Construction in Process: Understanding the Steps, Processes, and Formula

In the construction industry, "construction in process" refers to a project that is actively being built but has not yet reached completion. It plays a crucial role in project management, cost tracking, and accounting.

Understanding the different steps before construction begins, the transition from design to construction, and how to account for ongoing construction costs can improve project efficiency and financial management. In this blog, we’ll explore everything about construction in process, including its formula, types of construction processes, and best practices.

Steps Before Construction in Process Begins

Before a construction project moves into the "construction in process" phase, several critical steps must be completed:

1. Initial Planning and Design Phase

1. Defining project scope, objectives, and requirements.

2. Creating architectural and engineering blueprints.

3. Conducting feasibility studies to ensure project viability.

2. Regulatory Approvals & Permits

1. Securing building permits from local authorities.

2. Meeting environmental and zoning regulations.

3. Obtaining necessary legal approvals for construction.

3. Budgeting & Resource Allocation

1. Estimating total project costs, including labor, materials, and equipment.

2. Allocating resources efficiently to avoid delays.

3. Establishing financial backing through loans, investors, or company funds.

Once these steps are completed, the project can move from the design phase into the construction in process stage.

From Design Plan to Construction in Process

After approvals and budgeting, the design plan is implemented and construction begins. This stage involves:

1. Hiring contractors, engineers, and construction workers.

2. Procuring materials and equipment required for the project.

3. Setting up safety protocols and ensuring compliance with OSHA and other regulatory standards.

4. Laying the foundation, followed by structural work, electrical installations, and plumbing.

Common Challenges During Construction in Process:

1. Delays due to weather conditions or supply chain disruptions.

2. Budget overruns caused by unforeseen expenses.

3. Coordination issues between stakeholders, requiring efficient project management.

By addressing these challenges early, projects can stay on track and avoid costly setbacks.

Types of Construction Processes

There are different kinds of construction processes, each requiring specific planning and execution:

1. Pre-Construction Phase

1. Site preparation, including land surveying and grading.

2. Procurement of materials and workforce hiring.

3. Risk assessment and safety planning.

2. Active Construction Phase

1. Execution of structural work, electrical installations, plumbing, and roofing.

2. Ongoing quality control inspections to ensure compliance.

3. Coordination between engineers, contractors, and project managers.

3. Post-Construction Phase

1. Final safety inspections and obtaining occupancy permits.

2. Testing mechanical, electrical, and plumbing systems.

3. Handover of the project to the client or property owner.

Each phase must be well-managed to ensure timely project completion.

Understanding the Construction in Process Formula

The Construction in Process (CIP) formula is essential in accounting to track work-in-progress costs. It helps businesses manage ongoing construction expenses before the project is completed.

Construction in Process Formula:

CIP = TOTAL COST INCURED - COMPLETED CONSTRUCTION COSTS

Where:

1. CIP represents the cost of construction that is still in progress.

2. Total Cost Incurred includes materials, labor, and overhead costs.

3. Completed Construction Cost refers to the value of the finished portion of the project.

Why is This Formula Important?

1. Helps in accurate financial reporting for construction companies.

2. Prevents budget mismanagement by tracking ongoing expenses.

3. Essential for tax and accounting compliance in construction firms.

By utilizing the construction in process formula, businesses can make informed financial decisions and optimize their construction projects.

Conclusion

Understanding construction in process is vital for contractors, engineers, and project managers. From the initial planning and design phase to active construction and post-completion, each step plays a role in ensuring a successful project.

By effectively tracking costs using the CIP formula, managing resources efficiently, and overcoming construction challenges, companies can improve project timelines, maintain budgets, and enhance overall productivity.

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