By Dr Bartosz Zamara, Trebbi Polska, and Rafał Bałdys Rembowski, editor of Biuletyn Konsultant. Both are postgrad lecturers at Warsaw Technical University and Lazarski University.

Trebbi pole

By Dr Bartosz Zamara, Trebbi Polska,

Trebbi pole

and Rafał Bałdys Rembowski, editor of Biuletyn Konsultant

 

Mid-August saw an unexpected stir on LinkedIn. The CEO of a construction IT firm posed a seemingly simple question that turned out to be quite provocative: “Does the construction industry really need to manage budgets in Excel?” This snowballed into a heated debate. Surprisingly, over 100 experts chimed in, offering a wide range of opinions. The discussion that unfolded was both significant and passionate.

Why is this such a hot topic?

The construction industry faces a dilemma. With ever-increasing project demands – formal and operational – firm grapple with choosing the right tools for budgeting and project management. The question of whether Excel is sufficient for budget management in construction firms, or if specialised software is necessary, isn’t straightforward. It’s a complex issue that requires careful consideration.

This debate goes beyond software preferences. It reflects a broader discussion about software vendors’ promises to improve the industry’s quality of life – if only their product is used. These promises often miss the real issues facing the industry, which drive the need for highly flexible tools like Excel, despite its drawbacks.

On one side, we have Excel – flexible, ubiquitous, and a long-standing industry staple. On the other, we have dedicated systems promising enhanced control, security, and efficiency. This has real-world implications for construction firms. It affects their ability to manage projects effectively, control costs, and stay competitive. As construction projects become increasingly complex and profit margins shrink, choosing the right management tools can make or break a company in the long run. Even the best tools are just aids. They support a contractor’s processes but can’t solve organisational problems. If a contractor lacks solid processes, the fanciest tools won’t help.

No matter which product or supplier we look at, dedicated solutions share some common features. These typically include:

Enhanced Data Security: in an era where information security is crucial, dedicated systems offer access control and data protection mechanisms. Unlike Excel files, which can be easily copied, modified, or stolen, specialised software provides data encryption, change tracking and audit capabilities. This is important for large projects where the confidentiality of financial and technical information is critical.

Real-time control: one of the strongest arguments for specialised software is the ability to update and monitor data in real-time. In the dynamic environment of a construction project, where costs and schedules can change daily, immediate access to current information is invaluable. Dedicated systems allow multiple users to work simultaneously, with automatic updates and instant reflection of changes throughout the system. This significantly reduces the risk of making decisions based on outdated data, a common problem when using Excel spreadsheets shared via email.

Process Streamlining: integrated systems eliminate the need for manual data entry across multiple spreadsheets, reducing the risk of errors and saving time. Automating processes such as report generation, budget recalculation, and schedule updates allows employees to focus on more strategic aspects of the project. And specialised software often offers advanced analytical functions that can help identify trends, optimise costs, and improve future project planning.

The above arguments convince many CEOs. Life after implementation seems easier, but the reality of implementing such tools often differs significantly from the promises. At the same time, a characteristic subliminal message from vendors is the claim that Excel is far less perfect than a specially created tool and that using it is now passé. This is untrue, because it’s impossible to completely abandon Excel, which these software vendors know perfectly well. What often captivates during presentations of such systems is a kind of magic of calculations, statements, and reports that are supposed to be created automatically with a click. It’s puzzling why buyers of such systems are often not interested in where this data in the system comes from.

Let’s model information flows within a single project. Figure 1 shows the key players in the investment process. Various organisations, with their own departments and divisions functioning within the organisation, face the need to obtain information produced by other companies and departments. And the figure is not ‘flat’ – each developer or investor can collaborate with multiple contractors and designers. And contractors can serve many investors. This isn’t just about passing on successive versions of documentation; it’s about ongoing settlements, reports, invoices, invoice reconciliations, etc.

Figure 1. Project Participants

The increase in the number of information paths between participants depending on their number can be illustrated as shown in Figure 2.

Figure 2. Information path number increase. This is a quadratic function y=0.5x(x-1).

So, is there a practical and economically viable way to build systems that can handle so many inputs and outputs, enabling automatic information exchange? Isn’t this the main motivation for Excel supporters and the dirty truth about IT in construction? Vendors conveniently overlook the fact that data in their systems must be collected somehow. And I’ll bet dollars to doughnuts that it can’t be done without Excel. Why?

Because what characterises construction (especially in Poland) is a lack of standards in every area of process organisation. From the naming of individual work elements and materials (classification) through structures and aggregating information (the budget at each stage and for each participant is different, so simple aggregation is practically impossible) to data-transfer formats, unified headers, understanding of descriptions, units of measurement, etc. The number of combinations in just these three areas is practically infinite.

We’re completely ignoring where the source of information to be entered into the system is located. These are emails, notes, values counted on-site, measured on drawings or .pdfs, etc. Practically all information found in construction company systems is derived from design documentation. It’s from this documentation that material quantities are determined, and therefore implementation costs and revenues from the sale of services or products. Much has been written about automating the collection of this information. And much has been done, but for the same reasons, BIM is still not a common tool used in the implementation of construction projects.

We work in an environment where a contractor may use three different methods to describe the finances of a single project. One is for the offer, in accordance with the client’s requirements and their calculation template. The second is for internal settlements and control of financial flows, and the third for settlements with the contractor, for the purposes of processing and tracking the financial and material progress of implementation. We’re talking about spreadsheets thousands of items. Contractors, especially those dealing with materials, have long catalogues of assortments that they need to buy and settle. The investor doesn’t care whether their inquiry or descriptions in the documentation are consistent with those lists.

Modern systems supposed to support contract management and decision-making are based on the assumption that they operate on structured data, which means that a given assortment or work is described and understood in the same way at every stage of implementation. This is how systems work in other sectors. Thanks to this, each participant in this process (supplier, client or contractor) interprets the meaning and understands the description of a given item in the same way.

For such a system to be able to provide comparable data (e.g. for the management board), it would have to operate based on a repetitive data structure that flows from different contracts. The basic problem, however, is that this data differs depending on the type of contract, implementation model, or participation formula (consortium, general contractor, subcontractor, etc.). So to be able to use some dedicated system for analysing or controlling financial data from the contract, such as an ERP system, or portfolio management – the data that will feed it must be specially adapted for this purpose. This makes the use of such a system potentially cumbersome (expensive and time-consuming) in practice, because it may require the use of a different method of adapting this data for each new contract.

What we’re left with: Excel and its charms                                                       

The obvious answer to the ever-changing conditions in which contractors must budget, offer, contract, settle, and report is the spreadsheet. Excel is a flexible tool that allows for managing multiple data formats and easy adaptation to specific project requirements. In the construction industry, where each project can have unique demands, this flexibility is invaluable. Users can quickly create custom sheets, formulas, and macros tailored to specific project or client needs. This ability to adapt rapidly is often highlighted as Excel’s key advantage. And with this tool, an engineer on site or a cost estimator can organise the first set of information, filter it, and convert it into a digestible format that allows import into corporate systems like ERP.

Excel’s ubiquity has made it a standard go-to tool. This greatly eases collaboration and information exchange both within organisations and with external partners. Almost every employee in the construction industry has at least a basic knowledge of Excel, which minimises the need for training and eases the on-boarding new employees. Companies can easily find workers to perform Excel-based tasks.

For small and medium-sized construction companies, Excel offers a significant advantage in the form of a low entry barrier. They can use advanced project management and budgeting functions without having to invest in expensive, specialised software. The costs of licenses, implementation, and maintenance of specialised systems can be prohibitive for smaller firms, while Excel is often already available as part of an office package. There are also free solutions like LibreOffice, which have practically the same functionalities. This allows companies to allocate limited financial resources to other critical areas of operation.

There’s one more advantage of spreadsheets over dedicated software. Users can make changes to the data format themselves depending on the needs of the moment. Excel allows for quick adaptation to new needs without involving programmers or IT consultants. Users can modify spreadsheets, add new functions, or create ad-hoc analyses – particularly valuable in crisis situations or when a quick response to changing project conditions is needed. Dedicated systems require an intermediary to implement changes requested by the client, costing time and money.

Integration with other tools

Excel, especially in its newer versions as part of the Microsoft 365 ecosystem, offers integration possibilities with other tools and systems. It can be linked with databases, data visualisation tools like Power BI, or CRM systems. This integration capability allows construction companies to create custom, hybrid solutions that combine Excel’s strengths with the capabilities of other systems. In our view, the fact that Excel is not a finished project but a continually developing product means that its supporters will grow in number. Excel with superpowers like PowerAutomate or PowerBI will increasingly compete with dedicated industry applications. It’s worth noting the increasingly common trend of building overlays on Microsoft 365 solutions, which provide complete solutions for specific industries, including construction.

Until we see standardised classifications and methods for building various types of reports, we’ll remain stuck in a kind of tool dualism. What constitutes an unnecessary barrier to the development of this sector is also a barrier to the automation of many processes in projects, the introduction of BIM methodology and cost control. It’s difficult to responsibly estimate what kind of losses this mess generates for the entire economy. We’re talking billions rather than hundreds of millions.

Even if we assumed widespread introduction of standards, at the project level – whether for the contractor, designer, project manager, or cost estimator – basic communication and information exchange will still take place using Excel files. Large contracting firms that implement IT systems accept that, in terms of information, a construction site is a bit like an independent organism, functioning under specific conditions resulting from the scope, offer and contract. Quantitative and cost information at the most detailed level will be collected, analysed, and reported using Excel. From there, it will only reach possible internal management, controlling, and planning systems in the company.

The real art and achievement is arranging processes in the company, or more accurately, shaping the culture of information transfer, so that information once collected in any digital form is subject only to digital processing, without the need to involve a person, as these are situations where errors potentially arise.

Where is the industry heading?

The construction industry, despite its traditional nature, is inevitably moving towards greater digitisation. This shift will bring increased complexity and higher information requirements. Many companies feel the need to implement systems without fully understanding the scale of the challenge.

Information flow in a company can be visualised as a neural network. At the bottom, we have a mass of scattered, unorganised information that must be processed, aggregated, and interpreted at several levels. This allows decision-makers at the top of the organisation to have a synthetic overview. This is shown in Figure 3.

Figure 3. Levels of information organisation

At the highest level, for example, the board or management needs to know if a given contract will end with a predictable financial result. At this level, highly aggregated information is needed. Such summaries won’t include details like the cost of purchasing protective clothing. Currently, these solutions require data preparation for generating conclusions – e.g., from ERP systems or other dedicated tools.

However, at the middle level, when using dedicated systems for settlements like Aconex or PROCORE, or ERP systems – information is still provided using Excel spreadsheets. This is where the main difficulty in using ERP systems in construction companies arises, as the data format on which such a system can operate cannot be arbitrarily changed. Creating a uniform system that could be operated by the bidding department, site managers, purchasing department or quality control without Excel is theoretically possible but practically unfeasible. Any solution aimed at improving or helping the contractor organise information and its flow will most likely use Excel at the very source of the process. This is why we argue that the promises of dedicated solution manufacturers and system vendors cannot be fulfilled without Excel.

Orthodox proponents of dedicated technologies would see the above pyramid managed by a single unified platform. On the other hand, orthodox Excel proponents see no problem in using it everywhere and at any level of data aggregation. Both approaches are impractical and form the ground for the dispute we’re describing.

It will be difficult to escape from Excel in the first stages of aggregation. We expect that progressing standardisation, development and popularisation of BIM and market participants’ awareness, will gradually lower the level at which Excel is replaced by automated systems. These may not necessarily be provided by the IT sector but should be reliable enough to meet user expectations.

Summary

The ‘Excel vs. specialised software’ debate in the construction industry is far from settled and will likely continue for many years. Both sides present important arguments, and the choice between these solutions depends on many factors, including company size, type of projects, IT budget, and organisational culture.

The construction industry faces the challenge of finding a balance between flexibility and standardisation. Regardless of whether companies choose Excel, specialised software, or hybrid solutions, it’s crucial that IT tools support the people responsible for contract execution and business operations. The biggest market advantage will be gained by those who first have a real-time view into their own organisational processes. For example, personnel costs on a construction site are known almost in real-time, but most companies use data for internal reports that come in after payroll, which can be up to two weeks later. Reacting to phenomena with such a delay (decision latency) is the most common ailment of organisational supervisory bodies.

Ultimately, success in the digital transformation of the construction industry will depend not so much on the choice of a specific tool, but on the ability to effectively use technology to solve real business and operational problems. The dialogue between IT professionals and construction practitioners remains crucial for developing solutions. However, we expect that Low-Code solutions supported by AI may change the balance of power in the near future, giving engineers an advantage.


The article was originally published in Polish in Biuletyn Konsultant, September 2024.