The architecture, engineering and construction (AEC) sector is one of the largest and visible in the world. It is also one of the slowest sectors to embrace productivity innovations. More precisely, the McKinsey Global Institute found that the industry could gain AU$2.3 trillion (US$1.6 trillion) of value annually if it caught up with the rest of the global economy in terms of productivity.

These are some sobering statistics: labour productivity growth in the AEC has averaged 1% yearly over the past two decades, lagging behind the total global economy (2.8% growth) and manufacturing (3.6% growth). Less than 25% of construction firms matched the productivity growth achieved in the overall economies where they worked over the past decade.

In Australia, construction productivity fell 0.8% in 2017, marking four straight years of negative productivity growth. Overall market sector productivity, on the other hand, rose 0.5% in the same period.

Yet the future of Australian construction looks bright, with analysts estimating that construction growth will recover from its current slump to grow at 2.14% annually between 2019 and 2023 . Employment in the construction sector is also expected to grow another 10% in the same time period, employing another 118,000 workers.

In a sector that contributes to 8.1% of Australia’s GDP, and which employs 8.9% of the country’s workers, small improvements to construction productivity will have enormous implications.

Some savvy investors have already spotted the gap in the market. More than $1.5 billion has been invested in ConstructionTech (“ConTech”) across more than 200 deals since 2013; at least $142 million of this was invested in Australian ConTech. Most of these deals were at an early stage and analysts expect this figure to rise exponentially as the technology matures.

The scope of ConTech is wide, with technologies ranging from cloud-based construction collaboration platforms to blockchain solutions for supply chain management and even robotic bricklayers. By adopting the right tools and best practices, the Australian AEC sector can expect to extract another $36 billion of value annually over the next decade.

From foamboard models to 5D BIM

The AEC sector is often said to be “underdigitalised” – one classic example is the way project coordination is managed. Lacking a common, easily accessible data platform, project managers in various teams often rely on a head-splitting mix of face-to-face meetings, calls, meeting notes, schedules, contracts and emails just to keep abreast of project developments.

Development and adoption of 6D BIM may be underway. Essentially a 5D BIM given to building owners and facility managers after a project is completed, a 6D BIM allows building managers to have complete oversight on all components of the facility. 7D BIM incorporates additional information about the building’s energy and environmental impact, helping in sustainability analysis.

The private sector is leading the charge on BIM adoption in Australia with large contractors and designers bringing international experience back to the country. Examples of projects that were built with BIM include the Western Australian Rail Link and the Sunshine Coast University Hospital

Levelling out information asymmetry

Another sticking point for the AEC is information asymmetry, particularly among smaller specialised trade contractors and subcontractors, reflecting the overall fragmented nature of the sector. A lack of cost transparency, heterogeneous zoning and building codes and the sheer geographical dispersion needed for projects creates difficulty for companies wishing to obtain scale.
The opaque information market also benefits players who are able to take advantage of market failure. These range from contractors undercutting the more productive competition by using cheaper informal labour and companies that boost their margins from change orders and claims.

Digitisation is the first step towards balancing out unequal information access; digital transformation is the other. With accurate data at hand and accessible by multiple team members from any location, everyone can look forward to a more integrated, coordinated and transparent processes.

Increased connectivity does come with its risks, particularly exposure to emerging cybersecurity threats.

Solutions in the market so far are piecemeal and solve one problematic sub-section of the process at a time. But there is promise (together with a fair number of APIs).

With the increased use of mobile devices, cloud computing and a global trend toward 24/7 connectivity it is likely that workflows within the AEC will too, be swept up in the worldwide move towards higher productivity.

Moving to LEGO-style construction

Research by theMcKinsey Global Institute found that companies could potentially gain between 5-10 times productivity if they adopted a manufacturing-style production system for construction. With the bulk of the construction project built from prefabricated, standardised components that are manufactured offsite, the industry as a whole stands to gain from improved predictability, transparency, and a corresponding reduction in cost and delays.

While prefabrication used to be limited to commoditised steel and concrete components that are used repeatedly in structures, some companies have successfully begun using 3D printing in more complex projects. Bathrooms, houses and even an entire village have been constructed using 3D printing.

The prefab sector is still at a nascent stage in Australia nine years after the country’s first prefab building was completed.

Shifting the entire AEC sector to a production system will not be possible. But it is clear that prefab technology and a project-based (rather than process-driven) system is one approach that will define how construction operates in the not-so-distant future.