We are in the age of virtual construction. That is, virtual construction marries one of the oldest businesses with one of the newest business trends. This marriage has the possibility to minimize some life-long construction problems.
If you are younger, you are not surprised by this. You suspected that computers and technology were a solution looking for a problem for many years. Why shouldn't you have seen and believed this? Computers work at the speed of light. They can process billions of pieces of information and their cost continues to decrease.
If you are older, you sensed that the probability was there that technology could give contracting a real boost. You remembered, however, how poorly managed most technology companies were in the last two decades. This is fair. They busted the most important rules of business and went away. Also, “ghostware” was an accurate term for promised new versions of software. The lack of software upgrades disappointed many contractors several times a year as promises remained unfilled.
Just as significant was the poor financial management practices that technology companies exhibited. Venture capital was spent at enormous rates. Why? Many of us still don't know. Confidence in tech companies in and out of the construction industry has decreased, not increased. Many contractors felt a wait and see attitude was appropriate. There is still that sense today from many of my clients.
Everyone understands that what we are talking about is powerful. However, it is now a matter of degree. Some technology may be a “toy.” Some technology is necessary. Where is the line and at what cost? Construction profit margins don't allow for grand experiments.
As an example, project specific Web sites (PSW) were very well established by the late 1990s. Construction projects that used them have benefited greatly. I would have guessed that they would have been normal on any job by 2005. We still are amazed, however, that PSWs aren't universally embraced by owners, designers and funders. Even these people have some of the contractor's soberness about technology.
It is interesting to note that a large portion of our country's technology emanates from NASA and the U.S. Military. They sponsor and invent most American technology, and others develop it into a commercially usable form. Some countries applaud America for our innovation while other countries silently copy it. No matter what the source of the technology, it will continue to grow in all phases of our personal and professional lives. As contractors, we can see the logic of virtual construction and sense its power.
The new business model
Changes to our business have come in a steady stream, increasing the risk to contractors in the process. Today, it stands at an all-time high. The business of construction has evolved into:
Work acquisition — Where the process of construction contracting starts.
Building work — Old as the business itself, and where most people fell in love.
Getting paid — The largest business risk/focus of all contractors.
Tracking everything — If you don't keep track of everything, what will happen?
If not tracked, work acquisition, building work and getting paid will get away from you and may get out of control. At the moment, we have the most risk than at any other time in our careers, so it is rational to track more, not less.
We are software neutral. We don't have a vote and don't want to vote for any one company over another. As we look at using computer programming to proactively estimate, plan and build construction projects, it is clear that the platform to facilitate such a huge endeavor will be a long-tenured and established firm. Certainly, well-tenured and stable platforms would be a logical place to start, as we don't have the margins for grand experiments.
Virtual construction at its most basic definition is the collection, analysis and transfer of information in real time.
A typical collection of information includes material tracking on-site and/or installed; labor tracking by cost code and person; and equipment tracking by cycle time, fuel consumption and hours used.
Typical analysis metrics include function against budget, result against schedule and function against best practices.
Typical information transfers, i.e., data and information that have to be shared among parties to a project, include:
Building plans and specs to the work acquisition professionals for pricing.
Plans and specs to the field supervisors and project executives for planning and constructability review.
Real-time data from the field operations to supervisors and executives.
What-if scenarios as a way to propose solutions to scheduling problems, constructability issues, etc.
The computer will perform the calculations of time and cost as well as quality and safety. The supervision, managers and executives would then use those results to investigate, plan and troubleshoot. The computer would assume the role of clerk and do the collection, calculation and dissemination of data.
In virtual construction, we track. Having a current idea of where we are in the process allows for timely completion of tasks. As we stall in areas, senior leaders can step in at critical times and inject their years of wisdom. (See Rudy Giuliani's Method of Management.)
When we know each moment what our current cycle times, production rate costs, and safety behaviors are, we are able to affect them quickly and not let them fester and become unrecoverable.
By using the right software, robust hardware and the Internet, we can increase the quality of planning, forecasting, scheduling, communicating, measuring and feedback. When we do these things better, we will increase quality, safety and productivity. Any contractor, who increases these areas with his current clients enhances business relationships and promotes new ones.
Hardwiring your processes ensure that compliance is high, thus, reducing controllable risk.
Controlling the project means to control production in order to positively affect labor. Keep eight hours of material and information to the field at all times. That is, decisions are made and material is at the task site for the shift, at a minimum.
Print shops, restaurants, banks, etc., have cameras to keep a vigilant eye on employees. This is for many reasons, among them safety as well as productivity. The short term question becomes: Will the construction worker allow this? Will the shock of being tracked while being paid cause unrecoverable pain?
Long term, we see acceptance of virtual construction. It is what other industries consider normal.
Dimensions drive units
The first piece of any virtual construction project is the overall dimensions of the project. This determines many units of construction, directly and indirectly, such as cubic yards of excavation, cubic yards of concrete, tons of structural steel, square yards of asphalt and square feet of exterior cladding.
Dimensions drive the unit calculations. Resulting units help determine labor content. Labor is the great risk factor year in and year out in construction. To build with labor sensitivity allows for greater costs saving while preventing the greatest change for cost overruns.
Take the example of a square building or a four corner building: Say we proposed to build it in six pieces - four walls, a roof and floor for 100-ft. × 100-ft. building. We would have a design that would be constructible, but there isn't a truck big enough to deliver 10,000-sq.ft. sections. The computer would design the building, but if the programming did not help it discriminate against unconstructability it would design the building with six sides fabricated elsewhere.
So, we would break the job down into deliverable pieces, such as smaller structural components and “in situ” items such as ready-mix concrete. These are much easier to manage with little chance of damage while in transport.
If the programming is in place that actually makes customary and efficient construction a priority, we would be closer to on-budget and on-time construction with better safety and higher quality.
Compelling business reason
There has to be a compelling reason for a business to take a new direction, and I have two that work for specific reasons:
The best use of any professional's time is negotiation. A virtual construction protocol, once set up, frees up more time for each manager in the firm to negotiate more things. This means a higher per hour payoff of each supervisor's and executive's effort.
Taking labor expense out of collecting and disseminating information frees up more time for analyzing and acting on it. Ninety percent of all cost overruns on projects are due to labor costs. Increase the available time for analysis and you increase profits as you increase revenue and decrease costs.
Incremental approaches cost less on a cash-flow basis and cost basis. Rushing costs more in mistakes, rework and massive training programs.
Your incremental approach should first focus on labor management.
Technology will decrease in cost, but the training and programming time are a greater cost, one-third to two-thirds of the total. So, if you start acquiring pieces — e.g., GPS capability or WebCam technology — you will be able to train your people in small, inexpensive increments. They will not be rushed through a single intensive training. You can build a culture in which technology is good and provides benefits.
I have seen and heard proposals for fees of $10,000 a company and $500 a month/employee. This may be cost-prohibitive at today's salaries and wages. The contractor's client may have to help with the cost. In a few years, as salaries increase and the cost of the technology decreases, the cost/benefit lines will cross.
To balance this expense, you must discuss savings. Thirty percent waste time in the field, but discussing costs in the office makes the economic model work better.
I can't tell you when the costs/benefits line will cross (and Carnac the Magnificent retired), but get ready for it.
Matt Stevens is the founder of Stevens Construction Institute Inc., a multi-discipline consulting firm (www.stevensci.com), and the author of the book, Managing a Construction Firm on Just 24 Hours a Day. He can be reached at [email protected].