Historically, the United States has never recovered from an economic downturn without a corresponding resurgence of the construction industry.
Today 10% of American jobs are dependent on the construction and related design industries, so it's critical that effective strategies be implemented to spark their recovery.
The Alliance for Construction Excellence (ACE) at Arizona State University has been studying the impact of the extended economic recession on the construction industry with the goal of helping it chart a path toward renewed prosperity.
To expand that effort, ACE is organizing and guiding a series of think tank sessions, bringing together industry leaders from around the country to address questions pertinent to that goal:
• Can the industry return to what it was before the recession, or will recovery require fundamental structural changes in the way construction and design companies do business?
• If the down-market period persists, how fast and extensively can the industry transform itself to ensure a healthy survival?
• How does the industry need to reshape itself in the next decade to protect against future downward cycles in the economy?
Answers are crucial if the construction industry is to help the country with an economic rebound, says Gary Aller, director of ACE, the outreach arm of the Del E. Webb School of Construction Programs, a part of the School of Sustainable Engineering and the Built Environment in ASU's Ira A. Fulton Schools of Engineering.
"The recession has altered our industry's methods of delivering its services, changed business owners' attitudes and reduced profit margins," Aller says. "The balance of power has shifted into a buyer's market in which owners are driving contracting methods and influencing the construction process."
"When the construction industry is expanding, the market provides the opportunity for practitioners to influence and shape the industry," he says. "In a growing market the industry enjoys advances, such as improving delivery methods, advocating payment legislation, enhancing the industry image and attaining recognition for professionalism. In a slower market the industry loses momentum and has less potential for gains and improvements."
ACE research professor Thomas Schleifer says the failure of decision making and business planning that is slowing recovery "is not due to bad historical data or poor planning processes, it is erroneous assumptions about the external business environment in which the industry is operating today. We want to take the uncertainty out of the process of devising strategies to dig out from the market downturn."
Along with Aller and Schleifer, participants in the inaugural session of the think tank series, conducted last spring, included;
• Doug Pruitt, chairman and chief executive of Sundt Construction and past president of the national Association of General Contractors
• Hugh Rice, chairman of FMI Corporation
• Mike Medici, managing director of the Smith Group
• Charles B Thomsen, retired chairman of 3D/International
• Terry Gray, former global head of Construction Industry Practice, Zurich - General Insurance
• Emerson Johns, retired global finance leader for DuPont and former director of the Construction Industry Institute
• Edd Gibson, director of ASU's School of Sustainable Engineering and the Built Environment
At the session, Aller stressed that the lack of a unified industry voice, along with fragmentation among various sectors of the construction and design industries, is diminishing the ability to solve major industry problems.
Aller, Schleifer and other think tank participants identified numerous areas in which the industry's business models need to be reformulated if recovery is to proceed.
The major challenges include the impact of technological advances, diminishing workers' skill levels, labor shortages, credit and financing uncertainty and reduction of union influence.
Equally critical issues are intensifying international competition, the increasing impacts of the global economy, decreasing profit margins, reduced government funding and fewer public-private partnerships, lack of productivity, and industry consolidation trends.
"We want to provide the industry the data and the guidance it needs to develop informed strategies to deal with what appears to be an uncertain future," Aller says. BD+C