TECHNOLOGY TRENDS IN CONSTRUCTION


Te data transformations between


systems and stakeholders create both inefficiencies and opportu- nities for data contained within tags to be misplaced, and to drive delays in payment. Tis may seem trivial until you consider that these tickets document work that has been performed and financed by subcon- tractors who carry the financial risk for the work completed in the field. Subcontractors often bear a dispropor- tionately higher cost of financing and borrowing than owners and general contractors. Te T&M process assures


predictable delivery of work — often for the convenience of the contractor, owner and project – but it can often lead to disadvantaged subcontractors, themselves key stakeholders in deliv- ering successful projects. It can also represent a sizeable amount of work, and value, on projects. Andrew Cameron is a project


manager with Hensel Phelps on the new Terminal 1 renovation project at San Francisco Airport. He describes the nature of the challenge on his project: “We are two years into a five-year


long program, and our team has already generated over a thousand T&M tickets tracked against multiple scopes of work, Cameron said. "Tis volume places a significant burden on our trade partners, the owner and our team to track and process the tickets to get everyone paid on time.” Construction is generally


a low margin business. For many subcontractors the cost of T&M work can place an unbearable strain on the balance sheet. Tis is exacer- bated by other structural financial characteristics of the industry. Some of these are outlined below: 1. Te global financial crisis led to the Basel III


www.AGC-CA.org


Guy Skillett to Talk Tech at AGC Conference Guy Skillett, VP of Construction


Innovation at Rhumbix, spent 10 years on Bechtel job sites building airports, bridges, smelters and mines. He was a visiting research scholar at UC Berke- ley’s Project Production Systems Laboratory and he now heads up the construction team at Rhumbix, a Bay Area tech start up developing mobile tools for front line construction personnel. Rhumbix has recently released a


solution that is focused on digitizing the T&M workflows for general contractors and subcontractors on the biggest projects, to solve the problems outlined in this piece. Guy will be co-presenting on this problem and the opportunities for resolution at the AGC of California’s annual conference this October.


framework in 2013 and required improved capitalization of banks. In turn, this led to a tightening of lending requirements for small to medium businesses (SMBs)


– which typifies many small subcontractors – and a decreasing access to capital.


2. Financing challenges are compounded by the industry’s inefficient use of working capital. In their 2017/18 Working Capital Report, PwC confirms that construction is one of the worst performers in terms of working capital performance, and indicates the second worst performance in terms of improvements to capital cycles between 2012 & 2016. Impacts on working capital can have downstream impacts on investment, innovation, the ability to take on new work, or in the worst instance, remain in business. (Working Capital Report available at www.pwc.com/gx/en/working- capital-management-services/ assets/working-capital-oppor- tunity-2017-2018.pdf)


3. Timeliness of payments: A recent study by Building Connected and Contract Simply entitled "Slow Pay Adds $40B to Construction Costs" highlights the financial cost to the industry of slow payments.


Key findings of the study include:  88 percent of contractors wait 30+ days for payment.


 46 percent of contractors tap a credit line to float payments.


 $40 billion: Te estimated impact on the industry for carrying forward the fees and costs of slow payments.


 70 percent of subcon- tractors would offer a discount for net-30 payments.


 3.3 percent of total project costs are finance charges and expenses from floating payments.


Tese conclusions are significant


Rhumbix’s Time & Materials tracking app on a MacBook


as they indicate the opportunities that could accrue to the industry from more timely payments and better cash flow. How can the industry realize such


Continued on page 18 Associated General Contractors of California 17


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