That the construction industry lags behind other industries on innovation and digital transformation is well known. A lack of investment in research and development, slow adoption of new technologies, low productivity and inappropriate risk allocation in contracts are just a handful of the common barriers to change.
More fundamentally, there remains a lack of incentives for the parties that can make the biggest impact on a project to take action. Contractors, consultants and suppliers are often bound by lowest-cost solutions, delivered to meet paper-based, transactional performance criteria. In such cases, contractors work to fulfil the contract, not to make better-quality projects.
Research by McKinsey Global Institute reported in MEED describes construction as being ‘ripe for disruption’, with new technologies having the potential to deliver 60 per cent efficiency gains, equating to $1.6tn in potential savings every year. At the top of the list for investment is digital technology, with the research demonstrating that construction ranks lowest of 21 other sectors in terms of digitisation and has had only a 6 per cent growth in productivity since the 1940s, compared to 1,512 per cent growth in productivity in agriculture and 780 per cent growth in manufacturing. But the experience of these other industries shows that there comes a tipping point, where digital capability becomes a requirement for survival.
An example of this is Siemens Building Technologies new headquarters in Switzerland. The firm did not want to perpetuate existing construction processes where contractors deliver a building according to a contract, with the data developed during the construction period simply evaporating. Instead they wanted to capture this throughout design and construction and create a digital repository of data, a digital twin, that would enable the new facility to be cost-effectively managed for the rest of its operational life. This meant using building information modelling (BIM) to its fullest extent, incorporating not only the digital 3D design model, but using it for construction work packages and linking time (4D) and cost (5D) to the model.
To achieve this, Siemens Real Estate went out to the market and demanded full BIM enablement. Not all major construction companies were able to comply. In Switzerland’s building sector a tipping point had been reached and Strabag, an Austrian contractor that has invested in BIM for a decade, was ready.
An important lesson for the UAE industry to take from this case study is that Siemens Real Estate undertook this transition accepting that it would need to spend more in the early stages of this project. Innovation does not come for free. But this investment would allow the company to manage its facilities more efficiently in future, minimising the lifecycle cost. Making the crucial link between the cost of new infrastructure and its operational expenditure (opex) is a vital step along the path of transformation. Clients may need to spend more, for infrastructure to cost less.
At the same time, incentivising contractors to deliver solutions that will result in better, more innovative and more efficient infrastructure is also important. The Siemens project was carried out using a design-and-build contract, which gave Strabag the freedom to help its client create the most cost-effective long-term solution.
Use of design and build also gives the contractor an incentive to value engineer the scheme. As explained in MEED’s Mashreq Driving Better Value in Construction Report, this step sees contractors look for design alternatives that can maintain function and performance at lower cost. But under traditional lowest-price contract arrangements there is no incentive for contractors to do this.
The good news for construction in the UAE, and globally, is that the benefits of digital construction have finally been recognised; a tipping point is being reached, and the industry is investing for its own benefit. To date, contractors have told MEED that low margins mean they cannot afford to invest in digitisation. Now they report that they cannot afford not to.
Against this backdrop, MEED and Mashreq Bank have investigated some of the world’s leading-edge construction projects where digital transformation is already underway and new technologies are onsite. From 3D printing of the world’s first bridge to the development of a universal construction robot, to digital, cloud-based, project management platforms, what these case studies have in common is a commitment from project parties to provide better value in the construction industry, led by enlightened clients who are committed to achieving long-term sustainability.
On the positive side, such commitment is being demonstrated in the UAE at the highest level, from its intent to invest in innovative infrastructure outlined earlier this month, to its targets for 25 per cent of buildings to use 3D printing by 2030. On the path to digital transformation, Dubai’s Roads & Transport Authority (RTA) has become a global leader in adoption of BIM.
But to achieve innovation on a large scale, other clients must be ready to work more collaboratively with their supply chains, and to incentivise them to deliver on value, rather than lowest price. Continuing with business as usual will prevent high-level objectives from being realised and see construction remain one of the world’s least digital and least productive industries for another 70 years.
This article is extracted from a report produced by MEED and Mashreq entitled Delivering Innovation in Construction. Click here to download the report