Construction is playing a leading role in the UK’s economic recovery but in an uncertain world, accurately forecasting costs and keeping them on track can be tricky
With new opportunities on the cards, forward-thinking firms are using digital technology, including estimating software, to win more tenders and improve the profitability of projects, as Andy Day, estimating, take off & surveying software consultant from Access Construction, explains.
Whatever challenges the construction industry has faced in recent years, nothing could compare to the upheaval and uncertainty caused by Covid-19 and Brexit.
During the early months of the pandemic, we saw sites quickly close and then open again. As well as adapting to new ways of working, project managers had a number of other challenges to contend with, notably shortages of some building materials and labour due to workers needing time off to self-isolate. In an industry where many are unable to work from home, construction sites have continued to operate throughout the pandemic despite rising fears for worker safety due to rules not being followed.
Then, when the pandemic intensified at the end of last year, scenes of lorries queuing at the border in Dover prompted fears of more materials shortages and price hikes to come.
We don’t yet know what the full impact of Brexit will be on construction, specifically, whether restrictions on free movement will compound existing labour shortages. The trade deal struck in December has brought some clarity at last but reports of delays at the border due to paperwork are a cause for concern.
But there are reasons to be optimistic. The Covid-19 vaccination programme has begun in earnest, offering hope that normal life might resume once again.
What’s also reassuring is that the UK government sees construction playing a leading role in driving the green economic recovery, creating jobs and providing more sustainable homes, public buildings and infrastructure. This should bring more tendering opportunities for affordable housing, schools, hospitals and universities, on top of private housebuilding, build to rent (B2R) and commercial schemes.
With potentially more opportunities on the horizon, main contractors will have to demonstrate that they can deliver on time, on budget and meet the required safety and sustainability standards. They’ll need to do everything they can to avoid a race to the bottom on pricing, delays and unexpected costs, in order to protect their margins.
Those who use the latest estimating software are at a clear advantage, since they can price up potential projects with ease and accuracy. Cutting admin and improving the quality of your data, allows you to move quickly and gain a much better understanding of which opportunities offer the best returns.
Where are we now?
As outlined above, construction proved to be resilient in the face of the challenges brought about by Covid-19, buoyed by a raft of government incentives.
Some housebuilders benefitted from the stamp duty holiday, while the Prime Minister’s rallying call to “build, build, build” only underlined the vital role the sector plays in the economy.
It’s hoped that reforms to the planning system – said to be the “most radical… since the Second World War” – will help new projects to get off the ground sooner. There are also programmes to deliver more affordable homes, regenerate brownfield sites and help small-scale developers access finance.
Green initiatives look set to fuel further demand for contractors, bringing opportunities in new build developments, as well as refurbishing and retrofitting existing homes and commercial premises.
Outside the private sector, the government hopes that public infrastructure projects will provide another boost to construction. Last summer, it published its procurement pipeline, which includes 340 procurement contracts across over 260 projects, programmes and other investments for 2020-21. Bolstering the National Infrastructure and Construction Pipeline, last published in 2018, the procurement pipeline was a response to Covid-19 and calls from the industry “provide short to medium-term certainty”.
Fortunately, at least some of the problems linked to Covid-19 were short-lived. After the initial shock, the sector rallied comparatively quickly – fuelled in part by a boom in housebuilding. By the end of October last year, the number of construction workers furloughed had dropped to 130,700 from 723,600 in April and the sector had seen the sixth consecutive month of growth.
Signs of further recovery are so far encouraging too. Construction output grew by nearly a quarter in the three months to October, even if (apart from infrastructure) it hasn’t yet returned to pre-lockdown levels. This was achieved thanks to growth in new work (23.8%) and repair and maintenance (26.8%).
Challenges ahead
News of a Brexit trade deal should go some way in allaying concerns around materials availability. The Builders Merchants Federation (BMF), for instance, welcomed the announcement that the UK was leaving the EU “with a trade deal in place that enables the continued free flow of materials”. However, it remains to be seen whether the current border issues will escalate or be resolved swiftly.
What could be problematic is the end of free movement and the potential skills shortages that follow. Any major fluctuations in the labour market will make it more difficult for estimators to provide accurate costs, so it’s even more critical that their estimating software provides the latest data on labour costs.
It’s no surprise that Covid-19 and Brexit-dominated the headlines in 2020, bringing new challenges and exacerbating old ones. These two major events will certainly force many firms to review, improve and future-proof their processes.
Faced with the prospect of labour shortages due to reduced EU migration, we could see closer collaboration between the government and industry to nurture homegrown talent, from college leavers to those who’d never considered a career in construction before.
Where skills are at a premium, pressure will grow on firms to address long-standing efficiency and productivity issues, especially if they are to meet government housing targets and demand elsewhere. As one industry expert puts it, “‘we build too slowly, too expensively and with too little reliability”.
We’ll see later on that wider adoption of digital technologies is key to working efficiently and improving profitability.
Safety and transparency
The Grenfell Tower fire underlined the importance of materials traceability and firms must be vigilant in ensuring safety standards are met.
Removing unsafe cladding has been a drawn-out process. It’s sobering to think that since the fire in 2017, almost 3,000 buildings have been registered for funding to remove unsafe materials, not counting the 458 that have the same aluminium composite material as Grenfell.
Now there are fresh worries that the economic impact of Covid-19 “could result in corners being cut once more and commercial pressures being used as the excuse for further poor practice and delay.”
Speaking to the director of the Association of Cost Engineers recently, he told me that more responsibility will fall to estimators to make sure “the materials used or specified are fit for purpose and conform to all current legislation”. He added that “the onus will be on them and QA teams to carry out due diligence checks on their suppliers to be able to demonstrate this throughout the product’s lifecycle, from construction, commissioning and operation to ultimate demolition and disposal”.
Accurate costing from the start
The reasons why project costs escalate will be familiar to anyone working in construction. Optimism bias, inefficient processes, poor data and communication between stakeholders and limited labour supply can lead to project delays.
Digital technology, including BIM (building information modelling), is helping firms to secure contracts, improve safety, demonstrate transparency, speed up delivery and increase profitability. Using industry-standard estimating software, like Access ConQuest, firms can assess the commercial viability of projects before they tender and ensure costs are realistic.
A cloud-based tender management system, with anywhere, anytime sign-on, enables users to create, send and track price requests to subcontractors, compare multiple subcontractor prices and track their responses. Document packages for suppliers can be produced up to 70% faster compared to manual methods, with key information stored on the cloud, making it easy to access when required.
With all the estimator’s information available in one place, firms are able to control costs, manage cashflow and track actual versus projected costs with accuracy. The fact that data can also be imported from 2D and 3D drawings, as well as BIM representations, ensures a higher degree of accuracy too.
Finally, greater transparency means that quantity surveyors and finance teams can quickly see whether costs are rising and take appropriate steps, keeping other stakeholders and the client informed.
Unlocking new opportunities
As well as keeping costs on track, a data-driven approach to estimating helps to streamline time-consuming processes and firms to bid for more work and improve their chances of winning.
The right software means tendering teams can rapidly input the estimator’s information into the surveyor’s valuation and reduce the risk of error associated with double keying data.
When looking at prospective projects, tendering teams are able to draw on a rich bank of data with costings for similar projects. Access ConQuest, for instance, comes with a library of over 10m cost items, all of which can be modified if required.
Elemental rates can be updated in line with cost increases and market conditions and new elemental rates produced for the cost plan. Further insights can be gained with detailed analysis at a group element, element and sub-element level.
The bigger picture
Earlier, we said that greater transparency through the supply chain is essential for meeting safety standards. Of course, there is no guarantee that subcontractors won’t substitute materials for inferior alternatives on-site – but a robust audit trail, using recognised estimating software, will show whether or not the materials were on the approved bill of quantities.
This is why it’s important to use technology to bridge the gaps between contractors and improve communication at every stage. Leigh Edmondson, co-founder of main contractor CNG and one of our customers, explained how it supports “strong professional relationships”, not least because most contractors use Access ConQuest. Collaboration across the supply chain promotes trust and therefore reduces the chances of materials being substituted on site.
Final thoughts
We’ve seen that in an uncertain market, main contractors will need to be proactive, flexible and responsive, without compromising quality, safety or profitability.
It is worth sharing one excellent point the director of the Association of Cost Engineers made during our conversation:
“Rather than discounting rates and prices, companies need to invest some time in researching working practices which enable them to work quicker and smarter, while delivering a higher quality product. If they can work quicker and more efficiently than their competitors, they can afford to price the works without discounting rates as the time spent will be less, therefore offsetting the increased rates.”
In other words, firms don’t need to engage in a race to the bottom in order to win tenders but should instead make process improvements and become leaner.
Estimating software is not new but the latest developments are empowering contractors to take a more disciplined approach and make the most of their resources.
So important has digital adoption become in construction that teaching the next generation how to use the software is now an essential part of their training. At Access, we have partnered with a further education college to equip young people with the right tools and skills for the job, helping to improve their employability and plug skills gaps in the sector. As the next generation of digital natives enter the workplace, the appetite for new technology will only increase further.
With so much going on in the world, this is a critical time for the construction industry, and much depends on how well they navigate the challenges stemming from Brexit and Covid-19. This is a golden opportunity to futureproof your firm and play a key role in delivering quality and sustainable projects.
Access ConQuest estimating software is used by more than 800 UK contractors. To find out more, visit https://www.theaccessgroup.com/construction-management.
Andy Day
Construction software specialist
Access Construction
Tel: +44 1206 322 575
scs.marketing@theaccessgroup.com
www.theaccessgroup.com/construction-management
Please note: this is a commercial profile.
