Why spreadsheets are failing the construction industry.
Barry Chapman, Managing Director at Chalkstring, explains why spreadsheets can leave construction projects open to risk and contracting businesses out of pocket.
The construction industry is second to last when it comes to technology adoption, according to the 2016 KMPG Construction Technology Report. Ahead of only agriculture, we trail behind all other industries. It’s therefore not surprising that 69% of construction businesses admit they are either following the industry or are behind the curve when it comes to technology adoption.
From experience in providing project cost control software to construction contractors at Chalkstring, it seems that many businesses have made the move towards digitisation by replacing historically manual cost management processes with electronic versions of the same process. Despite there being a wealth of construction software available, contracting has generally seen a migration from paper to spreadsheets, with the more progressive companies using several software packages to deliver projects. What’s clear though, very few contracting businesses are truly harnessing technology to deliver construction projects in a fully integrated and efficient way.
It begs the question, in this digital world where integrated construction software exists, why is there an inherent dependency on spreadsheets to deliver multimillion- and even billion-pound projects? And more importantly, what is the impact of over-reliance on these spreadsheets for project delivery?
Spreadsheets – the default construction tool
Spreadsheets are ever-present in construction, with project teams relying on numerous worksheets to manage critical business and project information. From estimating departments creating tenders, through to Quantity Surveyors (QS) managing onsite costs, variations and progress, and even Business Owners determining project profit levels, spreadsheets are often the ‘go to’ option.
Versatile and able to deal with large volumes of data, spreadsheets are without doubt powerful. However, construction projects are often complex, and therefore spreadsheets that are used to deliver those projects must mirror this complexity. The fact that the majority of spreadsheets are uncontrolled and not audited only amplifies the risk.
“70% of estimating departments are dependent on spreadsheets.”
Source: JB Knowledge, 2017 Construction Technology Report
Although many construction businesses seek standardised templates, the inner workings of spreadsheets are often known only to the author, with complex formulae, pivot tables and macros used to manipulate and connect large volumes of data.
Although spreadsheets may link to each other, there is little integration with other software packages and maintaining real-time data across an entire project is nigh on impossible.
At a practical level, vital information sits in silos, on servers and local hard drives, making version control difficult – thus increasing the risk of the project team using outdated information. And because spreadsheets are often bespoke, sharing data across a project team can be difficult often resulting in re-keyed data and loss of productivity.
“88% of all spreadsheets have “significant” errors in them.”
Likely to contain errors
Considering the sheer volume of disconnected spreadsheets used across a typical project, a certain level of human error is inevitable. Indeed, a Forbes study found that 88% of all spreadsheets contain significant errors, demonstrating how vulnerable and exposed to risk the construction industry is with its over dependency on spreadsheets.
By way of example – a Chalkstring subcontractor client recently shared a real story whereby their project showed an unexpected £35k loss. The discrepancy was flagged because the figures produced by Chalkstring for an application for payment did not match those of the main contractor. After comparing Chalkstring’s data against the main contractor’s spreadsheet, it was found that the spreadsheet template contained an error, shaving £35k off the subcontractor’s bottom line. It later became apparent that the main contractor had been using the same template across multiple projects, hence other subcontractors were potentially left thousands of pounds out of pocket.
Until spotted, an error in a Main Contractor’s spreadsheet left a subcontractor £35k out of pocket.
Right tool for the job?
It’s not just the risk of errors we should be concerned about. Should we be relying on such a generic tool to manage specific construction workflows and processes? Using the analogy of a Swiss army knife, Excel is a versatile utility tool, but if you needed to cut a log in two, you’d probably use a proper saw rather than the one of the many tools on the penknife. If you were serious, you’d use the purpose-built, right tool for the job. It’s the same with the construction industry – why are we determined to use software that hasn’t been designed specifically for construction purposes? And what is the impact of this?
According to the 2016 Construction Technology Report, 67% of the industry is monitoring live project performance using spreadsheets or other manual methods. This means that critical business information that drives cash flow and other financial decisions, is being collated using numerous unconnected worksheets, rather than optimised, real-time software.
Collating data from numerous spreadsheets to prepare Cost Value Reconciliations wasted at least two days each month.
Most contractors use spreadsheets to painstakingly create Cost Value Reconciliations to determine the financial status of project progress against budget. A customer recently described how, before they used Chalkstring, their Quantity Surveyors spent at least two days every month finding, managing and manipulating data from various spreadsheets to create monthly CVRs.
Not only was this highly inefficient but information was out of date the next day – all it took was for someone to order more materials or maybe update site progress, and there was no way of knowing the health of the project until the next Cost Value Reconciliation had been compiled the following month. In this day and age don’t you expect more control and visibility than that?
“73% of contractors cannot ‘push one button’ to obtain fully integrated, real-time project data.”
Source: 2016 KMPG Construction Technology Report
The impact of spreadsheets on projects
Current methods of working – whether using only spreadsheets or a hybrid of software and spreadsheets combined– can have massive detrimental impacts on project delivery resulting in:
Inefficiency – unnecessary time spent creating, collating, re-keying and transferring information
Lack of control – without real-time information having true control of a project is difficult, even more so when spreadsheets are not audited
Complexity – hard to understand, personalised spreadsheets make it difficult to check and share data in a meaningful way
Risk – human mistakes arise when re-keying data and the potential to duplicate errors expose projects to further risk
Compromised decision making – a lack of real-time visibility of project performance reduces capacity to make informed decisions when needed.
Introducing the integrated solution
However, there is a solution to the spreadsheet conundrum – and it’s integrated project cost control software like Chalkstring.
Developed specifically for specialist contractors, Chalkstring offers a single platform through which the whole project team can manage the entire project from tender enquiry through to final account. It streamlines activities that have typically been spreadsheet based, like estimating, supplier management, value engineering and variation orders, and it automates manual processes, such as procurement, progress and valuations, applications for payment and subcontract labour payments.
Chalkstring’s integrated approach eliminates the need for multiple complex spreadsheets, with all project data available from within a single cloud-based system. This unique approach has been proven to increase margins, reduce waste and improve visibility of project performance. Integrated software can provides the project team with everything they need to run the project efficiently, and management with the real-time insight into key financial metrics, at any stage of construction.
Get ahead of your competition
Potentially containing costly errors, inefficient at best and effectively creating isolated silos of project data, many construction contractors have now started to question whether spreadsheets are really the right tool. In terms of technology adoption, we are now into the ‘early majority’ phase of adoption where integrated cost control solutions are no longer new and have been tried and tested by many businesses before you. That said, given that 69% of construction business are behind the curve, therefore those who harness technology now will get ahead of their competition, giving themselves a true competitive advantage. Worth taking a look?