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Suggested Citation:"Summary." National Research Council. 2009. Advancing the Competitiveness and Efficiency of the U.S. Construction Industry. Washington, DC: The National Academies Press. doi: 10.17226/12717.
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Suggested Citation:"Summary." National Research Council. 2009. Advancing the Competitiveness and Efficiency of the U.S. Construction Industry. Washington, DC: The National Academies Press. doi: 10.17226/12717.
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Suggested Citation:"Summary." National Research Council. 2009. Advancing the Competitiveness and Efficiency of the U.S. Construction Industry. Washington, DC: The National Academies Press. doi: 10.17226/12717.
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Suggested Citation:"Summary." National Research Council. 2009. Advancing the Competitiveness and Efficiency of the U.S. Construction Industry. Washington, DC: The National Academies Press. doi: 10.17226/12717.
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Suggested Citation:"Summary." National Research Council. 2009. Advancing the Competitiveness and Efficiency of the U.S. Construction Industry. Washington, DC: The National Academies Press. doi: 10.17226/12717.
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Suggested Citation:"Summary." National Research Council. 2009. Advancing the Competitiveness and Efficiency of the U.S. Construction Industry. Washington, DC: The National Academies Press. doi: 10.17226/12717.
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Suggested Citation:"Summary." National Research Council. 2009. Advancing the Competitiveness and Efficiency of the U.S. Construction Industry. Washington, DC: The National Academies Press. doi: 10.17226/12717.
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Suggested Citation:"Summary." National Research Council. 2009. Advancing the Competitiveness and Efficiency of the U.S. Construction Industry. Washington, DC: The National Academies Press. doi: 10.17226/12717.
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Summary In 2008, the National Institute of Standards and Technology (NIST) requested that the National Research Council (NRC) appoint an ad hoc committee of experts to provide advice for advancing the competitiveness and productivity of the U.S. construction industry. The committee’s specific task was to plan and conduct a workshop to identify and prioritize technologies, processes, and deployment activities that have the greatest potential to advance significantly the productivity and competitiveness of the capital facilities sector of the U.S. construction industry in the next 20 years.1 Because the concept of productivity can be difficult to define, measure, and communicate, the committee determined that it would focus on ways to improve the efficiency of the capital facilities sector of the construction industry. It defines efficiency improvements as ways to cut waste in time, costs, materials, energy, skills, and labor. The committee believes that improving efficiency will also improve overall productivity and help individual construction firms produce more environmentally sustainable projects and become more competitive. To gather data for this task, the Committee on Advancing the Competitiveness and Productivity of the U.S. Construction Industry Workshop commissioned three white papers by industry analysts and held a 2-day workshop in November 2008 to which 50 additional experts were invited. A range of activities that could improve construction productivity were identified in the papers, at the workshop, and by the committee itself. From among these, the committee identified five interrelated activities that could lead to breakthrough improvements in construction efficiency and productivity in 2 to 10 years, in contrast to 20 years. If implemented throughout the capital facilities sector, these activities could significantly advance construction efficiency and improve the quality, timeliness, cost-effectiveness, and sustainability of construction projects. Following are the five activities, which are discussed in the section below entitled “Opportunities for Breakthrough Improvements.” 1. Widespread deployment and use of interoperable technology applications,2 also called Building Information Modeling (BIM); 2. Improved job-site efficiency through more effective interfacing of people, processes, materials, equipment, and information; 3. Greater use of prefabrication, preassembly, modularization, and off-site fabrication techniques and processes; 4. Innovative, widespread use of demonstration installations; and 5. Effective performance measurement to drive efficiency and support innovation. The five activities are interrelated, and the implementation of each will enable that of the others. Deploying these activities so that they become standard operating procedures in the capital facilities sector will require a strategic, collaborative approach led by those project owners who will most directly benefit from lower-cost, higher-quality sustainable projects, namely, the large corporations and government agencies that regularly invest hundreds of millions of dollars in buildings and infrastructure 1 The capital facilities sector includes commercial (including high-rise and multifamily residential), industrial, and infrastructure projects. It does not include single-family and low-rise residential projects. 2 Interoperability is the ability to manage and communicate electronic data among owners, clients, contractors, and suppliers, and across a project’s design, engineering, operations, project management, construction, financial, and legal units. 1

2 ADVANCING THE COMPETITIVENESS AND EFFICIENCY OF THE U.S. CONSTRUCTION INDUSTRY in order to conduct their operations. However, these owners cannot effect widespread change without the collaboration and support of large contractors, subcontractors, architects, engineers, and researchers. The committee suggests a path forward for implementing the changes required to advance the competitiveness and efficiency of the U.S. construction industry significantly in the 21st century. BACKGROUND The quality of life of every American relies in part on the products of the U.S. construction industry—houses, office buildings, factories, shopping centers, hospitals, airports, universities, refineries, roads, bridges, power plants, water and sewer lines, and other infrastructure. Construction products— buildings and infrastructure—provide shelter, water, and power, and they support commerce, education, recreation, mobility, and connectivity. They also have significant environmental impacts, annually accounting for 40 percent of primary energy use in the United States and 40 percent of the U.S. greenhouse gas emissions linked to global climate change. Each year, new construction projects in this country account for 30 percent of the raw materials and 25 percent of the water used, and for 30 percent of the materials placed in landfills (NSTC, 1995). The construction industry itself is a major generator of jobs and contributes an important component of the gross domestic product (GDP). In 2007, almost 11 million people, about 8 percent of the total U.S. workforce, worked in construction. The value of the buildings and infrastructure that they constructed was estimated to be $1.16 trillion (U.S. Census Bureau, 2008a). The construction industry accounted for $611 billion, or 4.4 percent of the GDP, more than many other industries, including information, arts and entertainment, utilities, agriculture, and mining (BEA, 2009). Construction’s portion of the GDP would increase to 10 percent if the equipment, furnishings, and energy required to complete buildings were included (NSTC, 2008). Construction productivity—how well, how quickly, and at what cost buildings and infrastructure can be constructed—directly affects prices for homes and consumer goods and the robustness of the national economy. Construction productivity will also affect the outcomes of national efforts to renew existing infrastructure systems; to build new infrastructure for power from renewable resources; to develop high-performance “green” buildings; and to remain competitive in the global market. Changes in building design, construction, and renovation, and in building materials and materials recycling, will be essential to the success of national efforts to minimize environmental impacts, reduce overall energy use, and reduce greenhouse gas emissions (NSTC, 2008). However, industry analysts differ on whether construction industry productivity is improving or declining. Some analyses for the industry as a whole indicate that productivity has been declining for 30 years or more. Other studies document improved productivity for construction projects and construction tasks (e.g., the laying of pipe or concrete). One note of agreement is that there is significant room for improvement. Studies focusing on construction efficiency, in contrast to productivity, have documented 25 to 50 percent waste in coordinating labor and in managing, moving, and installing materials (Tulacz and Armistead, 2007); losses of $15.6 billion per year due to the lack of interoperability (NIST, 2004); and transactional costs of $4 billion to $12 billion per year to resolve disputes and claims associated with construction projects (FFC, 2007). A key message of the present report is that advances in available and emerging technologies offer significant opportunities to improve construction efficiency substantially in the 21st century and to help meet other national challenges, such as environmental sustainability.

SUMMARY 3 OBSTACLES TO IMPROVEMENT Studies of the construction industry over the past 30 years have documented a wide array of organizational issues, policies, and practices that result in inefficiencies and loss of productivity. The sheer number of construction firms (710,000 in 2002) and their size—only 2 percent had 100 or more workers, while 80 percent had 10 or fewer workers (CPWR, 2007)—make it difficult to deploy new technologies, best practices, or other innovations effectively across a critical mass of owners, contractors, and subcontractors. The industry is also segmented by industry analysts and practitioners into at least four distinct sectors—residential, commercial, industrial, and heavy construction.3 These sectors differ from each other in terms of the following: • The characteristics of project owners, their sophistication, and their involvement in the construction process; • The complexity of the projects; • The source and magnitude of financial capital; • Required labor skills; • The use of specialty equipment and materials; • Design and engineering processes; and • Knowledge and other factors. Nonetheless, these sectors also share common issues and obstacles to improving construction productivity, including: • A diverse and fragmented set of stakeholders: owners, users, designers, builders, suppliers, manufacturers, operators, regulators, manual laborers, and specialty trade contractors, including plumbers, electricians, masons, carpenters, and roofers; • Segmented processes: planning, financing, design, engineering, procurement, construction, operations, and maintenance. Each process is typically performed sequentially and each involves different groups of stakeholders, shifting responsibilities, and shifting levels of financial risk, which in turn often leads to adversarial relationships, disputes, and claims; • The image of the industry—work that is cyclical, low-tech, physically exhausting, and unsafe—which makes it difficult to attract and retain skilled workers and recent graduates; • The one-of-a-kind, built-on-site nature of most construction projects; • Variation in the standards, processes, materials, skills, and technologies required by different types of construction projects; • Variation in the building codes, permitting processes, and construction-related regulations propagated by states and localities; • The lack of an industry-wide strategy to improve construction efficiency; • The lack of effective performance measures for construction-related tasks, projects, and the industry as a whole; and • The lack of an industry-wide research agenda and levels of funding for research that are inadequate. In an industry of thousands of small establishments, an array of stakeholders, dynamic processes, diverse products, and no overall strategy or research agenda, three major issues arise: 3 Some practitioners would suggest that transportation-related projects be treated as a fifth segment of construction based on the characteristics of these types of projects (Hinze, 2001).

4 ADVANCING THE COMPETITIVENESS AND EFFICIENCY OF THE U.S. CONSTRUCTION INDUSTRY 1. Identifying the technologies, processes, materials, or other actions that can result in the greatest benefits to the industry as a whole; 2. Determining who should be responsible and accountable for driving change and improving productivity; and 3. Mitigating the risks to owners, clients, contractors, and suppliers from using innovative technologies, materials, and processes. CHARACTERISTICS OF AN EFFICIENT CAPITAL FACILITIES SECTOR To help determine which activities offer the greatest potential for resulting in breakthrough improvements, the committee first identified the attributes that characterize an efficient capital facilities sector: • Production of quality products that meet owners’ and the nation’s needs; • Competitiveness in the global marketplace; • Well-integrated processes, supply chains, and work flows; • Promotion of sustainability through the efficient use of time, materials, skills, and dollars; • Attractiveness to a diverse, well-trained, knowledgeable, professional, skilled labor force able to work collaboratively to meet owners’ and clients’ objectives; • Ability to adapt to new conditions and to deploy new technologies effectively; • Use of best practices to reduce rework and delivery time, and to improve job-site safety and project quality; and • Measurement of performance to enable innovation and improvements in products and processes. OPPORTUNITIES FOR BREAKTHROUGH IMPROVEMENTS From among many suggestions, the committee identified five interrelated activities that could result in breakthrough improvements in the capital facilities sector of the construction industry in the next 2 to 10 years. Following is a brief discussion of each activity. 1. Widespread deployment and use of interoperable technology applications, also called Building Information Modeling (BIM). Interoperability is the ability to manage and communicate electronic data among owners, clients, contractors, and suppliers, and across a project’s design, engineering, operations, project management, construction, financial, and legal units. Interoperability is made possible by a range of information technology tools and applications including computer-aided design and drafting (CADD), three- and four-dimensional visualization and modeling programs, laser scanning, cost-estimating and scheduling tools, and materials tracking. Effective use of interoperable technologies requires integrated, collaborative processes and effective planning up front and thus can help overcome obstacles to efficiency created by process fragmentation. Interoperable technologies can also help to improve the quality and speed of project- related decision making; integrate processes; manage supply chains; sequence work flow; improve data accuracy and reduce the time spent on data entry; reduce design and engineering conflicts and the subsequent need for rework; improve the life-cycle management of buildings and infrastructure; and provide the data required to measure performance. Barriers to the widespread deployment of interoperable technologies include legal issues, data-storage capacities, and the need for “intelligent” search applications to sort quickly through thousands of data elements and make real-time information available for on-site decision making.

SUMMARY 5 2. Improved job-site efficiency through more effective interfacing of people, processes, materials, equipment, and information. The job site for a large construction project is a dynamic place, involving numerous contractors, subcontractors, tradespeople, and laborers, all of whom require equipment, materials, and supplies to complete their tasks. Managing these activities and demands to achieve the maximum efficiency from the available resources is difficult and typically not done well. Time, money, and resources are wasted when projects are poorly managed, causing workers to have to wait around for tools and work crews’ schedules to conflict; when work crews are not on-site at the appropriate time; or when supplies and equipment are stored haphazardly, requiring that they be moved multiple times. Greater use of automated equipment (e.g., for excavation and earthmoving operations, concrete placement, pipe installation) and information technologies (e.g., radio-frequency identification tags for tracking materials, personal digital assistants for capturing field data), process improvements, and the provision of real-time information for improved management at the job site could significantly cut waste, improve job-site safety, and improve the quality of projects. A primary barrier to more effective use of such technologies is the segmentation and sequencing of planning, design, engineering, and construction processes. Improved job-site efficiency also requires a skilled labor force with communication, collaboration, and management skills as well as technical proficiencies. 3. Greater use of prefabrication, preassembly, modularization, and off-site fabrication techniques and processes. Prefabrication, preassembly, modularization, and off-site fabrication involve the fabrication or assembly of systems and components at off-site locations and manufacturing plants. Once completed, the systems or components are shipped to a construction job site for installation at the appropriate time. These techniques offer the promise (if used appropriately) of lower project costs, shorter schedules, improved quality, and more efficient use of labor and materials. Various obstacles stand in the way of the widespread use of such technologies, including building codes that hinder innovation as well as conventional design and construction processes and practices. 4. Innovative, widespread use of demonstration installations. Demonstration installations are research and development tools that can take a variety of forms: field testing on a job site; seminars, training, and conferences; and scientific laboratories with sophisticated equipment and standardized testing and reporting protocols. Greater and more collaborative use of demonstration installations can be used to test and verify the effectiveness of new processes, technologies, and materials and their readiness to be deployed throughout the construction industry. By allowing determinations to be made about whether innovative approaches are mature enough for general use, demonstration installations can help to mitigate innovation-related risks to owners, contractors, and subcontractors. 5. Effective performance measurement to drive efficiency and support innovation. Performance measures are enablers of innovation and of corrective actions throughout a project’s life cycle. They can help companies and organizations understand how processes or practices led to success or failure, improvements or inefficiencies, and how to use that knowledge to improve products, processes, and the outcomes of active projects. The nature of construction projects and the industry itself calls for lagging, current, and leading performance indicators at the industry, project, and task levels, respectively. • Industry-level measures are needed to determine whether the productivity of the construction industry as a whole is improving or declining over time. Lagging indicators can be used to track industry trends for several years to help identify the root causes of improvement or decline. Information relating to root causes in turn can be used to develop industry-wide strategies for improvement, including the improvement of policies, procedures, practices, and research. Industry-level measures can also be used to track the impact of innovations, such as the greater use of prefabricated components, interoperable technologies, and automated equipment.

6 ADVANCING THE COMPETITIVENESS AND EFFICIENCY OF THE U.S. CONSTRUCTION INDUSTRY Industry-level measures are of greatest interest and value to government agencies, policy makers, and research-oriented organizations. • Project-level measures are needed to contribute to the understanding of how an individual project compares with other, similar projects (e.g., other school buildings, other oil refineries) in terms of total cost, schedule, cost changes, labor hours, and other factors. Such current measures are of greatest value to owners of multiple projects and to large contractors who are seeking to reduce the costs and delivery time of projects, to improve worker safety, or to initiate some other change in construction-related processes and practices. • Task-level measures are leading indicators that are commonly used by contractors and subcontractors that need to evaluate the efficiency of their workforces on a daily or weekly basis so that problems on active projects can be detected and corrected quickly. As stated, all five activities listed above are interrelated, and the implementation of each will enable that of the others. For example, the widespread deployment of interoperable technologies will help to improve the supply chain management that is essential to the improvement of job-site efficiency and the greater use of preassembled components. Similarly, the innovative, widespread use of demonstration installations will help to mitigate the risk associated with new technologies, materials, and processes. Effective performance measures will help document which innovations result in improved efficiency and productivity and will help to build a “business case” for using such innovations throughout the industry. It cannot be stressed too strongly that finding ways to attract and retain skilled workers and recent graduates will be essential to achieving success. The committee believes that implementing these five activities for capital facilities and infrastructure will help to achieve the following: • Overcome fragmentation by requiring greater collaboration up front among project stakeholders; • Lead to more efficient use and better integration of people, processes, materials, and equipment through all phases of a construction project; and • Create more useful and more accurate information for the development of performance measures that can facilitate innovation in technologies and materials and improvement in products and processes. DRIVING CHANGE STRATEGICALLY THROUGH COLLABORATION Implementing the five activities identified above in order to achieve breakthrough improvements in efficiency and competitiveness for capital facilities and infrastructure projects will require a strategic, collaborative, evidence-based approach. The approach needs to be strategic because no single group of stakeholders or individual organization can drive change through the entire capital facilities sector. It needs to be collaborative in order to create a critical mass of stakeholders who can work together to overcome obstacles to the effective use of interoperable technologies and prefabricated components, to the improvement of job-site efficiency, and to the identification and use of appropriate demonstration installations. Collaboration will also help mitigate the risks and spread the costs and benefits of innovation. The approach needs to be evidence based because evidence-based best practices and effective performance measures will make a compelling business case for the adoption of new processes and technologies on a widespread basis throughout the construction industry. Large corporations and government agencies—the owners that regularly invest in capital facilities and infrastructure—are in the best position to lead an effort to drive change in the construction industry. Because they are contracting and paying for capital facilities, such owners can facilitate innovation in processes, technologies, and behaviors through contract provisions, incentives, and contractor selection

SUMMARY 7 processes. These owners will also realize the greatest, most direct benefits from improvements in construction efficiency—higher-quality, more environmentally sustainable buildings and infrastructure, produced at lower cost, and in less time. However, these owners cannot drive change without the collaboration and support of large contractors, subcontractors, equipment manufacturers, standards-setting organizations, and researchers. A critical mass of these stakeholders will need to develop methods collaboratively to share the risks, costs, and rewards of more efficient projects and processes. The committee believes that the critical mass of stakeholders needed to achieve breakthrough improvements can be assembled through a coalition of professional industry and government organizations. Such organizations include the Construction Users Roundtable, the Associated General Contractors of America, the Construction Industry Institute, the Associated Builders and Contractors, the American Council of Engineering Companies, the American Institute of Architects, the National Academy of Construction, the National Institute of Standards and Technology, and the National Science Foundation. These organizations collectively represent a critical mass of project owners, construction firms, designers, engineers, and researchers, all of whom have a direct stake in improving the competitiveness and efficiency of the capital facilities sector of the construction industry. These organizations provide the venues required for the collaborative activities necessary to change existing processes and practices. They have the resources for and, in some cases, the explicit mission of conducting research. And they have access to the industry media (e.g., trade journals such as Engineering News Record) and academic journals, which can be used to disseminate research results and evidence- based information regarding best practices, new technologies, and innovations in construction. The committee believes that as these owners, contractors, and researchers effectively use innovative technologies, they will improve their own efficiency and competitiveness. And as these owners, contractors, and researchers disseminate the results of their efforts through trade and research journals, presentations, and best practices, smaller firms that wish to remain competitive can follow their example. In this way it will be possible to effect widespread change throughout the capital facilities sector. The committee is not in a position to mandate action by leading construction firms or professional organizations, but it can suggest a path forward. The committee believes that the sponsor of this study, the National Institute of Standards and Technology, is well positioned to work with the construction-related organizations in the public and private sectors to develop a collaborative strategy for improving the productivity of the capital facilities sector. NIST’s mission is to “promote U.S. innovation and industrial competitiveness by advancing measurement science, standards, and technology in ways that enhance economic security and improve our quality of life.” To fulfill this mission, NIST staff routinely work with a range of construction stakeholders, including owners, contractors, and researchers from industry, academia, and government to support the development of construction-related standards and technologies. NIST also has sophisticated testing facilities that can be used for evaluating high-cost, high-risk, high- impact innovative technologies, demonstrating their capacity for improving effectiveness and productivity and verifying their readiness for deployment throughout the capital facilities sector. RECOMMENDATIONS The committee identified the five interrelated activities discussed above that it believes have significant potential to advance the competitiveness and efficiency of the capital facilities sector within 2 to 10 years. To expedite the deployment of these activities on a widespread basis, the committee makes the following recommendations: Recommendation 1: The National Institute of Standards and Technology should work with industry leaders to bring together a critical mass of construction industry stakeholders to develop a collaborative strategy for advancing the competitiveness and efficiency of the capital facilities

8 ADVANCING THE COMPETITIVENESS AND EFFICIENCY OF THE U.S. CONSTRUCTION INDUSTRY sector of the U.S. construction industry. The collaborative strategy should identify actions needed to fully implement and deploy interoperable technology applications, job-site efficiencies, off-site fabrication processes, demonstration installations, and effective performance measures. NIST is uniquely positioned to work with public- and private-sector owners, contractors, researchers, and standards-setting organizations. The committee recommends that NIST convene a series of meetings involving representatives of the Construction Users Roundtable, Associated General Contractors of America, the Construction Industry Institute, the Association of Builders and Contractors, the American Council of Engineering Companies, the National Academy of Construction, the American Institute of Architects, the National Science Foundation, and other government organizations. The purpose of the meetings should be to develop a collaborative strategy for fully implementing the five activities identified by the committee that could lead to breakthrough improvements in efficiency and competitiveness for the capital facilities sector of the U.S. construction industry. Recommendation 2: The National Institute of Standards and Technology should take the lead in developing a “technology readiness index” similar to indexes developed by the National Aeronautics and Space Administration and the Department of Defense, for high-risk, high-cost, high-impact construction-related innovations. Such an index could help mitigate the risks of using new technologies, products, and processes by verifying their readiness to be deployed on a widespread basis. A technology readiness index is most appropriate for evaluating the maturity of high-cost, high- risk, and high-impact technologies. Such an index could be used to provide a common understanding of the status of a technology and its level of risk. It could also be used to help make decisions about funding for additional research and development or for deploying the technology into widespread practice. Recommendation 3: The National Institute of Standards and Technology should work with the Bureau of Labor Statistics, the U.S. Census Bureau, and construction industry groups to develop effective industry-level measures for tracking the productivity of the construction industry and to enable improved efficiency and competitiveness. With its stated mission of measurement science and its resources, NIST is the organization best positioned to take the leading role in developing industry-level measures for construction. Collaboration with the Bureau of Labor Statistics, the U.S. Census Bureau, and industry organizations will be required in order to develop industry-level measures that help identify trends in construction industry productivity. Industry organizations can help NIST and others to determine which types of data can reasonably be collected and validated for this purpose.

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Construction productivity--how well, how quickly, and at what cost buildings and infrastructure can be constructed--directly affects prices for homes and consumer goods and the robustness of the national economy. Industry analysts differ on whether construction industry productivity is improving or declining. Still, advances in available and emerging technologies offer significant opportunities to improve construction efficiency substantially in the 21st century and to help meet other national challenges, such as environmental sustainability.

Advancing the Competitiveness and Efficiency of the U.S. Construction Industry identifies five interrelated activities that could significantly improve the quality, timeliness, cost-effectiveness, and sustainability of construction projects.

These activities include widespread deployment and use of interoperable technology applications; improved job-site efficiency through more effective interfacing of people, processes, materials, equipment, and information; greater use of prefabrication, preassembly, modularization, and off-site fabrication techniques and processes; innovative, widespread use of demonstration installations; and effective performance measurement to drive efficiency and support innovation. The book recommends that the National Institute of Standards and Technology work with industry leaders to develop a collaborative strategy to fully implement and deploy the five activities

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