Contractors around the world are reporting significant gains through adopting construction mobility software, but most still struggle to measure improvements. A good way to assess whether a new technology is successful is by quantifying its benefits. And lucky for us, there are plenty of simple, proven methods to track improvements in worker productivity, project schedule and quality:
Productivity Improvements. Much of the low productivity in construction is a result of workers spending too much of their time in the field performing non-value adding tasks.
Site engineers, superintendents and other field workers are constantly transferring information, drawings and observations between the site and the office. Mobility tools can boost their productivity by massively cutting down the time they spend:
- Searching or waiting for the latest drawings, photos, statuses of issues, etc.
- Walking back to the office to get information or tools they forgot
- Copying information in the office which was recorded on paper in the field
- Reporting and sending site observations to the wider team for follow up
To measure time savings, we need to first set a historical performance baseline. For example, how many hours does it take the typical site supervisor to create his weekly report back in the office after walking the site using a paper clipboard, printed plans and a digital camera? Once we have an estimate, we can then survey workers on changes in weekly durations of tasks. One study conducted by a major US general contractor found that compared to paper-based methods, mobility tools cut out nearly 1 day of non-value adding work per week for site staff, making them 15-20% more productive!
Schedule Improvements. Instant access to the latest project information such as construction drawings or issue statuses also eliminates "information bottlenecks" and reduces waiting time. Getting rid of non-value adding tasks optimizes end-to-end workflows, and shortens the overall time needed for critical activities in a schedule, such as:
- Inspections and rectification of quality issues
- End of project punch-listing/snagging
- End of project commissioning and owner handover
Once we have a baseline duration for an activity on similar projects in the past, we can measure schedule improvements against it. For example, if the paper-based commissioning process of a data-center has historically taken 10 weeks, and quicker issue turnaround reduces that to 8 weeks, the task has been compressed by 20%. This means we can hand over the project 2 weeks early, or at least claw back half a month's worth of previous delays.
Quality Improvements. Quicker communication, access to the latest information and more engineering time spent in the field doing value adding activities (like more inspections and subcontractor coordination) all result in faster detection and resolution of:
- Design coordination issues like errors, clashes or omissions
- Issues found during structured quality or safety checklist inspections onsite
- End of project punch/snag/defect lists
Above is the The MacLeamy Effort Curve: this illustrates the benefits of implementing BIM during the design phase, but its key principle applies equally well to construction: more rigorous, proactive inspections in earlier phases of a project ensure that we ‘nip problems in the bud’ and result in less costly rework issues. In the curve illustrated above, the baseline is $X - the average cost to resolve issues using a traditional process. The reduced total cost is $Y - thanks to earlier issue detection.
To see the effects of earlier issue detection in practice, let's consider the example above. We estimate the average cost to resolve an issue (such as a defective masonry joint) by calculating the associated labor, material and rework costs which accumulate over time. The longer an issue goes undetected, the more costly it is to resolve. Thanks to cloud-based mobility tools, subcontractors now have immediate access to up-to date lists of all outstanding items on site. They are notified the issue earlier, and can fix it with less time, effort and cost. By solving issues more quickly, we're also reducing the risk that other trades will install work on top of defects, which would otherwise need to be removed, resulting in costly rework (column furthest to right).
By analysing completed project data, we can measure the number of defective items which get escalated to an owners representative. We then multiply this number by the average cost of each overdue issue, to work out the total cost of late issue resolution. Over the course of a live project, we can then track a reduction in the number of these overdue issues, avoiding the costly involvement of more parties as time goes on. Some companies may also keep track of rework as a percentage of total costs, but this information is often sensitive and never openly broadcast!
Quantifying Savings and Return on Investment (ROI)
So far, we've talked about how to measure quality, schedule and productivity improvements achieved through using construction mobility software. Now, let's talk about how these benefits can be translated into cost savings, and how these savings can fit into an overall return on investment (ROI) calculation for construction mobility. Contractors and construction managers are now developing strategies for implementing software in a standard way across their business, but doing so without a strategy to track and maximize cost savings leads to sub-optimal results.
Translating Improvements into Cost Savings. Good news – once we've measured efficiency gains, schedule acceleration and rework reduction, the hardest part is over! We can now take the values for improvements, and multiply them by various project factors to estimate total cost savings.
There are generally 2 approaches to calculating cost savings of construction mobility:
1. Cost savings through reduced site supervision personnel needs. A contractor decides that they can do the same amount of site supervision work with a smaller team. For example, if our overall team has 20% more time available for value-adding tasks, a team of 5 could be reduced to a team of 4 and achieve the same as before. In this case, the cost savings calculation would be:
% Efficiency gain * Hourly labour rate * users * hours worked per week * weeks in use
2. Cost savings through earlier delivery and less rework. On the same project reporting 20% efficiency gains per user, a contractor may decide that rather than reducing the size of the site management team, they will invest the thousands of hours saved into value-adding tasks which optimize schedule and quality. In this case, we first need to subdivide the overall project costs, to understand what we stand to gain if we deliver early and reduce rework. To help visualize these cost breakdowns, lets consider a typical project. On a commercial development project with an overall contract value of £50 million , the costs might be broken down as follows:
*Areas for improvement
The two areas in which we can expect to reduce costs through focusing more construction site personnel time in value adding activities are:
- Preliminaries (general conditions) due to less overhead costs as total time on-site to deliver a project becomes shorter, reducing time based variable costs (eg. site offices, security, crane rental).
- Rework as a percentage of direct costs due to improvements in quality, through better coordination, and earlier issue detection and resolution. A study by a major US general contractor estimated that a project team could avoid up to 1/3 of all rework with an additional 50 hours/week of field supervision & planning, hours which mobility tools can make available by eliminating non-value adding activities.
Translating Cost Savings into ROI. In the first approach mentioned above, a contractor may decide to reduce site supervision personnel headcount, thus achieving the same performance with less staffing requirements, saving labor costs. In that case, our ROI calculation would be:
Another contractor may take the second approach and decide to achieve better schedule and quality by reinvesting the time of the same-sized site team, in which case, our ROI calculation looks like this:
This means that ROI can be calculated differently, depending on how we decide to interpret the cost savings which result from performance improvements.
Additional Benefits of Adopting Construction Mobility Software. Our discussion so far focuses on the three most commonly quantified benefits – productivity, schedule and quality - but these are not the only benefits of construction mobility software! There are two main reasons for our focus on these benefits: they are key project performance areas, and there is a proven methodology for quantifying savings in these areas. But our discussion of benefits and ROI would not be complete without considering that project-level improvements can also have knock-on benefits which improve a contractor's profitability. These include:
- Analysis of project data to identify trends, supply chain performance, problem areas and opportunities for continuous improvement. A future post will be dedicated to discussing the benefits of this analysis.
- Increased client satisfaction due to reduced waste, improved quality, earlier delivery and more complete information handover creating cost savings later in maintenance and operation. This results in increased repeat business, higher rate of successful project bids, and a lower annual cost of project pursuit.
- Insurance against claims after project completion due to clear and complete construction documentation.
- Improved site safety through more rigorous inspections, and the ability to drive down insurance costs by KPIs such as EMR (Experience Modification Rate).
For a detailed discussion of how a major US general contractor calculated ROI of construction mobility, watch this video.
This post was originally published as 2 articles by Michael Moran on Linkedin Pulse in Sept 2016