Productivity Decline in the Building Industry – What can be done?
The COVID Pandemic has been a challenging time for all industry sectors. Governments around the world have spent or borrowed billions of dollars to support businesses and communities and are now seeking to recover the costs. COVID lockdowns and restrictions have in turn reduced productivity across many industry sectors and there has been a marked Productivity Decline in the Building Industry. The decline in productivity has added to the strain on economies.
How can productivity in the building industry improve?
The building industry is a prime target for improvement. Numerous reports highlight a decline in building industry productivity – some of these dated before COVID. The Australian Productivity Commission’s 2020 report titled, Recent Productivity Trends[1], shows negative growth for the construction sector and is well behind the overall industry average.
The McKinsey Global Institute report 2017 ‘Reinventing construction’,[2] global labor-productivity growth in construction has averaged only 1 percent a year over the past two decades, compared with growth of 2.8 percent for the total world economy and 3.6 percent in manufacturing. McKinsey estimated that if construction productivity were to catch up it could add approx $1.6 trillion, or about 2 percent to the global economy or approx half of the world’s annual infrastructure need.
McKinsey identified seven ways to improve productivity.
- Reshape regulation and raise transparency
- Rewire the contractual framework
- Rethink design and engineering processes
- Improve procurement and supply-chain management
- Improve on-site execution
- Infuse digital technology, new materials, and advanced automation
- Reskill the workforce
As anyone in the sector will tell you all 7 items are on the agenda and underway. The 2018 Building Confidence report in Australia set out a clear framework to improve regulation and transparency. And the spate of building defects and failures has forced Governments to act.
McKinsey did say however that increased regulation was not always the answer and, in some cases, hinders productivity. One key element is the silos of regulation and administration. One agency covers planning, another licensing, others health and safety, codes and standards plus the added complexity of federal, state, and local authorities. Yet there is only one building or structure and a business process that delivers it. Could there be an option to re-focus regulations around the industry and its business process rather than for the convenience of the Government and its bureaucracy?
[1] Productivity Commission 2020, PC Productivity Insights: Recent Productivity Trends, Canberra, February
[2] https://www.mckinsey.com/business-functions/operations/our-insights/improving-construction-productivity
The role of Building Contracts in productivity
In McKinsey’s Report, items 2, 3, 4, and 5 are to an extent interlinked. They all share the common element of risk allocation. Building contracts define both roles and responsibilities and effects design, procurement, and delivery. While designing a cheaper building and delivering it faster may seem like a major gain in productivity it can hide real productivity. In NZ poor design, materials and installation affected the weather tightness of over 42,000 dwellings with a total economic cost estimated at $11.3 billion[1]. In Australia structural failures, inappropriate cladding, and other defects are adding to negative productivity in the sector. The NSW Building Commissioner identifies 5 major areas of poor quality, structural, waterproofing, fire safety, building envelope, and essential services. All these defects are the result of either poor design, materials, and installation or a combination. As the NSW Building Commissioner states ‘the cheapest way to build a building is to build it once.
Could a major improvement in productivity be achieved by simply adopting ‘zero defects’ as part of the contracts for design, procurement, and delivery and revising the measures of success accordingly for a new project at post-completion?
[1] https://www.beehive.govt.nz/release/review-reinforces-government-action-weathertightness
Will new technology improve Building Productivity?
Item 6, adoption of new technology is a given. The industry is taking up new ways and means of working. Online document management systems have reduced the need for a plan room and the small army of staff to copy, issue and update new drawings, not to mention the savings in paper. However, the Productivity Commission Report identified that despite increased labour hours compared to previous years there has not been an increase in productive outputs, rather a decrease. Adopting new technology may not always be a value add to real productivity.
The question is, does the new technology increase the value of outputs using the same or fewer inputs. The ease of data capture can simply create the want for more data with the risk of more work and less value.
The problem with re-skilling
Item 7, re-skilling is often seen as a simple fix if we assume declining productivity is only a people problem. Yet the Productivity Commission identified more hours worked and less productivity achieved. Could it be that re-skilling without the right tools and methods is pointless? If the fundamental issues of poor quality are often found in poor design, then it might be useful to re-visit the very foundations of current design skills (function over form) together with the tools and methods available.
Solutions to improve productivity in the Building Industry
OmTrak and the team at WebFM have always focused on creating real value and real improvements to productivity. Some of the productive benefits of OmTrak and our applications include:
- Users input data once and then utilise the same information for multiple outputs to support the different industry silos from design to build to operate and maintain.
- Design Manuals provide a uniform approach to capture design development and ensures owners have access to information on the proper operation and maintenance of the new facilities, particularly new technology and materials
- Consultants have transparent access to the relevant information to check and sign off the quality and accuracy of the data without copying or duplication.
- The same data is pre-structured to suit the end owners’ systems to avoid unproductive re-work and duplication.
- Using the same data contractors, designers and developers can manage their quality control process and ensure accurate tracking of defects, snags, and inspections
- Using the same data from the Manuals scheduled log-book servicing can be activated during the warranty period without any wasted effort
- Facility owners can simply access the pre-developed Manuals and convert them to a complete FM package without the need to procure and support yet more systems