“On time and under budget.”
This, along with many other similar phrases, has been repeated for longer than anybody can remember across the construction industry and on the jobsite. The one goal of every project is to be completed in the scheduled amount of time, costing the contractually agreed-upon amount. Over the last few decades, the construction industry has slowly (very slowly) begun to set its sights on technology to aid in making the construction process more efficient in both time and cost. The question that is then typically raised when considering adopting technology is, “will this technology benefit cost or schedule?” The June 8th analyst call titled “Achieving ROI in Construction Tech” broached this very subject. The call was led by Yves Frinault of Fieldwire and Brad Moore of Power Design who discussed the concept of achieving return on investment, or “ROI,” through the adoption of Fieldwire’s technology.
Before we can begin to calculate an ROI, we need to understand what the metric really means. At the most basic mathematical level, ROI is calculated with the following formula:
This formula provides a percent change in the value of the investment. Strictly from a cost perspective, a positive ROI is a good thing and a negative ROI is a bad thing. As you can see, the only two variables in this equation are the final investment value and the initial investment value. When considering adopting a field technology solution, the initial investment value will always be the cost of the product. The cost of the product may be based on membership subscription, user licenses, lump sum, or % of revenue basis, but will typically be provided as an up-front cost determined by the technology solution. That leaves us with one remaining variable, and the purpose of this briefing, the final investment value.
In the instance of Fieldwire, they produce a jobsite management technology which provides a platform with the ability to aggregate the most current construction documents (drawings, specs, etc), host real-time communications, and produce reports with the stored data. The stated purpose of this field technology solution is to reduce time required related to finding current construction documents and communicating questions and answers to field personnel. The direct impact, or ROI, of this technology is reducing trade hours required for administrative work, allowing tradespeople to spend more time completing the required tasks. The ROI for utilizing Fieldwire’s product then becomes the number of hours saved due to elimination of efficiencies multiplied by the average hourly rate of those hours. Applying our baseline ROI equation, a basic ROI for Fieldwire might look something like this:
In the BuiltWorlds environment, field solutions are broken down into the following categories:
- Field Management
- Jobsite Monitoring
- Progress Documentation & Reality Capture
- Materials Management
- Tools / Equipment Management
Fieldwire is an example of a field management technology, but how does this concept apply to the other field solutions technology categories?
Additional ROI Examples
Jobsite monitoring and reality capture technologies give owners and contractors the ability to “see” the jobsite in real time from anywhere. In addition to being able to “see,” integrated software allows jobsite cameras to understand and track construction not just from a progress standpoint, but also from the standpoint of safety, quality, risk management, time tracking, and so on. Similarly to Fieldwire, these field solutions aim to reduce overall time and cost required to complete a project; however, these ROI calculations might look a little different. For example, through productivity tracking with a technology such as Buildots, contractors can identify and comprehend anomalies in progress and understand how to course-correct in real time. The final investment value of this type of technology may be the avoidance of significant delays. Another good example is quality monitoring technology such as Openspace. Openspace technology can capture jobsite conditions and compare them to the virtual jobsite model, identifying potential quality defects in the construction process. In this instance, ROI is measured by the avoidance of rework or major quality issues.
Materials management and tools / equipment management solutions are geared towards adding efficiencies not only on site but also between the site and the broader construction supply chain. Companies like ToolWatch, Clue, and EquipmentShare all developed connected, cloud-based platforms aimed at reducing waste and inefficiencies pertaining to the use of tools, equipment, and materials. Calculating the final investment value of these types of products would be aimed at the reduced downtime of owned materials as well as understanding optimized quantities for required materials.
On top of the direct financial impacts of implementing field technology solutions, there are also less tangible benefits to technology adoption. In an age where data collection has become as valuable as gold, the ability to adopt and implement technology solutions allows users to aggregate, and eventually comprehend, massive amounts of data for the benefit of the organization. This benefit, while difficult to quantify, can be generally categorized by more informed decision making. Marketing can also be a major factor. Again difficult to quantify, Owners generally like to see and be a part of innovation, and contractors with new technology can market themselves in a way that appeals to Owners, ultimately leading to better RFP responses. Lastly, construction firms may find their employees are better-equipped to perform their tasks with the addition of new jobsite technology. When seeking new employees in a competitive job market, the ability to teach and use new technologies can be considered an added benefit.
With all of this information, ROI calculations can be succinctly summarized by making sure we understand whether or not adopting a technology will benefit either the project schedule or the project budget. What is worth additional exploration, especially when it comes to technology adoption, is the underlying components of time and cost, and the invisible benefits that live outside of a basic ROI calculation. Construction technology and innovation leaders will provide the most value to their organizations by having a strong grasp of these questions as we continue to accelerate into a future of technology-aided job sites.