Project Owner vs. General Contractor: Who Should Be Responsible For Digitalization?

When it comes to digitalization, everyone in the construction industry seems to?agree on one thing: it is sorely needed. With large projects taking 20% longer than planned to complete and coming in up to?80% over-budget, it’s clear that productivity and margins are in a rough place. In fact, cost and schedule overruns have become status quo for the industry.

While the digital transformation has overtaken virtually every other industry, progress in construction is lagging. The good news is that if you’re anything like your industry colleagues, you probably already agree that the industry could benefit from using more technology. This positive sentiment is progress in the right direction, however, significant challenges are still barring progress.

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Construction Digitalization Challenges?

There are a number of challenges thwarting the construction industry’s progress in adopting new digital technologies. One widely felt challenge is the?unique qualities of each construction project. Every project is different, so often digital solutions can’t easily be transferred from one project to the next. This creates additional work to tailor the system to each project.

Additionally, the industry has been?struggling to recruit younger workers.?The result is that the?median age?of a construction worker is 41, causing a lower interest in adopting new technologies. Further, training for many older workers requires an extensive time investment that may not even yield the proper use of the system in the end.?

At Cumulus, we’ve learned a lot from our clients about the challenges obstructing digitalization. Three of the most common digitalization challenges that we hear are:?

1. The overall conservative nature of the industry slows progress?
2. There is a general lack of interoperability that is inherent in the type of work?
3. It is challenging to accurately calculate an objective ROI on a new technology?

Each of these reasons are valid in one way or the other. For instance, it’s true building a data center or chemical plant is an entirely different type of complexity than running a marketing agency or finance firm. It’s also true that achieving near-term ROI is critical when adopting a new technology, and this is more challenging to prove with manual, “offline” work. When considered with the fact that there is a severe?shortage of qualified quality personnel?and a global supply chain crisis, it’s clear that the industry has its work cut out.

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Lack of Digitalization Accountability

Even as the industry has begun to overcome the aforementioned challenges, one final digitalization challenge is cropping up. A lack of accountability in who should own (and pay for) the digitalization efforts.

Oftentimes, the project owner will state that it should be the general contractor company’s responsibility to deploy a new digital technology. Their perspective is that since the general contractor will be the predominant users of the system, they should?figure it out and pay for it.

Conversely, the general contractor feels that it should be the owner who is paying for the new technology. Since the owner is often driving adoption and also one of the primary beneficiaries of the long-term benefits of using a new digital system, the general contractor believes they should be responsible. It is their project, after all. This is especially true in lump sum contracts, where use of new systems is not typically included in the original bid.

While there is merit to both sides of the argument, the truth is that both sides stand to gain a lot by adopting the right digital tools. So long as the right technology is selected—one that brings genuine value and aligns with the company’s value proposition—the ROI will far outweigh the initial costs.

This?savings calculator?can help you determine exactly how much money your project could save.?

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Benefits of a Joint Digitalization Approach?

By expanding digitalization accountability to both parties, a “fair” implementation approach can be achieved. In fact, achieving buy-in from both the owner and EPC often creates a more successful outcome that leads to greater ROI in the long-term. Everybody is a winner.

For example, Shell was looking to use digitalization to promote quality and safety during the construction of their Pennsylvania Chemicals facility. By effectively partnering with their general contractor, Bechtel, they were able to both reap the benefits of adopting a new technology. Read more about?PennChem’s joint digitalization strategy.

These are just a few of the ways that a joint digitalization approach can benefit both the owner and the EPC:?

• Cost savings:?When both companies are aligned on using a new technology, they are more likely to actually use the solution to its greatest degree. This is a best-case scenario that provides cost savings to both parties.
• Quality improvements:?Construction projects are highly collaborative. From owners and EPCs to contractors and subcontractors, there’s a lot going on. When everyone uses the same technology, there is greater visibility into the work being completed. This leads to better quality, because QA/QC personnel have a transparent view into?all?the work being completed.
• Time savings:?Paperwork and manual reporting is tedious, time-consuming, and boring. Luckily, there are plenty of technologies that can eliminate paperwork and simplify the work completion process and save everyone a lot of time.
• Rework reduction:?When communication breaks down, mistakes get made. When everyone is using the same platform, they’re all on the same “page” with the same information. Workers have clear instructions, Bluetooth tools capture and sync quality data, and quality personnel always know that the work was done right.
• Better sustainability:?Less paperwork, fewer leaks, and decreased rework all contribute to better overall project sustainability.??

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Final Thoughts?

The decision of whether the EPC or the owner should be responsible for digitalization is commonly debated in the industry. However, the truth is that this is not an “either or” situation. It is a win-win situation for everyone to be pursuing a digital strategy. Digitalization should be a cooperative agreement between both parties to adopt new technologies.

If we continue with the lack-of-digitalization status quo, billions (yes, billions) of dollars are being left on the table every year. When nobody takes the driver’s seat to own a new digitalization initiative, the construction industry will continue to face the same problems that it has been experiencing for decades.?

Ready to lead the digitalization charge??Schedule a demo?to get started.?