Part 3 in series about weather analytics and construction decisions
In the McKinsey&Company Capital Projects & Infrastructure article “How analytics can drive smarter engineering and construction decisions,” authors Garo Hovnanian, Kevin Kroll, and Erik Sjödin identify applications that illustrate how engineering and construction (E&C) companies are embracing data-driven solutions, strategizing future initiatives, and assessing project risks.
In a competitive market with profit margins between 5 and 7 percent, and from to time as low as 2 to 3 percent, “…misjudging risks and underestimating costs can prove disastrous.” For example, misjudging weather risks from normal adverse weather (versus unusually severe weather) can cause engineering and construction companies to lose money on projects. E&C firms are generally responsible for impacts as a result of normal adverse weather.
On balance, over-estimating weather risks with excessive weather contingencies can undermine competitive bids, and lead to loss of contracts for engineering and construction companies. With win rates for the construction industry ranging between 15 and 25 percent, or less for some engineering and construction companies, E&C firms can ill afford to not win new work and not secure new projects as a result of uncompetitive bids.
About the authors
Garo Hovnanian is a vice president of major projects in McKinsey’s Philadelphia office; Kevin Kroll is a consultant in Chicago, and Erik Sjödin is a partner in Stockholm.
(Source: Hovnanian, Garo, et al. “How Analytics Can Drive Smarter Engineering and Construction Decisions.” McKinsey&Company Capital Projects & Infrastructure, McKinsey Insights, www.mckinsey.com/industries/capital-projects-and-infrastructure/our-insights/how-analytics-can-drive-smarter-engineering-and-construction-decisions.)
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