Let’s Get More Efficient and Profitable (an important new Study)
Updated: Jul 18
Further to our blog last week about project efficiency, a study was just published in the Journal of Construction Engineering and Management, and summarized in Science Daily, that is an important addition to this discussion. That study for the first time looks at 40 years of construction productivity data in North America and Canada and concludes that productivity in the construction industry has been declining since the 1970s. As the Science Daily summary quotes the lead author, Hasse Neve of Aarhus University in Denmark:
“Since 1972, we’ve continuously gotten less and less out of every hour of work. Construction sites have simply become less and less efficient because more time is spent on non-value adding work. Ultimately, this means that we spend more and more working hours on a single construction job. Therefore, our contractors do not earn as much money on construction as they could.”
The Science Daily summary goes on to talk about the efficiencies and increased profitability that could be realized from more efficient (“Lean”) construction management and the savings that this could provide, which are conservatively estimated to be in the billions of dollars annually. Indeed, Science Daily quotes Hasse as calculating – by way of illustration -- that if the construction industry could become just 1% more efficient (i.e., devote 36-seconds per hour to value adding work), that would add $5.4-billion annually to the gross domestic production of the industry in the U.S. and Canada.
As mentioned in our last blog on this topic – huge new investments will be required for projects to revitalize our crumbling infrastructure, launch us into innovative new technologies and mitigate the already encroaching effects of climate change. Saving billions annually by better management of projects is just one obvious but important way to fund these desperately needed projects. All the other innovations we’ve mentioned remain important – including addressing the tremendously costly impact of bureaucratic and regulatory delays. But this new study adds a sobering piece of data that says we’ve going backwards rather than forwards in the ‘efficiency’ category.
As we said last week, here are huge challenges but also very promising opportunities. We need to find a better path forward and get more efficient in a host of ways.
 Hasse H. Neve, Søren Wandahl, Søren Lindhard, Jochen Teizer, Jon Lerche, “Determining the Relationship between Direct Work and Construction Labor Productivity in North America: Four Decades of Insights. Journal of Construction Engineering and Management, 2020; 146 (9): 04020110 DOI: 10.1061/(ASCE)CO.1943-7862.0001887.