How to Reverse Downward Productivity in Construction Projects

Posted by Phillip Schell Oct 29, 2013 10:24:00 AM

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While there are plenty of construction-industry researchers and pundits with varying opinions on the state of the construction industry and its projected growth in the coming years, they all seem to agree on one undeniable fact -- labor productivity has been on the decline for over 40 years.

This fact has been well-researched and documented by Paul Teicholtz, Professor (Research) Emeritus with the Department of Civil and Environmental Engineering at Stanford University. His research in the area of construction labor productivity from 1964-2012 was published in AECbytes Viewpoint (March 14, 2013),  and the findings are sobering as illustrated in the following chart:

Construction Index Labor Productivity 

The Teicholtz research underscores three key areas that contribute to the drag on labor productivity:

  1. Non-integrated IT applications from design, estimating, job scheduling, job cost and procurement.
  2. Procurement processes built on pure competition versus collaboration.
  3. Paper-based system for collaboration among construction industry partners. 

Moreover, industry research from the venerable Gartner suggests there may be a link between construction labor productivity and IT investments. In 2012, Gartner IT Metrics ranked IT spend as a percentage of revenue across all major industries from banking to insurance to transportation and utililities. The construction industry came in dead last ranking 1.6% for companies with annual revenues of approximately $250M, and 1.2% for companies with annual revenue of approximately $10B.

B4 Consulting has solutions to address the pain points noted by Teicholz. Consider this:

  • B4 Consulting solution harmonizes CBS and WBS structures allowing us overlay technology to provide an integrated solution connecting design, estimating and project controls. This vastly improves budgeting and forecasting and the increased utilization of past cost.
  • Consulting believes that the procurement process needs to learn supply chain lessons from other industries, say retail and Walmart. Walmart shares all kinds of data with the supplier base allowing them to provide them with the best overall cost, not just the cheapest price. Construction companies too often uses the procurement process to shove risk to other partners. IPD and Owner Contractor Interoperability are all pointing to a more collaborative approach sharing data. Our solution offers ECM and Collaborative tools to efficiently share information in the procurement process.
  • Paper-based systems and inefficient use of data also contribute to the lack of collaboration and the difficulty in engaging the IPD, JV or OCI business models.

There are, however, a number of construction companies who taking the lead in IT investments to increase productivity. Gartner notes, "...plenty of firms are pursuing new technology and realizing its benefits. For example, Bechtel CIO Geir Ramleth says Bechtel has developed application programming interfaces for construction project teams; APIs interface with the firm's core enterprise data, enabling use of tablets and web-based interfaces. At McGraw-Hill's FutureTech conference Turner Construction SVP Richard Bach said a key investment is to consolidate enterprise-resource-planning systems in order to improve the accuracy and timeliness of a company's data and profits."

I believe the construction industry is on the verge of reversing the decades-old trend in declining labor productivity. At B4 Consulting, we see many forward-thinking companies -- from small- and medium-sized to large construction companies -- embracing new technologies. Regardless of their size, they recognize the need for a full ERP platform that integrates business solutions and lays the foundation for mobile apps and a range of collaborative and productivity tools.

Learn how to increase labor productivity construction-industry specific business solutions from B4 Consulting -- contact Phillip Schell, vice president of Industry Solutions:



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Topics: construction, productivity, teicholtz, gartner IT, IT investments, job estimating, job costing, procurement