Productivity Problem

12 October 2017

The ITA Executive Committee met in the London last month. Taking the opportunity to attend the September BTS meeting, ITA president Tarcisio Celestino was invited to say a few words to the assembled engineers ahead of the scheduled lecture by high speed rail technology in China.

During his address, Celestino spoke about a recent article in the Economist magazine that took aim at the global construction industry for a perceived lack of productivity.

The article, published online on 17 August 2017, calls construction the worst-performing out of all industries. Using the McKinsey consultancy as its source, it says things are particularly bad in rich countries. Since 1995 it claims, France and Italy have seen a reduction in productivity by 17%, Germany and Japan are fl at, while the US has endured a 50% plunge.

With construction at 13% of global output, if its productivity growth had matched manufacturing, the world would be USD 1.6 trillion better off per year. Construction of course has a major difference with manufacturing that Celestino raises: that construction does not take place in the perfectly sanitised and controlled environment of a factory. There are unexpected site conditions to contend with and interactions with third parties. No two jobs are alike, even in construction sectors more predictable than tunnelling and underground construction.

The article from the Economist does not mention this, but it does throw out some other interesting points that it suggests to be the cause:

¦ In America, fewer than 5% of builders work for construction firms that employ over 10,000 workers, compared with 23% for business services and 25% for manufacturing

¦ Profit margins are lower than any industry besides Retail

¦ The highly cyclical nature of the business (boombust investment)

A couple of solutions are touted out: government efforts to smooth the investment rollercoaster and requirements for firms to implement new technologies (i.e. BIM) to bring the industry up to date.

Should we assume, in the case of tunnelling in particular, that a straight productivity measurement (cost of input vs value of output) is a valid indicator of the industry’s success? Particularly given the dramatically increasing complexity of work. If so, what are the chances or means of resolving such a problem? Thoughts on a potstcard: