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? Unless today's electricians pull less wire per hour than yesteryear's, most of the problem has to be overhead and indirect labor.
How did we get here? Could it be that there is no financial benefit for architects or builders to produce cost effective buildings? Despite BIM, IPD, et al more recent data shows the problem getting even worse, especially on the larger and more complex projects. The 2017 McKinsey Report "Reinventing Construction" cites mis-aligned contracting structures as a problem. A strong case can be made that - as long as design and construction profits are based on construction costs and overhead (billable hours) - both will continue to increase beyond inflation.
Figure 1 - Construction Escalation vs. National Inflation
We've known for years that fragmentation is a huge problem. Despite attempts to solve this, today every component, process, standard, and technical solution still operates in a silo. Figure 2 illustrates this - just in the preconstruction stages. Every person, department, organization, and building team operates in an information and one-off process silo.
Figure 2 - Preconsruction Silos
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.
Figure 3 - Construction as a System
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 – Pursuing 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.
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