Some $15.8 billion in lost efficiencies in the capital facilities industry--construction firms, architects, engineers, general contractors, specialty fabricators, and suppliers--during 2002 can be attributed to inadequate software interoperability, according to a newly released study commissioned by the National Institute of Standards and Technology.
Interoperability problems stem from the highly fragmented nature of the industry. Further compounding the problem: the large number of small companies that have yet to adopt advanced information technologies, according to the study, conduct for the government institute by two not-for-profit research groups, RTI International and the Logistics Management Institute. Researchers interviewed 105 people representing 70 organizations.
The study estimates that construction concerns shouldered $10.6 billion, or about two-thirds of the total estimated costs in 2002. Architects and engineers had the lowest interoperability costs at $1.2 billion. General contractors and specialty fabricators and suppliers bore the balance of costs at $1.8 billion and $2.2 billion, respectively. All stakeholder groups told researchers that seamless exchange of electronic data would shorten design and construction time, even though many couldn't always quantify the impact.
Researchers quantified the cost of inadequate interoperability by comparing current business activities and costs with a hypothetical counterfactual scenario in which electronic data exchange, management, and access are fluid and seamless. "This implies that information need only be entered into electronic systems only once, and it is then available to all stakeholders instantaneously through information technology networks on an as needed basis," the study says.
The concept of fluid and seamless data management encompasses all process data directly related to the construction and facility-management process, including initial designs, procurement information, and engineering specifications for operations and management. The difference between the current and counterfactual scenarios represents the total economic loss associated with inadequate interoperability.
Among the inefficiencies resulting from inadequate interoperability: manual reentry of data, duplication of business functions, and the continued reliance on paper-based information-management systems. "In the long run," the study says, "economic theory suggests that all cost increases are eventually passed on to the final consumers of products and services."