In 1963, President John F. Kennedy spoke to a key group of German dignitaries in Frankfurt. He focused on liberty and the need to work together to achieve a peaceful world. “Change is the law of life,” he said. “And those who look only to the past or present are certain to miss the future.”[1]
Sixty years on, the construction industry faces somewhat of a crossroads of its own. The past is scarred by decades of declining productivity and conflict. The present brings a shortage of skilled labour and ever-increasing pressure to reduce costs. But the future shines bright in the distance. It offers a huge opportunity that can only be unlocked by shaking free of short-sighted, short-term approaches and embracing something new.
Many of the industry’s productivity problems can be traced back to bad data and poor processes, which hit the budget through delays and the need for rework. Both are easily solvable, but they require the industry to come together in a forward-focused and collective approach.
Productivity is a big concern in the construction industry. While other sectors have increased their input-to-output ratio by almost a third over the last thirty years, construction has gone backwards. In an industry renowned for its tight margins, this regression places firms under significant pressure to increase both capital and labour.
It’s a vicious circle; the more competition there is for capital and resources, the more cost is involved in each project and the more pressure there is on productivity. The solution is to revisit how projects are procured, delivered and governed, and adapt to a better way of working.
The most significant opportunity for change lies in procurement. In recent times, the focus has been on driving tender prices as low as possible. Rather than encouraging improvements in the business itself, this practice has placed the onus on suppliers and subcontractors to find productivity savings and efficiencies. Unsurprisingly, it has resulted in tension across all the stakeholders along the supply chain.
Instead of this lowest-cost approach, focusing on the development of long-term partnerships would be a far more effective way of procuring resources and labour. It would bring stability to the smaller players in the market and encourage them to invest in improving processes, learning essential skills, developing innovative solutions and removing the barriers to investments in technology.
As a result of investing in digital technology and embedding it into a project from the very outset, a firm could place a greater reliance on tender information and streamline design reviews. For example, earlier contractor engagement can make any operation more efficient, but it requires up-front leadership and engagement. That’s unlikely to happen in an environment where the focus is on remaining profitable without redefining new collaborative approaches at the start. With long-term partnerships,it will be much easier for a business to take the plunge and invest, knowing that the risk has been diminished.
Recruitment and retention are also key issues. Competing for an ever-shrinking labour pool is driving costs upwards and impacting productivity. The construction industry is renowned for long, inflexible hours and minimal gender diversity. It’s hard to compete with other sectors that can offer potential employees far more flexibility over their hours and deliver better work-life balance. As a result, the construction industry is plagued by a shortage of skills, primarily in management, design and engineering.
The Construction Industry Culture Taskforce is working to address this by developing a culture standard that moves the industry towards being an employer of choice. It aims to improve productivity by helping to fix the underlying causes that affect the health and wellbeing of construction workers and make the industry less attractive to new entrants. To attract future leaders to our industry we need to demonstrate that there is a career pathway for them and the opportunity to leverage off their skills and capabilities in a manner that dissolves traditional and legacy thinking. Many of our new entrants are far more digitally savvy and can use technology in a unique manner and when bridged with experienced construction personnel they can assist with moving the business into a transformational zone.
In addition to improving productivity and profitability, taking a more modern approach to construction will also bring reductions in emissions. Right now, the process of constructing and operating infrastructure contributes almost three-quarters of all the nation’s greenhouse gases.
The solution to reducing the industry’s footprint lies in innovation. Rather than prescribing how a job should be done, the industry needs to focus on the outcomes and allow specialist suppliers and contractors to decide how best to deliver them. By encouraging improved performance and added value, the industry has the opportunity to take a real and sustainable step forward.
Making that happen is the shared responsibility of industry and government. For the transition to be successful, all stakeholders will need to play their part. For example, the Government is the nation’s largest infrastructure client and, therefore, can lead the way by incentivising greater productivity, innovation and long-term value.
Across the industry, there is already a general consensus that change needs to happen, but it needs to happen now—the window of opportunity to establish world-leading practice is closing with every passing day. The opportunity cost of poor productivity is estimated to be in the region of $41 billion per annum and rising. Any business that delays too long not only risks letting the opportunity slip away into the distance but also risks being unable to even compete in the market of the future.
With such a massive prize on offer, the time to recognise that change is the law of life is now, not tomorrow. It’s time for the industry to turn its eyes to a future in which every stakeholder in the construction supply chain sits, as one, right at the forefront of technology, allowing a safer and sustainable and thriving future.
