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How To Change The Property Industry

How to Change the Property Industry

Quality, Consequences and the Construction Industrial Complex (part 224).

I posted a link to my AABC 2019 Annual meeting presentation called “Outside the Bubble: International and Mega TAB Projects, 5G + IoT“.

Barry Wormald of AESG made some great comments that made me think, my reply follows.

Barry,

Thank you for watching the presentation ( Building Whisperer Presentation AABC Annual Meeting 2019 ).

You are correct, today building design and construction roles and responsibilities are diluted to the point of almost zero consequences for failure, as everyone can point the finger at someone else. To be fair, one reason for this dilution is the rise of the “specialist” as an emergent property of complexity plus technology in buildings. However this all leads to low levels of litigation i.e. low consequences and an environment that rewards, corner cutting, proprietary systems, cronyism and corruption.

Your 3 reasons for the continuing reduction in property product quality are interesting. When I “zoom out” I see:

1. In a world of instantaneous communication technology the property industry is populated by poor communicators and “low” technology people in power.

2. The whole property industry is a race to the bottom. If a firm responds to an RFP they are a commodity. The RFP game is sly corner and cost cutting with zero reward for performance other than you can play the RFP game all over again. The RFP game is a form of corporate self-abuse.

3. Scale and complexity are issues but without hard consequences there are no real incentives for building design and construction to innovate and change their means, methods and systems.

The construction industry talks a good game about technology solving its problems. So far this is all talk. The built environment is currently a “Wild West” of expensive proprietary software and systems. Until software such as 3D drawing and energy modelling become ubiquitous, 90% cheaper and 100% easier to use, I do not see this changing any time soon as there is no incentive for real change.

I like your idea of mobilizing the insurance industry to require minimum fee levels and PI insurance cover. However, I believe that property industry litigation levels and market size are just not large enough to generate interest from the insurance sector. Also, the insurance industry would only assess risk and therefore PI premiums based on claims history and actual litigation associated with its clients. In reality, few construction projects go to full litigation.

So how to change the property industry? I think there are 3 areas that can effect real change:

1 – Legislation

The power of the state can be impressive. However, governments and AHJ normally lag industry trends by about 10 years. They are reactive rather than proactive. The exception I see at the moment is the recent NYC legislation to decarbonize the existing building stock. Also, governments and AHJ are subject to influence and capture by special interests and lobbyists. I find it hard to be optimistic about governments and AHJ as leaders for change but NYC may change that.

2 – Competition Based on Competence

The only way this works is if firms and people are rewarded for good work and not subjected to the RFP “Hunger Games”. Good firms will compete for business and long term relationships from developers and owners that manage them well and pay on time. This requires competition primarily via extreme pre-qualification not price. Remuneration in this scenario would be a fixed % of construction cost and firms would compete based on skills, services and reputation.

3 – Consequences via Owner / Developer Monitoring for Extreme Compliance

This in my opinion, is where the answer really lies. When you set up a “Hunger Games” situation, provide no technical or project leadership then pay late, poor quality buildings result. On all projects, owners and developers get exactly what they deserve and only they have the power to change things.

Owners / developers need to:

1. Select and reward for performance to generate long term relationships based on trust.
2. Monitor for “extreme compliance” via a “Trust but Verify” system. We could call this “Commissioning & Verification”. This only works if this is undertaken by the owner or their directly employed agents.
3. Punish harshly, poor performance and non-compliance from the design process and throughout construction.

Ask yourself this, if you are “senior” in the building design and construction industry and had your time again, would you take your future and brain power and do the same again or go into another profession?

Whilst I have had a great time so far, if I had my time again, I would go into an industry where performance is rewarded and there are no caps on earnings. Currently, the building design and construction industry caps earnings and does not reward performance.

IMHO, the future belongs to artisans, artists and farmers.

BlueRithm Brand Ambassador 

Twitter: @BLDWhisperer 

Related posts & links:

#194 – Existing Buildings (NYC), the Elephant in the Room /

#174 – Ductwork is Difficult?

#219 – Twilight of the AEC Owner Managed Firm

Edifice Complex Podcast

Podcast Website

Podcast on YouTube

This Post Has 2 Comments
  1. Adam, thanks for your comments, and I’ll give you a few more comments for discussion when we meet up:-
    1. Insurance – policies are already going up and becoming un-affordable following the many facade fires (and likelihood of more to come with many known similar cases) and we are seeing many more cases of litigation being taken now due clients ability to pay, and consultants not being able to service projects well with low fees and bad cash flow.
    2. I forgot to mention that this should also include the professional institutes who should set minimum fee levels for certain projects and link this to the insurance companies, with a threat to companies who undercut these levels with sanctions. You will remember the RIBA and Inst of Engineers scale of fees in the 70’s -90’s? The fee level for MEP would typically be 1 – 1.2% of construction costs – I commonly see levels of 0.3 – 0.4% now with a much more difficult design process!
    3. The RFP’s that are issued today are often written by people who have no idea what they require – we often call them for clarification and they openly say they don’t know and request us to submit on what we think is the requirement! How they can then compare proposals is clear that that they can’t from some of the appointments they make.
    I could go on but it only frustrates me more but an example I came across in India really made clear where the Construction industry stands – I met a guy working for a chiller company who had moved there from a car manufacturer. When he started with the car manufacturer about 5 years ago now, the typical shelf life for a component for a new car was about 3 months. When he left them about 3 years later it was 16 minutes. The Construction Industry in general hasn’t made this improvement in 50 years and as Contractors fall by the way this will get worse and not better!
    Like you, I have had a great career in this Industry, and traveled the world and met many great dedicated people, but would I do it again if I was starting now and knew what I know…………………………….?

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