Construction Productivity Improvement

Gouranga C. Banik

Southern Polytechnic State University

Marietta, Georgia

Productivity is central to the value of money obtained by construction clients and to the competitiveness of the US construction industry. The construction industry as a whole can start a chain reaction of growth, opportunities, development and more growth. Unfortunately, construction productivity in the United States declined in the last decade. The results are presented on a survey of Atlanta’s largest 25 contractors to obtain their views on where productivity improvement would most help and to compare trends with a similar type of survey which was carried out nationwide in 1983. Data were collected on the general characteristics of the respondents and on the contractors’ opinions on potential areas for productivity improvement. The study shows that contractors should concentrate immediately on planning, estimating, scheduling, site supervision, labor turnout, engineering design, standardization and prefabrication. The survey found that marketing, communication, risk management, information technology, and value engineering are the areas, where more efforts are needed to improve construction productivity. Another finding is that the construction industry as a whole doesn’t want to spend resources for research and development to improve construction productivity.

                    KEY WORDS: Productivity, construction, perceptions, potential for improvement

Introduction

It has long been recognized that the construction industry must increase its efficiency and productivity in the face of competition in the USA and performances overseas (Business Round Table). The construction industry is the second largest industry in terms of dollar volume, number of persons employed, and contributions to Gross National Product (GNP) in the United States, just after the computer and software industry. In 1997, the construction industry employed about 6 million people; and in all its phases, expenditure was $650 billion dollars, or about 4% of the Gross Domestic Product (GDP) (US Commerce, 1988). On the other hand, the construction industry is one of the most risky, challenging, and rewarding businesses (Kangari, 1997).

Clients need better value with respect to cost, time and quality from their projects, and construction companies need reasonable profits to assure their long-term future. Both manufacturing and service industries increased their efficiency and transformed them in a competitive and innovative way to a degree which a decade or more ago nobody would have believed possible (DETR, 1998). For example, car plants in the US are among the best in terms of efficiency and productivity that was impossible to imagine just a decade ago. Of course, this success came against a background of rising world-class standards.

Recent studies in the UK, Scandinavian countries, and US suggest that up to 30% of construction is rework. Labor is used at only 40-60% of potential efficiency, accidents can account for 3-6% of total costs, and at least 10% of materials are wasted (DETR, 1998). This data clearly indicates that opportunities exist to improve efficiency by reducing the waste from construction.

The U.S. economy is now in its best condition in five decades. But recent market analysis and development indicate that the economy might slow down due to the Asian, Russian, and Latin American dismal economic performance. If the economy slows down or goes into a recession, there will be a ripple effect on the construction sector of both the southeast region and the whole country. For the continuous improvement of productivity, at least to minimize the effect of possible slowing down the economy, the construction industry should play a vital role by improving its productivity and by increasing its market share. The U.S. has neither the Japanese consolidation of labor and management, nor the German institutionalization of cooperation. Direct government intervention to allocate resources towards favored industries has been used sparingly in the US as opposed to the French and the British politics (Arditi, 1985). Labor productivity figures from the Organization for Economic Cooperation and Development (OECD) show that the construction industry in the UK compares well with that in other developed countries. Table 1 shows productivity (net output per person in 1990 US $ value) in the construction industry over a period of twelve years. It clearly indicates that productivity increased in real terms in all countries except the US. In the US, productivity was highest in 1983 among all developed countries, and it decreased from 1983 to 1993.

Table 1.

Net output per person in 1990 US dollar value

* 1993 Figure

Productivity is a complex issue in construction because of the interaction of labor, capital, materials, and equipment. It is difficult to measure due to the heterogeneity of the industry’s products and its input. Generally, productivity is stated as constant in-place value divided by inputs, such as work hours (Oglesby et al. 1989). High productivity is the intensive and/or efficient use of scarce resources converting input into output, which makes more profit (Arditi, 1985). Some argue that productivity can be achieved/increased by working harder, faster, or longer. In the real world, productivity can not be achieved by only speed and harder work without adopting better work practices (McKenna, 1998). True productivity (and profit) gains come from identifying and implementing the most efficient work process to satisfy the client’s needs (CIB report, 1996).

To remain competitive in the national and global markets, the construction industry needs to be looked into the productivity of labor, equipment, materials, methods of construction and management. These resources remain idle unless they are transformed into productive use by human performance. The construction industry itself invests little in research and development and in capital. In the UK, in-house research and development has fallen by 80% since 1981, and capital investment is about 35% of what it was twenty years ago (DETR, 1998). This is true to some extent in the US construction industry as well. This lack of investment is damaging the industry’s ability to keep abreast of innovation in process and technology.

The purpose of this research is to report the most important aspects that do contribute to productivity from the survey of construction companies. One set of questionnaires was developed for the Atlanta Business Chronicle enlisted top 25 commercial contractors. Companies were asked to express their opinions as to what aspects are most likely to contribute to productivity increases in their activities and what are their immediate and future concerns. Some of the findings were also compared with the findings of 1983 (Arditi, 1985). The results of this study highlight the current perceptions of contractors regarding performance improvement and the current condition of the industry.

Methodology

Chromokos & McKee (1981) and Arditi (1985) conducted a survey of the top 400 Engineering News-Record contractors in 1979 and in 1983 to identify the areas perceived by construction executives as having the greatest potential for productivity improvement. Chromokos & McKee got a response of 25% to their mail. Ardity received a response of 61 out of 400 companies (15%). In both the studies, the respondents expressed a great deal of interest. A careful review of the literature and the realization that conditions had changed significantly since 1983 constituted enough justification for the decision to conduct a similar type of study.

The productivity model used in this study is given in Figure 1. This model includes financing as one of the HEADQUARTER elements for its increasing role, as opposed to the 1983 study. Construction tasks have been divided into headquarter-type functions and project-site functions. It can be observed that there are overlaps among the functions such as the "procurement" function in headquarters and "materials" and "equipment" functions on sites. Functions like "labor" problems can be problems for both site and office.

The questionnaire that was developed by previous studies in 1979 and 1983 was modified incorporating finance, value engineering and computer applications, and robotics. The questionnaire was mailed to the top 25 construction contractors based in Atlanta (Atlanta Business Chronicle, 1997). Obviously, there is a possibility of qualitative change of response due to the dramatic change of contractor population in respect to their types, sizes and locations.

A copy of the questionnaire is attached in the Appendix. It covers basically five parts. The first part was designed to collect information of participating companies, such as size of the company in terms of dollar turnover, the number of persons employed as permanent and temporary, the amount of work subcontracted, the equipment use policy and geographical location of the activities. Since the survey was carried out on Atlanta-based contractors, the locations of project activities are mainly in Georgia and in neighboring states. The second part (Question 8) was designed to record respondents’ perceptions of the potential for productivity improvements in headquarter functions. The third part (Question 9) recorded respondents’ perceptions of productivity improvement potential in project site functions. In both the second and third parts, respondents were asked to rate the functions as high, medium and low for potential with respect to opportunity in productivity improvement. In the fourth part, questions were asked about the usage of robotics and their intended purposes (Questions 10 and 11).

Finally, the fifth part was designed to get the information about the respondents’ interests of actively taking part in various types of activities and areas of future concentration specially designed to improve productivity (Questions 12, 13 and 14).

Results

Out of the 25 questionnaires mailed, 12 responses were received with 48% return rate in this study (as opposed to 25% in 1979 and 15% in 1983 study). Out of 12 respondents, 6 (50%) respondents were presidents and/or chief operating officers, 4 (33%) were vice presidents and 2 (17%) were senior project managers.

Table 2 gives the information collected in the first part of the questionnaire, namely, general characteristics of the respondent companies. Seventy-five percent of the companies of the current survey have annual sales volume more than $100 M. whereas, in 1983 this figure was about 44%. The number of companies with more than 100 permanent employees are about the same in both 1998 and 1983. The Table shows that most (83%) of the Atlanta companies own very little (less than $5 million dollars) construction equipment, which is significantly lower than the national average of 1983 (52%). This is due to the availability of equipment, expansion of equipment business and economics for lease and rent in 1998. Among the Atlanta contractors, more than 50% of average work is subcontracted by 83% of contractors. But in 1983, only 40% of the contractors subcontracted more than 50% of their average contract. This may be due to the change of attitude of contract policy and popularity of general contractors who only manage the contract on behalf of the owner. Since the study is concentrated only among Atlanta contractors, 100% of the respondents have construction sites in Atlanta and in associated counties, 58% of the respondents have sites in other counties of Georgia, and 92% have sites in neighboring states.

Table 3 gives the respondents’ perceptions of potential in headquarters type functions with respect to the opportunity for productivity improvement. In this study, 50% of the respondents indicated that estimating, scheduling and communications have high potential for productivity improvement. None has mentioned that estimating and planning had the low potential for productivity improvement. There is now more interest in improving estimating practices than there was in 1983. This can be attributed mainly due to the development of user-friendly computers and related software like Microsoft Excel, Timberline, etc. Most of the companies are using computers for their estimations. But there is a persistent problem due to the shortage of experienced estimators who can use the latest estimating software efficiently. Another problem of estimating is the inconsistency of taking material quantity and subsequent addition of waste or overhead. Another possible improvement lies in the practice of conceptual, parametric and probabilistic estimating (Dickmann, 1983).

More than 80% of the respondents mentioned that planning, estimating, scheduling, procurement, marketing and communications have either high or medium potential for productivity improvement. Planning and scheduling is still marked by the respondents as having high potential for productivity improvement, although extensive use of software like Primavera (Suretrack) and Microsoft Project have already significantly improved the planning and scheduling performances. Still these are the priorities because respondents think that inadequate importance may jeopardize the project productivity. Sixty-seven percent of the respondents mentioned that procurement and marketing has medium potential for productivity improvement. Marketing and communication are becoming more important because of the increase of competition due to the removal of restriction of inter and intra country business and availability and simplicity of information technology (IT). On the other hand, about 50% of respondents indicated that drafting has very low potential for productivity improvement.

Figure 1. Productivity Model

Table 2.

General characteristics of the respondent companies

Table 3.

Productivity improvement potential in headquarters

* Financing was not included in Aridity's study (1983)

Respondents’ perceptions of potentials in project-site type functions with respect to opportunity for productivity improvement are given in Table 4. The survey revealed that management, engineering and labor are the highest opportunity for productivity improvement in comparison to materials, construction techniques, regulations and equipment. In management, supervision has the highest potential for productivity improvement. Fifty percent of the respondents indicated it as high, and another 50% indicated it as medium priority/challenge for productivity improvement. It is now becoming increasingly difficult to find an experienced and efficient superintendent for everyday project-site management. In the past, people became superintendent by practice, and the owner/contractor gave them enough opportunities for a long time to become successful. At present, contractors don’t want to invest enough resources for the staff training and growth because of their lack of loyalty for their company and their high demand from other contractors. Contractors hire construction management graduates as superintendents, sometimes those who have little knowledge about the site work. This trend of hiring superintendents affects the project performance as well.

Respondents indicated that material, construction techniques and regulations have the medium opportunity for productivity improvement. In materials, delivery (supply-chain), prefabrication and standardization have more opportunity for productivity improvement. The use of more standard components and products in construction and the increased application of prefabrication within construction have significant benefits in terms of improved quality, better predictability, and time and cost savings (CIB, 1994). The survey also indicated that detailed material delivery schedules and their implementation, storage time for materials in the site, and smooth orderly flows of materials have medium influence on site productivity improvement.

Construction and manufacturing industries generally complain about the negative effect of governmental regulations on productivity. Many large construction companies or projects require in-house staff who deal with the regulation process and obtain the necessary permits. In some cases, single projects may take several months to obtain all required permits from county/state/federal agencies. Equal Employment Opportunity (EEO), Occupational Safety and Health (OSHA), and Environmental Protection (EPA) have medium opportunity for productivity improvement. In some cases, OSHA regulations indirectly increase the overall productivity (Dias et al., 1996). Twenty-five percent of the respondents indicated that environmental regulations have high potential for productivity improvement. Since the survey was conducted mainly on Atlanta contractors, and they are mostly involved with commercial construction, the respondents’ perceptions might be conflicting to some extent. In comparison to the previous survey, it indicated that regulations have now lost ground as the potential for productivity improvement.

Under the labor category, 50% of all respondents indicated training, quality control and availability of labor have high potential, and 41.7% have medium potential. The high level demand of skilled labor in the Atlanta area for the booming construction industry is reflected in this study. Retention and turnover of trained and skill laborers are problems for the Atlanta area contractors. In 1983, availability of labor was not a challenge for productivity improvement.

In the category of equipment, about 50% of respondents indicated that equipment has a medium effect on productivity improvement. They cared mainly about the utilization instead of capacity because most of the contractors use leased or rented equipment.

Table 5 shows the respondents’ priorities or concentration that need attention according to the rank in improving overall construction productivity. This type of data was not collected in the previous study. The collected data were ranked from 1 to 9 (1 being the highest priority and 9 being the lowest priority). About 33% of respondents indicated that quality control and improvement is the number one priority, which means that it has the highest potential for productivity improvement. Approximately 25% and 17% of respondents indicated that training and education of the employee are their first and second importance. Some of the respondents did not rank any one of them. They felt that other elements are more important for them than the mentioned ones. Overall risk management and compensation were mentioned by all the respondents as one of their priorities of consideration for productivity improvement. Although venture or partnering is becoming important for productivity improvement, very few contractors could identify it for its potential. Robotics and automation has received the least priority of consideration for productivity improvement in construction because of the unstructured nature of construction work.

Table 4.

Productivity improvement at project sites

Table 5.

Willingness to concentrate in improving overall construction productivity

Another important finding is that no contractor wished to use robotics for productivity improvement, although a great deal of development had already occurred in the last several years. It may be due to the type of contractor because the contractors for this survey are mostly commercial contractors instead of combination of building, commercial, heavy/civil contractors. Another reason for not prioritizing robotics may be due to the fact that the use of robotics needs huge capital investment and trained workers to operate. Possible psychological barriers from labor and little incentives in contract also restrict its use for productivity improvement (Banik, 1999).

Table 6 shows how much the respondents are willing to get involved in various activities designed to improve productivity in the construction industry. About 58% of the respondents indicated that they wanted to participate in evaluating results of a project aimed at improving productivity and attend conferences and meetings on construction productivity. Very small percentages of respondents indicated that they do intend to contribute funds to support programs and/or subscribe to a productivity information service for productivity improvement. Smaller percentages of respondents in all activities under willingness to participate category reflect that respondents don’t wish to take an active part in developing, funding and coordinating research that can improve productivity.

Table 6.

Willingness to participate in improving construction productivity

Conclusions

The results of the survey of 25 contractors listed by Atlanta Business Chronicle indicate that the contractors’ perception about immediate needs for productivity improvement. But it may be different from the other parts of the country. By comparing the results of this survey with a similar survey conducted in 1983, it is clear that perceptions related to productivity have changed in the last 15 years due to the innovation of new technology, expansion of the construction industry, and incremental use of computer applications.

Among the head-office type functions, this study clearly indicates that the construction industry needs to devote more effort to planning, estimating, scheduling, marketing, communications, and procurement (Table-3). Marketing and communications reflect greater potential for improvement in productivity than shown in the previous study.

In the project-site function, site supervision, cost control, value engineering, design standards, and design improvement have high potential for productivity improvement (Table 4). Contractors seem to be satisfied with contract agreement with labor and governmental regulations. Governmental regulations, one of the prime areas for productivity improvement in the previous study, have lost ground in this study. Another interesting observation is that no respondents were in favor of using robotics for productivity improvement. Finally, a general observation is that interest and participation of contractors in productivity related issues are low.

Based on the outcome of the study, it has been observed that the construction industry does not particularly wish to spend money on research and innovation for productivity improvement. There is an urgency for the government to take some bold initiatives for productivity improvement if the US wants to become more competitive in the industrialized world. The initiative will enhance not only the construction industry, but also boost the national economy. Lean construction techniques is one area where the construction industry can look for further productivity improvement.

It is recommended that similar types of studies be conducted every four or five years regionwide and nationwide to observe and identify new trends in the industry and to steer research and education in that direction. Such research should be efficiently coordinated and the results should be quickly communicated to all parties involved in the construction activity.

Bibliography

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Atlanta Business Chronicle (1997, Sept.). Atlanta’s Top 25 Commercial Contractors. 22B.

Banik, G.C. (1999, March). Robotics Applications in Hazardous Wastes Sites. Published in proceedings of 2^nd International Conferences on Implementation of Safety and Health on Construction Sites, CIB W 99, Honolulu, Hawaii.

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