According to Deloitte’s 2020 Engineering and Construction Industry Outlook, companies can expect to face changes and trends that threaten what little margin they have, including:
- Increased project complexity
- Higher supply chain cost for materials
- Fierce international competition from contractors in previously less-active regions, including Asia
All these factors will push contractors to adopt disruptive technologies and construction methods that can increase efficiency, productivity and safety. These technologies include building information management (BIM), offsite and modular construction, automation, drones, data-driven analytics, predictive modeling, virtual reality and adaptive risk and return modeling.
IFS predicts that BIM and offsite and modular construction will be the fastest growing trends. These are more than technologies of course, but rather, emerging business methodologies enabled by disruptive technologies. Though it is imperative that construction companies invest in these technologies, and many are, they will need focus and discipline to quickly harness them to:
- deliver BIM-style collaborative asset data management for customers
- enable a production approach to project delivery, making for faster, cheaper and better-quality projects
According to new research data, this evolution could happen quickly. In the spring of 2020, IFS conducted a primary research project of 209 contractors from around the world and found that more than 75 percent of engineering and construction companies were planning to increase their spending on digital transformation—even as a global pandemic raged. And in all, more than 99 percent plan some expenditure.
These investments will likely drive a massive increase in per-employee productivity, which the 2017 Transforming Infrastructure Performance (TIP) from the UK government Infrastructure and Projects Authority identifies as a historical weakness of the industry, to the point where it affects the internal capacity of the nation. The report cites Office of National Statistics data revealing that between 1997 and 2017, construction productivity per employee increased by only about 10 percent while manufacturers increased theirs by about 65 percent, making for a significant productivity improvement opportunity.
The TIP report puts forward several areas where enterprise technology can be leveraged to deliver this increased productivity:
- Reducing reliance on hard bidding or tendering and adoption of more collaborative business models
- Adoption of more manufacturing-style practices including offsite fabrication and standardization
- Conforming to a standardized approach to BIM—which will help government agencies collaborate with their engineers and contractors during infrastructure projects, and over the lifecycle of built assets
A SOFTWARE PLATFORM ON WHICH TO STAND
However, engineering and construction companies have work to do before they can adopt these
approaches. In most cases, their business systems lack the functional capacity to deliver, in others, they are running multiple point solutions that will increase the complexity and total cost of any change management process. Much of the day-to-day operational detail is maintained in Microsoft Excel spreadsheets, which creates enterprise risk and prevents fluid sharing of project information in an environment conducive to rapid change.
IFS gives engineering and construction companies a single comprehensive, robust business platform that addresses the entire asset and project lifecycle— starting with the initial proposal or bid to the resulting contract, and through engineering, procurement, materials management and manufacture, build and installation, commissioning and decades of maintenance and service contracting or project warranty work. From bid to decommissioning and replacement, regardless of whether value is delivered on site or through shop-driven fabrication, the engineering or contracting company gets a single version of the truth with consistent processes and visibility throughout.
The software encompasses not only all the sources of cost and revenue on projects for excellent financial control, but all the information on the asset being constructed—to better support the project owner. IFS gives you what you need to proceed confidently into the digitally-enabled future of construction. This empowers you to make digital transformation investments that will:
- Grow and strengthen your brand, increasing pipeline, bid win rates and creating new revenue
- Reduce cost and increase efficiency through standardized project processes while improving quality and on-time delivery, all of which improve margin
- Mitigate risk through increased transparency and defined controls for business, projects and quality, health, safety and the environment (QHSE) exposures
- Improve the customer experience through improved compliance with contracts, budgets and timelines, and the ability to hire and retain the best people in the industry
- Higher project costs due to a lack of centrally enforced business processes, preventing standardized, reproducible designs, components and projects
- Revenue lost due to the inability to satisfy owner mandates for BIM as a digital asset lifecycle strategy or to execute using an offsite construction model
- High costs and loss of market share due to low project quality and resulting warranty and customer retention costs
THE COST OF INACTION
The over-arching risk if you are part of the 25 percent not increasing spend on digital transformation is that you will become less competitive as your rivals can do things faster, more affordably, more reliably and at a higher level of quality.
Specific, definable costs include:
- Revenue from work you turn down when you in fact have capacity in the business
- Financial penalties and customer loss from poor execution and missed delivery against timelines and budgets
- Financial losses that go unnoticed due to the disconnected and Excel-driven nature of the business
- Financial impact of unanticipated risks
As a result of many construction companies actively investing in digital transformation, there is the additional risk of being outpaced by companies using such technology to deliver more value faster, more reliably and at lower cost. Your competitors will be better placed to:
- Adopt transformational business approaches such as offsite construction
- Submit lower, accurate numbers for initial construction costs
- Maximize revenue over the entire asset lifecycle through maintenance and operational contracts
The question is—what are you going to do about it?
That is the question we will help you answer. Our Business Value Engineering teamwork alongside you to learn about your company, your position in your market and your immediate priorities. IFS enables you to realize your project value faster, on average 2 years faster. By collaborating with you we can identify your fastest path to value—with IFS. Learn more at ifs.com/value.