Report Addresses Construction Industry Uncertainty and Expectations

While the construction industry is often associated with cost and schedule problems, little data has been compiled about typical levels of uncertainty, reasons, and remedies. McGraw Hill Construction has released its new SmartMarket Report, Managing Uncertainty and Expectations in Building Design and Construction, that addresses this issue by identifying:

  • Key drivers of uncertainty that create unanticipated quality, cost and schedule problems, and how they can be mitigated
  • Perspectives and expectations of owners, architects, and contractors for their own and each other’s levels of performance on projects
  • The most impactful aspects of performance and how they should be measured, so all parties can align around reasonable expectations and improve outcomes throughout the industry

The AIA Large Firm Roundtable, an organization of the largest North American architectural firms, was a founding partner in this study in an effort to improve communication and performance in the industry. “We have long recognized the lack of real data about what levels of uncertainty to expect and how to manage it well,” says Bryce Pearsall, chairman of DLR Group and chair of the AIA Large Firm Roundtable. “We have seen the work of even top-performing project teams end with conflict and strained client relationships. Increasing understanding about the challenges of complex projects is the first step toward better outcomes.”

The study encompasses input from nearly 3,000 U.S. owners, architects and contractors, as well as commentary from an advisory panel of seven leading owners representing different building types. Key findings include:

  • Owner-driven issues – such as unclear project requirements/lack of direction, accelerated schedules, and program/design changes – cause the greatest degree of project uncertainty.
  • Most owners are willing to accept a reasonable amount of imperfection in design documents, and on average expect 3-5% added construction costs as a result.
  • Increasing design/construction integration and structured communication between project team members will have the greatest impact on reducing uncertainty and improving project outcomes, but needs to be managed to maintain individual responsibilities.

Commenting on the impact of this research, Steve Jones, senior director at McGraw Hill Construction and a principal author of the report, believes it will help to “shift the conversation away from blame and more towards a proactive and collaborative approach. While uncertainty will always exist, the findings clearly point towards better ways to avoid its negative impacts on building projects, by openly acknowledging its causes and working together to reduce their incidence and mitigate their effect. Having facts about the drivers behind problems and understanding each other’s perspectives on performance are two critical elements of a formula for greater success.”

The Managing Uncertainty and Expectations in Building Design and Construction SmartMarket Report was produced by McGraw Hill Construction in partnership with the AIA Large Firm Roundtable. The American Institute of Architects, Autodesk and the Design-Build Institute of America were Premier Industry Partners for this report, and additional Industry Partners include the Associated General Contractors of America, Graphisoft, and the Lean Construction Institute. Download the full report.

Dodge Momentum Index Slipped in February

The Dodge Momentum Index slipped 2.6 percent in February compared to the previous month, according to McGraw Hill Construction, a division of McGraw Hill Financial. The Momentum Index is a monthly measure of the first (or initial) report for nonresidential building projects in planning, which have been shown to lead construction spending for nonresidential buildings by a full year. February’s decline brought the Momentum Index to 116.5 (2000=100), down from January’s revised 119.7 but still nearly 20 percent above the year-earlier (February 2012) reading of 97.4. The latest month’s retreat is expected to be a brief pause in a broader upward trend. Weak employment growth in December and January raised concern that the U.S. economic expansion was losing momentum, dampening the planning environment for commercial and institutional buildings. The moderate improvement in the February jobs report should help alleviate some of that concern going forward.

The February Momentum Index saw contraction in both its main components. New plans for commercial buildings, usually the more cyclically sensitive sector, dropped 1.7 percent while institutional building fell back by 3.7 percent. On the commercial side, declines were reported across all of the major building types. Even so, there were a number of new commercial projects that continued to make their way into the planning pipeline. February’s projects included the $160 million Three Alliance Office Building in Atlanta; a $130 million expansion to the Burns & McDonnell Headquarters in Kansas City, Mo.; and an $80 million distribution center for ConAgra Foods in Frankfurt, Ind. The institutional component, meanwhile, was weighed down by a large downturn in education building plans. The education decline, however, was partially offset by an increase for new health-care projects, including the $50 million Presbyterian Rust Cancer Center in Rio Rancho, N.M., and the $50 million Jewish Home of Rochester in Rochester, N.Y.

Dodge Momentum Index Rose 3 Percent in January 2014

The Dodge Momentum Index rose 3 percent in January compared to the previous month, according to McGraw Hill Construction, a division of McGraw Hill Financial. The Momentum Index is a monthly measure of the first (or initial) report for nonresidential building projects in planning, which have been shown to lead construction spending for nonresidential buildings by a full year. January’s relatively strong gain brought the Momentum Index to 121.1 (2000=100), compared to a revised 117.6 in December 2013. Save for two minor dips in June and October 2013, the Momentum Index has been on a steady climb for more than a year. As the environment for new nonresidential development continues to improve, the planning pipeline of nonresidential building projects has grown more active.