Is Australia Missing Out on Lean Construction? 1

By
Thursday, August 6th, 2015
liked this article
Embed
Allegion – 300 x 250 (expire Feb 28)
advertisement
desal
FavoriteLoadingsave article

Around Australia, considerable debate in recent years has revolved around the efficiency of our construction sector and the costs of delivering buildings and infrastructure.

Indeed, at face value at least, Australia does not compare well from an international perspective on a cost basis. In the 2015 International Construction Costs report, built asset consultancies ARCADIS and EC Harris, for example, ranked Australia as the fifth most expensive out of 42 countries in terms of costs associated with building. On a square metre basis, meanwhile, costs to build an average quality high rise office tower in Sydney are 16 per cent, 52 per cent and almost 2.5 times higher ($US equivalent basis) compared with Singapore, Dubai and Bangkok, according to architecture, engineering and construction service provider AECOM in its 2014 Blue Book.

While construction costs are obviously influenced by a number of factors – some beyond our control – commentators suggest Australia could reduce building expenses significantly through adoption of more efficient ways of working. Renowned building sector advisor David Chandler OAM, for example, wants the nation to reduce its overall cost of construction by around 20 per cent.

With this in mind, a number of leaders suggest that Australia could make better use of opportunities through what is known as ‘lean construction.’ That concept and philosophy is built around viewing the entire building process and supply chain as a system of production which requires information and resources to flow smoothly and reliably and as a genuine collective enterprise in which collaboration rather than competition is the principal focus. Industry leaders gathered in Perth last week to discuss some of the ways in which the nation can better integrate such a philosophy into practice.

Richard Morwood, industry director – integrated project delivery for AECOM Australia-New Zealand and chairman of the Queensland branch of LCI (Lean Construction Institute) Australasia, says compared with the rest of the world, Australia has done well in terms of developing a culture of collaboration during the contracting process but could improve with regard to our implementation of lean construction principles throughout the supply chain.

In terms of driving overall cost efficiency and productivity, Morwood says much can be learned from the United Kingdom, which has undertaken a multi-faceted approach as part of a broad strategy to improve the way the building sector operates. The approach involves mandatory reductions in costs against set benchmarks and required adoption of Building Information Modeling (BIM) along with new forms of contracts and insurance and a reliable flow of long-term programs of work which are independent of electoral cycles.

“I think there are a lot of areas where we could improve,” Morwood said. “If you look at the places where it is done well in other parts of the world, there are all sorts of efficiencies that are gained through supplier conditioning, through long term frameworks that offer reliable sequence of work, through better management of risk and contingency, (and) through developing an industry that has consistency and reliability about it.

“In Australia we have a real boom/bust cycle for projects, particularly public sector projects, that does not serve the industry terribly well.”

Glenn Ballard, a co-founder and research director for the Lean Construction Institute in the United States, said Australia sat alongside the US, UK, Scandinavia, Chile, Peru and more recently India, Canada and Mexico in terms of having organised movements for lean construction. He also likened Australia to those countries when it comes to implementation of lean construction principles, but added that even in these countries, “implementation is spotty and the potential for value generation and waste reduction is enormous.”

Ballard says in economic terms, the costs of failing to implement lean construction principles include owners paying more than necessary, goods and services providers making less than they otherwise might and discouragement of investment through higher building costs than need be the case.

“But there are also social and environmental costs,” he added. “The construction game burns people up. It is stressful, dangerous, and adversarial. Those who have experienced the lean way of doing construction do not want to go back to the old way.

“As for environmental costs, studies have shown that reductions in solid waste and noxious emissions occur even without explicit intention when using lean methods.”

Ballard says it is imperative to engage critical purchasers of construction services to talk about how things can be done better, and to look to others for best practices. In the US state of North Carolina, for example, the number of designers, builders and suppliers who took lean concepts seriously went from being a minority to a broader part of the sector after Sutter Health decided to adopt lean project delivery as part of its capital raising program.

It is also important to focus not so much around growing ‘adherents’ to the concept but more on helping those already on board to continue to improve the way they operate. Demand from clients and pressures from competitors, Ballard says, will provoke an appetite for learning and change.

Though he stresses that the magnitude is difficult to quantity, Morwood says Australia is missing out on an opportunity through not further adopting lean construction principles. He says a large part of this reflects the fact that while confronted with deficits, Australia has not experienced fiscal pressures on the same magnitude as many other countries.

“I think in Australia we are not taking advantage of some of the skill sets and intellectual property we developed in collaborative contracting over the last 10 to 15 years,” he said. “I think we should actually build on our collaborative contracting experience using both Lean and BIM like three sides of a triangle, all linked and jointly driving better productivity.”

construction costs

Embed
FavoriteLoadingsave article

Comments

 characters available
*Please refer to our comment policy before submitting
Discussions
1
  1. John Doyle

    It is a good idea to improve building technics and techniques, but the article fails to spell out the external costs. Even if we leave out the actual land value, there are a myriad number of regulations to complete before even the design is ready to be built. For infrastructure projects where the public/private partnership is adopted the construction costs are massively outweighed by the finance costs, amounting to double or even triple that sum. There are costs incurred just by the delays in getting regulatory approval, often causing more than a year's delay. Streamlining the regulatory environment would save a large sum even before the first sod is turned.
    The really silly thing is there are already ways in place to save huge sums up front. For starters the Federal Government can pay for the project directly without one dollar of borrowing cost. It can fund the States also to do the same. The only losers are the banks and their fees and interest charges. Funding is not related to tax revenue. Such is not used in today's financial environment where we live with fiat currency.