CII Emerging Trends Research

NCCER Board of TrusteesNovember 17-18, 2009

Wayne A. Crew, Director

A research institute of leading owners,

contractors, and academics working

together to advance the business

effectiveness and sustainability of the

world’s capital facilities.

CII Purpose

CII’s purpose is to measurably improve the capital delivery process.

History Established as a recommendation from The Business

Roundtable Construction Industry Cost Effectiveness (CICE) Project to address:

- construction research

- fragmentation of the industry

Founded in 1983 by 28 companies; now over 100 members.

First to bring research to the engineering-construction world.

First owner-contractor-academic research collaboration for the constructed project.

The industry forum for the engineer-procure-construct process.

CII Principles

Place a premium on safety, ethics, continuousimprovement (cost, schedule and quality), and leadership.

Owner / contractor member balance and influence.

Promote a high level of knowledge transfer.

Provide leadership development through member participation.

High member involvement; small professional staff.

CII Knowledge Processes

Knowledge

Management

Knowledge

AssessmentKnowledge

Dissemination

Knowledge

Creation

Research to define best practices, breakthroughs, & industry norms.

Dissemination through publications, implementation guides, educational materials, workshops, and conferences.

Assessment of the impact of CII practices through benchmarking.

Management, organization, and assessment of the 500-plus CII documents and publications.

CII Member Benefits

• Research results and Best Practices• Implementation resources, information, and tools• Benchmarking & Metrics• Development opportunities for employees• Opportunity to shape the industry with other world

class companies• Safer, less costly, faster, project outcomes

Owner Members

AbbottAir Products and ChemicalsAlcoaAmerenAmerican Transmission Co.Amgen Anheuser-Busch InBevAramco Services CompanyArcher Daniels Midland BP AmericaBristol-Myers SquibbCargillChevronCITGO PetroleumCodelco-ChileConocoPhillipsDFW International AirportDow ChemicalDuPont

Eastman ChemicalEli LillyExxonMobilGeneral MotorsGlaxoSmithKlineHovensaIntelInternational PaperKaiser PermanenteMarathon OilNASANaval Facilities Engineering Cmd.NOVA ChemicalsOccidental PetroleumOntario Power GenerationPetrobrasPraxairProcter & GambleProgress Energy

Sasol TechnologyShell Oil CompanySmithsonian InstitutionSolutiaSouthern CompanySunocoTennessee Valley AuthorityTyson FoodsU.S. Architect of the CapitolU.S. Army Corps of EngineersU.S. Dept. of Commerce/NIST/BFRLU.S. Dept. of EnergyU.S. Dept. of Health & Human Srvcs.U.S. Dept. of StateU.S. General Services AdministrationVale

Contractor Members

Adolfson & Peterson ConstructionAker SolutionsAlstom PowerAMECAtkins Faithful & GouldAutodeskAZCO Baker Concrete ConstructionBarton MalowBateman EngineeringBechtel GroupBentley SystemsBIS Frucon Industrial ServicesBlack & VeatchBowen EngineeringBurns & McDonnellCB&ICCC GroupCDI Engineering SolutionsCH2M HILLCSA Group

Day & Zimmermanndck worldwideDresser-Rand CompanyEmerson Process ManagementEntech SolarFluorFoster Wheeler USAGrinaker-LTA/E+PCGross Mechanical ContractorsGS Engineering & Construction Hargrove and AssociatesHill InternationalHiltiJacobsJMJ AssociatesKBRKiewit PowerLauren Engineers & ConstructorsM. A. MortensonMcDermott InternationalMustang

Oracle USAPathfinderPegasus Global HoldingsR. J. MyckaS&B Engineers and ConstructorsThe Shaw GroupSiemens EnergySNC-LavalinTechnipURS CorporationVictaulic CompanyWalbridgeThe Weitz CompanyWorleyParsonsZachryZurich

University of AlabamaArizona State UniversityAuburn UniversityBucknell UniversityCarnegie Mellon UniversityUniversity of CincinnatiClemson UniversityUniversity of Colorado-BoulderColorado State UniversityUniversity of California-BerkeleyEast Carolina UniversityUniversity of FloridaGeorgia Institute of TechnologyUniversity of HoustonUniversity of IllinoisIowa State UniversityUniversity of KansasUniversity of KentuckyLehigh UniversityUniversity of MarylandUniversity of MichiganMississippi State University

Universities involved 1983-2009University of New MexicoNorth Carolina State UniversityNorth Dakota State UniversityOklahoma State UniversityOregon State UniversityThe Pennsylvania State UniversityUniversity of PittsburghPurdue UniversityPolytechnic UniversitySan Diego State UniversitySan Jose State UniversityStanford UniversityState University of New York-AlbanyVanderbilt UniversityVirginia Polytechnic Institute and State University Texas A&M UniversityThe University of Texas at AustinUniversity of WashingtonUniversity of WaterlooUniversity of Wisconsin-MadisonWorcester Polytechnic Institute

2009 Emerging Trends – items with potential to impact the capital facility delivery process in the next 3-5 years.

Emerging Trends Process

2008 2009

• Member Survey Data • Published Trends - World Economic Forum - Harvard Business Review - ESI International - FMI Corporation - McGraw Hill

• Member Interviews • Breakfast Meeting at CII Annual Conference in Reno, NV

• Feedback from Construction Academics

Trend Categories

• Workforce and Human Capability

• Project Delivery

• Corporate Strategy

• Technology and Innovation

• Markets and Demand Drivers

• Social and Political Influences

Major Changes – 2009 vs 2008

• Global Recession– Financial instability– Lower / more selective consumer spending– Surplus of skilled labor and management in U.S.– Large government stimulus spending– Lower trust environment between government and business

Trend HighlightsWorkforce and Human Capability

• Talent shortage no longer single most important issue as construction unemployment rises.

• Companies reducing staff to “low water levels”• World Economic Forum CEOs predict that the shortage

of skilled trade workers may return

Trend HighlightsWorkforce and Human Capability

• Increase in outsourcing operations (accounting and finance, HR, conceptual engineering and R&D) to “Best Value” locations.• Not just production engineering anymore!• Information and communications technology enabling distribution of

knowledge work.

• Growing challenge to attract and retain best and brightest individuals in E&C industry.• “Facebook Generation” attracted to “sexier” fields (IT, nano- and bio-

technologies) … meeting societal needs.• Increased mentoring a “must” for new employees

Trend HighlightsProject Delivery

• Increase in “Green Consumers” and the movement toward sustainable construction.

• Use of Lean practices and the application of prefabrication and modular systems.

Trend Highlights Corporate Strategy

• Managing through the current economic recession resides among the highest concerns of the E&C members of WEF.

• A growing trend of the purchase of domestic engineering and construction companies by foreign owners (FMI).

Trend Highlights Technology and Innovation

• Role of virtual teams will grow as budgets tighten.• Experts see increasing movement from work in a centralized

office to production from a network of virtual teams, globally distributed and working 24/7.

• Integrated project management systems continue to grow with interoperability of systems still a challenge.

Trend Highlights Technology and Innovation

• Growing interest in Virtual Design and Construction, specifically in the area of Building Information Modeling (BIM). • Government entities accelerating BIM use.• Half of the industry is now using BIM or BIM-related tools (75%

more than in 2007).• Convergence of BIM, Lean, and Green?

Source: Mortenson website

Trend HighlightsMarkets and Demand Drivers

• Abrupt fall in consumer spending• Businesses must prepare for slower long-term growth in

global consumption, shift investment to Asia, focus on older consumers and find ways to offer luxuries on a budget (Harvard Business Review)

Trend HighlightsMarkets and Demand Drivers

• Majority of “giga” projects constructed outside U.S.

• Ethics-related issues will become even more prevalent as work is pushed internationally.

Trend HighlightsMarkets and Demand Drivers

• Bigger government • U.S. government infusing large amounts of money through

stimulus packages into “shovel-ready” infrastructure projects.• Greater need for Public Private Partnerships due to aging

infrastructure

• Greater use of alternative sources of energy and renewable energy.• Construction of power production facilities will lead all other

sectors of construction (% growth in 2009).• FMI forecasts a10% power construction increase in 2009.

Trend HighlightsMarkets and Demand Drivers

Trend HighlightsSocial and Political Influences

• Precipitous decline in trust (in government, banks, insurance companies, etc.) since beginning of recession• Leading to higher transaction costs, lower brand value and

greater difficulty in attracting, retaining and managing talent. (Harvard Business Review)

• Due to increasingly interconnected global construction industry, many leaders fear corruption will negatively impact the success of international projects.

2009 Trends Summary

• Trend Environment is drastically different as a result of the global recession.– Lower consumer spending, labor surplus, large

government stimulus spending, and lower trust environment.

• Some trends remain on track and continue to accelerate.– Outsourcing, green, lean, BIM, virtual teams,

integrated project management systems, growth outside U.S., and alternative energy.

Questions?

www.construction-institute.org