Embracing Digitalization in Construction

While the construction industry wants and needs digitalization, there is much room for growth. As integrated systems are adopted, the technology will be cost effective and easy to use.
By John Duggan and Eric J. Meier
March 31, 2020

It was not that long ago that home audiences watched their favorite shows on tube televisions with small screens and low picture quality. Now, low-cost Smart TV’s with built-in applications allow for watching programming on demand with screen sizes and quality that rival movie theaters. As televisions have evolved, the changes have had an impact on a variety of related industries, from people cutting the cable cord to lower numbers of fans attending sporting events in person. In terms of having access to and otherwise embracing digitalization, the construction industry is much closer to tube televisions than Smart TVs; however, it will not be surprising to see a similar change arc over the coming years.

At a recent program on a variety of construction topics including digitalizing parts of the construction process, the audience of approximately 100 construction industry attendees were asked whether they had heard of blockchain. The majority raised their hands. When asked whether they understood what blockchain was, a lone individual raised their hand. The result of this informal survey is consistent with the premise that people are becoming more aware of technological advancements but are not well versed in how they work.

The potential benefits of blockchain in construction have been covered extensively. Even accepting the potential security, efficiency and other potential benefits as true, is the construction industry ready yet to embrace technological change? If not, why not?

Before answering those questions, it bears noting that the legal landscape for digital transactions already has a solid foundation and is adding more structure ahead of emerging technology entering the mainstream. For example, the Uniform Electronic Transactions Act was passed in 1999. At this point, 47 states have adopted the model act, with the remainder incorporating something similar. The ESIGN act was passed in 2000. Between the two, there is a framework for using electronic records and signatures.

Blockchain laws are starting to pick up steam as well. Wyoming is not just the “Cowboy State,” but is now being referred to as the “Delaware of digital asset law.” Wyoming has enacted 13 blockchain-enabling laws, with numerous additional bills proposed for 2020. According to the National Conference of State Legislatures, there are 27 other states who have introduced legislation relating to blockchain in 2019.

Within the last couple of years, EY conducted a survey of companies along the engineering and construction value chain (from general contractors, designers, developers, engineers etc.). One of the questions posed was, "what are the issues keeping them up at night?" The answers were:

  • risk management of construction projects;
  • cost management of projects;
  • safety;
  • acquisition of staff and employees; and
  • scheduling/time management.

It was noted that while technology is not on this list, it is a potential tool to help manage all of these issues efficiently and effectively. When asked whether they have a digital strategy in place, 28% of respondents said that they have a digital strategy, 56% were in the process of designing their strategy and 16% did not believe it was necessary.

The EY survey results show that there appears to be a digital appetite at some level. Why then, does it seem like there is so much room for growth than there is in embracing digitalization?

The appetite is driven from the efficiencies of digitalization that comes with its support of design, coordination of trades and prefabrication, etc. This also includes the efficiencies in our day-to-day life with the way we communicate and buy goods. The problem is the lack of effectiveness with the way we communicate within the construction industry; because many project management software solutions are antiquated, do not communicate with each other and are document driven, the industry is frustrated.

There are, however, some new, data-driven project management software solutions that purport to line all parties of a construction project on the same platform to improve efficiencies of communication and information. The premise is that by tying in the owners, owners’ representatives, general contractors, architects, engineers and subcontractors within one stream of communication, the system enables and facilitates clear and timely interaction among these players, thereby reducing the risk of breach.

One key element of risk (and cost/scope creep) mitigation on a construction project is proper documentation. RFIs, change orders, meeting minutes—they all add up quickly (and, too often, chaotically) and, if not handled properly, can expose players to potential liability. Emerging software solutions, which incorporate things like just-in-time reporting and tasking, as well as transparency between the players, can allow parties to materially reduce their risk with respect to such matters. Further, by bridging data between parties, the project becomes more transparent and effective in mitigating risk, and also puts parties in position to use data to determine liability.

The same EY survey discussed earlier identified the top five general challenges identified relative to digital transformation:

  • lack of integration between systems;
  • lack of trained staff to review, implement and operate digital technologies;
  • difficulties obtaining buy-in and adoption around technologies;
  • mentality of technology not being effective in construction environment; and
  • clients’ unwillingness to pay for system implementation or pay associated costs.

All of these obstacles are legitimate and real in the moment. However, as the industry obtains access to integrated systems, the technology becomes easier to operate, is shown to be effective and reaches reasonable costs levels (as Smart TVs have done), the construction industry will become heavily digitalized. For contractors not implementing full digital solutions now, it is not too early to start.

by John Duggan
John Duggan is COO of The Concord Group, a global construction consulting firm that specializes in providing Owner's Representation, Cost Management, Infrastructure Management, Cost Segregation and Real Estate Advisory Services. 

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