Commercial construction begins to grasp the Internet and its implications for a centuries-old industry.
For an industry steeped in the tradition of old companies and old families, wherehistorically close with a handshake and a nod, the Internet is poised to rock the boat.
Technology has been slow to reach commercial real estate, and Web-based businesses that can increase efficiency enormously in the paper-heavy construction business have been met with some skepticism.
But the power of this fledgling medium is evident, and Web-based companies have the power to change commercial construction. In order for that to occur, builders need to buy into the concept, and Web companies must offer truly irresistible solutions.
Historically, commercial construction technology consisted of mobile phones, fax machines, e-mail and some software packages. But even the software has not sufficiently served construction companies.
"Companies, at their systems level, have basically reapplied manufacturing ERP [enterprise resource planning] systems," says Doug Sabella, CEO of San Francisco-based Bidcom.com. "Or, specifically, point-of-pain solutions have been created, focused on solving a particular problem at a particular point in time."
Commercial construction appears stuck in the Dark Ages compared with how other industries have embraced the Internet. From a technological standpoint, Daniel N. Frasca, vice president of development at Skokie, Ill.-based The Alter Group, agrees.
"Technology in the construction industry has not kept pace like it has with other industries," he says. Frasca estimates that as few as 4% of all the construction projects in the world today use the Web, and he projects that figure will grow to only 10% by 2004.
"These are numbers that are somewhat shocking because it seems the rest of the world uses the Internet for virtually everything," says Frasca.
Adds Sabella, "No company has really defined itself as dedicated to solving the full end-to-end problems that exist in this industry. Everything is dealt with on a project-by-project basis rather than in terms of creating a strong knowledge foundation. At some level, that's what plagues the industry."
A changing blueprint There are approximately 25 Web-based firms in existence today that enable construction companies to manage projects via a Website. Specifically, developers, general contractors, subcontractors, architects and engineers can log on to a Website daily to check the status of the project, share documents, including blueprints, and make changes as needed. Most sites also offer a Web-cam, so interested parties can view live photos of the construction site, check the delivery of materials and watch as the building takes shape.
The Internet companies offering these services usually charge a set-up fee for each project and a subscription fee for each individual or company involved with the project. Such companies are relatively new, most only a few years old. Developers are just beginning to become familiar with their names and offerings, and in the minds of many the jury is still out as to whether the Internet can truly produce savings.
But across the United States and the world, the Internet has become such a force that it is prodding the commercial construction industry to at least study its potential. Builders are experimenting with different Web-based project management tools and selecting the aspects of each that best suit their needs.
Adoption rates vary by both size of the company and region of the world. Larger construction companies first recognized the importance of the Internet and first used online project management tools. As a result, many of the smaller companies in this very fragmented industry have been forced to use online project management tools as well.
For a project management tool like Bidcom to work, everyone involved must be connected, from the owners and lenders to the subcontractors who spend a minimal amount of time on the project. These Web-based companies are forcing some subcontractors who previously did not even own a computer to make the Internet an integral part of their business.
"It's gotten to the point where a lot of companies are really saying, `Okay, this is happening, and we need to be involved in it,'" says Ortez Gude, vice president of information technology at Atlanta-based Beers Construction.
Time equals money The scope of the Internet also reaches across nations in an interesting, comparative way. Metin Negrin, CEO of i-Scraper.com, offers a unique perspective. i-Scraper is an Israeli-based company that recently expanded to the United States.
i-Scraper offers what many Web-based construction companies offer in terms of services, including document management and increased communication abilities. In addition, i-Scraper provides an individual case manager to each project as a specific point of contact, if any questions or problems arise.
In 1998, i-Scraper was launched in Israel, a country known for adopting advanced technology. It expanded to Europe and then entered the United States. "It's very interesting among different cultures and countries because the adoption of technology is a challenge," Negrin says.
"In the U.S., people are more open-minded about trying new technology, definitely the best in the world, or at least in the countries we're in [Israel, Germany, Spain, the United Kingdom, and the United States]," Negrin continues. "I can see within the U.S. there's a big difference between California and the rest of the country because of Silicon Valley, where everybody is open to technology."
Taking action The scope of the Internet today is far reaching and growing. The conventional wisdom today is that the Internet is a great equalizer, accomplishing what heretofore only capital and a good reputation could do. Because the market is so active, any tool that can increase efficiency is perceived as worthwhile.
Understanding the complexity of the situation, the larger, traditionally successful companies have sought partnerships with Web-based firms or embraced the technology in various forms. Meanwhile, the smaller companies are capable of turning on a dime, adjusting to the Internet and using it to pull ahead in this competitive market.
"Time has never been as big a focal point as it is today," says Frasca of the Alter Group. When a company realizes it needs more space or that it needs to expand to a new city, it needs a work in progress or near completion, not a build-to-suit, Frasca explains.
"The industry is starting behind the eight ball, trying to deliver. It seems the speculative business has been very successful, not just for The Alter Group but also for a number of different firms, because people do not have the luxury of sitting around forecasting where we're going to be in 12 months," he says.
The Alter Group is committed to the idea that there are real financial advantages to using a Web-based project tool. Frasca estimates that if his company could save 5% on a project, it would pass the savings on to tenants. A 5% cost savings on a project could amount to as much as $2 million in rent savings over a 10-year lease. That number could easily be the deal breaker between his building and another developer's building, says Frasca.
Document management functions are another advantage. Considering the disputes that typically arise between contractors, developers and subcontractors, having all documents on one system increases accountability and creates an unbiased system - the Internet - as arbitrator of such disputes.
The facts can now be verified with a check of e-mail or electronic files. "I don't know if there's been enough time yet to see the value of general documentation," says Frasca, "but I guarantee you when it comes to disputes and you can go back and put your hands on a particular document much faster using something Web-based, it's really going to help."
With improved communication, construction companies are beginning to shave time off project schedules. Gude notes that previously an RFI's turnaround time could take as many as 21 days; with the Internet, the turnaround time averages four days. "That's a significant change that directly impacts the schedule for delivering projects on time," observes Gude.
Clearly, there are many estimated savings, especially in administrative costs. Blueprints and other drawings that were previously sent by express mail can now be scanned onto the Website, and changes can actually be made to the Internet copies and are immediately available to everyone involved. Meeting minutes, agendas and any other project management documents also are posted on the Web electronically.
"We're looking to use the Internet to enhance project communication," says Chris Phillips, CIO of New York-based Tishman Construction. "We're trying to see how we can get construction teams set up to manage more people and more locations. What also interests us is the ability to run a database behind these systems so that we can start to collect all the information that's out there, and get a better handle on the numbers and schedules," adds Phillips.
While the numbers are not certain, Gude estimates that Beers' projects that use the Websites to their fullest extent experience about a 60% savings in communications costs. And in the express mail department, Federal Express costs could be millions of dollars, certainly hundreds of thousands of dollars, per year for all of Beers, he says.
The impact of the Internet on the commercial construction industry probably will not truly be felt for another six months, when projects are completed and time and cost savings are calculated.
Not entirely convinced Commercial construction is beginning to realize the Internet's tremendous potential. But there are some who still drag their feet, and understandably so. First, implementing a system such as Bidcom or Buzzsaw takes time and money. That does not mean scrapping the way someone's been doing it for 20 years, but it means using new tools to achieve the same results. And there has been some reluctance.
Jeff Dun, vice president of business development at Newport Beach, Calif.-based Koll Construction, has worked in the construction business for two decades. While he acknowledges that Web-based project management tools have enhanced marketing efforts, Dun is still uncertain of the overall benefits.
"It's difficult to determine advantages at this stage because right now a lot of it has to do with training and communication and understanding the capabilities of the software that are available," says Dun.
Double entry can be a problem, Dun adds. If budgets are entered into a Web system or if accounts are tracked through the Web, the information still also has to be entered into Koll's in-house accounting software system. Right now, that's ineffective.
As for using the project site as a communication tool, he says, "I'm not sure exactly how often the owners we're dealing with access it and use it. The idea of how the system works, as far as centralized maintenance and integrated systems that are maintained by someone else, is attractive. It gets people excited and becomes a fun tool in the beginning. But as a long-term tool over the duration of the project, I can't comment on how valuable that is," concludes Dun.
Catalina Parada, vice president of marketing for The Alter Group, agrees that there is some reluctance to fully embrace the new systems. "These are industries that are pretty much old-time, and I think there's an older generation that's not so quick to embrace something like this. There's definitely a learning curve," says Parada.
Tishman's Phillips believes the Internet companies have a long road ahead of them before any system is totally comprehensive. Tishman has worked with approximately 12 different Web-based management tools and is experimenting with what works and does not work for its company.
"We're finding that all the companies kind of do the same thing, but all a little bit differently," says Phillips. "None of them are a complete package yet."
Part of the problem, says Phillips, is that the construction business is so fragmented and regional in nature. "Trying to come in with a product where one size fits all just isn't going to happen."
While subcontractors operating without computers is one problem, another is that construction procedures often vary by region. Internet services that solve problems in San Francisco might do nothing for a construction project in St. Louis. "I think the people who developed the Internet solutions underestimated how strongly regional construction is," says Phillips.
Across the country, many subcontractors have not introduced computers to their day-to-day operations, and to jump headfirst into using the Internet to manage the entire project really does require a lot of learning and a mental adjustment.
Significant capital investment also is needed. Even companies that already have computers may have to upgrade to new systems to be able to run all the design programs and download all the documents. Web services also cost money, and training and maintenance costs must be factored in as well.
And after making such an investment and learning the ins and outs of one Web company, it would be badto hear that a particular company went out of business, rendering the investment null and void.
"There are so many services and so many companies trying to jump on this bandwagon of Internet services, you know there's going to be a huge fallout," says Parada. "I think that some people are just sitting by and waiting to see what happens. With the newer generation, it will be easier to transition."
What's next Web company executives and developers alike agree that the Internet is the way of the future. However, developers are waiting to see how Internet services develop, what offerings can benefit them most and complement their style of business, and which Internet companies will be around one year from now.
Most everyone predicts a shakeout of the Web-based management companies within the next few years, with one or two big names surviving. Companies may forsake outsourcing the Web-based project management function, choosing instead to maintain all information on their own company Websites and keep it in-house.
Beyond the Internet, possibilities are endless. Gude foresees a day when images of buildings are actually a hologram, sitting on a table, and pieces of the building can be moved around with an electronic pen. Think of "Star Wars" without the bad guys.
A dream come true Ideally, Internet companies are aiming for the following hypothetical situation: Imagine you decide to build a 400,000 sq. ft. building on a piece of land in a city's central business district. From the moment you have the idea, the Internet companies want you to be able to use their services. You can apply to the banks for a loan online, and the lenders can have access to the project in every phase via the Website.
You talk to engineers and architects, and they have access to the site and can post drawings and blueprints online. Everyone involved can open the drawings and blueprints, make comments and make changes as needed. Instead of Fed-Ex charges and a two-week wait, you have a 48-hour turnaround time.
You hire a general contractor, who logs on daily to check the status of building plans, schedules and procurement documents, and to communicate with you, with architects and with subcontractors.
Meetings are eliminated, as the site provides a virtual meeting room where communication is easy, and decisions are recorded electronically and tracked for all to see. When the general contractor needs to hire electricians, plumbers and cement pourers, he places the job orders online and bids come in within an hour, eliminating faxes and paper-based bidding platforms.
When it is time to order materials, you do a reverse auction on the same Website, and you get the lowest price for all the materials and status of the delivery.
A Web-cam shows the site in real time, and you see that slowly, the building is coming together.
Through all stages of the project, all parties involved can access as much or as little information as needed. Security measures protect proprietary information and allow unlimited, paperless access to project officials who need to see certain documents.
The other interesting facet of these Web-based companies is they really can manage the project for the life of the building. Once construction is completed, a developer can hand the site over to the leasing agents, and they now have access to every scrap of information pertaining to the building.
An arena and the Internet When is the last time your construction project went exactly according to schedule or ahead of schedule? How much time have you spent shuffling paperwork throughout the construction process? These are common problems on virtually every construction project or any time you bring several individuals or companies together to accomplish one mission. The solution: project-specific Websites.
Project Websites are becoming more familiar to construction industry executives, and it won't be much longer until they are the only way to do business. But executives want to know if project-specific Websites really do save time and money? Specifically, can private Websites help speed up the time it takes for a Request for Information (RFI) to travel up and down the chain of command?
The solution Web-based management systems prevent delays and allow users to avoid clogged fax machines, missed telephone calls and communication breakdowns. Now, engineers, owners, architects, contractors, subcontractors and inspectors can view, complete and execute reports, plans and records through one central site.
To the bottom line, project Websites prove to be financially viable for use on construction projects in excess of $1 million, based on the savings in courier costs and meeting times. The cost of the services has dropped, and functionality has improved.
Enter e-Builder Using an Internet-based set of communication and collaboration tools, such as e-Builder.net, for the planning and building of a structure allows for an instantaneous exchange of information through a secure environment among construction project participants, while also providing a detailed record of construction.
Take, for example, the recent construction of Staples Center Arena in Los Angeles, a 1 million sq. ft. building costing $400 million. Glendale, Calif.-based PCL Construction Inc., along with Seattle-based NBBJ Sports and the Arena Development Corp., completed the sports and entertainment complex in 18 months. Through the use of e-Builder, the fast-track project was completed on time and within budget.
"Although the early completion of the arena could not entirely be attributed to e-Builder, the Website did help things run more smoothly," says Bob Hayes, a former project scheduler for PCL Construction.
Behind the scenes of productivity PCL Construction wanted an easy-to-use, robust and effective tool that could enable its 150-plus team members to collaborate daily on important issues affecting the schedule and budget of the project. After searching for a tool where team members could share critical project information, Hayes decided that e-Builder was just the solution for the project.
"We had our first Request for Information reconciliation meeting. Everyone brought their logs and they were all different," says Hayes. "That's when I knew that we needed a system to track RFIs. e-Builder was the only Website I knew that was doing this competently."
Depending on the program, project Websites may include meeting minutes, general correspondence and schedules. Further, the site can accommodate graphic-rich data such as photos, CAD-based drawings and scanned-in, hand-drawn sketches. The sites also feature instant messaging and updating capabilities.
Using an Internet-based set of communication and collaboration tools for the planning and building of a structure allows for an instantaneous exchange of information among construction participants through a secure environment, while also providing detailed records. The process is simple, benefiting all members of the construction team.
For example, if a subcontractor is looking at plans and sees a door has been erected the wrong way, he asks a contractor, who asks the architect. The average time it takes to find out what the problem is and for that answer to be delivered is 21 days. Project-specific Websites can expedite the solution to as few as seven days. Everyone is notified on the Website.
Bottom-line results Businesses that have used Web-based project management tools already have noticed improvements in their productivity. Some of the trends positively affecting profitability are a 50% decrease in RFI cycle times, an average turnaround time of nine days and a 40% reduction in travel to job sites. The Staples Center Arena project had 4,800 RFIs, with 3,600 routed through e-Builder, Hayes notes.
Although the use of the Internet in construction is still at an early age, its system functionality will continue to be enhanced. Improving and streamlining communication not only saves time and money but also places your company in a preferred position to win more work and perform better, faster and cheaper.
enhanced, "it worked well and in a timely nature," concludes Hayes. "Instead of multiple logs, the site becomes the sole source. Contractors, subcontractors and every group involved in the project could get real-time status."