Before the Wires Are Pulled: The Economics of Electrical Project Management

By Andrew Cooper

B.S. Project Management | Class of 2028 | Ohio University

When thoughts are focused on any electrical project, many people tend to think only about the finished work, like the lights turning on, inspections passing, equipment working as expected, or even the electrical system performing correctly. For any electrical contractor, however, the end is only a small part of a whole project. One thing to think about is that a project can be completed correctly, with everything working, but it could still end up a financial failure. Way before any wire is ever pulled, a project manager's goal is to determine if the job begins and ends with profit or loss. One of the biggest financial factors to consider is labor. Some research I had done and found from ELECTRI International showed that electrical contractors tend to allocate about 33-50 percent of a project's total budget for labor. This easily allows labor management to be a significant financial risk.

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A project manager needs to learn to compare any labor hours estimated for the job to the day-by-day hours being used. Simply falling behind does not just threaten the schedule, but adds additional labor hours, overtime, and even declining productivity to reduce the contractor's profit. Planning also has to account for scheduling and materials. One thing about electrical work is that it depends on having all the correct equipment and materials available throughout a project. Any bit of poor material handling or equipment handling can lead to electricians waiting a long time to get a part of the job done, which then starts to add to labor later on. ELECTRI International had identified initial estimating, scheduling, timing, and material handling as significant sources of affecting variables when it comes to the project planning. This can demonstrate just how project management can be closely connected to financial management.

Another big obstacle that arises is change orders. Most of the time, construction, electrical, plumbing, etc. tends to proceed perfectly to plan. Sometimes companies or owners may ask for additional receptacles, equipment needs to be relocated around, or even the overall drawing or plan may need to be changed to account for any obstacles. Changes like these can affect much more than just adding additional materials. Change orders could add to labor, disrupt any already scheduled work, increase overhead, or even create delays. Research that has been done exclusively on electrical contractors has shown that change orders will negatively affect both the remainder of a project's progress and budget and the changed work itself. Effective and good project managing requires excellent communication, documentation, pricing, and identifying these possible changes before they can heavily affect any financial disasters.

Photo: JSB Co. / Unsplash

Overall, electrical project management is there as a middle ground between the business aspects and field operations. The task of electricians to safely install a functional electrical system will always remain essential, but the profitability will depend on more than the craftsmanship alone. Estimates must be accurate, the labor must stay productive, materials should always be correct and there when needed, schedules should be coordinated, and any changes must be controlled financially.