VOICEThe The official magazine of The Construction Users RoundtableThe official magazine of The Construction Users Roundtable In collaboration with CIIIn collaboration with CII Issue 3, 2020Issue 3, 2020 The Capital The Capital Projects Projects Industry Industry Reacts to Reacts to COVID-19COVID-19The 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: 10 Connecting With CURT’s Board of Directors 12 Committee Conversations COVER STORY: 14 The Capital Projects Industry Reacts to COVID-19 FEATURES: 22 Owners STAND Up for Suicide Prevention 26 Generations: Why We Aren’t So Different LEGAL BRIEF: 30 Pardon our French, But You Should Be Tweaking The Force Majeure Clauses Governing Your 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) Publishers Jessica Potter, Julie Welsh 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 (in memoriam), Brenda McPhee, Brian MacIntyre, Cheryl Klassen, Colleen Bell, Frank Kenyeres, Jim Hamilton, Jon Beroud, Marlyn Beek, Michael Coutu, Rob Gibson, Sandra Kirby, Tanina Di Piazza, Tenisha Myke Advertising Design James Robinson Layout & Design Kayti Taylor ©2020 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 2245 Gilbert Avenue, Suite 100, Cincinnati, Ohio 45206-3000 Tel: (513) 563-4131 Fax: (513) 733-9551 E-mail: construction-users@curt.org Web: www.curt.org On the Cover: When COVID-19 hit North America in early 2020 and states began to enforce various degrees of shutdowns, capital construction projects were hit hard. Existing issues, like the workforce shortage, were exasperated as the industry grappled with how to move forward while ensuring their employees were able to work safety. This article, which starts on page 14, will highlight the lessons learned from CURT and CII members. 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. Have a conversation with CURT – and all of our great connections – in the digital world. Stay up to date on industry best practices, upcoming events, and the latest sector news by clicking to one (or all!) of these sites. You can also access them all by scanning in the QR code below, or, if you’re reading this issue digitally, click on the links below! CURT members, did you know that by creating an account on the CURT website you can access a database of members, our Knowledge Center, and AskCURT? It’s quick, free, and easy to access these great online resources. See you in cyberspace. Connect with CURT in Cyberspace! Web: www.curt.org LinkedIn: www.linkedin.com/groups/1286907 Facebook: https://www.facebook.com/CURT.orgThe Construction Users Roundtable 5 INDUSTRY LEADERS A Message from the CURT President W hen I last addressed our industry via The VOICE, I think the reality of COVID-19 hadn’t fully sunk in for many of us. It was March and the numbers were still “low” – relatively speaking. Now here we are in July. The sun is shining and the temperatures are warm, but with many of our colleagues, family members, or even ourselves, having been impacted by this virus on a personal level, it can feel like a dark cloud is hanging over all of us. I wanted to start this issue by extending my heartfelt best wishes to everyone who has been affected by COVID-19. Being affected can take many forms; from being laid off from work, from worrying about a loved one who is an essential worker on the frontlines, to those who are somehow managing to juggle working from home alongside a spouse and kids. We have all been impacted, and I would like to encourage you to be mindful of your own mental health. Before COVID, the number of suicides in the construction industry was three times higher than that of the entire United States. This is an uncomfortable and uneasy topic to discuss, however, as industry leaders we must acknowledge this reality and we must combat it with everything we’ve got. Please read Cal Beyer’s feature article, which starts on page 22. Cal presented at the CURT National Conference in February and he made it clear that this is an area we must champion as part of our overall focus on safety. We want our colleagues to go home safe, but we also need them to come back to work in the morning. COVID-19 is going to exasperate this already serious issue so please take what Cal writes to heart and act on it. We are construction leaders. Staying connected to the people is a key element of our job. A report by Marcum Commercial Construction Index, for the first quarter of 2020, tells the reality of an industry suffering the adverse effects of COVID-19. Construction employment fell by nearly one million jobs from March to April 2020, a decrease of 12.8 percent. Anirban Basu, author of the report, a frequent CURT National Conference, as well as webinar speaker, and Marcum’s chief construction economist, said, “Typically, construction is protected in the early months of a recession, as months of backlog acquired over prior periods allow contractors to continue working even as the broader economy slows down. That was not the case this time around.” As I write this, many states are opening up and many states are experiencing a resurgence in numbers, prompting leaders to think about closing back down. By the time this issue reaches you in August, the truth is, the construction landscape I am looking at today is very likely going to be vastly different from what I’ll be looking at a few months from now. What can we do? There have been tens of thousands of projects ranging in all sizes that have been safely and successfully shutdown and restarted across the globe over the course of the last several months. This has created a learning laboratory for us to extract and leverage new and better best practices to enhance the safety and wellbeing of people and assets, and drive efficiencies. This is what CURT is all about – sharing best practices and approaches, including new technologies and tools so that we can all do better. This has been our mandate since day one and I believe it has never been so important. Our cover story, which starts on page 14, talks about best practices learned from several CURT and CII members, and it touches on technologies that are making an impact on job sites. We are appreciative that these people took the time to share their knowledge with our entire readership, so that we can all continue to learn from each other. As Stephen Mulva dives into on page 9, COVID-19 may be the catalyst to more productive projects as industry looks to explore and try new ways of executing projects. Operating System 2.0 (OS2) is a joint venture that CURT and CII believe strongly in – we think it is the innovation our industry needs to take our projects to the next level. I would encourage you to read Stephen’s message and then reach out to myself or Stephen for more information on how you can be involved in the creation of OS2. It’s incredibly exciting to be a part of building something for industry that will have been created by the collective expertise of our industry. In closing, please take care of yourself and your family first and foremost. If our current situation has taught us anything, it is that life is precious and loved ones are the most important. Be well. Stay safe. Jim Ellis CURT President SABIC, Global Engineering Manager Engineering and Project Management Navigating an Unprecedented Storm COVID-19 is going to exasperate this already serious issue so please take what Cal writes to heart and act on it. We are construction leaders. Staying connected to the people is a key element of our job.AGILITY OPPORTUNITY SUSTAINABILITY: Thriving in the New Normal 20 th Annual CURT National Conference February 8-10, 2021 www.CURT.org AGILITY OPPORTUNITY SUSTAINABILITY:The Construction Users Roundtable 7 INDUSTRY LEADERS A Message from the CURT Executive Vice President I f this pandemic has taught us anything, it is to hold a little tighter to the ones you love and the friends you cherish. As most of North America – and the world – sheltered in place, making connections took on an entirely different meaning. Grandparents worked to figure out how to Facetime with grandchildren, kids connected with their peers through online games and the trendiest apps, and co-workers kept businesses going with video calls and endless zoom meetings during which we all acquired an increased appreciation for our colleagues at work. It is innate in human beings to seek connection and unite in a caring community. It is widely accepted that CURT has three primary purposes: to share resources, perspectives, and experiences to enable better decision making for capital projects. To do this, connectivity is essential. CURT responded to the connection challenge by quickly asking, “What do the pandemic, social unrest, and economic shift mean for construction owners?” Our “Construction in Crisis” webinars, followed by our CURT Construction in Crisis SPECIAL REPORT, along with our happy hours and constant outreach from our staff, enabled that essential connectivity. CURT will continue to monitor the needs of our members and respond accordingly in the months to come. In an article entitled, “Short- and Medium/Long-Term Outlook for Construction in the United States,” Ken Simonson, Chief Economist, Associated General Contractors of America, predicts that while the economy may be re-awakening, construction is likely to be a lagging sector. He notes that owners, whether businesses, institutions, or governments, are likely to put most types of construction far down on their priority lists. Ken may be correct as we are learning of projects delayed or canceled. However, certain sectors will continue to thrive and grow. More to come, I’m sure, and when that happens CURT intends to position itself to respond. What becomes more challenging for all of us is the unknown. Will there be a second wave, a recession, a federal election that shifts corporate priorities? No one knows for sure. What we do know is that CURT resources and connectivity will help all of us weather the storm. Whether you are a member or a nonmember, I urge you to take advantage of the many tools and educational resources we offer. If you are unsure about how we can help, explore our website or phone one of our very helpful staff members. Like most organizations, CURT is constantly re-evaluating our programs, shifting our resources, and identifying what is mission-critical for our members and the industry. We have pivoted to provide virtual content from leading experts who have great advice to help you manage the current crisis and plan for your future projects. The remainder of the year has been planned out. In August, our usual in-person get-together is going to be virtual. While we’ll miss seeing everyone in person, this virtual event is a great way to participate in CURT without leaving the comfort of your home or office. August 24th will be the International Construction Summit, August 25th will be the Member Meeting, and August 26th is the Off-Site Construction Summit and the Workforce Development Summit. Each Summit will feature speakers and topics that will discuss various aspects of construction projects, including the impact of COVID-19. Our committees will also meet. Our November event is still scheduled to be a face-to-face meeting. Keep in mind that you can always register online for any CURT event at https://www. curt.org/events. Finally, I’d like to connect with you, and I’d like to connect you with CURT. As we all adjust to the “new normal,” one thing remains true – valuable connections will help us all be successful. Get involved! Make your voice heard! Be a part of the solution! Stay safe and I will see you soon. Greg Sizemore CURT Executive Vice President The Importance of Connections August Events are VIRTUAL! JOIN US for these exciting events!The Construction Users Roundtable 9 INDUSTRY LEADERS A Message from the CII Director I n early 2016, I began speaking about how the business model in the capital projects industry was eventually going to become obsolete because of its inherent inefficiencies. The thinking behind what would replace it eventually became known as Operating System 2.0 (OS2). While much has been written in The VOICE about OS2, I’d like to explain why I believe COVID-19 and the current uncertainty in our industry is both necessitating and accelerating a shift to a different commercial model for engineering and construction. In short, I believe – more than ever – that adoption of OS2 (or a similar business model) will be required for any company wishing to succeed in the “next normal.” McKinsey & Company published a research report on June 4 th entitled, “The next normal in construction: how disruption is reshaping the world’s largest ecosystem.” I encourage you to read it as it contains a number of interesting observations and possibilities for the engineering and construction industry over the next 10 to 15 years. While I don’t agree with all of the report’s predictions, I do think that it provides an excellent diagnosis of the current and future economics of our industry (see the synopsis contained in the inset). My belief is that success in the “next normal” will belong to those firms able to shift from (being, or relying upon) vertically- integrated conglomerates to (being, or relying upon) trusted, strategic alliances featuring a cadre of specialist providers. In the alliance world, the distinction between “owner” and “contractor” will eventually be forgotten as investment in new facilities begins to enter projects through new channels. The transition of our industry’s commercial model to strategic alliances (known as a “digital neighborhood” in OS2) will be complete when three areas are addressed: Risk. Preliminary studies have shown that 41 percent of the cost of a heavy industrial capital project are wasted on transactions. Much of these costs can be traced to an imperfect understanding of all kinds of risks. When multiple parties are involved, risks can cancel – or amplify – each other, much like waves on a lake. In order to lower transactional costs, multiparty computing is being employed to anonymously share, pool, and potentially monetize risk. We’re not just looking at project risk either, but portfolio/ corporate risk as well. Supply chain. Risk presents itself at each layer of the supply chain – and each additional layer exponentially increases the number of interfaces, thereby complicating logistics. COVID-19 is accelerating the integration of digital tools, especially concerning the supply chain. This is an area where OS2 can help suppliers and other stakeholders gain visibility to ensure better control and integration on projects. Having a secured platform using a common data format lowers risk. Lifecycle investment decisions. One of CII’s companies recently described a situation where a critical piece of their infrastructure was nearing 100 years old, but the cost to replace it was approaching (an unaffordable) $10 million dollars, generating an interesting question: “How do you justify this kind of investment?” Today’s project investment tools are inadequate in such an environment; OS2 is looking at ways of integrating finance with facility lifecycles of any duration. Not coincidentally, these three things are the initial research priorities for the OS2 Industry Affiliates Program (IAP) research program, which has been underway since July 2019 at the University of Texas at Austin. Despite the trying times, we should try to view COVID-19 as a catalyst that motivates our industry to be different than before, and yet, more successful than ever. I’m highly confident that we’re going to get there – it’s just the transition that causes difficulty. The benefit of CII and CURT taking on OS2 is that we understand the industry’s starting point and we have members who have a shared vision that propels us forward. We just need you to get involved in this journey to a better business model. That’s what will ensure your success in the “next normal.” Stephen P. Mulva, Ph.D. Director, CII Succeeding in the Next Normal Current and Future Economics of our Industry • Over the past several years, $11 trillion of value has been added and $1.5 trillion in profits have been unevenly distributed along the construction value chain and across all asset classes. • Going forward, 20 to 30 percent of the value of construction will shift offsite, deeply impacting today’s general and specialized contractors. • Up to 45 percent of incumbent value may be at stake even as new, larger profit pools are created. • If that value is captured fully by players in the ecosystem, total profit pools could nearly double, to 10 percent, from the current five percent. • Players that move fast and manage to radically outperform their competitors could grab the lion’s share of the $265 billion in new profit pools. Courtesy of McKinsey & Company. The full report can be found at www.mckinsey. com.Next >