Construction industry firms and professionals working globally will find opportunities in markets that are fast-developing and changing over the next two decades, but they must prepare now for challenges that clients have not yet fully expressed or even recognized, executives told attendees at ENR’s Global Construction Summit in New York City on Sept. 10.

Uwe Krueger, CEO of U.K. design firm Atkins, noted how technology, particularly digital engineering, can meet customer demand and industry’s need to boost innovation and competitiveness. Terming firms “slow to innovate” and citing examples of “stunning incompetence” in project management, he called on the industry “to hold up a mirror to itself.”

Krueger said a Chinese contractor’s construction of a 57-story high-rise in China in 19 days using modular technology “demonstrates that the future is here, but it’s not evenly distributed.” The construction sector “is ripe for” disruptive technologies such as those created by Elon Musk and his firm Tesla Motors, he said.

The CEO also noted worsening infrastructure funding gaps. “The challenge is not money,” he said. “It is matching capital to suitable, financeable projects. So, what role can we play as an industry … in helping to attract investment to the infrastructure sector?”

While public-private partnerships are gaining in some global markets, a panel of Global Summit experts pointed to challenges elsewhere, particularly in the U.S., and misconceptions about the delivery system. “We are in one of the most competitive environments in a long time,” said Bryn Jones, managing partner at InfraRed Capital Partners. In the U.K., the government “is in austerity mode, and the P3 market is “not vibrant,” he noted.

P3 Education Needed

Nuria Haltiwanger, CEO of ACS Infrastructure Development, pointed out that the U.S. has a “very different way of procuring infrastructure,” since developers have to deal with individual states and municipal entities. She said project financials are always compared to what the costs would be using the tax-exempt bond market.

Jones emphasized that P3 is a “service being provided, not a financing exercise.” Even when a project went into bankruptcy, the public sector still got its roads built; it was the equity investor who took the hit, Haltiwanger noted.

Richard Fierce, a Fluor Corp. senior vice president, explained that, on P3 projects, “we don’t play if we are not an equity investor and part of the design-build team.”

Panelists noted gaps in owners’ understanding of P3 approaches. “In the U.S., there’s an education process that has to happen,” Haltiwanger said. She and Fierce are active in the Association for the Advancement of American Infrastructure, which educates officials on P3 life-cycle cost advantages, risk-transfer issues and how to accelerate project delivery.

Cumhur Kaur—deputy managing director of Turkey-based TAV Construction, which built the $1.2-billion expansion of an airport in Medina, Saudi Arabia, using the Gulf region’s first P3—said the approach is “not a free-of-charge investment by the private sector. There is a lot of risk.” He said, “Education issues are tougher in developing countries,” particularly when “political stability is not there.” Even so, Qatar is among the Gulf nations that are set to use the approach on planned projects, speakers noted.

Graham Robinson, director of London-based Global Construction Perspectives and Oxford Economics, warns that the fragmented P3 system in the U.S. must be resolved before the nation’s deficient infrastructure will become a greater drag on the economy. “There are literally trillions of dollars sitting out there looking for a home,” he said.

Markets Shift

In a preview of a detailed global outlook through 2030 to be published in November by the market forecasting firm, Robinson highlighted the accelerating shift in construction growth to emerging markets (see chart). In 2005, over two-thirds of construction was in the developed countries. “By 2030, the trend completely reverses,” he said.

Last year, China made up 28.7% of the global construction market, compared to 17% for the U.S. However, report data confirms the Chinese market slowdown and more construction capacity heading abroad. “China has a lot of money to spend in  foreign countries,” said Robinson.

He predicted that six of the 10 largest global contractors will be Chinese firms, which will bring materials, equipment, labor and other supply-chain components to markets such as the U.K., which Robinson says is growing at twice the pace of other European Union countries and faces a “skills shortage.”