Peter Reina

While productivity in other business sectors has surged ahead in the last half century, advances in construction have been “meager”, according to the World Economic Forum. In a new report, the Geneva-based business organization sets out a recipe of improvements the industry must follow to meet burgeoning global demand.

“Digitalization, innovative technologies and new construction techniques” represent springboards for improvement, says the Forum report, Shaping the Future of Construction–A Breakthrough in Mindset and Technology.

“To capture all this potential will require a committed and concerted effort by the industry across many aspects, from technology, operations and strategy to personnel and regulation,” adds the report, prepared with The Boston Consulting Group.

Already accounting for 6% of worldwide GDP and the largest global consumer of raw materials, the construction industry is expected to grow rapidly as urban population rises by 200,000 persons per day and environmental pressures grow.

Cutting construction costs by just 1% would save about $100 billion a year—enough to pay for the world’s cancer drug bill, says the Forum. But the efficiency trend so far appears to be in reverse, with U.S. construction labor productivity actually falling over the last 40 years, adds the report.

The industry “has been far slower than many… to adopt new technology and is only now beginning to undergo a modern transformation,” says the report. Other efficiency impediments include inadequate R&D and work planning, lack of continuity between projects and over reliance on the expertise of ndividual managers.

“The widespread perception is, justifiably enough, that construction companies are not sufficiently progressive or forward-thinking,” says the Forum, adding that, as a result, it fails to attract the best talent and does less staff development than other sectors.

Among the Forum’s proposed remedies is increasing the use of “lean” construction methods, such as just-in-time supply, which could reduce completion times by 30% and cut costs by 15%. The report also advocates greater use of advanced building materials, including cross-laminated timber, along with more standardization and prefabrication.

Digital technologies and processes “enable new functionalities along the entire value chain, from the early design phase to the very end of an asset’s life,” says the Forum. Full-scale digitalization in non-residential construction could cut capital costs by 13 to 21% and achieve 10 to17% operational savings, according to a study cited by the report.

But along with adopting new technologies, the industry must also change work practices to include increased integration of the supply chain, more whole-life planning and more innovative contracting models with balanced risk sharing.

Construction also must establish more robust global arrangements on standards. Construction could “forfeit the potential inherent in digital technologies if it remains such a fragmented industry, unable to agree on internal standards,” says the Forum,

Governments could help make big savings by driving out corruption in construction, which is rife even in developed nations, says the report.

According to a European Commission study cited, corruption in eight European Union countries drove up procurement costs by up to $3.2 billion a year.