InformationWeek
Defining The Business Value Of Technology
September 27, 1999
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Builders Rely On IT For Efficiency, Profit
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magine that your job entails building a power plant, airport, oil refinery, or highway halfway across the globe. You've been given a hard-and-fast deadline of 2-1/2 years to complete the job within a fixed budget and must coordinate the efforts of thousands of engineers, managers, buyers, and hard-hat workers, not to mention dozens of subcontractors and joint-venture partners in remote locations. Slight miscalculationssuch as misreading an exchange-rate fluctuation or variation in price of raw materials overseas will erode already razor-thin profit margins. And for every day you're late, your company can be assessed $150,000.
"That tends to drive certain behavior," says John Bailey, manager of computing infrastructure at Bechtel Corp., a $12.6 billion engineering, procurement, and construction company in San Francisco, and a veteran of such projects. Construction companies increasingly are turning to their IT departments for input into executive and managerial directives. They're being asked to participate in planning such projects as instantaneous and reliable communication among employees and partners, accurate project scheduling so firms can win bids while meeting profit goals, and integration of customers into the exchange of drawings and documents.
"In the past year, IT has become more engaged in the bidding process than we've ever been in the past," Bailey says. "IT is viewed as an integral part of the business." According to John Thomas, CIO at Parsons Corp., a Pasadena, Calif., engineering, procurement, and construction company with an estimated $2.12 billion in revenue, CIOs at these companies are "taking a seat at the management table," and are providing more input into corporate strategy and budgeting. "That's a real change in this industry," he says. Thomas and his staff actually work for Perot Systems, which is Parsons' IT outsourcer, but Thomas reports directly to Parsons' CEO.
What's motivating management to make such changes is the unrelenting push by the customers of these companies for shorter project cycle times and lower costs. In recent years, the downsizing trend among the nation's oil and pharmaceutical companies, local governments, and even the U.S. Department of Defense has stripped project owners' engineering departments, says Rusty Haggard, a technical writer and analyst at the Construction Industry Institute at the University of Texas. This means companies that invest in oil refineries, highways, and factories are demanding that builders take on more of the upfront design work. Construction companies are competing against businesses around the globe to deliver commodity products and services in return for low single-digit margins, which has contractors seeking more efficient ways to produce drawings, build models, and make changes in the field in order to bid for projects with more confidence.
"Information technology is their ace in the hole," Haggard says. Innovative ways companies are using IT to keep costs down include integrating project data within knowledge management systems, opening windows for contractors and customers into their workflow systems with Web interfaces, and adapting networks for communication in far-flung corners of the globe. "In our industry, there's a continuing drive to reduce costs and reduce schedule," Bailey says. "A project that took us 30 months to complete three years ago takes us 20 months now."
Like many construction companies implementing a knowledge-management strategy, Bechtel hopes to give partners, suppliers, customers, and regulatory bodies more visibility into the millions of design changes, authorizations, and calculations from its massive projects. During the past year, the company began implementing ProjectNet, a Web environment for sharing, tracking, and archiving all of a project's documents and managerial decisions. Bechtel and ProjectNet vendor BlueLine Online are co-developing the application to scale for multibillion-dollar construction companies. They're also working to integrate it with legacy systems, says Jeff Rouser, collaborative systems manager at Bechtel, who's responsible for the company's global intranet.
Bechtel runs its customer-relationship management and prospect tracking systems through a Web browser and Lotus Development Corp.'s Domino groupware platform. But the company hasn't yet successfully addressed the need to execute decisions through a dispersed work force, nor has it integrated its data with outside companies. "It's hard enough to deal with standardization inside your company walls. When you go outside, it gets more difficult," Rouser says. "That's the beauty of the Internet and why this is such an important project for Bechtel. We have a very sophisticated user base, but we have to think about the rest of the world."
Bechtel has five Windows NT ProjectNet servers, which let company engineers and joint-venture partners across 15 projects post and download drawings based on access rights and approval processes. To improve performance, Bechtel plans to enlist an Internet service provider for a hosted ProjectNet environment. Though ProjectNet isn't Bechtel's most expensive IT project-that honor goes to an SAP implementation-"it's the biggest in terms of opportunity," Rouser says.
Implementing such changes and opening up previously secured information to outside partners does not come easily. According to Parsons' Thomas, automating collaboration requires nothing less than a culture change at many companies, since maintaining a history of standard designs and repeatable processes can shorten project schedules and cut costs-and becomes a competitive advantage not easily shared with others.
But just as customers are prompting construction companies to bring down costs, they're also beginning to make more creative demands. Customers are asking "not only for a building, but intelligent buildings," Thomas says. "They want design documents in a format they can use in the future" to make changes.
Parsons has begun a full-scale rollout of Open Text's LiveLink, a knowledge-management system that lets the company develop and maintain a history of standard designs for components such as drums, pipes, and tanks. Parsons is hooking up partners and some customers via an extranet. Using the network, customers can review and approve documents relating to the Woodrow Wilson Bridge improvement project near Washington, D.C., and if they make changes or recommendations, an E-mail alert is sent to the next person in the process. These documents had been transferred via overnight delivery or FTP sites, which ate up time or bandwidth, says Dan Kelly, Parsons' chief technology officer. Parsons envisions providing plug-ins to build vertical applications that would allow viewing and markup of CAD drawings within the LiveLink environment.
"It's getting to a point where by relying on our knowledge-management system and the knowledge of our people, we can reliably tell a customer, 'We can reduce the project schedule for building this plant.' The faster we can build it for them, the faster our customer can start earning revenue on it," Kelly says. 
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