[+] Disrupt or Die: Why Construction Sector Must Evolve

Despite global improvements in technology, coupled with a booming population, Australia’s construction industry is less productive today than it was three decades ago—and it’s costing the economy as much as $47 billion a year. The latest report from the Australian Constructors Association, Disrupt or Die, has shed light on the sector’s serious weaknesses, labelling a shortage of workers as a major threat. Over the 31 years since 1990—when Australia was home to almost 9 million fewer people—the industry’s productivity has dropped 1.8 per cent. And since the peak of the resources boom in 2014, that productivity has declined 16.5 per cent. Australian Constructors Association chief executive Jon Davies says the industry must fundamentally change to not only tackle the significant amount of work currently in the pipeline, but also address the country’s current housing crisis. “Over the past 30 years, almost every other industry has advanced yet Australia’s construction industry has gone backwards,” he says, adding the industry is “out of touch” with the new generation of workers. “Workers do not want a job in an industry where the hours are long and disputes are commonplace, Excel spreadsheets are considered the height of tech and little focus is placed on the impact we are having on the environment.” Davies says another significant hurdle to greater productivity is the antiquated procurement process and how projects are delivered and governed—essentially white-collar activities. “The biggest opportunity here lies not in the traditional blue-collar space, which people normally talk about when addressing productivity,” he says. ▲ Australian Constructors Association chief executive Jon Davies: fundamental change is crucial. “Starting with procurement, we waste a huge amount of time and effort getting big tendering teams together to produce piles of documentation that rarely gets read. It’s just to give the illusion clients are getting value for money. “If you look at the governance phase, we employ third-party reviewers to review the work of other reviewers who then review the work of the contractor. What value are these additional levels of governance actually bringing?” While technology has been revolutionary in improving global productivity across many industries, technology alone will not streamline the construction sector, Davies says. “People ask me why contractors aren’t adopting more digital technologies. There are so many digital solutions we could be using, but that’s not the problem. The problem is the amount of barriers we have to their use,” he says. “A lot of these technologies rely on an open and transparent sharing of information. “But the contracts we use to procure projects drive opposite behaviours—they actually drive the behaviour of holding on to information. So we have this very adversarial situation where everyone is just thinking about protecting their own position.” Multi-faceted approach needed A combination of design technology and innovation are what’s needed for the industry to digest future pipeline problems, according to Hyecorp co-managing director Stephen Abolakian. “Using the technology to design the building as much as possible before it’s built not only provides a much better construction outcome (because quality reduces defects) but allows any improvements to occur upfront before it’s too late,” Abolakian says. “It might sound boring, but synergies and improvements can be had through collaboration between teams on site, in office, design teams, consultants and subcontractors. Utilising the technology available to do so is an ever-evolving and improving part of the business.” ▲ Hyecorp’s Stephen Abolakian: Keeping the team in-house gives greater control. Hyecorp’s recent systems improvements include increasing their in-house design team and upskilling with new design technology systems such as Revit. “We’ve kept this team in house (versus the more typical outsourcing to design firms) to allow us more day-to-day (or minute-to-minute) control of the design process,” he says. “Technology is first and foremost a facilitator. It must go hand in hand with a rigorous process as well as a well-skilled and equiped team. “Technology on its own is not the answer. It should not be ‘for the sake of it’.” While automation can help streamline some processes, Abolakian says a granular approach is still required for complex structures being built in an increasingly tight regulation framework. “Apartment buildings are not Ikea sets with a manual and the perfect amount of screws in the box. “There are smart people out there designing new products and materials; it’s important for construction teams to be across those innovations and use best-in-class products and materials to either; get a better outcome, provide cost efficiencies, or a better quality build.” Focussing on timelines George Tadrosse, chief executive of Sydney-based developer Aland, says before turning to technology as the holy grail, the industry should consider where the greatest hurdles lie. “We simply need more skilled workers, but equally the planning system is way too slow,” he says. ▲ Aland chief executive George Tadrosse: Planning laws must be overhauled. “Red tape seems to double down year on year; levies, fees and taxes get higher every year and utility providers—both private and government-owned—seem to have indefinite timelines. “Developing land or properties is a long process and you need support from government all the way through. The system is broken and there doesn’t seem to be much reform to actually fix it.” With anywhere from 1000 to 1500 homes under construction at any one time, Tadrosse says Aland relies on relationships and tailor-made processes to get through the pipeline. “As much as the world has bashed us down over the past few years, we’ve grown stronger,” he says. “We have a lot of internal departments so we can control it all the way from acquisitions, to legal conveyancing, planning, design, construction, building management and property management—we’re here for the whole property journey. “That way we can control our own destiny to some degree, at least internally, and strengthen the culture to push through anything.” Future-proofing the pipeline RSM Australia national director of property and construction Adam Crowley says a lack of suitable in-house technology can trip up even booming companies. “There are a lot of big profitable businesses who look at what they have on the back end in terms of software and it’s all out of date. “Sometimes they don’t know at any particular point in time how profitable they are—until it’s too late,” he says. “What they’ve done historically has sort of worked. They pick the job up, put in a planning process, get an Excel spreadsheet that measures how they’re going and update that once a month or so to keep track, but it’s just not good enough. ▲ RSM Australia national director of property and construction Adam Crowley: No company is immune. “As soon as you get cost pressures, or delays like the weather or labour shortages, it all falls apart because the information they capture isn’t real time.” As the rising costs of operation signal the demise of some builders and developers, Crowley says the government could be doing more to sustain construction momentum. “We’ve just heard the government rattle on about housing affordability in the federal budget as the No.1 thing to tackle, but inevitably there’s going to be price pressures due to lack of supply to market. “These construction companies going under or facing extreme difficulties are further compounding this housing supply issue. “If the builder or the developer falls over, that whole process then extends out because you need to get replacement people to finish jobs, liquidators have to be appointed. “What else can government do to support the sector? Is there some sort of intervention to prop up some of these companies so they can at least finish what they’ve started?” Crowley says supporting the industry addressing housing affordability is crucial to unlocking supply, but it often becomes a political football. “The public might think construction companies don’t need bailouts because they seemingly make so much money. “However, you could be in business and turnover $100 million to produce a $3 million or $5 million loss for the year. Are they just meant to absorb that and keep on going?” You are currently experiencing The Urban Developer Plus (TUD+), our premium membership for property professionals. Click here to learn more.

[+] Disrupt or Die: Why Construction Sector Must Evolve

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