The wave of new construction technologies has been dramatically transforming the industry. On today’s construction sites, robots conduct building inspections, drones buzz overhead capturing a project’s progress, and every drawing and plan is accessible to workers in real-time through the cloud and mobile devices.
Still, despite construction’s significant digital transformation, it seems cost management has lagged behind.
“Today, we live in a world where nearly every tool used to manage a job is in some way digitized. However, construction’s digital transformation has focused on digitizing drawings and documentation management while largely ignoring cost management,” said Katie Rapp, Procore Senior Product Marketer.
A new industry report by Dodge Data & Analytics commissioned by Procore took a close look at the industry’s current state when it comes to cost management. The study aimed to learn how owners, general contractors, and specialty contractors manage their costs, what tools and technologies they leverage to gain the insights needed to keep costs in check and uncover areas that need improvement.
The Confidence Factor
The report revealed an apparent gap in confidence between general contractors and specialty contractors in terms of their cost management capabilities, with GCs 12% more likely to be satisfied with their current tools than trade contractors. General contractors have traditionally taken on most of the responsibility for managing project costs and so are generally more familiar with the tools. However, effective cost management requires all hands on deck.
We can’t get there without trade contractors being really participatory partners along with general contractors to help everybody manage costs,” said Steve Jones, Senior Director of Industry Insights Research for Dodge Data & Analytics.
“At the end of the day, they’re actually spending the money. They’re putting the labor on the site. They’re actually buying the materials, and they’re dealing with the fluctuations in both the labor and the materials markets firsthand in the trenches, so it’s got to be a partnership here.”
It’s also worth noting that owners, perhaps not surprisingly, were more confident than any other group when it comes to their cost management capabilities.
One Tool to Rule them All
Most said they prefer to use a single tool for their top cost management challenges, with around two-thirds of respondents reporting they either use one tool or several. For instance, 73% of contractors use a single tool to establish a cost accounts system, and nearly four in five owners use a single tool when managing change orders and documentation.
Field users were far more likely to use a primary tool than office workers. They were also more confident than office users in the tools’ ability to solve their top cost management challenges.
“Just by the sheer nature of their jobs, they’re probably more inclined to gravitate to those types of tools in order to make their lives better,” said Jas Saraw, Procore’s Canada VP.
“When you’re in an office, you almost have the luxury of having different tools. When you’re in the field, ‘give me one tool, man,’ come on,” Jones added.
The high level of confidence and satisfaction shown by field users in using cost management tools compared to those in the back office highlight the ongoing shift in putting the power of cost management into the hands of the folks who are out in the field doing the projects.
The Future of Cost Management
While many of the survey responses found owners and contractors in agreement, the top needs for future improvement were where the groups diverged.
For instance, 23% of contractors cited the ability to confidently compare original estimates to actuals to improve future estimates as a high priority for improvement, while only 8% of owners agreed. On the other side, 40% of owners said dynamically tracking every dollar budgeted was something on their near-term radar, compared to just 23% of contractors.
Across all survey respondents, the most frequent areas cited as in need of improvement over the next three to five years included dynamically tracking every dollar in the budget and managing collaborative workflows. Forecasting critical costs with real-time data from the field was the top answer given.
“You’ve got to tie the field back into all the other systems, right? It’s just got to be looked at not as two different worlds. It’s got to be looked at as a holistic ecosystem,” said Jones.
Procore’s Financial Management Solution
Whatever cost management challenges your business is facing, Procore serves as the connective tissue between your real-time financial management needs in the field and your accounting system. Thus, it ensures that everyone, from office to field, has access to important project financial information at all times.
Where Procore focuses is how we can make our cost management solution incredibly collaborative with all of the different kinds of folks you need to get your job done,” said Geoff Lewis, Procore’s VP of Product Management.
“Think of a project engineer interacting with a project manager, interacting with a project executive, interacting with an accountant, all of whom work at the same company,” added Lewis.
Procore is built around both internal and external interactions, allowing for seamless and secure collaboration around every aspect of a project’s financials. As part of its ongoing investment in building the best platform in construction, Procore has added some exciting new enhancements to its financial management solution.
Procore’s new Work Breakdown Structure gives any size contractor the ability to organize, tag, and report on their financial data. This new enhancement adds the ability to create 10 new custom segments, taking it a step beyond sub job, cost code, and code type to improve the way project financial data is captured, organized, and analyzed.
Procore’s new approval workflow solution gives companies the financial control to configure and administer workflows within Procore.
“When I think back to my time in the field, invoicing approvals were always a very manual process. Processes were stopped in their tracks because one piece of paper went missing or someone didn’t realize that the ball was in their court,” said Mikala Larez, Strategic Product Consultant, Procore.
“With this new enhancement, you can foster transparency and collaboration throughout the entire invoicing process, easily define the roles that need to be involved, outline the process, and trust that team members will be notified when the ball is in their court for approval.”
Cost management is something every project stakeholder plays a part in, but they need to be given the right tools to be successful. Project managers spend much of their time thinking about the schedule, scope, quality, and RFIs. With a comprehensive set of financial tools at their disposal, it becomes substantially easier to calculate those factors’ impact on a project’s bottom line.
“A project manager has to spend all their time thinking about these interactions between these different things,” said Lewis. “What we think is so powerful is that rather than having your scope and schedule on one system and your cost in another, by bringing it all together into one system like Procore, you can really start to drive this insight of how these things are affecting each other.”
If you’d like to learn what the most important cost management practices to improve on over the next three to five years, be sure to listen to this on-demand webinar: Cost Management The State of the Industry.
For additional thoughts and insights from the report, you can download “The Construction Cost Management” ebook here.