Why Your Old Construction Technology is Eating Your Profit Margin

Ah, the old days... Remember not so long ago when a calculator, a camera, a map and a phone were each separate machines? Now all these different tools are in one place: your phone.

Construction technology is consolidating too. Estimating software, construction accounting software, construction project management software, reporting and analytics solutions and other cloud technologies are coming together as well.

As in other industries, construction companies are using digital technology to make use of newly available standardized data from across the organization — especially the finance, operations, HR and staffing, and IT departments. When real-time data technology connects these different functions, contractors can make smart use of resources, move faster and maintain better profit margins.

For years, contractors traditionally worked in silos, and software was built (or spreadsheets were made) to help different departments or people do their individual jobs better. When one department needed to share data with another, as it often meant having to re-enter data into different systems,

But slow, manual processes don’t work for large, complex modern projects. 

Take the massive recent fluctuations in the cost of lumber: You don’t need to look further than the cost of a 2’x4’ which increased by 400%, then experienced the biggest drop in history (40%) — just in one month!

An estimator who had to rely on paper copies or incomplete reports of last year’s project costs would find it impossible to create an accurate project bid today on a similar project.

The difference between profit and loss often comes down to the availability of real-time data.

Another hit to the bottom line comes from unnecessary rework, which accounts for 9% of the total average project cost, including direct and indirect costs such as overhead, site safety and materials. 

Unnecessary rework is usually the result of someone not having the right information when they need it on the job. Even more common is the profit fade that occurs when rework is done on the job but not recorded.