Digitising the front office

It is not unusu­al for con­struc­tion com­pa­nies to make invest­ments in infor­ma­tion tech­nol­o­gy. Most of that invest­ment, how­ev­er, has been focused on enter­prise resource plan­ning (ERP) sys­tems in the back office – ape­ing the strat­e­gy of large com­pa­nies in oth­er sec­tors.

The con­struc­tion indus­try is not like oth­er sec­tors though. The nature of the prod­uct is not uni­form or pre­dictable; con­struc­tion projects are diverse, each car­ry­ing with them unique issues and chal­lenges. In addi­tion, around 90 per cent of a con­struc­tion company’s costs are in the pro­vi­sion of mate­ri­als, sub-con­trac­tors, plant and labour need­ed to deliv­er these projects, where mar­gins are thin, risks are high, and change is con­stant.

Yet the oper­a­tional and com­mer­cial teams tasked with man­ag­ing these projects are typ­i­cal­ly rely­ing on a col­lec­tion of siloed sys­tems and spread­sheets in an effort to cre­ate a “sin­gle view” of the truth.

In the UK, attempts to make use of ERP sys­tems to con­trol project process­es have on the whole been unsuc­cess­ful. This has inevitably led to dupli­cat­ed effort, inef­fi­cien­cy, inac­cu­ra­cy and a pauci­ty of mean­ing­ful infor­ma­tion at the sharp end, with gen­uine impli­ca­tions for over­all effi­cien­cy and prof­itabil­i­ty.

Fur­ther­more, this is hap­pen­ing in an envi­ron­ment where the indus­try is under sig­nif­i­cant pres­sure to reduce con­struc­tion and life-cycle asset man­age­ment costs, while deliv­er­ing bet­ter val­ue for clients.

For exam­ple, the last government’s con­struc­tion strat­e­gy tar­get­ed a 15 to 20 per cent reduc­tion in the cost of con­struc­tion pro­cure­ment with­in the pub­lic sec­tor, to be deliv­ered through stream­lin­ing process­es. Look­ing fur­ther ahead, the 2013 gov­ern­ment report, Con­struc­tion 2025, Indus­tri­al Strat­e­gy: gov­ern­ment and indus­try in part­ner­ship, includ­ed in its pro­pos­als:

• A 33 per cent reduc­tion in the ini­tial cost of con­struc­tion and the whole life costs of built assets.
• A 50 per cent reduc­tion in the over­all time, from incep­tion to com­ple­tion, for new build and refur­bished assets.

The dri­ve to get bet­ter val­ue extends to the UK’s infra­struc­ture too. The High­ways Eng­land Deliv­ery Plan is com­mit­ted to mak­ing cap­i­tal effi­cien­cy sav­ings of £1.21 bil­lion by 2020 (in nom­i­nal terms) while deliv­er­ing an improved ser­vice.

In par­al­lel, the government’s Soft Land­ings pro­gramme is designed to elim­i­nate, or at least min­imise, the per­for­mance gap between design inten­tions and oper­a­tional out­comes.

In an indus­try where low sin­gle dig­it mar­gins are the norm, to para­phrase Ein­stein: “Doing the same thing over and over again, and expect­ing dif­fer­ent results” just isn’t going to cut it.

For many, build­ing infor­ma­tion mod­el­ling (BIM) is seen as the panacea, but BIM is still ground­ed in the design phase of the con­struc­tion process, and has had min­i­mal impact on man­ag­ing con­struc­tion deliv­ery and asset main­te­nance. Indeed, many of the con­struc­tion com­pa­nies that have tru­ly embraced BIM are still strug­gling with the age-old prob­lem of under­stand­ing the true finan­cial per­for­mance of their projects.

This brings us back to the need to digi­tise front-office process­es. Unfor­tu­nate­ly, the only way that the indus­try will be able to deliv­er game-chang­ing effi­cien­cies and sav­ings, and take full advan­tage of the poten­tial of BIM is if it can first­ly inte­grate the dynam­ic and ever-chang­ing rela­tion­ship between time, bud­gets, cost and val­ue.

Report­ing in 2014 on the poor per­for­mance of a lead­ing UK con­struc­tion con­trac­tor, KPMG gave one rea­son as: “Accu­ra­cy of cost and pro­gramme fore­cast­ing – insuf­fi­cient vis­i­bil­i­ty, con­trol and under­stand­ing on actu­al ver­sus report­ed con­tract per­for­mance.”

KPMG rec­om­mend­ed that project man­agers should have greater finan­cial and com­mer­cial account­abil­i­ty for project per­for­mance with an appro­pri­ate set of project key per­for­mance indi­ca­tors.

As data enters the Cause­way sys­tem, it enables us to cap­ture and com­pare across asset types some real-time and his­toric bench­mark­ing data. This is key as our clients seek to under­stand how their assets can be most effi­cient over a life cycle and is ulti­mate­ly where we add val­ue most

So this rais­es a key ques­tion: will divert­ing IT dol­lars from mono­lith­ic back-office finance sys­tems towards agile front-office oper­a­tional sys­tems offer greater scope for the process trans­for­ma­tion and suc­cess the indus­try craves?

The answer must be a resound­ing yes. If project and com­mer­cial man­agers at the coal­face are to be giv­en greater respon­si­bil­i­ty (and risk), they also need the tools to do their job effi­cient­ly. They need sys­tems that bring togeth­er all the busi­ness process­es asso­ci­at­ed with cost-cap­ture and man­age­ment of project. They also need to be able to share that infor­ma­tion with sup­ply chain part­ners and, ulti­mate­ly, clients’ sys­tems in inte­grat­ed project teams.

This approach played a key role in the suc­cess­ful deliv­ery of Lon­don Heathrow Airport’s Ter­mi­nal 5, where BAA man­aged a sin­gle team of more than 50 con­trac­tors and man­dat­ed the sys­tems they used, with Cause­way solu­tions at the heart of them.

That was in 2008 so this isn’t a new con­cept, but the sus­tained focus on back-office ERP has undoubt­ed­ly hin­dered its adop­tion.

In fact, as inte­grat­ed project teams become the norm, there is a strong incen­tive for clients to take more respon­si­bil­i­ty for the sys­tems being used. As KPMG notes in its 2015 Glob­al Con­struc­tion Project Owner’s Sur­vey: “Project own­ers must invest in rela­tion­ships with con­trac­tors to raise mutu­al trust and dis­cuss prob­lems or short­com­ings. Rather than sim­ply pass­ing all or most of the risk to the con­trac­tor, it is prefer­able to cre­ate an inte­grat­ed project team with com­mon goals and rewards.”

As with cap­i­tal projects, con­trac­tors oper­at­ing in asset main­te­nance need tools that will help them min­imise costs and increase client sat­is­fac­tion through bet­ter man­age­ment of their pre­cious resources. Cause­way has observed that cus­tomers who inte­grate job process­es with mobile tech­nolo­gies, GPS telem­at­ics and sched­ul­ing can increase the effi­cien­cy of mobile work­forces by as much as 30 per cent.

So the good news is that things are start­ing to change, albeit rather slow­ly, and the tech­nolo­gies and know-how are now there to sup­port digi­ti­sa­tion of construction’s “front office”. The chal­lenge is to make it hap­pen quick­ly enough and that may well require a change of think­ing at board lev­el.

Dis­cov­er four ways to digi­tise your front office now at go.causeway.com/future or con­tact phil.brown@causeway.com

CASE STUDY

RICHER DATA FOR REPORTING AND BUSINESS INTELLIGENCE

EM High­ways pro­vides high­ways main­te­nance ser­vices to a num­ber of strate­gic clients. The com­pa­ny intro­duced Cause­way as its core front-office busi­ness sys­tem in 2013 and has seen turnover increase by £210 mil­lion to £500 mil­lion.

Finance direc­tor Joe Incut­ti recalls: “We looked at sys­tems, such as Ora­cle and SAP, and realised quite ear­ly in the process that the Cause­way solu­tion, off the shelf, was going to be a very good fit. We decid­ed we were going to imple­ment the lot, not just take bits and try to inte­grate it with oth­er bits of sys­tems – we were going to use the whole thing from cra­dle to grave.

“Hav­ing that ful­ly inte­grat­ed suite of prod­ucts gives us a much rich­er extrac­tion of data from the sys­tem for report­ing and busi­ness intel­li­gence.”

Since imple­ment­ing Cause­way, EM High­ways has:

• Dou­bled in size, scal­ing the Cause­way solu­tion in line with this dra­mat­ic growth.
• Auto­mat­ed numer­ous pre­vi­ous­ly labo­ri­ous, time-con­sum­ing front-office process­es.
• Stream­lined pro­duc­tion of all key man­age­ment reports.
• Come top in High­ways Agency StART scores, with much cred­it giv­en to the sup­ply chain col­lab­o­ra­tion sup­port pro­vid­ed by Cause­way.
• Used the part­ner­ship with Cause­way as an exem­plar for BS 11000 accred­i­ta­tion.

CASE STUDY

RICHER DATA FOR REPORTING AND BUSINESS INTELLIGENCE