Why is the construction industry underperforming? The skills shortage is a reason for poor quality work and slow technology uptake, labor and material costs explain high rates for the customer, and each blames the previous link in the construction supply chain for whatever is going wrong. The time has come for the construction sector to take responsibility for fixing the problems around poor performance and efficiency.
“There is unanimous agreement that construction efficiency is poor, its supply chains deeply fragmented, and, despite record recent activity, construction margins remain at unsustainable levels to deal with the risks involved,” says David Chandler, OAM FAIB, principal of CE Advisory. “Despite all of these challenges, there is still a group of very capable construction companies who cope with all of this. They try to be more efficient. They try to embrace the new technologies and construction methods that elsewhere are redefining this industry into what’s called the Fourth Industrial Revolution or Construction 4.0.”
This group is driving progression despite the counter-productive actions across the rest of the sector. They hire promising young professionals, give them real-world experience and invest in their training. They are adopting technology to solve problems related to inefficiency and safety but also to create new value for their customers. They take pride in their work and that is demonstrated in the results. However, they operate in a market full of big promises and underperformance, where customers do not have the knowledge to differentiate.
“These companies are doing what they can to deliver quality projects and stay competitive. They invest in cadets and apprentices to help meet the need for new construction professionals, says Chandler, who also holds the position of Adjunct Professor in Construction Management at Western Sydney University. “But they compete with the fringe-dwellers, who strike with sub-cost tenders and clear intent of delivering less than has been contracted. They get away with having sub-standard work paid for, and they thumb their noses at construction safety. Many go broke and leave a trail of damaged goods behind them.”
Instead of focusing on the quality of their work, many architects, engineers and quantity surveyors, prefer to protect themselves by modifying client contracts to cover their shortfalls. Most clients opt for Build Only (BO) or Lump Sum contracts, expecting all their specifications and design requirements to be included, thereby ensuring quality and compliance. The reality, however, is that heavily modified contracts work primarily to protect against design failures, delays, and over-budget situations.
“These kinds of defenses embed fragmentation and introduce unmanageable risks down the entire supply chain, as these unknowns are passed on to each new latecomer, who finds themself duped, generally after the contract is awarded. The conflicts of interests and escape hatches then play out,” says Chandler.
“This is evident in the heavy amendments to BO contracts that attempt to sweep up incomplete design or resolution of over-budget estimate risk to the successful tenderer. It’s a mug’s game – these shortcomings do not lead to better buildings.”
To be “Better” they would need much earlier contractor and supply chain engagement, they would need to better demonstrate their compliance, they would need to be measurably safer, greener, and more efficient. It is not just the finished structure that’s important either, today the process itself is fundamental to client demands. If the client is paying for a “green” building to raise their status as an environmentally responsible company, then the construction process must also minimize waste and fossil fuel consumption. A chaotic construction site where polluting trucks wheel masses of waste to the landfill is not helping the client’s environmental record.
While no single element is to blame, the contracts and the tender process could certainly offer opportunities for a solution. Change could come from the companies themselves or be forced on them by regulatory bodies, but could also come from a more knowledgeable customer; but reform must happen if we are to move past this era of underperformance to an age of honest construction and better buildings.
“It’s time to get off the slippery slope and call out these procurement scams for what they are. The construction industry can do a lot better, but it needs a new context for this. And clients will not get full value until they understand how they are fuelling the escape hatch,” says Chandler, who goes into great detail on the tricky semantics used by such firms on contracts and tender documents, while also highlighting the language they could and should use, in this article for the Fifth Estate.