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Construction Management: Eliminate Waste, Maximise Profit

Construction Management: Eliminate Waste, Maximise Profit

What is Construction Management?

Construction management oversees all phases of a construction project, from planning, budgeting, and design to the actual construction, quality assurance, and handover to operations. Construction managers see a project through from beginning to end, ensuring it meets an agreed upon budget and timeframe. This requires several skills, including:

  • Budgeting and cost assessments
  • Client relations
  • Evaluating construction methodologies
  • Planning/scheduling
  • Organising and liaising between contractors and consultants
  • Safety and quality assurance of workers and assets

While the construction manager isn't responsible for the actual construction, which falls on the general contractor, they oversee the general contractor and consultants (e.g., architects, engineers) as well as serving as the link between executive management and business operations.

Construction Management Phases

Though every construction project has unique characteristics, there are several similarities which can be grouped into phases. Construction management typically involves overseeing the following five steps.

  1. Initiation: Before a project begins, all stakeholders must understand the scope and goals. This is the stage of the construction management process that involves the most business-side stakeholders and includes drafting documents such as a feasibility report and a project initiation document.
  2. Planning: This stage involves creating a project roadmap, cost estimates, engineering and architectural designs, hiring a general contractor and subcontractors, procuring necessary resources, ensuring all regulations and codes will be met, and obtaining necessary permits. Additionally, the construction manager must prepare plans to cover communication and information flow, a work breakdown structure plan, and a risk management plan.
  3. Execution: The execution stage is when construction can finally begin. The methodologies for this stage are explored in greater detail below.
  4. Monitoring: At this stage, the construction manager is primarily responsible for ensuring that all plans and schedules are followed, and contractors and subcontractors are meeting their goals. They are also responsible for organising and scheduling ongoing quality control, workforce scheduling, materials management, and dealing with any issues that may arise.
  5. Closure: Once construction on a project has been completed, the construction manager is responsible for inspections, training, compiling documentation, and final handover to operations.

Types of Construction Project Management Methodologies

There are four fundamental methodologies employed in construction project management: traditional, agile/lean, critical chain/path, and advanced work packaging.

Traditional or Waterfall Construction

The most common form of construction project management, the traditional (also known as waterfall) methodology, involves working through a series of set objectives or milestones in a linear path. The process is sequential, with full completion of each task required before moving onto the next. This strategy is commonly employed in basic construction projects. Building a house, for example, requires a foundation to be poured before the walls can be constructed.

The benefits to the traditional methodology are simplicity, high-quality work, and limited errors. Traditional construction management is simplistic in both planning and execution. Planning is done sequentially based on the necessity of completion and tasks are executed in that order by the whole team. This also allows for higher-quality work, as the whole of an organisation can be focused on each stage of the process at one time. For the same reasons, errors are reduced through added attention and greater oversight.

The traditional methodology has the significant downside of being the longest and, potentially, most expensive methodology. When tasks are completed sequentially, workers and equipment aren't being utilised to their maximum capacity. This can cause downtime, elongation of the construction process, and inefficiencies.

Agile vs Lean Construction

These two methodologies are frequently confused as they often overlap in their framework and goals. To explain these two methods, we will define them, compare their similarities and differences, and cover how they can be used together.

Definitions

Lean is the term given to a philosophy designed to create value and minimise waste without sacrificing productivity. While lean began in manufacturing, it is now considered a set of practices which are applicable to virtually any work process. In construction management, lean focuses on three key factors:

  1. Creating processes to maximise the flow of materials and information
  2. Increasing the value generated by a project
  3. Utilising paradigms to plan, execute, and control the construction process

Lean construction looks at a project as a holistic system, viewed from the top down. The whole project needs to focus on allowing specialists to do what they are best at, thereby creating the best product and eliminating waste. By letting the specialists (e.g., electricians, heavy equipment operators) do what they do best, the project will advance as fast as possible with the best result. Likewise, project directors and managers should focus on the overall structure and process, as this is the highest utilisation of their skills.

Initially developed for software development, agile is a conceptual framework for guiding a process that focuses on increasing value and reducing risk. This is achieved by managing complexity and maximising flexibility. Similar to lean, agile focuses on three key factors:

  1. Break down a project into small, manageable parts
  2. Prioritise time management and reviews
  3. Encourage feedback and input to improve processes

Agile construction projects respond to externalities by being open to changing requirements and providing frequent communication and deliverables to the customer. They achieve this through constant contact between workers and project management, including feedback and motivation to encourage adaptation to changing factors and a goal of achieving technical excellence.

Differences vs Similarities

The main difference between lean and agile is that lean is a philosophy, whereas agile is a conceptual framework. They also share several other differences, while overlapping in some areas.

Differences

Similarities

Lean is a philosophy. Agile is a conceptual framework.

Both are team oriented.

Lean focuses on value, agile focuses on satisfaction.

Both require cooperation and planning.

Lean reduces waste, agile simplifies.

Both seek to maximise profit.

Can they be used together?

Agile and lean can be used together in a system proposed as lean-agile or LeAgile. While still being developed and applied to the construction industry, a LeAgile system hybridises the two, taking the best elements of both. For instance, a LeAgile system would focus on both flexibility and simplicity, with the ultimate goal of maximising profits. It would also create and use paradigms in the various construction stages but ensure that workers would have a voice in providing feedback to increase the efficacy of these paradigms.

Critical Chain vs Critical Path

These two methodologies both focus on completing a project in the shortest time possible, however they take two different approaches. Critical chain focuses on resources by determining what the longest chain of tasks is for project completion and focusing on those tasks above others.

Critical chain project management does not allow for multitasking, instead focusing efforts on the maximum number of tasks capable of being handled based on resources. Those who are working on the critical element receive support from the organisation (e.g., postponing daily tasks) to focus solely on their critical task. Critical chain also ignores individual time buffers for completion of tasks, rather than focusing on task completion time overall.

Critical path focuses on the longest chain of tasks without a time buffer. In other words, the tasks that must be completed before a project can move forward. If tasks on the critical path are completed early, other tasks are also capable of being completed early. Critical path project management allows for multitasking, particularly on critical tasks. Because of the in-built multitasking, critical path allows for individual time buffers.

Advanced Work Packaging

By breaking down various construction tasks into packages, advanced work packaging seeks to eliminate wait time, productivity loss, and schedule delays. Fundamentally, advanced work packaging involves developing an overall plan, known as the construction work package (CWP), and then creating sub-packages involving the necessary elements to complete the CWP. These packages, such as engineering work packages and procurement work packages, are all aligned to the overall project and help to set out the path the project will take. Effective implementation of advanced work packaging involves experts known as Workface Planners, whose job is to outline, create, and compile work packages with the supervisory executives while also ensure there are minimal roadblocks to package and project completion.

Advanced work packaging has been identified as best practice and is supported by numerous case studies and over a decade of research (Construction Industry Institute, 2015). It has been shown to reduce the overall cost of projects by 10% and improve labour productivity by 25%. The investment is approximately 2% of the cost of labour, producing an ROI of 1000%. It also provides for increased safety, greater alignment with objectives, and allows the use of project performance metrics (Insight, 2017).

Digital Transformation in Construction Management

All industries are benefiting from digital transformation, and construction management is no different. Large-scale construction projects are at risk of cost overruns, expanding timescales, and a plethora of inefficiencies if not correctly managed. By implementing and utilising digital tools in construction management projects can become more predictable, workforce productivity can be increased, and completions/handover perfected to reduce error and cost.

Project Portfolio Management & Predictability

  • Utilising project portfolio management (PPM) practices can be very impactful for industrial organisations.  PMI estimates that organisations using effective project management practices can save up to 28 times more money than unmanaged organisations. Project portfolio management brings several benefits to an organisation:
  • Risk: Many construction managers focus on risks associated with specific projects. PPM makes sure an organisation focuses on their overall risk versus return profile, allowing for a more holistic risk management strategy.
  • Big Picture: Projects, particularly large-scale ones, can take years for completion. In this time, an organisation can get bogged down in the details and lose sight of the bigger picture. PPM can ensure the organisation's long-term goals and objectives remain relevant in the decision-making process.
  • Objectivity: PPM safeguards an organisation against losing focus on their defined goals and objectives by maintaining clear, objective goals and a long-term strategy to reach these goals.
  • Selection: By understanding how a project aligns with an organisation's goals, risks, and resource availability, the right projects can be selected to ensure success. Quality project selection utilises PPM data (e.g., ranking methods, scoring models) to produce data-driven and clear criteria for business leaders.
  • Collaboration: Large organisations have distinct groups working on different tasks and projects. These groups end up competing with one another for finite resources. PPM aligns overall organisational strategy with metric-based allocation of resources to different functions, allowing for project management to eliminate inefficiencies and align groups on collaborative tasks.
  • Decision-Making: By providing business leaders with a better view of their organisation's strategy, goals, metrics, and risk, PPM enables more informed decisions.
  • Accuracy: Through continuous monitoring of an organisation's data, PPM can provide a vital link between business leadership and on-ground project statistics. By establishing metrics for performance and tolerance levels, trends and outliers can be identified to eliminate adverse outcomes and maximise resource utilisation.
  • Timeliness: Even the best run organisations can struggle with timely completion of projects, and projects that run overtime tend to correlate with projects that run over budget. By aligning strategies, resources, and execution, PPM can help an organisation meet time and budget limitations.
  • Resource Management: Many organisations struggle with whether to allocate resources based on projects or select projects based on resources. By focusing on a bigger picture approach, PPM examines enterprise-wide resource availability and allows for more intelligent project selection, as well as periodic resource review, optimising utilisation across an organisation's projects.
  • ROI: All these benefits add up to increased returns on investment as well as safety, compliance, and morale. PPM allows organisations to be run more effectively and efficiently.

By utilising effective PPM, business leaders can give their organisation the ability to predict outcomes better. Predictability is vital for an organisation, as understanding the outcome of an event as early as possible can lead to better decision-making, less cost/budget overrun, and overall organisational agility. Digital transformation of an organisation using PPM can aid in increasing predictability in several ways: 

  • Projects: Managing complex projects by gathering data, promoting communication, and enhancing decision-making can help mitigate the damage caused by potential negative externalities.
  • Forecasting: By eliminating data silos and creating a central data hub, project managers and business leaders can ensure forecasts are based on accurate and consistent information.
  • Management: Software can help to manage, track, and execute projects, as well as improve risk and change management and ensure best practices are optimised throughout an organisation.
  • Culture: Managing projects and resources is essential to an organisation, but utilising those metrics to ensure an organisation has a culture capable of acknowledging and rectifying errors is vital.

KPMG notes that a full two-thirds of firms don't use advanced data analytics to monitor their project estimation and performance. By digitising an organisation, the ability to measure, track, and predict project and organisational outcomes are vastly improved. Modern engineering and construction firms shouldn't risk being left behind as the industry engages in digital transformation.

Workforce Productivity Boost

Enhancing the productivity of workers is a key component of digital transformation in construction management. Digitising communication is a core element of this enhanced productivity. The old methods of pen-and-paper communication can extend the timeline of a project, create data silos, and inhibit the ability for business leaders to monitor developments.

The first step towards enhancing worker productivity is a system that allows for real-time task allocation. The ability for managers to create, assign, and prioritise tasks during a construction project is critical. Progress reporting goes together with task allocation. A digital solution should allow business leaders and managers to assess and monitor the progress of tasks in real-time through an online system. This provides greater information for decision-making, which can help to avoid errors and slowdowns, thereby enhancing progress and minimising risks. Additionally, digital solutions should allow for the ability to push notifications to workers and subcontractors through mobile devices. This reduces delays, maximises asset uptime, and increases worker trust and productivity.

Completions and Handover

Possibly the most vital element of an industrial or large-scale construction project is the completion and handover to operations. Digitising the process and establishing a sound methodology can help to avoid delayed completions and incongruencies in handover. A methodology such as Hexagon PPM's Confident Startup, combined with digital construction management solutions, can safeguard the completion and handover process, adding the following benefits:

Execution on Approved Templates

By using a repeatable and standardised method to deploy projects, setup costs can be reduced by as much as 70%. By creating a turnkey system, the process is simplified, and execution can be done on behalf of the owner or EPC contractor.

Leverage Data into Parallel Work Processes

The Confident Startup solution prepares and loads all required Ready For Operations (RFO) data points. By leveraging engineering data, the cost of asset management can be reduced by 10% to 20% of all RFO activities.

Remove Paper and Human Error

Using Confident Startup methodology and digital project management tools can create an average savings of 45% to 50% on administration resources and time. This not only reduces the costs associated with printing (e.g., paper, ink) but also reduces human error by digitising data translation.

Reduce Turnover/Handover Compilation

Digitally transferring and assuming custody of an asset allows for full auditability and visibility of data changes to the smallest detail. By compiling all engineering data and using a digital handover to operations, the time reduction to create turnover packages can be reduced by up to 98%. This both reduces the cost for creation of handover package compilation, but also can allow for early production, as schedule creep due to lagged custody transfer is 2-5 weeks.

The Golden Triangle: Choose a process and people before technology

Digitisation alone isn't adequate for proper construction management. An organisation can not only purchase a digital solution and think their problems are solved. Instead, they must take a more holistic view of how they evaluate their project management and realise that technology is just one of three main elements. The other two elements – people and process – must be considered to implement a construction management methodology adequately. By balancing the three elements of this triangle equally, rather than overvaluing technology, as many businesses do, an organisation can be said to have achieved a golden triangle.

While all three elements of the triangle provide value, the people in an organisation provide the most value but are often most overlooked. Focusing on proper management techniques and creating a strong culture, from the top of an organisation's hierarchy to the bottom, can provide immense value. However, without the proper processes and technology, an organisation's human resources can't flourish.            

The process element of the triangle refers both to an organisation's overall business strategy, mission, goals, and methodologies, as well as the more granular policies and procedures in place for managers and on-ground workers. Aligning an organisation's processes with their people and technology will create effective management, workflow, and an overall holistic system.

Technology relies heavily on people and process to be effective. Without proper training and understanding, people will not only be unable to use technology properly, but the technology may be a detriment to the organisation. Similarly, digitising inefficient processes may only allow an organisation to operate ineffectively faster. Only after aligning effective process with a culture that allows people to thrive should an organisation invest in the best technology.

New Construction Management Costs

Investing large amounts of capital is always a concern for business leaders. Even successful multinational corporations with considerable budgets have limited resources and must allocate them wisely. However, if done correctly, investing in a new construction management system can secure ongoing success, reduce waste, and minimise risk.

How expensive is it?

While all organisations have different needs and will have different expenditures for construction management digitisation, there are some estimations which can be made. McKinsey & Company estimates that for organisations with outdated technology, the added expense might be double the current spending over five years for IT infrastructure alone. This will impact profits, yet the alternative of not remaining up to date in an evolving digital world is more dangerous in the long term. Controlling project costs with PPM solutions helps to eliminate cost overrun and minimise risks and challenges. Large-scale infrastructure and construction projects are at considerable risk of ballooning costs and timeframe, with famous examples such as the Sydney Opera House (completed a decade late and 14 times the planned cost) or the Big Dig (nearly a decade late and at 19 times the planned cost). While projects like these are famous for their poor planning, had they employed better management they likely could have saved themselves millions in fines and the more significant cost of lost reputation.

How long does it take?

No matter how large an organisation's budget may be, they still have the same time constraints as everyone. Digital transformation of construction management is a challenging issue on which to put a time frame. McKinsey & Company estimate a 5-year plan is realistic, while others, such as Government Digital Services, have estimates of nearly 20 years. A key takeaway from any discussion of time frame for business leaders is that digital transformation isn't a simple project with a fixed schedule and deliverables. Instead, it is an ongoing and iterative process requiring a shift in culture and mindset as much as technology.

ROI

Organisations expect a return on their investment, and construction management is no different. While no two companies or situations are alike, implementing Advanced Work Packaging (AWP) can serve as an excellent example of the value of digital construction management and PPM solutions. Executing AWP comes with cost increases in four areas – engineering, procurement, construction, and administration. Each area has small but notable costs attached. The administration costs, for example, are approximately three subject matter expert positions for every $1 billion of total installed costs. While these costs may add up, they are offset by a reduction in site indirect costs that conservatively equal them and likely exceed. The result is a cost increase of roughly 2% of the cost of labour but an overall increase of 25% in workforce productivity. This provides an overall ROI of 1250%.

Evaluating Construction Project Management Software

Before your organisation digitises its construction management, there should be a needs assessment conducted to purchase the appropriate software solution. A proper construction project management software solution should enable real-time communication, eliminate data silos, and manage a whole construction portfolio, rather than individual projects.

Real-time Communication

A vital task of construction management is the ability to communicate information about a construction project in real-time. This should include all levels of communication – up the management hierarchy to business leaders as well as down to the on-ground workers executing tasks. Any software solution should provide the ability to offer automated production of progress reports, schedule updates, and materials management. A cloud-based solution, like the Intergraph family of products, should be utilised to enable easy communication from mobile devices from field teams to a home office. Overall, a software solution with these capabilities provides efficiency in executing work projects, delivering cost and time savings.

Interoperability: Break down data silos

The various teams that make up a construction project (e.g., engineering, workforce, management) can create data silos, reduce communication effectiveness, and limit the use of analytics. Software must offer interoperability between different teams through a family of solutions. Software solutions like Intergraph span the entire project management lifecycle, from front end engineering and design through to handover. The ability for multiple software tools to work together breaks down data silos, allowing for greater efficiency, reducing surpluses and shortages, and reducing cost and risk on a construction project.

Enterprise Capabilities – Portfolios, not projects

Construction project management software needs to focus on portfolio project management (PPM) instead of individual projects. By working from a top-down approach to manage all project work, inefficiencies can be reduced, flexibility increased, and cost savings are maximised. Working with an enterprise PPM partner can ensure an organisation has access to an entire family of software solutions to improve their efficiency.

Conclusion

Construction management is a core component of engineering, procurement, and construction companies. Organisations not utilising construction management software are in danger of being left behind as the industry fully realises the value of the digital transformation that is happening. Speaking of digital transformation, Karl Havard of PA Consulting writes, “there can be no excuses for standing still. Whether it’s the perception that legacy IT systems and architecture are too big and expensive to change; or there aren’t the right skill sets on board; key staff retention is poor or there’s a lack of vision and leadership; there is always a starting point. Each situation will be different, but think big, start small and scale fast... as fast as you can.”

The efficiencies provided through adopting construction project management software are significant and can provide better workflow, reduce waste and risk, and ultimately cut costs. An enterprise-wide approach to product portfolio management that emphasises advanced work packaging will provide great benefit to any organisation. However, it is essential that business leaders understand that while technology offers the ability to improve productivity, it is vital that the people and processes employed by an organisation are aligned with digital solutions to challenges. Only when people, process, and technology align to form a golden triangle will an organisation operate at peak efficiency. 

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