Take a step back for strategy
February 20, 2018 by David Bowcott
Late last year I was asked to speak at a Cities conference that was put on by Builtworlds, a network and community that links key stakeholders of the construction and asset management industry, with those in the tech sector. Matt Gray, co-founder of Builtworlds, explained in his opening remarks that the event was created based on his own experience working in construction.
“When I was working in the construction sector we would pull drawings/RFPs, bid the work, execute the won work, and leave the job at substantial completion. We really only saw the structure we built and didn’t get a full appreciation for what that building meant to the city in which it stood,” said Gray. “If the construction sector could take a step back from its primary role and take a wider view beyond just the construction phase, it could unlock great potential. This is why I’m doing a conference on Cities. Cities represent several construction projects coming together to create a quality life for every citizen.”
This statement struck me as profound, and I think we can agree that it’s timely given the global changes we’re witnessing.
Cities represent several construction projects coming together to create a quality life for every citizen.
Design firms and contractors have so much untapped value to offer society and the economy. Who knows better how to get the most out of an asset, than the team that created it? When something goes wrong with a bridge, or a building, or a power plant, the owners rarely fix it themselves, they almost always call the construction industry. Further, the construction sector has a lot to offer governments and city planners as they organize assets in a way they deem to be the most efficient for the citizens that live within its boundaries. Construction has a lot of experience around integrating various asset types to ensure they operate most efficiently. Just look at some of the mega transit projects that bore tunnels underneath utility dense city streets and how they link transit stations to other commercial, residential and industrial facilities. They are the creators of the bones, arteries, veins, and organs of the city.
It’s a common belief among industry exerts, that the construction sector is on the brink of significant change. The following are examples of how it will evolve to encompass a bigger role within local and global economies:
New Delivery Models – The past 20 years has seen a migration away from the traditional design-bid-build model to a multitude of alternatives (Design-build, integrated project delivery, P3s or design-build-finance-operate-maintain, CM at risk, facilities management, etc.). Owners and construction stakeholders are experimenting in the hopes of finding a more efficient and productive way to build, and even operate assets.
Horizontal and Vertical Integration – Construction stakeholders are expanding their role (especially the larger ones). Some contractors offer design, construction, equity/finance, facilities management and even own their supply chain.
Technology – Never has there been more new technology solutions at the fingertips of construction contractors. Some nations like the UK, Germany and the US have government owners that are mandating the use of BIM. Others are starting to mandate the use of technologies born out of BIM. Don’t even get me started on the digitalization of the physical world and building nervous systems for all assets.
Total Cost of Ownership – More owners are starting to recognize construction costs only represent 10 to 20 per cent of the present value of all costs associated with their asset — 80 to 90 per cent of the assets’ cost comes from the operations. How can the construction sector help owners save 30 per cent on their operational costs? I guarantee if you can prove to an owner they can save 30 per cent on their operations, they won’t be so concerned if the construction budget goes up.
Much of the change that we are witnessing, comes from a few brave construction stakeholders who decided to take a step back from their primary role of birthing assets and decided to engage owners, financiers and governments to see if there might be a better way to design, build and operate assets, and even improve the efficiency around how all assets are organized and integrated. Taking a step back and seeing the big picture, and where you fit in that big picture, is the easiest way for you and your company to plot your ideal future path.