Published April 5, 2024 . 4 mins read

A Data Scientist’s Guide to WIP Optimization in Construction Finance

Over the past few months, I’ve pitched questions to contractors, CPAs, bankers, and surety firms about what they believe is a contractor’s most crucial financial tool. Unanimously, the answer came back: the WIP schedule. Diving deeper, I queried who impacts the WIP schedule the most. Once again, the consensus was clear: the Project Manager (PM). And on asking who’s tasked with keeping the WIP schedule current and accurate, the spotlight turned to the construction financial professional.

Reflecting on these insights, a compelling narrative begins to emerge…

Construction financial workflows, like baseball games, involve a complex interplay of strategies and roles, each requiring precise input from various players on the field. A misjudged play or a lapse in concentration can have far-reaching consequences, potentially jeopardizing the team’s success.

As someone who analyzes construction financial workflows through the lens of data science, here’s my perspective:

The Strategy of Construction Financial Management

Just as in baseball, where every pitch, hit, and catch is crucial to the game’s outcome, in construction financial management, every decision, report, and action plays a vital role in the project’s success. Industry experts recognize the WIP schedule as a crucial tool—comparable to a scoreboard in baseball—that guides financial health, project management, and stakeholder confidence.

Bruce Orr
CEO & Chief Data Scientist,

Decoding the Game: The Role of the Data Scientist

In construction financial management, the data scientist can be a crucial support figure for contractors, offering the analytical prowess needed to navigate the project’s complexities. They use predictive modeling to forecast project performance and financial health, drawing from historical data to manage risks proactively. Through machine learning, potential issues are identified early, allowing timely interventions.

The statistical analysis compares current project metrics against past performances to set realistic goals and highlight areas for improvement. Sentiment analysis of project communications reveals insights into team morale and stakeholder engagement, which are vital for maintaining a positive project atmosphere. Predictive analytics inform resource allocation, optimize efficiency, and reduce costs, while simulation tools enable scenario planning for various project outcomes. This approach not only aids contractors in making informed decisions but also transforms the WIP schedule into a dynamic tool for strategic planning and project success.

The Project Manager’s Role: The Star Player

Our discussions highlighted the PM’s pivotal role, similar to that of a star player whose performance can significantly influence the game’s outcome. By analyzing past performance data of PMs, we can forecast project results, pinpoint potential issues before they arise, and customize strategies to fit specific managerial styles and project needs.

Guardians of the Score: Construction Financial Professionals

While the PM might be the player making the big plays, the construction financial professional ensures the scorecard, in this case, the WIP schedule, accurately reflects the game’s state. They balance the drive toward project completion with a realistic financial health assessment.

Beyond the Numbers: The Power of Sentiment Analysis

But what about team spirit and morale? Just as the mood in the locker room can affect a team’s performance, the sentiment within project communications can provide deep insights into project health. By employing natural language processing, we gain access to the nuanced emotional currents that play a critical role in shaping project results.

However, the spotlight often falls on the Project Manager (PM), akin to a key player in crucial moments, tasked with defending their performance during pivotal reviews or “Stand-and-Deliver” sessions. PMs, who are frequently juggling numerous responsibilities and managing intricate relationships, find these moments particularly demanding. The challenge is not just in articulating their achievements but in the arduous preparation that precedes these assessments.

Herein lies the potential for transformative support through AI-driven tools. Imagine equipping PMs with an AI assistant tailored to compile and synthesize this wealth of sentiment data, effectively reducing the preparatory burden. Such a tool would not only streamline the process of gathering insights but also empower PMs to craft compelling narratives around the project’s progress and challenges. By alleviating the task of data consolidation, PMs could dedicate more energy to delivering impactful, sentiment-driven presentations about the project’s status and future direction, enhancing stakeholder engagement and confidence.

Reflections on a Data-Driven Strategy

Looking back at the insights gleaned, we see a story of interconnected roles and responsibilities, each critical to the financial management of construction projects. The data scientist’s role is to offer tools that can bring clarity, predictability, and strategic insight to the complex world of construction financial management.

In this narrative, data science elevates the WIP schedule from a mere document to a dynamic, predictive tool that tracks progress and forecasts future trends, risks, and opportunities. It’s about leveraging data not just to review past performances but also to illuminate the path forward.

As we envision the future of construction financial management, integrating data science promises to reduce risks and pave new avenues for efficiency, profitability, and strategic growth. It marks a journey of perpetual learning, adaptation, and innovation, where the ultimate goal isn’t just to play by the book but to rewrite it, ensuring sustained success and resilience in an ever-changing field.

The data scientist’s role is to offer tools that can bring clarity, predictability, and strategic insight to the complex world of construction financial management.

Be sure to catch Bruce at CFMA’s Annual Conference on Wednesday, May 22, at 8 am, when he presents “Real-World Construction Financial Insights” alongside Bob Biehl, CPA, CCIFP, GBQ Partners; Margie Morris, CCIFP, Partner, Guignard Company; and Gerardo Perez, Senior Vice President Relationship Manager, First Bank.

In this interactive session, you’ll experience construction financial data insights from various perspectives. In the first half of this session, a panel of industry experts consisting of a data scientist, banker, CPA, and surety professional will use a real-world scenario to show you how they assess the WIP to make strategic decisions, identify areas of concern, and evaluate the health of construction companies. They will share strategies and tips. Then, it’s your turn to review a real-world scenario with your peers to review the data to identify issues and develop a solution.

Learning Objectives:

Interpreting Data Trends: Participants will learn to identify and interpret key data trends within construction financial datasets, enabling them to recognize potential financial challenges and opportunities within their organizations proactively.

Cross-Industry Insights: Attendees will gain a deeper understanding of how financial data is analyzed and leveraged across various sectors, such as data science, banking, accounting, and surety, to broaden their perspective on financial management strategies.

Through hands-on activities, participants will develop practical problem-solving skills by applying data analysis techniques to real-world construction financial scenarios. This will empower them to make data-driven decisions in their roles and address complex financial challenges effectively.