4 Ways Contractors Can Use Business Intelligence
How many of your employees help you qualify for a tenure-based tax credit this year? Will taking multiple small jobs to make up for a dearth of large projects be enough to maintain current overall contract value? If you don't know the answers to these questions, you may need to rethink how you are using business intelligence (BI).
According to McKinsey's 2020 report, The Next Normal in Construction, 71% of construction companies believe that prioritizing digital skills and making data-driven decisions will be a winning move for the future of their business and the industry.
While there are almost infinite use cases for using data in decision-making, we decided to focus on four of the most important to construction companies today: Reducing spend, making more accurate estimates, managing field operations, and tracking risk across projects.
How your construction company can use business intelligence
Construction projects are acts of creation — buildings, bridges, parks, and parkways — but they also create a mountain of information.
The good news? This deluge of data from before, during, and after a project that can be used as business intelligence (BI) to inform future projects, spotlight efficiencies, help control costs, and more.
The bad? Gleaning critical insight from that data can be intimidating. It requires a business intelligence solution and staff to gather, clean, and visually present relevant information to stakeholders. Construction companies are often slow to adopt BI because of complex technology stacks, disparate data sources, and lack of technical resources.
But you're reading this right now for a reason: You know that whatever the implementation headaches implementation are, becoming a data-driven construction company is critical.
Going off instinct and vague discussions about past projects alone aren't enough to keep you competitive in the future.
"Before it was always, 'I've been tracking this number,' and there were long conversations to figure out where those numbers came from. Viewpoint Analytics [a business intelligence tool for general and specialty contractors] does a great job of pulling and manipulating data as a starting point for our entire company to drive deeper into a single job or multiple jobs," says Lindsey Jones-Robinson, Data Service Manager at Advanced Technology Group, an architectural and mechanical union contractor
Here are three tactics and four scenarios where business intelligence allows construction companies to gain a measurable competitive edge:
Tactic 1: Use BI to control costs
With margins hovering between two and three percent, it doesn’t take much to wipe out the entire profit of a project. Cost and performance analysis leads to better financial health and allows companies to set goals and track them effectively. Labor cost reports and cost summary reports allow you to compare actual costs to budgeted costs and take action where necessary.
PROBLEM: In an industry where “material waste and remedial work represent 35% of costs,” it’s essential to track costs and reduce spending on each project. But, this can be a daunting task if the goal is to track data across projects. It’s difficult to track expenses beyond the project level, such as tracking equipment inventory in a particular region, determining costs by supplier, or calculating spend for a certain type of project.
SOLUTION: Manage inventory and costs in every process — from bidding to building — so each project can be monitored by job, by supplier, by region, or whatever yields the greatest business value.
SCENARIO 1: Track costs and reduce spend
Companies often face penalties for delays and defects but often don’t know how best to avoid those occurrences.
One solution is to monitor which suppliers have a high rate of defective materials going to projects. Chances are good someone on the team has a hunch about this, but those thoughts aren’t captured, aggregated, and shared throughout the firm. As a result, companies keep using that same supplier, getting defective materials, and losing money.
With BI, managers can track each supplier on every job and across all projects to understand the quality of work and take action to improve the situation.
SCENARIO 2: Prepare more accurate estimates and bids
In a low-bid situation for a government contract, every penny counts to win the deal and come away with a profit. Costs can’t be based on best guesses and a project leader’s experience.
A BI solution enables managers to easily gather accurate micro-data on similar projects they’ve done to create more accurate estimates and bids, even at the last minute. Some in the industry say the worst day is the day a bid is won when many wonder, “why were we the
lowest?” With a BI solution, companies can know.
Job cost versus estimate report viewed in Viewpoint Analytics.
Tactic 2: Use BI to optimize scheduling, planning, and collaboration
Business intelligence enables operational teams to track complex projects with huge amounts of data easily and ensure that schedules are achieved, resources are appropriately allocated, and teams are coordinated.
A proper schedule analysis report can tell whether the project is ahead or behind and help identify causes for the delays to help you avoid them in the future. Status reports on field logs allow you to analyze patterns, uncover issues, and prevent damages.
PROBLEM: Inefficient scheduling and collaboration add costs and reduce productivity. It’s difficult to plan effectively or work together when data is not readily accessible by remote team members and those working in the field.
SOLUTION: Optimize collaboration, cadence, and scheduling of subs, deliveries, and equipment with a solution that makes real-time project data easier to find and work with by everyone on the team at each location. Track progress on projects, anticipate delays or changes and adjust across the project and company.
Crews will also be more efficient when they have remote access to data, punch lists, safety observations, and BIM from any job site and on any device.
SCENARIO 3: Manage day-to-day operations in the field
Your masonry crew completes only 90 percent of the estimated length-of-wall-per-day today. It needs to know immediately that it now needs to complete an additional length-of-wall every subsequent day to get back on schedule.
When crew managers know — each day — where they are in relation to the schedule or budget, they can make adjustments more quickly, making up the difference and mitigating other possible effects related to the changes.
Looking at remaining budget by project phase in Viewpoint Analytics.
This data can benefit you far beyond your current projects - using it to set benchmarks for how long jobs take will help you make more informed scheduling decisions in the future.
Tactic 3: BI helps you effectively manage risk
Construction is a high-risk business, from cost overruns and schedule delays to safety issues and legal matters.
Risk management is one of the most difficult aspects of project management, requiring the identification and analysis of root causes and a timely response. BI can help pinpoint risks at an early stage so you can mitigate them in the most cost-effective ways.
PROBLEM: No firm can afford to mismanage risks related to safety, contracts, defects, costing, and slowdowns. Yet, there’s no easy way to review that kind of data for a complete picture of where the risks are, much less how to mitigate them.
SOLUTION: Monitor contract requirements, legal restrictions, and safety issues by project and by locality. BI solutions enable managers to measure micro and macro items and make meaningful decisions that reduce future risks and improve all aspects of the bottom line.
SCENARIO 4: Track safety incidents across projects
Proper safety programs can’t be built and implemented if companies aren’t monitoring the types of safety incidents that occur across projects. That increases the likelihood of a lawsuit or penalties if someone gets injured.
As of January 15, 2021, OSHA fines for safety violations include a maximum penalty of $13,653 for serious violations. These incidents also increase costs and expenses related to insurance premiums, damages, and delays from lost workdays.
How will you put business intelligence to work for you?
A well-designed BI solution can extract insights from disparate data sources, provide analytical capabilities, show the impact of current decisions based on the past, and connect all departments of a company. BI has moved from a nice-to-have to a must-have for construction firms of all sizes. The insights to be gained can give you a better picture of your entire business, its projects, and the ability to make smarter decisions so you can:
Improve staffing, equipment, and scheduling
Evaluate whether a project is worth pursuing
Identify the projects best for the company, and the ones to avoid
Respond rapidly to opportunities and increase revenues
Keep learning about using BI in your contracting business. Check out this episode of Viewpoint's podcast where Bassem Hamdy, a 20-year-plus veteran of construction technology and co-founder and CEO of Briq, shares how BI and data collection has evolved over the years, why BI is still messy and misunderstood, and how contractors can use the data they glean from projects to boost profit margins.