There is universal agreement that construction productivity could be a whole lot better. Construction productivity is now worse than when Kevin was left home alone for a second time and CDs topped the charts.
There is also general agreement that when it comes to improving any outcome, what gets measured gets done, i.e. the best way to achieve progress is to start with a baseline and measure change to that baseline to identify what new practices work and what won’t
So, if we want to improve construction productivity………. how do we measure it?
Economists will tell you that there are many ways to measure productivity, all of which are based on measuring the output level for any given input level. In essence, productivity is about doing more with less. This could be doing more with less labour (labour productivity) or more with a range of inputs (multi-factor productivity).
It is still not straightforward, and I challenge anyone without an economics degree to explain in simple terms how the Australian Bureau of Statistics calculates its construction productivity measures….trust me, I have tried. I got an ice cream headache!
So, are there other things that could be measured that we industry practitioners can easily understand and would demonstrate that construction productivity was improving?
For a while now in the UK they have been using ‘the pound in the ground’ as one such measure.
In simple terms they are calculating what percentage of the total cost to build a project is made up of the direct costs of construction, e.g. cost of materials and cost of construction labour as opposed to the cost of project design, procurement, management and governance, often referred to as indirect cost.
The theory is that direct costs, as the name implies, are more directly linked to outputs (finished projects) than indirect costs, and so any reduction in indirect cost relative to direct cost should lead to an improvement in overall productivity. This is obviously a very crude measure and there are limits to how far indirect costs can be driven down to ensure, amongst other things, appropriate safety, quality and design, but there is undoubtedly significant opportunity to improve the efficiency of how we procure, deliver and govern projects.
For example, why do we ask pre-qualified contractors to provide draft management plans as part of a tender, have someone from the Client-side role mark every contractor position or have multiple levels of design review when the contractor is responsible for designing the project?
In our report, Nailing Construction Productivity, the Australian Constructors Association recommends the development of a National Construction Strategy to improve outcomes and the financial sustainability of the construction industry here in Australia. A key part of the strategy would be the creation of a data alliance to develop and track a number of simple metrics like the pound in the ground or, in our case, the dollar in the dirt!
This information would be anonymised and shared across the industry, a role that an independent body like Infrastructure Australia could potentially undertake. Once established, the alliance could be expanded to collect a broader range of data to better inform decision-making at all stages in the project life cycle.
So, who is ready to do a bit of digging?
Author: Jon Davies, CEO, Australian Constructors Association