The changing dynamics of today’s engineering and construction market are having an impact on already thin profit margins. Economic conditions combined with increased regulatory demands, the rising cost of claims, and the ongoing retirement of a large group of experienced professionals present significant challenges to corporate growth in the near future. In addition, engineering and construction firms are exclusively dependent on project delivery to achieve profitability. And individual project profitability can be hindered by a wide range of internal and external factors, including rising materials costs and contractor-caused delays. If a firm is not aware of problems early (before they affect projects) and equipped to respond accordingly, the results can be devastating.
Project-driven organizations face a clear problem in managing the business successfully. With each project posing potential liability, executives must maintain clear visibility at the individual project and program levels, as well as view the cumulative effect of all projects and programs within the overall organization, in order to protect and deliver corporate profitability.
To maintain a strong competitive position, forward-looking companies are improving project efficiency by adopting a progressive approach that calls for consistent, repeatable business processes and operating procedures supported by uniform technology — in other words, standardization.
Standardization at the project level
Effective project management and delivery requires three principal elements: people, process, and technology. Project delivery often occurs across a disparate group of people and organizations. To harness the efforts of these people to achieve the goal of successful project delivery, processes are put in place. One typical example of this is change management processes. Capital delivery projects routinely encounter changes, whether because of differing conditions in the field, volatile weather, materials delays, errors, or all of the above. The traditional approach to dealing with these changes is through the use of project managers and planners that oversee myriad pieces of information and relationships and keep the process moving. More often than not, however, the ability to see the impact of every small change, trivial decision, or missing document on the project delivery lifecycle is more art than science.
With people and processes in place, project delivery can move forward, but its success is dependent on all individuals rigorously adhering to defined processes, or designated individuals laboriously controlling performance and process adherence manually. This costs time, money, and resources that take away from project efficiency. This has been the traditional operating method for engineering and construction to date.
However, technology (and more specifically, software) is in a position to step in and serve two important roles. First, it can provide a framework to capture processes. Second, it can help monitor and control people participation and maintain accountability. This not only saves time, money, and resources otherwise used to herd people through processes throughout the various phases of project delivery, but technology used in this manner also provides performance metrics — both of the overall project, as well as people and process performance during the entire course of project delivery.
Now, not only does “what gets measured gets done” to move project delivery along, but in addition, people and process metrics allow identification of inefficiencies. Only with clear metrics on what inefficiencies exist (for example, latency in the RFI process) can engineering and construction firms now take measures to systemically correct those inefficiencies, thus improving project delivery efficiency across all people and processes, and ultimately ensuring greater project success probability.
Standardization at the enterprise level
Benefits of standardization at the project level are readily extrapolated to the enterprise. This is important to an engineering or construction firm’s profitability since it is entirely dependent upon project delivery performance for profitability. However, more often than not, attempts to measure and adjust project delivery efficiency across an enterprise run into the hindering belief that every project is unique and so no meaningful comparisons can be made.
Not so. At a closer look it’s apparent that standardization of one project allows for standardization of all projects. Even simply measuring and recording the same key performance indicators (KPIs) for each project can make a great difference across the organization. As a consequence, metrics can now be compared across projects, divisions, and the enterprise. In turn, executives now have the information at hand not only to help analyze their organizations’ performance, but also to find and eliminate systemic inefficiencies within their organization or their organizational approach to project delivery.
Benefits of standardization
Standardization enables maximized project delivery efficiency. Operating each project with maximum efficiency is the key to protecting profit margins in the competitive engineering and construction industry. Standardization enables firms to implement uniform, agreed-upon processes and operating procedures and customized workflows based on tried-and-true best practices, and to easily enforce them across projects and project teams. A standardized approach also enables clearer visibility and transparency across projects, with metrics and forecasts supporting project and business decisions.
Smart technology choices
In today’s highly competitive engineering and construction market, it is not only the company that adopts technology quickly that will come out on top, but also the company that adopts technology intelligently and strategically, with the future in mind, that will deliver projects more efficiently and to greater profitability. Even companies that are starting from square one can pull ahead of the competition by choosing a system that promotes company-wide efficiency and collaboration to increase profit margins and make a bottom-line difference.
A standardized technology environment is built around a system, or systems, that is:
- scalable so that it can be rolled out to new projects as they come online, to a division, and to a growing enterprise;
- fully interoperable to eliminate double data entry, increase accuracy of data, and gain full transparency across business functional areas (for example, project management and project accounting); and
- functionally industry specific to support the specific project and business needs of engineering and construction firms across the capital project delivery lifecycle, from estimating and bidding to planning and delivery through closeout.
- In addition, when exploring solution options, engineering and construction firms should also look for the following critical characteristics:
Role-based functionality — An effective system must provide users focused access to the information and tools they individually need to carry out their responsibilities effectively. The solution should offer customized dashboards that incorporate relevant data and functionality from different applications and sources in a single, easy-to-read window.
Executive dashboards — To catch problems before they have an impact on profitability and productivity, executives need clear visibility into what is going on with every project and with the general health of the company, which means that they need access to different information and analysis tools than anyone else in the organization. A solution around which to standardize must provide an executive dashboard displaying standard KPIs; the ability to create additional KPIs based on critical metrics to track results at the corporate, project, team, and individual levels; accurate, productivity-based forecasting with up-to-the-minute project health reports; and easy-to-read graphical trends and forecasts.
Integrated data repository — An integrated data repository is critical to cost- and time-efficient operations as well as effective, accurate reporting, stakeholder communication, claims resolution, and KPIs. An integrated data repository ensures a “single version of the truth,” so everyone will be working with the same up-to-date, accurate, and consistent information.
Workflow engine — A solution environment for standardization must provide or enable a workflow engine to establish existing best practices without changing established procedures to accommodate current technological limitations. Any workflow engine must be customizable to adapt itself to the organization’s expertise as this expertise develops. Document versioning and audit trail capabilities are critical to maintaining accountability and clear recordkeeping throughout any workflow.
Embracing a complete solution
To improve project efficiency, engineering and construction firms must move away from disjointed project-based processes and technology and move toward company-wide processes, measurements, and solutions to create the transparency necessary to prevent one bad project from causing disastrous effects. Uniform business processes based on best practices increase efficiency, accuracy, and effectiveness. This standardization provides enhanced visibility that enables all organizational and project stakeholders to have consistent information available that can be used to prevent errors, proactively manage change, and improve the profitability and timeliness of every project and the company as a whole.
Richard Sappé is engineering and construction industry strategist for Oracle’s Primavera Project Portfolio Management group. He can be contacted at email@example.com.