How To Apply Digital Transformation In Construction

What Is The State Of Digital Transformation In Construction In 2024?  

Few can doubt that construction is in dire need of modernisation. In an interview 5 years on from Mark Farmer’s review of the construction industry Modernise or Die, Farmer expressed that ‘the situation in many ways had in fact worsened’. 

The figures speak for themselves. Productivity has changed very little in the construction industry in the past 50 years. In the RICS 2023 productivity report, 45% of construction businesses said their productivity has not changed, and greater investment in data and digitisation was ranked the 2nd most important strategy for increasing productivity. 

While other industries are using advances in digital technology to create efficiencies and boost productivity, the construction sector has been slow to benefit from the opportunities presented by the dawn of ‘Industry 4.0’. 

The health of the construction industry is poor and will not improve without radical change. Recent years have seen some high-profile business failures, with Carillion the unhappy posterchild. While the impact of Carillion was notable, it wasn’t a one-off. 2024 was a record-breaking year for insolvencies in the construction industry, with 364 companies in England and Wales going into administration in December 2023 alone.  

It could not be more obvious. Failure to adapt to new technologies will mean that many in the industry will die a slow death, which we have already seen this happen in other sectors. To survive and thrive, the industry needs to innovate and disrupt.  

What Are The Benefits Of Digital Transformation In Construction?  

Significantly Boosted Productivity 

Digital technologies can help to streamline processes, automate tasks, and improve communication across the construction project lifecycle. This can lead to significant time and cost savings, alongside increased productivity. Time is saved on repetitive or manual tasks, and entire teams working on construction schemes can view the same data and updates in real-time, leading to faster-moving projects.  

Increased Safety 

Digital technologies can help to improve safety on construction sites by providing real-time data on hazards, risks, and compliance. This can help to prevent accidents and injuries, a continuing issue within the industry. This will help on-site workers feel safer and happier to work, boosting wellbeing and improving what can be a sometimes challenging work culture.  

Better Build Quality  

Digital technologies can help to improve the quality of construction projects themselves by providing more accurate information and data. This can lead to fewer defects and rework, a significant contributor to productivity loss, and result in improved relationships and repeat projects from clients. 

Improved Sustainability 

With the UK government pushing the industry hard on ‘Net Zero’ targets and the recent introduction of Whole-Life Carbon Assessments, digital technologies can help to make construction more sustainable by reducing waste, energy consumption, and emissions. For example, Building Information Modeling (BIM) can be used to optimise the design and construction of buildings to make them more energy-efficient. 

Simple Collaboration  

There are endless benefits to improving collaboration in construction projects, and digital technologies can help to improve collaboration between different stakeholders in the construction project lifecycle, such as architects, engineers, contractors, and owners. This leads to more confident decision-making and more efficient execution of projects. 

How To Approach Digital Transformation In Construction 

There are currently many construction businesses in the midst of radical, if painful, turnaround strategies. They are hunting for clients who are willing to pay them more and trying to reduce their cost base at the same time. While perfectly sensible, such strategies can take up to three years to come to fruition, if they ever come to fruition at all.  

There are quicker ways to provide a boost to productivity and improve margins. According to a report by Deloitte, the most cited benefit from digital adoption is increased productivity. The report also found that each additional technology introduced is associated with a 0.58% point increase in expected revenue growth over 5 years. 

 

Analyse Your Current Data Environment 

The fact is that most contractors simply do not know what data they have. A typical contractor will be tracking multiple data points across a range of sources, both digital and hardcopy. This includes important data points such as  

• Programme schedules 
• Plant and material costs 
• Subcontractor prices 
• WIP 
• Timesheets 
• Labour rates and more. 

Many build their own libraries of this data and often use complicated, bespoke spreadsheets to track it all. This is a manual process – and if something goes wrong, it is a painstaking task to go through the formulas and lines of data to find the problem. Take a bill of quantities for example. This could be thousands of lines of data. Why would anyone want to manage that manually?  

And if they don’t know what data is available, how can they possibly begin to use it to improve business efficiencies, boost productivity and increase margins? As a result, the starting point for digitising a construction business is to understand what data is where and how it is used. 

Gather And Organise Your Data 

 

From working with our clients to implement ERP and estimating software, it has become obvious that data is stored in different formats in different parts of construction businesses. That might mean, for example, that estimators are using spreadsheets and then passing information to quantity surveyors who may, incredibly, still work on paper.

What’s more, offices in different parts of the country may collect and store data in different ways, making it hard for financial directors or managing directors to have any visibility of the data, let alone an understanding of what data is stored and where.  

The beginning of the process involves asking a series of questions of all employees who have a responsibility for generating and processing data.. 

• Do you know where your costs for labour, plant and materials are stored?  

• What about previous estimates and tenders?  
• How are lists of subcontractors and suppliers maintained?  
• If you do know, does everyone else in the business know?  
• Is it stored in a way that it can be accessed by other parts of the business in a meaningful and useful manner? Or is your data stuck in silos around the business?  

Knowing the answer to these questions is the first step on the journey to digitising your business. 

If the answer to those questions is ‘I don’t know’, business leaders need to understand they are missing a trick. If data isn’t being collated and stored in a consistent fashion, it is highly likely that work is being duplicated, which is a waste of time and money. Duplication is a drag anchor on businesses which they can ill-afford in any sector of the economy, but it is particularly dangerous for contractors, who typically operate on wafer thin margins.

Learn more about improving your cost estimating data in our blog How to put your data in order: improve estimating data in six steps > 

 

Consider Impact On Profit Margins 

 

Bentley system’s analysis of the 100 largest construction companies’ found that average profit margins over the past 10 years was just 1.6%. Turner & Townsend found that the UK has the world’s lowest profit margins, with a typical medium-sized commercial job yielding just 3.9%. However, by leveraging the power of data, firms could go from 3-5% margin to 8-10% in just 5 years. 

The problem is not just for the businesses at the top of the supply chain. Issues tend to filter down, with each subcontractor also likely to suffer because of poor decision making and data management from others.  

Construction is a collaborative process where many businesses need to work effectively together. Often, processes and cashflows are at different levels of pressure throughout the supply chain, at various stages of projects. Everyone needs the same advantages: accurate, accessible data that can be used for making decisions easily and efficiently.  

If business leaders don’t know what data is being collected or how it is being stored and processed, it follows that they cannot understand where inefficiencies can be found and eliminated or what risks their company is exposed to. 

Learn more about construction profit margins in the UK and how to improve them - What is an Average Construction Company Profit Margin? >

 

Determine the Quality of Your Data 

 

Having gained an understanding of what data exists and how it is being stored and manipulated, as well as who has access and to what, company directors would be well-advised to interrogate the quality of the data. Simply put, is it fit for purpose? 

If different parts of a business are collating data in inconsistent ways, the clear answer is ‘no’. There are numerous variables that need to be considered and rationalised if a contractor is to be able to maximise the benefits from the data they hold.  

Even when strict protocols are in place within a single company for how data should be collected, if individuals are still inputting data manually into a spreadsheet the possibility for human error is a real threat. However highly skilled and professional, human beings make mistakes and an incorrect decimal place or transposed figure here or there can wreak havoc when estimating for a project tender or managing a project.  

On a simple development, a mistake is likely to be picked up before it causes major headaches. On a complicated project with hundreds of different cost bases, there is a real danger that it could be overlooked. However, making best use of proven technology, such as estimating software, minimises the likelihood that data errors will be introduced.  

What’s more, the cost of the software is tiny compared to the potential consequences of a mistake at tender stage that will live with a project for its duration. Doing business is inherently risky, but if that risk can be mitigated affordably it is only prudent to do so. 

 

Ask If Your Data Is Being Used Effectively 

 

Even if data is being collated and inputted seamlessly into spreadsheets, that does not mean that it is being used effectively or efficiently.   

Using dedicated estimating software and construction ERP software removes the time-consuming pain of having to analyse hundreds of variables, significantly increasing productivity.  

Using Access ConQuest Estimating as an example, when requesting quotes from subcontractors, information is distributed automatically, including any necessary drawings. Estimators can easily check which subcontractors have responded, and the software compares the quotes, flags up anomalies and identifies the best price. It also provides a robust audit trail that shows which subcontractor downloaded which drawings and when, or even if they did at all.  

Digital technology benefits both team members and the business. By automating much of their work, it allows them to concentrate on what they are best at, which is managing projects and budgets. They no longer have to spend time fiddling with spreadsheets; rather, they can get out of the office and do deals. In turn, that allows them to manage cashflow and control their margins more effectively, something that will be appreciated by financial and managing directors.  

From a management perspective, using estimating and ERP software provides a level of oversight that simply is not available using traditional methods.

Put A Value On Your Data 

 

The financial benefits of effective data management can only really be calculated by companies once they have implemented a software solution. However, there are numerous ways in which savings and efficiencies are realised. 

For instance, estimators are under pressure to get tenders out on time and manually inputting data into spreadsheets takes up time they simply do not have. Hitting deadlines means longer hours, poor morale and the clear and present danger of making mistakes – with all the cost implications for the lifetime of a project that entails. 

One solution, of course, is to hire another estimator, but given the well documented skills shortage in construction, such professionals are hard to come by, which has had an inevitable inflationary impact on salary expectations. Estimators can now command salaries of £60,000 and higher. Hiring is a time-consuming and expensive business.  

Implementing an effective estimating software solution removes the need for bringing in more human resource. Moreover, using software minimises the risk of human error. To give just one example, an attendee of one of our training sessions admitted that he had failed to spot a key element of a project that ended up being worth £18m.  

 

Determine The Future of Your Data 

 

Without integrating data in a common platform there is limited ability for detailed analysis and comparison. This is a major risk for organisations in an industry under cost pressures, with shrinking margins and a culture known for its combative nature.  

Those that have brought their data together are already seeing benefits. Estimators, project managers, quantity surveyors and finance directors that manage and share project data through a single system make better decisions based on accurate data that is transparent and easy to access.  

This gives organisations much greater control of data and removes inefficiencies, largely due to a more streamlined process and less rework. These incremental gains improve productivity and outcomes for project teams and help boost business margins.