Buildings cost too much and take too long to produce. As shown in Figure 1, since 2004, construction escalation has doubled the national inflation rate1. However, construction wage rates and material prices have only increased at about the same as inflation. So what's causing the excessive construction costs? It has to be in declining productivity and increasing overhead. As long as design and construction profits are based on construction costs and overhead (billable hours) - both will continue to increase beyond inflation. There is no financial benefit to improve productivity - in either the direct or indirect effort. The problem is getting worse despite new delivery strategies and technologies, especially on the larger and more complex projects.
Figure 1 - Construction Escalation vs. National Inflation
Integrated Project Delivery (IPD) and Design-Build delivery methods offer hope. But, despite these, every component, process, standard, and technical solution still operates in a silo. So does every person, department, organization, and building team. There is no relationship between any of these aspects of the building process and the building’s purpose. For lack of a knowledge system, every supporting data or information transaction between component groups or processes requires a manual action. A flood of new technologies all operate within siloes, further entrenching our siloed state - to the detriment of the whole system. Technology costs increase with no measurable value improvement.
Fragmentation and the lack of a knowledge system are the twin pillars that cause buildings to cost at least 42% more than they should. An electrician can pull wire today at the same rate as yesteryear. The electrician’s wage rate and the wire costs have increased about the same rate as inflation. Therefore most, if not all, of the excessive and unnecessary cost is due to the indirect or supporting efforts – rather than the direct labor or materials.
Building CATALSYT provides the first knowledge system needed to replace the fragmented and manual state of construction. There are four major sequential breakthroughs that CATALYST provides:
- Planning, Impartial Budgeting and Cost Management:
- Correcting today’s problem child projects
- Preventing tomorrow’s problem child projects
- Rewiring Contracting Structures – Flipping the design and construction profit motive to reduce cost and effort (billable hours).
- Consensus Data Standards and Structures – Applying integration and automation to design, procurement, and construction
- Objective Measurement System – Attaining true process improvements through measurement of variation against objective standards.
With good data, Building CATALYST is already providing the first of these breakthroughs. So, owners and builders can get started by correcting and/or preventing problem child projects. The technical standards and processing methodology are in place, and tested, to start rolling out the other three.
CATALYST, together with a new Win-Win contracting strategy, will reward lower cost and less effort. This How CATALYST Works, shows the step-by-step process for setting up, modeling and managing projects in CATALYST.
If interested in discussing further or scheduling a demo, feel free contact us at: Info@buildingcatalyst.com