Construction Risks, Part 1: People

Jes Pedersen laid out four key risk categories in his introductory article, each of which I will tackle on these pages. The first of these is THE PEOPLE PROBLEM.

February 10, 2022

Strategy / Planning

by Matt Rossie, Webcor COO/President

Jes Pedersen, Webcor's CEO, set the foundation for four articles I will post here on LinkedIn, each one representing a key risk for the construction industry. If you haven't read Jes's introductory post, you can find it here. In short, Jes delivered a keynote speech at the IRMI Construction Risk Conference in San Diego last November. We thought it would be worthwhile to reiterate the key points he made in that speech to make it accessible to more people.

Jes laid out four key risk categories in his article, each of which I will tackle on these pages. The first of these is THE PEOPLE PROBLEM. That should be plural, since there is more than one, starting with the availability of labor, which affects both salaried and craft employees. Clearly, we need both on every construction project, with project leaders, engineers, superintendents, and others in the trailer while craft specialists do the physical work of building.

The Diminishing Workforce

Construction crafts -- such as carpentry, drywall, concrete, electrical, plumbing, and dozens of others -- were once seen as viable career paths. People made the decision to enter one of these trades in their teens, ensuring a reliable pool of workers was always available. Today, the average age at which people enter the trades is 27. Not only are people entering the trades later in life; they are leaving earlier thanks to more options, many of which (such as work in the technology industry) were not available two decades ago. These options are often indoors and involve no strenuous physical labor.

This is an industry accustomed to seasoned veterans with wisdom and deep understanding mentoring the next generation. Current trends mean there will not only be fewer people to perform the kind of work we do, but fewer experienced veterans to help bring new craftspeople along. That's just one constraint on our ability to execute all the work we see coming down the pike. Construction companies everywhere are finding themselves at war for talent.

The quality of the work we perform is at risk as a result. With fewer people -- and fewer who have been mentored -- you have to wonder if the industry's ability to put work in place correctly will suffer. Imagine not having confidence that a critical electrical, fire, or mechanical system was installed correctly.

Appealing to Prospective Builders

We have to figure out how to attract people to the trades and ramp them up quickly. But we also must be realistic and prepare for the likelihood that there simply won't be enough people available. We can't simply stop building, so we have to find ways to build with fewer people. Prefabrication is one solution, which comes with other benefits, such as controlling quality the same way manufacturers do and providing a more controlled and therefore safer environment. It will take considerable effort to scale prefabrication while changing the methodologies and business models the industry currently uses.

Katerra represents a good example of just how challenging this pivot can be. This California-based company seemed to be doing all the right things, yet they filed for bankruptcy last June. Katerra took on wood and metal stud assemblies based on direct purchase of materials, disrupting the supply chain. This presented two big problems for them. First, they tried to innovate in too many areas at one time. (Call it a case of "boiling the ocean" syndrome.) Second, they needed to maintain the low profit margins typical in the construction industry.

Regardless of this failure, we need to solve prefabrication. It drives greater productivity, which will reduce our need for so many people. It will also move a lot of the labor away from project locations to safer, more comfortable facilities.

Scaling prefabrication so it makes repetitive manufacturing viable for single-family homes, apartments, condominiums, hotels, warehouses, and other structures is one of the key challenges we have to solve. There have been promising developments in three different categories of prefabrication:

  • Metal -- the citizenM hotel chain is using prefabricated rooms successfully in a number of locations. These rooms look a lot like shipping containers before they are assembled into a finished hotel. (The architect Gensler has produced a video that details the process:
  • Studs -- These are completed walls made of wood or steel, that stack one on top of another. This was one of the products Katerra undertook. Its failure demonstrates that it's not an easy business model to build.
  • Concrete -- Pre-cast concrete is used to build out several rooms on top of a structural plank, then ship it to a project site. We are employing this concept at a student housing project we're working on.

Prefabrication is just one solution to the labor shortage. Other technologies will help, too, such as the use of robots on buildings. (We are proud to be the first contractor to have our drywall people trained to use the Canvas drywall robot on our projects.) Ultimately, the industry must find ways to radically improve productivity while removing people from the most hazardous aspects of a project. That will require a concerted, strategic approach, with the industry pulling together in search of solutions and the means by which we will scale them.

Coming up in the next few weeks, I will share thoughts on the other three risk categories Jes outlined in his speech: climate change a building green, embracing organizational purpose, and employing emerging technologies.

Click here to read this article on LinkedIn, where it was originally posted.