Visit a construction job site and – along with the water coolers, chain link fences, portable toilets and tools – chances are you will come across stacks of papers, including plans, permits and invoices.
And that can present problems. Along with significant, even existential, risk.
Take payments. The cost of late payments in commercial construction runs $40 billion annually, according to one recent industry report. Those late payments, in turn, add 3.3 percent to project costs. Contractors typically have limited cash flow, and 46 percent of them must use personal savings and credit cards to cover the gaps left by late payments — which can serve to delay payrolls, too, and make it harder to retain labor when unemployment is low.
In fact, full-scale digitization in construction — a take-no-prisoners move to digital from analog — would save 21 percent in design, engineering and building costs globally by 2026, according to the World Economic Forum.
Part of the payment problem stems from that reliance on paper. Construction is an industry with many moving parts, with contractors, subcontractors and suppliers all sending receipts and invoices back and forth. And paper retains such a meaningful role in the industry that Construction Business Owner once estimated that a fire or flood that caused a massive loss of paper documentation would result in the failure of 70 percent of firms within a month.
“Paper is inefficient. Handwritten paper documents can also be easily lost and difficult to read,” is how Jobsite put it in an article arguing for more of a move away from paper-based documentation. “Workers could incorrectly report a site they were meant to visit but hadn’t, or wastefully duplicate efforts by repeatedly documenting the same information.”
Liens and bonds certainly help, but they require time and effort, often of the lawyerly variety. And not all jobsites are stuck in the last century, “as the now-ubiquitous tablet has all but taken the place of the clipboard, in some cases becoming the clipboard.”
Also, according to KPMG, “77 percent of contractors and 65 percent of owners use mobile technology to complete their construction and engineering projects.”
But other figures give that situation a dimmer tone. About 60 percent of construction firms are not investing in new technologies, according to JBKnowledge, with lack of support (40 percent), budget limitations (37 percent) and employee hesitance (32 percent) cited among the main hurdles.
“For most owners and contractors, project governance, risk and controls remain static, manual and paper-based activities that do not report events in real time,” KPMG said in its 2017 overview of the construction industry. “And over time, these controls have become ever more complex and lengthy, to the extent that they bombard users with too much information and too many tasks, so that project managers struggle to make sense of the data to make meaningful decisions.”
So, where is improvement taking place in moving construction away from paper, and toward the efficiencies anticipated by analysts? A recent discussion of the future of construction management from Construction Executive found that “technology is focusing on improving field productivity though easy-to-use cloud-based apps. Construction monitoring software, designed to be easily accessible through the ubiquitous smartphones and other mobile devices, can give construction superintendents the ability to file reports from the field.”
Technology and payment firms are also trying to tackle one of the biggest problems that can prevent more efficient payments and overall digitization in construction: fragmentation. “There is fragmentation in a number of categories,” Zlien CEO Scott Wolfe told PYMNTS. “One area of fragmentation is the types of companies involved. You have mom-and-pops, multinationals, lenders, banks, insurance companies – all of which touch the payment process.”
Tools such as software-as-a-service, data analytics, APIs, artificial intelligence and blockchain could potentially address issues of connectivity, efficiency and the marriage of data and payments in the future, Wolfe said.
Construction moves at its own pace, and according to the needs and traditions of its multiple participants. But the financial appeal of moving to digital from paper, even if manual processes remain, seems too large of an opportunity to pass up.