Cost vs. Benefit: The ROI of Modern Construction Technologies
Construction technology on a job site is evolving, but is the technology at the point where it's really helping your bottom line? From drones to robots to AR headsets, everyone's talking about this construction technology, but the real question is: what is the return on investment? Today, we're breaking it all down cost payback periods: the numbers you need to know before you invest in this technology. This is the Contractor Success Forum. I'm Wade Carpenter with Carpenter Company CPAs. With me, Stephen Brown, McDaniel Whitley Bonding and Insurance. And Stephen, what do you hear about these contractors talking about all this new technology? What's the first thing you tell 'em before they spend a dime on this stuff? When my contractors and I are talking about, technology, it comes up all the time, Wade. We're talking about generally, from their perspective, something that someone else is doing.
and everybody wants to be on the cutting edge of technology and. it's exciting. Everybody wants the latest and the best equipment, trucks.
What about the job site? What about the safety of your workers? What about the efficiency of your paperwork and running your office and getting the reports you need to manage your company? Technology does so much. When I think about where technology was 10 years ago in the construction industry, versus where it is right now, it just absolutely blows my mind, doesn't it, with you? Absolutely. And I know we've talked about this subject a couple of times and this time, I tried to take a deeper look at what all this stuff is, is it really making sense? That's what we're talking about today is what we're attempting to answer the question. Because, I remember back, I think I told you the story, I had a young, civil grading type contractor come in here and tell me how he was able to do his job so much faster by installing this GPS equipment on a bulldozer, an excavator. And saving time on , the grading and all that stuff.
And so I think that sparked some of my interest because it does cost more money. And in his case, I know he was spending like a hundred thousand dollars more to retrofit the bulldozers, excavators and those kind of things. So what point does it make sense? How much time does it take to pay back your investment in these things? Yeah, Wade, as an accountant, you can take that investment of technology as an expense, and as an accountant too, on physical equipment, you can depreciate it. But on something from a technological standpoint, can you figure out how long it will take for that to pay for itself? And you can say, well, certainly it's gonna keep me from redoing work that I didn't do correctly and allow me to work much, much faster. I think that kind of technology, once you embrace it, there's no going back, is there? Well, again, the whole question here is, is this actually going to improve my bottom line? And so, what I was trying to do with this is take a deep look at it and look at all these case studies and find out like, okay, what does it really cost to invest in this, and how long does it take? And where are we gonna find gains? Because we've got all this upfront costs, so if the example I gave earlier, it takes an extra a hundred thousand dollars to retrofit a bulldozer for something like that. Are we gonna save money by the savings and labor, or the being a more efficient or reducing errors, I guess I would say? And then, even we gotta take into account the cash flow effect.
So financing these things, can you afford to invest in this stuff? And at what point does it make sense? And at what point does it not make sense that you don't have that technology? Because time is everything in the construction industry. How long it takes you to do a project is what all your customers want. Well, like I said, I was just trying to put some kind of rOI I on this. And again, it's based in my analysis of it. somebody probably else would come up with different numbers, but it was my stab at it and I haven't seen anybody actually trying to do that.
So that's what we're trying to do is what is the return on investment? It actually went very wide on this one. And so, this particular episode I wanna focus on, what is it on the job site? Because we've got all of the things like software and project management behind the scenes, but let's talk about today job site stuff. What can we invest in that would pay us back quickly and make us more money, I guess. So the first category I wanna start with was drones, and this aerial imaging. I think drones are coming into their own, I guess because there's not a huge investment.
What I was finding is, a good setup for a drone is probably gonna cost you $5,000 to $10,000. You factor in the accessories, the software, there's a lot of times there's software subscription, there's training that needs to go with it. You've also got some things like, I think you got some training with FAA to actually be flying drones around, not as a hobby. But again, what I found with drones is if you're doing a survey, you can do a survey 75% faster with a drone than doing it manually.
And then again, it was just, a lot of this stuff was our best guess at what it really would save us, but the labor costs on something like a drone, the savings could hit somewhere between 10 and $50,000 a year by using drone technology for this stuff. What also goes into this? So if we have fewer rework issues or we're getting things done due to, faster, we discover an issue is happening. Something's off or whatever on the plans from a high level, it can save a lot of rework later.
That make sense? Yeah. For drones, what we found is that a $5,000 to $10,000 investment can actually pay back in 6 to 12 months. How do you figure that? Certainly $5,000 or $10,000 investment in something that would return that much value, but how would you figure 6 to 12 months you'd have a return on your investment? How do you calculate that? Well, again, I was trying to go back to an ROI formula that took the upfront costs, then divided by the, annual labor savings that you get, plus some kind of factor for reducing errors, plus any efficiency gains. And again, I use some ChatGPT and data analysis models to come up with this stuff. So there is some science behind it. But again, 6 to 12 months, this is a lower end technology that, for a smaller contractor can use this for, progress monitoring or even, marketing, just flying over your projects and having those kind of things on your projects, showing what they did.
But these larger contractors are integrating drones in their full project management workflows. And pairing it with the BIM and all these AI tools that we've talked about on the show. But, like I said, that's just the first category.
Sure. I've been asking all of my customers that have site drone footage. Send me some pictures of the jobs in progress and the completed project that I can share with your bond underwriter, which is nothing better than to let them know they're part of the team by showing them what they bonded and what project was finished. But the accuracy of this software and drone measurement is, it's almost flawless, isn't it? , it includes the GPS factors.
From satellite imaging with also with, the speed at which the drone is moving over the area and then the digital images. it's absolutely amazing to me how much better these drones, what they can do now. And you're right, a drone that used to do something like that was a hundred thousand dollars, 10 years ago, and it wasn't that good. When you think about this technology, some people say, well, it increases your proficiency. 10%. Some of this technology increases your proficiency 10 times, not 10%. It moves that fast.
What other, examples did you have, Wade? Yeah, and like I said, a percentage across the board, that's where I was trying to come up with something. And again, this is subjective measurement, but I did try to put some deep analysis into this. And again, the accuracy, just taking the human measurements and stuff like that, that kind of stuff is what we're talking about with drones. Again, this is stuff that's on the job.
So let's talk about like robotics and automation on the job. And there's several different parts under here. But one of the things I really wanna talk about, like these masonry robots, we, you brought these up before, where they can lay a brick a lot more efficiently. So as far as masonry, there's a project, I think they call it Sam or whatever, but it's very expensive to do. It's $500,000 investment. Or apparently you can rent this technology for $20,000 a month.
So at what point does that make sense? So what I found is that like these masonry robots were getting three to four times productivity boost. They're a lot faster laying these bricks. And so what they're finding is that the labor costs on masonry can be cut by actually 50%. That's a real number. You can measure those costs versus. A value of buying or renting that equipment if you purchase it, how you, amortize that expense over a period of years versus renting it.
It really hit me when you just brought this up about robots. There's a technology that is, is, it's a hard technology like buying an excavator. We have some, photographs in our agency of, some literally steam operated equipment that some of our older contractors built back in the twenties and thirties to build these levees. They built it from scratch. They built it because of the repetitiveness of what they were doing over and over and over again, and it made them fortunes. That's amazing.
Well, again, just, as far as like masonry, what we found is, if you're gonna invest in it, it's typically, a window of one to three years to pay it back if you're in investing in the full system. You know, It is great for a large masonry firm, but you know, smaller ones probably would have to rent or subcontract it, something like that. Let's move on. Staying in this, robotic stuff, there are rebar tying robots. One called tiebot.
I think from what I understood, it was somewhere around $425,000 investment, or possibly available to rent, and I don't have any prices on that. But you know, these rebar tying, some of these case studies, it says reduce the need, for four to six iron workers per job. They were able to do it so much faster than a human can do it. It's amazing. And the return on investment for something like that was just like one to two years with regular use.
If you had a big infrastructure project, a bridge highway, a large or something like that, that could make a lot of sense. Absolutely. We also brought up this autonomous earth moving equipment. That's what we were talking about before.
These retrofit kits can run $300,000 plus. I've seen some from a hundred plus. but it can also reduce the operator head count, waste and fuel and all this idle time.
And you know what I've seen, they can grade it out in one pass. Like you were talking about on a previous show, about like how it can adjust the bucket and get the grading exactly right. So, the payback period on that, from what I calculated, was about two to three years to pay that kind of stuff back.
But you know, this young man that I was telling you about that, he did a job. I think he was like 7 to 10 days faster than what everybody else would've taken to they were expecting. He made some good money on it. Of course he's gotta pay for all the equipment, but, I was amazed at some of the results he was seeing. So this is perfect for a large contractor.
for smaller ones there are maybe rental or leasing options. Again, these heavy equipment guys have all kind of leasing plans. They wanna get these out there in the world.
You know, I don't know how much work you lose by having a competitor that can advertise that they have this technology in place. They're selling the owner on the accuracy and the speed, that's something people will pay more money for. Well, I'm not a fan of underbidding everybody else, but if you do have.
, these technological advantages, you do have to factor in how much extra it's costing you. But how much is that labor savings, if you're not paying a person to do that? Well, there's just a lot of reasons, I guess is my point. Not just the cost savings from your point, but the, ability to get and maintain a good customer base. Right. The last category I had on the robotics part is 3D printing construction.
A lot of people think about like the concrete printing. That's sort of some of that stuff. I know Walmart did a couple of test projects and stuff like that, that I was sort of looking at.
But, the range on the cost for something like that, 350 to a million plus. But the savings, like the onsite labor savings was like 50 to 80%. So you think about, if you're having trouble finding people, I think about the masonry and some of that kind of stuff where you can't find a lot of people, or maybe the labor force is not there. This kind of thing is something maybe you should think about. Mm-hmm.
But this is a little longer term return on investment. It did say three to five years return on investment. But you know, for ones that we talk about all the time, like if you had a developer or these federal government jobs, the smaller players probably would have to outsource something like that.
Any thoughts on that? I know you wanna probably move on to this next one that we talk about all the time. My thoughts on that are, you're exactly right. And we've had podcasts on technology before. We've talked about a lot of issues.
And in this situation, you think about a machine that replaces repetitive, normal, boring type work more efficiently, faster, or more efficiently. You know who doesn't like that? Everybody embraces that. But as an owner of a construction company, you also have a lot of employees.
When you invest in technology, you have to get rid of the employees you don't need anymore, or develop some training and education to help move them to another level you need them for. And, that question that folks are dealing with as well. Yeah. Well, that sort of leads into the next category, which we were talking about before this episode.
And I think you've talked to some people, done a deeper dive on this part, and we may have some guess on it, but these wearables, these exoskeletons, that's where you got something to assist, whether it's lifting or, helping avert injuries, I understand, but, it does sound like science fiction, I guess, but they are here. But it's not. When you can, for example, you're doing some extremely sensitive wiring on some equipment, and there's a lot of moving parts to it and you've never done it before. You have on a camera and a shield and you're literally showing someone at another location, can be across the country, what you're doing. And they're, literally talking through your ears helping you.
Okay. I'm having trouble with this. So at any time you have a worker that can just communicate with someone to get the job done properly and faster, that saves you more money than you can possibly conceive of. And we talk about wearables, we talk about the technology. The hard hat, everybody's going to helmets now, but these helmets are they're having visors with built-in monitors and cameras and communication equipment. Then from the wearables that we were talking about, there's, an outfit called Hero Wear that, literally, if this equipment is fitted properly, it allows you to do so much more repetitive work lifting.
The first thing that hit me as I was talking to him about this is, is just literally getting up and down and in and out of equipment and trenches. That takes its toll on your body. And then because in the construction industry, most everything that's heavy is moved mechanically. It's moved by a forklift or a skid steer or something. but it's the repetitive type work, the waterline work, the utility work, the brick laying. and the painting, the drywall.
all of that can be computerized and can be done repetitively, through technology. Well, I guess that sort of does bring me into some of the stuff that I was looking at with it. There's basically the passive exoskeletons and stuff like that, and then there's powered stuff. But what you're talking about, I think. What I was finding, it was something like $5,000 to $10,000 per unit.
What we were talking about is, this stuff has to do with manufacturing, stuff like that. But, we're talking about, saving with overhead work and fatigue and stuff like that, and preventing injuries that could cost $10,000 to $50,000 easily. But the ROI on this is usually like 6 to 12 months.
But you know, one prevented injury obviously pays for the whole thing. Absolutely. And these things are motor driven and clutch driven. It just depends on the technology of it. And you think about a fence come along, you know that you ratchet Wade. As you're lifting that clutch, it's literally kicking in to help you lift that and give support to your skeletal system.
One of the most fascinating things, and I told you this before. But these studies, on the impact of, just jumping off or stepping down from a piece of equipment or flatbed trailer. If you are jumping down three feet, you weigh 200 pounds, you're putting almost 3000 pounds worth of pressure on your muscles and your skeletal system. That's takes its toll on folks. , and so yeah, these wearables are everything. But the savings, technological savings is not, and, what may not happen with an injury, but it's about your responsibility for the safety of your employees.
And I'd go even further to say it's for keeping and retaining good employees. Because no young person's gonna want to come into your business when you're not at least the best and state of the art, or wanting to be. And wanting their help to be that way. Well, I know probably need to hit all these things today, but, like the powered exoskeletons, some of those can be a hundred thousand dollars a year.
Heavy lifting tasks like you were saying before. That's more niche stuff and that may be more of a large scale operation. But, the next category I had on there was augmented reality or virtual reality, that kind of stuff. And, that part, I really felt like it was like, okay, that is science fiction, but it's really not.
it's not, even in that helmet, if you can see the blueprint in front of you while you're working. What I was saying was like cost of that was something like $3,500 per device plus the software. If it helps you reduce change orders or improve alignment with, say, your, customer or your client, I think that saves a lot of headache down the road and possibly lawsuits. You never know. You're recording the work that you're doing. Right.
But again, $3,500 per device, one project could offset the entire cost it prevented some major rework. Same thing with this virtual reality is $300 to $1,500 per headset. But that is a lot really faster onboarding, reduced training costs, just stuff like that. Payback is easily less than a year, especially if you're used for things like repetitive safety training or, things like that.
No, absolutely. Wade even the technology, we're talking about , the cost of that, just think about the technology and just materials to protect you from cuts, puncture, wounds. technology that cools you, vest with cooling air conditioning systems built into 'em. There's so much technology out there that, allows your workers to work smarter and safer and, that return on investment, I think it's fascinating the way you look at it as an accountant Wade and can measure that. Because when you're selling this, you have an idea and you're selling this to someone else. to give up the money, to invest in it.
You can give these kind of numbers and facts and figures. It's a lot easier to justify it, isn't it? Like I said, I know we're getting a little long on this one though, but the next segment I really wanted to talk about was like the Internet of Things, or I oT sensors, things like these smart devices, they're getting really commonplace in like home automation, stuff like that. And, depending on what we're talking about, a sensor may be $300 to a thousand dollars per sensor.
And sometimes there's subscription based stuff, like 10 to 40 bucks a month. But if that is saving you, things like fuel efficiency or reducing idle time, catching maintenance issues, those kind of things, the return on investment on stuff like that is often easily less than a year. That's a great point. Because you take a look at your cost and at some point you say, well, this cost doesn't justify me spending any money on technology to replace it. And then you crunch the numbers and you say, why didn't I implement this sooner? And like I said, there's all kind of ways you can talk about that with monitoring.
There's the bonuses or things like compliance, safety, tracking, those kind of things, reducing insurance costs. I do remember, I worked for several years with somebody that specialized in working with contractors on the security stuff, and they actually used to provide security guards. They built trailers and stuff or things that they could mount on a power pole or something like that, that can take the role of a security guard and basically monitor it remotely. And, with these infrared cameras, it was amazing to me, even five years ago, what all these things could save people. Same kind of thing.
It's not just security, but just whether it's maintaining, or making sure something's not going wrong or you've got a little, start of a fire or a gas leak or whatever it is. I love it that you mention that because that technology is there and relatively easy to implement. And that's a great point. Security on the job site because it's always an issue. And while you're talking about, insurable risk.
finally, lately, for example, Progressive Insurance has given 20% discounts on their commercial vehicles by implementing telematics. So there's a savings you can measure how long it will take the telematics to pay for themselves. And by telematics, I mean dashboard cams and the software that keeps employees from texting and driving basically. And, even that's evolving. It's a subscription service as the cost is coming down. If you haven't done that already, I've been preaching it for years.
You're just gonna about have to. And that stuff will start being installed in commercial vehicles before they're sold. It's just coming, just like what we were talking about before, Wade. On these Tesla upgrades, just on the, software upgrades.
it, it's not a 10% increase in how well it works. It's a 10 times better increase in how it works. So you have to not only think about the return on investment, but you have to think about what you're doing and whether you're staying viable by not implementing this technology. Well, I think that's a great way to sum it up.
The bottom line is, technology, is it no longer optional? it can be a very strategic business move. But you know, I think what we're seeing is, we have labor shortages and rising wages that drive up more adoption of this when we can be more efficient or reduce injuries, those kind of things. some things where we're leasing particular technology or something that may help smaller contractors lower the barriers to entry. And all this AI and predictive analysis, I mean that's the next frontier. So, I guess I wouldn't be surprised if all this digital compliance and stuff like that becomes mandatory, just monitoring and some, especially like federal jobs. But again, is this becoming a must have as opposed to a nice to have? That's a great point.
And Wade, we've had guests in the past, and we'll continue to strive to have the best guests with information on these products to share with our listeners. We don't have any sponsors and we don't plan on it. And we're not selling any one product over another.
But there's some good companies out there doing some good things. It's interesting to hear what they have to say, vet what they have to sell and what products and services they have and share what seems to be useful with our listeners. Yep. Well with that, I'd say, we hope this episode gave you some insight into making some smart decisions about investing in this construction technology. If it did, we would appreciate a like, share or subscribe, all that stuff.
And hey, if this episode helped you out, share it with another contractor. Let's help the industry work smarter or not harder. And we appreciate you being here. We'll see you again next week.
2025-03-20 08:44
