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Nataliebarry,New Zealand,Researcher
Published Date:13-07-2017
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Industry Agenda Shaping the Future of Construction A Breakthrough in Mindset and Technology Prepared in collaboration with The Boston Consulting Group May 2016ArcelorMittal Contributors – Patrick Le Pense, Manager, Flat Products, Business Development Construction - Infrastructure, Luxembourg – Chairman and Chief Executive Officer: Lakshmi Mittal Arup Project Team – Peter Chamley, Director; Chair, Global Infrastructure Practice, United Kingdom Andreas Renz – Chairman: Gregory Hodkinson Project Manager, Shaping the Future of Construction World Economic Forum BASF – Dirk Funhoff, Head, Construction Network Team, Manuel Zafra Solas Germany Practice Lead, Engineering and Construction Industries – Chairman: Kurt Bock Infrastructure and Urban Development World Economic Forum Consolidated Contractors Company – Jamal Akl, Group Vice-President, Sales, Proposals and Support, Greece – Antoine Haddad, Vice-President, Sales, Estimation and Editors Proposals (Civil), Greece – President, Engineering and Construction: Samer S. World Economic Forum Khoury Pedro Rodrigues de Almeida Head of Basic Industries, Member of the Executive Danfoss Committee – Nis Jessen, Vice-President, Strategy and Business Michael Bühler Development, Denmark – President and Chief Executive Officer: Niels Christiansen Practice Lead, Real Estate Industry Essar Group The Boston Consulting Group (Advisor and Knowledge – Shiba Panda, Managing Director, Essar Projects, India Partner) – Group Chief Executive Officer and Director: Prashant Philipp Gerbert Ruia Senior Partner and Managing Director; Co-Leader, Strategy Practice, Europe, and Global Topic Leader, Digital Strategy Fluor Santiago Castagnino – Mark Brown, Vice-President, Construction & Partner and Managing Director; Head of Engineered Fabrication, USA Products and Infrastructure, Western Europe and South – Chairman and Chief Executive Officer: David T. Seaton America Lixil Christoph Rothballer – Hanseul Kim, Director, Corporate Initiative Group, Japan Principal, Infrastructure Expert – President and Chief Executive Officer: Yoshiaki Fujimori Perot Group Steering Committee of the Future of – Todd Platt, Chief Executive Officer, Hillwood Investments, USA Construction Project – Chairman of the Board: Henry Ross Perot Jr Acciona SAP – Luis Castilla, Chief Executive Officer, Acciona – Michael Shomberg, Global Vice-President, Engineering, Infrastructure, Spain Construction and Operations Solutions, Germany – Chairman: José Manuel Entrecanales Domecq – Chief Executive Officer: Bill McDermott Aecon Siemens – Steve Nackan, President, Aecon Concessions, Canada – Roland Busch, Member of the Managing Board, – Executive Chairman: John M. Beck Germany – President and Chief Executive Officer: Joe Kaeser AkzoNobel – Chief Executive Officer and Chairman of the Board of Skanska Management: Ton Büchner – Nick Doherty, Executive Vice-President, Sweden – President and Chief Executive Officer: Johan Karlström Amec Foster Wheeler – Charles Mouzannar, President, Construction and SNC-Lavalin Specialty Consulting (CSC) Operating Unit, United – President and Chief Executive Officer: Neil Alexander Kingdom Bruce – Interim Chief Executive Officer and Chief Financial Officer: Ian McHoul 6 Shaping the Future of Construction: A Breakthrough in Mindset and TechnologyTarkett Fiona Murie, Global Director, Health and Safety and – Remco Teulings, President, Europe, Middle East and Construction, Building and Wood Workers’ International Africa, France (BWI), Switzerland – Chief Executive Officer: Michel Giannuzzi Ibrahim Odeh, Director, Global Leaders in Construction Management - Research Group, Department of Civil WS Atkins Engineering and Engineering Mechanics, Columbia – Jeff Herriman, Group Director, Corporate Development, University, USA United Kingdom Aristeidis Pantelias, Lecturer and Course Director, MSc – Chief Executive Officer: Uwe Krüger Infrastructure Investment and Finance, The Bartlett School of Construction & Project Management, University College Advisory Committee of the Future of London, United Kingdom Robert Prieto, Chairman and Chief Executive Officer, Construction Project Strategic Program Management LLC, USA Victor Chen Chuan, Professor of Engineering Management, Spiro Pollalis, Professor of Design, Technology and Business School, Sichuan University, People’s Republic of Management, Harvard Design School; Director, Zofnass China Program for Infrastructure Sustainability, USA James Dalton, Chief, Engineering and Construction, U.S. Norbert Pralle, Vice-President, European Network of Army Corps of Engineers, USA Construction Companies for Research and Development (ENCORD), Spain Juan Elizaga, President, European Network of Construction Companies for Research and Development (ENCORD), Aaron B. Schwarz, Principal, Plan A Architecture + Design, Spain USA Timothy Geer, Director, Public Sector Partnerships, WWF Douglas Stollery, Stollery Charitable Foundation, USA International, Switzerland Jan Van Schoonhoven, Senior Advisor, PPP International, Tiago Guerra, Founder and Managing Partner, TG Ministry of Infrastructure and Environment of the International Manager, Portugal Netherlands, Netherlands Shervin Haghsheno, Professor, Department of Civil Enrico Vink, Managing Director, International Federation of Engineering, Geo- and Environmental Sciences, Karlsruhe Consulting Engineers (FIDIC), Switzerland Institute of Technology, Germany Edmundo Werna, Senior Specialist, Labour Administration, Franziska Hasselmann, Director, Studies CAS MIA, Institute Labour Inspection and Occupational Safety and Health of Accounting, Control and Auditing, University of St Gallen, Branch, Sectoral Policies Department, International Labour Switzerland Organization (ILO), Geneva Markus Kraft, Professor, Department of Chemical James X. Zhan, Director, Investment and Enterprise, United Engineering and Biotechnology, University of Cambridge, Nations Conference on Trade and Development (UNCTAD), United Kingdom Geneva Shaping the Future of Construction: A Breakthrough in Mindset and Technology 7Context and Objectives of the Report Scope Audience This report is the first publication of a multi-year project for This report is aimed at all firms active along the construction guiding and supporting the Engineering & Construction value chain, including suppliers of building materials, (E&C) industry during its current transformation. The report chemicals and construction equipment; contractors; and describes the industry’s present state, assesses relevant engineering, architecture and planning firms, as well as global trends and their impact on the industry, and devises project owners and developers. Governments are another an industry-transformation framework with key areas target audience, as they not only have an impact on the for development and action. It also features many best industry via regulation but also act as the main procurer of practices and case studies of innovative approaches or most infrastructure projects. Finally, this report is also aimed solutions, and offers a view – at different levels, such as at at members of academia and civil society, in view of the the company-, industry- and sector-level – of how the future socio-economic importance of the construction industry. of construction might look. The project’s subsequent phases The industry will rely on effective collaboration with all and reports will deal with specific topics or will explore the stakeholders for its future success. subject in depth by geographical region. The project as a whole, and this report specifically, builds on the findings of an earlier World Economic Forum project – the four-year Strategic Infrastructure Initiative. That initiative identified and described the key government measures needed to close the infrastructure gap, by such means as improving the prioritization of projects, enhancing public-private partnership (PPP) models, improving the operations and maintenance (O&M) of existing assets, and 1 better mitigating risks. During that research, it became evident that important contributions can also be made from the supply side – the E&C industry – in the form of improvements to and innovations in project delivery. 8 Shaping the Future of Construction: A Breakthrough in Mindset and TechnologyExecutive Summary The Engineering & Construction (E&C) industry strongly Compared to many other industries, the construction affects the economy, the environment and society as a industry has traditionally been slow at technological whole. It touches the daily lives of everyone, as quality of life development. It has undergone no major disruptive is heavily influenced by the built environment surrounding changes; it has not widely applied advances in processes people. The construction industry serves almost all other such as “lean”. As a result, efficiency gains have been industries, as all economic value creation occurs within or meagre. In the United States over the last 40 years, for by means of buildings or other “constructed assets”. As example, labour productivity in the construction industry has an industry, moreover, it accounts for 6% of global GDP. It actually fallen. is also the largest global consumer of raw materials, and constructed objects account for 25-40% of the world’s total Given the sheer size of the E&C industry, even a small carbon emissions. improvement would provide substantial benefits for society. To capture such potential, this report presents Multiple global megatrends are shaping the future of an industry transformation framework (Figure 1) listing 30 construction. Consider just two developments: first, measures, supported by many best practices and case 30% of global greenhouse gas emissions are attributable studies of innovative approaches. Some of the measures to buildings (at the same time, the UK government can be adopted by private companies on their own, while has set a target for 2025 of 50% reduction in today’s others require collaboration with their peers or with other level of greenhouse gas emissions in the country’s built companies along the construction value chain. In addition, environment); second, the population of the world’s urban some of the measures can be adopted by government, areas is increasing by 200,000 people per day, all of whom acting both as the regulator and as the major owner of need affordable housing as well as social, transportation infrastructure projects. and utility infrastructure. Such trends pose challenges but also offer opportunities; either way, they require an adequate Figure 1: Industry Transformation Framework response from the industry as a whole. Figure 5: Industry Transformation Framework Figure 1: Industry Transformation Framework (Future) Best practices Technology, materials and tools Processes and operations 2.1 2.2 Advanced building Standardized, (Semi-)automated Front-loaded and Innovative contrac- A common and and finishing modularized and construction cost-conscious ting models with appropriate frame- materials prefabricated equipment design and project balanced risk- work for project components planning sharing management New construction Smart and life-cycle- Digital technologies Enhanced manage- Lean and safe con- Rigorous project technologies, e.g. optimizing and big data along ment of subcontrac- struction manage- monitoring (scope, 3D printing equipment the value chain tors and suppliers ment and operations time, cost) Strategy and business model innovation People, organization and culture 2.3 2.4 Differentiated busi- Sustainable Internationalization Strategic workforce Continuous High-performance ness model and tar- products with strategy planning, smart training and organization, geted consolidation optimal life-cycle to increase hiring, enhanced knowledge culture and incentive and partnerships value scale retention management schemes Industry collaboration Joint industry marketing 3.1 3.2 Mutual consent on Cross-industry Industry-wide Coordinated Effective interaction More data ex- standards across collaboration along collaboration on communication with with the public change, bench- the industry the value chain employer marketing civil society sector marking and best- practice sharing Regulation and policies Public procurement 4.1 4.2 Harmonized building Market openness Promotion and Actively managed Strict implemen- Innovation-friendly codes/standards to international funding of R&D, and staged project tation of trans- and whole-life-cycle- and efficient permit firms and technol. adoption pipelines with parency and anti- oriented procure- processes SMEs and education reliable funding corruption standards ment Source: World Economic Forum; The Boston Consulting Group Source: World Economic Forum; Boston Consulting Group Shaping the Future of Construction: A Breakthrough in Mindset and Technology 9 WEF-constr-full-edit23-mar16.pptx 0 Actors Government Sector level Company level To gain the support of society at large, the industry again Substantial improvements are already within needs to work collectively, along multiple dimensions. For reach for companies example, it should promote itself as an attractive employer, Companies themselves should spearhead the industry and it should engage local communities by means of transformation. Tremendous opportunities are available participatory planning and ongoing community-involvement through the application of new technologies, materials and initiatives during operations. A good example in that regard tools. New technologies in the digital space, for example, is the Considerate Constructors Scheme, a non-profit, will not only improve productivity and reduce project delays, independent organization founded by the United Kingdom’s but can also enhance the quality of buildings and improve construction industry to improve its image, share best 2 safety, working conditions and environmental compatibility. practices and strengthen public awareness of the impact of 7 construction on the environment. Building Information Modelling (BIM) plays a central role The industry is also very much affected by politics and here, as it is the key enabler of and facilitator for many other regulation and thus needs to optimize its interactions with technologies: the building of a bridge, for example, can be the public sector. Here again, companies should cooperate greatly facilitated by combining robotics and 3D printing via 3 in their efforts, to ensure constructive communication a parametrically designed 3D model. Another extremely with public agencies, to monitor political developments powerful lever for innovation is that of construction materials; accurately and to implement an effective advocacy strategy. the associated solutions are numerous and wide-ranging In the German “National Initiative on Energy Transition”, for – from incremental innovation of traditional materials and instance, the construction industry coordinated well with existing characteristics to radically innovative materials with the German government in developing a strategy on climate entirely new capabilities. Although many innovative solutions 8 change. are already being applied on a small scale or in a few countries, the industry still needs a large-scale application or As both regulator and major client, the better adaptation of current technological developments. To unlock the potential inherent in new technologies, government too needs to take action materials and tools, the industry also needs to adopt the In any given country, the public sector, and in particular relevant respective processes. For instance, the benefits of the national government, can enhance competition and BIM are reinforced if companies exploit the new ancillary productivity by simplifying and harmonizing building opportunities it offers – notably, a new way of collaborating codes and standards. By setting and enforcing time limits and sharing information between stakeholders. Large for construction permits and environmental approvals, productivity improvements can be achieved by optimizing governments can greatly reduce project delays. Ideally, existing processes: the broader use of “lean” principles governments should also minimize barriers to competition at and methods, for instance, could reduce completion times an international level. And they should provide appropriate 4 by 30% and cut costs by 15%. Another core lever is early support to academia and companies for developing project planning. To improve such planning, companies technological innovations in construction. The British should promptly draw on the knowledge of all stakeholders, government, for example, recently put the construction and should explore new contracting models. A minimal industry on the national agenda, in the hope of eventually increase in upfront costs of about 2% to support optimized positioning Britain at the forefront of global construction: design will lead on average to life-cycle savings of 20% on among the specific targets to reach, for instance, is a 33% 5 total costs. reduction in both the initial cost of construction and the 9 whole-life-cycle cost of assets. Every change has to be driven and supported by the people involved, so E&C companies must focus on attracting, Governments can also shape the industry by their actions retaining and developing talent, and establishing a company as key project owners. The Crossrail project in London, for culture conducive to innovation and improved skills. This instance, systematically generates, captures and replicates is all the more necessary as the industry is traditionally innovative ideas and eventually translates them into practical regarded as not particularly attractive to new talent and, at innovations and industry standards. It also aims to raise the same time, it is in increasing competition for talent with the bar for other construction projects by making these other industries. To compound matters, it has an ageing ideas, technologies and practices available to the industry 6 workforce. as a whole. Finally, the issue of corruption on construction projects can only be resolved by creating a corruption- Cross-company collaboration is pivotal resilient procurement environment, by implementing fair and transparent procurement procedures, and by establishing E&C companies cannot realize their full potential on their clear practices regarding the prosecution of corruption – own. The industry is one of the most fragmented in the practices that address both the supply and demand sides of world and relies on a seamless interplay of all participants corruption. along the value chain and throughout a project’s life cycle. Companies need to enhance coordination and cooperation across the value chain, and jointly define standards and agree on common goals. Australia is duly pioneering the standardization of project alliance agreements and is adopting a model of cooperative partnership to reduce initial costs. 10 Shaping the Future of Construction: A Breakthrough in Mindset and Technology1. Introduction: The Construction Industry – Time for a Transformation For countries to enjoy inclusive and sustainable growth, 1.1 The industry is crucial to society, modern and efficient infrastructure is essential. According the economy and the environment to a 2014 estimate by the International Monetary Fund, if advanced economies invested an extra 1% of GDP into Societal relevance infrastructure construction, they would achieve a 1.5% 14 increase in GDP after four years. Construction is one of the first businesses that humankind developed, and it continues to shape our daily life in unique Environmental relevance ways. Virtually all other businesses rely on the construction industry to provide and maintain their accommodation, The construction industry is the single largest global plants and infrastructure, and construction is a determinant consumer of resources and raw materials. It consumes of where and how almost everyone lives, works and plays. about 50% of global steel production and, each year, 3 For nearly the entire population of the world, the built billion tonnes of raw materials are used to manufacture environment heavily influences quality of life. In the United 15 building products worldwide. States, for instance, people on average spend nearly 90% of 10 their time indoors. So the building and the materials used About 40% of solid waste in the United States derives from in its construction and finishing have a major impact on the 16 construction and demolition. Throughout the world, such 11 health and well-being of its occupants. waste involves a significant loss of valuable minerals, metals and organic materials – so there is great opportunity to 17 create closed material loops in a circular economy. As for energy use, buildings are responsible for 25-40% of the global total, thereby contributing hugely to the release of 18 We shape our buildings and, carbon dioxide. afterwards, our buildings Value therefore lies in improving the quality of construction shape us. and the quality of materials used, in contributing to a healthier indoor environment, increasing its sustainability and reducing its cost. Any endeavour towards this goal will generate welcome benefits – whether for families investing in Winston Churchill, 1944 their first private home or governments embarking on a giant infrastructure project. Economic relevance With total annual revenues of almost 10 trillion and added value of 3.6 trillion, the construction industry accounts for 12 about 6% of global GDP. More specifically, it accounts for about 5% of total GDP in developed countries, while in developing countries it tends to account for more than 8% of GDP. The industry is expected to grow greatly in the coming years, to estimated revenues of 15 trillion by 2025. More than 100 million people are already employed today in 13 construction worldwide. Construction is a “horizontal” industry (like the Financial Services industry), serving all industry verticals; in other words, construction has considerable interaction with numerous other sectors, since value creation almost always occurs within or by means of buildings or other constructed assets. To mention a few, residential housing accounts for 38% of global construction volume; transport, energy and water infrastructure for 32%; institutional and commercial buildings for 18%; and industrial sites (from cement to automotive manufacturing) for 13%. Shaping the Future of Construction: A Breakthrough in Mindset and Technology 11markets, such as the United Kingdom’s, are characterized 1.2 The industry’s future will be by a high degree of fragmentation, which impacts shaped by a number of megatrends unfavourably on their level of innovation and their ability to access foreign markets. Eventually, the firms with strong The construction industry is affected by megatrends in processes in place and the ability to adapt their business four domains: markets and customers, sustainability and models to new markets will prove to be the winners. Many resilience, society and workforce, and politics and regulation of the others will disappear. (see Figure 2). The industry needs to identify and implement optimal responses to these megatrends – both with respect One particularly challenging area is that of infrastructure. to the opportunities they offer and with respect to the Ageing infrastructure assets in developed countries demand challenges they pose. proper maintenance, upgrading, replacing or newly built assets, and there is, of course, a fast-growing societal Market and customer trends need for infrastructure assets in emerging markets. So overall, there is immense opportunity, and responsibility, As demand in emerging countries rises, the industry must for the construction industry. The vast “infrastructure gap” identify how emerging and developing markets can benefit cannot be bridged by public-sector money alone. Private best from the technological advances and increased safety capital is needed, so the trend in infrastructure construction standards already being applied in developed countries, projects is for PPPs. One other notable development is the while still taking into account local market conditions. increasing number of infrastructure megaprojects; these projects, however, have a poor record historically in terms of The expected increase in global competition will produce on-time and on-budget delivery, environmental footprint and winners and losers as strengths and strategies differ 19 public support. between companies and countries. Many Asian construction firms capitalize on their cost advantages and put great effort into securing construction contracts abroad. Most Western Figure 2: Megatrends Shaping the Construction Industry's Future Figure 2: Megatrends Shaping the Construction Industry’s Future Market and Sustainability Society and Politics and customers and resilience workforce regulation Demand in developing countries Resource scarcity Urbanization and housing crisis Complex regulatory requirements of the next decade’s consumer of global people are added different procedures are 65% growth in construction No. 1 raw materials is the 200k daily to urban areas 25 required for a typical will happen in emerging construction industry and need affordable and warehouse construction permit countries healthy housing in India Globalized markets Sustainability requirements Health/comfort needs of citizens Stricter HSE and labour laws E&C companies of the solid waste in higher than outside of the workforce in a plan to move into the United States is are the levels of public project in 1 in 2 50% 2-5× 10% new geographies produced by the construction volatile organic compounds California had to come from the industry found inside US homes “otherwise unemployable” Bigger, more complex projects Energy and climate change Talent and ageing workforce Slow permit and approval process of global greenhouse of general contractors of infrastructure (76 miles) is the 123km 30% gas emissions are 50% are concerned about 1.2tn could be added length of the attributable to buildings finding experienced crafts by 2030 if all countries Undersea tunnel that will workers for their workforce committed to specific time limits connect Dalian and Yantai in for approvals China Ageing infrastructure Resilience challenges Stakeholder pressure and Geopolitical uncertainty organization Turkish construction signatures were German railway as many disasters were 18 workers were kidnapped 67k collected opposing the 1 in 3 bridges are more 3× reported last year as in by militants in Baghdad in construction of the Stuttgart than 100 years old 1980 September 2015 train station Massive financing need Cyberthreats Politicization of construction Corruption decisions annual investments of firms agree that of survey respondents the Portuguese 1tn are needed to close 90% information controls 49% believe corruption is In 2011 government the global infrastructure gap have an impact on front-line common in a Western cancelled a 165km (103 mile) employees European construction market high-speed train line project as an austerity measure Source: Press reports; World Economic Forum; The Boston Consulting Group Source: Press reports; World Economic Forum; Boston Consulting Group WEF-constr-full-edit23-mar16.pptx 1 12 Shaping the Future of Construction: A Breakthrough in Mindset and Technologyless glamorous than other sectors – will struggle to recruit Sustainability and resilience trends 23 the requisite “digital” talent. Increasingly, sustainability is becoming a requirement rather than just a desirable characteristic, and its pursuit The construction industry is concerned with the health is bound to affect both the construction process and the and safety not only of workers but also of the people built asset itself. The construction sector produces an who actually live or work in the buildings. Employee enormous amount of waste, so the more efficient use and health and productivity are linked to the quality of the recycling of raw materials, even a small improvement, offer indoor environment, and that quality is largely determined huge potential benefits. Other new priorities are emerging by decisions made during project development and accordingly, including optimizing space, for example, and construction. The construction sector’s responsibility does ensuring more efficient methods of heating, cooling and not end with the delivery of the project: the entire operations lighting. The industry is increasingly making use of off-grid or or use phase is affected by the initial selection of materials. distributed power sources, such as wind power, geothermal The safer the materials, the better for health and the energy and solar panels on roofs. environment. For instance, asbestos has been outlawed in many countries as a construction material, and construction The industry also has to address the growing concerns companies are increasingly motivated to ensure that the over natural hazards (notably, flooding, hurricanes and living and work environments that they create are ergonomic earthquakes), and to enhance resilience. So new emphasis and allergy-free. In addition, at the end of the building’s life, is being placed on devising risk-mitigating solutions, safer materials can be more easily integrated in the circular especially in urban areas with high population density. economy. Finally, the industry must engage against the growing threats to cybersecurity. No doubt many important benefits A further challenge facing the construction industry will emerge from the convergence of Web, cloud and concerns the rights or needs of local communities. mobile platforms, as well as the Internet of Things (IoT), but Neighbourhood lobby groups, for instance, often influence vulnerability will increase, too – particularly in an industry permit decisions and might even be able to force the as decentralized as the construction industry, with so withdrawal of permits already granted. Communities are also many different stakeholders involved. So the imperative to becoming more organized and professional, partly thanks to protect the industry from threats without disrupting business new forms of communication and social media. 20 innovation and growth has never been greater. Political and regulatory trends Societal and workforce trends The various political challenges relate to regulation, The world’s urban population is expected to exceed 6 billion bureaucracy, instability and corruption. by 2045, with about a quarter of that population living in 21 slums if the current proportion remains unchanged. Hence Regulation impacts on many aspects of the E&C industry. the need for a boost in affordable housing in urban areas In a recent global survey, regulation was identified as – where the construction process is very complex, owing 24 the most important driver of increasing complexity. to the space constraints – and for increased infrastructure The industry is especially affected by changes in health spending on water supply, sanitation, and so on. and safety requirements, financial and labour legislation, Another demographic trend, especially in developed and environmental standards. New regulations in any of countries, is the shifting age profile. The increasing these areas can affect business operations adversely. If proportion of elderly people in the population affects the designed thoughtfully, however, regulation can actually construction industry in two main ways: first, it creates a 25 prove advantageous to companies. For instance, retrofit need to construct or adapt buildings to accommodate investments in response to Germany’s new Energy ageing and convalescent citizens; second, it threatens to Conservation Ordinance have been a major driver of reduce the available supply of construction workers. That 26 innovation for the construction industry. Going even threat might seem less serious than in the past, since new further, one could think of regulation not as imposing a technologies are now taking over many of the tasks that burden but as offering opportunities to stimulate an industry 22 formerly required low-skilled workers. However, the new transformation and inspire innovations that would greatly technologies themselves require a highly skilled workforce, benefit society and the environment. and the construction industry – traditionally perceived as Shaping the Future of Construction: A Breakthrough in Mindset and Technology 13Next is the issue of bureaucracy and political risk. Finally, the challenge of corruption must be addressed. In Construction permits are, quite rightly, more and more many countries, corruption remains one of the greatest subject to environmental and social-impact studies. If barriers to economic and social development. Although these studies are conducted inefficiently, however, or bribery and other forms of corruption afflict almost every if there is a backlog in the granting of permits, projects industry sector, they are a particular concern for companies are needlessly delayed and their prospects suffer: cash in the E&C and Real Estate sectors, given the nature of their flows start later than anticipated, thereby compromising business. profitability. An appropriate balance is required: on the one hand, offering speedy approval processes; on the other, 1.3 The industry must also confront giving all stakeholders their due say. Even after the permits internal challenges are granted, infrastructure projects remain vulnerable to cancellation, owing to the vagaries of national or local In most countries, over the past 50 years, productivity politics. Frequently, a new government will set different 27 improvements in construction have been meagre, especially priorities from those of its predecessor. when compared to those in other industries (see Figure 3 for the respective historical trends in labour productivity in Another constant issue is that of political instability. The the United States). Some new technologies and tools have international community has arguably managed to reduce emerged, but the rate of innovation and innovation adoption overall levels of violence in recent decades, but regional has been very slow. hotspots obviously persist and new ones flare up, at Why does the industry have such an unimpressive record? enormous human and economic cost. Contractors are The underlying causes are many and varied. wary of getting involved in such locations, even in post- crisis conditions – especially in long-term infrastructure –– Lack of innovation and delayed adoption. The lifeblood programmes, where predictability is key – and need to find of any industry is research and development (R&D). The ways of mitigating the risks. benefits of R&D, however, are long term, whereas the costs arise in the present. This mismatch is ill-suited to the project-driven business in which the construction industry operates, so R&D has received less attention 29 here than in other industries. 14 Shaping the Future of Construction: A Breakthrough in Mindset and Technology–– Informal processes or insufficient rigour and consistency and key suppliers at different stages of the project. in process execution. The processes typically adopted This set-up militates against sophisticated construction by construction companies regularly lack maturity. planning. Ideally, the knowledge of all stakeholders Companies often seem to put greater emphasis on along the value chain should be fully exploited early on defining the final product than on planning the actual in the design and planning process, but that is seldom construction process. easy or even possible under current arrangements. –– Insufficient knowledge transfer from project to project. –– Little collaboration with suppliers. For many large Although each construction project will have its own contractors, the purchasing strategy involves long-term unique characteristics, the processes of construction relationships with key suppliers; nevertheless, the final itself are repeated in their essentials from project decisions are often still made ad hoc, on a project- to project. Lessons learned from one project could to-project basis. The problem is even more severe in therefore often be usefully applied to subsequent smaller construction companies, where purchasing is projects. Yet few companies have institutionalized such almost exclusively project-based. a process. Past experience is therefore often lost, and –– Conservative company culture. The construction projects continue to rely heavily on the expertise of the industry operates in a somewhat traditional environment individual project manager. and generally retains a conservative corporate culture. –– Weak project monitoring. A related issue is the weak The widespread perception is, justifiably enough, that monitoring of projects, relative to other industries. In construction companies are not sufficiently progressive many manufacturing industries, for example, operations or forward-thinking. are continuously tracked and large quantities of data –– Shortage of young talent and people development. The are collected. In that way, if something goes wrong, a image that people have of the construction industry as car manufacturer, for instance, can quickly identify the an employer is a relatively poor one, with inadequate root causes and implement remedies immediately and gender diversity and little job security (owing to the efficiently. Few construction companies are set up in cyclical nature of the business). As a result, E&C this way. companies often struggle to attract talented recruits –– Little cross-functional cooperation. The conventional to their workforce. Relative to companies in other construction process is generally sequential, reflecting industries, construction companies engage less often the input of the project owner, designers, constructors and less effectively in internal people-development initiatives. Figure 3: US Industry Productivity and Performance, 1964-2012 Figure 3: US Industry Productivity and Performance, 28 1964-2012 Looking at construction projects 1 Index of US labour productivity today, I do not see much 300 Relative improvement difference in the execution of the +153% 250 work in comparison to 50 years Non-farm business labour productivity ago. CAGR +1.9% 200 John M. Beck, Executive Chairman, Aecon Group, Canada 150 100 -19% CAGR -0.4% 50 Construction labour productivity 0 1 Peer set based on US companies with Engineering, Construction and Services-related 1 Standard Industrial Classification codes. Financials are inflation-adjusted and indexed to Peer set based on US companies with Engineering, Construction and 1964; output per working hours. CAGR = compound average growth rate Services-related Standard Industrial Classification codes. Financials are Source: Global Vantage; Compustat; Bloomberg; www.aecbytes.com/viewpoint/2013/ issue_67.html; www.nber.org/papers/w1555.pdf; S&P Capital IQ; BCG ValueScience inflation-adjusted and indexed to 1964; output per working hours. Center; World Economic Forum CAGR = compound average growth rate Source: Global Vantage; Compustat; Bloomberg; www.aecbytes.com/ WEF-constr-full-edit23-mar16.pptx 2 viewpoint/2013/issue_67.html; www.nber.org/papers/w1555.pdf; S&P Capital IQ; BCG ValueScience Center; World Economic Forum Shaping the Future of Construction: A Breakthrough in Mindset and Technology 15 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012 In fairness, the construction industry does have some Given the construction industry’s societal, environmental inherent characteristics that make it a structurally difficult and economic importance, even small improvements in performance will have a strong effect in all three domains: business and that hinder attempts at reform. It also represents just one step out of several in the value chain, –– Societal. A mere 1% reduction in construction costs and relies on a large number of stakeholders. So the much- 30 would save society about 100 billion annually – a sum needed company and industry transformation is bound to equal to the entire global cost of cancer drugs. In fact, be difficult. Figure 4 lists these unconducive characteristics the ambitions go far beyond that: the vision formulated in two categories: on the left, some of the industry’s main by the UK government for 2025 is of a 33% reduction peculiarities; on the right, the specific issues resulting from in the initial cost of construction and the whole-life-cycle the special role of its clients. 31 costs of built assets. –– Economic. The global shortfall in infrastructure capacity 1.4 The industry is ripe for and is expected to reach 15-20 trillion by 2030. Closing this gap could create up to 100 million additional jobs capable of transformation and generate 6 trillion a year in economic activity in the 32 long run. Up to 30% of this boost could come from improvements to construction projects and to asset operations. Clients do not want to be guinea –– Environmental. By harnessing the capacity of the building sector, many countries can cut emission rates pigs. cost-effectively and achieve energy savings of more than 30%, according to the United Nations Environment 33 Programme. The target set by the United Kingdom’s Roger Smith, Executive Director, Corporate Strategy, Fluor Corporation, construction industry for 2025 is a full 50% reduction of USA today’s level of greenhouse gas emissions in the overall 34 built environment. Figure 4: Unique Construction Environment Figure 4: Unique Construction Environment The industry has … and operates in a complex unique characteristics … client context Multiple stakeholders with diverse interests/needs Immature project definition and technical assessment —  Three different project owners are involved in the construction —  Construction costs of the Hamburg Elbphilharmonie increased of the Berlin airport. Delays of 10 years and cost overruns of from €241M to €789M. “Almost all the extra cost resulted from about €5 billion are expected. planning that was insufficiently progressed at tendering time.” Project business and on-site construction Over-preference for lowest price bid —  According to the corporate strategy director of a major global —  The launch of a 17km (11 mile) highway segment in Germany E&C firm: was delayed by six months, as one bidder raised objections to “Our product output is in the unit of 1.” the tendering process – the lowest bid had not been chosen. Insufficient or incremental funding High industry fragmentation Unique —  The United States has 710,000 E&C companies; only 2% of —  Many US government contracts have an Availability of Funds construction clause that limits the government’s liability to pay the full them have more than 100 workers and 80% have just 10 amount claimed. workers or fewer. environment Conservative clients Low profitability and capitalization —  A minor problem with an innovative rapid-hardening concrete —  Global listed E&C companies have a weighted average total during a night shift almost brought a public road project to a shareholder return of only 5% and are consistently halt, as the project owner lost faith in the new material. outperformed by most S&P 500 companies. Highly cyclical and volatile business Increased risk transfer to contractors —  The Spanish construction market declined from a peak —  Emerging-market infrastructure investments with private parti- of €151 billion in 2006 to just €70 billion in 2012, and has still cipation, which often involve a transfer of risk to contractors, not fully recovered. have tripled since 1995 and totalled 108 billion in 2014. Unstable workforce Complexity of contracts and dispute resolution —  25 years ago, a typical contract consisted of about 50 pages; —  In Canada, about 25% of workers whose construction jobs are terminated find their next job in sectors outside today it can easily exceed 1,000 pages and is packed with construction. legal complexities. Source: World Economic Forum; BCG analysis Source: World Economic Forum; The Boston Consulting Group Source: World Economic Forum; The Boston Consulting Group WEF-constr-full-edit23-mar16_edited-AR_FST.pptx 0 16 Shaping the Future of Construction: A Breakthrough in Mindset and TechnologyAll of this significant potential is ready to be unlocked. New The framework structures the various areas of action opportunities are emerging as transformative developments according to responsibility. Initially, the transformation reshape the E&C industry – from innovative technologies relies on the initiatives of individual companies – the to revolutionary construction techniques. Productivity and adoption of new technologies and processes, business- efficiency will surge. It is up to the industry to embrace these model innovation, refinements to the corporate culture and new opportunities more vigorously and change the way it organization, and so on. Individual action is not enough, has traditionally operated. however, in such a highly fragmented and horizontal industry: many of the challenges need to be tackled Other industries, such as the automotive industry, have collectively – the industry as a whole has a responsibility. It already undergone radical and disruptive changes, and their needs to establish new forms of collaboration, or to improve digital transformation is now well under way. Construction existing forms. Finally, governments, too, have a large part companies need to act quickly and decisively: lucrative to play, in their dual role as regulators and clients. rewards await nimble companies, while the risks are serious 35 for hesitant companies. Given all the megatrends and The following sections discuss the steps all those involved internal challenges, the construction industry should take must take. action in several areas. A comprehensive approach is outlined in the industry transformation framework shown in Figure 5. Figure 1: Industry Transformation Framework Figure 5: Industry Transformation Framework Figure 5: Industry Transformation Framework (Future) Best practices Technology, materials and tools Processes and operations 2.1 2.2 Advanced building Standardized, (Semi-)automated Front-loaded and Innovative contrac- A common and and finishing modularized and construction cost-conscious ting models with appropriate frame- materials prefabricated equipment design and project balanced risk- work for project components planning sharing management New construction Smart and life-cycle- Digital technologies Enhanced manage- Lean and safe con- Rigorous project technologies, e.g. optimizing and big data along ment of subcontrac- struction manage- monitoring (scope, 3D printing equipment the value chain tors and suppliers ment and operations time, cost) Strategy and business model innovation People, organization and culture 2.3 2.4 Differentiated busi- Sustainable Internationalization Strategic workforce Continuous High-performance ness model and tar- products with strategy planning, smart training and organization, geted consolidation optimal life-cycle to increase hiring, enhanced knowledge culture and incentive and partnerships value scale retention management schemes Industry collaboration Joint industry marketing 3.1 3.2 Mutual consent on Cross-industry Industry-wide Coordinated Effective interaction More data ex- standards across collaboration along collaboration on communication with with the public change, bench- the industry the value chain employer marketing civil society sector marking and best- practice sharing Regulation and policies Public procurement 4.1 4.2 Harmonized building Market openness Promotion and Actively managed Strict implemen- Innovation-friendly codes/standards to international funding of R&D, and staged project tation of trans- and whole-life-cycle- and efficient permit firms and technol. adoption pipelines with parency and anti- oriented procure- processes SMEs and education reliable funding corruption standards ment Source: World Economic Forum; The Boston Consulting Group Source: World Economic Forum; Boston Consulting Group WEF-constr-full-edit23-mar16.pptx 0 Shaping the Future of Construction: A Breakthrough in Mindset and Technology 17 Actors Government Sector level Company level 2. Companies as the Spearhead of Transformation The solutions emerging from the building material 2.1 Technology, materials and tools industry are numerous and wide-ranging – from the incremental innovation of traditional materials and Advanced building and finishing materials existing characteristics, to the generation of new material Materials constitute an extremely powerful lever for combinations with additional multifunctional characteristics, innovation. The European Commission estimates that 70% to radically innovative materials with entirely new of product innovation across all industries is derived from functionalities. A few examples appear in Figure 6. new or improved materials. With approximately one-third of construction cost attributed to building materials, the scope for applying advanced building materials (ABMs) is 36 considerable. Figure 6: Examples of Advanced Building and Finishing Materials Figure 6: Examples of Advanced Building and Finishing Materials Incremental innovation Radical innovation Advances on traditional materials New material combinations Innovative materials with entirely and existing characteristics and multi-functional characteristics new functionality —  iQ Natural, an advanced vinyl —  Lixil’s super-lightweight ceramic —  Rain-absorbing roof-mats, imitating flooring, is 100% recyclable, using a sidings combine fast-hardening the process of perspiration, bio-based plasticizer. The product cement with organic fibre to meet the considerably reduce air- 1 has TVOC values 100 times below required performance at half the conditioning costs the strictest European standards. weight —  Neopor is an enhanced styropor, —  Self-healing concrete, generated —  Micronal, a micro-encapsulated offering up to 20% efficiency through the addition of bacterial phase-change material incorporated improvement in insulation spores, is estimated to reduce into building materials, enables lifetime costs by up to 50% intelligent temperature management —  ArcelorMittal has launched —  Concrete admixed with special —  Slippery liquid-infused porous organically coated steel that achieves construction chemicals achieves surfaces constitute super-repellent 30-year guaranteed durability and 50% faster curing times surfaces inspired by the carnivorous does not contain genotoxic, nepenthes pitcher plant hexavalent chromium 2 Higher recyclability/reusability Reduced material costs Higher energy efficiency Early development/pilot phase 2 Reduced life-cycle costs Faster construction process Improved health/well-being Market-ready 1 Total volatile organic compound 2 Shading of the symbols indicates technology maturity (market-ready versus early development/pilot phase) Source: World Economic Forum; Boston Consulting Group ¹ Total volatile organic compound ² Shading of the symbols indicates technology maturity (market-ready versus early development/pilot phase) Source: World Economic Forum; The Boston Consulting Group WEF-constr-full-edit23-mar16.pptx 4 18 Shaping the Future of Construction: A Breakthrough in Mindset and TechnologyA large variety of innovative ABMs are market-ready or a project basis. For optimal innovation and better uptake close-to-market. Yet despite their great potential, they of ABMs, what’s needed is a concerted effort on the part very often fail to penetrate the market, let alone achieve of the industry as a whole – for instance, via industry-wide widespread acceptance. That is particularly true for standards and certifications (see section 3.1) – as well as emerging countries. One reason is that ABMs often require an active role by governments, in establishing innovation- a higher initial investment, with the benefits generally friendly policies and procurement processes (see section realized over the entire life cycle. Other reasons are that the 4). Proper risk sharing is crucial in this context. (See section new materials still lack a track record of success, and that 2.2 for a discussion of innovative contracting models with project owners and E&C company decision-makers may improved risk sharing.) not be up-to-date on the latest developments, or may lack the information needed for making difficult trade-offs (on Standardized, modularized or prefabricated such issues as price vs quality, durability and ecological components merit). All of that points to another serious impediment Productivity in construction could receive a substantial boost to the introduction of new materials: the liability risks that from standardization, modularization and prefabrication. engineers, contractors and suppliers would face if they 37 The standardization of components brings many benefits, recommend a new material. To remedy this unsatisfactory including a reduction in construction costs, fewer interface state of affairs, it is crucial for stakeholders along the value and tolerance problems, greater certainty over outcomes, chain to take action. reduced maintenance costs for end-users, and more scope for recycling. Modularization adds to the advantages E&C companies should build up relevant competencies of standardization, by increasing the possibilities for in-house, and create a database of evidence on the customization and flexibility, and helping to realize the applicability and benefits of ABMs, to be able to provide potential of prefabrication in a factory-like environment. clients with a convincing quantitative case for using Prefabrication would increase construction efficiency, ABMs. Afterwards, contractors should institutionalize the enable better sequencing in the construction process knowledge transfer to local project teams, so the decision- and reduce weather-related holdups; by such means, it makers at a project level have all the relevant up-to-date becomes possible to reduce a project’s delivery times information and can thereby optimize their decisions on and construction costs relative to traditional construction materials. 38 methods, and also to create safer working environments. Prefabrication can be applied in a wide variety of project EXAMPLE: Fluor has built up an internal team of experts types, ranging from residential housing to large-scale on concrete to advise the client at an early planning stage, industrial plants. The various systems can be distinguished to develop a foundation of data based on experience and by their degree of prefabrication: at the simpler end are to create a convincing business case for greater use of the mostly two-dimensional building components, such as innovations (such as 50%-faster-curing concrete) in the walls, ceilings or truss elements; then there are modular market. structures, comprising larger volumetric elements like entire rooms or storeys; and, finally, there are entirely prefabricated EXAMPLE: The United States Army Corps of Engineers assets. The degree of prefabrication is based not just on (USACE) validates new technologies (such as cross- these physical dimensions, but on a further factor as well: laminated timber), whether in its own research labs, in the integration and complexity of mechanical, electrical and demonstration projects or in collaboration with academia. plumbing systems. Once a new technology has met USACE requirements, its value can be communicated internally in multiple ways to How widely and to what degree prefabrication is accepted ensure broad awareness. Additionally, when appropriate, in the construction industry depends on the segment and such technologies can be specifically incorporated into country. Prefabrication is very common in offshore oil and design guides or specifications. gas facilities, for instance, and in residential projects in Scandinavia, whereas it has made little headway in the It is also essential to inform and convince architects, residential market in Germany. It is used very widely in the engineers and clients of the advantages of ABMs. For construction of prisons, and is becoming more important in instance, by showing how ABMs, despite their price transportation infrastructure, such as bridges and elevated premium, have an improved total-cost-of-ownership (TCO) 39 highways. Among the typical obstacles to its acceptance performance relative to traditional materials, the industry are: can win risk-averse clients who would normally favour the lowest-price options. –– Poor image, due to misconceptions about quality, price and the potential for individualization EXAMPLE: BASF and Arup have jointly developed an app for architects, engineers and project owners to calculate –– Client demand for individual solutions, which the energy savings achievable from the latent-heat storage discourages the use of standardized processes and system Micronal. components –– Limited experience of the application of prefabrication – Given the multiple-stakeholder nature of construction in high-rise projects, for instance projects, it is essential to improve collaboration and knowledge transfer among contractors, subcontractors and building material suppliers – both strategically and on Shaping the Future of Construction: A Breakthrough in Mindset and Technology 19–– The increased risk involved in committing to particular –– Introduce an economic and logistical assessment off-site suppliers, especially since the market is not of these technologies in the planning process and yet well developed and alternatives are not instantly tailor on-site construction processes to the use of available prefabrication components or modular systems; work of this kind can help greatly in realizing the full productivity –– Underutilization of the prefabrication factory space, due potential of prefabrication to the customized and irregular nature of construction demand EXAMPLE: Broad Group China, in cooperation with ArcelorMittal, is using a system of modular building –– The high cost of transportation, especially in cases components that enables very speedy construction: a where the distance between the factory and site is large 57-storey building was built in only 19 days by moving or where the transport links are inadequate, as well as 40 90% of the construction work to the factory. community opposition to the transportation of oversized components –– Collaborate with customers and educate them on the advantages of prefabrication; take into account –– Problems in handling large prefabricated components in the opportunities for repurposing or post-installation space-constrained construction sites adjustments, to meet society’s future needs –– Technical specifications from project owners: in EXAMPLE: MQ Real Estate developed, in collaboration Spain, for example, public projects forbid the use of with hotel operators, a scalable modular apartment prefabricated bridge foundations system that enables firms to build non-permanent housing or hotels within weeks in dense urban areas, Various mitigation strategies are available. The increased risk to cope with seasonal peaks in demand and exploit involved in committing to a particular supplier, for instance, temporarily vacant areas much more efficiently could be mitigated by developing industry-wide standards –– Apply new construction concepts on component dimensions or connections, and so on. Additional steps that individual companies along the value EXAMPLE: Skanska has developed a new construction chain should take include: concept known as “Flying Factories”, which are temporary factories set up close to construction sites; –– Further develop modular construction systems, working they apply “lean” manufacturing techniques and employ jointly with suppliers – to improve applicability, for local semi-skilled labour. The advantages include a instance, and generate systems to meet the demand for reduction in construction time of up to 65%, a halving affordable high-density housing in urban areas of labour costs and a 44% improvement in productivity relative to on-site assembly, while still upholding the EXAMPLE: Fluor has applied modular concepts from construction industry’s importance as a local employer. offshore construction to onshore projects such as chemical plants, and has thereby achieved capital- expenditure reductions of 20-40%. In collaboration with the supplier, it has included cable harness in its modular systems, resulting in further productivity improvements. 20 Shaping the Future of Construction: A Breakthrough in Mindset and Technology(Semi-)automated equipment offers great potential along (Semi-)automated construction equipment multiple dimensions – reduced construction costs, thanks As more and more processes in the construction industry to shorter delivery time and increased productivity; higher are mechanized, machinery has acquired a central role quality, due to higher accuracy and fewer workmanship and has proved to be a strong driver of productivity gains. errors; improved safety, by keeping workers out of danger Excavators and bulldozers make it quick and easy to move zones, and so on. large amounts of earth; drilling rigs and piledrivers facilitate underground engineering; conveyers and pumps optimize Companies along the value chain can take several steps to concreting work; and mobile cranes lift and position heavy increase the use of automation where beneficial: loads. –– Leverage new technologies by integrating physical and But while other industrial sectors, such as the automotive digital systems industry, have already reached the tipping point to Industry EXAMPLE: Komatsu, a Japanese manufacturer of 41 4.0, the construction industry still has generally low levels construction equipment, is developing automated of automation. That looks set to change, however, as bulldozers incorporating various digital systems. Drones, technological advances – in robotics, for instance – open 3D scanners and stereo cameras gather terrain data, up enormous new possibilities. New technologies in the which is then transmitted to the bulldozers; these are digital space (such as unmanned aerial vehicles, low-cost equipped with intelligent machine-control systems sensors, remote operations and autonomous control that enable them to carry out their work autonomously systems) could become significant enablers of innovation and thereby speed up the pre-foundation work on 42 in construction equipment. Semi-autonomous equipment construction sites, while human operators monitor the is capable of carrying out complex tasks, though it still process. On mining sites, autonomous haul trucks are requires considerable human controlling. Autonomous already in common use. equipment makes use of sophisticated digital tools and new technologies such as out-of-sight drones, leaving only “monitoring roles” for the human worker. Figure 7: New Deployment Models for Construction Equipment 43 Figure 7: New Deployment Models for Construction Equipment Volvo Construction Equipment Continuous monitoring and has launched a programme Improve preventive maintenance and based on a machine-tracking availability information system that aims to repair of construction equipment of individual identify problems before they result in better availability of equipment occur, improving equipment individual equipment uptime Central fleet management Teletrac provides GPS fleet- systems and the tracking of tracking software with a real- Enhance vehicle use increase the time view and analytics, utilization of utilization of equipment resulting in reduced fuel a company’s across the firm, e.g. by consumption of up to 30% – entire fleet identifying ways to save fuel for instance, by avoiding costs unauthorized vehicle use Various forms of equipment A large construction equipment leasing and sharing help to manufacturer has invested in distribute capacity more the start-up Yard Club, which Use equipment efficiently across the industry, helps owners of heavy better across e.g. equipment to rent out idle —  traditional leasing companies machines to other businesses, —  “power by the hour” thereby reducing the cost of —  “pay by intensity” owning equipment —  B2B sharing platforms Source: World Economic Forum; The Boston Consulting Group Source: World Economic Forum; Boston Consulting Group Shaping the Future of Construction: A Breakthrough in Mindset and Technology 21 WEF-constr-full-edit23-mar16.pptx 5 –– Create preconditions for automation early – as early Many companies are optimistic in this regard and point to as the design and project planning phase. That can other industries, such as aviation, where mass production be done by increasing the proportion of prefabrication of 3D-printed components is already common practice. and modular systems, since automation works best The following are some examples of pilot schemes within with standardized components and processes. Better the construction industry itself, with steel and concrete upfront planning and technical preparation in setting up components now being 3D-printed for purposes ranging construction sites is also needed. from bridges to complete homes: –– Establish industry standards – for communication EXAMPLE: In a project on 3D-printed steel components, protocols, for instance – so that automated and Arup achieved a 75% weight reduction and 40% reduction interoperable equipment can be applied widely to in materials compared with traditional production methods overcome the fragmented and multistakeholder nature of construction processes EXAMPLE: The Skanska 3D Concrete Printing project aims –– Make better use of existing equipment – for example, by to demonstrate that 3D printing can be used to manufacture adopting new business models (as described in Figure 7) concrete objects in shapes that were unfeasible through traditional casting methods. New construction technologies EXAMPLE: MX3D, a Dutch start-up working with partners The development of 3D printing is expected to have such as ArcelorMittal, ABB and Autodesk, has developed an a disruptive impact on the construction industry. The external sixaxis 3D printing robot capable of printing lines in technology enables the production of purpose-built shapes mid-air, and has used it to print a footbridge across an canal that cannot be produced by any other method; it promises in Amsterdam. productivity gains of up to 80% for some applications, together with an important reduction in waste. Construction EXAMPLE: WinSun (China) has been building 10 houses time for some buildings could shrink from weeks to hours, a day by using 3D-printed building components, and has and customized components could be provided at much concluded a deal with the Egyptian government for 20,000 lower cost. 44 single-storey dwellings leveraging this technology. Few other new construction technologies look capable of making a comparable impact, but structural bonding However, 3D printing in the construction industry is still is worth mentioning. It offers certain advantages over at an early stage of development. Several issues persist, conventional welding, such as greater design freedom, a including resolution problems (large-scale printing often more uniform stress distribution and lower heat input; so produces rough, chunky results), a trade-off between scale far, however, its applications in construction are limited, and speed (big printing remains slow – standard 3D printers owing to ongoing concerns about structural integrity and are constrained by their size), and high costs. At present, fire safety. One other new construction technology has 3D printing is still mostly applicable to low-volume, high- considerable potential: instead of constructing immoveable value parts. It remains to be seen how quickly companies concrete buildings, companies could create lightweight will overcome the main technological challenges, and block-like structures that can be relocated. whether they will be able to bring down costs and achieve economies of scale. EXAMPLE: An army of robot-crane hybrids (called “crabots”) will be assembled to build Google’s new headquarters in California. They will lift prefabricated components such as walls and heavy furniture into place 45 beneath vast glass canopies. 22 Shaping the Future of Construction: A Breakthrough in Mindset and TechnologyTechnology integration technologies across all sectors to create an environmentally Smart and life-cycle-optimizing equipment sustainable, economically viable and liveable city. The concept of smart building is gaining in popularity. This is in part due to technological advances, which are driving A number of issues persist, however, which restrict down the cost of sensors, data storage and computing the uptake of these smart technologies: the lack of a services. At the same time, potential customers are showing TCO perspective, a shortage of city-related information increased interest, attracted by the widening adoption of technology (IT) standards, heterogeneous starting points connected devices, and are demanding greater energy and low-quality legacy infrastructure, concerns about efficiency in buildings and improved safety and convenience. privacy and data protection, and so on. Until uptake As for the owners or end-users of buildings, they stand to increases, the industry as a whole cannot hope to reap gain several benefits: reduced operating costs, through a the full benefits. Various initiatives could help to increase likely 20-40% reduction in energy usage; greater comfort, the uptake: for example, building up the relevant internal thanks to improved lighting and temperature controls, for capacities; improving collaboration along the value chain; instance; and increased operational efficiency, partly by convincing customers of the long-term advantages of means of remote servicing. adopting smart equipment; and, if necessary, persuading governments and other project owners to take the initiative. This development affects all built assets and sectors. A sensible first step would be to conduct pilot schemes with In the Energy sector, for instance, smart meters and selected clients, and thereby gain practical experience. 46 demand response are emerging. In Transportation, smart technology enables smart transport and parking. In Housing, EXAMPLE: Skanska and its partners are pioneering the connected and smart devices are gaining popularity. And by wireless monitoring of buildings, using sensors to record interconnecting people, machines and data, smart-building data (such as temperature and vibration), and wireless equipment is contributing powerfully to the optimization of equipment to store and transmit this data. Data analytics are the O&M of buildings and other constructed objects. applied to determine the implications of any changes in the sensor readings. These smart-equipment technologies have The adoption of smart-building equipment is also a the potential to reduce unexpected failure by 50%, improve prerequisite for smarter cities and an increasingly powerful building-management productivity by 20-30% thanks to influence on people’s quality of life. less need for inspections, and improve the building’s energy performance by 10% over its lifetime. EXAMPLE: The South Korean city of Songdo – which claims to be the largest private real-estate investment in history – is a greenfield initiative, combining “smart” Figure 8: Digital Technologies Applied in the E&C Value Chain 48 Figure 8: Digital Technologies Applied in the E&C Value Chain Design and Planning Construction Operations engineering Life-cycle integration User Big data and analytics interfaces and applica- Simulation and virtual reality Mobile interfaces and augmented reality tions Building Information Modelling (in the cloud) Software platform and Ubiquitous connectivity and tracking control 3D scanning Digital/ physical integration Unmanned aerial vehicles Embedded sensors layer Cybersecurity Note: The figure displays the main application areas of the respective digital technologies along the E&C value chain. Source: World Economic Forum; Boston Consulting Group Note: The figure displays the main application areas of the respective digital technologies along the E&C value chain. Source: World Economic Forum; The Boston Consulting Group Shaping the Future of Construction: A Breakthrough in Mindset and Technology 23 WEF-constr-full-edit23-mar16.pptx 6 to provide 22 design options in one day, a 95% time Digital technologies and big data along the improvement on traditional design methods for similar value chain results. Digitalization – the development and deployment of digital technologies and processes – is central to the required EXAMPLE: Arup combines various data-collection transformation of the construction industry. Innovations of methods, including mobile surveys, security-camera footage this kind enable new functionalities along the entire value and traffic-flow reports, for improved decision-making in the chain, from the early design phase to the very end of an design of residential projects. asset’s life cycle at the demolition phase. Companies can refine their monitoring of projects by According to a recent study, full-scale digitalization in non- using drones and embedded sensors to enable real-time residential construction would, within 10 years, be capable communication and to track people, machines, components of producing annual global cost savings of 0.7-1.2 trillion 49 and the construction process itself. 3D scanners build (13-21%) on E&C and 0.3-0.5 trillion (10-17%) in the digital models of existing buildings; they can also detect any 47 Operations phase. The core technologies enabling this deviations very quickly during the construction process, and transformation are listed in Figure 8 and described below. can enable deformation monitoring. First, the use of big data and analytics: algorithms generate EXAMPLE: Skanska is developing a Tag & Tack system, new insights from the huge data pools created both on pioneering the use of radio frequency identification (RFID) construction projects and during the operations phase tags and barcodes on products and components in of existing assets. New methods of simulation and virtual construction projects. By facilitating real-time monitoring of reality help to identify interdependencies and clashes (clash delivery, storage and installation in this way, the new system detection) during the design and engineering stages, and is achieving reductions of up to 10% in construction costs. enable a virtual experience of the building even in the early design phase. By exploiting mobile connectivity and These digital technologies also facilitate the adoption or augmented reality, companies can engage in real-time enhanced application of many of the other innovations, such communication and provide workers with additional on-site as prefabrication, automation and 3D printing, and should information. help to improve various processes in the industry, such as front-loaded design and planning or project management in EXAMPLE: Atkins has implemented advanced parametric general. For instance, advanced project planning tools use design techniques for detailed design “optioneering” in the complex mathematical modelling to optimize the allocation water infrastructure industry. That has made it possible of construction staff and individual roll-out functions for Figure 9: Applications of BIM along the E&C Value Chain infrastructure projects. 50 Figure 9: Applications of BIM along the E&C Value Chain Operations Design and Building information Integration of support for renovation field data from engineering and termination laser scans Parametric Data platform for Data repository for modelling and object condition monitoring analytics- Construc- libraries and predictive optimized design tability and maintenance clash Storage, analysis Data repository maintenance Model input to and utilization for facility- and simulation and Concept Coordination of building asset-manage- rapid Renovation of design Design information Life- disciplines ment systems prototyping cycle Analysis O&M Integrated BIM Data delivery/ design- Platform for Handover Scheduling integration for construction virtual handover process performance and Construction Fabrication analyses commissioning Continuous Construction system integr. planning and across scheduling Coordi- Efficient, parties Data exchange with Data exchange with nation of information- construction-monitoring subcontr. project-management rich and suppliers and surveillance tools tenders tools Label Model input to automated and Model input to prefabrication and autonomous equipment additive manufacturing Construction Source: Boston Consulting Group Source: The Boston Consulting Group WEF-constr-full-edit23-mar16.pptx 7 24 Shaping the Future of Construction: A Breakthrough in Mindset and Technology

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