Global investment firm Goldman Sachs predicts AI will improve the world's GDP by 7 per cent during the next 10 years, worth about $10 trillion.
But Australia is below the global average rate of adopting or looking into AI, on par with the US and South Korea. Australia's rate of productivity, what we produce for a given amount of hours worked, fell 3.5 per cent in the 12 months to March this year.
Construction is even worse, at the lower end of innovation, technology and, as a result, productivity in Australia.
Construction management is on the verge of major disruption with the convergence of business process automation, AI, “trustless” blockchain applications, the internet of things and more.
We estimate productivity gains of 15% in automated contract management processes alone (DFCRC submissions 2023), without considering the uplift from allowing site staff to do what they are there to do, that is BUILD, rather than being held back by, and bogged down in paperwork.
BUT we must prepare to take advantage of the opportunities by establishing contracts and contract management processes to take advantage of automation and emerging technologies.
WHAT WILL BE AFFECTED?
Forecasting will be transformed by analytics and AI, giving clients and contractors more certainty about costs and margins;
Tedious manual procedures will be automated;
Construction will proceed seamlessly;
Sophisticated management techniques will become routine;
Delays and cost blowouts will be identified and corrected early;
Disputes will be reduced;
Contractors and trade contractors will shift focus from getting paid to doing the job;
People will do more with less;
The industry will be more inclusive and more attractive to new entrants;
Capital accumulation and investment will improve;
Clients will get better quality, more predictable outcomes.
THE TIME IS NOW
The construction industry is at an inflexion point. It has been decimated by sudden, unexpected resource constraints and consequent cost increases. A record number of construction businesses have collapsed. The sector is not meeting any targets for itself or its clients. Profitability and liquidity are at an all-time low.
Low prices, low profitable and low fees prevent any focus on quality outcomes, let alone preparing for change.
WHAT’S STOPPING US?
Over 40 years the industry was sleepwalking into a blind alley, with silo’d data, poor collaboration, declining trust, no structured network communication systems and combative contract management that has seen a decline in management skills and capability, with the added risk of internal corruption.
As with all cultural change, nobody predicted the outcome. Even worse, nobody was able to foresee that we were creating a system that was antithetical to the seamless adoption of new technologies that were on the horizon.
We know from a variety of research and anecdotal evidence that construction is at the bottom of the scale on most productivity indicators, including innovation, technology uptake, working conditions and working hours, competence.
This decline was driven by the adoption of highly risk-averse contracts through the entire contractual chain, where risk is sold down a contractual chain with little consideration of the buyer's capacity to manage, mitigate or absorb the risks they are required to assume.
Many clients, including public sector clients, have made attempts to include “value” propositions into bid documents. The difficulty is, we know from research (PAQS/ICEC Congress 2003) that proponents quickly “learn” how to respond to soft “value” questions, so that decisions ultimately come down to price, and low prices continue to drive cut-price service and high-risk outcomes.
The result is that, where a construction project should be a cooperative “temporary organisation” focussed on the client’s outcome, it is a group of isolated businesses, each prioritising getting paid or minimising and inhibiting payment to those further down the contractual chain.
WHAT ARE THE INHIBITORS?
Construction is unique, in that it is almost entirely based on groups of businesses (many micro-businesses), assembled into “temporary organisations” for the purpose of delivering a project, after which it is disbanded. Change is revolutionary, not evolutionary (Turner - The Handbook of Project Based Management). Unlike large manufacturing or service organisations, there is little interest in collaborative effort for continuous improvement. The industry is highly fragmented, with few common communication channels.
This isolation has been amplified over the past 40 years with the decline of shared, rules based common data and risk-averse bespoke contracts.
These contracts have driven and embedded isolationist management processes that are not fit for purpose, moving forward towards adopting innovative systems and technologies that drive productivity and an attractive, healthy industry. Some of the inhibitors include:
Contract management processes inhibits progress on site;
Contract processes discourage transparent two-way communication;
Contract management competence has declined in favour of aggressive negotiation;
Data siloing and isolation inhibits the flow of mission-critical information;
Data siloing does not provide for sophisticated analytics that is driving other industries forward.
HOW CAN WE TURN IT AROUND?
For the first time in half a century, there is a mood for change towards collaborative contracting.
Existing contracting arrangements have clearly failed at every level.
Whilst attempts have been made to introduce more collaboration (a range of cost-plus contracting models, PPP, etc.,) they have tended to be shallow agreements at the highest level of contracting parties. Communication, contract management process and management processes has not changed.
If we are to achieve the objective, collaboration must be deep and meaningful.
Interfaces must be frictionless. Contract management and construction processes must be separated to prevent slow, paper or semi-automated contract management processes from inhibiting progress, the No 1 objective when work on site commences.
The fastest, easiest and proven way to turn the tide is to re-introduce transparent, rules-based shared data through the entire construction network. The rules, skills and rudimentary technologies are mature and available.
Whilst it is common to share construction documentation (plans and specifications), sharing management data has declined over forty years.
BiM has enabled significant change in the sharing and visualisation of plan documentation and modelling. Sharing contract management data has not gained any similar traction.
Object definition, cost allocation and time management in BiM are still in their infancy. The work on essential enabling standards has dragged on for decades.
Sharing management data will immediately open clear pathways to new management processes that remove the friction between paper processes and construction progress.
It will, together with new and emerging technologies, allow for automating many clumsy, manual contract management processes, including payment and change management. It will open the door to seamless, smart contract applications.
Removing the focus from the drudgery of mountains of unnecessary paperwork will allow coordinating contractors to concentrate on leadership, team building and motivation that will drive cooperation and productivity.
Trade contractors will be able to confidently do what they do best, produce a quality job, without spending their time and energy on unproductive disputes and protecting their entitlement to payment.
The crisis in mental health and suicides will subside.
We will see an immediate return from improved professionalism in project management and professional services, making the profession much more attractive to new entrants seeking high quality professional employment.
AI is moving at warp-speed in developing more accurate predictions. But the data is fragmented and isolated. Rules-based, shared data will provide the foundation for these technologies to become business-as-usual.
There is no downside.
The only thing to overcome is our fear of change. I am confident that with the incredible energy in the industry and a close collaboration between all the stakeholders we will see a vibrant, effective, profitable industry that works for everyone who wants to be part of it.
More importantly it will work for our clients receiving real value for their investment.
