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Why are Infrastructure Contractors Deep in Productivity Crisis?

by | Jun 24, 2021

The construction industry is one of the largest in the world and yet, despite the year-on-year, multi-billion dollar investments from governments and the private sector, the industry finds itself in strife over productivity.

A report by KPMG, Climbing the Curve, found that 69% of owners say poor contractor performance is the single biggest reason for project underperformance. For those in the industry, it may be unsurprising that large projects often take an astounding 20% longer to finish than scheduled and exceed budgets by up to 80%. The same McKinsey report highlights that while economic productivity has risen overall, construction labor productivity has failed to keep up entirely.

The combination of the skilled labor shortage, rising equipment, and material costs, a competitive landscape, and tightening compliance requirements has driven even more complexity in construction operations. These are just a few of the factors creating massive bottlenecks for contractors, minimizing margins even further, and costing the industry billions each year.

Along those lines, a World Economic Forum study found that a 1% reduction in construction costs could save society $100 billion globally. Paired with 44% of firms reporting increased construction prices due to labor shortages, a clear picture is set: the construction industry is in a productivity crisis.

Risk concerns and rework

Self-perform and subcontractors take on over 90% of work on projects, meaning their businesses are hit hardest by the productivity crisis, as the weight of project performance falls on their shoulders.

Whirlwind Steel found that a quarter of projects grow past the scope of work by 30% in the field itself. The inability to properly communicate, approve and document the variation of work in the field fuels an endless cycle of disputes for the contractors, ultimately wasting time and money, and leading to delayed payment and cash flow challenges. With the global average length of construction disputes sitting at a staggering 17 months, subcontractors and self-perform GCs assume vast amounts of risk with every project.

In addition to risk concerns, rework has become an expensive standard, with nearly one-third of work performed by contractors actually being rework. According to a report by Autodesk, 52% of rework can be attributed to poor project data and miscommunication. Based on these figures, contractors across the globe are consistently wasting around 15% of their labor productivity alone.

Data, technology, and contractor support

Despite the grave productivity situation of the construction industry, contractors continue to be adverse to technology adoption. The right technology can enable timely data collection, communication, and decision-making, yet nearly 50% of construction companies report spending 1% or less on technology annually. To further that, only 18% of firms reported consistently using mobile apps to access project data and collaborate. This technology adversity continues to negatively impact contractors’ ability to remove bottlenecks from their business and ultimately protect their bottom line.

Simultaneously, 45% percent of construction professionals report spending more time than expected on non-optimal activities such as looking for project information, conflict resolution, and dealing with mistakes and rework. The time wasted on these non-optimal activities is often due to paper-based, manual processes around the collection of field data and scheduling. In fact, 68% percent of trades point to poor schedule management as the key contributor to decreased labor productivity.

The other challenge construction businesses face is finding the right solution. Of those who employed technology, 36% of construction professionals cited the reason for its failure was its poor fit with current processes and procedures. And while subcontractors and self-perform GCs conduct the majority of the work on projects, most solutions on the market fail to adequately support their businesses. Many solutions on the market are geared toward project management, while others are not industry-specific. Other solutions that fall short in the construction world include those that only tackle a single challenge, like timesheets. These solutions typically referred to as point solutions, create data silos and new obstacles within the business.

With the grim state of productivity in the construction industry, complacency in the competitive market is not an option. Contractors can improve their productivity, protect their bottom line, and future-proof their business with the right tools in hand.

At Assignar, we pride ourselves on being built for the industry by industry. Our CEO and Co-Founder, Sean McCreanor started Assignar for his own subcontracting business in 2014. Since then, being the operations platform for self-perform and subcontractors has been more than our mission; it’s our passion. We are in constant engagement with our customers who guide our roadmap. In 2020, we shipped over 110 customer ideas into our platform. Every day, self-perform and subcontractors shape the future of construction with their product feedback and success stories.

Success stories

Australian civil contractor, RCC Civil digitized their paper-based manual processes with Assignar and was able to reduce payroll admin by 93%. Belinda Hyett, Business Development Manager at RCC Civil reflected on their savings highlighting that, “in regards to payroll…doing the wages has gone from a 3-day process in chasing things, getting emails and all the data entry to now 1 hour and 20 minutes.”

Similarly, OE Construction, an excavation and utility contractor in Golden Colorado has embraced technology to future-proof their business. Terri Olson, their Owner and CFO realized that “we can prove that we have been able to save, just in the timesheet reporting alone, over $30,000 a year. And then you take that and add on all the other data that we’re collecting in the forms, and that translates to savings of $50,000 or $60,000 for a coordinator position, that we’re now able to accomplish with technology. These were immediate benefits we saw in the first year.”

Assignar

Assignar is a cloud-based construction operations software built to help self-perform contractors and subs improve productivity, profitability, safety, and quality in the field and office. Assignar’s platform upgrades key components of operations: labor and equipment management, scheduling, field data, timesheets, and more. Learn more about Assignar. Take our 7-minute video tour and learn how Assignar helps contractors operate better.

Elvia is a Marketing Manager at Assignar. She grew up in the trades, which sparked her passion for the construction industry. Before Assignar, Elvia worked for Colorado Contractors Association, Hamon Infrastructure, and Arrow Electronics.

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