By Stephane Chapuis
Special to Ontario Construction News
As we have learned at Turner & Townsend, both in Canada and around the world, infrastructure leaders are adapting and evolving in response to uncertainty with bold new approaches on multiple fronts.
Organizations globally are navigating a series of challenges as they respond to the disruption of 2020. This is prompting a rethink in ways of investing, planning, developing and delivering infrastructure assets.
Through our work on major projects globally, we have engaged with senior leaders over the last 10 months to understand how they are adapting their long-term strategies, changing their ways of working and getting closer to their people and the wider supply chain. It has enabled us to understand:
- Which areas of the industry are at the forefront of new ways of working?
- What changes organizations and project teams are considering that will have the biggest impact?
- How are organizations planning for change to stick in their business?
- How can new approaches overcome conventional barriers in the infrastructure sector?
Global infrastructure market trends
Our findings show that the need for modernization has long been recognized by the industry, with change notably needed in the following areas:
Modern methods of construction should be embraced to enable a culture of innovative challenge and thinking. It has been determined that a seven percent net saving in project time could be achieved through greater use of prefabricated components, by taking construction processes off site and into the factory.
Effective decision-making for project delivery and operation need proper data gathering to create an effective evidence base. An example of this is from COMET (Community of Metros Benchmarking Group) where 32 cities are globally sharing data from their railway systems to inform industry-wide benchmarks.
Greater tracking needs to drive productivity and automation. According to BuildForce Canada1, The “Canadian construction labour demand to intensify over the short term will require more than 300,000 new workers over the next decade. Ontario is expected to peak in 2020, driven by major project requirements in the Greater Toronto Area (GTA) and Southwestern Ontario.
These include light rail transit (LRT) projects, two nuclear refurbishment projects, and other
infrastructure-related demands. This will be followed by a second peak expected in 2026.
Embracing the challenge of embedding digital solutions and using big data to increase transparency, using real-time proactive decision making. Seventy-two per cent of construction firms
worldwide consider digital transformation a key strategic priority.
We need to focus attention on understanding and investing in the capability, resilience and alignment of the supply chain. According to Supply Chain Canada’s The Digital Supply Chain report,2 “The Canadian supply chain is a critical part of the Canadian economy, enabling $1 trillion worth of goods movement, generating $66 billion in gross domestic product (GDP), and employing more than 878,000 people (excluding truck drivers) across Canada.”
We need to look beyond delivery to the full benefit over an asset’s life. Typical asset management practices are estimated to save 15 to 30 per cent in operational and capital expenditure. We need to adopt Asset Management best practices to improve services and return on investment.
Investing in the right skills, leadership and capacity needed to avoid a future ‘capability drain’ is essential. Employment in Canada’s construction and maintenance industry is anticipated to grow by 50,200 workers by 20292. The industry will need to recruit more than 307,000 workers over the decade to keep pace with demand, according to the labour market forecast released by BuildForce Canada.
An approach to encourage collaboration to achieve shared objectives through improved behaviours and better sharing of risk and reward are necessary to drive continuous improvement in quality and innovation. In the 1990’s we saw the emergence of alliancing models.
These models were introduced to:
- Align the interests of the client with the interests of the supply chain through a commercial framework which rewards good performance against defined project outcomes;
- Remove constraints or barriers to effective project execution;
- Create a no-blame culture focused on proactive risk management and successful delivery through “best for project” behaviours; and
- Embrace collaborative approaches to increase productivity and avoid waste.
While these models have been more prevalent in the UK and Australia, they are relatively new to the Canadian marketplace. With that said, an alliance model is being used for the restoration of Union Station in downtown Toronto. These types of models serve well for large complex projects and are much needed for the continued modernization within the industry.
Integrated project delivery
Similar to alliancing models, another trend we’ve begun to see in Canada is integrated project delivery (IPD) which is defined as, according to the American Institute of Architects,4 “a project delivery approach that integrates people, systems, business structures and practices into a process that collaboratively harnesses the talents and insights of all participants to optimize project results, increase value to the owner, reduce waste, and maximize efficiency through all phases of design, fabrication, and construction.”
It attempts to align the business interests of all parties involved with the project to drive value and help to manage and mitigate project risk. Today, in Canada, there are numerous builds under way using this delivery method and the expectation is the momentum will continue.
Supporting communities to enable social, economic and environmental value to meet Canada’s 2030 Agenda for Sustainable Development.3
Key area of change
Changes were realized in 2020 through four key areas:
Reacting to uncertainty
The disruption of the past 10 months has enabled much needed change. The need for
modernization at an industrywide level translates to practical challenges daily for project teams.
Like industry challenges – these have been prevalent for years. In 2018, we asked industry
leaders what the most significant barriers were to deliver successful projects. Their answers identified
three key areas of concern, including meeting growing demand, adapting to change and increasing productivity and efficiency as per the chart below.
Our interviews in 2020 confirmed that these issues were still prevalent. They also demonstrated
how organizations sought to respond and implement rapid change.
Major projects and programs
- Reviewing and restructuring works and teams: development of plans to optimize works and recover lost time. This was common in transport, power and defence sectors.
- Securing skills and capability for the long term: encouraging retired specialists to return to
- work in the rail and transport sectors.
Asset owners and operators
- Rapid reprioritization: adapting asset maintenance, working with suppliers to reprioritize works and reduce costs. Hibernating some projects in the aviation and rail sectors.
- Crisis teams and re-planning focus: creating dedicated Covid-19 teams to focus on cost and schedule impacts and re-planning critical path works to enable continued progress on critical projects.
Investors and funders
- Resetting investment criteria: public and private investors adding greater rigour to business case requirements, with emphasis placed on sustainability, diversity and social value.
- Government stimulus packages: many countries including Canada are stimulating long term economic growth by investing in infrastructure projects and pipelines.
- Supporting suppliers: re-negotiation of payment terms and contract conditions, such as advance payments and more active payment cycles.
- Engaging regularly: direct discussions between clients and specialist contractors are helping to identify risks and safeguard staff.
Building resilience in four ways
Our interviews identified four areas where leadership teams have adapted business approaches to be more flexible and resilient.
Ways of working
We anticipate digitally enabled delivery with real time integrated control to help projects respond to future volatility. When managing projects, processes are increasingly focusing on outcomes to enable flexibility and alignment to a common purpose.
Greater focus on staying ahead of the curve and pre-empting changes in markets is taking
place. We are seeing action focused scenario-planning to support risks. Organizations are starting to integrate asset-related functions, seeking to remove siloed approaches and encouraging cross-function
working and mindsets.
We are seeing a clear movement towards a stronger capability culture with a more ‘hands on’ client approach. It is helping us reimagine how team structures can best operate to become more
integrated, lighter and inclusive. Better leadership which has the right depth and breadth, should
focus on creating a culture where everyone has clear responsibilities and a clear voice.
We envision the unification of energized teams who are now working in different locations, through a simple and accountable structure, linked to a clear operating model.
Supply chain trends
We anticipate greater recognition within projects on the lack of understanding of the wider supply chain, its fragility and the impact that disruption has on risk, cost and schedule.
We are witnessing a drive towards a much more integrated partnership approach with supply chain investment and outcome focused incentives. This includes increased interaction between major
and smaller contractors. Some organizations are considering carrying out the function of major tier one contractors themselves.
Strategy and performance trends
Stronger integration is being driven between asset-related functions to allow a whole life
perspective. Audits of costs and primarily ‘conditions driven’ cost changes including re-financing,
overhead reduction, reduced cost of build and re-planning of work will be key.
We see developments through increased awareness of risks being taken on by organizations,
business model changes and scenario planning to determine future strategies.
This will involve greater focus on identifying or limiting supplychain risks, instead of focusing on smarter market engagement and proactive performance assurance.
As we focus on the future, the learning we have done over the past year has been essential. As evidenced by the feedback compiled within this article, industries are showing innovative and resilient solutions to overcoming market challenges that will be of long-term benefit for now and likely for many years to come.
Stephane Chapuis is a director with Turner & Townsend.