The construction industry has lagged behind other industries in improving its productivity. In an excellent report entitled “Reinventing construction through a productivity revolution” published by McKinsey Global Institute, the authors address the issue of the construction industry’s poor productivity record. Construction is one of the global economy’s largest industries, and the report estimates that it employs about 7 percent of the world’s workforce and involves an annual expenditure of around $10 trillion on related goods and services.
Poor productivity in construction
The report argues that the construction industry has “an intractable productivity problem”. While other industries such as retail and manufacturing have drastically improved productivity through automation and digitisation, the construction industry’s productivity has not improved.
For example, according to the McKinsey research report The construction productivity imperative while the manufacturing sector’s productivity has nearly doubled over the last few decades, the construction industry’s productivity has been flat.
Reasons for poor productivity
The productivity performance of global construction is inconsistent. There are regional disparities, and major variants within the industry. The results are deficient project management, inadequate skills, inefficient design processes, and lack of investment in skills development, R&D, and innovation.
The impact of productivity improvement
Productivity improvement in construction was only 1 percent a year on average during the last two decades, while productivity for the whole global economy improved by 2.8 percent and for the manufacturing sector by 3.6 percent. If construction productivity were to match that of the total economy, the report Reinventing construction through a productivity revolution estimates that the industry can increase its added value by approximately $1.6 trillion.
Recommendations
The report The construction productivity imperative outlines 15 recommended practices that can help to improve productivity during the three phases of project delivery; concept and design, contracting and procurement, and project execution.
The authors submit that the Concept and Design phase is where most of the project value can be increased, and suggest the following seven principles to enhance performance and financial returns:
- Building only what is needed by minimizing the components that increase costs and providing the “minimal technical solution (MTS, design to deliver only the necessary value-added requirements)”.
- Considering the full life-cycle costs of construction and post-construction operation during the life of the asset.
- Undertaking scenario analysis by evaluating alternative scenarios that could affect the success of the asset or require significant alterations to the design.
- Taking into account the conditions of the project site, such as climate, soil and terrain.
- Standardizing and modularizing components as much as possible in order to save costs and time.
- Consulting construction and procurement teams from the start and obtaining their input into the design.
- Optimizing the engineering processes during the pre-construction stage, as work done during this period can have a substantial effect on project value.
During the Contracting and Procurement phase, the article suggests the following best practices in order to help construction firms avoid delays and save money:
- Adopting a balanced risk allocation between owners and contractors rather than attempting to transfer all risks to the contractors who may not have the financial capacity needed to assume certain risks.
- Setting up a clear and strict process for claims and change-order management in order to minimize disputes during construction.
- Aligning the interests of owners and contractors by having a set of common interests in the contracts, with a payment structure that includes “a balanced mix of incentives and penalties”.
- Owners should develop their own perspective on costs by maintaining a cost database and by having a clear understanding of what factors affect costs.
The following four practices are recommended during the Project Execution phase:
- Planning for unforeseen circumstances in order to ensure “a continuous work flow” by anticipating and reacting quickly. This minimizes lost time and improves site productivity.
- Using “prefabrication and preassembly methods” by maintaining an adequate supply chain for prefabrication and assembly in order to save time and minimize waste.
- Co-operating on project performance by ensuring that all project stakeholders are getting the right information in a timely manner, and more importantly, getting the same uniform up-to-date information instead of “operating from different versions of the truth”.
- Minimizing waste by reducing inventories, overproduction, rework, transportation, and waiting times.
The role of technology
Technology plays an important role in improving productivity in all sectors of the economy, including construction. An online collaboration software is one of the most effective ways to ensure that projects are managed efficiently and that all project stakeholders share the same uniform database of information in real time.
