The state should give the construction industry a lesson - and save billions

The construction industry is a productivity lagger. The solution is that the builders, especially the state, should take back power and force the necessary digitization.

Building and construction is a worst in digitalisation, and the builders and society pay a high (over-) price for the industry's backward march into the future. An important reason for the problems is that the structures in the industry reward inefficiency. Now the state and the municipality must use their power to create the necessary change.

While industry after industry is being digitized, with increased productivity as a result, building and construction are clinging to the last century. The industry is one of Norway's largest industries, with 60,000 enterprises employing just over 260,000. But productivity is falling like a rock.

While mainland Norway in the period 2000 to 2016 increased its labor productivity by 30 percent, it fell in the construction industry by ten percent, according to Statistics Norway.

At the same time, it is a conflict-ridden industry. Analyzes estimate that society incurs a cost of NOK 2.2 billion each year from disputes in the construction industry (source: bygg.no, December 2020). There are no signs of a decline in the level of conflict.

Why is it like that?

To understand the mechanisms in the industry, it is important to understand the players and what incentives they have. Following the money provides a basis for understanding.

Simen Bakken - Civil engineer, project manager and co-founder of dPlan        

Builders and contractors are the two key players in the industry, and they also bear the greatest risk. But two other players in the industry have great influence, and their incentives are on a collision course with the goal of a more productive industry.

These two actors are design consultants and consultants. These get paid for the hours they spend. And the longer the projects take time, the more disputes that slow down, the more hours they can write.

These groups have a great influence in the industry, often rightly so, because they are often people with great experience and competence. If the advisers had pushed for faster digitization, we would soon have seen positive changes. But they have no reason to. On the contrary.

Digitization inertia in buildings and construction is not a particularly Norwegian problem. Globally, the industry is lagging behind in digitalisation, as stated in a report from McKinsey from 2019 ("Governments can lead construction into the digital era", April 2019).

Since the powerful advisers are probably not going to go in the breeze for digitization, the industry's locomotives, builders and contractors must take control themselves. And the biggest locomotive of all, is the public one. As a developer, the state can use its purchasing power to stimulate faster digitization, and can also, as the McKinsey report suggests, launch incentives that make it more attractive to use new technology.

Such incentives can be:

Emphasis on the use of new technology in tender invitations.Public support schemes for actors who adopt new solutions.Requirement that collaboration tools be used across the many different companies involved in the contracts.The public sector can also help reduce risk. It is understandable that managers who are responsible for billion-dollar projects are reluctant to use untested methods. The risk is too great. The authorities may offer to bear all or part of the costs if new technology does not deliver as promised.

Compared to the long-term savings, it will probably be profitable.Another contribution to solving the challenges in the industry may be a national database of experience data. By using openly available and anonymised data, businesses and the public sector will be able to collaborate on data sharing. A national digital platform will be able to open up for innovation and early testing of research results among Norwegian companies, and simplify public procurement processes (Nagell 2019).

It is important that the contractors and builders take the lead. Today, there is a culture of disclaimer in the industry. When a problem arises, you call on the consultants, and when things go wrong, the consultants are blamed.

This culture, and the great influence of the hourly invoicing consultants, is the biggest brake on digitalisation. Those who pay the price for the countless transgressions and conflicts should now regain power, and both stimulate and demand faster digitization.

This article is "google-translated" from this: https://www.dn.no/innlegg/bygg-og-anlegg/byggebransjen/digitalisering/innlegg-staten-bor-gi-bygg-og-anlegg-et-spark-bak-og-spare-milliarder/2-1-963044