ABC - Financial Advice From Construction Technology Leaders

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FINANCIAL ADVICE FROM CONSTRUCTION TECHNOLOGY LEADERS (05/05/2011)

By Donald Berry, Construction Executive Magazine

With more construction companies embracing new technologies to eliminate redundant data entry, streamline workflows and improve business operations, Construction Executive asked construction technology leaders to share their insights on how the latest solutions are positively impacting contractors’ bottom lines.

“With a younger construction workforce becoming more technically proficient, whatis the potential cost to a contractor that does not keep pace with advances in construction technology?”

Jay Haladay
CEO
Viewpoint Construction Solutions
Nowadays, almost everyone in the workforce is younger than me. I‘m fortunate to have two younger sons in our business to keep me honest on current technology trends.

What I’m noticing is that companies unwilling to keep pace with the latest advances in technology are rapidly being left behind on the competitive landscape. Today, having an integrated software solution is absolutely necessary to understand where you stand with complex jobs while helping eliminate unexpected profit fade from tightening projects. Viewing and sharing data is more important than ever. With quick-view dashboards and ERP solutions delivered via the cloud, contractors using this technology have greater insights into both project and overall business performance data at any time and from any location. That’s a real advantage.

Young employees want to work for companies with a progressive technology platform in place. As we grow and bring new sharp minds aboard, I’ve noticed that our employees want to use the new social media technology and communication tools available. Twitter, You Tube, Facebook, and LinkedIn are becoming digital facts of life. More people are making connections with these tools as they find their way into the workplace. Blogs, product reviews and electronic message boards are all important. We are incorporating these online tools into our business model. We have found how useful they are to demonstrate leadership and knowledge about our products and service offerings. Much like branding through marketing activities, social media is another incredible way to reach the marketplace.

“What new technologies are having a positive impact on contractors’ bottom lines and their ability to compete for projects?”

Marc Goldman
Director of Strategy, BIM and VDC
The Blue Book Building and Construction Network
While the construction industry typically has been a bit slow to adopt new technologies, in the past few years there has been a shift in the “norm” with the implementation of online plan rooms, digital takeoff tools and electronic bidding systems. These new technologies have taken hold and are helping streamline workflows, improve productivity and ultimately make it easier for companies to compete. As we enter into the next stage of evolution, it is important that companies understand the need to adopt all available tools in order to continue to succeed.

Enter building information modeling (BIM) and virtual design and construction. BIM is not the panacea to all that ills the construction industry, but BIM is at the center of many information-rich workflows that address an unproductive environment. BIM provides a “place” and a “process” to enable intelligence from all parties to grow and live with controlled access—significantly enhancing workflows.

BIM is not yet the standard of practice everywhere. However, BIM tools, workflows and processes have become widely adopted and accepted. BIM is becoming a requirement of both public and private owners and a differentiator for firms that are embracing the new workflows. These firms are winning work because of their understanding and use of BIM.

BIM tools and processes are not necessarily an expertise of all recent graduates, but there is a BIM expectation from many emerging contractors, project managers, architects and engineers. This younger generation often introduces BIM to the firms they join and are leading efforts to modernize operations.

Richard Lee
President and CEO
Bluebeam Software, Inc.
The Portable Document Format (PDF) has become the de facto standard for sharing project drawings, specifications, RFIs and other documents electronically. While some think of PDF as simply a file format for publishing and archiving information, the true value lies in its ability to quickly capture and distribute design feedback digitally.

PDF is essentially an electronic representation of paper. Using PDF markup and editing applications designed specifically for the construction industry, contractors can electronically redline PDF drawings, specifications, RFIs and more. Markup options include text, shapes, CAD symbols and images––all of which can be placed and customized while protecting and maintaining the underlying design data.

When project issues occur, the ability to use PDF markup tools to digitally review and redline designs—instead of printing drawings, redlining by hand and shipping responses—saves contractors a tremendous amount of time. Using redlined PDFs to email supplemental instructions has enabled project teams to submit RFI responses within an hour of being received, reducing turnaround time by 60 percent.

Sharing and reviewing project information via PDF provides contractors with significant cost savings as well. From case study data, we have seen project teams leverage PDF markup applications to reduce printing and shipping fees by as much as 85 percent.

Jim Flynn
President and CEO
Maxwell Systems, Inc.
Utilizing mobile devices, contractors can improve project management and streamline communication across the business. This technology impacts contractors’ productivity and profitability, as well as their ability to compete for projects.

For example, the iPad and a construction project management app can be used to complement the capabilities of a complete construction management software solution that delivers estimating, job cost accounting and project management in a single solution. Contractors can access valuable information such as plans, project budgets, daily field reports, change orders, and compliance checklists in the office, on a jobsite or on the road. This eliminates the inaccuracies of using traditional job folders, and allows contractors to save time and manage with real-time data at their fingertips. When all team members use the same project data, companies can improve workflow, compliance and communication for optimal project execution.

Construction management software apps on mobile devices help contractors maximize profit with tools to easily track and manage change orders in real time directly from the field. Contractors can analyze, identify, estimate, budget, propose, execute and bill for the variety of changes that occur during project execution. This directly and positively impacts the bottom line.

Mobile technology solutions allow for more effective management of projects throughout the life cycle to help minimize risks, stay on schedule and budget, and maximize profitability.

Hemant Bhave
Vice President
Systemates, Inc.
Good online project management solutions trim the fat from day-to-day construction processes, which ultimately brings down costs for future bidding. In construction, fat is paperwork, data entry, misinformation and delayed responses. Project management software brings everyone together on a common platform. This controlled transparency increases owner confidence.

Project delays mean less profitability. With a substantially improved workflow, there is little chance to realize anything but improved productivity. Better project oversight, shortened workflow processes for change orders and RFIs, automation of routine tasks, streamlined document distribution and increased accountability all contribute to successful project delivery.

The need to be productive remotely is critical. Contractors benefit from anytime, anywhere access to real-time information. Rather than waiting to get to the office, contractors act on issues from the field using a Blackberry or other mobile device. PDAs, smart phones and even iPads are becoming the norm.

Project managers have a difficult time capturing up-to-date financial information when change orders are being manually tracked in spreadsheets. Compiling reports for each project, let alone for the entire capital program, is difficult and time consuming. With Internet-based technology, real-time reports and the latest project information are at your fingertips.

There are direct cost benefits to using web-based technology for construction management. On an $8 million project, managing submittals online eliminates an average of 22,649 sheets of paper. That translates to savings of $32,000 in printing and shipping costs for submittals alone. Shop drawings that used to take three weeks are turned around in seven days.

Chandler McCormack
President
OxBlue Corporation
Every construction company and developer working on projects today is dealing with the effects of an extremely competitive marketplace. Increasing risk and narrowing margins are changing the landscape of the construction industry. It’s absolutely essential to have tight control of expenses and cash flow in order to survive, and thrive, in this market. Technology that provides easy access to verifiable, real-time information can make the difference between just getting a job done and having a successful job.

The use of professional construction camera solutions is becoming standard practice on jobsites, and those who are responsible for financial controls are taking advantage of them:

A contractor in Indiana paid rental invoices for heavy equipment, including an expensive crane. After checking his construction camera’s online archive, he discovered he was due $25,000 in credits for time the equipment was not actually on the jobsite.
An owner and a contractor were in disagreement over contract deadlines jeopardized by weather delays on a multi-million dollar project. The project’s construction camera clearly showed the history of the jobsite, including valid weather delays, and the disagreement was quickly resolved.
An out-of-town architect was responsible for approving pay requests. Using the project’s construction camera, she not only reduced the owner’s cost by thousands of dollars in travel expenses, but also approved payments faster for the contractor.

Cecilia Padilla
Vice President
On Center Software
During recessionary times, when profit margins are low or non-existent, executing your best project management skills is crucial to your bottom line. Those of us that have been contractors for decades will tell you it’s time to get back to basics. Excellent process, planning, execution and tracking are critical. The most important part of any solid project management process is knowing how to keep score.

Labor represents the biggest risk to, and the biggest opportunity for, profits. When margins are good, we accept budget overages. That is no longer an option. Digital Production Control (DPC) automates the labor-tracking process and puts focus back on increasing profits through better productivity. Simple math will tell you that a 10 percent improvement in labor production can add 5 percent profit to your bottom line.

What happens when you have a good process, but others on the job don’t? For years, contractors have known the importance of tracking the “Measured Mile.” If you are already using DPC to track labor, a valuable by-product is solid documentation of the “Measured Mile.” If you incur labor losses due to outside factors, you’ll have the documentation to protect your bottom line.

Ultimately, DPC provides actual production rates on completed jobs, which results in tighter estimates and winning more projects.

Fred Ode
CEO and Chairman
FOUNDATION Software
Ever since this photo was taken of me, people have asked the same questions about technology—and they’re never the right questions.Technology is all about the next logical step.

New technologies such as mobile applications, Software as a Service (SaaS), BIM, document imaging and dashboards are all useful, exciting tools—if your company is ready for them. To determine this, I use an evaluation method called “People, Process, Technology.”

People. Start by making sure the right people are in place. For instance, if you want to incorporate mobile technology, consider those who will be using it. Will your foremen and project managers be on board and prepared to learn how to use it? If not, the new technology will probably fail.
Process. Say you have the right people in place, and you’ve found a mobile application that allows you to enter job cost data, keep track of equipment and inventory, etc. But if you don’t have a proper job costing system in place for the mobile application to feed into, all that extra data goes to waste—along with the money you spent on it.
Technology. If you have job costing in place with incredibly advanced spreadsheets and you think you’re ready for mobile technology, wouldn’t it make more sense to upgrade to integrated construction-specific accounting software first? Don’t just follow the latest craze because everyone else is; make sensible technology decisions.

Patrick Allin
Chairman and CEO
Textura Corporation
Most industries invest 2 percent to 6 percent of annual revenue on information technology (IT). The construction industry invests between 1 percent and 2 percent. To put that in perspective, a contractor with $10 million in revenue spends an average of only $100,000 on IT, while his counterpart in another industry is investing an average of $500,000 or more annually.

Studies have shown that increased IT use correlates with improved company performance. In terms of construction projects, increased IT use correlates with improved schedule and cost performance. Given this, isn’t it surprising that the construction industry spends so little on information technology and software? Why is this?

Historically, few software programs have been built specifically for the construction industry. What has been built for construction is “shrink wrapped” software. It runs on a company’s internal computer systems or network and is intended for users in that company. While it may be well-suited to the needs of an individual company, it is not well-suited to the nature of a construction project and how contractors work.

Because construction projects bring together a team from a wide range of organizations, IT must support communication, data sharing and processes across functions. In short, software solutions truly built for construction must support the teaming that is at the heart of how the industry works.

We are beginning to see adoption of collaborative software that reaches far beyond the four walls of a contractor’s organization to automate its interactions with others on a construction project. Collaboration software is designed to help people involved in a common task achieve their goals, especially when they are not co-located.

Collaboration software built for the construction industry is beginning to emerge for processes like bidding, permitting, billing and payments, pre-qualification, project management and BIM.

The benefits of a collaborative solution include dramatic efficiency improvements through automation across organizations and functions, and better effectiveness through improved communication and greater visibility.

“Green construction is a key driver of growth in the construction industry. How can construction companies capitalize on this growth and maximize profitability on green projects?”

Dennis Stejskal
Vice President, Project Management
Sage Construction & Real Estate Division
Building green tends to be more expensive than non-green building, so in order to ensure profitability of green projects, it is particularly important to estimate costs accurately. Business owners and managers can utilize cost estimating software to save time, curb risk and maximize profits by automating the entire estimating procedure.

Companies should chose estimating software that allows flexibility. Software that includes industry-specific databases can be updated with your own prices and productivity information. Automating the estimation of green processes ensures more accurate estimates in comparison to using Excel or manually calculating the estimate, both of which significantly increase the possibility of errors. The added accuracy of reliable estimating software puts construction businesses in a better position to win more green jobs at a higher profit margin.

“How can a contractor justify the cost of implementing a new software system and the expense of training employees?”

Bassem Hamdy
Vice President, Solutions
CMiC
To justify the cost and establish a return on investment (ROI) for the implementation of a new software system, two methods can be used: quantifiable and qualitative.

The quantifiable benefits a contractor receives from a new software system can be measured. For example, by integrating all departments—accounting, operations, pre-construction, business development, human resources—on a single system, multiple data entry is drastically reduced. Once entered into the system, data is easily sent to different project stakeholders and the need to re-enter data is eliminated. This creates immense time savings, as employees no longer have to gather documents, consolidate spreadsheets and re-key project information. To put a hard dollar amount on this benefit, simply multiply an employee’s hourly wage times the number of hours spent re-entering data. When you have calculated this cost for all employees, you’ll have a concrete and quantifiable savings.

Having employees focus on higher value tasks, instead of redundant data entry, reaps significant qualitative benefits. Employee morale is improved and productivity increases. Eliminating multiple data entry also reduces the chance of data being entered incorrectly, lowering risk for the organization.

Implementing a new software system also forces a company to look at its core business processes, which leads to replacing inefficient processes with better methods. Qualitative benefits are harder to measure in pure dollar and time savings, but they are substantial in terms of operational improvements and better risk management.

“What analytical and control procedures would you advise contractors to implement in order to prosper in the current economy?”

Don Kavka
President
ToolWatch Corp
Implement a cloud-based tool, equipment and materials management system to oversee all your construction resources—in the warehouse and out in the field—to achieve the highest efficiency and accountability.

An asset management system enables your team to effectively manage valuable resources while quickly improving operational performance and efficiency in several ways.

Create accountability, one of the critical components needed for successful asset management.
Reduce tool and equipment loss, as well as unnecessary purchases.
Support repeatable “best practice” business processes that can be measured and improved.
Generate actionable information that is critical for making sound business decisions.
Provide critical insight to actual costs for using and maintaining tools and equipment.

Scott Anderson
Founder and CEO
EquipRent.com
Construction is a low-bid industry, so contractors must have competitive pricing to continue to prosper. With competitive pricing comes the need to implement tighter controls on job costs when performing the work. Software and online services allow contractors to operate more efficiently while effectively tracking pricing and costs.

To ensure the project bid is as competitive as possible, it is imperative for contractors to have a systematic process of obtaining multiple quotes for the subcontracted resources they need to complete a project. With the availability of new software and online services, contractors can quickly and more efficiently communicate their bidding opportunities. Contractors can reach more vendors of more services in less time, ensuring the most competitive pricing to complete the job. Suppliers also benefit from the same technology with more opportunities to bid and an easier, more cost-effective method of responding.

The contractors, vendors and suppliers that adopt the latest technologies will expand their bidding network while saving time and money and more effectively controlling project costs.

“How do new technologies such as cloud computing applications impact a contractor’s bottom line and ability to compete for projects?”

John Meibers
President
ComputerEase Construction Software
A recent study by IDC, a leading market research firm, revealed startling statistics about cloud-related IT services. IDC states that, by 2014, revenue generated in the United States from these services will grow to nearly $30 billion. This growth is being spurred, in large part, by the increasing demand for cloud computing applications in markets like construction, where increasing efficiencies and lowering costs have been keys to survival.

These solutions, which are hosted by the software provider at a secure datacenter and are accessed by end users from a web browser, provide measurable bottom-line benefits; specifically, lower upfront software costs, lower IT costs and better support for a mobile workforce.

Because cloud applications are deployed via the web, there is nothing to install or maintain. This speeds implementation and eliminates the need for in-house IT resources. And, because most cloud applications are subscription-based, they deliver a predictable monthly expenditure that includes software access, hosting, support and maintenance.

Many cloud applications can be accessed from a variety of computers and mobile devices, including laptops, tablet PCs, Mac computers and iPads. This flexibility gives project managers and superintendents more options for staying on top of their jobs – and puts real-time information at their fingertips. For contractors looking to improve profitability without compromising quality, cloud computing applications show significant promise as tools for gaining a competitive advantage.