Time spent on nonoptimal activities costed the U.S. construction industry an estimated $177.5 billion in 2018 alone. Here’s how technology and reliable data can help reduce that number and put construction firms back on the right track.
The time, money and effort that goes into nonoptimal activities in the construction industry is staggering. In 2018 alone, the industry spent an estimated $177.5 billion on noncore activities that don’t positively contribute to the organizational bottom line, with looking for project data (e.g., revised drawings and material cut sheets), resolving conflicts (disagreements between the general contractors, owners and/or subcontractors), and dealing with mistakes/rework being three of the biggest culprits.
Put simply, construction professionals spend a considerable amount of time on activities that take away from actual building on their project sites.
To avoid this trap, smart firms are finding strategic ways to optimize their time not only to reduce waste, but also to stay competitive in today’s market. In 2018 PlanGrid commissioned a study with FMI in which we interviewed a wide swath of project teams, only to find out that they spent over one-third of their time dealing with activities and decisions that provide zero value to their projects.
The research found that, in most cases, poor communication and bad information were to blame for the wasted time and effort. Knowing that construction labor accounts for 50% or so of project costs, this basically means that 15-20% of a company’s total project costs is spent on tasks and time that can be completely avoided with good communication and the sharing of accurate, relevant information.
Here’s how it breaks down:
- Let’s say a general contractor is working with a 3% net profit.
- And let’s say that GC’s project managers and supervisors spent over one-third of their time dealing with nonoptimal activities.
- That means the GC can increase its net profits by 18% to 23% by simply improving communication and ensuring that it only uses and disseminates accurate data and information.
As you can see, the benefits of taking this issue seriously, and doing something about it, can be incredibly significant.
Technology to the Rescue
2018 was an especially noteworthy year for technology, innovation, research and development (R&D), the growth in commercially available technology, and related investment activity in the engineering and construction (E&C) sector. The industry as a whole is now accepting that the fundamental means and methods of the construction industry are not sustainable, considering the pressures of:
- A pervasive (and increasing) labor shortage
- Lagging productivity
- Increasing project complexity
- Shrinking project schedules
Combined, these roadblocks are making it more difficult than ever for firms to achieve their profitability goals, scale up to meet current demand, and plan for the future. The $177.5 billion that the industry is wasting every year on nonoptimal activities isn’t helping, but that doesn’t mean E&C firms have to stand by while their profits go down the drain.
According to the FMI-PlanGrid survey, poor communication—mainly due to inaccurate project data or difficulty accessing needed information—among stakeholders is one of the biggest time inefficiencies. In fact, 48% of respondents said that all their rework was caused by poor data and miscommunication. With rework estimated to be 5% of overall construction costs, this suggests that an estimate of $65 billion of construction spending was spent on rework in 2018 alone. (Globally, an average of 52% of rework was caused by poor project data and communication, representing a worldwide cost of $280 billion in 2018.)
5 Ways to Leverage Technology for Good Communication
By utilizing technology to flatten out organizational silos and open those lines of communication across the enterprise, E&C firms can effectively rise above a challenge that’s been plaguing their industry for decades. Here are five ways companies can start doing this right now:
- Capture and retain more data during all phases of design and construction. According to the FMI-PlanGrid survey, 71% of owners say that capturing and retaining more data during design, construction and closeout will reduce life cycle operations costs.
- Provide construction teams with better access to project information. And give them the ability to capture data from the field more accurately. These steps not only produce short-term benefits, but also benefit the contractor-owner relationship and help reduce long-term costs.
- Use data to strengthen relationships between contractors and owners/developers. Many types of data can be captured on a project; however, owners’ top choices to reduce long-term facilities costs included as-built data for general information sharing and contractor or vendor operational performance data.
- Focus on delivering value through the data. E&C firms can add exceptional value to owners by giving them complete, accurate closeout documents and providing the data that shows the quality and quantity of work done during construction as well as the performance and product data of each building system and component by maintaining the building information model. Basic closeout documents are contractually mandated, but E&C firms can stand out from the crowd by viewing the comprehensiveness of facility turnover and client operations phases of the building life cycle as a differentiator.
- Introduce the technology in phases. Don’t throw it out there all at once and expect everyone to jump on board and start using it. Starting with small pilot projects helps to minimize the upfront commitment to any vendor while also preserving the flexibility to adapt and change when new information is presented. It also transforms the role of the end user from “passive recipient of a corporate mandate” to an “active participant in the decision-making process.” Being diligent and deliberate in choosing the technology partners is just as important as your onboarding. Seek those technology partners that are interested less in your number of user licenses and more in understanding your technology point of view and business and operations processes.
Owners are increasing their use of technology throughout the operational phase of the facility and rely on the seamless transition of all construction and building systems data into their facilities and operations teams. Contractors that anticipate this need by providing this data will have a large advantage over those firms that do not.
Communication and Collaboration Count
The construction industry has reached a turning point. Firms recognize the need for better communication and access to project information for their entire team. However, many are off to a rocky start in this transition, which means there’s an opportunity for E&C companies that want to strategically invest in and approach technology deployment.
As firms in the E&C industry plan for the next three, five or even 10 years, planning for technology and innovation will become an increasingly important part of the forecasting process. To remain relevant, companies should focus on initiatives that have immediate benefit to the company, both now and in the future. For now, establishing point of view on technology, forming a technology steering committee, and improving communication and collaboration during a project are great starting points that, if addressed properly, can put an E&C firm head and shoulders above its competition.