Shaping the Future of the Construction Industry

November 1, 2017

While some industries have invested in the development of collaborative ecosystems and have significantly benefited from increased innovation and productivity, the culture in the construction sector remains divisive, adversarial and has been slow to adopt processes and business models that promise to improve our productivity.

This paper explores how other industries have adapted to ecosystem models and embraced the “creativity revolution”. A central aspect of these ecosystems is Building Information Modeling (BIM), which can be a collaboration enabler as it encourages the involvement of all stakeholders earlier in the process.

Many in our industry are struggling with information management. While Information Management in the construction industry is a challenge, it isn’t the problem.

The Challenge

Construction of commercial buildings is one of the largest manufacturing industries, consisting of a large number of disparate companies involved in designing, constructing, and operating buildings. This fragmentation of the industry is a major barrier in changing current practice in order to drive greater levels of efficiency and results in projects that:

• take longer to build,

• take longer to commission, and

• have less than expected operational performance.

During the design phase, there is often not enough communication between all parties involved, quite often due to the contract type.

Currently the construction industry is driving the BIM agenda as they are gaining the most value in quantification, organization and coordination. Designers have tunnel vision, very little discussion or thought of facilities management during design and even construction.

Our industry’s performance record is poor with more than 90% of mega-projects above budget and behind schedule1. The biggest reason for this poor performance is that the traditional contract models and processes are disintegrated and adversarial. The challenges include:

• Stakeholder fragmentation

• Lack of cooperation / collaboration and sharing value

• Limited knowledge transfer between stakeholders

• Project management is fractured

Our objective is to manage projects to create certainty on schedules, budgets and operational performance. The biggest risk to cost and schedule is repeated work, loop-backs in the process that often are a result of not involving all stakeholders earlier.

Although the industry is looking to BIM to enable collaboration and interoperability, it’s not sufficient. We will not solve our challenges by mere adoption of BIM. The management of BIM culture and processes are imperative.

The Idea

Earlier involvement of all stakeholders (owner, architect, engineers, construction managers and operators) in a collaborative process provides the means to improve project efficiency as it is critical to minimizing the re-work and process loop-backs.

A study of the evolution of organizational structures provides some insight into how we can achieve this. When you think back to the evolution of organizational structures, we started as “artisans” or individuals with no corporate structures (Figure 1). In this age, an artisan could produce a high-quality product for the local market. Their challenge was low volumes and high cost. But as society expanded throughout the agricultural revolution, we demanded higher volumes at lower costs.

Figure 1: Evolution of Corporate Structures

This introduced the industrial revolution and the hierarchical organization, which has served us well for 100’s of years. With mass production techniques refined and the availability of global markets, low cost manufacturing centers started to arise all over the world. The challenge then was that the consumers wanted more complex products.

This integration of complex systems led us to develop the information revolution and the “matrix” organization that cross links vertical markets with domain experience.

Many of us work in this kind of structure today. But hierarchical and matrix organizational structures cannot keep up with the velocity of change in the

market. Innovative solutions are coming faster and faster and we just can’t keep up.

The structure that is emerging to address the challenges of velocity and innovation is the “ecosystem” structure.

This will drive and support the “creativity revolution” (which is what we are experiencing today) by establishing a smaller group of stakeholders that are collaboratively working on a common project, each with alignment of objectives and personal motivators, even though the participants may work for different companies.

Ecosystem models such as the Joint Contracts Tribunal (JCT), Collaborative contracts, Integrated Project Delivery (IPD) and project alliance (PA) are project delivery methods and involve:

The development of multi-stakeholder contracts with the key stakeholdersClear definitions of roles and responsibilitiesClear understanding of the decision-making processDefined procurement processesClear understanding of the risks related to each stakeholder andAn open book practice

The basic idea of an ecosystem is to provide an operational model where risk is borne jointly and reward is shared on the basis of the success of the entire project. This encourages all stakeholders to consider other’s views and collaborate more efficiently for the best of the project. The ecosystem model also allows for the integration of a wide range of perspectives and experiences giving an opportunity for innovation.

However, this structure demands the selection of stakeholders based on compatibility and mutual respect, which, at times, can limit the composition of the team.

All stakeholders must enter into a “development agreement” with the owner which outlines the project’s target cost and incentives based on the owner’s goals.

As the project progresses and the stakeholders agree on the project cost and plans, the owner will sign the implementation agreement.

In these ecosystems, it is critical that all stakeholders understand and agree on the project processes in order to avoid the inefficient loop-backs and repeated work.

Figure 2: After defining the processes, identify the work-products, the stakeholders involved (colored dots), the loop-back points and who can trigger them. By involving those stakeholders early in the process minimizes the risk for re-work. The top work flow shows the traditional construction process with periodic hand-overs and loop-back points. The bottom work flow shows the ecosystem process where stakeholders are involved earlier and help to minimize the risk of loop-backs and re-work.

This means that the process must be clearly defined, identifying the work-products and those that collaborate in their development. It is then straight forward to identify the stakeholders at each loop-back in the process and to ensure those stakeholders are involved early enough to avoid a decision to go backward (Figure 2). These loop-back points define the points of highest risk in the project.

This methodology also identifies the cultural issues that need to be addressed at the outset of the engagement.

This Information Management Strategy is not just about data and documents and the integration of systems. It’s also about the processes, governance and decision-making method. The team needs clarity on who is responsible for which work-products, at what time, and how they are going to be used.

With stakeholders involved earlier in the process, the Information Management Strategy can also reduce the challenges during document “hand-overs”.

The JCT collaborative contracts and Integrated Project Delivery (IPD) are examples of an ecosystem approach that many in the industry think can make the process more collaborative. These structures promote discussion at the start of the project to break down the silos between all the project stages. However, much of the silo’d nature of the industry is due to the fear of losing one’s unique value and not accepting the benefits of this type of collaboration. A central aspect of these ecosystems is Building Information Modelling (BIM), which can be a collaboration enabler as it encourages the involvement of all stakeholders earlier in the process.

The Impact

The transformation to ecosystems models can impact costs, schedule and asset performance. Ecosystems have been shown to be effective in a number of projects1, but are still relatively rare in the industry today.

Other industries have been successful in implementing these collaborative ecosystems. Both the Oil&Gas and Aerospace industries create assets of similar value and life span to the construction industry. However, the Oil&Gas companies have developed as strong culture of collaboration with the oil field services industry, partnering on many projects, improving cost and schedule certainty and a focus on environmental improvements. Similar to the construction industry, the Oil&Gas companies were originally fully integrated. As the sector matured, the companies divested the non-core capabilities giving birth to the oil field services sector. However, they stopped short of fracturing the industry by maintaining control of the asset life-cycle.

All stakeholders in the aerospace sector maintain a life-long interest in the assets they build. While the industry has developed a broad services sector, they have maintained a collaborative culture. This is in strong contrast to the construction industry that is fractured; stakeholders have limited interest in the asset performance once their role is complete.

The impact on these industries has been profound, creating a healthy environment that encourages creativity and innovation in addition to process efficiencies, cost and schedule certainty and asset performance. In order for the construction industry to enjoy these benefits, we need to re-invent the industry to an ecosystem model.

The Barriers

The change of culture and a new way of thinking will be a significant challenge to our industry that is mired in traditional processes. Ecosystems have been shown to work well when all stakeholders are willing to work in an open and collaborative environment. However, when this is not realistic, the project team will return to the current challenges of document hand-overs and a sub-optimal process. Having the ability to shift culture requires the willingness to accept managed risk and reward as opposed to maintaining the mindset of first proving it elsewhere.

The Way Forward

The adoption of collaborative ecosystems combined with the modernization of traditional processes and the introduction of information management technologies will provide the environment necessary to support the needed cultural change in the industry.

This shift to ecosystems will focus attention on a culture of cooperation and collaborative processes, integrating all stakeholders at appropriate points throughout the building life-cycle. Ecosystems break-down organizational boundaries and creates the environment needed to deliver improved efficiencies.

As ecosystems demand establishing mutual trust and respect within all stakeholders, we recognize that this structure is not realistic in all projects. However, those organizations that can evolve to support ecosystems will benefit from improved productivity.

About Mark Chidwick, Scius innovations

Mark Chidwick is a certified management consultant providing consulting services to a variety of industries in the energy sector.

For over 25 years, Mark has provided services including program and project management, change management, thought leadership, technology leadership and development and market research.

Should you wish to expand on this topic or have any questions on how your organization can benefit from ecosystem models, please contact Mark at mchidwick@scius.ca.