Building the Built World: Construction Today

Construction is one of the world-economy’s largest sector and has only seen a 1% annual increase in productivity, compared to 2.6% annual increase of the world economy. According to the McKinsey Global Institute, there is an opportunity to boost value by $1.6 trillion adding 2% to the total economy.

Unravelling the value chain

The construction industry is composed of architects, engineers and contractors working separately towards a common goal. Problems facing construction can be categorized into the following five areas:

Fragmentation: The construction industry has long been recognised as having problems in its structure, particularly with fragmentation, which has resulted in poor performance. Due to the uncertainty for the main contractor in obtaining continuous work, subcontracting has been adopted as the dominant approach, resulting in further fragmentation.

Adversarial Relationships: The industry had become less trusting, more self-interested and adversarial. Increased fragmentation brings increased transaction volumes at lower average values and inevitably higher levels of opportunism, particularly in the context of low barriers to entry.

Project Uniqueness: Construction is a project-based industry meaning that projects are very often ‘bespoke’ as the requirements and specifications of technologies for specific clients determine their characteristics.

Separation Between Design and Production: One of the main problems in construction is the extent to which the industry separates design from production. This particular characteristic of the industry is still common in spite of the deficiencies of traditional procurement and the benefits offered by newer and more flexible approaches. There have been many calls to bridge the gap between design and planning by creating a seamless supply chain whereby the interface between various phases of the project’s life cycle are integrated with one another.

Competitive Tendering: Unlike manufacturing, construction projects are not priced and advertised for sale but instead uniquely priced after a negotiation or bidding process. Adopting ‘low bid wins’ strategies results in low cost production rather than ‘right first time’ or ‘best value’. Alternatives do exist, but require attitude change within the construction sector and its professions.

Diving deeper and unravelling the value chain, we find that the industry is in a deep conundrum: each party wishes to optimize time, cost and/or quality through non-legitimate risk transfer (passing risk down to the next level of the supply chain). Consequently, any error infects all parties objectives. Figure () visualizes how this places immense pressure on sub-contractors who effectively inherit low-budgets, short deadlines with the expectation of high-quality products. As a result, this carefully balanced Jenga-Tower of work-flow operations collapses — sacrificing time, cost and quality for all parties. In order to help alleviate these issues, the industry and governments have taken on initiative to adopt building information models (BIM) aiming towards a digital twin.

While complex on-site BIM technologies aim to alleviate adversarial relationships and fragmented processes in the value chain; the nascency, lack of capabilities and slow ROI do not provide a compelling case for adoption. Studies show that contractors are rather attracted to reliable methods to ensure their return on investment. Complex BIM solutions will be more attractive in the future when BIM applications broaden (considerable life cycle phases), deepen (BIM levels), and diversify(the benefits of various analyses), bringing immense benefits -see figure 5. In the meantime with BIM still developing, solutions must focus on the most immediate issues with the highest ROI to encourage adoptability.