The excitement about virtual construction is justified, since the majority of the cost of any building is the actual construction. It is many times more than cost of the design. With wasted time of labor still around 30 percent, however, it is logical and rational to start there in our quest for better project outcomes. Virtual design has its place, but the real opportunity is to increase productivity, safety and quality while constructing in real time.
We are on the verge of the virtual construction age. In our lifetimes, most of us will experience a deep interconnection between construction and high-tech. Virtual construction marries one of the oldest businesses with one of the newest business trends, with the potential to minimize some long-lived problems. To be clear, computers won’t build anything (people will) but they can make the process of building more efficiently and more safely while achieving high quality results.
If you grew up with computers, you are not surprised by this. You have seen technology as “solutions looking for problems” for many years. Computers work at the speed of light. They can collect, analyze and transfer billions of pieces of information, and their cost continues to decrease.
If you are older, you sensed the possibility that technology could give construction a real boost. However, you remember poorly managed technology companies of the past two decades. This is fair. You haven’t forgotten about “ghostware,” the term for promised new versions of software. The lack of software upgrades disappointed many contractors several times a year.
Just as significant were the poor financial management practices that technology companies exhibited. Confidence in tech companies waned across every sector. Many contractors I talk to say a wait-and-see attitude is appropriate.
For example, project specific websites (PSWs) were well established by the late ’90s. Construction projects that utilized them benefited greatly. I would have guessed them to be standard on any job by 2010. We’re amazed that PSWs still aren’t universally embraced by owners, designers and funders. Even these professionals share construction firms’ leery attitude toward technology.
Construction companies see the logic of virtual construction and some are practicing parts of it. Everyone understands the marriage of construction and technology is powerful. Technology integration is now a must for most construction companies, but it is a question of degree. Some technology is a “toy,” some is necessary. Where is the line and at what cost? Construction’s profit margins don’t allow for grand experiments.
The new business model of construction
Changes to our business have come in a steady stream, increasing the risk to contractors in the process. Today, in the opinion of many, risk stands at an all-time high. The construction business model has evolved into:
- Work acquisition — Where the business of construction starts.
- Building work — Old as the business itself and where most people fall in love with construction.
- Getting paid — The largest business risk/focus of all contractors on contracts, change orders and delays by others.
- Keeping track — If you don’t keep track of everything, what will happen? Those activities (work acquisition, building work, getting paid) not closely tracked will get away from you. They may become unrecoverable regardless of your fire fighting skills. With risk at an all-time high, it is rational to track more, not less.
Software
Looking at using computer programming to proactively estimate, plan and build construction projects, it is clear the platform to facilitate such a huge endeavor will be a well-tenured and established firm. Whoever will assume this leadership position must be financially substantial and see the significant value of virtual construction.
Defined at its most basic level, virtual construction is the collection, analysis and transfer of numeric, visual and spatial information in real time.
Typical collection:
- Material tracking — onsite and/or installed
- Labor tracking — by cost code and person
- Equipment tracking — by cycle time, fuel consumption and hours used
Typical analysis:
- Daily production against budget
- Result against schedule
- Function against best practices
Typical information transfers:
- Virtually detailed building plans and specifications for pricing and constructability comment
- (After the above step) Extensively detailed plans and specifications for planning and scheduling
- Real-time construction data from field operations to supervisors and executives
- “What-if” scenarios as a way to propose solutions to schedule problems, constructability issues, etc.
Under this scenario, the computer assumes the role of clerk collecting, calculating and disseminating data faster than is humanly possible. While software performs calculations of time and cost as well as quality and safety, supervisors, managers and executives would investigate, plan and troubleshoot based on the results.
Real-time tracking
In virtual construction, as we do, we track. Having a current idea of where we are in the process allows for timely completion of tasks. As we stall in certain areas, senior leaders can step in and inject their years of wisdom. (See Rudy Giuliani’s Method of Management.) When we know the current status of:
- Processes/behaviors
- Cycle times
- Production
- Costs
- Safety
We are able to affect them quickly before they become unrecoverable. Senior managers continue to assert that we all must “manage by exception” in our overwhelming business. It is a constant theme among the most experienced.
Compelling business reasons
There has to be a compelling reason for any major new direction in a business, construction or otherwise. I have three. All this work and investment can be justified these ways:
- Hardwiring your business processes standardizes them and assures timely monitoring. As a result, compliance with those predicable processes will increase, meaning greater discipline. My observation is that well-disciplined firms continue to outperform their less-disciplined brethren.
- Taking labor effort out of collecting and disseminating information frees up more time for analyzing it and then acting on it. Approximately 90 percent of all cost overruns on projects are due to labor. The earlier we know of any problem, the better the outcome.
- The highest and best use of any professional’s time is negotiating. It has the highest monetary payoff per hour. Once established, a virtual construction protocol frees up more time for each manager, supervisor and executive in a firm to negotiate more things. In construction, all things are negotiable. This means a higher per-hour payoff of middle managers’ and executives’ efforts. All this travels quickly to the bottom line.
I have seen and heard proposals of up to $10,000 for a one-time set-up fee per company and $500 per month per employee. This can be prohibitive at today’s salaries and wages. Construction’s end users and owners may have to help with this expense. However, in a few years, business costs will increase and the cost of technology (predictably) will decrease. The cost/benefit lines will cross.
Further balancing this expense is the potential savings. Taking into account 30+ percent wasted labor time in both the field and the office makes the economic model work better.As qualified craftspeople and managers are harder to find, helping the existing ones be more productive is a rational approach and virtual construction assists with that.
I can’t tell you when the age of virtual construction will happen (Carnac the Magnificent retired), but get ready for it. Younger professionals can see it and older ones sense its power.
Matt Stevens has been a management advisor, educator and researcher working only with construction contractors since 1994. He has over 35 years experience in the construction industry. McGraw-Hill published his new book, Managing a Construction Firm on Just 24 Hours a Day. His next book, The Practical Construction MBA, is due out in 2010. His firm is located at www.stevensci.com. Matt may be reached at mstevens@stevensci.com.