How construction leaders are future-proofing their operations

ProcurePro’s inaugural 5Ps Conference kicked off in Melbourne in March 2024, welcoming some of the state’s leading construction professionals to explore the trends, challenges, and innovations shaping the industry.

Included in the day was a panel discussion featuring prominent construction figures - Andrew Miller, Commercial Manager at Devco, Eko Oetomo, Commercial Manager at Kapitol Group, and Kasi Palaniappa, Chief Financial Officer at Cobild.

Want to find out how these leading commercial builders are embracing change and preparing their businesses for the future? Read on!

What are the key challenges that you’re facing? And how are you overcoming them?

Andrew Miller: For 20 years, we've heard about the technologies that would come through on design, Revit, 3D all those sorts of things. Yet we still build in two dimensions, with hard copy drawings, we're not building from 3D models. It's a real challenge to get designs completed on jobs and that affects procurement.

Eko Oetomo: For us it’s the people and getting the right quality talent on projects within the business. We're going through a bit of a growth phase at the moment and trying to maintain the culture, as well as grow the business.

How are you retaining and attracting new talent these days?

Eko Oetomo: Our focus is always about continuous improvement. Whether it be with our people, with our systems. We've got a system called CLIP, which is our Continuous Learning Improvement Process and we do a lot of things on checklists. Going back into the aviation days, you see pilots using checklists. We’ve incorporated that into our business.

Our Founders, Devo & Dave, they're very passionate about continuous improvement and so that's embedded within our business.

How are you focusing on productivity and how are you working together to boost productivity across the industry?

Kasi Palaniappa: It comes down to the utilisation of resources and technology. The ecosystem in construction doesn't really adopt a lot of new technology and automation. We're still using a 2D approach to building. There is an opportunity in terms of adopting technology, ProcurePro is a good example.

There are opportunities within other utilisation or efficiencies, labour is a great example. Most of us have experienced constraints around labour, whether it be downstream or even within our teams. It's been hard getting the right resources and getting enough resources.

Are you seeing a difference between onsite labour, as well as the in office project teams?

Kasi Palaniappa: Definitely. There's been changes happening in the landscape. At a high level, our industry is highly dependent on migration and the labour that migration brings into the country. For Australia as a whole, we've had about 500,000 net input to the country for the 12 month period until September last year.

But if you look down and dig deeper, in Victoria the skilled migration category is down by 80 percent. That’s where a lot of our downstream labour resource comes from, and that needs to be fixed.

Should the government be getting involved to fix this problem?

Kasi Palaniappa: Yes. But I'm not sure how we can push that. Clearly it has to be a priority for the current government, as well as the incoming government at the next election that's coming. If not, we will continue to have an experience that directly translates to [issues with] program duration, contractors, and contract overruns.

What are the barriers to adopting new technology and how do you overcome them?

Andrew Miller: Construction has for a long time been, “this is how we do it and this is how we've always done it”. The way that pre-construction is done is how it was done 20 years ago when I first started out. How hasn't that changed over 20 years? AI could be a big game changer in this. I'm already starting to use it for meeting summaries and think it could be used for contract summaries in the near future.

Is it about working smarter and faster?

Andrew Miller: Definitely, ProcurePro has taught us that there are opportunities out there to work smarter. A lot of us are cynical about new technology coming in because we’ve all experienced using different technology that fails. To actually see a technology come through that delivers what it promises to deliver is brilliant.

How does construction procurement need to improve and what does the gold standard look like?

Eko Oetomo: We go from project to project and negotiate the same terms and conditions. If you can have your standard terms and conditions agreed and you're not negotiating the same things moving forward, that's going to increase productivity within the procurement space.

Kasi Palaniappa: We have to take a more global approach generally, teams within construction tend to operate purely within their own project team. As with most opportunities, in terms of consolidation of procurement, buying power, and things like that, these have to be done in a more systematic manner going forward.

How has the availability of procurement data changed the way you operate?

Andrew Miller: When I first got the data that came out of programs like ProcurePro, what I found really interesting is it gave me a much better insight into my people and where my people were at. If one of my people was having trouble and wasn’t putting their hand up, I used it as a prompt to go and have a friendly conversation to see if there was something we could do to help them.

There could be an opportunity there for procurement teams. Rather than having a Contract Administrator who does every role involved in a construction life cycle, have teams that are focused on procurement who work across multiple jobs and can bring the benefits and the efficiencies that come from that.

How are you improving profit margins in your company?

Kasi Palaniappa: Revenue is vanity. Profit is sanity. And cash is king. Interestingly, cash is king because cash sits on the balance sheet not on the profit loss account. So the profitability or profit loss represents the performance of an entity, or a construction company. Whereas cash sits on the balance sheet and represents the position of the company.

Lots of companies within construction have gone under mainly because of an inability or weakness in their balance sheet. We always try to bill clients ahead of paying subcontractors and to build up the buffer.

At Cobild, we also ask everybody to think like an owner, which I think is very powerful. What outcome would the owner want and what impact would that be, not purely for your standalone project but for the business as a whole. That has been a pretty powerful change of mindset for us.

What does 2024 and beyond actually look like and what do we need to do?

Andrew Miller: I'm still very positive about construction. It gives me hope that a few of the other areas can improve, in particular pre-construction, ERP. If we can improve those areas, it'll improve that.

Eko Oetomo: There’s couple of sectors where we can start seeing some upward trajectory. Industrial through to data centres. There's a lot of work out there in that space. And then we're starting to see a lot of Build to Rents (BTRs) coming through and it's going to keep all of us busy. I think that 2024 and beyond is going to be exciting for everyone.

Kasi Palaniappa: At the high level economic metrics, we're forecasting about 1.2% GDP growth for 2024. This may feel like stagnation, but it’s still growth no doubt. Interest rates are expected to come down, from about Q3 this calendar year, which is good news for a lot of us here. Our developers and the metrics will start stacking up and that helps speed the supply chain quite nicely.

Overall input price materials have stabilised and are expected to hold. The yo-yo that we saw in the last 24 months has gone past. So that's all really good news and we can start budgeting, planning, and pricing our projects accordingly.