Are firms ready to execute on the American Jobs Plan?

Having read through the American Jobs Plan, it’s clear that federal funding and capacity-building proposals for infrastructure and climate are transformational, once-in-a-lifetime, and good for business. However, if the design and construction industry views the proposed policy framework through the lens of just the project flow opportunities, it could miss a massive opportunity to address some important underlying and persistent industry challenges that are systemic to improving the economy and mitigating (and adapting to) climate change. Yes, investment in infrastructure and climate is urgently needed, but is the industry able and ready to execute?

Industry Current State and Level of Impact

To start, let’s examine the design and construction industry as a whole. In 2020, it represented about 7% of US GDP (as supplied by the American Institute of Architects) and 13% of the global GDP. More than 700,000 design and construction firms employ more than 7 million people. Those firms are not only a big part of the economy in terms of the jobs created and sustained, but it is also THE industry that shapes the quality of life for society on this planet. What firms build, what they don’t build, what they maintain, and what they don’t maintain impacts everyone’s quality of life and everyone’s ability to trade and transact business.

All of us spend approximately 90% of our time indoors. Besides recreation, most of the other 10% is spent moving from one indoor place to another using infrastructure and its systems indoors and out, all day long, every day. The industry supports society’s ability to move and transport goods and services from point A to point B. Clean water, clean air, the provision of electricity, internet services, transportation services, sanitary/waste services, they all depend on design and construction professionals.

Industry Challenges

And yet as an industry overall, there are many challenges in the way projects are delivered—70% of projects are over budget and over schedule. Labor productivity has been flat for decades. Buildings are a big source of greenhouse gas emissions—almost 40%—when you factor in operations, materials, and construction techniques, and 70-80% of construction and demolition wastes are discarded into landfills instead of recycled and reused. Moreover, the regulatory environment doesn’t promote life-cycle thinking of constructed assets. Instead, design and construction services are procured by governments in large part through the lens of upfront construction costs, neglecting the reality that approximately 80% of a building’s life-cycle costs come from maintenance and operations.

At the federal level, and in most state and local jurisdictions, the regulatory framework doesn’t even allow for innovative project delivery or the use of “Lean Construction” methodologies. To make matters worse, talent and workforce shortages are reaching critical levels—there is no pipeline for new generational talent, either professionally or in skilled labor. With the current state of demand, it’s difficult for industry stakeholders to pause and learn new technologies or innovative project delivery methods. Furthermore, the industry is enormously fragmented with building code systems operating mainly at the state and local levels, creating a patchwork of jurisdictional confusion.

Solutions

Two big ideas could be specifically addressed in the proposed American Jobs Plan to help solve these underlying industry challenges and could help the industry become more efficient, economical, and environmentally sustainable.

First, what if the American Jobs Plan included a procurement framework that encourages the use of Integrated Project Delivery (IPD) and Lean Construction Principles? IPD is a contract structure for design and construction where participants have “skin in the game” through shared risks and rewards, as well as dispute resolution provisions that force participants to take responsibility for the project rather than blame other project members. Out of the more than 500 projects that have used this delivery method, experienced stakeholders report that only a handful have the potential to involve any claims, and change orders are an anomaly. Using this kind of delivery method could be paradigm-shifting for asset owners, but who’s going to take the time and risk to experiment if there’s little government support? Moreover, IPD isn’t currently allowed federally, at least not explicitly. Even the simple act of encouraging Lean Construction Principles at a policy level could result in 30% improvement on completion times and 15% reduction in costs.

Second, what if the American Jobs Plan included a “Construction Innovation and Technology Fund” to de-risk innovation for design and construction stakeholders who want to learn and try new ways of designing and constructing, but need programs that support their training, skills-building, and technology acquisition? IPD, energy modeling, net-zero or Grid-Integrated Energy Efficient Buildings, generative design, design for manufacturing and assembly (DfMA), low-emission building materials, and many other innovations would be incentivized and stakeholders could dare to learn. Other countries have offered this kind of government support and programming for the industry and so should the US. There’s also an opportunity for this kind of fund to scale with private sector capital through mechanisms like Green Banks that are structured to tie private financing to innovative climate mitigation and resiliency measures. Design firms, in particular, have an important role to play.

While the American Jobs Plan outlines myriad ways in which the federal government is proposing to invest in the future of America, its people, and the economy, it isn’t yet clear how the investments might help the design and construction industry manage as a whole to execute efficiently and economically. Money is great and the investment is certainly long overdue, but I can’t help but wonder whether “give a man a fish and you feed him for a day, teach a man to fish and you feed him for a lifetime” may be worth consideration. More importantly, can and will the industry as a whole organize and coalesce around a new policy framework that not only welcomes money for projects, but also welcomes investment in the industry to execute?

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