Upbeat Asean construction sector vows to harness data for fast, efficient, cost-effective operations
CONSTRUCTION industry prospects here and across Southeast Asia remain bullish as challenges continue to confront the build sector amid the end of the Covid-19 pandemic, revealed a study of an international construction management software company.
Procore Technologies Inc.’s report, titled “How We Build Now: Technology Trends Shaping and Shifting Construction-Southeast Asia 2023,” showed that professionals in this field are generally optimistic when polled on their outlook for this year.
In fact, the commissioned research, which tapped YouGov to conduct the online survey from January 31 to February 22, bared that 88 percent of 876 executives from Singapore, Malaysia and the Philippines interviewed expressed confidence in market conditions over the next 12 months. This could be attributed to expectations for the increase in both the number (73 percent) and value of projects (71 percent) during the same period.
Such positivity is so high, for instance, in the Philippines, wherein 95 percent of those 303 top construction officers reasoned out the “fast-moving economy and continuation of the current administration’s modernization efforts” for their conjectures. With this, four-fifths or 80 percent of them see a hike in project volume and 83 percent expect higher value by end of 2023.
According to YouGov Associate Director for Research Fumin Rianto, the construction industry is strongly upbeat despite the headwinds being faced by this sector, and growth forecasts are higher this year.
“There’s optimism across the Southeast Asian construction industry. Businesses face largely the same challenges this year as they did last year, particularly around costs, which continue to keep leaders up at night,” he told reporters during their media briefing held in Makati on June 20. “However, what we are seeing this year is that businesses are starting to adapt to these challenges and are placing a larger emphasis on risk management.”
In handling uncertainty to protect their bottom line, almost four in 10 respondents (39 percent) in the region are rethinking contracting models to protect margins or considering new payment methods, such as early payments at reduced margins (37 percent). Focusing on risk management has become more important, especially in light of persistent challenges such as the increased cost of raw materials and equipment (44 percent) and winning competitive bids and tenders at a sustainable margin (32 percent), as answered by the participants.
Gap in belief, capability to use data
PROCORE found out that businesses in the surveyed member-states of the Association of Southeast Asian Nations (Asean) are well aware of the benefits of data management.
As a matter of fact, almost all or 99 percent of construction professionals in the region who were engaged in the research unanimously agreed that better handling of information can bring benefits to their companies.
The top five of these think they can gain with more efficient data, improved decision making (40 percent), help achieve sustainability goals (40 percent), improved visibility of information (39 percent), increased productivity (39 percent); and safer working environment (38 percent). To wit, Filipino respondents highly believe in almost all the benefits between 40 percent and 48 percent, except for improved visibility at 38 percent, slightly lower than Singapore (40 percent) and Malaysia (39 percent).
“[The overall response] is encouraging given the unfortunate reality that safety incidents and issues still occurring in the construction industry are even more than they should be,” Rianto pointed out.
The study also bared the potential savings that businesses expect to realize from managing data more efficiently as a proportion of time spent on projects. In this view, Asean participants estimated that on average, 22 percent of total project spending could be saved if they effectively handle their data: again, with the Philippines having the highest mean range of 25 percent, Singapore at 22 percent, and Malaysia at 18 percent.
While there’s a strong knowledge of how data can be used to their edge, only 6 percent of companies in Southeast Asia have laid the foundation for a data strategy. This, per the associate director of research at YouGov, is indicative that “majority of businesses in the region are still in the very early days in their data journey.”
What’s concerning as well is that although 77 percent are planning to design and implement a data strategy this year, more than half or 52 percent of these builders are only somewhat confident in their ability to do so.
For him, this clearly suggests that there may be some issues on the way. He said: “These businesses don’t get the adequate support and guidance in developing and implementing a data strategy. And so, as a result, despite the good intentions, despite the strong appetite for the strategy, what we may see is…a gap between intention and implementation, [or] intention and reality in their past projects.”
Tom Karemacher, head of Asia Pacific at Procore, could not agree more with him. Even if construction professionals in Asean have a strong understanding that data and analytical insights can help drive better results and protect their businesses, many still struggle with developing clear data strategies.
“While software vendors undoubtedly play a critical role in assisting construction businesses in this transformative journey, more can be done. Software vendors will need to clearly demonstrate the returns on investment, thereby justifying the indispensability of construction technology and data management. This will help drive the adoption of innovative solutions within construction that unlocks unparalleled value for the industry,” he said.
Constant technological adoption
NOTWITHSTANDING the problems in harnessing data in construction, industry professionals in Asean are still committed to embark on their digital transformation journey.
Asked about the benefits they could get from adopting technologies, construction decision makers elaborated the following gains: improved cost management (42 percent), reduced reliance on human labor (39 percent), resource efficiency through fewer errors or less rework (38 percent), improved build quality (38 percent), and improved ability to handle more projects (38 percent).
Given these advantages, Rianto shared their observation that many builders in the region are betting more on innovations that can have a high impact on their business and development projects.
“What we can see clearly here [in this study] is that the appetite for investment in construction technology is very strong in Asia, with nearly four out of five, or 77 percent of businesses looking to increase their spend on construction technologies as a proportion of annual budget in the next financial year,” he noted.
Correspondingly, more than three-quarters of industry players interviewed (77 percent) disclosed their plan to accelerate their spending on construction technologies as a proportion of their yearly appropriation.
“Looking across the country markets, we can see that appetite is stronger in the Philippines (84 percent) compared to Malaysia (75 percent) and Singapore (72 percent),” he cited.
Interestingly, businesses that have existed for less than 10 years were discovered to be more likely to embrace technology (81 percent), as compared to established businesses between 10 and 20 years old (71 percent) and those over 20 years (68 percent). Size-wise, 81 percent of large businesses with 100-plus employees are looking to increase their construction technology spend versus 69 percent of smaller businesses with fewer than 100 workers.
In the next three years, construction management platforms (55 percent) are seen to become the technologies that will be the biggest drivers of change, followed by payments technologies (38 percent), prefabrication (34 percent), big data (33 percent), and next-generation BIM (30 percent).
Digital shift challenges
THE road to digitalization is not so smooth as the digital transformation journey of the construction sector could continue to face challenges.
Given that there are bottom-line, cash flow and solvency issues that may arise, justifying the cost and return on investment is one of the key challenges facing the builders and they need more guidance on how construction technology can actually bring them improved profitability, based on Procore’s study.
Another concern is the “wait-and-see” approach to technology adoption, as 40 percent of respondents reported that they prefer to wait until technologies are more established and proven in the market before adopting them. So there is a tendency for a lot of businesses in the region to be on the “backfoot” and “follow the leader” mode, Rianto said.
Quality in the construction business, which he emphasized as critical for competitive advantage, is also a problem. The top executive cited that in their study, around half of engaged construction businesses believe that quality can improve confidence and trust among consumers, reduce waste and increase sustainability, improve retention as well as increase margins on projects.
“However, one in five project hours [on average] continue to be spent on rework. And this is a much bigger problem in larger businesses—those with 100-plus employees—compared to smaller businesses with fewer than 100 employees,” he said.
By and large, the construction industry in Southeast Asia constantly shows very strong interest in adopting technology including data strategy, particularly younger and larger businesses.
“There are lots of opportunity out there. Right now public sentiment is strong. In fact, companies would need to take much more concrete steps to accelerate the adoption of technology. And this is not just to help them increase productivity and profitability in the midst of all their investments, but also to remain competitive and, eventually, rout their competition,” Procore Head of Sales for Asia Kin Weng Tan said.
“Construction companies need to do more to harness the power of data and intelligence to build smarter, better and safer as the build industry emerged from the pandemic.”