The largest municipal bankruptcy in U.S. history, caused by bonds issued for the construction of sewers in Alabama's Jefferson County, and the looming bankruptcy of Stockton, Calif., have brought home the reality that construction professionals cannot continue to remain oblivious to the economic risks associated with construction projects and programs. My position is that the construction industry's dependence on government support prevents stakeholders from clarifying the risks in construction and coming to an agreement on how the construction economy can remain systemically sustainable.
A recent book, "Modern Construction Economics" (Routledge, 2010), illuminates some of what I believe is behind the industry's predicament. Edited by Gerard de Valance, the authors describe the fragmented nature of construction, with its multitude of contracts, subcontracts and delivery methods, causing the players to externalize risks rather than holistically define risks and risk exposure of construction-project stakeholders. Part of the problem is that construction managers are often far removed from the overriding economic drivers of construction projects and programs. The sobering message of the book suggests there is no single economic theory universally understood by participants in the construction industry. The authors call on researchers and practitioners to take a deeper look at the purpose of what they do and ground their actions in coherent economic theory that is methodically tested from time to time with credible evidence, rather than the opinion surveys commonly relied upon by academic researchers in construction.