Is COVID construction’s Uber moment?
In 2011 Uber launched in San Francisco, allowing users to hail a luxury car for 1.5 times the price of a taxi. It now has annual revenues in excess of $10Bn and has decimated the traditional taxi industry in many cities around the world.
The taxi industry was ripe for disruption. Its basic service offering had not changed in years, it was slow to adopt new technologies and the customer experience often left a lot to be desired.
For those involved with the construction industry, this may sound very familiar.
The way that roads are constructed has not changed substantially since Roman times. Productivity growth in the construction industry over the last thirty years trails that of other significant industries by 25%. Major projects are often completed late and over budget resulting in lengthy disputes that leave all but the lawyers with a warm and fuzzy feeling.
So why hasn’t the construction industry been disrupted?
The construction industry is heavily regulated by all levels of government and barriers to entry are high, especially in the marketplace for major projects where a substantial balance sheet is a pre-requisite to compete. This could also be said of the taxi industry though, where limited taxi licenses were tightly held and infrequently traded for large sums of money.
Where the construction industry differs from the taxi industry however is in terms of the diversity of its customer base. The market for taxis is made up of millions of private individuals whereas the market for construction, particularly construction of infrastructure, is dominated by large government agencies. Their buying power allows them to dictate the terms on which projects are procured and delivered.
Furthermore, these agencies tend to be very conservative in their approach, worried of the potential political fallout if a project runs in trouble. Increasingly, this has led to Contractors being asked to allow for all project risk in a firm lump sum price estimated in a short tender window without being able to rely on the information given to them.
For their part, contractors have been willing participants in this process which has turned into a game of survival as risks eventuate, margins disappear, and lawyers are called in.
In this fight for survival it can be no surprise that there has been little focus on innovation.
The COVID-19 pandemic however has the potential to significantly disrupt this unhappy status quo.
Governments are relying on the construction industry to lead the economy out of recession.
The sheer volume of work planned will require a major change to the traditional rules of the game if it is to get constructed.
It will require significantly increased collaboration between all stakeholders to make projects truly shovel ready, to develop the capability, capacity and skills to construct them and to leverage the social and economic benefits that can flow from them.
If we get this right, we can also develop a platform for innovation, efficiency and value outcomes that the traditional model simply does not provide
COVID can be construction’s Uber moment but we all need to be up for the ride.
Independent Strategic Infrastructure Advisor and ADR Practitioner
4 年Attempts by government to use infrastructure spending to achieve social outcomes such as more jobs, apprenticeships and skills development, greater workforce diversity, and indigenous and SME participation are also compromised by the commercial dynamics that a fixed price contract creates. Tying the contract profit margin of the non-government participants to the performance of the project against these social outcomes (as well as cost, time and quality outcomes, of course) would see governments getting much greater 'bang for buck'.
Project Manager
4 年I believe that the industry is ripe for a disruption. I have noticed and built buildings where as you mention above the information can not be relied upon. The skills of architects to design and detail buildings has gone from a lot of the newer entrants and the older have cut back on the detailing to compete. Builders appear to accept this as normal now with the race to shovel in ground. Margins are tighter across the board. BIM i thought would be the disrupter but i think it might be a combination with prefabrication which may cause the change of the industry. Time cost quality we all understand as the unholy trinity. Balancing these seems to have been lost by some builders and sub contractors! Cost savings through defect reduction and minimisation of variations due to design are currently the only way to achieve the required margins now.
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4 年Jon Davies, this is another good article from you and this one provokes the 'potential energy' that the industry is sitting on. I love the analogy with UBER too. We have the choice to sit back and wait for Governments and clients to change their model (like the taxi) or collaborate and develop a model they can't resist but buy. I felt your article points to the latter and along the lines of what UBER did. The current technology platforms in construction and the innovation we have been successful with came from individuals like us who got together and took the next/ first step. I am asking myself and am challenging my peers in the industry - what's that small step I can take towards this vision? Letting go of the opportunity COVID-19 has created would be wasteful. Interested to discuss this further.
Specialist Quantity Surveying Consultant (Major Civil/Structural Works)
4 年A good starting point would be for the extremely conservative and inward looking QS profession to become more adventurous and to take a much more proactive, innovative, creative approach to design phase cost forecasting ("Cost Planning") and tender phase documentation and the integration of these functions into the project management process. Every project is a one off, every site is unique and the design/construction process will remain a traditional fragmented trade based process much as it has been since the times of the Romans. But with much of today's digital technology, the possibilities for refining , enhancing and speeding up the process are numerous. Clients will also, of course, need to abandon deep rooted conservative attitudes, and embrace new ideas more readily.