Recently I’ve had a number of conversations about how artificial intelligence (AI) might change the construction industry. One observation keeps coming up: AI may change how construction businesses are managed, but it isn't going to change the physical work of building in anything like the same way. Bricks will still need laying, concrete pouring, steel fixing, services installing and projects managing on site. But what happens around that physical work could look very different.
For SME contractors, AI has the potential to change how we generate leads, assess tenders, control costs, manage information and support our people. It could automate much of the administration that currently takes up management time and make information available faster and in a more useful form. That doesn't, however, remove the need for management judgement. In fact, it may make good management even more important.
The owner or director will still need to decide which opportunities to pursue, what price to tender, which risks to accept, how much work the business can realistically deliver and, ultimately, whether the decisions being made are producing a profitable and sustainable business.
This brings me back to what I call the Golden Triangle for SME contractors:
- Lead generation and the tender pipeline
- Winning profitable work, managing cash and controlling project costs
- People and suppliers
AI may change how each of these is managed. But the fundamentals remain the same. So, rather than asking whether AI will replace people in construction, perhaps the more useful question for a contractor is:
How could AI change the way I manage my construction business?
1. Lead Generation and the Tender Pipeline
The most straightforward place to begin is your pipeline. What enquiries, frameworks or tenders are you currently pursuing? What's likely to land and when? Where are the gaps?
These are questions that every contractor should already be asking. AI could simply make the process of answering them much faster and more informed. For example, AI could help analyse previous enquiries and tenders, identify the types of work where you are most successful, monitor potential opportunities and help assess whether a new enquiry fits your preferred type of client and project. It could also help identify patterns that might otherwise be missed.
Which types of work produce the best margins? Which clients pay reliably? Which tenders consume significant estimating time but rarely convert into profitable work? The technology may make the analysis easier, but the decision remains yours. To do this AI does need accurate information from your accounts, such as Gross Profit and Market Segmentation.
You still need to be honest about the strength of each opportunity. What is solid, what is likely and what is speculative? And if the pipeline is drying up, you still need to take action.
That might mean refreshing your prequalification credentials, improving your bid strategy, investing in a stronger presence on portals or developing relationships with key contacts.
AI may help you find and assess opportunities, but it cannot make an unprofitable market profitable simply by finding more work. The objective remains the same:
Focus on the right work, not simply more work.
2. Winning Profitable Work, Managing Cash and Controlling Costs
Once you have identified the work you want, the next challenge is winning it at a price that will make a profit. For contractors, this means understanding both the price the market will bear and the cost of delivering the project. AI could have a significant impact here.
Imagine being able to interrogate your previous tenders, project costs, variations, labour productivity and final accounts in seconds rather than spending hours working through spreadsheets and reports. AI could help identify trends, highlight unusual costs, compare planned and actual performance and flag potential problems before they become major losses.
It could also help with the administration around contracts, variations, payment applications and project reporting. But there is an important distinction.
AI can identify information. It cannot take responsibility for the commercial decision.
If the system tells you that a project is showing signs of losing money, someone still needs to decide what to do about it.
· Do you challenge the client?
· Do you recover a contractual entitlement?
· Do you change the way the work is being delivered?
· Do you renegotiate with the supply chain?
· Do you accept a lower margin because the project has strategic value?
· Or do you decide that the project is simply not worth pursuing in the first place?
These remain management decisions.
Cash control is another area where AI could become increasingly useful.
Credit control, debtor days, payment cycles, retentions and disputes all produce data. AI could help bring that information together and highlight where action is needed. But again, the fundamental principle remains unchanged:
A contractor can have a full order book and still fail because it runs out of cash.
The better the information becomes, the more important it is that someone is prepared to act on it.
3. People and Suppliers
The third part of the Golden Triangle is people & managing the business.
This is perhaps where the discussion about AI becomes most interesting. There is understandable concern about whether AI will replace jobs. In construction, however, much of the physical work will continue to require people. What could change significantly is the amount of administration and information processing that sits around that work.
AI could help produce reports, analyse information, prepare meeting notes, draft correspondence, assist with training, organise procedures and provide managers with information that previously took considerable time to assemble.
That could mean a site manager, quantity surveyor or business owner spends less time administering information and more time managing the things that actually make a difference.
There is another potential benefit. A smaller contractor may not be able to employ specialists in every area of the business. AI could give a small business access to capabilities that previously required additional people or expensive external support.
But that doesn't mean people become less important. In fact, it could make good people management more important.
Someone still needs to lead the team, make decisions, deal with difficult conversations, build relationships with clients and suppliers and take responsibility when something goes wrong. The same applies to subcontractors and suppliers. AI may help you assess performance, compare costs or identify capacity issues, but relationships, trust and judgement remain fundamental to successful construction projects.
So What Does This Mean for the Contractor?
I don't think the immediate question for most SME contractors is: "How do I become an AI business?"
It is probably a much simpler question:
"Where am I spending management time on tasks that could be done better or faster with AI?" Start there.
· Look at the information you already produce.
· Look at the reports you already prepare (or should prepare).
· Look at the repetitive administration that consumes management time.
· Look at the questions you repeatedly ask yourself about pipeline, tenders, project performance, cash and people.
· Then ask whether AI could help you get better information, more quickly.
· But don't lose sight of the fundamentals.
· AI is a tool. It isn't a business strategy.
· You still need to know what sort of work you want.
· You still need to price it properly.
· You still need to control the costs.
· You still need to collect the cash.
· And you still need good people to deliver the work.
The Golden Triangle Isn't Going Away
The construction industry has always changed.
Technology has changed how we design, estimate, communicate, procure and manage projects. AI is likely to accelerate that change considerably.
But for SME contractors, I believe the Golden Triangle will remain remarkably familiar:
1. Generate the right opportunities and maintain a healthy tender pipeline.
2. Win work at a price that makes a profit, then control project costs, income and cash.
3. Have the right people and suppliers to deliver it.
AI may change how you manage each of these.
· It may make a good contractor more efficient.
· It may allow a smaller business to do things that previously required a larger management team.
· And it may give owners better information on which to base their decisions.
· But the physical work still needs to be done.
· And someone still needs to run the business.
Perhaps the real opportunity from AI isn't to replace the contractor. It's to give the contractor more time and better information to run the business.
That's potentially a very different—and much more useful—conversation about AI in construction.
If you would like a discussion around the processes, you could harness AI to do and cleaning up your data so it has a clean starting place then get in touch for a no-obligation chat. Peter.Searle@ba4cs.co.uk Remember the old saying Rubbish in equals Rubbish out.
