Delivering innovation in construction

That the construction industry lags behind other industries on innovation and digital transformation is well known. A lack of investment in research and development, slow adoption of new technologies, low productivity and inappropriate risk allocation in contracts are just a handful of the common barriers to change, but more fundamentally there remains a lack of incentive for the parties that can make the biggest impact on a project to take action. Contractors, consultants and suppliers are often bound by lowest cost solutions, delivered to meet paper based, transactional performance criteria. In such cases contractors work to fulfil the contract, not to make better quality projects.

However digitisation, transformation and innovation are underway in the industry. You just need to know where to look. From the potential for Universal Building Robots, to 3D printed bridges and Building Information Modelling (BIM) throughout the construction and operational life cycles (not just in design), change is coming. Aware of this Middle East Economic Digest (MEED) and Mashreq Bank asked me to write about some of the world’s leading projects for a report which was shared at the MEED Quality in Construction Awards on 2nd May and will be online soon.

Before diving into the six case studies the report mentions research by McKinsey Global Institute which describes construction as being “ripe for disruption”. New technologies, it says, have the potential to deliver 60 per cent efficiency gains equating to $1.6 trillion in potential savings every year. At the top of the list for investment is digital technology with the research demonstrating that construction ranks lowest of 21 other sectors in terms of digitisation and has had only a 6 per cent growth in productivity since the 1940s compared to 1,512 per cent growth in productivity in agriculture and 780 per cent growth in manufacturing. But the experience of these other industries shows that there comes a point, a tipping point, where digital capability becomes a requirement for survival.

An example of this included in the MEED report is Siemens Building Technologies new headquarters in Switzerland. The firm did not want to perpetuate existing construction processes where contractors deliver a building according to a contract with the data developed during the construction period simply evaporating. Instead they wanted to capture this throughout design and construction and create a digital repository of data, a digital twin, that would enable the new facility to be cost effectively managed for the rest of its operational life. This meant using building information modelling (BIM) to its fullest extent, incorporating not only the digital 3D design model, but using it for construction work packages and linking time (4D) and cost (5D) and creating a virtual twin of the final building. To achieve this Siemens Real Estate went out to the market and demanded full BIM enablement. Not all major construction companies were able to comply. In Switzerland’s building sector a tipping point had been reached and Strabag, an Austrian contractor that has invested in BIM for a decade, was ready.

Siemens Real Estate undertook this transition accepting that it would need to spend more in the early stages of this project. Innovation does not come for free. But this investment would allow the company to manage its facilities more efficiently in future, minimising the lifecycle cost. Making the crucial link between the cost of new infrastructure and its operational expenditure (opex) is a vital step along the path of transformation. Clients may need to spend more, for infrastructure to cost less.

At the same time, incentivising contractors to deliver solutions that will result in better, more innovative, and more efficient infrastructure is also important. The Siemens project was carried out using a design and build contract, which gave Strabag more the freedom to help its client create the most cost effective long-term solution. Use of design and build also gives the contractor incentive to value engineer the scheme. As explained in MEED’s Mashreq Driving Better Value in Construction Report, this step sees contractors look for design alternatives which can maintain function and performance at lower cost. But under traditional lowest price contract arrangements there is no incentive for contractors to do this.

The good news for construction  is that the benefits of digital construction have finally been recognised, a tipping point is being reached, and the industry is investing for its own benefit. To date contractors have told MEED that low margins mean that they can’t afford to invest in digitisation. Now they report that they cannot afford not to.

Other case studies included in the report include:

  • The world’s first 3D printed bridge
  • Universal construction robots
  • Drones in monitoring and inspection
  • Offsite innovation on the Hong Kong, Zhuhai, Macau bridge
  • Digital construction innovation on a new bridge between Russia and China
  • Model based design delivery on London’s Thames Tideway

I will include a link as soon as this is live but here is a sneaky peak of the cover…..

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PPP: learning from the past

 

It is not difficult to find examples of failed public-private partnerships (PPP). From Mexico to France, and from Australia to the US there are many many examples of how PPP has failed to deliver the benefits intended. In France for example the trend to use PPP simply to keep expenditure off the public balance sheet has led to some disastrous projects and highway projects in the Americas have become roads to bankruptcy.

However it is not always a disaster and it doesn’t have to be.  Involving private finance in infrastructure from the very early days can bring a number of benefits and ensure that public projects are delivered in a timely and effective way. Sometimes it is the only way that projects can be delivered at all. But it is crucial that private firms are held to account throughout the life of the project with contracts that demand high performance levels for the full term, and like London’s forthcoming Thames Tideway sewer tunnel, that projects are structured to ensure that the cost of capital is as low as possible. Here the consortia tendered the cost of capital at 2.49% – significantly lower than the 6-8% that might typically be required for private returns. One of the biggest criticisms of PPP is that private money costs more than public money. It doesn’t have to.

So I was pleased to be asked by The Guardian (article here) to look at examples where PPP has worked, or is working, for companies and the public sector. Governments around the world, including US President Elect Donald Trump are looking to private finance to fund much needed infrastructure. Highlighting the ways in which this has been successfully achieved might help avoid some of the contractual catastrophes of the past. Bankers will tell you that PPP works best in sectors with clear revenue streams such as energy and aviation. For roads and rail it is much more difficult to make this work.

There are exceptions of course and A contract for 65 high capacity metro trains signed in November is the largest single order of new trains in the history of the Australian state of Victoria. It is also the state’s first ever public private partnership (PPP) for manufacturing. Unlike traditional contracts where trains are purchased as a commodity manufactured in the preferred location of the supplier, this partnership with the Evolution Rail consortium will ensure that sixty percent of manufacturing will happen locally creating 1,100 much needed jobs.

Job creation is key. Like the US, Australia has battled with the decline in local production industries particularly in the automotive sector. Ford closed its plant in October 2016 and Toyota and Holden will follow in 2017 leading to thousands of job losses. Not only does the new AUS $2bn PPP demand local manufacturing, further partnerships with Toyota and other local organisations will ensure that staff from the automotive sector are transitioned into the growing rail industry.

This and many other projects are covered in The Guardian article. Thanks to all that took the time to discuss the topic: ARCADIS, Pavegen, Mott MacDonald, Washington DDoT, Skanska Infrastructure Development, La Guardia Gateway Partners, Victoria Ministry for Public Transport and Major Projects and the IFC.

 

 

 

 

 

Exploring energy issues

Having storage in networks is a foregone conclusion in most industries. In the water sector reservoirs hold potable drinking water supplies and massive underground pipes act as additional storage for sewage. Gas is converted to liquid (LNG) and held in tanks for transportation or storage. But in the electricity sector storage remains elusive. And yet the need for this is becoming even more crucial as the UK seeks to decentralise and de-carbonise energy provision. How wonderful it would be if homeowners could store the energy generated by their solar panels, or farmers could capture the energy from their wind turbines for later use.

The good news is that this could happen sooner than we think. Two recent developments have thrust battery storage into a 12 month boom period. Before September 2015 Distribution Network Operators (DNOs) who bring electricity from the national transmission network into homes and businesses, had zero obligations from third parties on grid-scale storage. But today there are around 20GW of obligations.

Driving this boom is Ofgem’s £500m Low-Carbon Networks Fund and National Grid’s Enhanced Frequency Response competition. Since becoming available in 2010 the Ofgem finance has led to massive investments in new storage technology such as the UK Power Networks Leighton Buzzard £17.2m Smarter Network Storage Project. The primary aim of the 10MWh facility is to allow deferral of the need to reinforce the network, so instead of extending a substation, the battery provides peak storage at the times of year where load exceeds the local constraint.

And in September 2015 National Grid launched the UK’s first ever competition to provide network storage that would respond within 1 second. The organisation received 37 tenders containing 64 proposed solutions and 61 of these were batteries. This is expected to result in eight new battery storage solutions being built in the UK.

At the same time the cost of renewable energy generation is falling significantly with onshore wind and solar power having the lowest capital costs of all technologies, and figures from Scottish Energy showing that offshore wind costs have fallen by a third over the past five years from £136MWh to £100MWh. The firm has launched a pilot “smart battery solar power home” which can store excess solar energy in a battery.

Yet despite the incredible technical advances being made and strategy levers being implemented there remains a need for clearer long term energy policy if major new projects are to move forwards. Investors are viewing the market with caution and the UK’s position in the single energy market remains a negotiating point with the EU for Brexit negotiations.

All of this and more was covered at the Major Projects Association event “UK Energy to 2025 – getting major projects moving” which I attended as a reporter.  A summary of the day produced for the MPA can be read here.

 

 

 

 

Tunnel Vision

Over the past couple of weeks I have been looking into the research that is underway at UK institutions related to tunnelling. There was more than I expected. My 2000 word article is currently 3124 words. But I can’t bear to cut anything out. Should I omit some of the amazing work underway at Cambridge University which is using increasingly sophisticated sensors to give real time data that can be compared with the centrifugal and numerical model data? Or should I edit back the report on work at Edinburgh University where explosive spalling of concrete during fire and the influence of ventilation are major research topics?

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Edinburgh University’s testing rig for studying the explosive spalling behaviour of concrete during a fire

I could miss out some of the incredible work being done at the University of Leeds Institute of Resilient Infrastructure where world leading research is being carried out into the cumulative effect of seismic loading on tunnels – something that design codes don’t currently cover. They are going to use sensors on two live tunnels in Chile where there there is an astonishing amount of earthquakes every month. Have a guess how many (the article will tell you – unless I have to cut that part)!

With the raft of tunnels planned in cities around the world the research at Imperial College London into the effect of tunnelling on existing tunnels, surely must be included. More specifically the university has carried out an incredibly detailed study into the impact on cast iron tunnels. Similarly Nottingham University is focused on the interaction between tunnels and buildings and its research is giving more effective tools for evaluating the effects of tunnelling on piled structures. City University too is focused on tunnel/structure interaction as well as undertaking research supported by the Pipe Jacking Association.  A current research project looks at the effect of tunnel excavation on escalator tunnels. Another focuses on ground support at the tunnel face and the effects on stability and surface settlement.

New technology and construction methods too have to be included. Dr Alan Bloodworth, who this week took over as the head of the UK’s only dedicated tunnelling and underground space MSc at Warwick University, has been studying sprayed waterproof lining systems, examining whether composite action occurs between the primary and secondary sprayed concrete linings due to the bonded waterproof layer (it does). How can I cut that?

And what about the future? Universities have research plans a plenty. I simply must include those or how will people know that Cambridge wants to create virtual tunnelling models and research the redistribution of loads around cross passages; that Edinburgh is working on new design strategies for mitigating concrete spalling in tunnels during fire or that Leeds University will create a virtual platform where the public can view the earthquake response of tunnels in Chile?

As I said there was more than I expected. There is nothing boring about tunnels!

 

 

 

 

 

Election reflection

It seems that the entire nation was shocked by the Conservative’s majority win in the General Election but many in the infrastructure sector were hoping for this outcome. Analysis conducted by Infrastructure Intelligence before 7th May showed that the engineering sector was voting blue.

Infrastructure business leaders said Tories were best for their business

At Infrastructure Intelligence we had a feeling that many of our readers were supporting the Conservatives. Anecdotally they had told us that they wanted to retain infrastructure investment momentum and preserve stability in the economy. But when the results of our poll, conducted with the help of global software firm Deltek, came in we were surprised at how decisive the results were. Overall 120 CEOs, directors and managers, from consultants, contractors, suppliers and clients gave us their views with 67% reporting Conservatives best for infrastructure and 49% planning to vote for them.

“I am voting conservative because all the other options will influence economic uncertainty, this will have an effect on interest rates and this will influence opportunities and investment,” said the CEO of a contracting firm. “We have built momentum behind the National Infrastructure Plan and invested accordingly,” said another senior consultant. “Rumours that infrastructure spend could be subject to reviews, emergency budgets and curtailment if we have a change of government are worrying as growth and investment will inevitably stall.”

Post-election threats

The Conservative/Lib Dem coalition government had been good for infrastructure and their tenure seemed to bring about a turning point in political thinking with public acknowledgement that infrastructure is good for the economy – which it is. Construction and related sectors were devastated by the recession and financial crisis yet they held their breath, dug deep, fought on, and are finally exhaling as measures such as the very welcome NIP published in December 2013 and major projects such as the Thames Tideway and Crossrail give certainty. But there is no doubt in my mind that much of the Blue support was a result of seeking to maintain the status quo and would have been Red, Yellow or Green support for whoever was in power during the recovery that had overseen their return to growth.

Looking ahead though the new government has some important decisions to make on critical issues such as aviation capacity, energy generation (UK headed for tightest reserve margin in years this winter) and rail investment (HS2, HS3, Crossrail 2). For now the sector has put its faith in David Cameron’s government and Cameron must make the decisions that allow the industry to deliver the infrastructure that the UK needs to support economic growth.