Digital displacement: How modernized project controls are the new kid on the block

As a construction technology veteran with over twenty years of experience, whenever I ask construction businesses how they manage cost, their typical response is: '[We] use spreadsheets.'

In fact, the KPMG 2015 Global Construction Project Owners survey states that '50% of construction companies have not yet introduced an integrated Project Management Information System (PMIS )'*. Old-school spreadsheets still prevail, and the construction industry still has a long way to go in adopting digital project management solutions.

For example, I recently met with a fit-out contractor in Dubai who had just finished working on a hi-spec, small-sized hotel refurbishment project. The contractor managed over 600 variations on Excel during a 7-month period. The contractor said he chose to manage these arduous variations on spreadsheets for two reasons: 1) his office system couldn't manage costs, and 2) he considered the refurbishment project too small to invest in cost management software.

Despite the hundreds of modern software applications designed to replace manually-based systems - including spreadsheets - the construction industry is lagging. Only 8% of survey construction professionals fall into the 'cutting edge visionary' category in terms of adopting new technology. Companies should be running, not walking, to adopt modern project controls or get left behind. In this post, I'll make the case for why modernized project controls systems are more flexible, reliable and efficient than old-school spreadsheets.

Risky spreadsheets and disconnected cost and scheduling systems

Both the project and finance teams exchange real-time data with one another (generally via a spreadsheet) to determine a project's financial health and track and manage its status. The project team records, monitors, and reports on costs using spreadsheets. However, as project requirements become more onerous, over-complicated spreadsheets pose an ongoing risk to the business - not to mention integration with other databases and systems. Complex spreadsheets and disconnected systems fuel the potential for errors and inefficiencies within the business.

To compound matters, external companies also use a myriad of standalone cost management systems to support project teams' estimating, planning, cost controls, accounting and document management. While these isolated systems may address specific project challenges, siloed solutions won't contribute to an organization's overall efficiency. Just 36 percent of engineering and construction companies - and only 21 percent of owners - use advanced data analytics for project-related estimation and performance monitoring. More construction companies should jump at the chance of adopting digital project delivery.

Why ERP Systems aren't the answer for project-based cost management

Traditionally, construction companies have invested in financial Enterprise Resource Planning (ERP) systems to manage controls. These financial systems assist with company operations, including: inventory, procurement, and cost control. However, rigid ERP systems can't adapt to real-time changes and manage corporate finance systems at the same time.

Project teams resort to spreadsheets so that they can determine costs in real time - including anticipated and pending costs -not at month's end. Inflexible ERP systems account for costs after the cost incurred. The project team assesses a project's immediate financial health while the financial team reports on what's already happened and how it affects the greater organization. Furthermore, project teams need a flexible system that not only tracks cost, change and schedule, but, also the origination of each decision and change. Companies need to have connected systems joining finance and project management into one cost management solution.

A 'one-size fits everyone' financial system is too broad for construction

Many companies regard ERP systems as a one-size fits all solution. However, in an industry where successful project delivery depends on multi-team collaboration, a closed, firewalled ERP system is not the answer. In 2015, Gartner predicted that ERP software will be 'deconstructed' and outsourced as cloud services. Furthermore, developing a cloud-based ERP system that supports a variety of industries - from Retail to Consumer Goods to Construction - is far too broad. Engineering and Construction is a highly complex industry that requires specific solutions; not a 'one-size fits everyone' approach.

Reliable reporting and a 'single version of the truth' are essential to cost

Accurate, reliable source data is essential in delivering cost reports to decision makers. If project and finance managers don't have confidence in the solutions they're using (spreadsheets), they won't feel confident on accurately reporting data in a report.

In addition, spreadsheets and disjointed solutions don't offer a 'single version of the truth'. Once Party A shares a cost report (commonly a spreadsheet via email) with Party B, the information is outdated. When Party B begins to make edits, there are now 'dueling' spreadsheets. Variances now exist between two versions of the report.

Digital project management systems to the rescue

A modernized project controls system empowers project leaders and project controls teams to forecast and manage their project cost plan with accuracy and efficiency. Modern, digital systems are highly collaborative, meaning that your team is using the same tool for key project processes. You can avoid cost overruns, delayed schedules and the hassles of outdated technology.

Currently, only 20 percent of survey respondents say their organization has a single, fully integrated project controls solution across the enterprise. This adoption rate is surprisingly low. The emergence of digital cost management systems will begin to overshadow the industry's reliance on inefficient spreadsheets, disconnected cost and scheduling systems, and ERP systems. The construction industry traditionally faces the challenges of operating on very tight margins and must deliver projects on time, budget, and specification. Modern construction companies are beginning to see the value in investing in technology to help save costs and drive efficiency.

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[1] KPMG, Building a Technology Advantage, Global Construction Survey 2016, Armstrong, Gilge.

[2] Ibid.

[3] Ibid.

[4] KPMG, Building a Technology Advantage, Global Construction Survey 2016, Armstrong, Gilge.