How Connected Data Connects
Owners and Contractors

Transcript

Catie Williams:
Hello everyone. My name is Catie Williams and I’m a Product Director at InEight over our Products Connected Analytics. With me today, I have Dr. Dan Patterson, our Chief Design Officer and Brad Barth, our Chief Product Officer. Today we’re going to talk about how technology, specifically having an integrated project controls and schedule system, has improved the relationship between owners and contractors.

Catie Williams:
But before we start, just a few housekeeping things. At any point you can ask questions and then we will follow up later after the presentation with some answers. I think to kick us off, how about, Dr. Dan, will you give us a little more background, a little more of an introduction about yourself?

Dan Patterson:
Sure. Well first of all Catie, thank you very much for the opportunity to share my thoughts with you all today. Gosh, a little bit of background. Well, I’m probably going to show my age here, but I’ve spent my entire professional career focusing on, I guess really bettering the science of scheduling. I spent the last two decades developing technology driven solutions that have really helped improve the science of what we call CPM scheduling. As you know, CPM scheduling has sort of been the backbone for forecasting CapEx projects, and so adding to the mix things like risk analysis to help with increasing the accuracy of those forecasts. And then, obviously more recently at InEight, really leveraging very cutting edge technology, such as AI and machine learning, moving now more towards what I would call sort of knowledge driven planning. Being able to digitize an organization’s expertise, and then reuse that expertise through the power of AI.

Catie Williams:
Great, thanks. And Brad, do you want to quickly give us some background about you as well?

Brad Barth:
Yeah, sure. And I echo Dan’s sentiments, Catie. Thanks for having me today, and having the opportunity to share my thoughts on the subjects. Similar to Dan’s background, I’ve spent my entire career in the construction project control space, and specifically more on the cost side. So, going back 30 years to really the beginning of the legacy of InEight. I have a company called Hard Dollar, and we started creating project cost management software, was kind of the focus. And before that, grew up in the construction industry, been around the construction industry my whole life. My brother, my father are in the business, so it’s kind of in the blood, and it’s a passion of mine.

Brad Barth:
But certainly, the technology side of it really captured my interest, really from… Again, like Dan said, I’m probably showing my age here, but really got enamored with technology when PCs first came out. This whole concept of personal computers. And obviously, over the last 30 years, it’s been a blast looking at all the advancements in technology, not just in construction but just technology in general. What we’ve been able to do to improve just the science of project controls, as that practice has evolved, and how we could use technology in different ways to get better control of our projects.

Catie Williams:
So, not to poke at the depth of experience that you both have, since you both mentioned it, or poke at your age. But how would you say, maybe starting with you, Dan, that over that time, the duration of your career, how has technology changed? Or just in general, how has scheduling changed? Maybe focus on that first before the impact of technology. But has that business process changed at all throughout the duration of your career? And then, Brad, I’ll ask you the same question for project controls.

Dan Patterson:
You know, Catie, it’s been interesting because from a business process perspective, CPM scheduling itself hasn’t actually inherently changed significantly in the last two decades. I think, for me, the biggest process change has been in the early days of developing solutions, I would say we spent probably a third of our engineering time on a feature called print. We had this concept of a computer doing calculations, but the end product was always a printout, and typically a ginormous Gantt chart, pages and pages long. And I think one of the biggest business process changes were evolution to move away from the end product being paper, and everything truly being digitized now.

Dan Patterson:
And I think, tied to that, the concept now that that end product, because it’s digital, teams can more easily collaborate, and communicate, and provide feedback against that digital entity. Again, previously you’d have to print something out, you’d manually red line it, walk down the corridor to a colleague. That was the form of collaboration. And thankfully, that’s now streamlined through that digitization process.

Dan Patterson:
So, I think for me in the scheduling world, it’s this concept of moving away from the output being paper, and thankfully now operating in a more integrated and digitized environment.

Catie Williams:
So, even though it was manual before, it wasn’t necessarily at a different level of granularity, or it wasn’t necessarily less detailed with technology and now maybe modern tools would assist. It still existed the same, you would say?

Dan Patterson:
I would, to a large degree. It’s been really interesting, again. Order of magnitude, a lot of CapEx schedules run into the tens of thousands of line items, and I’ve always been of the mindset that actually the more line items in a schedule, arguably the less manageable that schedule is. I think one advancement, or one recognition, has been that Gantt charts and CPM scheduling, typically they span multiple years. Let’s say on average, a CapEx project is to take three years long. So that arguably does warrant a very large number of line items.

Dan Patterson:
When we’re in the field actually executing the plan that we forecast, because there’s so much fluidity and change in execution, you typically don’t plan more than, say, three weeks out. And so, again, the advent of having this big picture, tens of thousands of line items long, but then marrying it up with a much shorter term, we call it interval planning. A look ahead plan underlining those two, again, really has been a big change, and that’s probably only occurred, I would say, in the last probably 18 months to two years.

Catie Williams:
Interesting. So, if we switch gears to project controls, I know Brad, when you were doing your intro you mentioned that there’s been some technology changes, but from a business process perspective, is managing work and managing your costs still fundamentally the same? Or have you also seen some changes in the business process for that area?

Brad Barth:
I think, in terms of change, the business process probably hasn’t changed a whole lot. I think the practice of project controls is pretty evolved, and it’s pretty mature. So, the craft of it hasn’t changed a whole lot. I remember, early on in my career in the space, what I learned was it’s all about setting expectations, communicating expectations in the form of all the different forms that you do that in, right? Models, drawings, budgets, estimates, work plans. All those things kind of set expectations, and then the other side of that equation is tracking the expectations against those… Or, excuse me, tracking the outcomes against those expectations.

Brad Barth:
So, that’s the essence of project controls, right? Set the expectations, track the outcomes against them, learn from it, monitor, and improve as you go along. And do that against the three dimensions of scope, cost and schedule. So, I think the essence of project controls really hasn’t changed a whole lot. That’s still as valid today as it was 30 years ago, but I do think that technology has made it a lot easier to do that. I remember, especially as we talk about the cost side of it, the natural inclination to use these cool things called spreadsheets, right? These digital spreadsheets, very easy to get estimates and budgets, forecasts, that type of thing into a spreadsheet.

Brad Barth:
But it’s funny Dan mentioned the printing. That was one of the challenges with spreadsheets early on, was you create these big, massive spreadsheet but then you go try to print it out, because that was the only way to share it. And you could either make a tiny font to fit it, or you’re printing on 37 pages and you’re trying to tape them together to create a macro view.

Brad Barth:
So, I think that’s… Just the general tech evolution in terms of everything from email, to the cloud, to mobile technology, has just made it so much easier to share information now, and collaborate. And that’s probably the biggest difference, right? It’s so much easier now to get information, so much easier to share information, and information is the lifeblood of project controls. You’ve got to be able to communicate it and validate, as the information’s coming in, on progress. Are we meeting our expectations? So, getting your hands on that data is a lot easier now. And so, now it’s more about how do we interpret that information? How do we make sense of it? How do we weed out the junk? How do we turn that information into knowledge? That’s probably the bigger challenge in front of us now.

Catie Williams:
Sure. So, outside of the printing and the collaboration and sharing of information, can you… For either of you, what additional benefits has adding technology to solve some of these traditionally manual processes that were now providing systems to support? What other things would you say that you’ve seen? Or productivity gains, things like that. Do you have any thoughts on that?

Brad Barth:
I think one of the things that’s really starting to see some traction around is just the notion of benchmarking, and the notion of, both through human intelligence and machine learning and those sort of things, to be able to take the work that we’ve done, capture it in the past, and leverage that in the future. So, I think that’s long been kind of the bane of the industry, of this industry, that every project’s different, we’re starting over every project, almost invariably. So, the technology has made it easier, I think, to capture more detailed models. I don’t mean 3D models, but cost models and time models, schedules. With all of the assumptions in there, right? So we’re not tracking and reporting just the high level outcome, but what were the assumptions inside of that? So, if we came out above that or below that, why was that? And so, being able to track things at that lower assumption level, so that you can improve those models over time, that’s going to lead to that benchmarking and the ability to leverage all this work we do on project one, leverage that on project two and project three.

Catie Williams:
No, that’s great. Do you have anything, Dan, that you’d add?

Dan Patterson:
Catie, it’s interesting. With the advent of, for example, cloud computing, in many ways there is more data available today than there’s ever been. And ironically, that actually, I think, makes things more complicated because, to Brad’s point, having more and more data doesn’t actually help you. It’s understanding and knowledge about data is where the real value comes. And so, I think one of the biggest strides forward that’s been enabled through technology has been the ability for platforms to digitally capture knowledge. And there’s this concept of what we call unstructured data.

Dan Patterson:
Gone are the days where you have to have a formal SQL database in order to store entities. These knowledge libraries now can literally store information in multiple formats and not really care too much about the format. And even more importantly, when mining the information from those knowledge libraries, this concept of having a smart, an inference engine, where the computer can draw intelligent analogies, and then in turn make suggestions back to the end user. For me, I think that’s probably one of the biggest advents, or the biggest strides we’ve had.

Dan Patterson:
And that’s been a technology, I would say more of a technology enabler. I’ve never believed that technology is a driver. I think innovation in an industry is the driver, and I think we’ve just been fortunate in the last two or three years that the likes of AI and machine learning have become so prevalent and accessible as a technology, that we’re at really such an exciting point in the history of project controls.

Catie Williams:
So, I’m going off-script and I’m going to ask a question I didn’t tell you I would ask. But when you both were talking, it made me think about how I keep hearing that project complexity is increasing, all these projects keep getting harder. But, I almost wonder if that’s really the case based on the things you’ve said, and is it really just now that all these tools and the data that’s generated has made it appear that they’re more complex? And maybe there’s not a right answer, but I’m just curious on your thoughts after what you both just said.

Dan Patterson:
Here’s the outtake after it, bollocks. It’s a marketing spin. Projects have always been complicated.

Catie Williams:
Yeah, makes sense-

Brad Barth:
Yeah. And the key is, regardless of the complexity or size of the project, another hallmark of project controls is breaking whatever the project is down to its component levels, down to that atomic level. So, that’s really a driving force of project controls itself, is to break the work down into manageable chunks that sort of remove that complexity to it. You break it down to something you can get your arms around, and track consistently over time. That thing on a small project or that thing on a big project, it’s still that thing. I think a lot of what we hear in the industry along those trends is projects are getting bigger, contracts are getting bigger, I think. And that’s a function of owners looking into contract models, looking at different ways to remove risk. I think that is a trend. Some of the mega projects, you see a lot more of those now than we used to.

Dan Patterson:
I think you’re spot-on, Brad. I think the concept of construction necessarily getting more complicated… I’m not sure that I necessarily agree with building the pyramids so many years ago was really complicated. It’s the, like you said, it’s the contractual layers that are being added. I think the complexity in CapEx projects still is arguably more around accurate forecasting and planning than it is in the execution phase. And CapEx projects have a horrible reputation for coming in late and over budget. Well, they’re only coming in late and over budget because we’re comparing them to something, and perhaps that something was a poorly defined, or poorly forecasted look-ahead. So maybe we should spend more time getting that cost and schedule, and to a degree scope forecast, more realistic in the first place so that the expectations are more aligned going into execution.

Catie Williams:
Thanks. I appreciate you taking my off-the-cuff question. So, I don’t want to get too far off of what the point of the webinar is supposed to be. So, how would you describe or explain the changes that we’ve seen between the owner and contractor relationship over time? Have there been big differences? Are there expectations that are changing? Brad, you look like you want to go first.

Brad Barth:
Yeah. That’s one that’s been interesting to follow. And being in the position that we are at InEight, we get to see and hear from both sides of that, both from the owner side and the contractor side. I guess, funny thing about owners I think that sometimes is hard for people to realize is I don’t think that most… Most sophisticated owners are not just looking for the lowest cost and the shortest schedules. All things being equal, of course they want that, they prefer that compared to the alternative. But, I think what I hear, and the way that I interpret what I hear from owners, what they want the most is certainty. They want less risk, more predictability.

Brad Barth:
Which makes sense, right? Because that’s based on their ability to fund these projects, and all the business dependencies that they have on that new facility, whatever it is, coming into operation. Uncertainty just creates havoc in their business, so it’s not just spending a little bit more on the project or taking a little bit longer to get done. It has a ripple effect throughout that company. And it also, that risk element, and to Dan’s point about the industry not having a super great track record on delivering under budget and ahead of schedule, there’s a contingency pot that gets set aside on every one of these projects, so if you’re owner you’ve got this capital sitting there on the sideline that you hope to not have to use, but you know you have to have it there in case. And they’re not getting any return on that investment, on that capital that’s just sitting there.

Brad Barth:
So, if you can minimize the risk and minimize that business uncertainty in all of the things that come after the delivery of the project. I think owners recognize, they’ll pay for that. They’ll pay to remove that risk and remove that uncertainty. And that’s the challenge of our industry across all the stakeholders, right? How do we achieve that certainty without driving up the overall cost of construction?

Dan Patterson:
Brad, it’s almost as if the age-old concept of the triple constraint needs to be updated to be a quadruple constraint, where the fourth dimension is certainty. It’s been interesting in recent years, we’ve been supporting a lot of owner organizations conducting what we call third party risk assessments. And, in simple terms, the outcome from those assessments give the owner organization literally a percentage confidence level as to the certainty of duration and certainty of cost. And I think what’s really interesting is owner organizations, what they do is they take that certainty back to… Let’s say, for example, the analysis comes back and says you’ve got a 30% chance of finishing in two years. What they do is they use that mathematical model to then say, “Okay, well if I’m 30% certain it’s going to take me two years, I’m not going to fund this project until I have at least, perhaps, a 75, 80% certainty. Get me the model to tell me the true duration at that certainty level.”

Dan Patterson:
So they’re actually coming up with realistic durations and realistic costs in context of a given certainty or confidence level. Which, again, I think is fantastic. That’s the way the industry as a whole should be marching. And to that point, I’m seeing contractor organizations now, during the bidding phase, not just submitting a cost and a schedule bid, but actually having a defense around those numbers with regards to certainty and confidence. Which again gives a feeling of trust with the owner as well.

Brad Barth:
Yeah. It’s funny, thinking about the opportunity to grow the industry just based on there’s a couple of facts that I’ve always found interesting. The productivity curve in the construction industry has been flat. I think most people, probably, in the industry have seen that curve at a conference or presentations. Basically, the amount of work divided by the number of man-hours going into that work, in construction that’s been flat. Other industries, a lot more work with fewer hours, whether it’s banking, or medical, or whatever it is. So the opportunity to improve that, construction’s obviously a 10-plus trillion dollar industry. Just closing that gap, if construction just had the same kind of productivity gains as other industries already have had, there’s a $1.6 trillion additional, essential GDP for the construction industry, if you will. So, improving that productivity.

Brad Barth:
But, in addition to that, I think the other thing that can play into that and add to that number is that risk component we’ve been talking about. Because that risk leads to contingency, contingency leads to capital that could otherwise be spent on additional projects that’s just sitting on the sidelines. So, between those two factors, there’s another $2 trillion, probably just kind of sitting out there that the industry could consume for the benefit of all the players in the industry. So, pretty optimistic for this industry.

Dan Patterson:
Yeah. Again, another really interesting trend, Brad. You mentioned risk leading to contingency, and then that is associated with potential tied up capital that can’t be used on other projects. Again, historically, certainly in the oil and gas or energy sector, owners would apply a 20% arbitrary contingency amount for each project, while in reality not every single project would consume all of that 20%. And so, there was a huge opportunity cost, and opportunity lost in terms of that contingency not being released, or being unnecessarily applied to the portfolio of ongoing projects versus being applied to new ventures coming down the pipe. And so, I think owner organizations now are getting more effective at applying relevant amounts of contingency to each of their respective projects based on the respective risk, or respective risk profile.

Catie Williams:
So, you both alluded a little bit to the benefit of having cost and schedule integrated and the benefits it brings. I’m wondering if you could talk a little bit more specifically about how that helps both the project team, the owner as well, and then maybe why it hasn’t been so hard, to date, to have that? I mean, I think you hear typically that having that data blended together is typically challenging, and maybe why is that a problem?

Brad Barth:
Yeah. That’s an interesting statement, I guess, about our industry. And maybe the impact that tech has had on the industry in an inadvertent way. Because I think, and I think Dan would agree with me, the cost and schedule, we’ve tended to approach in the construction industry as two separate things, and there’s specialists that focus on one or the other. But the reality is, they’re two sides of the same coin. They can’t exist independently, there’s a cost aspect to time, and there’s a time aspect to cost. So, approaching them together… And in fact, I would argue that if you took the skillset required for cost engineer or estimator and the skillset required for a scheduler or planner, as a Venn diagram there’d be much more overlap at the intersection than outside the intersection. So the skillsets are largely the same.

Brad Barth:
But the technology, because we have these, early days we had these estimating systems, we had these scheduling systems, that especially in the early days were very complicated and hard to use. You ended up with these specialists that, “You’re a scheduler, that’s what you’re going to do. You’re an estimator, that’s what you’re going to do.” And I think, when I met Dan just a couple of years ago, as we mentioned we’ve both been doing this for 20, 30 years, Dan on the schedule side, myself on the cost side. And we kind of get together, it reminded of that old Reese’s commercial where chocolate and peanut butter meet for the first time, and you realize how good these things can be together. And so, I think we both have that-

Dan Patterson:
Are you the chocolate or the peanut butter, Brad?

Catie Williams:
In a strategic way, I asked both of you, too. Purposeful.

Brad Barth:
But I think the, just like a Reese’s, right? They’re better together. So the cost and schedule, like I said, they can’t exist in a vacuum in and of themselves. They absolutely impact each other, one impacts the other. And so, being able to… Part of the vision we have here at InEight and what we’re delivering is that integrated cost and schedule view that allows for that specialization and allows for particular perspectives on the project from both the time angle and the cost angle. But when you bring them together, you all of a sudden enable these meaningful what-if scenarios where you can go in and look at, “If we change this, what does that do to the cost? If we change that, what does that do to the schedule?” And that goes a long way to understanding those risk factors we talked about.

Dan Patterson:
Brad, I was never a big peanut butter fan, so I’m going to use the chocolate digestive biscuit as a similar analogy. But, going back to the relationship between cost and time. Projects typically tend to be what’s called either cost-sensitive or schedule-sensitive. And I think without having that integration of cost and schedule, and being able to understand, “Okay, well a 5% increase in duration, does that result in a 5% increase in cost? Or is that relationship, or that correlation, A, different, or in some extreme cases, inversely proportional?” I’ve seen cases, again, very large CapEx projects where it’s actually made more sense to elongate the duration of the project in order to get a slightly lower cost, which is very counter-intuitive. And so, depending on the sensitivity, typically of the owner organization, is this project… Are we more cost-sensitive or schedule-driven? You can’t react to that unless you have an integrated cost and schedule model.

Dan Patterson:
Now, I know the purists amongst us are going to argue, “Well, there’s a reason why the WBS, the Work Breakdown Structure, is a different format or a different hierarchy to the CBS, the Cost Breakdown Structure,” and I take onboard that there is reason why those structures are different. Often the WBS is work-oriented and the CBS is more quantity and cost-oriented, obviously. But thankfully today, I think after 40 years of project controls, the industry is now coming to the point where you can maintain those two structures. And there’s good reasons to have those structures as separate entities, but now we can start to map between them and have relationships between them such that having a truly integrated cost and schedule forecast is absolutely a reality.

Catie Williams:
So this challenge of having this possible, the integration. Would you attribute it then more to people? Or to the technology? Neither, both? Why are we still in a place where there isn’t integration between cost and schedule?

Dan Patterson:
Gosh, so I think historically, Catie, humans have perhaps used technology as a reason why not, or used it as a scapegoat. But I think in order for this convergence to happen, there has to be willingness from us as an industry, as humans in the industry. But then, obviously there’s got to be technology to enable it. So I think the human recognition that cost has value, and having an integrated cost and schedule forecast, I think we’re beyond that and it’s a given, and it’s a global recognition. Now we’re at the point where, “Okay how, through technology, can we provide that?”

Dan Patterson:
And again, I think the industry’s pivoted massively in the last five years where we’ve moved away from really what was largely an environment of what we call point solutions. You’d go to your cost vendor for the cost estimating tool, you’d go to the risk vendor for the risk tool, scheduling vendor, so on and so forth. And then if you were somewhat lucky, you’d probably be able to, with a lot of effort, move data between those different tools.

Dan Patterson:
Thankfully now, with the advent of cloud based computing, the concept of a single environment, or what we call platform computing now is enabling information, whether it’s cost, schedule, change, risk, visualization, HR, document management or control. All of the different facets of project controls can all be part and parcel of the same environment. And so, we don’t have this challenge of trying to shoehorn, or import/export disparate data sets. It’s all part and parcel of the same environment. So, I think that technology is helping us get towards this concept of integration. I know we were specifically talking about cost and schedule, but I think it’s actually broader than that.

Catie Williams:
And Brad, have you had anything to add before I ask something else?

Brad Barth:
Yeah, Catie, that two-sided coin that I was talking about. The coin itself is the scope. The things that’s in common is, what is the work that has to be delivered? What’s the outcome that we’re trying to achieve? And obviously, different ways to break out that scope and chunk it out, but then the cost view and the schedule view are literally just views of that, they’re just dimensions of that scope. So, I think the technology, to your question, the technology has gotten better at bringing those two things together, so as we’re adding scope or changing scope, removing scope, we can see what happens on both sides of that. What does that do to the cost? What does that do to the schedule?

Brad Barth:
So, I think the technology has been a bit of a hindrance up to this point. As Dan said, the specialized systems out there have created specialized humans, basically, that run those systems. But increasingly, I think that’s changing, I think you’re seeing. Because, intuitively, and I’m sure Dan would agree, as you’re thinking through the time logic and the sequencing of the work and all of the schedule nuts and bolts, you’re intuitively also thinking about the cost, especially as you start getting into resource loading those schedules and doing your what-ifs and optimizing those schedules. What impact is that going to have on our cost? And likewise on the cost side, certainly estimators have to think through the sequence of the work. They have to think through the constraints. They have to think through working arrangements and all of that. All the things that you would think of in a schedule in order to arrive at a cost that they can have some confidence in.

Brad Barth:
So, I think the systems will support, I think, this continued marrying of those two disciplines, if you will. They haven’t in the past, but I think, to Dan’s point, in the last few years they’ve started to come together.

Dan Patterson:
And again, Brad, it’s interesting. When gosh, it’s only been, really, in the last two and a half years, but as we, together, have been developing some of the concepts at InEight, such as the knowledge library. If you recall, we started off thinking about scheduling stuff. Really, durations and sequence of work, and we built this concept of the knowledge library and storing historical duration-based productivity rates. And then as we got into that, we obviously realized where productivity rates are based on quantity. Well, hold on a minute. If we’re going to tackle durations and derived durations from quantities, it’s not that much of a leap to go full circle and apply the cost of those quantities. Well, gosh, once you’ve that then lo and behold, you’re already at that integration between cost and schedule. And you’ve tied in the concept of quantity, which of course ties directly back to scope. And then you’ve achieved the triple constraint.

Brad Barth:
And the knowledge library just gets better and better after every project, as you get those outcomes versus the expectations that were set on both cost and schedule, and obviously to do that you can’t just look at one or the other. We could look at, maybe we beat the budget so we’re patting ourselves on the back, but if it took three times as long to do it, not so great. Or conversely, we got it done in half the amount of time, but we spent way more than we thought for more productive crews, or overtime, or whatever it is. So, you have to have them together. They have to… And people do it, and they’ve done it. It’s just, they do it, historically done it the hard way. It’s a lot of trying to marry up multiple systems, point solutions, as Dan said, where these more modern systems that kind of tie all that stuff together, make it a lot easier to do.

Catie Williams:
So, I don’t want to lead too much in my question, but how do you feel this integration will change when a contractor is bidding work, the requirement or expectation from the owner? So, maybe said another way, how do you see this… The technology is available to have the integration between the two, and for contractors that don’t have it available, how is this going to impact their ability to win work? And do you see this as a differentiator or competitive advantage, to have this together? If that makes sense while trying not to lead too much to what I think it is.

Dan Patterson:
I think the contractor really has little choice but to adapt to the new world. I think the standard going forward, in terms of expectation from the owner, is going to be look, A, we need transparency if we’re going to work with you in a partnership on a CapEx project. And B, again, just to reiterate Brad’s point around risk, and maybe turn risk on its head, and think about it in terms of certainty and confidence. Anything you share with us, as a contractor, to us as the owner is not going to be sufficient going forward to just represent that in terms of time and money. There has to be an associated confidence, and a defendable reason behind the numbers, whether it’s cost numbers or schedule numbers as well.

Dan Patterson:
So, I see a lot of change. I’m a believer that change is always a good thing, albeit painful during that change process. But yeah, I think it’s this concept of much more transparency. I think that the days of them and us in a contractor relationship are thankfully diminishing. And again, I just can’t emphasize enough this third dimension of confidence and certainty. Because in absence of any confidence or certainty, a schedule forecast or a cost forecast, it’s a little bit irrelevant.

Brad Barth:
That’s a great point. I think that starting to see some quantification of that confidence, some way to measure that, and ways that can be compared to the traditional ways of measuring a project, cost and schedule. As we talked about at the beginning, I think the owners continue to look for ways to decrease the risk and increase that confidence, so I think many of them… And you see this in some of the new contract mechanisms that are heavy shared models and transparency, incentives. Where there’s incentives to deliver on time and on budget. Both disincentives and incentives.

Brad Barth:
I think what we’ll increasingly see owners really forcing their contractors to participate with them in a way that allows them to make that optimization between cost, schedule and confidence, or cost, schedule and risk, where maybe the cost is a little bit higher for this contractor, maybe the schedule is a little bit longer, but if that confidence number, that risk number, is lower then maybe that’s okay. So, I think you’re seeing a gradual move away from the low bid gets the job kind of thing and see a lot more of these creative contract models that I think incorporate what Dan’s talking about. How do we get the confidence, risk, into those contracts.

Dan Patterson:
Hopefully not too many of our competition are listening to this, but if you are then maybe we should consider a risk index.

Catie Williams:
So, when you envision the future, maybe not 10, 20 years from now, but do you think that the owner will start to be the driver, or the push for specific systems? And instead of it being the contractor bidding and they say, “Here are the systems that we have and we use, and here are the reports and information we can provide you on a project.” Do you think it’ll start to shift where not the owner says, “You’re using this system because it provides me this connected data that I bring into my system, and then here is all of the information that I get.” Do you see anything changing there?

Brad Barth:
That’s a tough one because I think there’s certainly some benefit to all the stakeholders on a project using a common system. There’s a lot of efficiency gains to be had there. There’s a lot of standardization that can be leveraged, and so forth. I think the owners are probably always going to be a little hesitant to force specific systems on their stakeholders and their partners. In my mind, it’ll more likely be, “Hey, here’s the kinds of things that we expect you to do as a partner. You bring whatever system you want, but it’s got to meet these criteria. It’s got to allow us to achieve the results that we have in mind.”

Dan Patterson:
Yeah. I agree, Brad. I think it’s going to be more a case of a requirement for you bringing to the table the system that provides a one-stop shop set of capabilities. I think the emphasis is going to be around capability versus a given solution or system.

Brad Barth:
Dan, that probably also goes to the… I mean, I know certainly at InEight we focus a lot on that open platform that we have. So enabling customers, whether they’re on the owner side or the contractor side to share information, collaborate, even if they’re not all on 100% the same system, I think is a key. And that’ll also be a bit of a weeding out as well in terms of, you’ve got to be able to play in that ecosystem to be able to tie that information together across various platforms.

Catie Williams:
The ability to connect seems pretty key.

Dan Patterson:
It is, and Catie, somewhat going back to your previous question around owners and contractors. Again, developing solutions now for over 20 years. In the early days it was absolutely unheard of for a prospective user of our tools to ask whether or not the tool could be opened up to contractors or sub-contractors if I’m an owner organization. It was actually the opposite. It was like, “What do you have in place so that there is this firewall around this information?” And I think today, without exception, during that same process probably the most common question that we get asked as a software vendor is, “In a controlled manner, can we share this information, not only in a publishing manner, but also use your solution or platform as a bi-directional collaborative platform and glean information back from the contractor or the sub-contractors and incorporate that into our own model?”

Dan Patterson:
So Brad, you mentioned some of the philosophies around contractors and owners changing, and I think there’s this concept of IPD evolving now, Integrated Project Delivery. Which is more of a contractual vehicle designed to encourage this sharing of information. So yeah, I think it’s really interesting that people are actually looking for that now versus, again, in years gone by it was the opposite. It was, “No, we don’t want to share that information.”

Catie Williams:
Yeah, I mean in a lot of other industries already share, have a very open data that they’re sharing between each other, even from a competitor perspective. So it will be really interesting to see if we start to see a much broader, open data environment, and a lot more sharing across the industry.

Dan Patterson:
Imagine, this is a little extreme, but you take the likes of sort of a GitHub in the software development world. Imagine if the construction management industry got to the point where there were open shared libraries of productivity rates and things like that. That would be a huge leap forward in our industry.

Catie Williams:
And very powerful.

Brad Barth:
How often do we get asked that, right Dan? That knowledge library, can you fill that up with industry data that’s collected from a bunch of others? They all want that, but then you ask them, “Hey, would you contribute to that?” They’re like, “Oh, no. That’s my data.”

Catie Williams:
Yeah.

Brad Barth:
And part of that’s, I think, those contracts I think have enforced some of that in past, that kind of, “Hey, this is my stuff. I’m only going to give you the data that you need, or that is absolutely required by the contract.” And now, I think some of those more shared risk models drive that transparency, and you saw. I think you’ll see a lot more willingness and desire to collaborate more openly and to a greater level of detail.

Catie Williams:
All right, I have two questions left if we get to them, if we have enough time. So, the first is are there any big gaps still from a project controls or scheduling perspective that, from a business process, need to be solved? And maybe technology is the solution, but are there still any large gaps or business problems that we don’t have a good solution for in the industry?

Brad Barth:
To me, there’s a big opportunity to weave risk assessment proactively through all the different roles that are involved in the project, whether they’re estimators, schedulers, cost control, field engineers. Whatever it is, that proactive… especially with the opportunities we talked about with machine learning and AI, that identification of risk and recommendations of how to manage that risk. To me, feels like that’s a big opportunity for our industry. Dan, that’s your background, right?

Dan Patterson:
It is. And in some ways, Brad, it’s funny. Because the concept of these risk expert consultants floating around has actually kind of annoyed me over the years because at the end of the day, the actual analysis, whether it’s Monte Carlo or using algorithms, the concept of managing risk is actually very, very simple. And I think this concept of, “Let’s schedule and/or cost estimate, and then we’ll throw it over the fence to a risk analyst to do their thing,” is a bit ridiculous. Why wouldn’t we embrace the concept of potential downside and things going wrong during the planning phase? Let’s build in the risks, the uncertainties, the scope change, the quantity growth. Let’s build that in during our plan development. And our plan development then becomes more of a risk-adjusted forecast up front.

Dan Patterson:
We’re seeing the industry slowly pivot towards that. And again, from a software perspective I’m of course a little bit biased, but if you look at our InEight schedule module within the platform, yes, we have risk analysis but it’s not a separate module. It’s part of the scheduling process up front, and it’s tied to collaboration and team members providing their input. So, I agree wholeheartedly, Brad. The concept of embracing and accounting for risk. And bear in mind, risk can also be a positive thing in the form of opportunity as well. So risk shouldn’t just be seen as negative. You’ve got this balance of threats and opportunities. Now let’s build that in to the forecast versus thinking about it after we put our forecast together.

Brad Barth:
Yeah, it gets back to the equation of expectations equal outcomes. That’s what project certainty is, right? Well, project controls 101, as we talked about, is setting proper expectations in the first place. And, to your point, often times those expectations don’t properly account for those risks. Like I said, I think that’s where just evolution of technology in general, and so the things that are happening, not necessarily in the construction industry but just in general around how to take a whole bunch of data and learn from it. Let the computer do its things and surface those risks, and surface those opportunities for improvement that we don’t have time to do because we’re running, and running, and running, going from one project to the next. I think that’s where we’ll see a lot of improvement in the next few years. Bringing that risk evaluation, making it a continual thing in the mainstream rather than sort of the domain of the risk experts.

Dan Patterson:
And also then, the computer being… I think of computers, funny enough, as they need to be humble enough such that if the human or the teams don’t agree with those suggestions and they push back, the computer’s knowledge likely then should be able to adjust accordingly so the next time around, it’s just that little bit smarter. And that’s where the machine learning aspect comes into play. And I think, again from a technology perspective, in the last three years AI has made great strides. I think the concept of true machine learning, so if AI is the computer making suggestions and machine learning is the computer getting smarter. The computer getting smarter bit, the ML, the machine learning piece, I think is still in its infancy. And I think construction or project management is the perfect platform to really take advantage of machine learning.

Dan Patterson:
Again, while by definition every project is a unique endeavor, blah blah blah blah blah. At some point, when you break it down into small enough chunks, there’s a lot of repetition, whether it’s the work or the actual materials, or the labor, or the equipment involved in executing that work. And so, again, the concept of machine learning, and making those forecasts smarter isn’t such a huge leap, it’s not that big a step in terms of time away from us. I think we’re right on the doorstep of massive change with machine learning.

Catie Williams:
That was actually my last question. I was going to ask about artificial intelligence and machine learning but you guys answered it. I mean, unless there’s anything else from a up and coming technology that you would add that you think will impact the construction and engineering industry in a positive way, but I was going to ask you about machine learning and AI, so I’m glad that you brought it up.

Brad Barth:
Well, maybe just one other angle to that. I think the outcome of all of that, whether it’s AI or machine learning, to me is you can… One of the hardest things in this industry is the development of experience. Because these projects are long, it’s not like you’re turning them over every day, right? So it takes a while in one’s career to get a valuable set of experience where you can become a key part of the decision making on these projects. So, with AI and machine learning, every project… I might be on one project over the course of two years, but maybe my organization has done 20 projects during that time. So if we can build up that knowledge base and apply some context to it through machine learning and artificial intelligence, then we can essentially make that knowledge accessible to everybody. So every time we complete a project, everybody on the team gets smarter, even though they didn’t live through all 20 of those projects, they just lived through one of them.

Brad Barth:
I’m not suggesting there’s a complete artificial or digital substitution for experience, but you can simulate it, or you can close where you can start to empower people with better knowledge than if they were solely relying on their own personal experience. When we talked about that sort of $2 trillion extra economic growth opportunity out there for the industry, well then you think, “Well, how are we going to do that? Where are we going to get the people, where are we going to get the experience?” And I think that kind of collective capture of knowledge, along with the right context, can help keep up with that workload.

Brad Barth:
I thought Dan, for a minute there, was going to say that as the machine got smarter they would start to get the confidence to fight back to the humans, and when the humans disagree with them they’ll just shut down or something.

Dan Patterson:
While I am a huge advocate of cutting edge technology, I actually am not a big fan of the term artificial intelligence. I’ve always thought of it as augmented, because at the end of the day, like it or lump it, a computer is algorithmic and while incredibly powerful, these wonderful machines are tools that help us, and they’re certainly not going to replace us. But I guess just segueing just a little bit, we’ve talked a lot about wonderful technology, and knowledge, and lots of data.

Dan Patterson:
I think, and Catie I know this is certainly your domain with regards to analytics, but I think as an industry I would like us to see the continued simplicity. Project management is very complicated, and simple things such as just weekly status reports can often be pages and pages long. And so, bringing more relevant information in a more timely manner to the right people in a project, I think, is incredibly helpful. And again, that goes back to hopefully moving away from just reams of data to information and knowledge.

Dan Patterson:
And again, I think without exception, less is more. As a project manager, I only need to know certain things but I need to know them at a certain point in time, and so this concept of everything being platform-based and integrated, I would like us as an industry to continue down the path of simplicity with regards to the analytics and reporting.

Catie Williams:
Yeah. No, I think that’s great. Makes a lot of sense. All right, so I think we’re out of time, but I appreciate both of you so much being willing to do this. Thank you so much, and I think that’s it.