For years, large owners have been campaigning for their construction service providers to come up with new methods to deliver projects faster, cheaper, safer and more efficiently. The industry has responded in fits and starts, providing technological advances and project delivery enhancements. But now, large owners are pressing the industry to put developing technology and project delivery advances together to rethink the way construction programs are conceived, designed and built.
As part of its overview of the owners, ENR is once again presenting its Top 425 Owners list. This list ranks publicly held companies based on the construction-in-progress figures for 2005 they supplied in federal financial filings to the U.S. Securities and Exchange Commission as compiled by Standard & Poor’s, a division of The McGraw-Hill Cos. However, many companies do not separate out their construction spending from other elements of their capital expenditures. So this year, for the first time, ENR has published a ranking of 200 publicly held corporations ranked on their overall capital expenditures reported to the SEC and compiled by Standard and Poor’s.
Recruiting To Lead
Probably the biggest issue of immediate concern to large corporate owners is the lack of personnel to do their projects. “It’s sad to say, but work force development, which the industry has talked about for years, is now a major problem in the industry,” says Greg Sizemore, executive vice president of the Construction Users Roundtable, a Cincinnati-based owners group. “We see a lot of local programs, but no comprehensive approach. Owners are not always getting their preferred contractors simply because the contractors don’t have the capacity to do the work.” He worries that this may force some of the large, multinational owners to look abroad to locate their projects.
“The basic challenges have not changed,” says Tom Weise, corporate director of facilities, materials and services at Intel Corp. “We are still struggling to make sure that good labor is available at the right place at the right time. And that’s a global problem, not just here in the U.S.” He argues that this is an issue that must be addressed now. “As the baby boomers retire, there could be catastrophic consequences if we fail,” he says. “Construction prices will go through the roof.”
Many large owners have not experienced critical shortages of personnel on their projects, but are worried. “Our projects have not been experiencing major shortages in the trades, but there are many owners that have,” says Joseph Gionfriddo, global construction manager for Procter & Gamble, and chair of the lean construction committee for Construction Users Roundtable and member of the globalization committee for the Construction Industry Institute, Austin, Texas. Neither has Johnson & Johnson had shortages in the trades, says William P. Tibbitt, J&J’s executive director of worldwide engineering and real estate. “But we have seen shortages of experienced, competent managers on the contractors’ side,” he says.
Many owners are unhappy with the industry’s inability to come up with a coordinated approach to recruiting people into the industry. And some say that owners shouldn’t have to solve the industry’s problems. “Coming to owners for leadership on finding the next generation of construction workers is like General Motors going to the consumers and asking them for advice on solving the problem of rising steel prices,” says Sizemore.
However, large owners are attempting to get involved in the issue. One owner initiative that many hope to bear fruit is the CURT Tripartite Initiative, a program to stimulate discussion between owners, contractors and labor unions. “We hope, working through the contractors and the unions, to increase the level and availability of training in the industry,” says Ricardo Aparicio, contract manager of GE’s corporate properties and service operations and president of CURT. “One of the things being considered is the need for creative approaches to recruitment and training,” adds Sizemore. For example, he asks whether an apprentice always needs to spend a whole day at work and then go to training classes at night. “These are things we are thinking about,” he says.
Going Where the Workers Are
For some big owners, one answer to local worker shortages may simply be to consider relocating the work, if not the project, where labor availability is less of a concern. “Much of the engineering on a project can be done anywhere. You can get equipment from abroad. And, with modularization, process construction can be done almost anywhere,” says Gionfriddo. He says that large owners increasingly are exploring and using offshore sites to fabricate and preassemble process elements that used to be done at the jobsite. “Owners are simply going where the skilled labor is available,” he says.
Many of the large process-oriented companies, particularly in the chemical and pharmaceutical industries, already are using modular construction and more may be following that lead. “We’ve seen several companies successfully using modularization and we are now investigating it ourselves,” says Tibbitt of Johnson & Johnson.
For many large owners, the construction industry seems fragmented and uncoordinated, resulting in a product that is the result of a sequence of disjointed operations. “Everyone says they have a process that works, but deep down, those processes work only within their particular silos,” says Weise. “The big problem is to get people to look beyond their own silos and assess the flow the construction process as a whole.”
But the advent of new technologies and some evolving attitudes in the industry have some owners see progress. “We are beginning to see a shift in the paradigm from project delivery to asset delivery,” says Aparicio. He points out that, from an owner’s perspective, a construction job is not the delivery of a project but the delivery of an asset to serve a specific function and all parties to the project should be focused on that end. “We need a greater integration of teams and collaboration among the parties to avoid a ‘not-my-job’ attitude in the industry,” he says.
Evidence of the need for a more comprehensive, collaborative approach was shown in a survey on owners’ use of program management in delivering capital programs conducted by FMI, a Raleigh, N.C.-based management consultant, and Construction Management Association of America, McLean, Va., released Oct. 18. The survey covered 171 owners doing $64.6 billion in projects. It showed that owners increasingly are looking to program management to provide a more comprehensive approach to managing the construction process. The survey showed 85% of the owners used some form of program management to deliver their capital programs. “This confirms our belief that the use of program management is growing as owners realize that they don’t have the internal resources needed to manage programs effectively,” says CMAA Executive Director Bruce D’Agostino.
Part of this push toward program management is the increasing need by owners for a more collaborative or integrated approach toward executing projects. “The survey showed that owners that treated their construction program as a single program managed by a single service provider, rather than as a series of projects to be managed independently, saved money,” says Mark Bridgers, senior consultant for FMI. This shows that collaboration and concentration in management lowers program costs, he says. And new technologies are helping to push the industry toward this more integrated management approach, says Bridgers.
Blurring the Roles
Aparicio agrees that the development of new technologies is providing the industry with an opportunity to break through the silos in the industry. “The question is how do we integrate this technology not as a toy or novelty, but as a way to change the process to make it more efficient,” he says.
CURT, the Associated General Contractors, Arlington, Va., and the American Institute of Architects, Washington, D.C., are attempting to answer these questions. The organizations on Oct. 11 announced that they have formed a new strategy group named 3xPT to work toward an industry process transformation. The group will attempt to show through practical examples how to best use new technologies to maximize productivity through early planning and collaboration. 3xPT plans to help define roles and responsibilities in the process through model contracts, promote collaboration and early contributions of expertise from all participants in the construction process and define protocols for sharing digital information.
Tibbitt, the owner rep on 3xPT, says technology will allow managers to change some basic processes to make projects more efficient. This would mean a blurring of roles for many participants, as contractors and subs would be introduced sooner and have a more input on design and management issues. “It also forces the owner to lead, and to share information widely among all participants in the process,” Tibbitt says.
For the industry, the opportunities for an integrated construction process hold out great promise, but it will take more than a snap of the fingers to make it work. “The software is now at the point where it can effect change,” says John Tocci, president of Tocci Building Corp., Woburn, Mass., and AGC representative of CURT’s 3xPT committee. “Just think of how much owners could save in nondiscretionary change orders through eliminating design conflicts at the start.”
But he points out that major impediments to wider adoption of a collaborative and technological approach to project management include owner concerns over liability, and risk avoidance and shifting. “There are elements of risk and overhead costs to the process,” says Tocci. “The opportunity for reward is so great that owners should be willing to bear some of the risk during the transition, to create a litigation-free zone. If owners want this, they should bear a portion of the costs and they shouldn’t kill us if we fall off the new bicycle we are learning to ride.”
The transition in construction from traditional, narrowly tailored roles and responsibilities, to a broader, more integrated approach where lines are blurred, will not be easy. “We changed our processes to reflect the new technologies available in the industry,” says Weise of Intel. “But we found that changing behaviors may the the hardest thing we did.”