Understanding the Next Wave of Digital Transformation
Advancements in cost management technology are powering the next wave of construction’s digital evolution and only a fraction of the industry is currently taking advantage of them.
In an effort to better understand the current state of cost management and where the industry is headed, Procore partnered with Dodge Data & Analytics to survey the construction industry. Conducted in July 2021, the report explores the industry’s perception of project cost management and how construction professionals across multiple regions leverage technology to effectively manage costs. Participants included construction owners, general contractors, and specialty contractors in the public and private sectors across Australia, New Zealand, Canada, the United Kingdom, and the United States.
The new global report shows that 1 out of 3 projects come in over budget and even among projects identified by contractors as their best performing, over 1 in 5 fails to meet estimates. Both owners and contractors face a variety of challenges when it comes to project cost management, but they believe using one streamlined tool will help facilitate construction projects and cost management more efficiently.
“The opportunity to redefine what the industry should expect from a cost management solution has never been greater,” said Tooey Courtemanche, Procore founder and CEO. “Procore consistently works to be at the forefront of innovation, and this report highlights how construction technology gives teams insight into project financial risk and confidence in their connected data.”
Breaking Down Key Findings
While the report data establishes a baseline of current construction cost management practices, findings underscore similar challenges experienced by general contractors, specialty constructors and owners.
Key takeaways include:
Current State of Cost Management Capabilities: When asked to evaluate their organizations current cost management capabilities, only 39% agreed and less than a quarter (24%) strongly agreed that capabilities allowed them to effectively manage costs, indicating room for improvement globally.
Cost Management Challenges: Respondents ranked “Converting a final cost estimate into a project budget compatible with cost accounts” and “Tracking costs for every aspect of the job to determine how they impact overall project cost” as the most difficult cost management challenges to solve.
Most Important Future Needs for Cost Management: Respondents ranked “Forecasting critical costs with real-time data from the field” and “Dynamically tracking every dollar in my budget” as the most important future needs to solve with project cost management.
Satisfaction with Cost Management Solutions: General contractors and specialty trade contractors, reported notably different levels of satisfaction with their use of software for cost management. The disparity sends an important message that technology is needed to effectively support the workflows of every team member in order to advance the entire industry.
Disparity in Real-Time Data Between Field and Office Teams: The greatest disparity when it comes to challenges with cost management between project-related staff and office-related staff is with “Understanding in real-time where we are making or losing money.”
“The report shows that construction owners and contractors alike are ready and able to participate in a more holistic and integrated cost management approach,” said Stephen Jones, senior director of industry insights, Dodge Data. “Focusing on using fewer, more comprehensive technology tools and increasing all stakeholders’ engagement with cost management will ultimately generate better cost-related outcomes for all parties.”
Cost Management is Everyone’s Responsibility
Setting the right culture around partnership and accountability sits at the foundation of a healthy cost management practice. But, if you’re going to ask your teams to take ownership of costs, you need to give them the tools to manage costs collaboratively and in real-time. And real-time insights can only be leveraged when you move away from multiple disconnect point solutions and manual processes.
“When I started at First Capital everything was being managed by excel spreadsheets and it was a difficult conversation every month trying to understand where the costs were at, both at a construction level and at an overall project level,” says Sarah Heppinstall, VP of Construction at First Capital REIT. “Fast forward five years, we’ve rolled out Procore and it’s now embedded in everything that my team does. Now, I sit down with my regional directors every month and they can tell me right down to the dollar exactly where we are, where we’re sitting with the construction budget and the overall pro forma, and it’s been really powerful.”
Looking Toward a Connected Future
As construction’s digital transformation continues, comprehensive data will serve as the linchpin for real-time insights that inform critical decision making, and cost data is an integral part of that. Connecting the systems and processes used to manage cost, scope, and schedule in the field to company accounting solutions in real-time, is critical for organizations in the next five years. This global report stresses that importance across owners and contractors alike, and encourages the industry to invest in cost management best practices and technology so we can continue to advance and meet the growing demands of our industry.
Access the full report here. To learn more about Procore and its financial solutions, visit Procore.com.