Pay attention when the New York Times covers construction. We’re not an industry that they usually give attention to unless something is going terribly wrong.
What Ails Construction Productivity…
“We’re getting worse at construction” is a good attention grabber. The author is actually only drawing attention to the industry’s well-publicized inability to raise productivity. Productivity as measured by economists of residential construction shows no growth in nearly 50 years. But that’s flat, not down. The economists test a couple hypotheses, but nothing stands out. “Everyone has their pet theory. But everyone has a different pet.” said one.
Myself, a software industry veteran, find the productivity issue fascinating. Sure, moving molecules is harder than moving electrons via software. But that hasn’t held back manufacturing, retail and any number of other industries.
To get an insider perspective, the author contacts a veteran estimator and principal at Construction Analytics. To summarize, back in the 1970’s:
- Contractors prepared one estimate per bid
- Safety was “invisible”, an afterthought, or up to the worker
- No paperwork reports needed by government, insurers, owners, etc.
Compared to now in the 2020’s:
- Contractors prepare multiple estimates per bid
- Safety is very visible, from PPE to continuous jobsite training
- All stakeholders in a project want data, lots of it, whether on paper or not
Note that construction technology innovation doesn’t merit a mention.
…Ails America Too?
The author then flips to a political economic discussion that recalls the German and Japanese “economic miracles” after World War II. Those countries went from devastation to high functioning in just a bit over 20years. His theory is that those societies initially had fewer stakeholders involved with building and construction, and those stakeholders were largely aligned with the goal of building quickly. The same, I suppose, could be said of the USA in the postwar period. The culture believed in “progress” and celebrated new building and construction innovation.
So what happened? Affluence naturally produces more stakeholders. More people have in interest in a construction project today, and want their say: “You have to meet so many parking spaces, per unit. It needs to be this far back from the sight lines. You have to use this much reclaimed water. You didn’t have 30 people sitting in a hearing room for the approval of a permit 40 years ago.” One could add that workers prefer to end their shift with all their fingers, toes and other body parts intact.
Where’s the Competitive Advantage in Construction?
The author quotes the economists who are mystified why higher productivity states like Georgia and the Carolina’s don’t seem to produce national construction champions. Instead, “In the cities where I’ve covered politics closely, developers are fixtures in the local political scene. They have to be.” Perhaps construction is essentially a local industry: Developers and contractors need to know who all the local stakeholders are and how to meet their needs and objections.
“Construction should become safer, more respectful of community concerns, and more environmentally sustainable as countries become richer and less desperate for growth. But it’s also true that many of the problems America faces — from decarbonization to affordable housing — would be a lot easier to solve if we were getting better at building, rather than worse.”
I agree that construction innovation is needed. The team at Safe Site Check In is doing their small part.
After a couple of years working in the construction industry, I have my own theories, first published by TechCrunch in this article in 2021, why construction innovation lags:
- Projects are highly variable and every building ultimately unique: Type of structure, climate, local economy, regulations, demographics.
- Competitive advantage is largely in having a long term local presence and connections with stakeholders
- Contractors are project businesses with limited funds and motivation to make capital investments in technology
- Complexity of risk management, find off litigation, and still make a profit
To this list, I’d now add:
- Lack of competition. Some projects are so large, that only the biggest contractors can plausibly bid on them. But most projects are regional or local, and competitive advantage goes to the oldest surviving contractors with the best local stakeholder connections.
- Workforce culture. HQ for most contractors has already adopted lots of software for finance, accounting, bidding, CRM, HR and project management. But the culture in the field on the jobsite is still experiential, anti-technology, visual and real-life, not data-driven.
- Customers want uniqueness. Customization is the enemy of efficiency in the absence of automation.
Where’s Construction Innovation Going to Come From?
I’m advocating for these strategies to address the mystifying problem of construction productivity:
- Prefabrication. Manufacturing efficiencies have to supplant bespoke onsite building methods.
- Business model innovation. Reduce stakeholder complexity by combining Design&Build, for example.
- Data in the field. The jobsite and those who work there have to go digital and use the same data as HQ.
- Regulatory reform. Restrictive zoning rules not only prevents building, it drives up costs too.
- Six Sigma safety. In software, you can’t test-in quality, its built in. Same goes for safety during construction.
Let me know what you think about this article and our other blogs on construction innovation.