Is Technology Reducing Construction Risks? | Construction Podcast

Listen to Dodge's Ben Johnson and Donna Laquidara-Carr discuss the emerging technologies shaping risk management in construction. Below is a transcript of this construction podcast.

Ben Johnson:    

Hello and welcome to this episode of a podcast that builds. I'm your host Ben Johnson, and on today's show we'll be discussing the use of technology to help manage construction risks. The data we'll be using in today's show came from a new SmartMarket Insight called Using Technology to Improve Risk Management in Construction. The premier partner on this report was Triax and our expert on this topic is our favorite guest, Donna Laquidara-Carr. So welcome to the show, Donna.

 

Donna Laquidara-Carr: 

Thank you, Ben. It's always a pleasure to be here.

 

Ben Johnson:    

So, to start with, can you give us a few details about the study before we dive in?

 

Donna Laquidara-Carr:

Sure. So our partner on this was Triax Technology and with them we developed a study that actually took two tracks. The first one is we did an online contractor survey and we ended up getting 135 responses with 80 GC's and 55 trade contractors. So a nice blend of general contractors and trade contractors. We wanted to look at a few key topics, generally how they manage risk management and the challenges they face, and then really do a deeper dive on the topic of technology and construction risks. Then secondarily, we also did in depth interviews with 12 executives from 10 insurance companies including six that were actually formally insurance companies and four brokerages with the insurers. What we were looking for was their perspective on contractor data gathering analysis because they do get a good understanding of where the industry stands and who understands data better than insurance companies, right? And the potential of the technology to help them mitigate construction risks.

 

Ben Johnson:    

So, let's start out with challenges and what are the biggest challenges contractors face in managing construction risks?

 

Donna Laquidara-Carr: 

Alright, so we did find that over half of the contractors report moderate difficulty with identifying project risks. Now moderate doesn't sound that big, but remember this is a core part of their business is dealing with risk. So the fact that there's over half do such struggle with it a little bit is really pretty relevant. There are other categories that even more contractors find challenging like the ongoing management of project risks and preparing a critical assessment of risk. But really it's that identifying risk that so many are troubled with that that really jumped out at us. This is also echoed in another data point in the study as well. Less than half believed that there are clear ways to measure a project's overall risk performance. So they're really not even sure how to get at that. That stepped back overview of risk.

 

Ben Johnson:    

That's really interesting. But why do you think these findings are so important?

 

Donna Laquidara-Carr: 

Because they really suggest that for most contractors, they face every project and new and they have to figure out how to deal with the risks as they arise. And that is not the best strategy to go with. Right. I mean construction does involve a lot of very unique work, but still there are a lot of risks that they face that are present from project to project but you aren't able to just pull back and if you can't pull back and just get that bigger picture, you can't really figure out the trends and risks that you face and know how to deal with them.

 

Ben Johnson:    

So, what do you think the challenges are that are keeping contractors from pulling back and getting that larger picture?

 

Donna Laquidara-Carr: 

It's interesting. We happened to be doing another study this year with a viewpoint that looked at how contractors gathered data and analyzed data that really does address this question. And one of the things that study revealed is that contractors are still in the midst of the process of converting from paper and excel spreadsheets to software for tracking data. Now that's really important actually because it doesn't lead to good data standards, right? You can have very inconsistent data from project to project, which prevents you from really comparing them. We also found when we did, I remember I said there was that second track with the insurance executives. We found that they confirm that, you know, out of all the contractors they see there are very few who really are effective at gathering data and even fewer since most of them don't even have the kind of data needed that can really analyze projects effectively from their perspective.

 

Donna Laquidara-Carr: 

And I have to say this is not something that's going to be a shock to the industry. The contractors were very clearly aware of this too in the viewpoint study. They pointed out that very few of them, when they talked about the benefits, the changes they've seen in the last few years and their ability to, to gather data, very few of them pointed to doing trend analysis across projects as a top benefit. It was on the list of seven or eight, one of the bottom benefits that they've experienced so far. But when we said, okay, in three years, what do you need to be doing to really improve this? It came in second. So it really moved up the ranks a lot more. So this is a direction that the industry wants to go when they want to be able to do trend analysis across projects.

 

Ben Johnson:    

So, I guess that takes us sort of to the heart of the issue. How will technology help with this issue?

 

Donna Laquidara-Carr: 

Well, one of the great things that we see about this IoT in construction technology that's out there right now is that, in addition to just what it's there to function as, it also often creates a great flow of data. And as an industry, we really haven't even scratched the surface yet of the ways in which that data can be used to help companies. And again, I think the contractors are aware of this and really interested in what these kinds of technologies can offer them. In this study and the Triax study, 73% think that IoT devices can provide medium to high improvement and their ability to manage occupational risks. Occupational risks are so key, right? And there's 41%. Okay. 73% really are looking for that medium level of risk. But 41% says it offers the opportunity for high improvement. This is a lot of optimism about technologies that a lot of the companies who are answering this survey may not be that deeply engaged with yet.

And we do see them also pretty enthusiastic about technologies addressing risk to the public property damage risks over half. Think that they'll help with those and then just under half think that these kinds of technologies will help them deal with construction defects and financial risks. And we did see when we were doing the in depth interviews that the insurers were also really enthusiastic about the tech using technology for all of these purposes. So there seems to be a lot of consensus in the industry and a lot of attention right now being paid to what potential these technologies have.

 

Ben Johnson:    

Let's take a quick step back for a second. And, by IoT in construction you mean...?

 

Donna Laquidara-Carr: 

Ah, anything with sensors that feeds back data. So like for example, wearables are probably the most common. Anything from hard hats with chips to, you know, the kind of clip-ons to everything else. You know, these provide productivity data, important construction site safety data. But there's also things like telemetrics, RFID tagging of pieces of equipment or materials that really can help contractors better understand what's going on their sites.

 

Ben Johnson:    

So, are there any other technologies that contractors are interested in for risk reduction purposes?

 

Donna Laquidara-Carr: 

Well, we were very focused on IoT technologies on the online survey that we did with the contractors. However, we, when we talked to the insurers, we actually asked them a broader question about technology and risk than what we put to the contractors. And when it comes to the insurers, one of the things that really leaked out that they're very enthusiastic about is associating visual monitoring, just, you know, video cameras onsite with artificial intelligence so that the images are not just being captured, they're being analyzed to look for things like an unsafe work practices, you know, risk to the public, anything like that. There was a lot of enthusiasm and interest about this, you know, the AI's pretty sophisticated, but the technology to gather images on site that's already there.

 

Ben Johnson:    

So, a slightly loaded question here. Do you think we're on the verge of a digital revolution in construction?

 

Donna Laquidara-Carr: 

Well, I think everyone hopes so and certainly there's a lot of venture capital that's betting on that, but there is a big obstacle right now. The study that, the study that we're talking about, it showed that only 10% of contractors have an actual innovation budget for investing in technology, which means that they don't have a lot of room for error. What they're doing instead to help fund their technology investments is they're either hoping it pays off just doing the investment and open the ROI shows up further down the line, or they're passing on the cost to their clients. And obviously either one of those approaches is going to really limit the kind of risks you're willing to take when you're doing it. And you can't blame contractors, you know, and it's challenging. Construction is often a pretty low margin business. It's hard to set aside the innovation budgets, but without that, it's going to be a big challenge for really new experimental technologies to get widely adopted.

So, what are you thinking to help the industry get over this hurdle? Well, you know, it's interesting, one of the reasons why we included insurers in the first place is because they really do have the potential to help with this in several ways. First of all, we've done a lot of research on construction site safety in the past and, contractors consistently say one of their big reasons, for instance, investing in safety practices is to get lower insurance rates. And in this study as well, they said that one of their big reasons for investing in technology would be to see lower insurance rates. Now I want to be very clear, all the insurance we spoke to said, man, they're not really expecting to see lower insurance rates coming from contractor adoption of these technologies anytime soon. They actually need to crunch all the numbers, determine, you know, on actuarial tables that these things actually do lower costs.

But they did say that there are other things they could do. For instance, possibly contractors who are investing in these kinds of things could get lower deductibles, which would be a big impact. Right. And, another thing that several companies pointed out that they're doing is they're trying to set up centers of expertise for contractors. It's not just a question of finding the money to invest, it's finding the resources to even understand what's worth investing in. And the, in some of the insurers are trying to step into that gap and at least say, hey, you know, we've got a bigger, broader view of the industry. Here's some technologies we've seen that we think are very exciting, that make sense for you to really consider help narrow down the field a little bit and that's an important role. In addition to that to, there were just a couple that I spoke to that are actually partnering with construction firms, which is really interesting.

One of them talked about how they paid for the first year of telemetrics. They paid for the initial equipment investment and the first year of telemetrics for one for several companies. And when it came time to renew the contracts for the telemetrics, all the contracts, we would pick them up themselves. Once they saw the payoff of having that data, then they were willing to step in. It was just getting the ball rolling and they, they really viewed their role as important for that. So there's a lot of interest by insurance companies and being partners with contractors on this, so hopefully there will, there'll be more of that in the future.

 

Ben Johnson:    

Yeah, it certainly sounds very promising and hopefully on a future episode a few years down the road, we can report the progress that's been made in this area. But for now, I'd like to thank you for Donna for visiting the show again.

 

Donna Laquidara-Carr: 

Oh, it's always a pleasure. Ben

 

Ben Johnson:    

Both of the reports referenced in today's show can be found in the show notes or at construction.com; just hit the Resources tab and you'll have access to all of Dodge's reports as well as other media such as this podcast and you can reach Dodge at construction.com or at (877) 784-9556 thanks for listening. Be sure to tune in next time when we'll be discussing the Q3 2019 CCI commercial construction index report. That's all for this one. We'll see you next time.