IT and e-commerce

ITs changing business

By Fran Krix

 IT and e-commerce are changing the way the building and construction industry does business. An essential and important technology that acts as a powerful communication and information transfer tool, business must be prepared to change and adopt the current tools available. Understanding these tools will allow business to keep up with minimum industry, client defined, standards.

The direction the industry is going is yet to be clearly defined and seems to be a concept always on the cusp of revelation. The evolution of software, the marketplace, and the forces of buying and selling which motivate decisions of change within it, contribute to this constantly changing environment. Eric Mies, from ConstructOne, a construction industry portal, predicts a buyer centric model to be adopted over the next six to eight months. This type of model or marketplace is simplistically composed of a large number of online catalogues. This market is highly competitive and organisations competing for clients are offering lower prices on large quantities of goods and operating on very small profit margins.

New companies are being formed with the sole purpose of purchasing large quantities of indirect goods and services. The type of purchases where the type of quantity and associated saving may be achieved are particularly goods which are common to all large companies, such as office supplies. An example of this market structure and current market direction is the formation of CorProcure.

CorProcure is an internet marketplace for suppliers of indirect goods and services. It is a venture that includes Amcor, AMP, ANZ, Australia Post, BHP, Coca-Cola Amatil, Telstra and Coles Myer as its founding shareholders. These companies have invested in the infrastructure and establishment of this marketplace with the aim of achieving an estimated $5 million projected saving for each company.

Mies states that the models for business to business (B2B) portals, exchanges, or marketplaces within the building industry must be simple and accessible. The expected performance of existing portals and estimated marketplace revenues have not been achieved. ConstructOne is moving towards an in-house infrastructure which offers support to its clients through a system that enables project management collaboration as well as being accessible to the on-site staff that cannot access a computer with reasonable ease because of the nature of the industry. "Hauling a laptop to the nineteenth floor isn’t going to happen" says Mies. "We need to predict how the guy on the back of the ute is going to use these technologies".

The systems to be used within the building industry must be accessible to a great range of people and have varying capabilities that can utilised from different sources. The Mies model incorporates an Application Service Provider (ASP) with a call centre type arrangement. This service allows a comprehensive access for situations such as on-line plan viewing, design and construction details as well as the ability for those on-site to chase materials, prices and delivery times through a single external source.

Tony Eiby from TSC Lodex agrees that Australia must maintain flexiblilty because there are so many small companies using many different types of software. Lodex software performs many functions and is approaching the industry with a product that offers full operational and accounting functions as well as interactive software similar in idea to that currently being used by the DPWS. Accessing plans and specifications online and being able to change and communicate these changes in an internet desktop meeting are powerful business tools.

John Eden from NSW Department of Public Works (DPWS), sees the application of IT within the industry as "providing better communication between all parties". Currently the DPWS are utilising web based tools for collaboration on specific projects. They have set up a site, Project Web, which allows information related to a project to be accessed on-line by both those involved with the construction of the project and the public. The system allows for the same information to be accessible to everyone concerned, although information access rights differ for the construction professionals and the public.

Eden states that the DPWS are "not rushing in because it’s easy to get burnt going in too early. They are "starting small and thinking big, teasing out the big issues". He acknowledges that they "can’t afford to wait but that they need some involvement". Eden sees the benefit associated with waiting, to "take out the non-value added steps" as there are "big gains in doing things smarter and better".

As a government organisation Eden sees also sees the DPWS as having an influence on industry standards. The adoption of government procedures as a typical standard within the organisation becomes a benchmark for businesses that tender and communicate with the department. The systems used should be effective communication tools for all concerned.

Eden estimates it will be two to three years before a final system and structure is put in place for the DPWS but already identifies benefits in the level of information access and quality of information being shared. A CAD system which incorporates perspectives and 3D modelling provides a better client understanding of all project aspects. A construction sequence can be illustrated to allow greater understanding of the necessary operations and maintenance defined by the project whilst at the same time giving a more complete concept to the planning and needs of the structure and surrounds after project completion.

Where ten per cent of a building’s total life cost is the cost of its construction, improved facilities management, access and operational details are achievable through information access, communication and cooperation.

In collaboration with Penrith City Council, the DPWS recently submitted a DA for a school project. The working documents were submitted to the council offices and a more flexible approach allowed communication through the process of document creation. The constant dialogue was a useful time saving tool and a trial for future processes. Influences such as these may alter industry direction for private business in regard to DA and BA submission. Collaboration and improved communication could result in cost effective time reductions, which could become a welcome industry standard.

Eden also sees government influence in the area of training and the direction this will take after industry discussion. Government organisations including the DPWS can influence change by requiring their supplier to conform to particular standards and putting those requirements in place. The collaborative potential offered by the use of online information dissemination should result in a greater understanding, from the outset, of a project. Consideration of all those involved and the issues that concern them will ultimately result in a project that is successful in its design both during construction and in fulfilling its function. A simultaneous achievement of many possibilities can be realised from the project concept.

The Garner Group, an internet research company, recently provided a summary of the first e-construction conference which was held in May 2000 in San Francisco. Architectural, Engineering and Construction (AEC) leaders gathered to explore how opportunities in the B2B e-commerce markets will be impacted by competition, technology and evolving user requirements, as well as how e-market makers may optimise relationships with existing supply chain participants. The strategic business imperatives were identified as follows:

e-marketplaces in construction that hope to revolutionise the business process must provide tools that give the targeted buyers and sellers enhanced collaboration, broader and more robust bidding and buying processes for materials and subcontractors, and more complete, timely and accurate project information to all participants.

e-market makers in construction must provide a compelling business case for their workflow that will result in higher-quality ouptuts (in labour and information) and construction projects that are completed on time and within and within budget.

The figure below provides a simplified view of a building life cycle and where participants contribute in a project.

The final analysis or Gartner perspective on the conference is as follows:

e-marketplaces are emerging in the construction industry to focus on three major areas; project collaboration, project management, and procurement/commerce. The workflow around collaboration, communication and procurement creates many opportunities for new business practices to emerge.

One of the long term benefits that e-marketplaces can provide to a building life cycle is that collaboration can become real time and occur throughout the planning and building process. Collaboration that can impact material selection and construction quality can potentially reduce litigation during construction and later cut down on the costs of managing and repairing buildings.

Adopting new technology or the tools that promise gains in productivity and project management is not new to the construction industry. For example, computer aided design (CAD) software is largely used to create and capture the design and specification data generated by architects and engineers.

Although CAD has the design aspects integral to planning projects, it does not enable workflows that automate or enable actionable processes such as project management (for example, making sure the right material is available at the right time at the job site), or the contracting and subcontracting process.

e-marketplaces are emerging to provide a central virtual place that can drive collaboration and new unrealised process efficiencies by eliminating redundancies and uncertainties in the current business process. However, convenient access to plans, specifications, and agreements by all project participants will be a slower adoption process, especially moving downstream to subcontractors in the building process. e-marketplaces must address accessibility, that is the cost/time trade-offs associated with utilising marketplaces for projects or procurement, especially from remote job sites.

e-marketplaces that provide the most value for construction projects will improve project management collaboration and communication among all participants. e-marketplaces that can embrace the following challenges will illustrate the benefits of e-commerce in construction and industries at large:

• Construction projects are similar to creating a movie, where each project is designed and executed in a unique way, requiring collaboration and cooperation among a temporarily formed collection of independent operators. Construction projects are built in a particular place and are often served by regional or local contractors who are extremely dependant on trusted personal relationships. At the same time, cooperating contractors on one project often find themselves completing against each other for the next project. e-marketplaces must recognise the value of the personal, "high-touch" relationships and deliver digital value that engages collaboration. It will be collaboration that drives higher quality inputs (materials and labour) into the finished project, while at the same time creating an environment of trust and security for any process that involves competitive bidding or proprietary information.
• The construction process today is characterised by project stage silos, resulting in inefficient hand-offs. Each process owner (owner/planner, designer, contractor, builder) depends today on documents (plans and specifications) with real signatures, signed off with linear process to execute their function. Paper transferring hands is typically the acceptable, official form of original documentation. Adoption and acceptance of digital signature technology will begin the process of incorporating workflows that attack some of the industry’s process inefficiencies.

The Gartner perspective and summary are a useful analysis of the industry in identifying general direction and the type of tools that are useful to achieve this direction. Choosing the most useful tools and accepting an industry standard programming language that will enable the tools maximium functions are the more difficult tasks ahead for the building and construction industry. Accessing the technology that will allow versatility of functions such as buying, selling, chasing supplies, online plan and specification posting, downloading, tendering, accounting, job costing, interactive meetings, establishing new markets, maintaining existing customers and building on these relationships implies the use of powerful software tools. The building and construction industry also faces the immediate and practical challenge of fitting out projects with technical capabilities that will allow or include the appropriate components necessary for the proposed structure to fulfil its IT requirements.