In recent years Public Private Partnerships (PPP) have become an interesting way for government entities and private companies to join together in a win-win scenario for the public good. But what is a PPP? There are many different structures to them but basically in this type of partnership the private entity provides the design, build, and financing for a public works project and in return they’re able to collect revenues from operating the public work for a set amount of time. Since these are typically joint ventures often times a whole new company is created to operate and maintain the public asset and here’s where traditionally an ERP can add value. But what if an ERP was implemented for use at the very start of construction, could even greater benefits be realized?
A key area of an ERP is its project management module. Typically, companies use it to manage their own internal projects, but in a PPP, they could use it to manage the construction of their own infrastructure. It could be used to schedule construction activities, plan milestones, and identify the critical path of the timeline. Further, the sourcing of construction materials could be driven directly from the construction activities enabling “Just in Time” delivery of materials. What’s more, reference documents and construction plans can be linked to construction activities providing project wide visibility. The point is many strengths of an ERP already mitigate many of the risks found in construction project budgets and scheduling activities.
Continuing on the point of “Just in Time” delivery of materials, applying an inventory management module of an ERP to construction projects would provide better visibility into where certain materials are located on the jobsite and how much there currently is. This could be especially helpful on public infrastructure projects where a lot of the material can be special made or have long lead times. Having inventory controls on construction materials can mitigate common risks found in losing material on a job site and increase worker productivity since less time is spent looking for materials.
The next advantage that an ERP can provide is in the contractor/vendor management arena. Earlier we discussed the benefit of scheduling construction project activities, but beyond that contractors could also log time against these activities. This can provide greater transparency into how construction activities are progressing against what’s budgeted. Additionally, the hours could feed into payroll, so the project knows how much to pay a certain contractor. Even a contractor portal could be implemented, and this could be a place for contractors to log time, update billing information, put in job requests, view their performance or benchmarks, and even help with onboarding. Typically, a lot of these activities are done by hand or at best in disparate systems but with the ERP many associated areas can be tied together.
After construction of the project has ended, the JV can begin to operate the public work and collect revenues from it. Utilizing the Billing module of an ERP would enable you to begin collecting and recording revenues on day 1 of operation. ERP can arguably make the transition from the construction phase to operation phase smoother. Also having one central system where all costs and project revenue is stored can allow for deeper insights while adding less overhead since there’s no need to gather data from multiple sources of information.
Lastly the backbone of an ERP is its general ledger. In almost a blockchain fashion, everything from construction and material costs to customer revenue and maintenance costs can all be on one ledger and trace back to the inception of the project. Furthermore, having access to a repository of information on what materials were used during construction and where they were sourced from can provide advantages operating and maintaining the infrastructure. The advantages are multiplied for high value infrastructure projects that are operated for several decades. Sourcing replacement parts and tracking warranties on machinery becomes easier since there is increased traceability. Another key concern with PPP that an ERP can mitigate is clear visibility into the return on investment on both sides of the partnership. Having an ERP already in place by the beginning of operations means reporting and queries on data are available at every point during the project lifecycle.
Many of the same pillars apply to PPP and construction, like reducing risk (both in construction and operation), providing visibility into costs and offering a platform for collaboration and communication. But there are benefits that can be realized at an industry level, introducing ERP into these types of projects can further sustainability in construction and operations, promote lean construction practices and further accelerate the adoption of technology in the construction industry.