David Bowcott, Managing Director and Co-Leader
Historically, construction contractors have struggled to identify those projects they will have the best chance of winning, and, perhaps even more important, those projects that will give their company the best return on investment.
Construction projects have thousands of risk components that vary from one to another, thereby making it extremely difficult to select the perfect one to pursue. Even the best management teams struggle to choose the perfect project given the massive amounts of both internal (within the company) and external (project specific) data. Traditionally, decisions related to which projects to pursue, and which to leave behind, were done using the information and experience housed within the minds of top staff and management, and the various documentation available from the owner of the project, trade publications and various other sources. Limited resources, limited documentation and limited information is made available to construction contractors to help them make the right decisions.
Why Construction Lags on Data and Technology
The construction sector needs to get its data and technology house in order. Other industries continue to be well ahead of the construction sector when it comes to incorporating data and technology into its core processes. Banking, securities, real estate, manufacturing, and healthcare have seen massive improvements in efficiency and productivity, which has resulted in substantially improved profitability.
The slow adoption is not the fault of the construction industry itself, rather it is because of the industry’s massive global sprawl and complexity. Given this sprawl and complexity the construction sector has sidestepped regulations and oversight, including data standards, mandated collection of data and retention of data. Given these sidesteps, there are no industry wide protocols for reporting activities and retaining records, no standard frameworks for announcing information and no centralized archive of past activities. For the most part current project and procurement data is fragmented, dispersed and nonuniform.
New Advances, New Opportunities
Given the recent growth in construction data architecture, data science strategy and built environment technology advancements (AI in particular), the migration to a better industry platform is already in motion and the industry will be in a position in the coming months and years to make better decisions.
Advances in the above referenced areas have moved swiftly to allow construction contractors a substantially improved ability to screen prospective projects and to identify projects that they have the greatest likelihood of winning. Further, this environment of better organized data and intelligent digital assistants has helped contractors develop greater certainty around which projects will return the greatest profitability.
The age of data, technology and AI is bringing forward a massive evolution in the realm of “go or no-go” decision making for the construction contractor community, and those adopting these solutions early are reaping the financial reward that comes with picking the right projects to pursue.
Go or No-Go Decision-Making Framework
Now let’s get into some of the key categories of “go or no-go” decision making. We’ll also discuss how these data and technology offerings are better organizing this data to bring forward this new age of higher project hit ratios and improved profitability.
Technology platforms are available within the market that provide well organized project specific attribute/risk information. Things like:
- Location risks
- Natural catastrophe risk
- Supply chain risk given location
- Labor supply risk
- Site access risk
Specific information on the owner based on historical data:
- Financial risk
- Political risk
- Claims and dispute history
- Repeat contractor business
- Internal data on relationship with owner (your organization’s experience with owner – individual relationships, dispute history, payment issues, profitability of previous jobs, owner satisfaction ratings, etc.)
Solutions which help to identify top contractual risks (or contractual risk allocations) and provision of alternative more appealing contractual terms and conditions:
- Information on the contractual model being utilized or contractual models historically used by the owner
- Specific details on contractual focus areas:
- Indemnity provisions
- Warranty provisions
- Liquidated damages/penalties
- Force majeure and supervening events
- Payment terms
Data provided on the dispute and claims history of key project stakeholders.
Information on subcontractors and suppliers that could be strategically beneficial to your pursuit — location of facilities, financial, business, safety.
Information on the degree of design and planning investment by the project owner:
- Design payment levels
- Site conditions due diligence Investment (geotechnical, utilities, environmental, etc.)
- Planning and collaboration investment
Information on competitors potentially bidding, competitions history with owner and competitor differentiators.
Information on your team’s members and how the sum of the parts of your team leads to winning and profitable outcome:
- Member experience in project category
- Member expertise in role within project
- Previous experience in working with other stakeholders
- Current financial health of team members
- Team member risk exposure to other projects
Top risks in this category might include the following and more:
- Public opposition to the project
- Opposition from various organizations (environmental, socio-economic, etc.)
- Risk of funding reversal due to political shifts
These categories represent a few of the screening classes where technology and data strategies are coming together to help construction contractors make better “go or no-go” decisions.
We are entering an age where vast amounts of data can be organized, analyzed, and synthesized into structures that drive much improved decision making. In some cases, technology companies are aggregating all of these “go or no-go” categories under one roof for ease of use for their clients. The construction sector has always had vast amounts of non-structured data which drove less than ideal decision making.
Given the data and technology advancements over the past 10 years, the construction sector appears to be entering an age of improved strategic project selection and those that are adopting these tools early are reaping tremendous rewards.