February 11, 2021
Businesswire, a Berkshire Hathaway Company, recently released a report detailing data and trend analyses on the construction industry in Australia. The report predicts a compound annual growth rate (CAGR) of 5.4% to reach AUD 253.1 Billion by 2024. Several industry surveys and reports forecast continued growth for the industry. Despite the positive prediction, there are still a few challenges that keep the C-Suite up at night. Below are the top 5 challenges facing the construction industry.
- Shortage of skilled Labour
Experience and skills of your workers play a huge role in the success of your projects. The sector has always struggled with a massive shortage of skilled labour. COVID has only made this worse with the growing number of people getting infected or staying away from the work. Commercial projects in Sydney like the Barangaroo and large infrastructure projects such as West Connex and Northwest Rail Link etc have increased the demand of labour. In 2019, Sebastian Fleury, the Regional Head of Rail Project Delivery of AECOM said that he could double his workforce if he found enough skilled people to fill the vacancies. However, there are a number of pathway programs that transform the lives of engineers from marginalized backgrounds by offering a door-opening opportunity into Australia’s booming construction & infrastructure industry.
- Retirement of aging boomers
Numbering more than 5 million, the baby boomers are one of Australia’s largest population groups. Baby boomers are retiring in record numbers leaving us at a demographic tipping point. It is one of the bigger challenges in the construction industry as it threatens to change the structure of the construction workplace considering 54% of construction managers are boomers. With them leaves their intellectual property, knowledge and experience they have built upon throughout their career. For a smooth transition, it is critical that their knowledge, from risk mitigation and compliance to high level process management, is captured and documented in a centralised system. This not only helps with handover but facilitates onboarding new hires and upskilling existing employees
- Safety risks and associated costs
The inherent dangers of construction work make insurance and workers’ compensation an expensive affair. According to a Safe Work Report, more than 28 people lost their lives in 2020 while working on the construction sites. This raise a concern that many organisations are not maintaining a safe work environment. Organisations must remain up to date with developing safety guidelines and keep their staff aware about safety measures they need to take while working. Open communication between upper management and staff is essential to keep personnel informed of updates to safety procedures. This can be difficult on a large scale so project management software with embedded risk and control management is essential to all construction firms. Organisations must give staff easy access to the procedures and controls of their job to ensure safety of staff and the company.
Such software allows your staff to be notified whenever there is an update or change to the safety procedures in your business processes. Their managers are in turn notified if the staff fails to acknowledge these changes. These are some of the ways to monitor and ensure that your staff is referring to the latest safety procedures and relevant information on a regular basis.
- Supply chain issues
The pandemic has created ongoing and unprecedented supply chain challenges for construction. It has become increasingly difficult or sometimes impossible to obtain the materials or equipment needed on time and for the agreed pre-COVID cost. This has caused delays and significant increases in project costs. Stakeholders of the project are sometimes unable to absorb this due to tight margins and deadlines. Whilst there is no “one size fits all” approach to resolve every supply chain issue, companies must review their contractual liability, more specifically the Force Majeure Clause. The Force Majeure Clause may relieve a party from performance of some or all its obligations under a contract upon the occurrence of an unforeseeable event outside of the control of the parties.
- Project delays
Project delays seem to be one of the biggest issues faced by the industry at the moment. Due to COVID, on site work was paused and social distancing rules limit the number of personnel on site. A global construction survey conducted by KPMG found that only 25% of projects are coming within 10% of original deadlines. Delays have traditionally been attributed to changes in scope, design, poor planning, inaccurate engineering estimates etc. Prior to project launch, experts advise you to think about the seven project performance factors. If you want to avoid delays and cost overruns in the wake of COVID, it’s critical to have robust and consistent processes to establish clear accountability for checkpoint management, planning and project execution. Even more critical is to ensure that all the stakeholders in the project including the front-line staff have easy access to this information and are empowered to make suggestions for improvements in the process.
The construction industry is Australia’s third-largest industry and a significant contributor to its economic activity. In this dynamic market, companies must adapt to external change by streamlining internal processes, which is why the novel concept of business process management in the construction industry is right on the horizon of making a significant impact. The companies that are tackling these challenges effectively and efficiently have already created a culture of continuous improvement in light of COVID-19. This improvement mindset is built on the foundation of transparent processes and procedures and levelled up by analysis and collaboration.
If these challenges resonate with you, let’s connect. The team at PRIME BPM have helped over 300+ businesses build organizational capability and capacity to achieve service & operational excellence through continuous improvement.
Written by Kiran Raj