The Best Practices series asks CRE leaders around the country about how to best execute a single aspect of their business.
Throughout 2019 and into the new year, the challenge of keeping construction costs contained has remained front and center for developers and general contractors.
Bisnow/Jon Banister
The construction site for The Wharf Phase 2 in Washington, D.C.
According to Deloitte’s 2020 Construction and Engineering Industry Outlook, various cost-related factors will continue to bedevil the industry this year. These include long-standing issues, such as labor shortages, but also project complexity and supply-chain constraints. Building material prices are also still on the rise.
How to blunt the impact of rising costs? One way is new technologies. In a business that is traditionally slow to adopt them, many developers and contractors are looking to PropTech to help manage costs.
Kwant.ai Chief Operating Officer Kelsey Poinsatte-Jones
Courtesy of Kelsey Poinsatte-Jones
Kwant.ai Chief Operating Officer Kelsey Poinsatte-Jones
Cost overruns and delays occur on most projects. Sometimes, with more than 40 contractors on a project, a lack of coordinated effort among tradesmen results in greater than 25% of total project loss.
PropTech platforms reduce the guesswork related to productivity loss and safety incidents by passively collecting real-time data in the field and using accurate information to predict safety and cost delays.
For example, real-time data collected from the field using the emerging Internet of Things — wearables, sensors, mobile phones — and robot such as lidar scanners and drones, can collect accurate information about materials installed, quality of work, safety incidents, environmental data and man-hours.
Such accuracy and speed of data collection wasn’t possible even a few years ago, when a superintendent would be walking around a job site with a notebook on a monthly walk-through. This data are now powering artificial intelligence algorithms, together with 3D Building Information Models implemented using Lean Principles, to make better decisions.
New York-based Kwant.ai is a construction analytics platform using Internet of Things and AI.
C.W. Driver Cos. Project Executive Tom Jones
Courtesy of Tom Jones
C.W. Driver Cos. Project Executive Tom Jones
New technologies can help improve project efficiencies and control costs. Although slowly implemented, they’re finding their place in modern design and construction.
Augmented/virtual reality and drones make it possible for end users to see and interact with a space before construction begins. Bringing the vision to life helps eliminate surprises and can identify potential issues before construction begins — all of which can cost money. The added level of detail allows estimators to develop budgets more efficiently and accurately.
When we worked on Vanguard University’s Student Union, the architect used the design software Sketchup to create a model we used throughout the pre-construction phase for efficient budget updates and to better understand the design details.
Laser scanning has made precise measurements of existing structures fast and simple when designing for additions and upgrades. Also, construction companies can use drones to capture high-resolution 3D photos to assess and share the progress of the project.
C.W. Driver is a Pasadena, California-based general contractor and design-build company.
H.J. Russell & Co. Vice President of Operations, Construction Division Michael Swick
Courtesy of Michael Swick
H. J. Russell & Co. Vice President of Operations, Construction Division Michael Swick
Controlling costs boils down to ensuring the construction workers in the field have the correct information needed to build. The major sources of cost overruns are from redoing work, interruptions to the flow of work and design or work not being properly coordinated. Technology can step in to minimize the errors in the flow and coordination of information.
Document management software, like Procore, can handle the flow of information. As this kind of software improves, the more user-friendly it will be to the workers in the field, which helps solve the challenges associated with the ever-constant revisions and changes, making updates across all digital devices using that software in real time. That’s driving the extensive use of digital tablets on-site, so all foremen of every trade and crew have updated information.
I believe the next step will involve virtual reality, which, in a construction context, puts the user into a 3D model where they can see exactly what will be built in advance of building it. That allows the owner to see and experience what they’re getting in the final product, minimizing changes throughout the process. It allows the design team to visualize and experience their design, promoting proper coordination. And it allows the contractor or subcontractor to visualize and experience exactly what they are to build, minimizing rework.
Atlanta-based H.J. Russell & Co. is a developer and construction company.
Virtus Real Estate Capital Director-Construction Management Derek McDaniel
Courtesy of Derek McDaniel
Virtus Real Estate Capital Director-Construction Management Derek McDaniel
Local knowledge is a basic foundation of any successful job. Even national developers get caught up on idiosyncratic local building code issues, and the best subcontractors generally offer preferential terms and timing to familiar GCs who promise future work.
Beyond that, true cost outperformance is most achievable earlier in the development process than later. A full pre-construction team — ideally including the developer, architect, general contractor and interior designer — can save tremendously before shovels ever hit the ground. Problems tend to occur when the GC is brought in later, or when value engineering efforts begin late in design. Such jobs result in costly and rushed redesign, which in turn causes delays and change orders during construction.
Virtus is a real estate investor based in Austin.
Annex Construction President Tom Tomaszewski
Courtesy of Tom Tomaszewski
Annex Construction President Tom Tomaszewski
The Annex Group frequently deploys off-site construction for framing and other system components before transporting the completed materials to the construction site. This helps to reduce both time and labor costs, while allowing a uniform process for construction.
Overall, developers should consider learning potentially disruptive new technology, like 3D printing, to keep costs down. This emerging technology will allow developers to print their own materials at a lower costs, avoiding price markups, travel costs and more.
When managing multiple new construction projects, the ability to trust the contractor on the job site is important, so consider asking your contracting partners if they will travel with you from site to site. While the initial investment might be a bit higher, the cost will be offset by the high quality you can expect from these partners.
The Annex Group is a multifamily developer and construction specialist based in Indianapolis.
OnSiteIQ CEO Ardalan Khosrowpour
Courtesy of Ardalan Khosrowpour
OnSiteIQ CEO Ardalan Khosrowpour
Construction is still one of the least-digitized industries in the country, so as new PropTech companies enter the space, owners and developers need to make tech procurement decisions that add value to their processes. When building owners and contractors effectively use technology, job sites are safer, transparency is higher and costs get pushed lower.
Project management tools were the first to hit the market with companies like Procore and Autodesk, which help general contractors and project stakeholders better manage projects and control costs. The technology available now can provide insights into all areas of the building life cycle: streamline construction with project management tools, better manage facilities in with digital twins and comprehensive image archives and effectively manage risk on-site.
New York-based OnSiteIQ specializes in construction visual documentation and risk assessment.
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