Construction of new infrastructure will be an important tool for governments around the world seeking to rebuild economies devastated by shutdowns in response to COVID 19. Every dollar spent on construction projects has a multiplier effect. It directly results in increased employment by the contractors and consultants engaged to do the work, increases demand for goods and services required to build the project, and results in increased spending by the new workers employed. This in turn leads to further employment of people in the wider economy.

Chosen wisely, new infrastructure also has the capacity to improve the performance and competitiveness of the economy as a whole and bring broader social benefits.

Unfortunately, the industry being called upon to build this new infrastructure has itself been in poor health for some time. Profits have declined and risk profiles increased as megaprojects have become the new norm. Project completions are more a cause for relief than celebration and contractual disputes and business failures are commonplace throughout the supply chain.

In this environment, it can be no surprise that the industry is finding it increasingly difficult to recruit and retain the next generation of industry professionals.

Industry 4.0

It is widely recognized that we are currently in the 4th industrial age. This digital age follows the ages of computer/automation, mass production, and power.

Construction 4.0

In terms of construction, the 4th age was supposed to herald the widespread adoption of Building Information Modelling (BIM) which, through sharing of digital information, would provide the insight and tools to more efficiently plan, design, construct, and manage buildings and infrastructure. This in turn would lead to an increase in productivity and reduced life cycle cost of the asset.

Despite having been introduced 20 years ago, BIM has still to be widely adopted and is rarely used for anything more than the detection of clashes between trades. Furthermore, over the same period, construction labor productivity growth has averaged only 1 percent a year compared with growth of 2.8 percent for the total world economy and 3.6 percent in the case of manufacturing*.

Why has Construction 4.0 failed?

The construction industry is highly adversarial. Contracts are drafted not to ensure project success but to protect positions when things go wrong and rarely are the commercial interests of the stakeholders aligned.

Contractors are more focused on managing business-critical project risks than investing in the future. Designers are more focused on minimizing the chance of premium boosting professional indemnity claims than innovating. Clients are more focused on demonstrating perceived value for money to their shareholders (lowest price) rather than achieving real value outcomes.

These imperatives define the culture of an organization and ultimately the culture of an industry.

When the overriding culture of the industry is one of mistrust that a party is not doing anything but look after its own interests, it can be of little surprise that productivity-enhancing tools and processes such as BIM and Lean Construction, that rely on collaboration and sharing of information, have failed to take hold.

If there is a silver lining to the COVID-19 cloud it is the once in a generation opportunity it provides to reboot how the industry operates for the benefit of all stakeholders, not just contractors.

Let’s call it Construction 4.1

Source Code for Construction 4.1

There are a number of essential elements to Construction 4.1.

  • The most important element is the development of a culture of mutual respect. Construction should not be viewed as a zero-sum game where the success of one stakeholder is automatically viewed as a loss for another.
  • Contracts should encourage collaboration across the supply chain and align participant interests rather than pit them against each other. They should contain standard terms, be written in plain English, and provide for an equitable share of risk.
  • Procurement processes should be more efficient and tender effort appropriately reimbursed, with contracts awarded based on value proposition rather than price.
  • Contractors and designers should be encouraged to innovate and industry-leading performance recognized and incentivized.
  • Prompt payment for work done should be a right rather than a luxury.

Benefits of a Rebooted Construction Industry

When implemented across a transparent and sustainable pipeline of work, Construction 4.1 has the potential to hasten the adoption and exploitation of BIM and provide an environment conducive to investment in tools and processes that could generate millions of dollars in productivity savings and significantly reduce carbon emissions and waste.

Workers involved in lower-skilled on-site activities will be retrained to undertake higher-skilled off-site prefabrication work in safer and cleaner environments and construction will once again be seen as an industry of choice for the next generation.

What Next?

The requirement for a coordinated response to economic recovery post-COVID-19 and the need for the construction industry to play a major part that recovery, provides a golden opportunity to reset how the construction industry operates and to set it on a more sustainable path but for this to happen there needs to be concerted and coordinated action by industry associations and government organizations the likes of which only a crisis can bring about.

* McKinsey. Reinventing construction through a productivity revolution. February 2017 | Report

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Jon Davies in Managing Partner at Lean Construction Advisory Group and CEO of the Australian Constructors Association. He is a recognised Commercial Leader with extensive Australian and international contract and commercial management experience. He is particularly interested in the development of collaborative forms of contract to provide a solid platform for the application of lean construction processes and tools.