When TradeTapp, Autodesk’s subcontractor qualification solution, was first acquired, founder Justin Levine shared a story:
“The very first day I started working in construction risk management, my new boss challenged me with something I couldn’t fully appreciate at the time. He said, ‘The hardest thing you’ll do here is to integrate a risk management mindset into our operational teams. Find ways to make our project managers think like risk managers, and we’ll become a better company.”
Quantifying the Need for Risk-Adjusted Cost
For decades, the cost of construction has been a function of marketplaces: labor, materials, insurances, and fees. However, given increasing project complexity, this reality is changing. Understanding and quantifying risk will shape the way estimates evolve in the very near future.
It’s safe to say that cost overruns have become the industry norm. According to a study from KPMG, just 31% of all construction projects are completed within 10% of their initial budget.
Examples of this trend abound:
- In a recent public works project in Florida, what began as a $91 million cost estimate quickly escalated. The project ended up requiring a 53% increase in budget for the engineering firm to adequately complete the job.
- Overruns are not limited to projects in a particular sector or class, either: Crain’s New York reported last year that over half of all New York City projects were over-budget and delayed.
However, with project budgets being scrutinized more than ever, construction management firms cannot afford to accept overruns as the new normal. Given the importance of accurate cost estimates to project success, firms must start to consider one of the biggest potential costs—risk—in their estimates.
How Does Risk-Adjusted Cost Work?
When developing risk-adjusted costs, an estimator uses a structured framework for quantifying uncertainty. Risk-based estimates take a bottom-up approach as they analyze project risks, including both the probability of an event occurring and the potential consequence of an event occurring.
Example #1: Financial Concerns
The most familiar example of this would be if a subcontractor’s qualification has discovered financial concerns, and the general contractor has deemed it necessary to implement a risk mitigation action such as lien waivers, or joint checks. These types of tools are effective, but they also add administrative costs to the subcontractor’s bid. Instead of incurring these costs after the budget has been finalized, a general contractor should factor them into the bid leveling phase.
Example #2: Scope of Work
A second example would be if a subcontractor that has been selected for a project is not known to have extensive experience with that particular scope of work. In this situation, the general contractor may add cost for additional supervision on-site in order to avoid a quality issue. This cost is quantifiable (general contractors can use known supervision labor rate and hours needed) and should be factored into the bid whenever possible.
The Problem TradeTapp and BuildingConnected Solve Together
Risk managers have historically struggled with quickly analyzing, assessing, and communicating plans for subcontractor risk to estimating teams. This is because they’re often serving many projects at once, or their workflows are siloed from the estimating department.
Together, TradeTapp and BuildingConnected solve this problem, allowing company, financial, safety, insurance, and other subcontractor data to flow freely between platforms. We like to say, “Estimators live in BuildingConnected, and risk managers live in TradeTapp. Let the systems do the work of talking to one another.”
In TradeTapp, teams can assess risk, make decisions about qualification statuses, and communicate automatically through their company’s BuildingConnected account. In BuildingConnected, estimators can search for subcontractors and build their bid lists, knowing exactly where each of their subs stand in the qualification process.
After all, the most effective way to ensure that estimators consider risk as they bid out work is to make it a part of the systems and workflows that they operate in. Ease of discovery is key, which is why TradeTapp’s integration with BuildingConnected Pro displays qualification details in five different locations within the app. As estimators search for subcontractors, invite them to bid, review and compare bids, and ultimately award contracts, TradeTapp data remains front and center. This ensures risk stays top of mind as estimators evaluate subs, pushing them to think beyond just cost and availability.
How GCs Benefit from Integrated Bid Management & Qualification Workflows
With BuildingConnected Pro, GCs can:
- Get access to the most accurate database of subcontractors
- Quickly discover, invite, and choose the right trade partner for any project
- Reduce project risk and mitigate unforeseen costs before breaking ground
- Save time soliciting bids, accurately comparing and awards bids, and collaborating in real-time
With TradeTapp, GCs can:
- Tap into the largest crowdsourced Builders Network to expand reach to quality subs
- Compare similar subs against each other by assessing benchmark scores
- Get automated mitigation recommendations based on company specific risks to help proactively safeguard projects from future liabilities
- Speed up workflows and reduce wait time with an easy-to-use platform
With the BuildingConnected Pro and TradeTapp integration, GCs can:
- Surface essential risk related data (e.g. safety, financial, and backlog data) to estimators in BuildingConnected Pro, allowing them to make more educated bidding decisions
- Access a unified source of truth for sub data in the Builders Network
- Bring estimating and risk teams closer together through integrated workflows powered by one platform
How Subcontractors Benefit from Bid Management & Qualification Workflows
The integration between TradeTapp and BuildingConnected makes things easier on subcontractors, too. Some of the benefits this unified experience gives subcontractors include:
- A single login for both systems. This provides less hassle, as subcontractors only have to remember one username and password.
- Increased day-to-day efficiency. Subcontractors can save precious time as they’re able to bid and qualify in the same place.
- Simplified path to adoption. With a unified experience, there’s no need to create two separate accounts and have two onboarding experiences for two different products.
Why Risk-Adjusted Cost Is the Future
Developing accurate cost estimates is both an art and a science. The art of cost estimating has been refined over time by preconstruction professionals with decades of invaluable experience. However, with higher stakes than ever, it is vital to ensure that construction organizations also anticipate the implicit costs of performing complex projects.
Today, by using TradeTapp and BuildingConnected to help anticipate and surface risk insights, firms can plan for the possibilities earlier on in the project lifecycle. As technology continues to improve and data becomes more readily available, a risk-adjusted cost estimating approach will help general contractors uncover an even wider breadth of risk factors, helping ensure project success time and time again.