There are a growing number of Australian constructors who get what modern construction is about and who already deliver better construction value propositions to their clients. Connecting them is the challenge.
Integrated project delivery methods are offered as one way of achieving this, but for the sceptical it’s hard to determine the quantifiable benefits. Early contractor engagement (ECE) is another. It’s becoming clearer that traditional procurement models driven by the design, bid and build processes are unsuitable in a modern construction industry. In the end, quantifiable benefits hold the key to unlocking it all.
Let's put some quantifiable benefits on the table by way of example and to draw on these in progressing this discussion by:
- Suggesting what an ECE value proposition should be holding out to prospective customers
- Recommending that customers reset their procurement team expectations upward
- Explaining why smarter construction procurement and delivery is fundamental to delivering smart buildings that differentiate their value to owners and users.
As a starting point, we share an observation of a growing consensus by leading industry technologists, suppliers and specialist advisors on subjects like BIM, DfMA, OSM, Lean and sustainability. We believe these modern construction proponents now accept that the full potential of what they can bring to the smart construction table will not be realised because of their inputs alone. There is now an accepted realisation that unless construction clients can see tangible, quantifiable benefits capable of being assured by their construction team, then why bother? Clients are rightly looking for more than qualitative possibilities that attach to best endeavours. Qualitative possibilities are not merchantable or financeable.
Until now, the claims about what modern construction will deliver are widely varied. We hear that ‘this is faster’, ‘this is better quality’, ‘this is safer’, ‘we make less waste’ and ‘there are ‘fewer clashes’. But what does any of this mean if there are no comparable measures?
We are talking about leading indicators for improving construction effectiveness over time, benchmarked with peer performances for similar construction types. In this instance, we argue that price measures are in effect trailing indicators and reflective of a traditional process. There is now evidence that non-price measured improvements in lowering on-site construction durations, reducing on-site construction generated waste, reducing on-site workforce inputs and dramatically lowering construction injury rate frequencies translate into lower construction cost - by up to 20 per cent - and better quality buildings.
But there should now be more on offer if construction clients are to enter the ECE world.
The following schedule of benefits is an example of what more might looks like:
In this instance, the on-site construction duration has been reduced by 50 per cent, the on-site waste by 80 per cent, on-site workforce by 50 per cent, and LTIs by 80 per cent. These assumptions extend to commensurately reducing temporary on-site infrastructure and a 40 per cent productivity gain for the workforce moved off-site to OSM.
Is there any reputable constructor who does not believe they could assure most of these quantifiable achievements if they were contracted early? And there would be no compromise in design intent, scope of work or functionality. The question that might then be reasonably asked by a sceptical client is "how will this capability be demonstrated and benchmarked?"
The answer is that contractors need to take an interest in tracking and improving their performances over time to demonstrate a credible proposition. For this discussion, we are proposing that a performance benchmark date be the July 1, 2015.
Now, let’s consider ECE. The traditional prequalification process is flawed. Typically, owners' project managers try to pre-select contractors who they feel will be able to deliver the project before calling for priced bids. This process considers a company’s size, their work on similar projects, available people, financial strength and presentations that many call a ‘beauty contest.’
Elimination from consideration, if there are no glaring issues, occurs more to reduce the bid field to a manageable or seemingly fair number. The threshold for invested time in pre-qualification is fairly low and the list of credentials predictable. It’s a process, it ticks the box and except for avoiding pain there is no real quantifiable gain. If an overlay of predictable quantifiable performance were to be injected, the business case for ECE can be made, and the project team organised to commit to that mission.
Metrics alone are insufficient. Every constructor will have arrived at achieving better performances in different ways. There is no single model. Lindbacks' Helena Lidelow presented some instructive insights into this subject at the recent PrefabNZ conference. Lidelow’s diagrams provide examples the types of enterprise that could present in future ECE prequalification. Understanding their potential will be essential for project managers and consultants wanting to engage in SMC.
Lidelow described a range of supply chain business models or structures in construction that a pre-qualifying constructor may use to demonstrate how they organise procurement and on-site activity to achieve their measurably better performance outcomes.
Lindbacks deploys an integrated or joined up business model they translate into delivering client projects. This is their unique business model. Others will differ. However, all will share a modern repeatable construction supply chain engagement culture. Unless this can be demonstrated, there will be the risk of old, less effective construction cultures lurking below the surface.
Modern construction enterprises will need to systemise what they do and apply these methodologies across their construction platform, and from project to project. In this way, they will be able to ratchet up a demonstrable improvement cycle from a base date to the present.
These business' improvement journeys do not happen overnight; they will take three or more years. But early realisable benefits are possible. Lindbacks have been at it since 1924. For those thinking of delaying the pursuit of SMC, there are consequences. For constructors who think they can catch up later, the culture shock may prove unmanageable. Clients, meanwhile, risk being late into the market with smarter buildings, constructed better at lower cost.
Construction customers have only one immediate task: raise the performance bar for their project teams. If they want to benefit from ECE, their entire team should be able to show how they will scope and prepare to capture what should measurably be on offer from SMC.
That may require a new upstream pre-qualification process. Not all project managers are up for these sorts of leadership roles. Those that do will have developed the insights and confidence to procure better construction, smarter, faster and at lower cost. This will not come from screwing margins. Most importantly, they will understand quantifiable goals.
There is good news for clients who want to engage the potential of SMC. They do not need to be guinea pigs in this endeavour. There is a small but growing number of quantity surveyors who have experience with SMC. These professionals have accepted that measuring project benefits in the new modern construction era is different. They have accepted the inevitable shift from traditionally fabricated construction which will transform construction sites toward becoming places of assembly with high value added construction inputs having been organised and fabricated elsewhere. They already understand the substantial benefits of lowering on-site construction durations, avoidable temporary infrastructure, having fewer self-supervising elemental work packages and smart logistics management. Most can report better construction for at least eight to 10 per cent lower cost.
It is important to emphasise that these benefits will not have been arrived at by the old design, bid, build model and in the end, reliance on screwing the last half per cent out before tender award. Similarly, ECE requires intending contractors to demonstrate how their procurement methodologies incorporate collaborative pre-engagement relationships with their supply chains long before the project presented. Clients should by now have a whetted appetite to test this potential in the hands of high-quality project managers and quantity surveyors. There are not a lot of them just now.
Clients looking to capture all the benefits SMC should offer must understand that this is a mature process. It requires a redirection of consultant and contractor energy and fees to the new way of procuring projects. This is not a half-pregnant exercise.
Too often we hear of project managers and contractors lamenting that their clients had pushed to progress the traditional design and bid process so far that by the time they tested the potential of ECE, most if not all the possible benefits could not be pursued because of the time and rework cost of having to retrace earlier less-optimal effort. Clients should now be coming sceptical of what they ever got out of traditional build. They are clearly paying more than they should, they are getting buildings much later, with uncertain impairments and smartness.
Another significant transformation in modern construction is that the constructing and constructed processes are converging. Smart construction is enabling the delivery of smart buildings. Buildings that will increasingly interact with their owners and users in ways that have not previously been imagined. The Internet of Things is enabling these possibilities at a fast rate.
Importantly, insurers and financiers are starting to recalibrate the way they engage with the construction industry and built assets. It is now possible to embed digital smartness in construction’s pieces and parts from their source, to assembly and into service. The technologies supporting these capabilities are already widely used. Other industries have deployed them for decades. Construction has been held back by its traditional dysfunctional processes. But no longer, as they are replaced by the quantifiable alternate.
It is now possible for construction customers to receive their buildings with much greater assurance as to their quality, their resilience and their functionality. Financiers can now look to a future where what they fund is what they intended to fund, not the lesser good.
Insurers have the most influential interest in all of this. New procurement models already being deployed by first mover constructors are enabling project specific assurance, and for insurers the ability to rate individual buildings for their likely resilience and fitness for purpose. Insurers can also make better risk assessment of how these buildings will stand up in new climate extremes. Like they have in all other markets, insurers will be able to rate individual project team delivery capability and risk. They will be able to rate individual building risk, and price each accordingly through their lifetime. This is game changing.
Construction’s traditional design, bid and build procurement models have reached their use-by date. They are incapable of producing the smart, the assured, the more bankable and the more insurable buildings that will underpin their value in the future. The days of not knowing about, and or avoiding construction’s past shortcomings have already passed. But ECE, like other modern construction tools, is not an end in itself. It is the quantifiable benefits of SMC that will enable construction customers to expect and achieve more for less.