According to McKinsey and Company, 98 percent of all construction mega-projects (projects worth hundreds of millions of dollars or more) experience cost overruns of at least 30 percent. In many instances, these overruns are due to the inability of the construction industry to complete these projects on time. The truly startling statistic is that 77 percent of mega-projects are experiencing cost overruns of 40 percent or more.
In 2013, the global construction industry completed $6 trillion worth of mega-projects and lost money on many of them. The value of the world’s mega-projects is expected to reach $13 trillion by 2030, and that is due in part to the huge bump in construction that is expected to take place in New York City. Should contractors be concerned about the low construction productivity numbers throughout the industry? A lack of new technology in the construction industry is hurting more than just productivity, which means that the construction industry must get better at developing solutions to its problems.
How Much Could Productivity Save The Industry?
Obviously, being able to eliminate 30 percent in losses on $6 trillion in projects with improved construction productivity would go a long way towards helping companies to become more profitable. However, Construction Dive notes that every one percent of improvement on productivity would save the construction industry $100 billion per year. That means that the industry could realize tremendous cost savings if it could just find a way to get back to meeting its minimum productivity marks, and then improve them by one percent. But how can this be accomplished?
The construction industry has traditionally been resistant to change, and that means that engineers tasked with creating new technology are becoming frustrated at the lack of integration their new ideas are getting. Top rate design and engineering talent that would normally be the answer to the construction industry’s problems, is looking for work in other fields. If the construction industry wants to start catching up to the rest of the world, then it needs to start becoming more accepting of new technology and encourage development.
Where Does The Construction Industry Rank In Development?
The World Economic Forum noted that the construction industry has seen almost no increase in productivity when compared to other world industries over the past 50 years. A study released by the WEF noted that the construction industry, more than almost any other industry, is resisting the advance of digital technology and not realizing the full economic benefits of utilizing the latest technological developments.
The study noted that the construction industry faces several problems if it does not break its resistance to technology and start encouraging development. With the number of mega-projects set to rise over the next 15 years, it is safe to say that the construction company that embraces technology and increases productivity will find itself very busy and very successful.
What Is Being Done To Solve The Problem?
Mobile technology is at the forefront of construction productivity improvement at the moment. There are many new apps being developed that are helping to improve project management and make projects more efficient. Mobile technology is also being used to investigate new ways to automate the construction process, to speed up production and reduce costs.
Another step being taken towards increasing productivity is employing proven business efficiency methods such as Lean Construction Methods. These are methods that are modeled after the Lean manufacturing and production processes that help manufacturers to cut costs by reducing the inefficiencies in the system. It is estimated that construction companies can save as much as 15 percent in overall costs with Lean Construction Methods, and reduce work schedules by up to 30 percent. This could help the construction industry to get back to even in its productivity, and then set the stage for money-saving production ideas.
If the construction industry does not start embracing new technology, then the outlook for productivity in the industry is bleak. At this point, large construction project owners are desperate to find contractors that can finish large projects on time and within budget. In New York City, the increasing needs for office and residential space within the five boroughs means that there are going to be more projects that need to be done. If construction companies do not start to inspire innovation, then there may come a time when construction productivity losses could cause economic problems around the world.