Some challenges for the US construction industry and how BIM can help
The USA is a global economic powerhouse with the world’s largest and most influential economy. The USA is also home to the world’s largest construction industry with a workforce of over 10 million people. It won’t be wrong to say that the construction industry is one of the pillars providing strength to the American economy. Every year, projects worth $1.3 trillion are undertaken.
The stats are impressive, but perhaps, the reality is not all as rosy. Even though the US has the world’s largest construction industry, construction has become a challenging business to win in.
1. Slow growth rate and low-profit margins
One of the biggest challenges faced by the construction industry in 2019 is the decline in the profit margins. This is said to be a result of the burgeoning interest rates and equipment rental costs. The construction industry has long depended on debt. In fact, the meagre borrowing costs after the Great Recession encouraged companies to fuel expansion with new debt. The trend carried through and became a norm. High corporate debt stands at $9 trillion today. The construction industry, more than most, faces the challenge of serving massive debt numbers. Add to that a decline in demand. There’s a case to be made that after the boom in multi-family housing, followed by commercial building, the current focus on public infrastructure projects portends a coming construction slowdown. In fact, a survey by the Wall Street Journal predicts that the US economy could experience another bout of recession in 2020.
2. Adoption and integration of technology
Businesses across sectors are fast turning into technology businesses, but the construction industry, across the globe, still seems to largely rely upon traditional methods, and the US is no different.
According to a survey by JB Knowledge, 39% of the surveyed correspondents cited the lack of IT staff as the biggest limiting factor in adopting more technology. This inability to adopt the latest technology means is impairing the ability of construction companies to dramatically drive up efficiency, effectiveness, sustainability, and impact. This reflects in the results too. While the construction sector has managed to improve productivity by only 1% in the last 20 years, other sectors of the economy have seen productivity gains of three-times as much!
3. Lack of skilled labour
The JB Knowledge survey also found that a meagre 24% of the construction employees were comfortable with the idea of adopting new technology, and only 11% of general contractors are using wearable technology. The future will be driven by technology. The construction industry won’t be immune to these changes. The inability to find trained and skilled labour will result in a failure of adopting new technological methods, thereby denting the profit prospects of a company and industry at large.
Of course, the labour shortage is not in the futuristic areas alone. Even in the traditional construction roles, positions are proving hard to fill. The Associated General Contractors of America estimate that as many as 79% of companies in the space need to hire more people.
4. Increase in cost of materials
The global cost of construction materials has grown around 9% since the last year. This has also pushed up overall construction costs by as much as 6.2%. The demand-supply parity has made construction companies run from pillar to post to make ends meet. The increased costs result in low profitability. Several uncontrolled external factors dent the profits margin along with some controllable internal factors that companies often overlook. Poor estimation of raw material quantities, over and under-ordering, and losses under storage cause lower profit margins. Inaccurate estimates also add to increased logistics cost and delays in construction.
How can BIM help in overcoming the challenges?
A lot has been said and written about the pros and cons of adopting BIM technology in the construction industry. The UK construction industry is considered the hotbed of BIM technology. As per an NBS report, BIM adoption saw a staggering rise from 14% in 2012 to 74% in the year 2018. The estimated savings on the initial prototype projects was calculated to be around 2.5% of the total lifetime cost. The BIM Level 2 mandate has helped the UK government in curtailing the cost for public assets by 20%. The UK government is said to have saved $2.1 billion since the BIM mandate. There’s no doubt that BIM works.
That said, BIM is often reduced to a 3D model drawing of a building. But it is far more than just that. BIM is a centralized source of information for all the involved parties. It helps in avoiding the duplication of information along with providing real-time access to accurate information. This reduces the scope of errors due to unavailability of information, eliminates waste, and removes the possibility of time and energy lost due to clashes. This can drive higher productivity and faster project completion. This can help companies get more done with the resources at hand.
Better estimation of costs and raw materials is another critical feature of BIM technology that helps in curtailing construction costs. The 3D model lets the builders derive a certain quantity of the required raw materials. A change in design automatically reflects in the amounts estimated. This feature helps in avoiding over or under-procurement of the raw materials. This helps drive improved financial performance and more efficient working.
The construction industry, just like any other industry, keeps evolving. Every day brings in a new challenge. But the future of the world is technology, and any industry that refuses to adapt to technological advancement will find it hard to break free of the shackles that have always held it down. Dramatic changes demand the adoption of disruptive technologies. It’s come to that time for the construction industry in the USA.