That you are reading this piece on ROI calculation for construction automation makes me consider a few assumptions (cautiously) - you have been researching construction monitoring technologies or are well aware of the innovations happening in this technology landscape. You have possibly come across several technologies that offer virtual walkthroughs, photo documentation, and drone scans of your site. Importantly, these technologies look promising upfront.
However, committing to a technology solution has always been an exercise in making a calculated bet. It is a partially measured evaluation and primarily a spontaneous decision. After all, if it was about estimating the amount of mortar and bricks needed on a construction site, there is a rather well-founded process to arrive at the quantity. No such well-established process exists for software applications. This is not just true for construction management technologies but every other industry. Therefore, the ROI-driven approach to evaluation has been so predominant in understanding a solution’s expected efficacy.
Typically, the software is adopted for two essential purposes: (1) To eliminate repetitive manual work and (2) To deliver better assistance to human resources in delivering high-quality work for lower cost and within tighter timelines. Both the applications of software have an impact on the top line and bottom-line. For example, using a software application to photo document a construction site eliminates the need for site operations to capture photographs of large areas and save them methodically in a folder over and over till the construction completes. Notice the repetitive nature of the operations in this case: same site, the same process of documentation. Automation is an excellent option to free up the resources and redeploy them in more productive tasks. With 360-degree cameras capturing the site is a cakewalk. Just walking across the site with the camera ON does the job with greater accuracy. This can be accounted for as the Direct Cost Savings for the construction business. Over the years, construction progress monitoring solutions have also started adding value beyond automating repetitive tasks. For example, today, many technology businesses can stitch the photos from the 360-degree camera across several runs and create an entire timeline of the construction progress. In this example, the software application adds value to a project manager’s decision-making process by saving their time in making decisions at the very least.
Considering these important factors, we are ready to formulate an ROI equation for us:
Returns = ([Direct Cost Saved] + [Indirect Cost Saved] + [Other Gains])
Investment = [Cost of Software] + [Cost of Maintenance] + [Cost of Adoption]
ROI = (Returns - Investment) * 100 / Investment
An assessment of the returns on your projects can be evaluated using the calculator below. 3RDi has prepared this assessment methodology.
The goal to access a construction monitoring technology is simplified with this formula - the product that maximizes returns while minimizing investment is the best fit for your business. Let’s take a closer look at what specific areas of returns you should target and how to judge the investment on the software product.
Cost of Site Monitoring
The cost of the inspection is directly related to the size of the site. A larger construction area would require the project manager and site inspection team to spend more time on the site going through the checklist of quality standards. For a typical construction project, it would ideally need a project visit every week. With construction work distributed across distant locations, project managers spend a lot of time on the road moving from one place to another. They could have used this time to work on other more value-added activities. However, this is a limitation that was unmitigable until recently. Photo-documenting technology and, more recently, with AI-powered construction progress management, such site visits can be cut down by 25% to 75%. A typical site inspection activity would require a project manager and team to reach the site and inspect a checklist of items. The checklist items may include the following :
a. Understanding the contractor activities and schedule and documenting the same
b. Ensuring the material in use is of the approved quality standard.
c. Verifying whether the construction installations follow the quality norms
d. Matching the construction to the drawings or BIM to verify deviations and defects in the work
e. Reviewing change orders from previous inspections, tracking the status and completion
f. Inspecting ancillary work such as paint, heating, ventilation, and air conditioning
g. Inspecting safety standards deployed on the site and whether it meets the expectations.
After completing the inspection, the documentation and data collected have to be analyzed at great length to arrive at a decision. On closely noticing these activities, one would realize that the project management team brings invaluable skills of analysis of the construction site. It requires specialized skills to identify the quality of the construction. However, there are several major data collection activities, including inspection of the site, collation, etc., that are necessary for project management.
With automated technologies, the grunt work of data collection is carried out by autonomous machines such as drones and 360-degree cameras. At the same time, advanced applications are programmed to stitch together the data of the construction progress. The data is then presented in an accurate 3D-model to the project management team and other stakeholders on their digital devices. Complete inspection and further analysis can be carried out virtually with measurement tools and virtual navigation support built within the application.
Cost of Reworks
A significant issue faced during every construction project, an Achilles heel for the construction industry, is the Reworks. How many times have minor deviations become a massive problem in the latter part of the construction project when structures on the top of the defect have already been built. Depending on the impact of the deviation, the cost can run up to 10% of the project cost, and on occasions, even more. For a long time, there was no solution to reworks. This cost was taken as an expense of doing business. While best practices to avoid reworks have been developed, however, it remains a challenge.
Reworks can occur in numerous places. It could come from a design change
during the construction or an error made by a contractor on the field. It could be a structure that was omitted due to negligence or misunderstanding of the plan. Errors creep up as early as during the building’s design phase that is only realized once the structure is being built. Even fabrication processes often encounter deviations that lead to the redoing of several activities.
AI in Digital Twin utilizes the BIM information and the construction site to identify the construction adherence to the plan Schedule. This functionality helps construction businesses identify deviations and defects in the job site work very early in the construction lifecycle, saving them hundreds of thousands of dollars that would have otherwise been wasted in demolishing and reworking those defective areas. Therefore, while shopping for a technology solution, rework reduction could be a significant consideration.
Cost of Adhoc Coordination
Coordination, communication, follow up, and feedback form the bedrock of any high-performing team, but how often do we even think of it as a part of the process? Mostly never. Communication issues can lead to disputes disputes
between contractors, sub-contractor, and developers. One in four construction projects has had a bitter dispute and claim raised by one party. Communication issues often lead to defects in the construction project. Communication can be viewed at two levels in the construction industry. One that is between larger bodies such as contractors, builders, and subcontractors. In comparison, the next level is between employees working on the project. Communication gaps between larger bodies are often severe in some cases leading to the halting of the project. Gaps in communication among individuals could lead to delay in closing tasks, deviations, and unnecessary back-and-forths. Therefore, there are many costs involved in letting communication gaps exist. Construction leaders have to take an objective look at it to understand the cost of allowing the Adhoc processes to continue. Several papers give construction businesses a way to understand this type of cost.
This is an area where technology has made significant progress, and with the right change management and technology adoption training, businesses could get better at following standard communication protocol. Integrated chat-tools and discussion boards help in getting the coordination and communication streamlined. All meaningful discussions are documented for reference. Notifications on open discussions help the teams be on top of their responsibilities. With a Digital Twin of the construction project, task management can be done better. Tasks can be tagged on the Digital Twin, which helps the contractors on the location have a better understanding of the open tasks. The responsible project manager also benefits because the follow-ups are visible right inside the technology platform. A record of all of the activities is available with a click of a few buttons making evidence capture and dispute resolution easier. Disputes that could have cost thousands of dollars can be mitigated with simple extensive documentation, without breaking a sweat.
Cost of Software
The software cost was much talked about ten years before when the cloud started getting into the thick of things. Today, the cloud is enabling most of the advanced technology platforms, including construction management. The benefits are several: (1) Investment in software technology has moved from capital expenditure to operational expense. Organizations can take a subscription to technology for minimal costs. (2) The hardware cost has been practically reduced to zero because the hardware is managed by businesses maintaining the cloud.
Therefore, compared to the benefits, using a subscription-based platform makes the cost of software negligible.
Cost of Maintenance
The cost of maintaining software was a big concern for large scale IT adoption businesses. Substantial IT teams were required to maintain the technology and the hardware on the premises. Moreover, bug fixes, enhancements, and change requests are sometimes used to make the use of software technology counterproductive. New-age IT innovators help you eliminate all such expenses as updates and fixes to the technology are implemented periodically and are automatically made available to you on your browsers without any downtime. For no additional cost, Therefore, the cost of maintenance can be eliminated.
Cost of Adoption
While it does take a business to move to new technology and train the stakeholders on the platform, this cost is also getting reduced because the user interface’s standardization makes it easier for users of the application to learn it. Moreover, the knowledge base of technology applications are a part of the offering, and software businesses are taking it more seriously. The chances are that the videos and help documents available for the cloud products will be well updated.
Switching cost for cloud products is also minimal just in case a construction business finds itself using a technology that is a misfit for its business. Thanks to the operational nature of modern software products. The investment starts low while giving the company enough time to pilot it and measure the benefits.
Revisiting our case, for construction businesses, it makes sense to understand their current cost of construction progress management based on the areas we discussed and then fitting the numbers in these equations:
Returns = ([Direct Cost Saved] + [Indirect Cost Saved] + [Gain from Quality Improvement])
Investment = [Cost of Software] + [Cost of Maintenance] + [Cost of Adoption]
ROI = (Returns - Investment) * 100 / Investment
At 3RDi, a technology platform for the construction business, we have considered these costs and benefits and created an ROI calculator for measuring the cost savings if you were to adopt technology such as that of 3RDi. Here is the link to the calculator:Construction Progress Monitoring Technology ROI Calculator
Try it out to see how you stand to benefit.