BK: Welcome back. It is HxGN RADIO. My name is Brian. Thanks for joining us.
In the construction industry, the ability to properly forecast and adjust project budgets throughout the building process is integral to make sure projects are delivered on the date and budget as expected. The need to more accurately predict the cost to complete for a project will be aided by the use of HxGN SMART Build project controls, Hexagon’s new construction management solution that connects and simplifies the process. Joining me today is Cathi Hayes, the director of business development for HxGN SMART Build. And Cathi, welcome. Thanks for being here.
CH: Thank you.
BK: So, I’m excited. You’ve got some construction jokes that we could … I don’t know if you want to talk about them or not. I’m just kidding. We were talking about them before we got on today. Just so much fun. I’ve learned so many new things from you. Thank you.
CH: Absolutely. My pleasure to share my knowledge and experience in construction with you guys.
BK: Wisdom would be the right way to call it.
CH: Wisdom, wisdom.
BK: Yes. Wisdom, yes. It’s like Yoda, so we’ll go with that. All right, so tell us a little bit about the challenges that occur—let’s start there—when it comes to predicting projects’ costs to complete in the construction industry.
CH: So in the construction industry, there’s a problem with visibility, and the visibility I’m talking about is where are projects exactly? How do we know exactly where the project is when it relates to the schedule and to the budget, right? Why is this a problem? It’s a problem because there’s a lack of an integrated platform that allows all the information to flow back and forth between the many parties that are involved in a construction project. If you’ve ever been involved in construction, you know, you can just see there are lots of different trucks coming in and out and tractors and different things with different company names on them. So there’s a lot of activity, a lot of change and just a lot of different subcontractors to manage what work they’re doing, how much work has been performed and how much has been billed. So what’s the actual cost, and then how do you see that information? And a lot of times, that information comes late because you’re relying on invoices coming in that come in after the fact; the work has already been done and in place for a while. So having that visibility is a real big challenge today and lots of downstream effects of that. When you have a challenge like that, it’s really hard to predict what is the cost to complete because you don’t know where you have cost overruns or where you may be underspending.
BK: Understood. Now, is it true that the majority of them are not using integrated project control systems?
CH: Yeah, as a matter of fact, there’s a huge percentage of owners and contractors that are not using project controls today. So that means that they’ve got information and multiple different systems and there’s silos of information. You can think about different pieces of information in different formats that aren’t getting synthesised together. And you really need to see what the planned schedule was, what the planned budget was and then compare that on a regular basis to what the actuals are, and then also take into account the changes, the pending and accepted changes. That’s a really big deal in construction because changes happen on an hourly basis, daily basis, hourly basis, and all those changes need to be accounted for, and you need to look at those so you can really predict what’s in your pipeline of changes and costs to predict your cost to complete.
BK: It seems a little complicated and—
CH: There are a lot of moving parts in construction, that’s for sure.
BK: Exactly. So finding a way to simplify things to make it more efficient.
CH: That’s right, that’s right.
CH: And that’s really the role we see with Cloud and mobile technology today is that it helps to simplify some of these complex things. Now that mobile devices can be connected with solutions like SMART Build, it helps to make things much easier that in the past were just very complicated and complex to keep track of.
BK: Yeah, absolutely. So how do most projects manage the change and how does it impact the forecasting?
CH: Yeah, so today, change is typically managed by the change-order process. And that’s a great, great mechanism to do that. However, once again, the information is typically in a totally different system. There’s usually tracking RFIs, or requests for information, either with paper, via email, and they may or may not be connected to the actual change order, which is the instrument that then, in turn, will impact the budget for the project. A lot of people are using paper and email and Excel, a lot of Excel, to process the change request and also just to track all the actuals that are coming in or the actuals live in the ERP system; once again an isolated, siloed solution, so that data’s not coming together and getting synthesised.
BK: You mentioned Excel. How efficient is this, really?
CH: Excel is a favorite and an archenemy, all at the same time, because Excel is extremely flexible, it’s very accessible, it’s easy, it’s friendly. But there are some definite downsides of using Excel. There’s no version control. There’s no audit trail. How do you know who did what, when and where? What if somebody changed a formula or changed a dollar amount? How do you know who did that when and where? You simply don’t, right? And then if you go from project to project, if you’re trying to standardise so that you can measure across multiple projects and see the performance of each project, in comparison with each other; if they’re using Excel, and they’re doing it with different methods and different formulas, it’s just nearly impossible to do that. And then there’s no way to really effectively, collaboratively share Excel. Once again, it’s a great, easy tool. I love it. I use it myself. It’s widely used in construction, but it definitely has some downsides, and that’s where a whole fully Cloud- and mobile-enabled solution can come in and bring a lot more value to the game.
BK: So, when a company uses HxGN SMART Build project controls, how does it help them better manage their projects?
CH: Yeah, so, Hexagon’s SMART Build Project Controls is a brand new Cloud-based solution built from the ground up, zero install, so construction companies operating with thin margins, they typically don’t have big IT departments, so it’s very easy to get up and running. You don’t need the IT department at all. It’s one platform that synthesises all this information together, digitally. We can connect with the ERP system so when the actuals come in, they’re going to automatically come into the project controls solution, and it’s going to automatically be comparing those actuals with what was planned. It also manages the change-order process with an audit trail. So when you bring a budget in, it’s kind of locked down, if you want to think of it that way, as a baseline budget. You cannot change the baseline. And the reason why that’s done is so we can compare all the changes to it, so you always have a running audit trail with charts and graphs that are very easy to read that show you graphically where you originally planned to be versus where are you today. And then based off of all that information getting combined and synthesised together and analysed, then you can see what your cost to complete is going to be.
And you can even do what-if scenarios. So you can take a look at, well, we have all these pending changes, let’s get the team together and talk about creative ways to solve these problems in a more cost-effective way so that we can predict the margins for the project and so we can do a lot of that planning. If you’re using Excel and other disconnected systems, you just don’t have that early visibility into the problems. And that’s how projects get off track, and they get too far off track to really pull them back into straight.
BK: Sure. Have you had any feedback on how this has worked so far?
CH: Yeah, oh, absolutely.
CH: Our customers tell us that the improvement in productivity has been dramatic: 70 to 80% productivity gains, with people taking their time that used to be spent on collecting information, low-value tasks where they were just calling people and getting Excel files and extracting data out of this system and that system, and then taking data in different formats and manually trying to get them into the same format to put them together. It was taking 70 to 80% of time. And then only a very small per cent of their time was actually doing the analysis and the what ifs to figure out how do they course-correct the project. Once they implement project controls, that turns upside down. And now they’re spending 70 to 80% of their time doing the analysis and the what if and evaluating what’s going on with the project so that they can protect their margins, have greater profitability and meet the expectations of their clients as well, which helps with the repeat business, of course.
BK: Absolutely. I love hearing about the efficiency factor and all that and how it just helps everybody to do what they need to do best, more. I love that.
CH: Absolutely. The construction industry has been suffering over the last 20 years from productivity gains being flat or even in decline, so any opportunity that we have to help move the construction industry forward by Cloud and mobile technology, it just makes us really excited as well. We really want to shape change with Hexagon SMART Build.
BK: Good, good. Well thank you so much for this information. Anything else you want to share about this?
CH: No, I think we covered it well. Hexagon SMART Build, built from the ground up, and our three pillars are clarity, connectivity and simplicity. Thank you.
BK: I love that. Thank you very much. HxGNSMARTBuild.com, by the way, if you want to get some more information on that, check it out. And Cathi, thank you for your time. Thank you for sharing the information.
CH: Great. Thank you.
BK: Be sure to tune in to more episodes on HxGN RADIO at HxGNRADIO.com, or we are on iTunes, SoundCloud, or Stitcher Radio. Have a great day. Thanks for listening.