As COVID-19 cases continue to rise and fall globally, and countries emerge and reenter into various stages of lockdown, the impact of the crisis on the industry is still unknown. With uncertainty still dominating the market, construction firms will need to leverage transformational technologies and prioritize risk to prepare for the post-pandemic era. Challenger organizations should take advantage their ability to be agile.
Construction companies are the most likely organizations to believe they can displace industry leaders, according to an IFS study. As 81% of construction chief financial officers look to reduce costs due to the impact of the pandemic and stress the need for transparency from contractors in the supply chain and vendors, their pre-pandemic vigor to outpace those dominating the market puts these organizations in a prime position for success in a post-pandemic era.
But changes in the industry will not just be necessary within financial departments. Contractors need to adjust how they design and build projects to address the additional risks that the pandemic poses. COVID-19 caused widespread disruption to projects.
Going forward, project owners need to leverage technology and risk management strategies to limit disruptions from floods, fires and lockdowns and extend their asset support across the whole life cycle to maximize revenues.
Market Leaders Lack Agility: Enter the Challengers
Market leaders in construction are determined more by their reputation and the ability to maintain high project revenue and margins than any enduring intellectual property or superiority in distribution. But PwC figures show that 71% of contractors are concerned with financial impacts of the pandemic, including efforts on operations, future periods of liquidity and capital resources, and 64% fear a global recession—large companies involved in major projects will struggle to adapt quickly.
This means that with the right investments in process and technology, construction challengers are in an excellent position to move up the ranks by offering improved project delivery performance resulting in faster, high-quality delivery at a more competitive cost.
This could mean adopting modular, off-site or prefabricated project delivery methods while streamlining and automating project steps at the back end. These challengers can also drive revenue from other sources—including maintenance and facilities management. In some cases, there may be revenue potential in licensing of proprietary designs used in projects.
Address Risks to Maximize Project Value
Disruptions cause projects to run over time and budget. Therefore, an area where forward-thinking contractors can add significant value now and post-pandemic is by actively managing risk to avoid surprises and delays. Disruptive events like the global pandemic can be mitigated with the right strategy and tools.
What contractors, engineering companies, clients and asset owners need to determine, though, is how they can design and build assets around these risks. Will a 5% increase in construction costs make a structure more resistant to wildfires? If so, how does that pay for itself over the life of the asset in terms of replacement and repair cost or insurance premiums?
Will rising waters caused by global warming put the project at risk of flooding during its life cycle? Government bodies have been issuing risk management guidance regarding global warming for years. How will site plans and designs change to accommodate the impacts of climate change, including more extreme rainfall events and rising sea levels? Contractors must have the tools to help project owners identify and plan around these risks.
Ensure Safety Through Entire Projects
Work safety measures are not the only implication the COVID-19 pandemic will have on construction. Contractors should help project owners evaluate the desirability of things like the American Society of Heating, Refrigeration and Air-Conditioning Engineers’ Position Document on Airborne and Infectious Diseases.
It may prove cost-effective for many institutional environments to adopt some of the air purification tactics like those used in hospital environments, or perhaps other building technologies, such as ultraviolet air and surface treatment, are more desirable for a given project. Either way, contractors must be able to consult intelligently with their clients based on risks that are identified, monetized and amortized over the useful life cycle of that asset they are building.
Unlock Additional Revenues: Offer Full Life-Cycle Support
Project owners and engineering firms should open the door to new, reliable and high-margin revenue sources, including facilities and maintenance contracting or even operations and maintenance contracts. Some of these contracts can be best supported with a facilities or field service management approach.
These advanced practitioners will need to engage in collaborative asset life-cycle management processes with their project and asset owner, as they will share responsibility for the design, operate and maintain phases of the asset.
IFS research shows many contractors have already built out maintenance and facilities management capabilities. As project owners seek ways to navigate in an uncertain future, now is the time for more contractors to move in this direction.
Seek Flexible Software in Hybrid Business Models
If contractors want to unlock additional revenue streams and offer customers aftermarket support, they need software that can support project-centric construction projects, as well as facilities and service management contracts to maintain and refurbish the assets after they are handed over to the owner or operator.
Service and facilities management software can facilitate many types of asset management contracts, which include service level agreements, repair and replacement of asset components, and modification and refurbishment projects.
For companies that need to manufacture modules, assemblies or components to support the off-site construction model, the right software can become a powerful tool to aid engineer-to-order fabrication for off-site construction, delivering lean improvements and enabling contractors to improve productivity.
In addition, the strong trend toward off-site and modular construction may require the contractor to manage a production facility and also have the capability to managing shipping, logistics and inventory control processes.
Prepare for the Post-Pandemic Era
As industry processes are rethought in the post-pandemic era, the construction companies that can be innovative and agile will emerge as leaders. Risk management will be a determining factor as we enter a new market environment, and with budgets being squeezed, construction organizations need to look to capable software solutions to maximize productivity, increase margins and explore additional revenue streams.