It is internationally recognised that the construction industry is facing a major crisis due to a combination of falling productivity, rising costs, and lack of skilled labour. The Economist recently reported that productivity in the American construction industry has fallen by a staggering 50% since the 1960s. While other countries haven’t experienced such a drastic slump, in France and Italy productivity has fallen by around 16% in the last twenty years, and Germany and Japan have had almost negative growth.
In New Zealand, Fletcher Building recently reported a $368 million drop in profit, mainly due to bidding for too much work with fixed-price contracts, some of which they were then unable to meet due to shortages of materials, resulting in hefty financial penalties. With slim profit margins, they were also vulnerable to the skyrocketing costs of building resources.
One reason for the productivity crisis in the US and around the world is the boom and bust nature of the industry, which is particularly susceptible to fluctuations in the global economy. This makes companies reluctant to invest in technology and equipment that may be underutilised during a downturn. Instead, they have preferred to invest in human resource which is far more scalable, but less effective in improving productivity.
The Economist suggests that governments, as a major customer of the construction industry, can help to mitigate the problem by investing more evenly in infrastructure projects, thereby creating confidence within the industry to invest in technologies that will improve productivity. They also suggest that standardising building codes will pave the way for companies struggling to mass-produce buildings because of disparities between different area’s compliance requirements.
However it comes about, the industry needs to embrace change. Construction techniques have changed little in the last 50 years, but demand has skyrocketed as populations grow. New ways of producing buildings that are less reliant on traditional materials and labour are likely to be the only effective answer to boosting output in an industry that has reached production capacity in its current format.
These construction industry Plan Bs include pre-fabrication, with more and more of the work done by robots, and the use of Building Information Modelling technology, where the entire project is digitally managed to ensure that there is no inefficiency at any stage of its life cycle. Clients engaging with the construction industry can help to instigate change by specifying new technologies in their requirements, giving the industry the impetus and confidence to start adopting progressive techniques.
Change is daunting and often disruptive, especially in industries that have stuck to the tried and true for decades. But change also opens up exciting opportunities for growth and could herald the start of a new golden era for construction. By being open to new possibilities and willing to adopt a Plan B, your business and your employees will be better prepared to cope with change when it happens.