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Automating Subcontractor Management Processes Proves Highly Beneficial, New Study Shows

The construction industry is going through a digital transformation and firms are seeing performance improvements in different areas. One such area, as revealed by a new study, is subcontractor management automation.

According to a survey carried out by Dodge Construction Network and GCPay, it has come to light that general contractors who automate subcontractor management processes report increased productivity, profitability, and cost performance.

The study surveyed mid-size US contractors, i.e., those with annual revenue of $50 million – $500 million (via Construction Dive) and it gives these key insights-

  • 91% of contractors that used subcontractor management technology reported improved productivity
  • 81% reported lower costs
  • 79% reported higher profits

Using software for subcontractor management

Dodge states that only 33% of contractors automate less than half of subcontractor management processes. Among them, 9% automate 1-3 processes, 25% automate 4-6 processes, 36% automate 7-9 processes, and 30% automate 10-12 processes.

Furthermore, most use generic or internally created software that can handle only a couple of processes. Therefore, to identify areas where new technology adoption is likely to be concentrated, the study assesses the current utilization of technology by general contractors.

The study evaluates 12 key processes that are crucial for effective subcontractor management like accounting, finance, and contract management. By benchmarking the existing use of technology in these areas, the study provides insights into where future adoption and advancements are expected to be prioritized.

Bringing in more tools for subcontractor management

The study points out that contractors that automate subcontractor management processes bring in more benefits. Therefore, those who are not should prioritize automation to optimize their operations.

Talking about the survey, Steve Jones, senior director of industry insights research at Dodge Construction Network said: “Everyone benefits from increasing the automation of these processes — the findings make that clear — but those who do it for the majority of their processes and commit to purpose-built commercial solutions benefit the most. Automated processes open up a whole world of efficiency, analysis, and decision support.”

Today, there is an array of specialized software that caters specifically to subcontractor management needs. These tools offer streamlined communication channels, document-sharing capabilities, real-time progress tracking, and performance evaluation metrics. By implementing these tools into their workflows, contractors can enhance collaboration, improve transparency, and efficiently manage subcontractors, ultimately leading to smoother project execution and improved outcomes.

Willingness to adopt technology

The report reveals that contractors that aren’t automating processes plan to do so soon. One area where they expect growth is applications of payment which is a huge positive since it was reported earlier this year that subcontractors overpaid in 2022 owing to increased material costs and labor shortage.

However, the study also reveals that only 9% of companies plan to automate other crucial processes like OSHA compliance, reporting, and tier vendor management. This indicates a need for contractors to recognize the value of automation.

“With the ongoing concerns of project delays, supply chain constraints, and labor shortages, this study really confirms that contractors are looking to automate as many financial and managerial processes as possible through technology,” according to Mike Milligan, Chief Growth Officer at GCPay.

Technology, in whatever form, will bring benefits for the construction and the AEC industry, as a whole. From leveraging Building Information Modeling (BIM) for enhanced project planning and collaboration to harnessing new technologies for decarbonization efforts and driving innovation for sustainability, the potential impact is immense.

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