Increasing growth and improving margins are a big challenge for E&C firms. According to McKinsey & Co., fewer than 15% saw double-digit growth and profit margins from 2005 to 2015. Large projects also typically take 20% longer to complete than scheduled and are up to 80% over budget. The company says a number of factors contribute to these problems, including uncoordinated project planning, failure to adapt to new technology, competitive pressure, and increasing complexity. But they identify next-generation 5D building information modeling (BIM) and digital collaboration and mobility as two ways the industry can transform itself.
Less than 15% of E&C firms saw double-digit growth and margins from 2005 to 2015.
Source: McKinsey & Co.
Instead of working on paper or relying on custom software programs that typically don’t sync with one another, adopting a suite of integrated, multi-discipline civil BIM design tools gives everyone involved in the process access to current plans, designs, schedules, and budgets, with changes made in real-time.
And now is the ideal time to move toward collaborative tools that connect the entire construction process seamlessly. Associated Builders and Contractors Chief Economist Anirban Basu say a tsunami of economic and employment growth across America is coming, and President Biden’s $2 trillion infrastructure plan dedicates $621 billion for transportation infrastructure.
With a civil BIM software tool, contractors can reduce inefficiencies, become more productive and capitalize on demand for new infrastructure projects to improve their profits. And it starts with better estimating and takeoff.
Accurate Bids for Winning Construction Projects
Accurate bids are necessary for winning construction projects and remaining profitable. But the industry has seen increasing competitiveness, with underestimating becoming a trend among E&C firms.
A McKinsey Global Institute survey conducted in September 2020 found that 89% of E&C firms across industries and geographies reported changing how they approach bids, with a third changing their pricing approach. And of the 82% who have seen a change in the nature of the competition, the majority (47%) said they’re seeing aggressive pricing (i.e., bids submitted at or below cost). One large metropolitan transportation agency reported that since May they’ve seen bids come in as much as 30% lower than internal estimates.
33% of E&C firms have changed their pricing approach
82% have seen the nature of competition change
Source: McKinsey Global Institute
While bidding lower than normal may be tempting in competitive times, ultimately it will hurt business growth. Especially with rising construction costs. Highway construction costs jumped 68% between 2013 and 2016, according to the Federal Highway Administration (FHWA), with asphalt, concrete, and metal prices increasing in that same time period by 107%, 61%, and 45%, respectively.
Challenges to Developing Accurate Estimates
But creating accurate cost estimates is not an easy task, even under different economic circumstances. Estimators need to be able to identify all costs related to the project, detect conflicts instantly, and plan out estimates with each phase of the construction process.
Because of the complexity of estimating, the process is prone to mistakes and errors. A common one is relying on historic prices. Because costs are highly dependent on the specific details of each project, including site-specific conditions and the contractor’s resources, it’s difficult to create accurate estimates from them. It’s even more challenging to gauge the impact different variables might have on a unit rate when the assumptions used to develop the original rate are unclear.
But costs aren’t the only variable that can affect estimates. The timing of the project in combination with resource availability also complicates matters. With linear projects like highways and railroads, if estimators and project managers don’t have a clear view of the schedule and they can’t link the schedule to the estimate, they can’t determine what resources will be required at different times. This can lead to cost overruns, schedule delays, and inefficient use of resources.
Another challenge to accurate estimates is being able to detect conflict and consider all viable alternatives. Given the time and resources required, the planning stage is already a costly phase. Without the ability to evaluate all possible solutions, contractors may miss the most efficient, profitable plan for their civil construction projects, or lose the bid.
Estimates Rely on Accurate Takeoffs
Accurate quantity takeoff is also a crucial component of estimating. Silesian University of Technology researchers say a well-prepared takeoff is vital for cost estimation because it provides a “properly detailed record of the elements that need to be priced” necessary for a complete cost assessment.
Unfortunately, quantity takeoff is often an inefficient, time-consuming, error-prone process. Part of this can be blamed on the use of 2D models. As one construction company found, going to model-based estimating over the typical process of working off a PDF allowed them to see all of the returns, reducing the odds of omissions and errors. In fact, the project they first used model-based estimating on was going to finish within 1-2% of their initial estimate.
When model-based estimating is used in infrastructure projects, estimators can ensure they’re creating a detailed cost analysis that includes all earthwork and material quantities for bids.
How Civil BIM Design Tools Solve Estimating & Takeoff Problems
With all of the factors that impact civil construction project estimation, adoption of cloud-based, digital, construction collaboration tools and software that integrate across different teams are key to developing more accurate estimates that win bids and ensure profitability.
Evaluate Feasibility by Considering All Viable Alternatives
The first step in creating an accurate cost estimate, and winning a bid, is having a detailed plan. That starts with studying all possible viable alternatives to identify a plan that will avoid conflict, reduce costs and ideally be the most sustainable and have the best environmental outcomes.
Contractors that focus on environmental impact will likely improve their odds of winning future bids, as the Biden Administration has prioritized combatting the climate crisis in its $2 trillion infrastructure plan. Transportation Secretary Pete Buttigieg says that the transportation sector is the economy’s No. 1 contributor of greenhouse gases and that the “proposed resilience investments would support projects across America that reinforce, upgrade or realign existing transportation infrastructure to better withstand extreme weather events and other effects of climate change.”
With the help of feasibility planning tools like Trimble Quantm, contractors can calculate forecasts of carbon dioxide emissions generated during the project, as well as emissions produced by future traffic that will use the new infrastructure. This kind of assessment allows contractors to evaluate millions of alternatives to understand both viability and long-term tradeoffs of cost and carbon dioxide emissions.
Feasibility software is also key to reducing financial risk and ensuring profitability because it allows contractors to include all factors that affect the alignment of a construction project and their accurate costs. By inputting geographic inputs, construction costs, and design values, Quantm will produce an optimal alignment between two points based on cost and movement of materials.
The payoff on this kind of evaluation can be big. Take the high-speed rail system between Lisbon and Madrid, for example. When the owners began this construction project, they relied on Quantm to determine the best plan. The technology explored millions of alternatives and summarized the best options, taking into account environmental, community, cultural, engineering, and cost factors. With Quantm, the owners identified a better solution to their originally preferred alternative. This resulted in a 10% reduction in their total investment, which equaled a savings of more than 300 million Euros.
Create Construction-Ready Virtual, Real-World Designs
Once feasibility has been evaluated and the best alignment determined, project owners can move to the design phase by either sending out a tender for a design and build contract, with the winning contractor beginning the detailed design process or by releasing a tender for design and engineering firms to do the next design phases for the detailed design, which they’ll use in their estimation. This detailed design plays a crucial role in developing accurate takeoff.
With BIM design tools like Trimble Novapoint, designers can create complex, multi-domain transportation infrastructure designs with 3D terrain surfaces, subsurface layers, and road, railway, and bridge structures. And because it integrates with Quadri Civil BIM collaboration software, designers have continuous visualization of their design in a virtual, real-world environment.
These models are also construction-ready and give contractors the ability to harvest information across all domains, which makes for more accurate construction takeoff across the model and project.
Norconsult Sweden can attest to these advantages first hand. One of the largest Nordic consultancy companies within community planning and engineering, Norconsult Sweden relies on Novapoint and Quadri for their civil infrastructure projects. They’ve found that working with the 3D models has made it easier to coordinate with stakeholders, which minimizes mistakes and design conflicts, reduces construction costs, and improves quality.
Precise Takeoffs for Faster, Accurate Estimates
With the best alignment plan determined and a 3D model in place, estimators can use these tools to calculate quantity takeoff. With the help of Trimble Business Center (TBC) this process can be sped up while improving accuracy.
A complete office software solution, estimators can use TBC to calculate earthwork and material quantities for bids, prepare data for construction stakeout, build 3D models and deliver as-built documentation.
Instead of doing takeoffs manually or spending hours over a digitizer board, this takeoff and estimating tool allows contractors to import PDF documents or CAD files into TBC where they can trace, digitize, or extract the vector data and elevate the 3D lines required to build surfaces. These can then be used to calculate cut fill volumes and other earthworks such as strata layers.
Detailed takeoff reports can be created once everything has been configured, and those can be customized to look and present the data that is most important.
Once the accurate quantities for the bid items that need to be completed on-site have been established using TBC, Trimble Quest allows contractors to create their cost estimates using unit rates based on their on-site processes. They can then easily use these cost estimates to report on their required resource utilization quantities and expected time durations for the project.
Apart from ensuring that their bid item quantities are accurate, a big problem contractors face is being able to track and control the resource quantities they’re using on-site, so they don’t use more of those resources than they allowed for in their estimate.
To help with this, Trimble Quest gives contractors the tooling to track their on-site progress against their bid items on a continuous basis. They can see the exact quantity of each resource they should have used at each point in the project and compare it to the actual costs and resource quantities, captured in their ERP software, that they have used at that point in the project. This enables contractors to stay within budget and helps to ensure their projects remain profitable.
Collaborate Digitally to Boost Productivity & Ensure Consistency
Over the past two decades, global growth in labor productivity in construction has averaged 1% a year over the past two decades — a significant shortfall to the 2.8% for the total world economy. In the U.S., the average annual percent change from 2007-2019 for highway, street and bridge construction was -0.3% for productivity, 0.3% for output and 0.6% for hours worked. The U.S. Bureau of Labor Statistics says that since 2016, labor productivity has fallen, as output has declined even though hours worked has increased.
As McKinsey & Co. points out, difficulties to adopt an integrated platform that spans project planning, design, construction, operations and maintenance, is one reason why the industry lags behind in productivity improvements. A reliance on physical paper to manage processes and deliverables results in communication delays that impact a project’s progress, quality control and overall outcomes.
When contractors make use of a BIM software tool like Trimble Quadri, they move from disorganization and potential for miscommunication to a cooperative, real-time collaboration platform. With one central model in a common data environment, access to the BIM is instant, and changes are reflected immediately, so there’s never a delay of information — regardless of whether a contractor is in the office or field. This instant communication ensures that estimators have the latest information and data about a project’s plans, so their calculations for quantity takeoff, materials, labor, and more are all up-to-date and accurate.
When it’s time to start making cost calculations, estimators can rely on Trimble Quest, a cloud-based, first-principles estimating software designed specifically for project teams who need to collaborate on budget management and control. With Quest, contractors, estimators and project managers can communicate changes, track and record on-site progress quantities, report on resource utilization, and link schedules to estimates to forecast resource requirements — all of which help prevent cost overruns and keep the project profitable.
Connected Construction Results in Faster, Accurate Estimates and Takeoff
Estimating may be the first stage of the construction process, but when preparing a bid estimators need accurate construction cost projections that span the entire project. The only way estimators can have a clear understanding of these costs is when all stakeholders and planners are involved and able to communicate with each other in real-time.
When estimators have a 3D model that can be used for the construction phase, and all viable alternatives have been explored, they can better calculate quantity takeoff and create a bid that will win projects and improve profit margins. All while staying in touch with other key personnel to ensure the budget is aligned.