Workers building cars in a factory, 1930s. VOICEThe The official magazine of The Construction Users Roundtable In collaboration with CII Issue 3, 2019 Other Industries Have Perfected Modern Production. So, When Will Construction? From That to This: ↑ ↑ CONNECT WITH CUR T! Have you registered for upcoming Member Meetings?The Construction Users Roundtable 3 TABLE OF CONTENTS INDUSTRY LEADERS: 5 A Message from Jim Ellis, CURT President 7 A Message from Gregory Sizemore, Esq., CURT Executive Vice President 9 A Message from Stephen Mulva, CII Director GET TO KNOW CURT: 11 CURT Comments 13 Committee Conversations ON THE COVER: 16 Other Industries Have Perfected Modern Production. So, When Will Construction? FEATURES: 24 New CURT Committee Tackles Technology and Productivity 29 CURT Presents Outstanding Service Awards LEGAL BRIEF: 31 Managing Risks of Complex Construction Projects Effectively to Achieve Successful Projects 34 INDEX TO ADVERTISERS Published By: Matrix Group Publishing Inc. 5605 Riggins Court, Second Floor, PO Box 41270, Reno, Nevada 89504 Toll Free Tel (866) 999-1299 Toll Free Fax (866) 244-2544 www.matrixgroupinc.net President & CEO Jack Andress Operations Manager Shoshana Weinberg (sweinberg@matrixgroupinc.net) Publisher Jessica Potter Editor-in-Chief Shannon Savory (ssavory@matrixgroupinc.net) Senior Editor Alexandra Kozub (akozub@matrixgroupinc.net) Editors Jenna Collignon, Kaitlin Vitt Finance/ Administration Lloyd Weinberg, Nathan Redekop (accounting@matrixgroupinc.net) Director of Marketing & Circulation Lloyd Weinberg (distribution@matrixgroupinc.net) Sales Manager – Winnipeg Neil Gottfred Sales Manager – Hamilton Jeff Cash Matrix Group Publishing Inc. Account Executives Albert Brydges, Andrew Lee, Bonnie Petrovsky, Brenda McPhee, Brian MacIntyre, Cheryl Klassen, Colleen Bell, Emerance Kitenge, Frank Kenyeres, Jim Hamilton, Julie Welsh, Kapenga Kitenge, Kevin Harris, Liam Hindle, Mackenzie Carare, Marlyn Beek, Renée Kent, Rob Gibson, Sandra Kirby, Tanina Di Piazza, Tenisha Myke, Terri Erkelens Advertising Design James Robinson Layout & Design Kayti Taylor ©2019 Matrix Group Publishing Inc. All rights reserved. Contents may not be reproduced by any means, in whole or in part, without the prior written permission of the publisher. The opinions expressed in this publication are not necessarily those of Matrix Group Publishing Inc. Published For: The Construction Users Roundtable 4100 Executive Park Drive, Cincinnati, Ohio 45241 Tel: (513) 563-4131 Fax: (513) 733-9551 E-mail: construction-users@curt.org Web: www.curt.org On the Cover: The construction industry is in the midst of a major transformation, from the industrial age to the information age. This article will discuss how the owners and contractors who are best able to capture value amid this transition will be the ones who come out on top. Learn more starting on page 16. To update your subscription information, email distribution@matrixgroupinc.net. Note, all past issues are available for free at www.curt.org if you prefer to read the electronic version. September Member Meeting September 9-10, 2019 Charleston, SC Lean Construction Summit September 10-11, 2019 Charleston, SC CURT China Summit September 18, 2019 Shanghai, China CURT European Construction Symposium October 17, 2019 Dublin, Ireland November Young Professionals Summit November 4, 2019 Clearwater Beach, FL November Member Meeting November 4-5, 2019 Clearwater Beach, FL CURT Awards of Excellence Gala November 5, 2019 Clearwater Beach, FL Offsite Construction Summit November 6, 2019 Clearwater Beach, Florida 2020 CURT National Conference February 10-12, 2020 Chandler, AZ JOIN CURT AT THESE UPCOMING EVENTS Up-to-date details can be found at www.curt.org.The Construction Users Roundtable 5 INDUSTR Y LEADERS A Message from the CURT President As you’ll read in this issue of The VOICE, the construction industry is on the precipice of great change. And it’s not a moment too soon. We have a burning crisis in terms of skilled workforce availability and sustainability, and our industry lacks the production efficiency and productivity that neighboring industries have in place and are now reaping the rewards from. I believe that workforce and productivity challenges go hand in hand. We can’t become more efficient if we don’t have enough skilled labor to even do the basics on a job. At SABIC, we are ‘all hands-on deck’ to drive growth in key regions of the world over the next six years, but rising construction costs with low productivity are challenging our goals. So, what do we do? Many companies have been forced to find their talent offshore. In fact, we’re witnessing many owners shift to low-cost countries where they can secure highly-skilled engineering talent as well as skilled craft labor. However, this is not a long-term solution, nor sustainable. We know how to drive efficiency. We know how to be creative. But we need to get to the root cause of the problem, first. Right now, the countries graduating the most STEM students are China and India. The United States is third on the list. Sure, we can hire companies from these countries, and they’ll get the job done, but I believe it’s in all our best interests to build the capability here. Once we can fill all the job openings with knowledgeable and highly-educated workers, from engineers right on down the line, we’ll start to see improvements in productivity. This is business critical, and it is critical for our communities, too. Say, for example, a company wants to complete a multi-billion-dollar project in the Gulf Coast. A labor survey is going to indicate there is insufficient craft labor and significant risk. The owner can use high-cost incentives to attract top craft workers, or they can go offshore and mitigate their risks. Yes, the project will get done, but think of the missed opportunities. Think of the hundreds of millions lost in wages for the community, the tens of millions in federal, state and local taxes. Going offshore might be good for the company, but it is a major loss for the communities we live in and for the United States as a whole. Extrapolate this beyond one project to all the projects a given company is working on. Go beyond that to all the projects our industry is working on. We are talking about billions in wages and taxes heading offshore. Onshore is preferred, but it’s simply not available and if deployed today the risks are high and must be mitigated, thus offshore is becoming a preferable solution. There is certainly lots to consider and as I wrap up this message, I’m going to ask you, my fellow owner community, to consider this: We, as owners, need to step up. We need to invest time and resources to develop skilled labor. This is not a contractor problem anymore – this is an industry- wide problem and as the leaders of this great industry, we have an obligation and a mandate to develop skilled labor. Without action, attraction and retention, skilled craft labor issues will continue to loom. Do we really want to be talking about this (still!!) five years from now? Owners, contractors, government, and academia must work together to drive integrated solutions, but make no mistake, I fully believe that owners have to own this problem and must champion workforce development as a core value. The crisis is now. It’s burning, and it’s out of control, but we can extinguish the flames. We can drive accountability and we can be leaders who are committed and invested. I have full faith that we’re capable of this major change. Jim Ellis President The Construction Users Roundtable SABIC, Global Engineering Manager Engineering and Project Management Reshaping the Construction Industry Owners, contractors, government, and academia must work together to drive integrated solutions, but make no mistake, I fully believe that owners have to own this problem and must champion workforce development as a core value.made. kept. 2020 National Conference Save the Date: February 10-12, 2020 Sheraton Grand at Wild Horse Pass Featuring . . . RICHARD BARNES Internationally Recognized Mediator ANIRBAN BASU Economist with a Personality BRENT DARNELL Author, Speaker, and Authority on Emotional Intelligence JEFF HENDERSON Celebrity Chef and Author ROSS SHAFER Change Expert and so much more! JIM GLORIOD CEO, Aon Construction Services Group U. S. CAL BEYER Director, Risk Management, Lakeside IndustriesThe Construction Users Roundtable 7 INDUSTR Y LEADERS A Message from the CURT Executive Vice President Despite having passed away more than 70 years ago, Henry Ford is still listed as one of the wealthiest figures of the modern period. His net worth was $188 billion when he passed in 1947. Mr. Ford is iconic for many reasons, most notably for transforming mass production with the creation of the assembly line. This allowed him to lower the base price of his automobiles and reach a wider market, which increased profits. Perhaps most remarkable, he used those profits to increase salaries and reduce worker turnover. Why is this slice of American history important? First, because it’s fascinating, and second, those of us wanting to transform the future can learn a great deal by looking at the past. I believe that it’s the construction industry’s time to shine. Presently, there are many brilliant minds focused on how to move our industry’s productivity needle to the right – men and women who understand the dance of materials, and tradespeople, and change orders, and risk management, and regulatory compliance, and tax structures, and countless other considerations that go into completing a successful project. While there are a lot of challenges stacked against us, the rapid advancement of new technology and its deployment will serve as a substantial interrupter on how our projects are conceived and completed. Like Henry Ford, they are thinking differently and, one step at a time, with a singular goal of transforming our industry. Many of those thinkers reside in CURT and CII. The initiative is called Operating System 2.0 or OS2, and the delivery means is called PrairieDog Venture Partners. While Mr. Ford’s ideas were pioneering, they became mainstream. Eventually the industry caught up; his competition either had to transform or fail. Similarly, the innovative construction ideas and practices that are now being explored are pioneering. Members of CURT and CII intend to achieve success, and those who choose not to keep up will likely fall behind. As my colleague Steven Mulva writes in his message on page 9, “humanity isn’t always quick to accept those who think differently from us.” I agree. So, this begs the question: If our current approach to projects isn’t making us more productive, then isn’t it about time we tried something different? Borrowing from James Ellis’ message on page 5, this action is “business critical.” Profits, livelihoods, and the future of our sector are on the line. If you want to be a part of leading the charge, come join us at CURT. If you know there is a different way and want to help us discover it, join us. We are leading the industry and working on some incredibly exciting projects that are going to transform project execution as we know it. In 1909, the Ford Motor Company produced 18,000 cars. In just over 10 years, because of new and innovate production practices, that number rose to 1,000,000 cars produced in 1920. A century ago, one man’s innovative idea, and his daring to take action, changed the world. A single organization set the course on how modern production looks – think what we, CURT, and our alliance partner CII, can all accomplish if we go forward together. If you want a seat at our table, join us at our upcoming Member Meetings, Workshops, and at our 2020 National Conference in February. There is a full list of upcoming events on page 3. Consider this article as a personal invitation from me to you, whether or not you are a member of CURT, come join us at any of these events as together, we build a better tomorrow. Greg Sizemore Executive Vice President The Construction Users Roundtable The Power of One, The Power of Many “Most people spend more time and energy going around problems than in trying to solve them.” – Henry Ford While there are a lot of challenges stacked against us, the rapid advancement of new technology and its deployment will serve as a substantial interrupter on how our projects are conceived and completed. The Construction Users Roundtable 9 INDUSTR Y LEADERS A Message from the CII Director What makes something unconventional? By definition, it is something not bound by or in accordance with convention. It is out of the ordinary. Consider modern oil and gas production – advanced production technologies have created new classes of “unconventional” reservoirs and products such as synthetic crude, gas-to-liquids (GTL) and light tight oil. Energy firms and governments around the world are investing in these unconventional sources due to the increasing scarcity of new conventional oil reserves. From this perspective, one could conclude that we search for (and value) products that are unconventional. In contrast, where people are concerned, we tend to not value those who are unconventional or use different approaches. We brand them with unfavorable labels like dissident, heretic, iconoclast, unorthodox and maverick. It is not considered flattery to say “he/she has an unconventional lifestyle.” Instead of celebrating their approach, too often we discard or attack – preferring the “tried and true” methods of the past. So, we have a dilemma: how do we advance our industry with new and unconventional approaches if we are unwilling to embrace people who think differently? Albert Einstein said, “the world we have made as a result of the level of thinking we have done thus far creates problems we cannot solve at the same level of thinking at which we created them.” Go ahead – read that again (for me, it took a few attempts for it to sink in!). If we consider the world of project planning, execution and operation, it seems that we may be unable to solve our current issues unless we involve people who are willing to try something unconventional. Indeed, that is the essence of research. Looking for answers to vexing (and properly defined) problems can often create valuable solutions. In people, it also creates something else: unconventional wisdom. A few years ago, I became fascinated by something called Innovation Diffusion Modeling. Marketing professors created this technique to determine how quickly an innovation, such as an iPhone, would spread or diffuse through a marketplace. When my research group at CII applied this modelling to our industry best practices, we discovered that while the things that were adopted the fastest (think zero accident techniques and front end planning) had a sizeable impact in terms of performance improvement, they rarely possessed much capability for further improvement among the companies that used these practices the most. For example, good front end planning (FEP) explained just eight percent of the variation in leading companies’ project cost performance. Today, we believe that is because leading companies deploy FEP at a good level on most, if not all, of their projects. Leading companies must consider what is next. To do that, they must invest in R&D and pursue approaches that may seem unconventional. Note, this is not to say that the leading companies should not attempt to perfect their deployment of industry best practice – because absolutely, they should. But they should also seek to understand and solve problems in a new, perhaps unconventional, way. Doing so creates the opportunity and space for breakthrough advances to occur. Concerned about workforce availability, industry specialization / fragmentation, or field productivity? So are we. CII is funding and conducting research now to: 1. Understand the impact of offsite construction on the workforce. 2. Model the anticipated composition of the workforce in 2030 so companies can prepare. 3. Create a smart, model-centric approach for the collaborative execution of capital projects. 4. Support the design of a more efficient business model known as Operating System 2.0. 5. Maximize the use of resources in the field through Advanced Work Packaging (AWP). These topics may appear a bit unconventional, and that is intentional. Research conducted and sponsored by CII and the Construction Owners Association of Alberta (COAA) pioneered the concept of AWP. This best practice is a great example of how the productivity of a capital project can be improved by focusing on the production side (i.e., the numerator) of the productivity equation: Output (e.g., tons of steel erected) / Input (e.g., ironworker hours expended) = Unit Rate Productivity I now refer to AWP as a “modern production system” because it really encourages new methods of production, rather than blindly accepting “time honored” approaches and attempting to expend fewer worker hours. It even considers how design is done and, eventually, how the supply chain will collaborate to increase output. AWP is one of the modern production systems that headlines this issue of The VOICE. To be sure, AWP was not the first lever pulled in improving productivity; rather, it was the unconventional one. But it has created a following amongst those who understand its potential and who value the power inherent to unconventional wisdom. Dr. Stephen Mulva Director of CII Unconventional WisdomNext >