Data-related problems are causing the construction industry to hemorrhage revenue.
Globally, 48% of rework is caused by poor data and miscommunication - costing a total of $31.3 billion annually in the United States alone. Additionally, the average construction dispute costs $54.26 million and lasts almost 13.4 months. The underlying cause? A failure to effectively communicate using available data.
These financial losses are not part of the cost of doing business; they’re preventable.
By developing some basic data management procedures, construction companies can significantly reduce both rework and disputes - saving millions of dollars and months of time in the process.
What is data management?
In short, data management is the collaborative process of collecting, organizing, and storing all the digital material related to a construction project. It forms the basis of all project related communication by creating a foundation of context upon which every stakeholder interaction is built.
Getting your data management running smoothly prevents the costs associated with rework and disputes by stopping them before they happen. It’s like the difference between building on sand and building on solid ground, without a firm base it’s much more difficult for your project to be successful.
Explore our guide to using modern technology to solve construction’s biggest headaches.
Understanding the Causes of Disputes and Rework
Construction’s dispute problem
Construction is a notoriously litigious industry rife with exceedingly long, expensive disputes.
Ultimately, this is a byproduct of the bidding and contract processes: owners and contractors enter into rigid agreements for a process that inherently requires flexibility.
Inevitably, every construction project will run into differing site conditions or issues that will lead to cost overruns or delays. Construction contracts try to accommodate for this reality by incorporating specific protocols for change orders and submittals, but many setbacks still evolve into legal disputes.
In theory, if all stakeholders followed the outlined procedures for dealing with unexpected hurdles, disputes wouldn’t exist. So, for some reason, contracts continue to fail even with specific processes in place for problems that arise. So, why do they keep happening? It’s not like anyone except lawyers like disputes; ALL project stakeholders would rather avoid them.
Disputes continue to happen because of systemic issues in the industry’s data management structures. More simply put, one of three things is happening:
1. People aren’t finding the information they need
2. People can’t get the right information to the right person
3. People don’t have the context needed to identify an issue before it becomes a full blown dispute
When one of the above happens, people tend to bury their heads in the sand and ignore the problem. They’re simply too busy to waste hours trying to get information where it needs to be.
When the problem gets ignored and work continues, the proper contractual procedures aren’t followed, work doesn’t meet the obligations, and a dispute arises.
“The age-old problem of failing to timely and accurately communicate between project team members seems to be at the root of many construction disputes, or at a minimum, turns a problematic, but potentially correctable situation into a claims nightmare. Swift intervention, especially as to correcting basic project communication “hiccups” can go a long way toward reducing both the frequency and severity of construction claims. The absolute worst thing that one could do is to ignore a brewing delay/disruption claim.”
Brian Stewart, partner at Collins Collins Muir + Stewart
The 2018 Global Construction Disputes Report
Construction’s rework problem
There are very few things more frustrating than tearing down something you’ve built and building it again. It’s not only expensive; it’s time-consuming and demoralizing. Still, construction companies in the US spent over $31 billion on rework in 2018 alone.
Rework is one of the chief causes of cost overruns and delays, amounting to 4-6% of total construction costs. The industry needs a cure.
Rework will never go away completely - it’s impossible to eliminate mistakes. But in an industry with razor-thin margins, 4-6% should be considered unacceptable. Rework should be no more than 2.5% of total construction costs, and this number is achievable today.
To understand how to get rework costs to an acceptable level, you have to understand the root issue.
By far, the largest contributor to rework is poor project data and poor communication, accounting for 48% of rework globally. The other 52% is hard to pin down, stemming from incidents like design changes, material failures, or unforeseen site conditions. If you can eliminate the 48% of rework caused by poor data and miscommunication, you can easily cut the total spending on rework in half.
The solution to disputes & rework
With this background in mind, the root of both the dispute and rework problems becomes clearly identifiable: people don’t have the tools to communicate about the problems they encounter. Which means that two things need to happen before the industry can tackle this epidemic:
- Get the right tools for construction teams to report problems
- Teach the teams how to make use of these tools
Fortunately, any construction firm can accomplish both these tasks relatively simply. We’ll break down how in a later section.
What Is Data Management in Construction?
To understand data management in construction, you have to have a solid definition of exactly what construction data is. Construction data refers to any physical or digital artifacts created in the process of building a structure. This definition includes but is not limited to:
- Text messages
- Pay Apps
A typical, large-scale construction project will produce terabytes of data spread across hundreds of devices and servers.
Combined and organized, this data creates a powerful tool to streamline project efficiency. Scattered and unorganized, it becomes a cumbersome roadblock that prevents on-time and on-budget operations.
While data management is critical to smooth operations, it doesn’t often feel like it actively moves the project forward, so the majority of teams decide to ignore it. Especially in the wake of construction’s labor shortage, people can’t find the time to do anything that’s not hands-on work.
Changing this attitude toward data management is critical to reducing rework costs. What’s more unproductive: 15 minutes to an hour of data management per day or hundreds of thousands of dollars and multiple weeks of rework?
So, what does data management look like for a construction team?
There are two basic parts:
Your data management toolset
To effectively manage construction data, you have to have a single system of reference.
You already have too much data to be worried about spreading it out over multiple systems. This system should automate your data organization and collaboration while integrating with whatever data capture methods your team already has in place.
Your data management practices
For data management to be effective, you have to ensure that everything is uploaded to your data management toolset.
That’s why you need a set of best practices that outlines how your team goes about data capture and collection. Ideally, your toolset is flexible enough to work within whatever is most natural for your team.
Essentially, effective data management in construction comprises bringing all of your data into a single system and using that system to manage all project communication. How does this lower construction costs by preventing rework and disputes? We’ll take a look in the next section.
How Can Effective Data Management Eliminate Rework and Disputes?
Two things lie at the heart of construction’s rework costs, and arguably the industry’s dispute problem as well: poor data and miscommunication. To understand how data management resolves these issues, it helps to break them down even further.
Understanding and resolving miscommunication
A miscommunication occurs any time people fail to effectively transmit information. In construction, the most common causes of miscommunication are as follows:
When you’re inundated with messages across several different systems, it can be easy to miss or forget about some of the people you’re supposed to respond to.
There are two ways data management can resolve this problem. First, by keeping all your communication organized in a single system, messages don’t get lost in the chaos of email, texts, calls, etc. Secondly, it promotes transparency. Messages are much less likely to go unanswered when multiple people can see something important is waiting on a response.
2. Inability to collaborate effectively
While this issue is more intangible than unresponsiveness, it typically comes down to people lacking the context and tools they need to deliver their message. When talking about an issue in construction, it’s extremely helpful to see photos, plans, location, and any other relevant information to fully understand the problem.
By working with a modern data system that mixes all of your data types, you can ensure each stakeholder has the context they need to understand the issue, as well as the tools needed to manipulate the data as needed.
3. A lack of a common communication platform
Imagine a sub reports an issue to a super. The super calls the PM and has the sub text a photo to him. The PM needs to report the issue to the owner and the architect, so he uses his phone to email the photo from the text, and then writes a separate RFI to be sent in an Excel sheet. Now the owner and architect must communicate about the problem, and compile a response to be sent to the PM, who must then relay it to the super, who must then relay it back to the sub.
There are so many opportunities in this process for information to get lost, missed, forgotten, or misunderstood that it can make your head spin. It’s no wonder that a significant amount of rework is caused by people simply not keeping their communication in one place.
Understanding and resolving poor data
Problems stemming from poor data all relate to people not having what they need to properly respond to an issue. The top 3 problems related to poor data are:
1. Inaccurate information
If you build off outdated or inaccurate data, at best you’re going to end up with rework, at worst a dispute - not much explanation needed there.
How people end up with inaccurate data is another story. Using paper drawings is one of the worst offenders. It’s far too easy for someone to be unaware that they are not holding the latest plans for their work.
How do you prevent inaccurate information altogether?
Maintain a single system of record and make sure everything project related is digital. If everyone on a project is using one system to access all project related data, and the latest project data is always uploaded to that system, then you’ve completely eliminated the problem of anyone working off inaccurate data.
2. Inaccessible information
The problem of being unable to access the right information is a relatively new phenomenon, created primarily by the invention of user licensing in software.
There’s been an explosion in construction software over the last decade. While these tools have been extremely helpful in building more modern, complex structures, they’ve also created new data types that are often gated behind licenses. If people don’t have the access to the software they need to view the data, then they can’t make the decisions they need to make.
With a modern data management system, you should be able to upload and view file types from all the different systems used by each stakeholder. This will allow everyone to access the data they need without having to purchase expensive licenses that are only needed for one-off purposes.
3. Inability to share necessary information
The inability to share necessary information most often arises from a lack of methods or equipment to communicate technical issues.
Perhaps project photos are stored on a local device, and the field team doesn’t have the equipment to do the necessary bulk data transfers. It’s also possible that people need to mix various data types like orthographs and digital plans, but don’t have the means to overlay and share them.
As construction tech evolves, it’s becoming necessary to compile and share an ever growing amount of data on cloud servers. Without a modern data management system, this process is quickly becoming impossible - leading teams to work with less than reliable information to complete their builds, which ultimately ends in rework and disputes.
How Data Management Solves Real World Problems
To really understand how data management can save construction projects from rework and disputes, it’s helpful to put it in a real world context.
The benefits of proper data management in construction aren’t always immediately clear, as it can be difficult to quantify the value of preventing errors. We’re highlighting two real world examples from our customers to help complete the picture of data management’s value.
Case Study #1: Ending disputes and getting paid quickly
Company: Saab Site Construction
Project: Pico Norte Reservoir
Location: El Paso, TX
Problems Prevented: Dispute
Summary: Even though change orders had been filed, the city disputed extra work done by the contractor.
The city of El Paso contracted Saab Site construction to excavate a storm water dam. Not wanting to hire a new survey crew, the city took bids based on a survey from several years back. During the course of excavation, the contractor quickly realized they were excavating far more dirt than planned and filed a change order.
Work continued and the city agreed to address the change order later, while the contractor kept tickets for the number of trucks leaving the site. After project completion, the city disputed his claim that more earth had been moved, as they thought that the GC was half filling trucks to get more money.
Having used Unearth's OnePlace to regularly capture aerial images of the site, the contractor could easily produce detailed aerial maps of his site from every month of the project. He was able to show photographic evidence of full trucks leaving the site, as well as accurate volumetric measurements of the area that had been excavated.
With clear evidence in hand, the city was happy to pay the GC the full amount he was owed and avoid litigation altogether, an outcome that saved the GC and the city months of time, as well as thousands of dollars in attorney fees.
Case Study #2: Preventing rework on conflicting projects
Company: A General Contractor
Project: Silver Lake Apartments
Location: Everett, WA
Problems Prevented: Rework
Summary: A large general contractor avoided major rework by halting construction that was going to be torn down by a city roads project.
As part of the construction of a new apartment complex in Washington, one of our general contracting customers was tasked with modifying the sidewalk in front of the building to accommodate new retail space. As they were preparing to break ground on that part of the project, one of the supers noticed road construction on a separate project happening a few blocks away.
Because they were using our data management system, the super decided to quickly double check if the road project would end up conflicting with their build.
He downloaded the plans from the DoT website, uploaded them to his site in OnePlace, and overlaid them on his project. He immediately saw that the road construction was slated to change the roadway and sidewalk they were about to build, meaning that if they started construction - not only would their work be torn down, they were going to need to send the plans back to the architect to get designs that matched the new roadway.
He was able to stop work immediately, saving hundreds of thousands of dollars and weeks of wasted time. To notify the architect, he simply pinged him from within our system to show the conflicting plan overlays and let his data do all the talking for him.
How to Get Started with Data Management
It’s daunting to think about bringing all of your data together and overhauling your data management processes. However, it’s easier than you think to get started.
The software companies that build these data systems, like Unearth's OnePlace, have programs in place to do the heavy lifting for you.
Take a minute to think about how much rework and disputes have cost you in recent years.
See what modern data management can do for you
Start your free trial of Unearth's location-based software for Capital Construction.