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What if you had an early warning system to keep projects on track?
Challenges in effectively managing and delivering projects on time and on budget are not new for the construction industry. Traditional approaches to project management often rely on reactive decision-making and are hindered by legacy workflows and technologies. However, with the emergence of new technologies and data-driven tools, contractors now have the opportunity to implement robust early warning systems that can revolutionize project delivery.
This paper envisions what project delivery could look like for a contractor who has successfully implemented an early warning system. The contractor's day-to-day operations are transformed as they leverage data and analytics to inform decision-making and proactively mitigate risks. Real-time access to comprehensive project information allows for better planning, accurate estimation, and effective coordination among stakeholders. Historical data and benchmarks are utilized to optimize scheduling, resource allocation, and procurement strategies. Key performance indicators (KPIs) are monitored in real-time, providing early warnings of potential issues and enabling proactive interventions.
Data-informed decision-making empowers the contractor to make informed choices, prioritize actions, and allocate resources efficiently. Issues such as delays, cost overruns, and quality deviations are promptly addressed, minimizing their impact on project performance. Collaboration among team members is enhanced through real-time communication and access to project data, fostering proactive problem-solving and decision-making. The contractor is able to continuously monitor and measure project progress against established targets, and make adjustments as needed to ensure project success.
The implementation of an early warning system transforms the contractor's approach to project delivery, enabling a proactive and data-driven approach that improves overall project outcomes. The paper highlights the potential benefits of leveraging emerging technologies to overcome historical constraints and achieve better project delivery in the construction industry.
Early Warning System for Capital Projects: Introduction
Once upon a time, there was a skilled contractor named Patrick who was tasked with building a large office complex in the heart of a bustling city. With years of experience in the construction industry, Patrick knew that accurate planning and estimating were key to delivering the project on time, on budget, and on value.
To ensure predictable project delivery, Patrick and his team had implemented project controls software to act as an early warning system. The software had robust data collection, analysis, and reporting capabilities that allowed Patrick to use historical data to improve future project planning and then closely monitor various project aspects in real-time.
At the start of the project, Patrick's preconstruction team used the historical data from the software to analyze similar past projects in terms of cost, schedule, and resources. They identified patterns and trends, and used that information to create a more accurate and comprehensive project plan, taking into account potential risks and challenges that they had encountered in the past.
The project controls software also provided detailed cost breakdowns, labor productivity rates, and material usage data from previous projects, which helped Patrick's team in creating more precise cost estimates for the office complex. They were able to identify potential cost drivers and allocate resources more effectively, leading to a more realistic and reliable budget for the project.
Furthermore, the historical data in the system allowed Patrick's team to proactively mitigate risks. They could identify common risks and challenges faced in similar past projects and develop mitigation strategies in advance.
As the project progressed, the project controls software's early warning system alerted Patrick's team to potential deviations from the planned schedule and budget. One day, during the construction phase, the software's early warning system alerted Patrick to a potential delay in the delivery of steel beams due to a delay in the supplier's production schedule. The software had flagged this issue as it was tracking the procurement timeline and had detected a discrepancy in the expected delivery date.
Patrick quickly sprung into action. He proactively contacted the steel supplier and obtained updated information
on their production status. He also alerted his project team and worked with them to devise a contingency plan to minimize the impact on the project schedule. Thanks to the early warning system, Patrick was able to take swift action and prevent any delays in the construction timeline, keeping the project on track.Another instance where the early warning system proved invaluable was in cost management. The software's data analytics capabilities allowed Patrick to closely monitor project expenses and compare them against the budgeted costs. The early warning system raised a flag when certain costs started to exceed the allocated budget, indicating a potential cost overrun.
Thanks to the early warning system provided by the project controls software, Patrick was able to proactively manage potential risks, control costs, and optimize value throughout the project's lifecycle. The office complex was completed on time, within budget, and with enhanced value, earning Patrick and his team accolades for their exemplary performance.
Owners and contractors often struggle to implement effective early warning systems in construction projects due to constraints from legacy workflows and technologies, including disconnected and outdated excel spreadsheets for planning and control. As such, it is a challenge to aggregate project information in one location and have a complete view of the project status in real-time, leading to imprecise decision-making during planning and construction phases. Moreover, construction projects are complex and involve numerous variables, making accurate planning and prediction challenging. General contractors may face uncertainties in site conditions, weather, material availability, labor productivity, and coordination with multiple subcontractors and vendors, which can result in unforeseen issues and the need for reactive decision-making during the planning and construction phases.
Additionally, construction projects are time-sensitive and dependent on shifting schedules, adding extra complexity to project management. Legacy workflows and technologies, such as excel spreadsheets, are often used for project planning and control, but these can be disconnected and out-of-date, with project information scattered across different sheets or documents. A lack of real-time visibility into the complete project status hinders the implementation of an effective early warning system, leaving contractors reactive in their decision-making.
Communication and coordination challenges among multiple stakeholders, including owners, architects, subcontractors, and suppliers, further complicates the situation. Misalignment or delays in communication frequently results in reactive decision-making by the general contractor to address issues as they arise. Human errors, bias, and unforeseen issues also impact the planning and construction phases, requiring immediate attention and resolution. Without a centralized and real-time data source, owners contractors can not make data-informed decisions that proactively mitigate risks and address issues in a timely manner.
Addressing these constraints and implementing modern project controls software can help general contractors overcome these challenges and improve their ability to proactively manage projects and keep them on time, on budget, and on value.
Early Warning System Solutions
Ignore the problem
The cost and result of ignoring the sources of imprecise planning and reactive construction are significant. However, we are often biased against addressing them, calling these results “costs of doing business.”
Some of the potential costs and consequences of ignoring this problem include:
Increased project delays: Without a proactive approach to identifying and mitigating risks, issues arise unexpectedly, resulting in delays in project completion, which can lead to additional costs and penalties.
Cost overruns: When a contractor is not able to tie their actuals with estimates, it is difficult to identify and improve areas of poor estimating.
Quality issues: Reactive decision-making compromises the quality of construction work, as issues have to be addressed hastily without proper planning or coordination. This leads to rework, defects, and other quality issues that impacts the overall durability, safety, and functionality of the completed project.
Legal disputes: Poor planning and lack of insight into project decisions leads to mistakes, which may result in disputes and claims among project stakeholders, such as owners, contractors, subcontractors, and suppliers. The result is costly legal battles, damage to relationships, and delays in project progress.
Damage to reputation: Construction projects are often highly visible, and negative impacts resulting from reactive decision-making and lack of proactive risk management damages the reputation of both contractors and owners.
Increased project stress: Current systems create a stressful working environment, as project teams may be constantly micromanaging and fire-fighting. Increased stress levels among team members lead to decreased morale, decreased overall productivity and higher turnover.
Missed opportunities: Current systems may cause owners and contractors to miss opportunities for optimizing project performance, cost savings, improved project outcomes, and increased stakeholder satisfaction.
The Impact of Doing Nothing
Budget and schedule overruns are common challenges in commercial construction projects, and they can have significant cost implications. Here are some statistics and costs associated with budget and schedule overruns in commercial construction projects:
According to a report by McKinsey & Company, the average cost overrun for large construction projects is 80% of the original budget.
A study by KPMG found that 69% of construction projects experience cost overruns.
The Construction Industry Institute (CII) reports that cost overruns of 10% or more are common in the construction industry, with some projects experiencing cost overruns of 50% or more.
The same report by McKinsey & Company found that the average schedule overrun for large construction projects is 20% of the original schedule.
The CII reports that 61% of construction projects experience schedule overruns.
A study by Dodge Data & Analytics found that only 35% of construction projects are completed on time, with the remaining 65% experiencing schedule delays.
The direct and indirect costs of overruns vary depending on the size, complexity, and location of the project, but they range from thousands to millions of dollars, leading to significant financial and reputational consequences for construction projects and stakeholders involved.
Enable an early warning system
An innovative owners contractor can implement an early warning system for project delivery by leveraging modern technologies and best practices. Here are some steps that an innovative contractor can take:
Invest in a common data environment: Implementing a common data environment enables real-time data capture, analysis, and reporting that provides a solid foundation for an early warning system. The software should be able to integrate and aggregate project information from various sources, such as scheduling, budgeting, procurement, and quality control, into a centralized system for easy access and analysis.
Utilize data analytics and predictive analytics: Leverage data analytics and predictive analytics to analyze project data and identify patterns or trends that may indicate potential risks or issues. For example, using historical project data, contractors can develop predictive models to forecast potential delays, cost overruns, or quality issues. This allows for proactive decision-making and timely interventions to mitigate risks before they escalate.
Implement real-time monitoring and reporting: Utilize real-time monitoring and reporting tools to capture project data in real-time, such as progress updates, quality inspections, and resource allocations. This enables contractors to have a real-time view of the project status and identify any deviations from the plan or early warning signs of potential issues.
Establish early warning triggers and protocols: Develop early warning triggers and protocols that define specific thresholds or criteria for identifying risks or issues. For example, if a certain activity is delayed by more than a certain percentage, or if the budget exceeds a predefined threshold, it could trigger an early warning alert. Establish protocols for how these early warnings will be communicated, escalated, and addressed by the project team.
Train and empower project team members: Provide training and resources to project team members to develop their skills in risk management, data analytics, and early warning system implementation. Empower team members to contribute to the early warning system by providing them with the necessary tools and authority to identify, report, and address potential risks or issues.
Regularly review and update the early warning system: Continuously review and update the early warning system based on project feedback, lessons learned, and evolving project conditions. Incorporate feedback from project team members, owners, and other stakeholders to continuously improve the effectiveness of the system.
By following these steps, an innovative contractor can implement an early warning system for project delivery that enables proactive risk management, real-time monitoring, and timely interventions, leading to improved project outcomes and increased project success.
Benefits of an Early Warning System
Data-informed decision-making for an owner or contractor using an early warning system involves leveraging project data and analytics to make informed choices in managing construction projects.
Here are some specific examples of how a contractor can use data to improve decision-making:
Resource Allocation: An early warning system can provide data on resource utilization, productivity, and performance. Contractors can analyze this data to identify trends, patterns, and areas of improvement. For instance, if the system shows that a particular subcontractor is consistently falling behind schedule, the contractor can take data-driven action to reallocate resources or provide additional support to address the issue. This helps ensure that resources are optimized and utilized effectively, resulting in improved productivity and reduced costs.
Schedule Management: An early warning system can track project schedules and provide insights on progress and delays. Contractors can analyze this data to identify critical path activities, potential bottlenecks, and areas where the project is falling behind schedule. This allows the contractor to take proactive measures, such as adjusting the schedule, reallocating resources, or implementing additional measures to accelerate progress and prevent delays. Data-driven decision-making in schedule management enables the contractor to optimize project timelines and meet project milestones more effectively.
Risk Management: An early warning system can capture data on project risks, such as potential delays, budget overruns, and quality issues. Contractors can analyze this data to assess the severity and impact of risks, and prioritize them based on their likelihood and consequences. This helps the contractor develop and implement risk mitigation strategies, such as contingency plans, alternate sourcing, or additional quality controls, to address the identified risks.
Cost Control: An early warning system can track project costs, including budget allocations, expenses, and variances. Contractors can analyze this data to identify cost trends, discrepancies, and areas of potential cost savings. For example, if the system indicates that a particular aspect of the project is exceeding the budget, the contractor can analyze the root causes and take appropriate actions, such as renegotiating contracts, optimizing material procurement, or implementing cost-saving measures.
An early warning system allows contractors and owners to make data-informed decisions, resulting in more efficient project execution, reduced risks, and improved overall project performance.
While historically implementing an effective early warning system in construction projects has been challenging due to legacy workflows and technologies, new and innovative technologies are now being developed to address this issue. These technologies offer opportunities for contractors to leverage data and analytics to inform decision-making, proactively mitigate risks, and optimize project performance. With the advancements in construction project controls software and data-driven tools, contractors now have the potential to overcome the limitations of traditional approaches and implement robust early warning systems that enable them to achieve better project outcomes. Embracing these emerging technologies can revolutionize the way contractors operate on a day-to-day basis and drive improved project delivery in the construction industry.
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