Efficiency eludes the construction industry (2017)
economist.com
economist.com
In addition, value added per hour can be a sign of productivity loss, but is also impacted by shrinking margins (which they note is the case - but shrinking margins has nothing to do with productivity and everything to do with competition).
Also the article says "Many building professionals use hand-drawn plans riddled with errors" - Hand-drawn plans? This isn't my experience in the UK (I design warehouses and have worked with lots of primary contractors). CAD here is pervasive, and anyone with a hand drawn plan would be laughed out of the room (unless you were literally a builder doing a quick sketch - in which case CAD isn't a replacement).
And the article then recommends... self driving bulldozers as one part of the solution? This is so far away from being safe on a worksite that it's nowhere near an immediate concern.
I’m guessing this explains most of it.
It’s common in the construction industry to compete during the bidding phase by underestimating the time and cost of the project, then making up for it with change orders later. It’s so pervasive in some domains that contractors feel they have no choice but to play the game to get contracts.
The smart buyers employ people who know how to manage contractors and construction companies with contracts that make time and budget overages less profitable for the company. The catch is that you need someone on your side watching the work so they don’t try to cut corners to get the job done. It’s difficult.
At smaller scales, it’s common for contractors to bid more projects than they can handle and then rotate between them, tending to the clients who complain the most. They’d rather overbook their calendar than have gaps in between projects.
Construction and contracting are not fun industries to deal with. Having known reputable contractors is very valuable, but the good ones are often booked out a year in advance.
And I agree about the other oddities in this article. I don’t even know if hand drawn building plans would be allowed in modern towns. Usually a licensed engineer is required to draw and approve the plans and there aren’t many licensed engineers still doing this who don’t use CAD.
Do you mean to say big gov IT contracts ?
We are on HN after all.
This is called change order abuse. Sometimes the contractor actually has an inside person receiving kick-backs or bribes where they can purposefully underbid while knowing in advance that they will be able to make it up with change orders (which will be approved by the inside person)
I've heard about the New Engineering Contract (NEC) system that is supposedly used a lot in the UK:
* https://en.wikipedia.org/wiki/New_Engineering_Contract
* https://www.designingbuildings.co.uk/wiki/NEC4
This is where (AFAICT), contracts are standardized templates, and it is only 'amendments' that are custom for the project: blueprints, bill of materials, timetables (for staging payments), etc, are custom on each job. This (supposedly) allows for fewer lawyers to be involved, and only the 'technical' stuff needs to be looked at.
How pervasive is NEC? Useful at all?
There's plenty of beautiful CAD plans that don't hold up in the real world (this is why as-builts exist). I feel like there could be a scripted tool to check things like code compliance and stop people routing conduits through beams etc.
I need to interface with the electricians, carpenters, HVAC, and the GC on every project. None of them have the same drawings and none of their versions are the latest from the architects and engineers. The architects or engineers are also very expensive, so they rarely get brought back in for updates to drawings once unless it has to do with code / regulatory approvals. This ends up with the client's latest real drawings being a jpeg screenshot of the original plans that they just email blasted to everyone.
All the vendors and boots on the ground definitely have a version of the CAD floorplans, but it was whatever they decided to print out 3 weeks ago when they got this job on their calendar. The workers have just been marking it up by hand since then. This is where a lot for the confusion, delays, and change orders come from. I don't know if this is just what to expect with budgets less than a few million, or maybe it's just retail style projects, or maybe my clients attract poor quality vendors (I guess that says more about me). The only time with no major problem was when one client stuck to one GC over the course of 20 new buildouts. They eventually figured out how to wrangle all their subs together.
Just ask the client to go ask for the DWG, 9 times out of 10 you will get it. Might be different in the USA but that’s my experience in the uk. If there is only paper, we have a CAD guy who can quickly transfer it into CAD in about an hour (there is software specifically for this).
Why do the same companies always seem to win?
In my neck of the woods (The Bay Area), one company seems to get all the jobs. The company's name rhymes with Gelato.
I started to look carefully at the bids.
(I got a General Contractor's license a while ago, and it an easy test, and verification of work experience is a joke.)
Ok, I looked into the owner of the contractor's license, and in all three bids, they had a "Gelato" as owner of the company.
It looks like the "Gelato" family sent three kids to Sacramento to take the test, and get their licenses.
They all bid on the same project, and one wins.
They must share the million dollar equipment, and pool of employees though?
Is it legal? I don't know.
Do I know for a fact this is how it works--no.
(There's a bill, I believe up for vote soon, in Sacramento. It requires all bidding parties to verify their company us big enough to do the project. I don't think we need a bill like this. I don't think small companies bidding on huge project to is a problem. If I am right about "Gelato" construction company--authorities should look into the bidding process. There us a reason, besides inflation, that public projects get more expensive each year, and never seem to end.)
Sometimes what looks like cronyism is just someone picking someone they trust to do the job. It can be hard to tell the difference unless there are obvious problems constantly being overlooked - like with NASA contractors for example.
Plus elaborate custom specifications for projects also make it hard to keep track of costs and bureaucrats wind-up fond of these things. Etc.
The industry is rife with corruption and misaligned incentives. Kick-backs are common. Bids are often not truly competitive, and when they are, people find ways like change-order abuse [1] to subvert the system. There are so many ways to rig the bidding process (bribing someone to find out competitor bids so you can undercut them) and the execution (cutting corners that you don't expect someone to find out about, or just bribing whoever is overseeing quality who might detect the corners you cut).
Even the US Army Corps of Engineers has had massive corruption cases. When I was in the industry this was an open secret, which surprising to me given the Foreign Corrupt Practices Act... eventually this would be cracked down upon [2], but as far as I've heard, still common.
[1] https://guide.iacrc.org/potential-scheme-change-order-abuse/
[2] https://www.justice.gov/usao-dc/pr/former-us-army-corps-engi...
It was a family business and I helped out by the managing operations (this was more as a supplier of building material to contractors) and doing business development (which involved bidding for construction projects).
Quick look at https://sbcmag.info/news/2015/jan/construction-jobsite-fatal... does seem to bear this out, though really need a longer time-scale for a bigger picture upon this.
I have an uncle who has lived for 40 years with mental disabilities and unable to drive, from an a construction site accident.
My grandfather died before reaching 60 after a series of ailments starting with a back injury suffered in the construction industry.
It is hard & dangerous work, which has gotten dramatically safer over time. It nonetheless remains hard on the body.
And at the moment the software field seems a lot more financially rewarding to smart, practical young people trying to figure out what field they should go into.
I'd say it's the same process even in China these days.
There was a big stir online few years ago where it came to light that Shenzhen polytech grads have significantly larger salaries, and employment than much more prestigious university graduates.
On other side, I see more, and more Chinese companies becoming carbon copies of American corporates with engineering offices stuffed full of MBA's, and needing 10 SWOT analyses to fix a single line of code bug.
(And in general, I think mechanization is under-appreciated as a productivity enhancer compared to automation... Who is more productive moving something like gravel around, someone driving a 5 ton capacity dump truck or someone overseeing 100 gravel-moving drones with a capacity of 5 kilograms each? Even if the drones are essentially autonomous, the dump truck driver will be more productive in moving the material around because he's driving a big machine and the drones will need someone to manage them especially when there are problems. Or even compare 5 ton autonomous mining trucks with a 500 ton dump truck... the 500 tonner is gonna win. Larger scale machines are still a pretty straightforward way to improve productivity.)
I guess I’m just saying that scaling up your smaller machine to be larger has the same kind of productivity enhancements as switching your smaller machine to autonomous. It is also something humans have been doing ever since the development of domestic beasts of burden.
I met a guy a few years ago who had a plumber role in one of those modular factories... he said he was paid lesser but he likened it to a 9-5 job in a factory, and was ok with the pay.
So the skilled labor content of plumbing a house has decreased over the years.
Every house in my neighborhood has hardwood floors throughout -- it was cheap when the subdivision was built out, but laborious to install. Today, the same class of house would have carpeting or sheet flooring, costing a lot less to install.
Other things like vinyl siding, Romex instead of hard conduit, etc.
You can be a massively skilled electronic engineer, but you don't need to hand solder every board to have a great, skilled, outcome. I guess the answer is all the machinery we employ for larger buildings, but there's no real equivalent for the individual suburban home which still involves most of the manual labor.
OTOH, I, a physicist, used to be a certified NASA solderer.
That was in the days before surface mount.
Interestingly, no electrician I've used knew what inductive coupling was. :-(
Inductive coupling is one of the most fascinating topics in EM. And, is all the power really flowing in the air between the wires? The electricians don’t know that, either.
I'm the one who teaches the chemists to solder. ;-)
Good small time subcontractors show up to the job themselves but train others to do most of the work.
Subs I worked with had pretty healthy markup over what they were paying their workers (>100% when invoicing hours).
The catch is they all had spent years learning the trade, and that part is definitely dangerous. I saw a guy ruin his back being over eager pouring concrete.
Suburban housing is very easy to build. Building 1 storey houses is not a challenge anywhere in the world, and it is possible to build it super cheap even without any capital equipment.
Steel housing is a prime example that even a double digit percentage cost advantage, with it being a very straightforward, and overwhelmingly superior, replacement for wooden framing, doesn't seem to been enough to drive new technology adoption in USA.
It was in 2nd year when I watched a youtube video when some guy actually explained thay you need to heat up the pad on the board, then add solder. I was totally flabbergased.
Soldering was a very minor part of my degree, so it didn't really matter, but still.
I’m thinking that, when you first learned to solder, you remembered the first step but not the second one, and thus got off on the wrong foot.
I think it’s not as bad in single family construction as commercial work, since the activity varies more over the day/week. But still, I can’t imagine my body not breaking if I did this for a career.
OTOH electrical work seems mostly reasonable. If one of my kids wanted to get into a trade that’s where I’d steer them.
You're starting it at best in your mid-to-late twenties? And even if you played sports in HS and go to the gym regularly, your body just isn't used to it and it's past the point where it can quickly adapt and more importantly get used to the stimulus. You're likely much more prone to injury than someone fifteen years older than you whose been doing that work since they were 17 (I'm sure I am too, it would destroy and I am very active for a SWE).
I do consider myself very fit/active, but it’s not the strength or stamina that’s the limiting factor, it’s the holding weight at weird angles, or applying torque, or just reaching out over my center of mass for hours.
Anecdotally it seems like the specialists have it worst. His friends who did flooring all have wrecked knees, and the drywall hangers have messed up shoulders. He seems to have made it out unscathed, though other generalists he knows have back problems.
I've had people come to my house to do handyman work, and at the same age as me, they are hobbling and broken.
I suspect that one of the causes of the opioid crisis is that we had a pain crisis, caused by bad working conditions. I could imagine advising one of my kids to go into the trades, but only if they move to a country with decent labor laws, safety net, and health care. Not in the US.
HVAC installation costs as much as a car in warmer regions.
General handyman work outclasses all retail jobs, but you don't hear about people with two bachelors doing that type of work like you do at a Starbucks.
I'm inclined towards the skilled trade side of things because I like getting my hands dirty but I understand why people wouldn't want to do a job that has you in a shop or working out in the heat, cold, or rain on a regular basis. Not to mention I imagine the injury and/or casualty rate is much higher for many trades compared to desk jobs.
TLDR: We obviously need both and they are equally good fields but I completely understand the perceived higher valuation for the safer, less physically taxing albeit often more boring and sedimentary jobs.
I wouldn't qualify for workers compensation for my herniated disc because I don't know when it started or why. But it's probably from sitting in front of a computer. Asking coworkers over 35, they almost all have injuries from computer work.
Maintaining weight and strength while a huge chunk of your day is sedentary is a big chore too.
I'd argue the public perceives sedentary jobs as much safer because of this even if they may not be in reality.
Why would you ever consider doing that? Livable wage discussions are about what’s livable, not how much value the job provides.
But sure. Let’s tie federal minimum wage to inflation and then do local cost-of-living adjustments, say make minimum wage equal to, say, three times the typical rent for a two bedroom apartment in the area. That way places that might really struggle with $21/hour minimum wage (like Wichita, Kansas) but have low housing cost would be able to maintain adequate employment levels and attract business investment. (It would also force NIMBY-heavy communities like San Jose, California actually have to pay a consequence for extreme housing costs in the form of higher wage costs for local low-skill services… Encouraging more housing to be built.)
A plumber might make a lot more money but they’ll never be able to shake the association with dirty, unpleasant work, despite the fact that a great deal of plumbers work in new installations for construction rather than household repair.
When I think of young and old PhDs alike, I don't think of high status individuals. I think of people who spent too long in academia. Most of them don't contribute breakthrough insights to their field in their lifetime, but rather make indentations to broader collective knowledge. That's not high status to me.
I think more highly of someone who owns their own plumbing business. An employer has more status to me because they command labor. A PhD graduate will most of the time be contributing deep narrow insight to a larger organization, not using their studies for entrepreneurial pursuits.
This is fast changing. The days of "ooh they work in an office" vs. your average handyman are mostly gone US metro areas. If anything, electricians, mechanics, carpenters, firefighters, etc. are seen as "manly men" with the surviving traditional masculinity compared to most men in metro areas.
I know more tradesmen that are leaving the trades than joining, and they are usually the best among their group. Being a skilled framer often nets you nothing over being a barely competent framer. Despite all these claims of trades making huge money, most tradesmen are not. For ever plumber in NYC making $50 an hour, there is a dozen other contractors working for $12 an hour using their own tools and trucks fighting over the scraps of lower class business who can barely afford them.
Every indutry that doesnt reward skill qill eventually go to shit
Hair color and bleach is nasty stuff.
More power to him!
Public works usually require separate bidding for different aspects of projects, which means you have 2-5 different entities to coordinate around. Some states and entities are experimenting with design/build contracts, but there’s obvious opportunity for corruption there, so who knows how that will fare.
Just anecdotal, but made sense to me why costs are going up and productivity declining.
In its preamble the Economist says: the project encountered a series of successive delays due to poor construction planning, execution, management, and corruption
That would be poor: planning, execution, and management. The corruption was of the best European standard. Quite excellent.
I’m glad he had a job, but it stems like the builder could have saved a lot of money by just moving a little slower, and doing it right the first time. Then again, maybe the cheaper labor building the houses offset the extra cost.
Now it's plastered walls, with large doubled glazed windows everywhere. Laminate floors. HVAC. Extra insulation to reduce heating costs.
And all buildings now need to be wheelchair accessible with lots of ramps, lifts and specialised bathrooms.
Result: Specialised workers at very stage, reducing competition and causing delays.
Building something is very labor intensive (the way we do it here in the US; the article talks about China and other ways of building) and the actual proposed budgets should be higher and timelines longer based on how we build.
But in order to win a contract, the builder must lie and say "we can do it for this much and in this time frame," which tends to be lower than what we can actually realize.
This is largely because of staff shortages.
It's much easier to build a dozen of something when you don't have to deal with 12 different clients/owners.
And sure, the "cost disease" effect makes labor intensive industries seem less productive with apparently too-high-paid people.
In IT, it happens often that there is a clause that prevents contractors from sub-contracting a position. This forces them to hire for that skill.
What is special about the construction industry that this cant be done?
Actual article title:
Efficiency eludes the construction industry
> Construction holds the dubious honour of having the lowest productivity gains of any industry, according to McKinsey, a consultancy. In the past 20 years the global average for the value-added per hour has inched up by 1% a year, about one-quarter the rate of growth in manufacturing. Trends in rich countries are especially bad. Over the same period Germany and Japan, paragons of industrial efficiency, have seen nearly no growth in construction productivity. In France and Italy productivity has fallen by one-sixth. In America, astonishingly, it has plunged by half since the late 1960s.
- While it was a subtitle, it was way more to the point
- Specifically pointing to America was also appropriate
The Economist is a magazine publication. Their headlines are a concession to the content.
I was shocked to read this until I saw the date. 2017 should be added to the title.
Instead, volatility in demand for construction has trained builders to curb investment. “The industry has learned through bitter experience to prepare for the next recession,” says Luc Luyten of Bain & Company, a consultancy. Capital-heavy approaches to construction bring high fixed costs that are difficult to cut in downturns. Workers, in contrast, can be fired.
One of the factors of construction is "it costs what it costs". Builders are willing and able to pass costs on to consumers and so don't have an incentive for cost savings.
It's pretty ridiculous that you've the whole thread whining about "the trades". A variety of vested interests keep building costs high, with trade unions well down the list. Developers, large, monopoly builders and homeowners' association each as a group have more money than any unions and through a system that bring huge profits by high priced building and land appreciation, they have a vested interest in the high cost of building. Consider that when it's time sell schemes that raise the cost of building, the best "face" can trade union "protecting livelihoods" but that doesn't that's where the real power or money lies.
On a practical note - mobile home parks in my area are blocked by county and city government they serve home-values, out here in the sticks, unions really don't have but we've had no new parks for twenty or thirty years. But oppositely, it's easy to put mobile unit on the high price land you occupy yourself. Yeah, it's land value.
Here is one example where this lobbying was done in the open. There are many many more that don't hit the papers because the topics are pretty narrow/boring but highly impactful. https://www.sfchronicle.com/bayarea/article/San-Francisco-tr...
The claims are fairly well-founded: https://www.sfchronicle.com/bayarea/article/San-Francisco-tr... "San Francisco, trade unions at odds over modular construction - even for homeless projects"