Failure to go digital keeps construction profits at just 2%

Photo by Josue Isai Ramos Figueroa

The typical profit margin on a construction project averages only 2% as a lack of digital transformation has left many companies reliant on manual and paper-based workflows, a survey from Finalcad shows.

Done in February and March, the survey covered 400 construction leaders in France, Spain, Singapore and Japan.

Finalcad said the findings come at a time when the slowdown from the impact of the Covid-19 global pandemic is highlighting the benefits of digitalising operations and support remote working.

Further, not digitalising is significantly damaging companies’ ability to collaborate and having a direct impact on the bottom line, with 62 percent of respondents saying that a lack of collaboration is the single biggest cause of construction project delays.

Results also show that companies have several different methods and channels in place — more than half (51%) are using a combination of in-person, telephone, email, and/or paper to inform the person responsible for repairs during the quality process of the next action. 

However, 53% are using unreliable text/SMS or instant messaging like WhatsApp to document a safety incident or hazard. Finalcad said this lack of consistency leaves a considerable margin for errors and miscommunication, which can lead to broader safety risks, delays and cost overruns.

“The construction industry’s continued reliance on outdated processes – both on- and off-site – is causing significant inefficiencies,” said Frank Le Tendre, CEO of Finalcad. “This is not sustainable in a sector where slender margins are a persistent issue.”

Le Tendre added that as regions emerge from the downturn caused by the Covid-19 pandemic, those that have digitised will be able to act quickly to get back to business as usual.”

Another consequence stemming from the failure to digitalise is the difficulty in documenting and capturing data, resulting in invoices being unpaid when a contractor cannot prove work has been done. Among respondents, 90% said this “free work” was a common problem.

Moreover, construction companies are guilty of “reinventing the wheel” on new projects, with 59% saying they create new templates for existing workflows some, most, or all of the time.