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smart city and megaproject contracts

What Challenges Come With Construction Megaprojects and Smart City Contracts?

As urbanization continues to rise, some projections estimate that up to 60% of the world’s population will be living in a city by 2050. In order to respond to this continuing demand for space, many countries are planning ground-up megaprojects rather than sticking with the usual pattern of organic and piecemeal growth.

Enter smart cities. They combine the best of technology advancements with improved planning and layout schemes to eliminate traffic issues and improve the residents’ experience. Megaprojects, usually defined as construction work with a total cost over $1 billion, play essential roles in helping build these cities of the future. However, the companies providing the design, engineering and construction work for these projects inevitably face many challenges on these complex, lengthy contracts.

Looking for more information on how to improve construction practices for smart cities and megaprojects in general? Download our ebook “Leveraging Construction Technology for Smart Cities and Megaprojects” to learn more about how to navigate these high-demand construction projects and what’s involved.

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Key Challenges of Building Megaprojects

Budget Overruns

Staying within budget for any major construction project is challenging due to changes in tariffs, labor costs, material prices, subcontractor charges and other related fees. When a project’s costs are calculated decades before the actual completion date, it’s not surprising that inflation also plays a role in raising the finished price. With many megaprojects involving private investors who want to see a return–and are reluctant to approve new spending–it’s essential to come as close as possible to any proposed budget.

Unfortunately, some research estimates that up to 98% of megaprojects fail to stay within their original budget constraints. Staying within the specific budget requires realistic planning, good project management and sustained productivity throughout the project.

Unforeseen Complications

The Alaskan Way Viaduct tunnel project in Seattle was relatively within its proposed timeframe when the boring drill is known as Bertha unexpectedly broke down. Removing the drill with a secondary tunnel and replacing it added years and millions of dollars to the project.

It’s prudent planning, not padding, to add budget line items to megaproject contracts for secondary equipment and contingency plans. Otherwise, the cost will become significantly higher. There’s little chance to negotiate when a project needs to get back on track, so budgeting for backup plans from the beginning allows for faster responses to any complications.

Supply Struggles

Even major global suppliers like India and China, which also happen to be working on some of the world’s biggest megaprojects, sometimes struggle to produce enough raw materials for steel, concrete and wood construction. Megaprojects like dams, cities and underwater tunnels require millions of cubic yards of concrete. Any supply shortage or change in price can slow down construction and therefore raise the total cost of the project.

Some countries are also struggling with shortages in labor, especially for highly skilled positions. The U.S. is still struggling to replace workers lost from the 2008 recession in which many experienced contractors found new careers. Other countries like Israel, Dubai and the United Arab Emirates are importing skilled workers to help build their new smart cities and other megaprojects.

Increasing Complexity

Smart cities don’t just require civic planning and zoning considerations, they require integration with the Internet of Things (IoT). Installing everything from smart parking meters to automation integration exponentially increases the complexity of these construction projects.

Even experienced construction teams can falter when trying to track thousands of unique data points specific to each part of a huge complex or work site. With this much data to track and manage between workers that are often physically separated, construction software is essential.

Multiple Partners

In most countries, private construction firms are involved in megaprojects that are fully funded by the public. Since there are so many distinctive steps to build a smart city or other types of megaprojects, these contracts can involve dozens of different companies and subcontractors. Each new company partnering on a project introduces another set of workers to remain up-to-date on all relevant information. Considering that each company is likely to prefer a different file format or management style, it’s essential to find a shared construction software solution for teams collaborating on megaprojects.

Underestimated Scope

Failure to fully scope out the project during the estimation and planning stages is one of the major causes of both time and cost overrun. No matter how experienced, most construction companies still face plenty of surprises when tackling megaprojects. Attempting to use the same systems, models and construction software that work for smaller projects on a megaproject will only result in inaccurate scoping. Once the entire scope of the project has been improperly estimated, it takes a lot of extra work to get everything back on track and almost always results in a budget change.

Pick the Right Megaproject Software Tools

Flexible, powerful and secure construction software is required for megaprojects. It’s essential for construction projects of all sizes, but it’s even more important when the scale of the work increases so dramatically. Software tools like PlanGrid help overcome all these challenges and more when working on global projects. Choose a suite of other construction software apps that integrate with our software to ensure a steady flow of data between all of the company’s management systems.

There’s even more to know about megaproject software tools and choosing construction software services. Get all the information you need to make the right decisions with our ebook about megaprojects and smart cities, “Leveraging Construction Technology for Smart Cities and Megaprojects.”

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Eric Thomas

Eric Thomas is a Content Marketing Manager at PlanGrid. He develops PlanGrid’s content strategy and creates assets to educate their customers based on his experience working at Gilbane Building Co. and Truebeck Construction. He has more than six years of marketing experience and a Bachelor's Degree in Scientific and Technical Communication from Michigan Technological University.

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