Critical Project Cost Accounting
The construction industry is responsible for undertaking some of the biggest and most expensive projects on Earth. Huge amounts of resources and work go into major construction projects and of course this means that huge volumes of data are generated.
Number crunching has always been a big part of construction, a commonly heard phrase is that construction companies are accounting companies which happen to erect buildings. It’s an industry where 35% of costs are accounted for by material waste and loss of productive days.
Over the past few years’ revolutionary advances in computing technology and the explosion of new digital data sources have expanded and reinvented the core disciplines of construction firms and managing agents. Today’s advanced analytics push far beyond the boundaries of traditional cost accounting.
Construction firms are starting to move into arenas such as real-time, cloud-powered analytics of large and unstructured datasets including 2D & 3D data, financial data, documents, schedule elements and weather data. Modern analytics methods have the potential to redefine the traditionally fraught relationships between the interested parties. Architects who want to unleash their creative energy, engineers who must try and make it all fit together and not fall down again and owners, desperate to keep costs from spiralling out of control
Building Information Modeling (BIM)
Now the combination of innovation, applications and data sets combining means advanced analytics is emerging in all types of construction. The sector has lagged other areas such as financial services, but they are now catching up in their adoption of predictive and optimisation models delivering more accurate cost models and predictions reducing materials and man power waste and shortening the pre-construction phase. From now, the creative sourcing of data and the distinctiveness of analytics methods will be much greater sources of competitive advantage for constructors
Constructors and planners have always looked at weather patterns to determine when, where and how to build whilst optimising energy efficiency and environmental impact. But in a time when it appears climate change may be contributing to an increase in natural disasters, these companies are now turning to weather analytics for greater insight to lower build costs and reduce construction risk. Innovation in weather data has been long overdue and is now here
Smarter buildings mean lower operating costs. The modelling of real-time local climate data when interacting with HVAC ( Heating, Ventilation & Aircon) through the buildings management system dynamically gives control to spend the minimum amount of money to provide the comfort level desired in line with the occupancy pattern
When further combined with signals from the electricity market dynamic power consumption can be deployed ensuring the smart building achieves the lowest possible energy costs and can generate revenue by selling load reductions back to the grid.
Data Science over these multiple data sets including government statistics combined with construction data going back over 150 years allows companies to determine specific risk from weather, combining with latest climate forecasts to deliver more accurate predictions.
A Lesson from Carillion is the limitations of today’s financial statements, and the limitations of audit due to the lack of adoption of forensic analytics by auditors. Auditing firms have a responsibility to ensure financial statements to give a true and fair view of the financial condition of a company, year by year. That way, all of the many stakeholders of the company who rely on the financial statements – customers, suppliers, employees, investors – can make a timely assessment of the risks of dealing with it. But, rather, accounting has become a game of financial hide and seek. Auditor data analytics needs to be adopted to deliver enhanced audit quality. There are different angles on what this means in practice but audit quality has to become a common objective of auditors, regulators and standard-setters alike.