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Construction over the horizon

More of the same won’t work

David Chandler OAM - Constructor

Briefing to ACIF Board Members and Executive Melbourne – 3rd March 2015

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Construction’s new world

• Annual global construction will exceed US $25 trillion by 2025,

• 60% of this will occur around the Pacific Rim The US and China will be the major players with India and Indonesia increasingly weighing in,

• Australian + New Zealand Construction is expected to reach about US$ 300 billion by 2025,

• Today Australian Steel consumption only makes up 0.5% of global steel consumption, and

• The use of steel, concrete, engineered timber and plastic composites are becoming interchangeable.

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Global Construction Trends

• Construction is becoming industrialised,• Like other industries construction will increasingly be

defined by - “smarter, faster, better and cheaper,”• Indian Construction is adopting -

“German quality at Chinese prices” as a benchmark,

• The construction supply chain is already global,• This will redefine the way the industry uses ICT’s, makes

progress payments & certifies its inputs, and• Construction processes are going off-site (and for

Australia increasingly off-shore including many jobs).

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Australian Construction snapshot

• Characterised by a federation of states and industry organisations who fiercely defend their sovereignty,

• Despite the importance of construction to build and maintain the nation’s economic and social infrastructure there is no national construction strategy,

• Many Pacific Rim countries have national construction strategies i.e. New Zealand, Singapore and Malaysia,

• Australia’s construction conversations are constrained by conflicts of interest and maintaining the status quo,

• Australia’s public works and informed buyer capabilities are all but dismantled.

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Who’s affected by this conversation?

• The 1 million Australian constructors who could witness as many as 150,000 of their jobs going off-shore,

• Over 205,000 Australian construction enterprises who on average employ fewer than 5 people,

• Clients and employees of the 25,000 construction entities whose businesses fail in Australia each year,

• Over 50,000 new constructors who will commence their careers in Australia in 2015,

• 20,000 traditional (stick build) housing constructors who will see their market halved within 10 years, and

• Consultants affected by 60% of all current design inputs becoming a free good in the new construction world.

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What is Australian Constructors up against?

Engineers and scientists are the key drivers of the global construction economy. They underpin;

• Innovation and problem solving• Design and built construction integrity• New process and system integration

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Resetting the Construction deal

• Construction procurement these days is mostly governed by self-interest and defences which compete with the client’s purpose for initiating a project,

• There is little prospect that a consultant or designer will offer a single point of “risk wrap” of the type sought in the transaction between the client and contractor, and

• Few members of the procurement chain have an eye to the cross-over point of where tender documents are quantified by a bidder and then “risk wrapped” by a contractor to deliver the construction deal.

It’s time to refocus construction to be about the customer

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Why the “risk wrap” is fundamental

• Achieving more for less through a better alignment between the client and contractor is a critical procurement success determinant,

• But resolving this time old conundrum requires clients to step up and become more engaged in the procurement process than they have in recent times.

• At stake; - better value for money and project viability - the key ingredient for construction finance - a line of sight to the end product

It’s time to deliver more for less

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Themes that will drive change/1

• Real integration across computer technologies (including robotics) with a focus on design for manufacture and assembly,

• A radical rewriting of traditional construction contracts: to minimise avoidable risk transfer, to embrace the changing relationships of off-site (and off-shore) in the superintendence of work, to adopt automatic payment of the major supply chain inputs to coincide with the payment from client to head contractor, to incorporate extended construction warranty options and to deal with multi-jurisdictional construction standards and certifications, /2

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Themes that will drive change/2

• At least a 30% shift of trade based fabrication and supervision currently on-site to off-site,

• Repackaging of construction work with a focus on elemental assemblies to achieve a 50% reduction of on-site project durations and waste,

• New construction materials and methods including a rethink of construction “givens” such as the role timber will have as a growing equal to traditional uses of concrete, steel and masonry, and

• Redefinition of construction careers to match changing work methods on and off site, /3

It’s time to recalibrate!

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Themes that will drive change/3

• Real time gathering of construction performance data to inform a continuous productivity improvement loop and benchmarking with peers,

• 24/7 construction using quiet construction methods to reduce expensive on-site overhead expenses, lower the impact of construction materials movement during peak hours and lowering the impact of construction project durations on their immediate neighbourhoods.

• Multi-cultural and multi-lingual construction organisations will have the greatest business prospects if they offer the best career networking around the Pacific Rim, and

• The game changers will be better, faster, smarter and cheaper. At least 20% cheaper.

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Old givens replaced by new ones

• Irrespective of what Australian politicians, policy makers, industry associations and institutions do or not do, the old will be replaced by the new,

• Those at the centre of the problems facing Australia’s construction future will not be part of the solution,

• The new deal between constructors and their clients will pave the way to a more viable industry,

• Expect a new construction enterprise model to be the game changer, and

• Do not expect lawyers and generalist consultants to have the main seat at the table in this transformation.

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How will you know?

• Unless you measure it you will not know,• Industry strategies that do not have simple quantifiable

in-the-field goals will not work,• On-site is the best place to measure the accumulation of

productivity improvements off-site to achieve e.g. - 30 % reduction in on-site labour - 50 % reduction in on-site project duration - 50 % reduction in waste and defects• Establishing industry wide pre-competitive performance

measures is the only way to smoke out the laggards.

No more group hugs as the old ship goes down

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More of the same won’t work

“Construction’s on-site waste of material, labour, time and variable quality would not be tolerated in any other industry”

Thank you - David ChandlerSee: www.constructionedge.com.au