In the soon to be post-world of COVID-19, to understand how construction companies will react to the new opportunities and challenges created by COVID-19, it’s helpful to look at the options that were available, but unused, prior to the pandemic.
The global pandemic has forced the world to embrace dramatic changes to our lives, with most of us isolating at home, waiting for governments to open their respective economies safely. But what does that mean for construction companies who have been looking at the impending digital transformation with concern, and sometimes dread.
There’s a plethora of excellent thought leadership articles published by consulting organisations reflecting the current predicament created by COVID-19, and the new questions being raised on how best to manage the challenges for companies and communities alike.
Given the quick-change artist characteristics of the COVID-19 virus, there are still many questions that can’t be answered because the experts still don’t know what they don’t know.
There’s also a dearth of information on how COVID-19 will affect the real-world practicalities of the construction site, a rapidly changing environment that construction companies are grappling with. Governments are instituting safety guidelines, but these are mainly physical. What do companies need to do digitally to navigate problems thrown up by the pandemic?
Many of these thought-leadership articles carry one recurring theme; that of dramatic induced change, new ways of thinking and the acceptance to incorporate new information and altered approached to business. This is reflected by McKinsey in their on-line Executive Briefing of the 13 May 2020 “COVID-19 and implications for business“.
“…Leaders should be prepared to incorporate new information and alter their approaches, either incrementally or radically, as new information becomes available.”
These changes also apply to families, local communities and as importantly, the human impact on the environment and its effects. However, we should not consider these as new ways of thinking, for all COVID-19 has done is emphasise the choices that always existed, which were previously delayed, or worse, ignored.
For the construction industry there is little doubt that site Health and Safety methodology will need to be revised to accommodate the constraints of COVID-19. In the UK, the Government has already issued guidance for working safely on construction sites.
The guidance states: “Construction sites operating during the COVID-19 pandemic need to ensure they are protecting their workforce and minimising the risk of spread of infection.” This includes considering how personnel travel to and from site. There is little doubt digital transformation through information technology can play a huge role in helping manage the new guidance.
In the United States, trade organisations such as the Associated General Contractors (AGC) are leading the charge, with a resource-rich list of information for American contractors, including recommended safety practices, preparedness plans and site checklists. However, these are physical processes. There is little information on resources available to set up digital monitoring processes or how to incorporate digital technologies into safety policies.
Mckinsey’s article of 22 April 2020 entitled “Digital Strategy in a time of crisis” reinforces the case for rapid digital transformation where businesses will need to be seen to adopt options which were previously overlooked or ignored.
This begs the question as to why, when these same options already existed, did construction company executives need an event such as COVID-19 to force a digital transformation?
As McKinsey states, “The COVID-19 crisis seemingly provides a sudden glimpse into a future world, one in which digital has become central to every interaction, forcing both organizations and individuals further up the adoption curve almost overnight.”
We can ask the questions of the business executives later, but at the moment there’s still too many unanswered questions about what the post-COVID-19 world will look like to be able to provide informed answers.
However, this is the moment to learn what we can do to manage the next critical phase of a construction company’s progression into the digital space. McKinsey goes further:
“A world in which digital channels become the primary (and, in some cases, sole) customer-engagement model, and automated processes become a primary driver of productivity—and the basis of flexible, transparent, and stable supply chains. A world in which agile ways of working are a prerequisite to meeting seemingly daily changes to customer behavior.”
Failing to do the above will create two types of construction companies – those that survive and grow, and those that will suffer and be increasingly challenged by the digital construction space they can no longer compete in.
“Now is the time to reassess digital initiatives—those that provide near-term help to employees, customers, and the broad set of stakeholders to which businesses are increasingly responsible and those that position you for a post-crisis world. In this world, some things will snap back to previous form, while others will be forever changed. Playing it safe now, understandable as it might feel to do so, is often the worst option.”
In a pandemic environment, we can no longer rely on PDFs and data silos for effective Health & Safety processes
It’s fair to say COVID-19 has provided the construction industry with new challenges. Construction crews now getting back to work will need to, along with their current safety practices, enforce social distancing, initiate people tracing and wear additional personal protective equipment (PPE).
Recently, the Construction Industry Training Board (CITB) launched updated versions of their COVID-19 safety checklist for construction employers. The handy checklist provides a detailed and comprehensive guide to assessing the health, safety and environmental issues of construction sites in a COVID-19 world.
What it doesn’t do is explain how to utilise digital reporting methods to better monitor and safeguard personnel on construction sites.
While the guidelines are very specific, they are also in PDF format, which makes timely monitoring and analysis problematic, as the information is not readily reportable or available in real-time.
Using Kapio Cloud field reporting templates, these reporting templates could be easily replicated as a digital process using automated workflows reflecting agreed project procedures. Site managers could, at the click of a keystroke, see the daily health of their workforces.
We believe this is a critical step in enhancing communication between all parties and is a prerequisite for effective mitigation of hazards and viral risks. The contractor can also more easily adhere to government guidelines while supplying timely digital reports to their HSE stakeholders.
These new government initiatives will require swift measures and enforcement so that construction organizations comply with new legislative requirements regarding Health and Safety (HSE). Put simply, this is not the time for half-hearted transformation processes. Forward thinking companies need to be implementing digital transformation strategies in weeks and months, rather than years. Unfortunately, this is not the case:
“…companies often experiment at a pace that fails to match the rate of change around them, slowing their ability to learn fast enough to keep up. Additionally, they rarely embrace the bold action needed to move quickly from piloting initiatives to scaling the successful ones”
In the case of Health & Safety, we already know that Apple and Google are collaborating on the area of Contact Tracing. Construction organizations will need to up their game too. They must move quickly from analogous Health & Safety reporting systems to digital systems where data is acquired, analyzed, reported, approved, pushed and pulled in a way that means the information is far more efficient and transparent. In a pandemic environment, we can no longer rely on PDFs and data silos.
“McKinsey research shows bold moves to adopt digital technologies early and at scale, combined with a heavy allocation of resources against digital initiatives and M&A, correlate highly with value creation”
Field reporting software allows users to quickly transform analogous record templates into a digital format
In the wake of COVID-19, the UK government has already published guidance for the construction sites. One guideline in particular is to maintain a record of all visitors, where possible. Kapio Cloud field reporting software allows users to quickly transform paper-based record templates into a digital format, from any device, thereby fulfilling the guidance produced by the UK government.
“Prior to the crisis, leading companies had already been increasing the cadence of their learning as part of a quickened organizational metabolism (Exhibit 3). Companies can look to their example as they work to adapt to change more rapidly during crisis times—and beyond”
PPE & tracing applications on construction sites
Field reporting platforms like Kapio Cloud allow construction organizations to gather their HSE data from remote sites into a central database. Once in a digital format, the HSE data can be used to demonstrate compliance or used in conjunction with other digital applications to enhance the organizations overall HSE regime.
McKinsey takes it one step further. “In the immediate term, for example, most organizations are looking for virtual replacements for their previously physical offerings, or at least new ways of making them accessible with minimal physical contact. The new offerings that result can often involve new partnerships or the need to access new platforms and digital marketplaces in which your company has yet to participate. As you engage with new partners and platforms, look for opportunities to move beyond your organization’s comfort zones, while getting visibility into the places you can confidently invest valuable time, people, and funds to their best effect.”
Rather than merely being a recorder and enforcer through HSE data, digital platforms allow construction organizations to think beyond their current business models and allow for better, more transparent and enhanced collaboration with, for example, PPE suppliers, or tracing applications currently being developed by tech giants like Apple and Google.
The impact of COVID-19 on construction projects and how quality field reporting reduces contractor’s financial risk
Imagine you are the CEO of a construction contractor who, in November 2019, began a 12-month construction project. Because of COVID, you’ve had to stop construction operations and now realise that to recommence your works, a different methodology needs to be implemented, which is different from the one which you tendered when winning contract.
Furthermore, you believe your project will be critically impacted by 4 months and that there will be disruption due to changed working methodology, which resulted from changes in working legislation due to COVID-19.
The Federation of Consulting Engineers based in Geneva, Switzerland is an Internationally recognised publisher of standard forms of construction contracts used all over the World.
Reading the FIDIC updates on COVID-19, you know what the professional community expects, but what tools are at your disposal so that you can obtain fair and reasonable compensation for the impacts above?
FIDIC states: “Covid-19 presents an extraordinary challenge and FIDIC commends all members of the construction community to be focused on the successful delivery of the project before them in a way that sustains the long-term viability of the construction community.”
There is a recognition by FIDIC that COVID-19 will impact contractors, but also information on what contractors can do in terms of mitigating the time and cost implications to their projects.
FIDIC goes on to say: “In all scenarios outlined above, the Parties are reminded to timely comply with their communication obligations, such as notices and contemporary records”
Clearly in our example above, there is a time and cost impact to the project. So, how does the construction contractor articulate to the end-user client his time and cost impacts? Usually this is done by means of claims for delay and/or disruption.
Typically, such claims rely heavily on field data reports combined with the use of project management scheduling tools such as Primavera and Microsoft Project, to demonstrate how impacts on baseline programmes and determine cost.
Reinforcing the importance of good field recording
Ali D Haidar and Peter Barnes with their book “Delay and Disruption Claims in Construction” published by Institution of Civil Engineers, London, state:
“It is noted that the courts place a particularly heavy burden upon contactors in terms of maintenance and presentation of documentation in support of any claim for delay and/or disruption”
The message is clear; good field-data reporting and contemporary record keeping are paramount for contractors to be able to articulate any claims they have resulting from the disruption and delays caused by the COVID-19 epidemic.
To do this, it’s important that contractors use the right tools to record their project information so that they can efficiently produce their claims and receive appropriate reimbursement. These take the form of digital capture and report platforms, which have seen increased popularity as more construction companies transform to digital processes.
What is the solution?
Digital field reporting platforms have been designed with the above scenarios in mind. While we didn’t anticipate a global pandemic, we designed a platform to be flexible enough to add or customize reporting tools and templates to allow for unforeseen challenges like COVID-19.
Contractors looking to integrate a data capture platform into their business should look for platforms that are future-proofed as much as possible.
Platforms must allow for emerging big data-hungry digital technologies that are coming on stream, like remote robotics and drones, with their digital scanning ability, to artificial intelligence (AI) and machine learning algorithms that make rules-based decision making available to the boardroom executive.
From a practical perspective, contractors can record all their field data digitally and use digital workflows to obtain approval and authorisation. As the field data is digital, reports can be imported into and out of scheduling software tools such as Primavera or Microsoft Project and used to substantiate time impacts.
Disputes, contract resolution and the importance of accurate claims
Unfortunately, contract disputes are a reality in construction. They cost millions, reduce productivity and profitability and are the bane of the $10+ trillion global construction industry.
But it doesn’t have to be this way. Disputes could be reduced dramatically if more companies kept accurate, digital records of their workflow deliverables. At-source data capture technology is currently available where project managers & workers can report digitally, directly from site-to-office. This minimises the issue of the garbage in, garbage out scenario.
For instance, Kapio Cloud offers digital reporting at source, on any device, in over 20 languages, so multi-cultural teams can communicate without lost-in-translation problems. A Nigerian project manager can deliver field reports in his language and the Vietnamese office can translate this with a keystroke. With accurate digital records that are validated, transparent and reported in real-time, contract disputes should be a thing of the past.
However, construction disputes will continue to reign for the foreseeable future. In order to establish a claim, a fundamental key is to have good record keeping, which contractors are supposed to oversee. But typically, contractors win the tender, mobilise on site and start working without setting up the project in a proper way, which leads to future unnecessary disputes between them and their client, as well as subcontractors.
In many cases, unsubstantiated claims are being sent by different parties on a project and quickly end up with the project suffering because of a flawed initial setup, or habitual bad record keeping throughout execution. If the dispute goes to arbitration, it becomes increasingly difficult for the parties in the arbitration to understand the claims, as they have not been involved on the project, as the record keeping has been so poor.
Construction companies who run afoul of the above scenario can range from huge global organisations to small SMEs. All can benefit from a digital reporting platform. With new lower-cost subscription models now available, it’s now more affordable than ever for Sole Proprietors and SMEs to use data reporting software in their daily processes. It’s not just for the big boys anymore.
Below is a real example of two SME construction companies working together on a small housing project in the UK. It neatly illustrates dispute complexities in the time of COVID-19.
Contractor A, called Alpha Contracting for the purposes of this example, entered into a contract with Developer B, called Bravo Builders, to build 5 houses on a brown field site.
Issues arose from the start as Bravo did not employ the relevant professionals needed to operate the contract terms as required.
Nonetheless, Alpha continued the work and eventually took on many of the tasks created by Bravo’s failure to properly assign the correct professionals to the project. The site also had various problems and substantial additional works had to be carried out as a result, thereby increasing the costs even further.
There were also issues with Bravo’s finances, with slow and inaccurate payments the norm. Eventually Alpha became frustrated with its dealings with Bravo, while also incurring out of pocket expenses totalling £200k, a not unsubstantial figure for two small companies with limited financial resources.
Eventually the houses were completed successfully and handed over and sold.
At issue was the fact that Bravo Builders was not going to see much, if any profit from the sale of the homes, as they overspent on development and ground preparation. And they still owed substantial sums to Alpha. Rather than pay, Bravo decided to delay payments for the foreseeable future to Alpha Contracting. This was the basis of the dispute when COVID-19 hit.
To resolve the dispute, Alpha Contracting requested repeated face-to-face meetings with Bravo Builders. These were denied with Bravo using a host of excuses to delay meeting: wife’s pregnancy, isolating-at-home, meetings being non-essential activity, government approval required prior to meeting, etc.
The contract allowed for a mediation process for any dispute before going to adjudication, with mediation meetings proposed 4 times, only for Bravo to back out each time. Eventually Alpha became so frustrated with Bravo using COVID-19 as an excuse not to meet, Alpha decided to enter into a Statutory Adjudication process that Bravo could not get out of. To do this, Alpha appointed outside personnel to produce the required referral document.
Unfortunately, due to the lack of accurate record keeping, the professional Contracts Consultant hired to manage the dispute spent 2 months attempting to decipher files from Alpha’s office to create a document to work from. This extra time allowed Bravo a window of non-payment which Bravo used to create various spurious items to defer payments, including wrongly issuing £27,000 in liquidated damages and hiring a Quantity Surveyor to create further excuses.
Eventually the document was ready to begin the adjudication process. To date, this process is ongoing, along with the associated costs.
While the above scenario may or may not have been averted, if Alpha Contracting had used a digital reporting platform where all reports and workflows were digitalised, the above Contracts Consultant process could have been carried out in days, not months, saving precious time and cost for Alpha in its quest to get back delayed funds.
This is an actual incident. The companies involved are not large construction companies with multiple works and sites, but two small construction companies with turnover in the £1-2 million area.
The moral of the story is digitalisation is critical. A company cannot start or win a contract dispute if its records are in disarray, missing or subject to interpretation. Having transparent workflow templates with authenticated real-time reported deliverables, supported by time-logs, signatures and payment dates, in the correct linear order, is a prerequisite for a successful resolution in a contract dispute.
As can be seen from the above example, good record keeping is key to the success of a project, but often overlooked by management. Setting up a digital reporting process at the onset would help contractor executives to understand what’s happening on their projects, in near real-time. This makes for better productivity and higher profits.
In the time of COVID-19, the construction industry has quickly realised just how far behind they are in relation to other industries when it comes to digitalisation. Now, in an effort to work efficiently, contractors have been forced to implement new solutions to address pandemic-era problems.
These include using apps like Google Teams, Slack, Zoom or WebEx to collaborate and communicate. But to be successful in a post-COVID-19 world, construction companies can’t stop there. They need to replace physical processes with digital. And key to this digital transformation is integrating a data-capture reporting platform into their processes.
Adopting to the digital future will strengthen their ability to better manage and react to the challenges thrown up by the new post-pandemic world, while making them more competitive and agile.
During this time of crisis, in an effort to help construction companies and contractors explore what a digital reporting platform can do for them, we are offering a Free 90 Day Trial of the platform.
To start your risk-free trial, sign up here.
For more information on how Kapio Cloud can help your company, you can find it here.