IT in Construction – Estimation and tendering
The growth of the infrastructure sector in the country has provided tremendous opportunity for most companies engaged in project oriented construction and development for multiplying their business.
When business starts growing at such a pace, need for better processes and efficient ways of managing those processes are imperative. One of the enablers for this is the adoption of good information technology (IT) tools. Although there is marked growth in the adoption of ERP in the last couple of years to improve the business processes, some niche areas still need a deeper look. These niche areas include the key processes of tendering and estimation.
For any project oriented industry, estimation is one of the core processes. This is applicable for consultants, contracting companies or owners engaged in development. In fact, it is applicable to almost all the stakeholders. It extends to any type of contract like item rate, lump sum, cost plus etc and covering all models like BOT, EPC etc.
Today, given the time crunch, it is critical that companies do not miss the tender opportunity.
Moreover, the accuracy of the estimation will lead to better cost management during execution and thereby managing the bottom line of the company. But then there are challenges.
What are the challenges today?
When it comes to estimation and tendering, the industry as a whole today is facing with several challenges. An estimator has no choice but to carry out the entire process either in excel or some locally developed tool which takes most of his time and energy. The knowledge and information while preparing the estimate resides with individual estimators. Others are not able to access the history of information quickly and easily.
Estimating for a new project is almost a full repetition and takes too long. This is basically due to the non availability of database for resource masters and templates. As details for components of an item estimate are usually best known to the estimator hence it is very tedious task for the reviewer to track and drill down those components.
Due to repetitions there is a chance of human error. Improper planning and missing costs lead to inaccurate estimates and budget escalations during estimation. People want their estimates to be as close to practical reality as possible during the actual execution. It is really a challenging task without availability of past estimate models, which have evolved to this level.
Catering to the various types of allocation of indirect costs and mark-ups is not easy for an estimator and it is time consuming. Analysis of the bid to find out the accuracy, what if scenarios etc. are although theoretically possible to be done manually but require a lot of time and efforts.
Transfer and use of estimate data seamlessly while preparing roll out plans and budgets during execution is not easy. Tendering being a very confidential activity, security of the information is a vital concern.
Can the challenges be addressed?
For many reputed construction organisations, most major functions like project management, procurement, plant & machinery operations and execution are already taking place in ERP (such as SAP).
Engineering and design functions already have designing and CAD tools. However, one of the key areas which we were focussing on was to adopt an efficient tool for estimation and tendering which addresses the pain areas discussed earlier.
During this process we came across RIB Construction suite also known as Csuite. It is a software developed by RIB Software AG headquartered at Stuttgart, Germany. The tool is being used by a number of construction companies worldwide ranging from contracting companies, consultants and owners.
This software could address many of today’s existing pain areas and it covers almost all scenarios of estimation and tendering. Quantity takeoffs for BOQs can happen manually by writing formulas or converting from drawings or automatically being picked up from BIM integration that facilitates take off of quantities from 3D models.
A library of masters can be built in for the company which helps the estimator to use it repetitively for new estimates saving enormous time. Masters are created for the materials, operating norms for plants and equipment, labour etc. Direct and indirect costs for the items are built up using these resource masters.
Some of the other components such as taxes, depreciation, escalation etc., are catered through the characteristics and parameters. The software allows the user company to load the mark ups in terms of risks and profits.
The tool is quite flexible in providing user rules for allocation of indirect cost on the items for deriving the unit price of the item. It covers the bid analysis phase before tender wherein it provides what if analysis and reports that helps the estimator to cross check and decide on finalisation of the tender. This allows for the accuracy check of the estimate.
This software integrates with most of the major CAD tools, ERPs and project management software. The integration with major ERPs also facilitates the use of estimate data during the execution phase. Security in terms of authorisations is very tightly built in. Authorisations can be provided for users for create, change and view only. User authorisations extend to document levels.
The software operates on client server architecture. Users can do parallel work on the same projects and its components with network licences which saves a lot of time. Also the software can be operated with user licences even over standalone PC.
Implementation time takes somewhere between a timeframe of 1.5 to 2.5 months depending upon the legacy master data which needs to be built up as master library. Alternatively initial library can be built up to start the work and subsequently the users can go on building the libraries as well. The ease of navigation and use reduces the learning curve for the user to a great extent and hence stabilises the system in a very short period of time.
To keep pace with the growing business opportunities today, we have to win bids in a very competitive environment. This asks for more efficient and innovative ways of working by our people. Companies should also start focussing on preserving the history of information and knowledge which can be made easily accessible for future use. Adopting a combination of rich domain experience with right kind of IT tool can help us in creating a value for the company as a whole.
Satish Pendse (The author) works as the CIO of Hindustan Construction Company (HCC), which has started offering IT services to the infrastructure industry. This includes implementation of the tendering & estimation software. Through this column, the author brings out the increasing significance of IT in construction. He can be reached on firstname.lastname@example.org