San Diego, We Do NOT Have a Problem! SE Leadership in the Construction Industry

Abstract

Problem Statement. Construction holds the dubious honor of having the lowest productivity gains of any industry. The Economist reported recently that more than 90% of the world's infrastructure projects are either late or over-budget. Even the sharpest of tech firms are not immune from this affliction. Apple's new headquarters in Silicon Valley, for instance, opened two years behind schedule and cost $2B more than budgeted (Economist, 2017). While many US sectors including agriculture and manufacturing have increased productivity ten to 15 times since the 1950s, the productivity of the construction industry remains stuck at the same level as 80 years ago, according to the McKinsey Global Institute (Barbosa, 2017). Root Cause(s). The construction industry has become less likely to reinvest in productivity. Volatility in demand for construction, extensive fragmentation of construction companies, and slim margins lead to a tendency to defer improvement investments. Often projects have more than a dozen subcontractors, each keen to maximize profit rather than collaborate to contain costs. The result is an industry that mostly ignores tools that might improve productivity (Barbosa, 2017). A variety of factors account for poor productivity and cost outcomes: poor organization, inadequate communication, contractual misunderstandings, poor short-term planning. Contractors and suppliers identify misaligned contracts as the most important root cause of low productivity (Barbosa, 2017). Possible Solution(s). Examples of innovative firms and regions suggest that acting in several areas simultaneously could boost productivity by 50 to 60 percent. Many of these actions translate directly into Systems Engineering activities, including rewiring of the contractual framework, rethinking design and engineering processes, improving procurement and supply-chain management, and introducing holistic project-operating systems into infrastructure megaprojects (Barbosa, 2017). Systems Engineering Challenge(s): Most individual construction industry players lack both the incentives and the scale to change the system, resulting in industry that is literally not willing and not able to make changes to improve productivity. Systems engineering attempts are commonly met with a firm “San Diego, we do NOT have a problem, we have always done it this way!” The true systems engineering challenge is therefore to nudge industry players towards “being willing and able” to make changes by applying organizational change management skills while cautiously introducing systems engineering elements. This paper demonstrates how systems engineers – despite the identified obstacles – can be successful in identifying systems engineering opportunities, and using influence and leadership to drive change from within construction projects, as illustrated by two real world construction megaprojects.