This blog post was authored by Andy Verone, Chief Strategy Officer at Contruent.
One thing that’s certain about capital construction projects is their inherent cost uncertainty.
With projects becoming increasingly sophisticated and expensive, the need has never been greater for cost management that is more accurate and reliable — and predictable.
In the world of construction, where cost overruns are often the norm, artificial intelligence (AI) offers a beacon of predictability.
Artificial intelligence (AI) has the undeniable potential to deliver the level of predictability that the construction companies managing those projects demand. Incorporating this innovative technology also enables the analytics and insights needed to more proactively and effectively manage project costs while overcoming the challenges that have typically thwarted that control.
This blog post explores how AI tools, including machine learning and generative AI, are revolutionizing cost management strategies to ensure project success.
The Challenge of Cost in Capital Projects
Projects face many uncertainties that have cost implications. Given how dynamic projects are, this is to be expected. And the longer the span between estimate and turnover, the more time and opportunity there is for cost uncertainty challenges to compound, widening the gap between estimated and actual costs.
Where do these cost uncertainty challenges stem from?
Common Sources of Cost Uncertainty
💢 Inaccurate estimates due to limited data, no historical or benchmark information, or heavy reliance on subjective or experiential judgment.
💢 Lack of real-time data on project progress, resource utilization or the budget impact of internal or external risks.
💢 Inability to predict how markets will behave, how material costs will fluctuate or what unanticipated risk factors will surface.
Their consequences have a broad impact: The project’s financial health becomes strained by budget overruns. Timely, accurate decision-making is hampered. Planning for and mitigating potential real-world risks and their cost impact is compromised. And stakeholder confidence is reduced — a far more challenging consequence to measure and overcome.
This all highlights the need for greater predictability.
Embracing Predictability with AI in Cost Management
Predictability is about more than just having a clear understanding of anticipated project costs. It’s about empowering key stakeholders — owners, cost engineers and contractors — to proactively do more with their data and cost-management efforts so they can:
💢 Realize greater cost certainty, with less risk of budget overruns for improved financial stability.
💢 Prepare for and manage factors that could impact costs ahead of time, supporting informed decision-making and proactive mitigation efforts.
💢 Optimize labor, material and equipment allocation and utilization by more carefully and judiciously spending on those resources when and where they best meet project needs.
💢 Identify and address potential risks early on, preventing them from occurring or reducing their cost impact.
💢 Increase stakeholder confidence by demonstrating control over project costs.
Anticipating and managing these cost drivers is where AI steps in.
The Connectivity of AI in Cost Management
AI in cost management is becoming increasingly pivotal in strengthening the cost management practices. Many companies have years of project-level cost and schedule data to leverage in addition to what is accumulating in their current projects.
This is ideal because AI thrives on data. The larger the dataset it can access, the more it can empower construction executives and managers to leverage their data insights to benefit the project.
Making Data-based Predictions with Machine Learning
Through machine learning (ML), AI quickly and constantly examines all data for you. It seeks out and learns the hidden patterns and trends that may shed light on predictable events and outcomes and refines what it learns as real-time data is incorporated.
AI in cost management helps answer the questions that get to the root of effective cost management: Are costs aligning with what was planned? Where are costs rising and falling, and what is driving them? How are resources being used or underused? Are there frequent causes of delays? What is equipment sensor data indicating about usage and maintenance? Having these answers allows it to reliably and accurately forecast how costs will be affected going forward.
Based on its predictive findings, AI in cost management can also suggest realistic ways to course-correct to improve efficiencies and save on costs. For example, where and when resources should be reallocated and when preventative equipment maintenance may be necessary. From this, executives and managers can make data-driven decisions that make their cost management a more proactive than reactive effort.
Making Data-based Predictions with Machine Learning
While machine learning shines at finding patterns in existing data, generative AI (GenAI) produces new content from inputs it’s been trained on, such as models, design plans, code, images, etc. — another reason for construction companies to embrace AI. It holds promise for the future of construction design in a couple of ways.
Based on the inputs and constraints used, it has the potential to enhance the design process by generating realistic models and design concepts or recommending changes to meet updated constraints. And with that newly created content, GenAI in cost management can predict potential costs associated with each.
When integrated with building information modeling (BIM) technology, GenAI can analyze BIM data (materials, costs, etc.) to identify potential cost implications unique to each design choice during the modeling stage. This allows stakeholders to make informed decisions about designs and late-stage alterations based on their financial feasibility.
Future of AI in Cost Management & Capital Projects
AI has the power to deliver a higher level of predictability that meets the needs of today’s large-scale capital projects. Leveraging the capabilities found with ML and generative AI, cost management can become a more strategic practice, turning the previous unknowns into knowns that can be proactively acted on. And as this innovative technology continues to evolve, its applications and value will become even stronger.
Start your AI-enabled transformation with a robust cost management solution. Visit Contruent.com to learn more or request a demo today.
References
- Boosting Cost Accuracy and Control with Sophisticated Cost Management Technology, by Ryan Craaybeek, Solutions Consultant Director at Contruent, February 2024
- 3 Cost Management Tools That Improve Project Cost Accuracy, Visibility and Control, by Ryan Craaybeek, Director, Solutions Consulting at Contruent, November 2023
- Top Technology Trends in 2024 for Project Cost Controls, by Rich Humphrey, Chief Product Officer, February 2024
- Unlock Capital Project Performance with Intuitive Dashboards to Improve Outcomes, by Ryan Craaybeek, Director, Solutions Consulting at Contruent, November 2023
About the Author, Andy Verone:
As Chief Strategy Officer, Andy continues to bring his wealth of experience to the forefront, spearheading initiatives and identifying solutions that position Contruent as a key player in the construction technology sector.
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