Blog

A healthy strategy for higher profitability

Author: Ronald de Graan, BIM-evangelist & Product management director at  KUBUS

In times when the sky seems the limit, it is difficult to keep both feet firmly on the building plot. The housing market frenzy has also reached the market for new builds. Increasingly often, project developers are selling yet-to-be-built homes to the highest bidder. House hunters put in their bids at far above cost price, purely on the basis of square footage and location. Development contractors start building with massive profits on the horizon. Apart from the—in my view—questionable ethics of selling houses by auction, the strategy of pursuing a fast profit is also not a healthy one. However, companies can hardly be blamed for doing so after a period of severe crisis—in which many construction companies went belly up, and others are still experiencing the after-effects of daily rising cost prices. Nevertheless, there are other, more sustainable ways to achieve higher profits. The road to sustainable, successful entrepreneurship is that of BIM and reducing the cost of failure.  

Construction companies, themselves, are in control of reducing most of the costs of failure, which cannot be said about cost prices, fickle markets and political decisions. Traditionally, the costs of failure that are incurred by contractors are generally estimated at around 10%. And, just as traditionally, these costs are simply factored in—and often even exceeded, in the daily construction practice. There are few other sectors where such a percentage would not feature high on the management agenda. The top 10 of contracting companies, on average, are left with a return of 3%; a percentage that also deserves to be high on that same agenda—as a point of concern, that is.  

The construction sector has a collective responsibility towards a future-resilient, waste-free world. Failure costs of 10% do not fit this image, certainly not when considering that there are tools for bringing them down, relatively easily. 

FAIL-SAFE VIRTUAL CONSTRUCTION

Many building projects are still tendered out in the traditional way. This involves a linear structure that is both inefficient and costly. BIM offers insights that enable a more rapid, economical and more sustainable realisation of building projects. There is integral collaboration between all partners in the chain, with all data in all phases (design, construction and management) being included in or linked to the BIM model. All construction elements and their characteristics and relationships are registered, before construction commences.   

Using BIM means that design decisions are made at an early stage, problems are both detected and solved before the start construction. In particular, reducing the costs of failure and the related shorter construction process both lead to higher profits. BIM enables more efficient and sustainable operations and saves on costs. And this, in turn, equals a healthy strategy for profitability.  

Communication, in traditional construction, also is a linear process, and issues are passed on to others relatively quickly. For construction teams within the chain, BIM offers an excellent solution here, in the form of an integral communication platform, moving from solving failures to fail-safe virtual construction, with a crucial role for the communication between partners along the chain.  

CIRCULAR CONSTRUCTION PAYS OFF

In this blog post, I invite you to increase your profits in a sustainable way—one that is based on individual strength and makes you less dependent on market developments—by reducing the costs of failure through the application of BIM. I realise that, as a BIM software developer and supplier, I appear to be preaching to the choir. Yet, this is mostly a moral appeal. All those in the construction sector have the collective responsibility to pursue a future-proof world without waste. Failure costs of 10% do not fit this image, certainly not when considering that there are tools for bringing them down, relatively easily. 

This sector is currently the fastest growing economic sector in the country. Construction is showing strong growth, and this comes with a certain level of responsibility. The EIB (Dutch economic institute for the construction sector) recorded a substantial growth for 2017, with a 5% increase in production, to a total of 63.3 billion. A similar picture is emerging for 2018, with 4.5% growth—even while being hampered by shortages of production capacity and resources, in particular.  

The practice of opting for opportunistic construction practices, reaping the benefits and building reserves is understandable. However, we do not need to choose between a seemingly expensive route of responsible construction practices and a strategy of scouring the market for the most attractive profit rates. The BIM knife cuts both ways; there are no contrasting economic values. The practice of applying BIM while reducing the costs of failure leads to healthy profit development—win-win.  

For this blog post, I was partly inspired by Material Matters, the book by architect Thomas Rau and economist Sabine Oberhuber, in which they describe a new economic model where construction consumers become users rather than owners, where materials are awarded rights and waste has become a thing of the past. 

Questions?

For more information on Madaster, please phone +31 (0)85 060 1242, mail info@madaster.com or fill out the contact form.