The End of Design + Construction and the Emergence of Making Buildings
Part 2: Building (Together in) the Future – Where should we go from here?
Intermission
In our post of March 20, 2020, early in the pandemic we surmised that we would likely emerge into an unprecedented socio-economic maelstrom. This turbulence during the pandemic was (and continues to be) marked by severely disrupted supply-chains, dispersed, non-collocated/ diminished workforces, restrictions on financing and fettering of the movement of trade and people amongst other equally troublesome events that emerge to evolve quickly on an almost daily basis. This against the backdrop of pent-up demand for infrastructure renewal spending (for now we will focus on the vertical; buildings sector) perceptibly slowing with the ball and chains listed above despite increasing demand for both renovated and new buildings.
Then in our blog of April 2, 2019 it was stated that “the future of making buildings lies in no longer having distinct design and construction activities but rather a Master Builder process (not individual) that seamlessly transitions (digitally) through the design, procurement, assembly and operation using non-linear, fully-iterative and non-traditional approaches to move any building” from plan and design to make and beyond “at considerably less cost and in less time”. The pandemic will eventually end but its mark will be indelible globally for decades to come. As we stall in a sort of economic holding pattern, we will offer some tangible solutions and approaches.
In the April blog we said “… we need a moonshot… because we need to solve a major problem”. That problem is a multi-headed Hydra, the offspring of over 10 generations of what we know as design and construction. The archaic processes employed produce too many buildings that are no longer rewarding for many because they are too costly, take too long to build, deliver too little value, and provide little in the way of addressing meaningful stewardship of the environment and resources they consume pre-construction, during construction and afterward into operation.
Over the next few months, we will show what we at Next believe is a plausible pathway to fundamental but disruptive change, what it might look like and how it could seamlessly be integrated as self-acknowledging digitally based solutions within a much broader digital ecosystem or modern-day virtual agora for our industry. It won’t be without problems, it will not be perfect. It will have failures and such, but it will be generally right to allow us to move ahead as we avoid trying to be prescriptively correct and go nowhere. To use the words of Ernest Shackleton, one of the greatest explorers of all time: “Difficulties are just things to overcome.”
Laying some foundations.
Governments are making bold attempts to create unprecedented levels of stimulus across a broad section of the infrastructure industry at a time when the tax base that they traditionally draw from is at an all-time low without even beginning to address the bill for the past after nearly two years of this pandemic. While there are private sector proposals for ways and means to finance large public buildings (Public-Private Partnerships, or P3) that tend to dominate total floorspace constructed and are only viable north of $100 M, we are still left with the fact that 70 - 80% of all building projects globally are likely to cost between $2 to 10 M (USD)[1] to build. These smaller and more frequent projects lack the ability to effectively wrestle excessive costs due to inflationary pressures, inherent waste, and mismanagement within the current climate. Then, add to the mix the present desire and earnestness to see a more robust and meaningful approach to environmental and resource stewardship to stave off potential catastrophic impacts to our earth within the next two decades, without doubt we have before us a “perfect storm.”
Against this incomplete and ever evolving backdrop everyone individually, corporately, and financially involved in the design and construction industry needs new strategies – ones that do not try to fix the old. Although Mark Carney was commenting directly about climate change in Value(s): Building a Better World for All, we could broaden and apply his statements equally to how making buildings could be part of something much more engaging, instead of having the design and construction industry continue to languish. He stated that this “… isn’t about niche products, (using incremental innovations such as IPD to get to collapsing current infrastructure costs using old processes would be one example we might use); it is about every part of the economy adjusting… we need the whole economy to transition”. This is a logical conclusion, the least of which is that our industry has the potential to be the new gold standard of enhancing environmental and resource stewardship locally, nationally, and in support of international efforts. It is only through, as Mr. Carney states,“every part of the economy adjusting” to and being part of a digitally led “whole economy to transition” that we could realize greater potentials and dramatically reduce the total cost of ownership and occupancy of all projects over time going forward into the latter part of the 2020’s.
Now, however, we are conceivably approaching a time where project budgets could flatten and not keep pace with inflation or the other industry-specific spook: escalation. In addition, all involved in the effort of Building the Future have urgent and competing digital modernization and recapitalization needs. Yet, project budgets are not the only thing shifting. Many building owners have renewed interest to incorporate innovative technologies that could address their Environmental, Social and corporate Governance (ESG) charters and are actively seeking professionals, vendors, constructors, and suppliers to help with these strategic priorities. Companies that develop innovative technologies will need to assume and not avoid some risk, as they are heading into untested and uncharted areas, but on the flip side they may find that their services and products become high in demand.
In this now rapidly evolving and reforming ecosystem of Building the Future, how might the participants prioritize their retooling efforts over the next 5 – 10 years or more to remain competitive against their contemporaries? One solution may involve truly keeping costs in check – not simply the lowest cost, but developing “just” costs. By taking a new, fully open and transparent cost-collapse (as in to fold down into a more compact form) approach that sets reasonable (and realistically justifiable) targets across all areas: internal direct and indirect costs, cost of manufacturing/fabrication/assembly, functional support for post occupancy in-use analysis, etc. can be better managed but importantly tracked transactionally using digital platforms. This approach to target setting and cost-collapsing, which is designed to help deliver building projects at costs that will and must suit the owners’ project budgets and be applicable across all stages of the total cost of ownership: plan, design, make, and operate. The need for better performing buildings over time must now factor total cost of ownership over many years and not only the portion that was traditionally associated with design and construction activities or the capital cost.
Some may well be skeptical of any new cost-collapsing initiatives because many prior efforts in this area have fallen short of the mark, even when they applied lean principles such as Integrated Project Delivery (IPD), or undertook intense provider negotiations, and applied other time-tested techniques common to design and construction. A new approach to Building the Future may deliver better results since it does not employ niche solutions and goes beyond traditional cost levers by focusing on cost in multiple areas – or as stated a “whole economy to transition”.
Building (Together in) the Future.
To summarize, in response to a potential slowing of growth in infrastructure spending, many are dedicating more attention to and investing in total digital solutions and technologies to drive first cost containment, then reduction and collapse costs (again, as in adjust to be more compact), but this alone will not yield the looked-for advantages and few companies are undertaking internal digital revolutions.
To stay competitive, all participants should consider going beyond their typical efforts that ostensibly are analog-driven approaches that use emergent technologies to focus on labour, material, equipment, overhead, and profit, with the latter often being the sole focus as a driver of all costs. Instead, by completely changing their overall strategies and tactics today, all involved will be better prepared not only to secure more work over the short term, but also to position themselves for even greater growth in the future and avoid becoming irrelevant. This may seem strange, yet the current design and construction industry is rife with a drive to the bottom on cost at all levels while significant waste increases, pointless markups added by useless intermediaries employed at just about every transaction, buried profit, and a heavily fractured industry that is contractually bound in silos by increasingly anti-collaborative language designed to have everyone averse to risk vs embracing risk and seeking opportunity.
In the coming months we will discuss five key priorities that could drive strategies to plan, design, make, and operate our vertical infrastructure in the future. These are:
100% Digitization of integrated solutions to plan, design, make, and operate by migration to the cloud.
Prioritization of sustainability as both an internal and external exercise focusing on robust stewardship of all resources, environmental, fiscal, and social.
Increase velocity of delivery to more rapidly move through plan, design, and make, and on into operation.
The new Agora where the marketplace is transformed by digitally based fintech, blockchain and distributable ledgers will collapse the cost by making all transactions transparent and open.
Reformation to Operate with Purpose means that the traditional 200-year-old structure must be renewed.
[1] US Energy Information Administration Commercial Buildings Energy Consumption Survey, Page 19, average building built between 2000 and 2018 is 19,100 SF x lowest and highest cost indices for 2021 reported by Altus Group.
