5 Ways Technology Can Help Construction Businesses Effectively Manage Cost
This blog is a collaboration with our friends at Ryvit.
The COVID-19 pandemic has reiterated the importance of effective cost management and resource planning for businesses in every industry. For the construction sector, this could not have been a timelier reminder. A report by KPMG found that, in the last three years, more than two-thirds of construction projects missed their budget estimate by more than 10%.
Despite effective job costing and cost management being a basic requirement for construction projects, many managers struggle to keep projects within budget due to constantly changing project requirements, a dynamic business environment, and ineffective data collection practices.
Just 31% of all projects came within 10% of the budget in the past three years.
Project managers responsible for managing a construction job’s costs have to deal with many moving parts. For leaders to have the necessary information to plan and make financial decisions, contractors, subcontractors, clients, site workers, and office staff have to come together and share the responsibility for gathering and sharing data. In the past, the construction industry has been notoriously siloed—causing higher costs and ineffective budget management.
However, with technology adoption ramping in the industry, project managers can use integrated software and hardware solutions to transform outdated processes, improve collaboration, and increase efficiency.
Here are five ways technology can help construction businesses effectively manage project costs.
1. You can predict the financial requirements for a project before even going on site.
Every construction project has unique needs for finances and budgets. For some projects, budgeting can be extremely speculative and inaccurate. If that’s the case, when construction begins in the real world, project managers may realize they need different materials—or have to approach the project differently. This makes it difficult for business leaders to predict the cost of a project, and increases the likelihood of rework.
Simulation technologies such as BIM let construction businesses move beyond the traditional design-bid-build model to a more effective design-build model. As more companies use BIM technology to simulate projects before on-site work begins, project managers can use the modeling software to compare supply and financial needs of different building techniques. That way, they choose the most cost-effective method of delivery.
2. You can respond effectively to changes in project scope.
Construction projects are very dynamic. In fact, clients often change their brief or the scope of the job multiple times throughout a project. Rework also accounts for nearly 30% of all work done by construction companies. As information is shared with them, project managers need to adjust their budgets, plan new processes, and communicate these changes to the rest of the team in real time.
Around 30% of the work performed by construction companies is actually rework.
Communicating these changes from the boardroom to the construction site can be a challenge in an industry that relies on a variety of communication platforms and methods. To communicate in a more timely manner, business leaders can use dedicated project management software that combines integrated communication channels with the latest information about project requirements and policy changes. This allows construction projects to remain flexible and quickly respond to project changes—while reducing unnecessary rework.
3. You can update cost plans to compensate for market fluctuations
The biggest lesson the pandemic has taught businesses is that unpredictable market forces can throw off even the most considered project plan. Construction projects are especially subject to inflation, fluctuating labor costs, and inconsistent supply prices. These factors are often noted during resource planning in early contracts, but are usually static (not dynamic). This means that project managers referring to early budgeting data are often working with outdated market information.
However, given how often market forces change, it can be difficult for project managers to stay updated while juggling other on-site responsibilities. AI-based software can help close this information gap by alerting business leaders to sudden changes in regulations or costs. Software also helps identify areas of inefficiency within the project.
4. You can improve decision making through effective data collection.
Construction sites generate a lot of information daily. This data gives managers insight into how things are playing out on-site, and how they compare with initial plans for the project. However, a significant portion of this data is often not collected or is wasted. This is the direct result of inefficient data collection at construction sites.
The effective collection and delivery of on-site data helps business leaders quickly identify and resolve productivity bottlenecks, resource shortages, and on-site staffing challenges. Business leaders should embrace digital solutions (like Raken) that can gather, organize, and analyze project data in real time. That way, decision makers can spot expensive inefficiencies (and prevent them) as they come up.
5. You can increase on-site efficiency with automation and connected technologies.
As the construction industry grapples with rising demand and a rapidly shrinking workforce, it has become more important for businesses to find new ways to increase on-site productivity and efficiency. Doing so allows construction companies to reduce turnaround time and operational expenses. In a bid to solve margin and cost challenges, 76% of construction companies have invested in connected technologies such as drones and robotics.
Automation lets business leaders improve efficiency and increase work capacity—without spending a significant amount of the planned budget on additional labor costs. This also allows companies to reduce their dependence on an increasingly stretched workforce.
How do integrations extend the value of technology, beyond individual cost-cutting applications?
Specialized digital solutions can help business leaders improve cost efficiency in all areas of a construction project. However, the value of BIM, automation, robotics, construction management software, and more are not limited to their individual domains. By adopting a customized suite of fully integrated solutions, business leaders can save costs by choosing the solutions they need to get the most value possible from their technology stack.
About the author
Tom Stemm is the CEO and founder of Ryvit. Tom leads a team of integration developers, application enthusiasts, customer heroes, and sales superstars on a mission to eliminate duplicate data entry and rampant data errors from the construction technology world.