Business

Focus on Productivity and Risk Management to Navigate the Post-Pandemic Construction Industry

If construction organizations keep risk management a priority while improving productivity, they can capitalize on post-pandemic opportunities.
By Kenny Ingram
October 29, 2020
Topics
Business

According to a recent IFS study, the construction industry is opportune for challenger organizations, with construction and engineer respondents three times as likely to believe they could disrupt market leaders than discrete manufacturers. As PwC reports, 81% of CFOs in the construction industry are re-evaluating budgets due to the coronavirus crisis and are highlighting the need for visibility from vendors and contractors in the supply chain. This is a golden opportunity for contracting organizations to displace market leaders who cannot adapt to the changing market climate.

But construction after the pandemic will require different practices from contractors. With an additional global pandemic risk to factor in during the lifetime of a project, risk management will be paramount for organizations to build and design projects post-pandemic.

Time is ripe for challengers to move up the ranks

Figures show that 71% of contractors are concerned with financial impacts of the pandemic, including efforts on operations, future periods of liquidity and capital resources. Very large companies involved in major projects will struggle to adapt quickly. That means, with the right investments in process and technology, construction challengers can move up the ranks of ENR’s Top 400 Contractors list by offering improved project delivery performance, resulting in faster, high-quality delivery at a more competitive cost. This could mean moving toward adopting fast-paced modular, offsite or prefabricated project delivery methods, while streamlining and automating project and subcontractor management steps at the back end.

Risk management will be a major part of the design phase post-pandemic

A key area where forward-thinking contractors can add significant value is by actively managing risk to avoid surprises and delays. Disruptive events such as the global pandemic can be mitigated with the right strategy and tools. What contractors, engineering companies, clients and asset owners need to determine, though, is how they can design and build assets around these risks. Will a 5% increase in construction costs make a structure more resistant to wildfires like those that recently devastated Australia and California? If so, how does that pay for itself over the life of the asset in terms of replacement and repair cost or insurance premiums? Contractors must have the tools to help project owners identify and plan around these risks.

Safety also will be a major part of the design phase post-pandemic

Safety will also be a determining factor well beyond the work safety measures many are currently focusing on. Contractors should probably help project owners evaluate the desirability of things like the ASHRAE Position Document on Airborne and Infectious Diseases.

Contractors must be able to consult intelligently with their clients based on risks that are identified, monetized and amortized over the useful lifecycle of that asset they are building. Alongside this, contractors should explore adopting air purification tactics or other building technologies such as ultraviolet air and surface treatment for projects.

Add revenue streams with after-market services

IFS research shows many contractors have already laid the foundations for maintenance and facilities management capabilities. As project and asset owners seek ways to navigate in an uncertain future and contractors seek repetitive annual revenue streams, now is the time for more contractors to move in this direction.

Project owners and engineering firms can access additional revenue through facilities and maintenance contracting or even operations and maintenance contracts supported by a facilities or field service management approach. These advanced practitioners will need to engage in collaborative asset lifecycle management processes with their project and asset owner, as they will share responsibility for the design, operate and maintain phases of the asset.

Contractors need software as agile as they are

To take advantage of additional revenue streams, contractors need software that can support project-centric construction projects, as well as facilities and service management contracts to maintain and refurbish the assets after they are handed over to the owner or operator.

Service and facilities management software can facilitate many types of asset management contracts, which include service level agreements, repair and replacement of asset components, planned and predictive maintenance and the use of subcontractors to perform work in the field.

In addition, the strong trend toward offsite and modular construction may require the contractor to manage a production facility and be capable of managing shipping, logistics and inventory control processes. In short, the next generation of contractors need to be agile, hybrid businesses that are construction contractors, manufacturers and service businesses.

The post-pandemic era holds opportunities for construction challengers

The global environment has changed, and adaptability will be key for construction organizations going forward. As market leaders struggle to adapt to the new normal, challengers are primed to outpace competition. If construction organizations keep risk management a priority while improving productivity, they can capitalize on post-pandemic opportunities.

by Kenny Ingram
Kenny Ingram is the Vice President for the construction, contracting, engineering, infrastructure and shipbuilding industries at IFS. In addition, he is heavily involved in other project and asset lifecycle industries including oil and gas, energy, utilities, and defense.

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