Construction lost as much as $40B on poor productivity in 2022

Dive Brief:

  • U.S. contractors wasted between $30 billion and $40 billion in 2022 due to labor inefficienciesand it appears to be getting worse, according to a new survey from FMI Corp.
  • Nearly half of respondents (45%) said they saw declining labor productivity on their jobsites in the last 12 to 18 months, compared to 23% who claimed improvements. The report describes labor as “the largest, riskiest, yet most controllable variable cost” in construction and said that these problems could worsen in coming months.
  • The report emphasizes construction’s already thin labor margins, and respondents estimated the industry could have saved $25 billion of the wasted funds with improved management practices.

Dive Insight:

FMI, a Raleigh, North Carolina-based consulting and investment banking firm with clients in the built environment, said that high-performing companies can increase productivity through intense planning, reliable budgeting and documentation and buy-in from all stakeholders. These also happen to be many of the principles championed by lean construction methods.

On top of wasted money on productivity, construction faces a well-documented shortage of workers compared to demand. Estimates put the industry’s current need at half a million.

“We’re all impacted by the labor shortage, there’s no getting around that. The solution will be in how to do more with less,” said Keyan Zandy, CEO of Dallas-area contractor Skiles Group. “In a nutshell, you need the right people working together, sharing ideas and solutions, and making strategic decisions.”

Zandy, a lean construction proponent, said the real solution lies in people and “how they work together,” collaborating and connecting early in the preconstruction process.

Lean practices are commonplace on projects from many major general contractors, said Les Hiscoe, president and CEO of Boston-based Shawmut Design and Construction, who said that he has found a lot of the inefficiencies in the project lifecycle occur during handoffs.

“If an electrician says they’re going to be done in five days, it might actually be done in four, but they round it up to five to give themselves a little buffer. So then, maybe the drywall says, ‘Well, I’m also gonna take five.’ But they might have one built in for a day that’s not quite ready,” Hiscoe said. “So if you take two out of five days as not entirely necessary, that’s 40% waste right there.”

Schedule, trust, flow

Hiscoe said Shawmut schedules early with subcontractors and stakeholders, builds trust with them and holds each team accountable to deliver on time, which can make a huge difference. From project to project, that adds up, he said.

Charlie Murphy, senior vice president and lean manager for Turner Construction, said the contractor often turns to crew leads for their expertise to create “flow” on the jobsite, working efficiently from one area to another to allow more work done at once.

Murphy attributed the increased labor inefficiencies, in part, to an increase in infrastructure and manufacturing projects, which are often quicker to market. 

“When you don’t have good planning time, those impacts show up downstream,” he said. “We can’t give up on that upstream planning, it’s such an important part of the project.”

Asked to distill the best method to decreasing inefficiencies and minimizing wasted labor costs, Murphy said, “Slow down to speed up. Plan. Engage the crew leads. And create an environment where the workers are respected.”

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