In the wake of the 2024 ISG collapse, the construction industry is once again grappling with the harsh reality that cash flow mismanagement can topple even the most established players. The domino effect of ISG’s insolvency has left suppliers and subcontractors reeling, highlighting the urgent need for more accurate cost forecasting in a sector notorious for its unpredictability. Alex Hall, head of solutions engineering at Access Construction, sheds light on the challenges and solutions in this complex arena.
“Construction is anything but straightforward,” Hall remarks, pointing to the myriad variables that can send project costs spiraling. “From a spell of bad weather to a delayed delivery, small hiccups can have massive repercussions on a project’s cash flow.” The traditional approach to cost forecasting—aggregating small predictions from CVRs, project programs, and site reports—isn’t cutting it. Hall argues that the sector needs to pivot towards data-driven insights, grounded in historical trends and real-time analysis.
At the heart of the issue is construction’s ‘race to the bottom,’ a vicious cycle of low productivity and underinvestment in technology. This has led to an over-reliance on ground-level reporting for cost decisions, without the benefit of statistical analysis. “Other industries manage risk through thorough statistical analysis,” Hall notes. “Construction needs to break out of its short-term, heads-down approach to avoid the cash flow crises that lead to insolvency.”
The unique challenges of construction, such as long payment delays and the ripple effects of design changes, complicate cash flow prediction. However, Hall sees a path forward in technology tailored to the industry’s needs. Enterprise resource planning tools like Access Coins can provide a single source of truth for data, enhancing communication, collaboration, and risk management.
“When construction companies invest in technology, they often focus on immediate problems rather than long-term risk management and cash flow control,” Hall observes. “But embracing innovation is crucial for stabilizing cash flow and grasping costs, especially in volatile times.”
Hall’s insights serve as a call to action for the construction industry. As the sector continues to grapple with fallout from the ISG collapse, the urgency for better cost forecasting is clear. By leveraging historical data, statistical analysis, and industry-specific technology, construction can move away from the ‘race to the bottom’ and build a more stable, sustainable future.
The human cost of insolvency—from job losses to the strain on suppliers and subcontractors—underscores the need for change. As Hall puts it, “Better forecasting won’t eliminate all the risks, but it will help us navigate the challenges more effectively. And in a sector that touches so many lives, that’s a goal worth pursuing.”
The future of construction lies in a proactive, data-driven approach to cost forecasting. By embracing technology and breaking away from traditional methods, the industry can forge a new path—one that promises greater stability, sustainability, and success for all stakeholders involved.
