Improved Productivity Key to a Better Construction Future 3

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Monday, January 18th, 2016
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The coming year must see Australian construction lock in the potential of a more lawful industry and address the challenge of measurably lifting its productivity and effectiveness.

Australian construction costs are amongst the highest in the world. These costs stand out when compared to those of our immediate regional neighbours. Being more competitive in the Indo-Pacific construction market will increasingly define our industry’s future success.

Construction is often dismissed as being measurement resistant. The reality is that construction companies resist measurement. The institutions of construction make measurement comparison more difficult that it needs to be. This need not be so.

There are two ways to measure construction effectiveness. The first is by using currency comparators such as metres or square metres, which are the preferred choice of quantity surveyors. Currency-based comparators can be distorted by movements in currency. A falling Australian dollar will make domestic construction costs look comparatively better.

The second approach is by using non-currency comparators. Non-currency measures will have the most direct impact on productivity. These include workforce, time, waste, injury, quality and compliance inputs. Improving the effectiveness of these inputs will also lower cost.

Currency-based comparators are at best a trailing indicator. They accommodate existing construction practices and inefficiencies. The next project cost estimate is based on forecast market price movements such as construction margins, wage and materials. Non-currency measures establish benchmarks which look into construction productivity and effectiveness.

Construction companies with the greatest capacity to set and then pass on their construction costs to clients also prefer currency based cost comparators. These companies don’t have to brace themselves for the inevitable trickle down effect of those costs. Those costs damage the wider construction industry and the economy as a whole when there is no measurable productivity trade-off. The last 10 years of construction enterprise bargains demonstrate this. Australian construction labour costs have risen at twice the rate of consumer price increases with no measurable productivity trade-off. Unlawful industrial conduct has been used to force larger construction companies to submit to these costs.

According to the Australian Bureau of Statistics, there are over 207,000 construction enterprises in Australia. It is possible that fewer than 100 construction companies set the industry’s cost and work practice norms, which inevitably affect the rest.

Beyond this, the claims of new construction technologies and fabrication methods are difficult to assess. The use of BIM is an example. Large design and construction organizations are pushing to have BIM technology mandated on all public projects. There is no question about the potential of BIM, but that potential must be directed to measurably improving construction productivity and effectiveness on-site. Otherwise, BIM runs the risk of being an elite fad of the status quo. The broader industry view of BIM is that it is a burdensome and expensive overhead.

The on-site construction workforce has little to do with how a project is designed, procured and organised. The order and sequence of construction work is essentially determined by off-site designers, consultants and construction managers. There is no question that on-site workforce practices can be more efficient, but to test this, the effectiveness of pre-construction inputs must firstly be held to account. Unresolved design has no place in the post-construction award sequence if it has an impact onsite productivity. Lazy risk allocation to the supply chain will not create the setting to improve construction effectiveness.

There is a direct correlation between ‘pre’ and ‘during’ construction inputs. There is no place in a modern construction industry for any player not to be focused on how construction can be performed smarter, better, safer, faster and as a result cheaper. Currency-based comparators give little insight to these challenges. They do not quantify measurable goals that reflect improved productivity and construction effectiveness.

These goals initially should include:

  • 30 per cent productivity improvement in the use of on-site workforce inputs
  • 50 per cent reduction in the cost of on-site injuries and lost time
  • 40 per cent reduction in the overall time, from inception to completion of projects
  • 50 per cent reduction of on-site produced construction waste going off site

Measuring construction performance must be simple. The data must be easily captured. Preferably, the data should exist and require no major new process to be introduced. With the above goals in mind, the following data should be relatively easy to assemble:

  • The number of people working on a construction site each day
  • The number of injuries and their consequent cost
  • The duration of the project from its start onsite to completion
  • The amount of waste (excluding prior demolition and excavation) removed

All projects can be grouped into categories such as schools, hospitals, apartments, freeways, bridges, offices, retail, storage and the like. All projects have a core defining metric or unit such as cost per square metre, cost per bed and cost per kilometre of road. With sufficient sample size, project data organises itself into clusters which reflect complexity, scale and geography. It is relatively easy to determine the average performances for each, such as days per unit output, on-site workforce inputs per unit output, cost of injuries per unit output and tons of waste per unit output. And most importantly, it is far easier to then allow mapping of performance change over time.

From this data it is relatively easy to create a set of pre-construction and a during construction performance indices. A Pre-Construction Effectiveness Index could reflect an aggregate of on-site workforce (including management), duration and waste. A Construction Delivery Effectiveness Index could be a composition of on-site workforce, duration and the cost of injury data. The difference between the two would account for waste and injury.

If construction consultants could be tagged with the downstream effectiveness of their pre-construction inputs, improving productivity and effectiveness would have a foundation.

Construction’s greatest lament these days is a lack of pre-construction documentation resolution and aggressive risk allocation, which passes these often unquantifiable unknowns on to contractors, subcontractors and suppliers. The next level of disquiet comes from the prime tender and post-tender bid shopping processes which sets in play a cat and mouse game of who can do the least, for the least. Establishing a reference framework which measures and then benchmarks construction delivery effectiveness would cause a recalibration of all previous behaviours.

But I am then brought back to reality by constructors, subcontractors and academics who are resigned to nothing changing, because it’s always been that way. Well the reality is that unless you can measure it, you can’t meaningfully change anything.

This is the conundrum facing policymakers and politicians who on the one hand want industrial lawfulness locked in, while they make half-hearted muffles about the need to be more productive as well. It throws up a corresponding challenge for constructors and unions who will assert that submitting to quantifiable productivity and performance measures is akin to submitting to red tape or equally draconian ‘Big Brother’ burdens. But, it seems a small price to pay.

Construction’s future is about a measurable realignment of all its parts. This realignment must displace traditional construction’s unquantifiable dysfunction. I estimate that as many as 30 per cent of existing construction enterprises will not survive the next 10 years. There is simply not room in the market for so many micro-players who underinvest in capability building and innovation.

The housing market will be the worst hit as many builders fail to adapt to the coming decline in detached housing starts and to what the market now needs.  I think the future for tier 2 and 3 general contractors offers better opportunity, and they will eventually bite hard on the heels of their tier 1 counterparts who defend more of the same.

The key to unlocking construction’s potential is quantifiable performance benchmarks which differentiate the leaders from the laggards. Construction productivity measures like those mentioned above can provide a level of pre-competitive insights into what must be done to lift the industry’s game.

No one can prescribe what construction innovation will be best, and which to discard. What will help inform those decisions are effectiveness measures which provide direction. Trying to be competitive without having those insights enables delusional beliefs that one can guess the right answer every time, without any reliable evidence.

If the Australian construction industry can sense that a more lawful industrial future may be possible, then it should get behind contributing the simplest of project performance data collection and analysis. Only a small number of collaborators are needed to encourage this movement. If contractors want a better deal in what they get served up to build, then they need to reciprocate and show clients that construction productivity and effectiveness is on the up.

Our regional neighbours are also looking for help in lifting construction sector performances as their workforce and material costs rise. It’s a common theme across the Indo-Pacific construction market as more infrastructure is needed, but value for money in the face of scarce capital resources dictates. There is too much opportunity to stare down.

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3
  1. Peter

    Great work David,

    Over the years, my comments regarding productivity have generally been met with blank stares. The old saying "more speed less haste" comes to mind as well.
    My own early training of productivity was, work faster, but never smarter. I've also noticed, as technology has increased, the ability to problem solve, think outside the box etc. etc. has somewhat diminished, & productivity is always someone else's department.
    More communication at early designing & planning stage is the best time to start.

  2. lou sarri

    Productivity what a joke , the only enterprises that achieve something like productivity are the likes of the CFMEU , AWU , MUA etc and they measure productivity by the $ amount they can extort out of industry in general. The cost of labour is killing this country , the minimum wage needs to be increased by 10 to 15 % and the fiefdoms controlled by the unions reduced by 20 to 30 %.

  3. Peter Young Leon Mills

    I would also add a more stable set of regulations so that the developers know what will pass / fail EIA's and the like.