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Report: 80% of North American Construction Professionals Experiencing Inflationary Pressure on Labor and Supply Chain Costs

Report: 80% of North American Construction Professionals Experiencing Inflationary Pressure on Labor and Supply Chain Costs

InEight Inc., a global leader in construction capital project management software, today launches its third annual Global Capital Projects Outlook. The Outlook draws insights from research conducted with 300 of the world’s largest capital project owners and contractor construction professionals across North America, Europe and APAC.

Eighty percent of respondents in North America report experiencing inflationary pressure on employee/contractor pay, while a further 80% cite experiencing cost inflation in the supply chain according to this year’s outlook. The impacts of inflation are evident across scope, cost, schedule, collaboration, and workmanship with delays in the supply chain also having an effect.

The construction industry continues to face challenges around effectively leveraging project funding, such as the $1.2 trn in infrastructure spend outlined in the Infrastructure Investment and Jobs Act. As a result, North America is falling behind its peers when it comes to project certainty – only 42% of North American projects stayed on time and 38% within budget compared to 47% and 45% globally.

Slow Uptake of Digital Technology

Several findings in the outlook point to a somewhat slower uptake of digital technologies in North America compared to their global peers. For example, North America is the only region where non-standardized systems and processes that create inefficiencies are still among the three biggest barriers to project certainty (51% vs a global average of 46%). Similarly, industry benchmarks and historic project data are only being used to improve project certainty 45% of the time in North America, trailing the global average of 47% and 48% respectively.

“Although inflationary pressures are beginning to moderate, the last couple of years have shown how essential it is for all stakeholders to work together to identify and mitigate risks at an early stage. Technology plays a leading role in this, helping to retire the old ways of rigid risk allocations, roles and responsibilities towards better stakeholder communication, connected data and informed decision making.”

The North American construction organizations that are using connected data say they can more astutely identify risk and balance the tradeoffs between scope, cost, and schedule. Forty-six percent of respondents say it improves risk management, while a third say it reduces cost overruns (35%), leads to fewer scope changes (37%), and schedule overruns (36%). It also has a markedly positive impact on employee productivity according to 47% of respondents.

Construction organizations who complete projects within schedule over 80% of the time are the most likely to use industry benchmarks (66%) and historic project data (69%). Conversely, those who run over budget or over schedule 80% of the time were the least likely to use them.

“Those organizations that have remained committed to achieving technology sophistication are reaping the benefits, both for themselves and their clients and the results set out a strong case for all construction organizations to follow suit.”

Globally, the use of connected data varies by company size with those with the fewest capital projects most likely to report using industry benchmarks (52%) and historic project data (51%) while the largest portfolios are the least likely (43% for benchmarks, 46% for historic project data), possibly due to the greater complexity of integrating new technology software and managing greater volumes of data.

Responding to a Challenging Operating Environment

Many respondents say their organizations are using technology to understand and engage with the big picture operating environment. Globally, the use of project management or project controls software is most popular (58%), while many organizations also use artificial intelligence and machine learning (50%), risk-adjusted project planning software (47%) and connected worksite communication (47%).

“Only once we understand how the big picture impacts the fine details of a project, and how those fine details all interact with each other, can we fully optimize project decision making to drive predictable project outcomes and support long-term growth,” said Macholtz.

Despite a challenging operating environment, optimism has remained high for a third year in a row with digital technologies, economic growth/recovery, and data collection, analytics and insights identified as key areas of growth. Construction and capital project spending levels continue to trend upwards, with 83% in North America reporting an increase, slightly trailing the global average at 86%.

This positivity is somewhat tempered by a significant rise in concerns over labor challenges. Concerns over staff and skills shortages were identified as a risk to growth by 40%. Yet, even with an intensifying skills shortage, along with disruption caused by cost inflation and supply chain delays, industry confidence remains high this year, with 93% feeling somewhat or very resilient.

To access the full report, visit InEight Global Capital Projects Outlook.

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