We build the stuctures for a many reasons, to live in them, to drive on them. To generate or help even facilitate certain type of services, such as provide electricity, or power, or water, and many other reasons. But in general, we do divide construction industry into four types, which are, first, building construction. Examples of a building construction could be schools, universities, hospitals, theaters, commercial office towers, warehouses, government buildings, commercial malls, and recreation centers. The second type is residential
construction. It could be a single family homes, a multi-unit townhouses, high-rise apartments, or even condominiums. Also heavy engineering construction, such as dams, tunnels, bridges, highways, airports, urban transit systems in general, ports, pipelines, water treatment plants, and communication networks.
Last type is industrial construction. Examples of industrial construction, petroleum
refineries, petrochemical plants, nuclear power plants, steel mills, and heavy manufacturing plants. Also, our industry continues to evolve. Which is going to the evolution toward building information modeling or what we refer to as BIM, B-I-M. Another example is land surveying.
Now there are many reasons why our industry is evolving. That could be to help increase safety, or quality, or it could reduce project costs, or project time, or schedule. And last but not least, we also started to consider many other factors.
There are nine examples of unique industry characteristics:
1. Fragmentation
Fragmentation market is defined as a marketplace, where no single organization has enough influence to move the industy in a single direction.
2. Profitability 3. Cyclical Nature
The relation between residential construction and non-residential construction.
4. Workforce 5. Lowest Bid 6. Funding 7. Contracts 8. Product Output 9. Multiple Stakeholder
The R and D research and development benefits usually are long term even if the costs arise at the present, unfortunately, R and D has received less attention in our industry compared to other industries.
There are ten trend examples are shaping the industry’s future : 1. Project Complexity
2. Aging in Infrastucture 3. Global Presence 4. Gap in Investment 5. Climate Change 6. Sustainability 7. Urbanization 8. Workforce 9. Global Risks
10. Complex Regulation
Now with the examples of our industry characteristics, and environment that I just represented, our industry also do face some internal challenges. Now just a few
companies, they actually institutionalize such a process because projects rely heavily on the planning and expertise, companies often seem to put a greater emphasis on defining the final product than when planning the actual construction and process. Another industry challenge is the shortage of young talent and people develop and also that in adequate gender diversity and the little job security, again, the cyclical nature we spoke about in the previous
section. Companies do struggle to attract talent recruits, other industries are doing a much better job in engaging more effectively in internal people development initiatives.
We do have at the moment around five generations in our industry, in which all of them have unique characteristics that we need to understand carefully to be able to manage, to attract talents and not just to attract and hire talents, but also to retain talents in the companies. The second generation after that came is the baby boomers, which born between 1946, to 1965 in that period, they are also well known of being Workaholics. And also they do expect some degree of difference to their opinion, not a lot but some degree. Generation X, born between 1966 to 1980, they are very comfortable with authority and will work as hard as needed.
Not only that, they are also a very, what we call goal or achievement oriented generation. Generation Z. As the environment of work in our industry is still a
fluid, Generation Z will bring a new set of factors to the job site that will change our most creative minds to solve moving forward. Other internal challenges that I would like to share are, 1, lack of innovation and delay of technological adoption. If you think about it, the likely the lifeblood of any industry is the R and D research and development.
The benefits of R and D usually are long term even if the costs arise at the
present, unfortunately, R and D has received less attention in our industry compared to other industries. My personal opinion, we need to shift this term in our industry from the R and D to what I call the R and I, research and development shifted to the research and innovation. I believe it is more relevant to the nature of our services and work what we do in the
industry. Conventional construction that process is sequential.
We have input by the owner to the designer, we get them engaged designers engineers, and then to the constructors and general contractors to build on parallel to that and sometimes after that, we link it to the suppliers. Another internal challenge weak project
monitoring. Manufacturing industry they actually are really good in tracking data If
something goes wrong, the manufacturing industry can quickly identify the root causes and implement remedies. Now our industry in general, yet are not doing that good of a job in using data.
Now, let's move to the second level of engagement or that second actor to this
transformation, which is government. Government needs to encourage, and support this industry transformation. Actually, government can influence the engineering, and
construction industry in various ways. As a regulator and as a policy maker on many critical areas such as health safety and environmental conditions in and around construction.
The government should perform its role as efficiently as possible. To mitigate adverse
effects, especially on productivity, by the way, it also can influence the speed and direction of technology development, and the future. Construction permit processes. Another good best practice on this regard is to digitize the construction parents.
That use of technology not only reduces the cost of the approval process, but also enables regulators and practitioners to cope with the rise level of complex building the standards
particularly promising in this content. Next is the development of building information modeling days software tools, the BIM tools that are capable of automating the verification of the building code compliance. Examples of these obstacles are, of course startups such as fees on important, imported construction services, insufficient recognition of foreign professionals qualifications, and strict capital requirements for foreign firms, all of these barriers need to gradually be eliminated by national government to help make the global engineering and construction market become more and more a reality. In addition to international market opens and engagement, regulators should promote diversity and competition.
In the local construction sector by many ways, encouraging participation from a broad variety of small and medium sized enterprises or SMEs. In this regard, local authorities can definitely promote the formation of alliances between international national and local construction firms. A third example under this area would be the promotion and funding of research and development technological adoption and education. Actually speaking of which, recession development investments among the engineering and construction companies are, as mentioned before, surprisingly small, so national governments can create a better environment for developing technological innovation.
They can do that by providing appropriate support to companies as well as
academia. Moreover promoting the recession development is just the first step. Of
course, with that being said, the construction workforce and engineers need to be upskilled appropriately with a regard to new technologies and processes. But also government can offer training programs in collaboration with these companies.
In addition to the government role as a policy maker and regulator, the public sector also has an immense impact on the engineering and construction industry through its role as also a project owner. Government procurement accounts for a major share of total construction expenditures worldwide. Governments need to actively manage and coordinate public sector demand and play a major role in driving this change in our industry. If you think about it, when it comes to compiling the public sector, the Project Portfolio and Pipelines, there are many multiple objectives that need to be considered.
Somehow they are conflicting to some extent to be able to develop a strategic procurement plan by the public sector. The United Kingdom launched several years ago an initiative that supported the management of the public sector Product Pipeline, for example, the project pipelines for 19 sectors are being published online and updated every six months. Another example I would like to show based on our work also, is the strict implementation of transparency and anti-corruption standards to ensure integrity in the public contracting and thereby promote efficiency and fairness toward bidders. Let's take an example here, the C-0- S-T or the construction sector transparency or sometimes referred to as the Infrastructure Transparency Initiative, is the leading global initiative, improving transparency and accountability in public infrastructure.
Last example I would give under discussion would be the idea of considering the whole lifecycle oriented procurement. Now, as mentioned in the start of the
course, traditionally, public procurement has largely relied on design, build, build delivery methods with a strong tendency towards the lowest bid. The new procurement models are being used in numerous major public projects around the world. Now, to improve the bidding schemes in respect of innovation and construction performance, government should for sure review the asset, the processes specifications in light of newly available technology and materials as well as other procurement objectives such as total life cycle cost and sustainability.
Let's take an example here, and we will wrap up with the session the Seattle's largest water treatment facility, which provides around 70 percent, seven zero, 70 percent of the city's drinking water, was procured on the basis of a Design-Build operate contract. That produced cost savings of around 30 percent relative to the city's initial estimate and enabled the state of the art water treatment technology that had previously been inaccessible to the public sector.
The first area is strategy. Let's take a few examples on this area. As mentioned in the start of this course, about the industry characteristics in specific, there is a fierce competition in the market, it is so fragmented, and margins are really slim. In some cases, as I mentioned, five percent or much lower to one to two percent only.
Therefore, firms are seeking opportunities to differentiate their business models. To differentiate the business model, companies need to find the right balance between
developing customized solutions on specific service or becoming more general and thereby achieving economies of the scale. Now, in today's construction markets, many engineering and construction firms, E&C firms, are struggling to develop the required know-how internet. One strategic approach to overcome this is to improve collaboration or partner with, merge with or even acquire other companies.
Now, when speaking of mergers and acquisitions, this will be an option when the company complements the portfolio to the other company. Or it can be a company that mustard a specific rising technology or certain technological and digital services, or been pioneer in specific geographical location, just to name a few. Which we actually started to see more of these M&A transactions. Especially we saw that now in the rising promising startups in AEC industry.
The M&A transactions with companies that they are technology-based service firms, are few examples we found in the literature, especially in the last two to three years. A global
positioning giant Trimble snapped at Viewpoint for also, based on the literature 1.2
billion. The Canadian Company, WSP, acquired Parsons, Brinckerhoff, based here in the US from British company, Balfour Beatty. Canadian also Company SNC acquired
Atkins, again, just to name a few.
Now moving forward, the industry should also invest in design and systems and as well as the products in general, but they need to consider the improved life-cycle
performance. First, BRE innovation parks, they have several global showcases that
experimentally incorporating new sustainable construction technologies with increased life- cycle performance. For example, and insulation material originally developed by NASA, has been adapted for use in window blinds that control heat in different seasons and can save up to 40 percent of energy cost during the operation phase of the building. Another company called A View, I had the pleasure to communicate with their founders in several occasions and several time.
Changing the mindset from an End of Life product to an End of Use Product. Now, moving toward the last example under strategy. As you know, the construction industry, usually a local business in which the local relationships, assets, and resources are extremely
important. Now, when entering a new country, you can enter by either acquiring and buying local company or organically grow in that area by taking small product and grow slowly, or partner with usually local firms.
Actually, the business strategy is to cooperate with local firms. In that way, the company can combine their own expertise with their new partner's local knowledge and relationships. The value of local partners is particularly high. In respect of understanding one national or
regional regulatory requirements, or dealing with the local labor force and also negotiating your way through culture.
This initiative is focused on developing a global construction and engineering community by adding and leveraging on the more than 100,000 participants and learners that came from 190 countries and took our construction management certificates on Coursera. Which there are four level explained in the survey in participating in our future GLCM studies and last enable us to better understand your perspectives on the industry in general and what you consider to be critical issues. If you have other colleagues from that construction engineering
industry, who are interested in joining, we do encourage you to forward to them this survey link to be able to be included in this network.
