The COVID-19 pandemic has only heightened risk for the construction industry at large. As issues compound and organisations struggle, business leaders are driven to consider tangible ways to reduce risk across the board.
While digital transformation once presented a way to gain a competitive edge, now software solutions spell the difference between success and failure, providing the means to successfully complete projects and dramatically reduce the potential of costly disputes.
Understanding risk: billions lost, the flow of information, having a single source of truth
A recent survey of construction industry members in ANZ by Russell McVeagh found that 61% of people predict an increase in the number of disputes over the next two years, with the most likely cause expected to be poor quality documentation. Echoing this sentiment is HKA's recent analysis of 1,185 construction projects globally.
The researchers found that extensions of time total six centuries, and the cumulative value of sums in disputes exceeds US$48.6 billion. To move a little closer to home, a CRCCI study stated that disputes cost the Australian economy approximately $7 billion a year, adding 6% to the overall cost of each project.
These astronomical figures represent huge potential for the construction sector if it can reduce the number of disputes that arise. Imagine if this money could be funneled back into development, people and technology. But how exactly can there be a shift?
There is no way to control the quality of work completed, but what can be done is try to reduce uncertainty, misinformation and, by extension, unnecessary tension.
Within the construction industry information is valuable, often withheld and treated with secrecy for fear of it being used against its owner. However, if people look at the same information and bring differences of opinion to the fore a lot earlier with better data management, then there is a way forward.
Ultimately, it comes down to having a single source of truth. There has never been a greater imperative for contractors and subcontractors to understand the source of the information they are working from and validate the integrity of the data they are gathering and acting upon.
Clearer and more equitable contractual relationships, and collaborative and streamlined information frameworks, will lead to better risk management practices and a brighter future for the industry.
Construction law firm Kreisson's solicitor director David Glinatsis, shares a perspective on this topic. Working on the front lines in construction law since 1995, Glinatsis has a deep understanding of the issues the industry is facing and how that feeds into various aspects of the law, from contracts to dispute resolution.
On the importance of having a single source of truth, Glinatsis says, “What we look for in preparing a case is provable material based upon evidence, and that evidence has to be tested against the narratives of the witnesses as well as against the documents. Sometimes we must go back into the documents and establish their provenance - how the document was created and on what source material.
There may be issues around this, for instance people leave projects and all the institutional knowledge invested in that person is potentially lost. Capturing information and having documents in a single place provides us with the assistance that we need. It's very important to know that we can have confidence in that process.”
What can be done: Manual processes versus software designed for construction
The construction sector is known for relying on traditional tools such as Excel to track and manage projects, and this is one obvious way organisations are opening themselves up to risk.
It's a well-known fact that 88% of Excel spreadsheets contain errors. Spreadsheets serve their purpose and can be functional for construction companies, but they are also very limited in their ability to accurately log and track important and actionable data. In addition, using spreadsheets can lead not only to error rates but lack of visibility, lack of consolidation, lack of consistency and lack of control.
In a sector that relies heavily on Excel to track important data from project dates to payments, it's simply not good enough to ignore more secure alternatives. A more robust and reliable source of truth would better protect contractors and subcontractors and reduce the level of human error associated with more traditional methods.
Advancements in digitisation have led to technology solutions designed specifically for the construction industry. Software designed to aid the daily processes of contractors and subcontractors offers several benefits. These tools ensure the progress of a project is managed and tracked in a very visible way, including certain data entries enforced to ensure the completeness of information.
In addition, they can offer reliable consistency of form with auto-generated payment schedules and automated calculations, deadline monitoring with reminders and reporting, integrations to prevent cross-system gaps, an audit trail of user actions and alerts on process failures.
Notably, these tools present vastly improved visibility and transparency and the potential to significantly reduce disputes caused through errors. They can remove the need to check signatures on paperwork, ensure there is one repository of information, and eradicate the ability to edit, duplicate or share project data without permission.
Overall, working from the same set of numbers means that differences are obvious earlier, and necessary discussions can be had. It's better to have a small disagreement early than a big disagreement later.
Glinatsis explains this from a legal standpoint by saying, “As perceptions are exchanged in a narrative, down the line those perceptions potentially become distorted. To test what witnesses say, we look at what the available documents say, how those documents were compiled and where the documents are stored.
"It's not unusual to have various repositories and parallel streams of communication. This could be key information held in emails or on the hardware of the person working on the job, and it may not necessarily be linked to everybody. Often a contractor is left with different strands of communication that may not be consolidated or complete.”
He continues, “Overall, contractors need to improve their contract administration, comply with the time bar provisions under the contract and focus on good record keeping. If there is a single source of information, we can have greater confidence in the integrity and completeness of the available evidence and have comfort that our preparation of legal and factual positions can be based on accurate and complete information.
"Also if there are disputes that arise, efficient access to documentation and information means that those disputes can be dealt with early - because little things become big things, we know that from experience.”
Take a step towards a brighter future
The pandemic is a catalyst for change in the construction sector, prompting organisations to update their systems and processes to move closer to having a single source of truth and, as a result, reduce the risk of misinformation and disputes claims.
Software tools designed for the construction sector help teams to manage the progress of projects in a very visible way from start to finish, helping to plan, run and manage every facet from payments to daily progress updates.