Feature Story

Engineering and construction sector on the verge of a digital transformation

by Anne Field

Engineering and construction on verge of digital transformation

Though slow to get started, E&C early adopters are stepping up to the plate.

In the drive to transform business digitally, the engineering and construction industry (E&C) has tended to be at the back of the class. That’s thanks to a number of challenges, from a lack of reliable ways to determine an ROI to a surfeit of fragmented platforms that have slowed down innovation in the sector.  According to a recent report from EY, less than 10 percent of E&C respondents surveyed were confident in their readiness to embrace digital transformation.

“It is challenging for the E&C industry to unlock digital transformation,” says Santiago Ferrer, managing director and partner at Boston Consulting Group (BCG), “Organizations are grappling with complex digital ecosystems that have multiple platforms creating and duplicating data – all with limited incentive to cooperate.”

At the same time, a small number of innovators, from general contractors to engineering, procurement, construction and installation (EPCI) firms, have started to step up to the plate. They’re hoping to reap the benefits of introducing digital systems, including increasing productivity and lowering costs—a key consideration in an industry where profitability is a constant challenge.

Certainly, few companies doubt that digital transformation can produce significant financial benefits. Some 98 percent of respondents agreed that digital solutions will be critical to the future viability of their company, according to EY. Some 40 percent felt such systems are somewhat critical, and 58 perent characterized digital solutions as absolutely necessary.

With that in mind, early adopters in the E&C industry are seeking to kickstart the transformation process throughout the sector.  In 2017, digital project platform company Aconex established the Global Industry Council (GIC), which brings together such industry leaders as Bechtel, Fluor, John Holland and Lendlease in an effort to boost transformation efforts. Last year, as part of its first major initiative, the group released a report pinpointing the major barriers facing E&C companies, along with proposed solutions.

A focus on standardization

One major area of focus for early adopters is the patchwork quilt of old and redundant systems within their companies. According to the GIC, “Most large enterprises have hundreds of systems across their businesses.” To that end, they’re turning their attention to the process of standardization, particularly in complex joint ventures with globally dispersed project teams. In such situations, where large amounts of data are generated, it’s untenable for each partner to operate with its own multiple systems. As a result, there’s a clear upside to addressing the fragmentation.

“E&C industry leaders should focus on standardizing data and tools in large joint venture projects where there would be significant benefits to all stakeholders,” says Ferrar, “This makes it easier to implement change, but also gives incentives to all stakeholders to participate.” 

Case in point: A consortium of 80 owner operators, EPC contractors, equipment suppliers and service companies involved in developing a data framework called the Capital Facilities Information Handover Specification (CFIHOS). Many years in development, CFIHOS aims to boost efficiency by improving the way companies that own, operate and make equipment for oil and gas and other process sector businesses exchange information. It allows everyone involved to get the data they need and share it in a standardized format.

Some companies are also working to build collaborative data platforms with members of their supply chain. Global construction company Bouygues Construction, for example, is developing a digital project management platform that all parties can use simultaneously throughout the life cycle of a project, according to recent report from Deloitte.

Assessing ROI

Another key area is more basic: determining the potential ROI of digital systems. “In the absence of demonstrable ROI, users will be reluctant to adopt new systems and technologies,” according to the GIC.

That’s why Fluor, a US-based construction and engineering company, developed a structured, metrics-driven process for adopting innovations. The process addresses areas such as adoption preparedness—including documentation and work process changes—communications, executive sponsorship, training, project mentoring and coaching. The company’s metrics include measurements for identifying and reporting on the value of each project, as well as tracking the progress of an innovation throughout the enterprise until it becomes fully adopted throughout the organization. For a successful rollout, each innovation has to be adopted and used on at least 10 projects.

According to some industry experts, perhaps the most promising potential lies in connected construction. That uses sensors, as well as wireless, augmented reality,  virtual reality and other technologies, to link properties, suppliers and contractors, automate processes and synchronize equipment, labor and supply chains, according to Deloitte. “E&C companies should invest in and leverage connected construction technology to provide innovative solutions and real-time insights to formulate and achieve the desired project outcomes—increased productivity, reduced costs, and ensuring safeguards against hazards,” says the report.

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