Innovation driven by situation by lindahy

VIEWS: 34 PAGES: 15

More Info
									      Innovation driven by Situation



              Construction in Australia 2008



                                 Andrew Wilson
                                  Executive Chairman
                               Laing O’Rourke Australia




Note: The statements made in this submission are not intended to represent the
thoughts of the construction industry as a whole. This is a personal observation of
the industry and its innovation requirements, written specifically for this Federal
Government Review. The paper is submitted purely to enlighten the government to the
construction industry situation and the barriers to innovation.




SUBMISSION TO THE EXPERT PANEL, REVIEW OF THE NATIONAL INNOVATION SYSTEM, DEPARTMENT OF INNOVATION,
INDUSTRY, SCIENCE AND RESEARCH – INNOVATION DRIVEN BY SITUATION

                                                                                         PAGE 1 OF 15
Introduction

Construction has not enjoyed the degree of innovation
experienced by other industries in the world.

Bricks, for example, have been produced in one form or
another for centuries and our bricklayers continue to
place them just as hundreds of generations before them
did so. Whilst generations of builders have thrived by
replicating the traditions and methods of their
forefathers, an emerging global skilled worker shortage
and, more importantly, the ongoing prevalence of injuries
to our construction workers demands that we dramatically
change the way our industry operates.

We have one of the highest occurrences of long term
manual handling injury causing large workers compensation
costs. The emotional and financial hardship for thousands
of families whose key breadwinner is incapacitated is a
drain on Australia’s productivity and society in general.

Construction continues to be one of the most dangerous,
lowest skilled, male dominated and economically risky
industries for those who choose to participate – hardly
an attractive proposition to our school leavers.

Construction companies (Main contractors) and suppliers
(subcontractors) take on major contracts at fixed prices
with limited ability to manage the external influences
that effect the out-turn cost – labour availability,
inclement weather, costs of copper, aluminium and steel.

As a result Main contracting and subcontracting
businesses regularly fail, leaving creditors, clients and
governments more suspicious and more inclined to add
further bureaucracy, legal burden and financial security
hurdles to contracts, in turn making it harder for
smaller companies to compete.

Industry participants play a ‘win some / lose some’
financial outcome lottery which prevents long term
investment in innovative practices.

Because projects are relatively short term in nature and
won very much on price, there is little opportunity or
incentive for participants to invest in long term R&D
activities to improve the industry.


SUBMISSION TO THE EXPERT PANEL, REVIEW OF THE NATIONAL INNOVATION SYSTEM, DEPARTMENT OF INNOVATION,
INDUSTRY, SCIENCE AND RESEARCH – INNOVATION DRIVEN BY SITUATION

                                                                                         PAGE 2 OF 15
Governments at all levels have in particular undervalued
any form of innovation in their selection of contractors
and have driven builders to become price driven and cost
conscious, reducing overheads and squeezing out funds for
innovation.

We have extremely limited career paths available to
construction workers which sees 50 and 60 year olds still
involved in heavy manual handling work practices. In
fact, the industry is seen by many of those in it as a
string of projects rather than a career and this inhibits
many from staying in the industry as they age.

Women are not attracted to an industry which is itinerant
in the location of projects, works a 6 or 7 day week and
provides little continuity of work, especially to those
on maternity leave.

The process involved in delivering a project is complex
and unpredictable in its outcome. The chain of processes
between the originator of a project (the client) and the
deliverer (the constructor) involves many entities whose
interests are not necessarily aligned. These divergent
interests cause adversarial contractual conflict, cost
blowouts and time delays.

Notwithstanding the above, the construction industry
remains one of the most challenging, dynamic and
rewarding industries in the world.

Our industry is one of the few that sees physical
evidence of progress on a daily basis. We provide every
person in our society with their basic shelter needs
whether it be to sleep, work or play. We turn designer’s
dreams into reality and we will be one of the key
industries to shape a carbon constrained world.

Construction attracts salt of the earth people who enjoy
a hard day’s work. We are solutions orientated ‘can do’
people who are accustomed to every project situation
being different from the last. Our innovation is usually
carried out in the face of adversity to get the job done.

Our industry has an emotional attraction, bordering on
romantic, and our workforce celebrates key milestones of
projects completed as major highlights of our lives,
shared with mates who help each other out in the true
Australian tradition.

SUBMISSION TO THE EXPERT PANEL, REVIEW OF THE NATIONAL INNOVATION SYSTEM, DEPARTMENT OF INNOVATION,
INDUSTRY, SCIENCE AND RESEARCH – INNOVATION DRIVEN BY SITUATION

                                                                                         PAGE 3 OF 15
Key Points

    1. Construction does not enjoy innovation because of
       the industry’s structure
    2. Construction companies have little incentive to
       invest in long term R&D
    3. Injury rates and long term incapacitation of workers
       detracts from Australia’s productivity.
    4. Women are not attracted to the industry because of
       male dominance, working hours, inflexibility
    5. There are limited career paths available for the
       construction industry.
    6. The industry is one of the last remaining ‘mateship’
       industries where Australian traditions of working
       together for a common goal are practiced.




SUBMISSION TO THE EXPERT PANEL, REVIEW OF THE NATIONAL INNOVATION SYSTEM, DEPARTMENT OF INNOVATION,
INDUSTRY, SCIENCE AND RESEARCH – INNOVATION DRIVEN BY SITUATION

                                                                                         PAGE 4 OF 15
    Emerging Situation

    It is estimated that by 2020, even allowing for
    projected immigration, more construction workers will
    be leaving than joining the Australian Construction
    Industry.

    On the contrary, projections of construction activity
    continue to grow strongly to support Australian mining,
    transport Infrastructure, social Infrastructure
    (schools, hospitals), Housing and Water Infrastructure.

    Soon, demands will be placed on the industry by climate
    change driven activity to convert Australia’s current
    building stock to more environmentally efficient
    accommodation.

    Power generation, including renewable energy generation
    is also projected to grow exponentially throughout the
    next decade.

    Further still, Australia’s aging population and
    continued trend towards singles living will sharply
    increase the demand for residential accommodation.

    If this were not of enough concern, the same pattern is
    emerging across the developed world in the UK, Europe
    and the Americas.

    Added to the is the unprecedented construction demand
    of developing nations such as India and China who are
    transitioning from being the exporters of construction
    labour to quickly assuming the position of labour
    attractors to deliver their own construction needs.

    The Middle East explosion of new urban quarters in
    Dubai, Abu Dhabi and other oil supported economies is
    adding further fuel to the fire.

    Thus, the concept of labour shortages is not a passing
    phase – it is a reality which is here to stay and which
    demands attention if the construction industry wants to
    continue to satisfy the demands of its customers in
    Australia and the world.

    These shortages mean that we employ less experienced
    and less skilled workers who are more susceptible to
    injuring themselves and are less productive.

SUBMISSION TO THE EXPERT PANEL, REVIEW OF THE NATIONAL INNOVATION SYSTEM, DEPARTMENT OF INNOVATION,
INDUSTRY, SCIENCE AND RESEARCH – INNOVATION DRIVEN BY SITUATION

                                                                                         PAGE 5 OF 15
    In short, if we want a sustainable construction
    industry we must change.

    So, the key issue is increasing productivity to help
    bridge the gap between a growing market and a dwindling
    workforce. This productivity increase will be addressed
    through numerous initiatives that fall broadly into the
    following categories:-

    1. Increasing the number of people entering the
       construction industry (attraction)
    2. Skilling those in the industry to become more
       productive (Skills)
    3. Shifting construction activities where possible from
       the site environment to the factory environment
       (Prefabrication)
    4. Longer term procurement practices which encourage
       research and development (Procurement)
    5. Changing the industry to outline clear career paths
       that don’t necessarily mean heavy manual roles on
       sites in later age. (Structure)

    Key Points:

    1. By 2020 more construction workers will be leaving
       the industry than joining it.
    2. Construction activity is not forecast to experience
       ‘normal’ growth because of infrastructure demands,
       aging population demands, climate change demands.
    3. The issue is global, not limited to Australia
    4. Traditional providers of construction labour (e.g.
       India) are providing more opportunity for their
       workers to stay at home.
    5. Skills shortages mean less skilled workers who are
       therefore more susceptible to injuring themselves.




SUBMISSION TO THE EXPERT PANEL, REVIEW OF THE NATIONAL INNOVATION SYSTEM, DEPARTMENT OF INNOVATION,
INDUSTRY, SCIENCE AND RESEARCH – INNOVATION DRIVEN BY SITUATION

                                                                                         PAGE 6 OF 15
    Barriers to Innovation

    The following are observations on barriers to innovate:

    1. Construction projects are short term and price
       driven in nature which doesn’t encourage long term
       innovation in product design or the adoption of
       labour saving methodologies.

    2. Clients are interested in the end product, not
       necessarily the process used to get there. Generally
       price is the winning bid criteria. Because
       construction is rarely the core business of a
       client, they commonly choose not to become involved
       in the promotion of innovative products or methods.

    3. The subcontracting nature of the industry inhibits
       major contractors from investing in innovative
       delivery processes because innovation around the
       integration of the supply chain are inhibited
       through ownership barriers and unaligned interests.

    4. The lack of alignment between the promoter and
       provider of the project caused through the vested
       interests of other parties adds cost and risk to
       project outcomes.

    5. The relatively ‘thin’ depth of the Australian
       industry prevents contractors from investing in
       research & development capability which drives
       innovation. Compare this to say, the Japanese
       contractors who operate extraordinarily large R&D
       centres of excellence.

    6. The decreasing skill level of construction workers
       means that contractors specify traditional methods
       of construction to cater for the lowest common
       denominator.

    7. Material suppliers have full order books limiting
       their desire to undertake expensive R&D to develop
       more efficient products.

    8. The construction industry is not product based, it
       is a service industry and therefore does not attract
       the world’s best innovators.




SUBMISSION TO THE EXPERT PANEL, REVIEW OF THE NATIONAL INNOVATION SYSTEM, DEPARTMENT OF INNOVATION,
INDUSTRY, SCIENCE AND RESEARCH – INNOVATION DRIVEN BY SITUATION

                                                                                         PAGE 7 OF 15
    9. Later in their career, construction workers are not
       attracted to use their knowledge and skills in
       research and development activities.




SUBMISSION TO THE EXPERT PANEL, REVIEW OF THE NATIONAL INNOVATION SYSTEM, DEPARTMENT OF INNOVATION,
INDUSTRY, SCIENCE AND RESEARCH – INNOVATION DRIVEN BY SITUATION

                                                                                         PAGE 8 OF 15
    What can Government do?

    1. Role Model
       Governments can act as role models for the private
       sector by changing their procurement criteria to
       value innovation and R&D investment by construction
       companies, scoring companies on their innovation
       around labour reduction, safety focus, pre-assembly
       techniques, product development and research
       participation with universities and the CSIRO.

    2. Provide the platform
       Governments are positioned for the longer term and
       could change their procurement practices to provide
       longer term framework opportunities for contractors
       which then provides the opportunity to jointly
       invest in R&D over a much longer period than that
       provided by a single construction project. Longer
       term co-investment strategies could include product
       driven design initiatives with a targeted 50% pre-
       assembled product in any one building.

    3. Skills Training
       The Rudd Government is positioned to invest in
       skills enhancement in the construction industry.
       Ongoing support for apprenticeships, cadetships and
       fast-tracking of graduates.


    4. R&D Projects
       Commission (solely or jointly) construction
       companies to develop specific materials, products or
       processes that meet the criteria for achieving more
       productivity for a given manpower level. This will
       encourage the development of in-house R&D
       capability.

    5. Investing in People
       Adopt a programme similar to the UK’s ‘Investors in
       People’ which recognises world class development of
       people inside companies – orchestrate the criteria
       for such a government sponsored programme to
       recognise innovation as a key scoring criteria. Link
       accreditation to this programme to the selection
       criteria for government projects as an encouragement
       to the construction industry to invest in R&D.

    6. Economic development zones

SUBMISSION TO THE EXPERT PANEL, REVIEW OF THE NATIONAL INNOVATION SYSTEM, DEPARTMENT OF INNOVATION,
INDUSTRY, SCIENCE AND RESEARCH – INNOVATION DRIVEN BY SITUATION

                                                                                         PAGE 9 OF 15
        Recognising that pre-assembly and prefabrication are
        longer term investments and that initial investment
        returns are likely to be marginal, provide cheap or
        free development zones for R&D industry sites that
        add further incentives for constructors to invest in
        more efficient methods of construction.

    7. Innovation Awards
       Sponsor and celebrate an innovation in construction
       award, the criteria of which is centred around
       initiatives that make the industry more sustainable.

    8. Manual Handling Injury
       Explore incentive mechanisms that encourage the
       industry to reduce manual handling injury. This type
       of injury is unique in that it does not usually
       result from an accident. Accidents are investigated
       and managed by both industry and government whereas
       manual handling injury is traumatic, expensive and
       largely ignored. The ongoing sustainability of the
       construction industry is reliant on manual handling
       energy being addressed.




SUBMISSION TO THE EXPERT PANEL, REVIEW OF THE NATIONAL INNOVATION SYSTEM, DEPARTMENT OF INNOVATION,
INDUSTRY, SCIENCE AND RESEARCH – INNOVATION DRIVEN BY SITUATION

                                                                                        PAGE 10 OF 15
    Laing O’Rourke Innovation Case Study

    Laing O’Rourke (LOR) is the largest privately owned
    construction company in the UK. It operates in the UK
    and Ireland, the Middle East, India and Australia. The
    group employs 30,000 people of which about 20,000
    actually undertake work on sites.

    The company has delivered iconic projects such as Dubai
    Airport, Dubai Ski Dome and Terminal 5 Heathrow. In
    Australia the group has delivered iconic projects such
    as the Alice to Darwin Railway and the Seacliff Bridge
    which hugs the coastline south of Sydney.

    The group is currently part of the 2012 London Olympics
    delivery authority. LOR has a joint venture with a
    prominent property developer in India to deliver
    approximately 8 million square meters of built space.
    In the Middle East LOR is delivering a Joint venture
    project to build a new city near Abu Dhabi of circa
    US$25bn. In Saudi Arabia we are constructing a railway
    line of 880kms across the Saudi desert.

    The diversity across countries and sectors allows the
    group to observe different trends in construction.

    The Chairman and CEO of the group, Ray O’Rourke is
    recognised as a visionary leader in the construction
    industry, renowned for his innovation. Ray comes from a
    subcontracting background and understands construction
    from the bottom up.

    His vision is to change the face of construction for
    the better, to make it a more attractive environment
    for employees to work in and to better prepare it to
    support the demands placed on it by its clients.

    Innovation inside LOR is drawn from the following key
    principles:-

    1. People are the lifeblood of the organisation. Employ
       the best people and support them with world class
       learning. Give ‘young guns’ responsibility and
       support them with ‘grey hair’ mentors. Never allow HR
       to run the Human Capital Agenda – leadership is
       paramount.



SUBMISSION TO THE EXPERT PANEL, REVIEW OF THE NATIONAL INNOVATION SYSTEM, DEPARTMENT OF INNOVATION,
INDUSTRY, SCIENCE AND RESEARCH – INNOVATION DRIVEN BY SITUATION

                                                                                        PAGE 11 OF 15
    2. Learning never stops – align the business with the
       best Universities in the world and mutually commit
       to innovate.

    3. Integrate the supply chain into the business so that
       innovation can occur – that means directly
       undertaking the work rather than subcontracting it.

    4. Value technical expertise – employ the best PHD
       graduates who can give you technical edge

    5. Prefabricate and pre-assemble where possible to
       minimise the manpower requirements on site.
       Preassembling components in a factory is safer and
       can accommodate less skilled workers than those on
       site. Quality is better.

    6. Products, not projects. Drive products into the
       market to change the way design and construction
       works – if we design preassembled products and
       provide a catalogue of these components to designers
       we could end up with 60% of a project constructed
       from factory produced preassembled product.

    7. Celebrate Innovation – recognise, promote, reward
       people for innovation.

    8. Align with clients who value innovation.

    These principles have manifested themselves in some key
    result areas for the group. Examples include:-

        Heathrow Terminal 5 (BAA) – the first piece of major
        UK infrastructure to be delivered on time and under
        budget in recent history. Pre-assembly and just in
        time delivery used.

        Al Raha Beach, Abu Dhabi. A $25bn project where the
        initial manpower estimates required a 100,000 labour
        force on site. Through prefabrication, pre-assembly
        and product component design the number of onsite
        workforce required has been reduced to 60,000.

        Steetly Facility UK – LOR has development approval
        underway to build it’s first fully robotic pre-cast
        component factory to provide components for
        designers to use in buildings.


SUBMISSION TO THE EXPERT PANEL, REVIEW OF THE NATIONAL INNOVATION SYSTEM, DEPARTMENT OF INNOVATION,
INDUSTRY, SCIENCE AND RESEARCH – INNOVATION DRIVEN BY SITUATION

                                                                                        PAGE 12 OF 15
        Building Constructive Relationships (BCR) Framework
        – a mutual commitment between LOR and its design
        partners to explore innovative practices together.




SUBMISSION TO THE EXPERT PANEL, REVIEW OF THE NATIONAL INNOVATION SYSTEM, DEPARTMENT OF INNOVATION,
INDUSTRY, SCIENCE AND RESEARCH – INNOVATION DRIVEN BY SITUATION

                                                                                        PAGE 13 OF 15
Summary

        The construction industry worldwide is facing a
        tough future. Labour shortages are here to stay and
        will worsen as migration solutions to manpower
        issues become harder to execute.

        The industry is arguably not sustainable and must
        reinvent itself as an innovative driver of new
        products and processes that protect our valuable
        manpower and generate unprecedented levels of
        productivity.

        Government can undertake initiatives to assist the
        construction industry to become sustainable such
        that the needs of Australian citizens can be met
        over the longer term.

        The alternative to a sustainable construction
        industry is the very real scenario that Australia
        cannot supply its own accommodation needs in years
        to come.


        Ends




SUBMISSION TO THE EXPERT PANEL, REVIEW OF THE NATIONAL INNOVATION SYSTEM, DEPARTMENT OF INNOVATION,
INDUSTRY, SCIENCE AND RESEARCH – INNOVATION DRIVEN BY SITUATION

                                                                                        PAGE 14 OF 15
        Declaration of Interest

        My interest as Executive Chairman of Laing O'Rourke
        is the promotion of a more innovative, sustainable,
        productive and safe construction industry in
        Australia




SUBMISSION TO THE EXPERT PANEL, REVIEW OF THE NATIONAL INNOVATION SYSTEM, DEPARTMENT OF INNOVATION,
INDUSTRY, SCIENCE AND RESEARCH – INNOVATION DRIVEN BY SITUATION

                                                                                        PAGE 15 OF 15

								
To top