project timelines must be completed before the next sequence commences.  For example you cannot lay the road base until foundations and drainage has been completed.