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Construction Heads Into the Internet Age

Andy Ball, president of Webcor Builders, a Silicon Valley construction company, can smell inefficiency in a project – even  before he walks around the job site to discuss things with the foremen and supervisors.

The tell-tale odor is the ammonia-like stench that can fill a construction trailer with each set of revised blueprints.

To Mr Ball, whose $500 million-a-year company is based in San Mateo, Calif, the very presence of blueprints indicates that some members of the construction team have not yet embraced the Internet.

He knows that those who have already entered the era of e-construction can view architectural drawings online and print relevant sections straight from their computers – without wasting time waiting for the drawings to be commercially printed, packaged and delivered to the scores of participants in a given project each time the plans are tweaked


Already helpful, the Web may soon be indispensable.


“It stinks,” Mr Ball said of the bad old blueprints era “It all stinks That’s the whole point”

Unfortunately for Mr Ball and others on the vanguard, the air is not clearing quickly enough. Many construction executives complain that their industry has been among the last to embrace the Internet, even though the medium offers a ready solution to their thorniest problem – how to coordinate the efforts of what sometimes amount to hundreds of separate teams across the life of a projects as the original plan evolves, doorway by redesigned doorway, conduit by rerouted conduit.

True, the Internet has begun to reshape the highest reaches of the nation’s $12 trillion construction industry. The nation’s biggest contractors, like the Turner Corporation and the Bechtel Group, have started to use e-commerce sites like Bidcom and Cephren, which help them communicate with partners and subcontractors and even buy materials and bid for jobs.

Webcor, though perhaps one-fifth Turner’s and Bechtel’s size, has joined them in incorporating the Web into its basic operations. (The Web in Webcor’s name predates the spread of the World Wide Web by more than two decades. the company was founded in 1971.)

E-Commerce Report: Construction Heads Into the Internet Age

Webcor is using the Cephren system extensively in building a $50 million, 12-story office tower in Santa Clara, Calif. The building’s owner, Tishman Speyer Properties, is based in New York, but has employees around the country who are involved with the project. The architect, Hellmuth, Obata and Kassabaum Inc, is in San Francisco, as is the engineer, Middlebrook & Louie Structural Engineers.

Mr. Ball said the Cephren system was proving invaluable, enabling the various parties to communicate “without all the faxes, without all the calls.” He estimated the cost savings at $50,000, but said it could have exceeded $200,000 if all the subcontractors and suppliers were online “Right now, it’s a good tool for us,” he said. “Next year, it’ll be more necessary for people to have on our projects. In two years, it’ll be absolutely mandatory.”

So far, though, e-commerce has barely penetrated the industry’s second and third tiers, among companies with less than $100 million in annual revenue, where most communication still occurs the old-fashioned way – with faxes, voice mail and overnight packages. The result, executives and industry analysis said, is the loss of billions of dollars in potential savings.

“Construction has always been a very fragmented industry because it’s so local,” said Kent Allen, an e-commerce analyst for the Aberdeen Group, a consulting firm in Boston.

So far only a fraction – some $63 billion – of the construction industry’s overall business is conducted online, according to Forrester Research, which studies e-commerce. Even by 2004, Forrester expects the online total to reach only $141 billion or less than 11 percent of total construction spending.

Some construction executives cite a stubborn resistance in their industry to any new approaches to business. Others suggest that the Web’s continued reliance on the personal computer makes the medium impractical on many job sites (although at Webcor, hand-held Palm computers supplement desktop and laptop machines) And some of the holdouts say that the benefits of e-commerce sites have not been made sufficiently clear to them.

Still, enthusiasts say they have noticed a shift in the attitudes of the biggest construction firms in recent months, and they hope a trickle-down effect could compel more subcontractors to catch the Web wave – or face the prospect of losing work.

Mr. Ball says Webcor now uses Cephren in connection with every new construction project. As with other Cephren clients, Webcor pays a start-up fee of $750 and a monthly fee of $1,250 to connect the entire construction team, then receives passwords enabling all parties to enter the portion of the Cephren site devoted to their particular project Cephren charges an initial $1,500 training fee and offers support to clients during the life of a projects, but clients are primarily responsible for the site’s content and operation.

The passwords allow for differing levels of access to information and services. A midlevel manager on a building site, for instance, might be able to get information on one area of the site, but might not be able to view the minutes of the senior project management team’s meetings.

Such centralized communication is the essence of Cephren’s offering – as it is with the company’s chief competitor, Bidcom, and smaller newcomers like Analysts generally regard Bidcom, founded in 1997 and based in San Francisco, as the construction oriented Web site with the biggest following, with Cephren close behind.

These companies and others on their trail are also developing marketplaces for their sites, which would include huge catalogs of construction goods, as well auction services that would allow suppliers to bid on various portions of a project. But for these Web sites, the core component “is the linking together of the communications of dozens of companies, as they collaborate on everything from design and engineering to management,” said Jas Dhillon, chairman of Cephren, which was formed in January by the merger of eBricks and Blueline Online and has its headquarters in Palo Alto, Calif.

Web collaboration means that the most up-to-date blueprints can be posted on the site, with e-mail notifications going out to anyone who needs to know. Work schedules can also be e-mailed or posted on a particular page on the site, so that different teams can track the job.

Significantly, most of the construction Web sites also create a virtual paper trail of the project, including who has viewed what information and when. If legal disputes arise, there is a concise record of who was informed of and accountable for what parts of the job.

Much of the same information is vital to the building’s maintenance team after the job is completed. Rather than having staks of equipment manuals and building specifications stored in a warehouse, the data can be compiled on disks or cartridges and kept in a single desk drawer.

It is during the construction itself, though, that the Web offers the greatest advantages, Mr. Ball said “we can all work off of the same page; before, I’d have to go out to the job site, meet with people and ask them how things are going,” he said “Now, I know the answers to the questions before I ask them”

That is, if everybody were using the system – and not everyone is. The steel subcontractor on one current Webcor project, for instance, declined to sign up for the Cephren service. The Supplier was selected by the Building’s owner, anyway, because it had submitted the low bid.

But being offline meant that Webcor and the project engineers “had to send paper back and forth” to the subcontractor before completing the specifications and placing the order for the 3,000 tons of structural steel required, Mr. Ball said.

Using the Web site, he said, the structural engineers, the steel subcontractor and the contractor could have worked on the plants in tandem on the Web site “You get it done in one day, instead of dropping a week” each time the parties have to send the plans out, review them and make changes offline, he said.

Mr. Ball said the losses from such inefficient depend on the project. With an office building, “if it takes another week to get the project done because of that, there’s another week that the owner can’t fill the building,” he said

“Depending on the rents being paid, it can be anywhere from $100,000 to $200,000,” Mr. Ball said “But there’s not much I can do right now. A lot of these subcontractors are still in the Dark Ages”

That is not stopping entrepreneurs and their investors, though, from setting up sites on the assumption that such laggards will eventually see the light.

“There are hundreds of start-ups now with $5 million worth of backing,” said Carl Bass, chief executive of The company was spun off from Autodesk, the maker of computer-aided-design software, and last fall raised $15 million in an initial round of financing “if you can quote the size of the industry and spell AEC” – the industry acronym for architecture, engineering and construction – “you can raise $5 milllion, “Mr. Bass said.

He predicted that Buzzsaw would be competitive  because Autodesk’s AutoCAD software – widely used by architects – made it easy to integrate the design and architectural drawings into the Buzzsaw site easily. “Design is at the headwaters of this whole process,” Mr. Bass said.

Some other sites are focusing on more narrow slices of the construction industry, hoping to entice smaller subcontractors to log on One, NetClerk, in South San Francisco, means to give users a way to navigate the municipal permit process. On the site, users can find, complete and submit permits that municipalities require before installing a water heater, for instance. So far, NetClerk is operating primarily in the Bay Area, but has ambitions for a national expansion.

“You’re going to see more and more companies like ours pop up, to make the entire process easier,” said Jon Fisher, NetClerk’s chief executive.

Matthew Sanders, an analyst with Forrester Research, agreed. “Down the line a bit, these sites will evolve to the point where they’ll include players that are far upstream, like providers of sawmill equipment,” he said, “Procurement will be in place, and everyone will be plugged in along a virtual supply chain. It’ll be incredible to see how that drives efficiency”

Meanwhile, executives like Mr. Ball plan to enlist the support of building owners to persuade every subcontractor on a job to get wired.

As for that recalcitrant steel subcontractor that got the job solely on the basis of a low bid?

“Next time I’ll do a better job of convincing the owner to go with somebody else who wasn’t as low, but who’ll save us money in the long run by using this system,” Mr. Ball said. “It’s the new math of the Internet”


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