As the U.S. construction industry experiences an ongoing period of slow growth, budgets are tighter than ever. Tariffs are up, margins are slim, and price volatility remains.
Smart supply chain managers are finding “silent costs” hidden in construction expenses that can be 1-to-5% of project invoices, say the auditing experts at CPRS.
For example, the $2.1 billion home of the Tennessee Titans football team started construction in January 2024. Already, the project is $135 million over budget. The New Nissan Stadium could potentially have $100 million in “silent costs” hidden in project invoices.
3 REASONS FOR SILENT COSTS
Silent costs remain silent for many reasons, including:
- Belief that ‘There are no errors in CapEx or MRO expenses.’ CPRS has found that silent costs exist with almost all expenses related to indirect labor, materials, and equipment. While systems and processes have improved, silent costs remain from 1-to-5% or more, according to audits conducted by CPRS.
- Hubris. Arrogance and pridefulness remain in the business world. No one wants to expose that their work or their team’s work may have holes.
- Lack of reward and recognition – Finding silent costs is not incentivized by most businesses, since it is a back-office activity. It’s an added cost to a business, and so often ignored. Growing the business gets the limelight. Finding silent costs is an investment project, yet it can have a 3x, 4x, even 5x ROI.
Benefits of Billing Validation
CPRS’ Contract Billing Validation Services follow a rigorous process to compare vendor invoices or project cost summaries to the contractual terms governing the payment of invoices. CPRS provides a comprehensive suite of services, including Active Invoice Review, Cost Summary Review, and Recovery Audits.
“Many clients are using our new Active Invoice Review process to find invoice errors before paying that invoice,” said Dan Berg, Senior Vice President of CPRS. “With CPRS Active Invoice Review, we can validate for accuracy before your internal approvers see the final invoice, saving you time and money by eliminating the costs of rework and outright errors.”
Contract Compliance Errors Lead to Overcharges
Active Invoice Review also can solve problems before they happen. For example, one CPRS client unknowingly paid additional charges on $2.5 million in invoices from a subcontractor. The charges did not adhere to the original terms and conditions of one of their contracts and resulted in a $41,488 credit memo. Such instances, if left unchecked, could cast a shadow of doubt over even the most solid partnerships.
While CPRS is often brought into a project when the budget is blowing up, smart companies are engaging our experienced audit teams earlier. This forward thinking allows companies to stem the flow of billing errors during the beginning phases of a project and focus on corrective action to limit unintended profit loss moving forward.
“Our vision is to be the innovator in cost-recovery solutions,” Berg said. “Cost recovery solutions improve complex sourcing-to-payment processes and the financial health of any organization by recovering and preventing overpaid funds and identifying underpaid incentives, billing errors, fraud, or other factors. Our innovative approaches and best-trained audit teams deliver proprietary, cutting-edge solutions that address the ever-changing nature of B2B contracts and transactions.”
Contact Jeff Meaux, CPRS Vice President Business Development, by phone at: 404.916.3422, or by email: jmeaux@cprs-inc.com.
