Adopt relational contracting to promote a collaborative project environment instead of one based on conflict.
However, there are examples of closer collaboration generating substantial benefits. In particular, relational contracting is starting to become more prevalent in Australia, the United Kingdom, and the United States. And leading Southeast Asian energy company PT Energy Indika saved 10 percent of its costs thanks to a collaborative approach. Participants noted that collocating the entire design and build team has hefty advantages. For London’s Heathrow Airport, for example, bringing together the deep domain expertise of a large energy and construction firm and the client’s intimate knowledge of the asset helped produce quality technical results quickly.
Private-sector project owners are leading the move toward greater collaboration. For the public sector to fully engage, it will need to move away from relying on punitive contracts and develop the capabilities to ensure that public interest is being protected. Across both the public and private sectors, this transformation will require owner organizations to become more sophisticated contributors in the design and construction process. To realize the benefits, this change will also require more data transparency and the involvement of stakeholders earlier in the project.
“The pace of change of innovation and technology growth has to be matched by an adequate improvement in the pace of process innovation and sophistication as well. And we’re seeing the emergence or the need for a common platform for owners, developers, contractors, and subcontractors to speak a common language, function around a common contract, and have common incentives.”
—Mukund Sridhar, Partner, McKinsey & Company
The construction industry has a series of capability gaps that need to be resolved to improve productivity and performance. Currently, young engineers tend to be moved from one project to the next, without exposure to the wider project ecosystem. They are thus unequipped for weathering challenges associated with building and leading a successful team. In particular, participants cited stakeholder management, conceptual thinking, and owner project management skills as core areas where improvement is needed.
Organizations should start looking at different ways of upskilling their workforce by supporting employees’ participation in continuing education such as MBA or apprenticeship programs in a range of industries. Participants expressed optimism that these young employees are more likely to stay in the industry when equipped with the right skills to perform.
“I think it’s very clear that organizations need to think about changing their culture. I think they need to develop a learning culture, a purpose-driven culture, and a collaborative culture.”
—Greg Stanmore, Partner, Spencer Stuart
Participants discussed increasing evidence of construction projects innovating with processes, technologies, and new materials. They unanimously agreed that the industry is on the verge of disruption as advanced materials, connectivity, data and analytics, and technologies such as Building Information Modeling (BIM), 3-D printing, and augmented reality/virtual reality (AR/VR) are poised to dramatically change how owners and contractors approach work across the project life cycle. MGI research shows that greater adoption of such technologies could support the step-change in productivity so greatly needed across many parts of the industry.
For example, off-site modular construction has become prevalent in the affordable housing market. In the United States, Katerra has dramatically reduced materials waste by moving work from construction sites to manufacturing facilities. At the other end of the spectrum, Bechtel’s Curtis Island development successfully deployed industrial modularization, enabling the construction of a project that would have been significantly more complex through conventional means. We are also seeing technological developments—such as drone-enabled 3-D models being used throughout the life cycle in some countries, including China and India.
To create a step-change, companies need to embrace a culture of innovation. The construction industry should learn from sectors or other industries that have successfully made this shift. For example, the mining and resources sector uses automation of trucks and sensor-enabled processes extensively. Infrastructure industry leaders need to aggressively adopt this change to ensure that it filters down to the smaller players. Experience demonstrates that if owners and contractors agree to use a system, the rest of the ecosystem will follow. To facilitate the process, the government could establish an independent body to provide guidance and recommendations on various practices and technologies, as has been successfully done in other industries.
“Digitalization through 5-D BIM technology combined with prefabrication in modular construction will be the keys to helping our industry catch up with advanced industries.”
—Thomas Wolf, Chief Executive Officer, RIB Software SE
This article is originally from Global Infrastructure Initiative: http://bestideas.globalinfrastructureinitiative.com/build/
Since 2012, McKinsey & Company’s Global Infrastructure Initiative (GII) has convened many of the world’s most senior leaders in infrastructure and capital projects to identify ways to improve the delivery of new infrastructure and get more out of existing assets.
The fourth GII Summit took place in Singapore on May 24-26, 2017. The Summit’s theme, “New Solutions for Global Infrastructure,” encouraged participants to explore the latest data, global best practices, and innovative approaches to infrastructure in the 21st century.
RIB Software SE is an innovator in construction business. The company creates, develops and offers cutting-edge digital technologies for construction enterprises and projects across various industries worldwide. Its flagship product iTWO 4.0 is the world’s first 5D BIM enterprise cloud solution for construction companies, industrial companies, developers and project owners, etc. Since its inception in 1961, RIB Software SE has been the pioneer in construction innovation, exploring and bringing in new thinking, new working method and new technology to enhance construction productivity, and transforming the construction industry into the most advanced and digitalized industry in the 21st century. RIB is headquartered in Stuttgart, Germany, and listed in Prime Standard Frankfurt Stock Exchange since 2011. With more than 900 talents located in over 30 offices worldwide, RIB is serving 100,000 clients including construction contractors, sub-contractors, developers, owners, investors and governments, in the field of building construction, infrastructure, EPC sector and more.