Sage CRE Blog Articles

Got Competition?

by Deb Carpenter-Beck

Steve Jobs. Michel Phelps. American Idol contestants. All are fiercely competitive. But could they make it through a bid day?

Hands down, construction tops the list as one of the most highly competitive industries. And with fewer jobs available in recent years, the competitive pressure on contractors is even higher.

In a recent survey of Sage construction customers, 41 percent predicted that increased competition would be a main challenge for them in 2012. They also indicated that improving efficiency would be the number one way to address their competitive challenges.

An Efficient Way to Go

Improving efficiency can be as simple as automating a single manual process, such as how you store and manage your documents. Or you can integrate your company’s systems to reduce duplicate data entries while improving information sharing throughout your organization. Some companies are improving field productivity with mobile devices. Others are adopting sophisticated lean construction and integrated project delivery programs.

Nowhere is the competitive pressure cooker more intense than in a firm’s estimating department. Poor estimating efficiency leads to lost bids or, even worse, an unprofitable winning bid. How are contractors improving their hit ratios on profitable work? San Diego construction firm Echo Pacific has integrated Building Information Modeling (BIM) with automated estimating to increase their efficiency by 75 percent. You can hear their story here.

Many of our customers are also closely tracking their actual job costs to assure what they put in their bids is as accurate as possible. Knowing your real cost is one secret to winning work, according to Mike Clancy and Cynthia Paul of FMI Corporation in their report Unfair Advantage. They indicate that 40 percent of firms they see in the marketplace do not track their costs with significant rigor to conduct a detailed analysis versus final profit. The best firms, they say, are using real-time cost performance data so estimates are competitive without bidding below cost.

Advancing the competitiveness and efficiency of the U.S. construction industry has a national focus as well. A 2009 report by the National Research Council (NRC) identified five interrelated activities that could lead to breakthrough improvement in the quality, timeliness, cost-effectiveness, and sustainability of construction projects. Commissioned by the National Institute of Standards and Technology (NIST), the NRC listed the following key competitive activities:

  • Widespread deployment of Building Information Modeling (BIM)
  • Improved job site efficiency through more effective interfacing with people, processes, materials, equipment and information
  • Greater use of prefabrication
  • Innovative, widespread use of construction demonstration installations
  • Effective performance measurement tools to drive efficiency and support innovation

Today, the National Institute of Standards and Technology (NIST) is continuing its work primarily focused on metrics that will increase investment in productivity enhancing technologies.

Is increasing competition a concern for you? How are you addressing competitive pressures today and in the future?