A strong technical base; A clear understanding of design; An understanding of the intimate connection between technology and culture; and An understanding of foreign languages and regional studies.
Construction Growth:
The construction industry employes nearly 6 million people representing 5 percent of the total work force. According to the Deparment of Commerce, the total value of construction put in place in 1995 was $547 billion representing 8.1 percent of the Gross Domestic Product (GDP). The industry is in the doldrums and still trying to match the record volume of 11 percent of GDP established in 1972 (Fig.1). An analysis of new construction put in place from 1986 to 1995 shows an anemic growth rate of less than 3 percent from $430 billion to $547 billion in current dollars. Inflation accounts for most of this apparent growth. The Department of Commerce’s Construction Review predicts only modest growth in new construction for the period 1996 to 2000, in line with the predicted average growth rate of 2.4 precent for the GDP.
Construction Productivity:
Data compiled by the Bureau of Labor Statistics (BLS) show that the construction wage rates are among the highest, 30 percent higher than the average for non-farm wages in 1996 ($15.31 an hour for construction vs. $11.73 an hour average for others) . The measurement of productivity growth rates for the construction industry are not readily available and tend to be complex. However, some parallels to the construction industry can be drawn by examining overall labor productivity growth. According to the Center for the Study of American Business (CSAB) at Washington University in St. Louis, there has been a general decline in labor productivity growth beginning in 1973. A CSAB study indicates, while the post World War II era (1947 to 1973) saw productivity growth accelerate rising by more than 3 percent a year, the productivity gains rose barely to 1 percent a year over the period 1973 to 1994. A strong correlation appears to exist between the decline in labor productivity growth and an increase in federal social and economic regulation. A case study done by the author showed that on a federally funded airport project of 12 years duration, more than 30 percent of the time was attributable to the regulatory permit and approval process. Data compiled by the CSAB show that for the period 1970 to 1996, the number of people employed in regulatory agencies increased by 89 percent from 70,000 to 132,000. In the meanwhile, the increase in federal regulatory spending went up a staggering 1,080 percent from $1.4 billion in 1970 to an estimated $16.5 billion in 1996.
Construction Safety:
Construction is considered hazardous work. According to the 1995 Accident Facts published by the National Safety Council (NSC), the probability of accidental death in construction is four times greater than the average for all other industries. NSC statistics also show that over the period 1984 to 1994, the construction industry was responsible on average for 1,860 work place fatalities and 230,000 permanent disabling injuries annually. Thus while representing 5 percent of the work force, it accounts for 20 percent of fatalities. Although, the percentage of construction work place fatalities has been high, there is a dramatic improvement in recent years with the number dropping to 910 in 1994. On the other hand, the number of disabling injuries has been climbing and reached a record 300,000 in 1994. It is estimated that work place injuries cost the construction industry as much as $18 billion annually.
Global Markets:
The National Science Foundation reports the U.S. industry spending on research and development is among the world’s lowest-- about 0.4 percent of gross sales. The U.S. has been losing market share in the global markets to fierce competition from foreign multi-national companies. According to the Engineering News Record (ENR) , in 1994 the U.S. construction contractors captured only 16 percent of international revenue vs European contractors’ share of 53 percent and Japanese contractors’ share of 20 percent. In addition, foreign contractors are aggressively pursuing work and gaining market share in this country. Data compiled by ENR show that in 1994, foreign contractors made $10 billion from the U.S.market. Although, this represents only 2 percent of the new construction put in place in the U.S., the situation is not encouraging when viewed in the context of the gain of market share of foreign car sales. According to the Fortune magazine, the gain in car sales by the foreign transplants grew from 4 percent in 1985 to 19 percent in 1995. It is also interesting to note that only two U.S. contractors (5th place Flour Daniel, Inc., and 15th place Bechtel Group) are in the first 20 in the ENR’s ranking of top 250 international contractors based on revenues received in 1994. Comparisons to rankings of previous years are not meaningful as ENR ranked the companies on the basis of contracts awarded rather than revenues.
Infrastructure:
Our crumbling infrastructure poses additional challenges and is in great need of refurbishment and/or replacement. USA Today reports that an analysis of the Department of Transportation’s National Bridge Inventory reveals that the percentage of busy bridges labeled "deficient" by the Federal Highway Administration (FHA) has more than doubled in the last decade from 18 percent in 1982 to 39 percent in 1993. The FHA estimates that the cost of fixing all the bridges between now and the year 2011 is close to $165 billion. The total cost of infrastructure refurbishment and/or replacement on a national level is estimated to reach several trillion dollars. According to the Associated General Contractors of America’s report, Quality of Life... The Unspoken Promise, there is strong corrrelation between productivity growth and investment in infrastructure. All of the major industrialized countries invest a higher percentage of GDP in public works than the U.S. In fact, Japan’s investment in 1992 was three times that of this country and lead all the G-7 countries.
Getting Out of the Doldrums:
It is clear that the two most promising areas which will help the construction industry regain its lost ground are the global markets and domestic infrastructure development. According to the Futurist magazine, by the year 2030, developing countries could represent up to 87 percent of the world’s population. The emerging and third world countries are trying to make a quantum leap into the 21st century with huge infrastructure and building programs. For example, India has radically revised its restrictive policies regarding foreign investments and is opening its doors to foreign companies to build process and power plants on a fast track basis, in addition to billions of dollars worth of infrastructure. Exciting projects like the 1,483 foot tall Petronas Twin Towers in Kaula Lumpur, Malaysia have taken away the title of world’s tallest buildings from the Sears Tower in Chicago and the CNN Tower in Toronto. The emerging countries are also expected to show a future growth of 6 percent a year in the GDP vs less than 3 percent for the U.S. The implementation of programs of this magnitude by the emerging markets requires not only enormous resources but also highly sophisticated and qualified technical and management specialists. It is time the U.S.contractors develop long term strategies that will make them major players in the global construction markets for years to come. According to the National Research Council’s (NRC) report on Building For Tomorrow, young professionals need strength in the following key areas to meet the challenges of global competition:
A strong technical base;
A clear understanding of design;
An understanding of the intimate connection between technology and culture; and
An understanding of foreign languages and regional studies.
The key issue regarding infrastructure development is one of providing financing, without raising federal taxes. A growing trend both nationally and internationally is privitization, where private investors build and operate facilities normally funded and operated by public agencies. President Clinton’s Executive Order 12893: Principles of Federal Infrastructure Investments, encourages private sector participation in the ownership, financing, construction and operation of infrastructure projects. In the House of Representatives, HR5120 (28 Sep 94) would have facilitated efficient investments and financing of infrastructure projects and new job creation through the establishment of a National Infrastructure Development Corporation. The future is likely to see more Bills like the HR5120 that would trigger an explosive growth of billions of dollars of privitization. ENR’s cover story Gold in the Hills of Privitization succinctly put it "... it may be slow in coming, but experts say once a few projects move, it will be a gold rush".
There is also an urgent need for the construction industry to exchange its traditional ways for innovation both in materials and techniques aimed at delivering a quality product within the cost and schedule parameters.