to read the article?
We’ll forward it to your inbox.
Engineering and construction firms are in a tricky global position. Even if we ignore the changing times and subsequent "new normal" that we're all scrambling to predict, the truth is: construction growth isn’t awesome.
It’s not hard to see why either. The single biggest problem the construction sector faces is digital transformation. McKinsey rates construction as the second-worst industry across all digital transformation metrics.
In a business where large projects can be 80% over budget and only 15 to 25% of bids get approved, construction companies are failing to use the very technology they've been craving for years.
The role of predictive analytics in construction
Advanced data analytics and predictive modeling aren't mid-horizon technologies anymore, they're here. And construction companies that join the digital revolution are the ones that stay the most competitive.
We need to stop looking backward. Construction trends towards historical data. Benchmarks are set using past project data, and profits are projected using previous project cash flow, labor needs, and contingency cushions. But construction is too variable to accurately rely on historical data.
Historical data analysis fails to take into account in-the-moment parameters and data flow from all of your systems. It ignores the present in favor of the past. On the other hand, predictive analytics uses all of your data sources to accurately portray your unique project situation. In fact, McKinsey estimates that predictive analytics will be the final stage in transformation for construction companies in the "New Normal."
To help illustrate the value of predictive analytics, let's observe how predictive analytics forecasting technology can help you maximize your Work in Progress (WIP) reports — which require project-to-date financial analysis.
WIP, enhanced fee, and the ever-dreaded profit fade
WIPs can be scary. Gain-fade analysis is the boogeyman in the corner that scares owners and bonding agents. Worse yet, you can't predict profit fade with historical data. It's project-specific and heavily reliant on both accurate bids and a concrete understanding of project requirements. Here's the truth: every construction company deals with profit fade. This is a high-risk, low-margin industry. Fee erosion is the thorn that causes 80% of projects to go over budget with added costs.
Believe it or not, predictive analytics can help you eliminate profit fade and transform fee erosion into fee enhancement. Forecasting technology based on predictive analytics helps you automatically identify trends that will impact your bottom line on a project-by-project basis. It doesn’t just converge a few data sources; it brings all of your data into one common system for deep, meaningful analysis. Best-in-class AI systems can leverage your hard-earned data to accurately predict profit, help you understand bidding needs, and give you the insights you need to develop project-to-project strategies across multiple dimensions (e.g., labor, equipment, hours, etc.).
Predictive analytics platforms can produce WIPs in minutes. That means no more 90-day waiting times, less energy spent on gain-fade analysis, and more time spent focusing on growth-driven projects. It quite literally eliminates profit guesswork and turns fee erosion into fee enhancement. Imagine competing on bids and delivering projects in a world where you can predict the future.
Better yet, these smart analytics systems can automate your accounting tasks. So, not only do they allow you to instantly generate WIPs, accurately forecast bidding needs, eliminate pesky gain-fade analysis, and maximize project efficiency, but they also reduce your accounting overhead and gather more data without you lifting a finger.
Briq helps contractors use their data to drive better outcomes for all phases of construction. Using modern technology such as automation, machine learning, and predictive analytics, Briq helps to stop fee erosion, freeze overhead costs and provide better outcomes for your business. Contact us to see what Briq can do for you.
