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Contractor 2030: What would you do with unlimited resources?

Construction News and Autodesk assembled a board-level panel, and gave it certain unlimited resources to role-play how tech will transform the industry by 2030. How will the landscape change? Damon Schünmann finds out. 

The board

  • Steffan Battle, national pre-construction director, Wates
  • Mark Cotton, CIO, Galliford Try
  • Paul Hamer, CEO, Sir Robert McAlpine
  • Madeleina Loughrey-Grant, legal director, Laing O’Rourke
  • Paul Timmins, project director, Amey (standing in for Nicola Hindle, MD – Consulting & Rail)
  • Peter Tosland, group commercial director, Murphy
  • Claudio Veritiero, COO, Kier
  • Matthew Wrighton, commercial director for the South East, Willmott Dixon
  • Tom Fitzpatrick, editor, CN (and ‘chairman’ of the board)

Also in attendance:

Matthew Keen, industry strategist EMEA, Autodesk | Joerg Winzenhoeller, senior director, AEC named accounts Europe and ANZ, Autodesk

Technology is set to reshape the construction sector over the next decade and those businesses that catch the winds of change will surely reap the benefits.

On the flip side, those that fail to keep up are at risk of losing their competitive edge.

To develop a sense of what main contractors must be doing to survive and thrive in this changing landscape, a ‘virtual board’ of business leaders, drawn from a number of firms, was brought together to envisage what contractors might look like in the future.

Convened by Construction News in association with Autodesk, the board – which included individuals from operational and commercial roles – first defined the main challenges facing traditional models of construction.

It then debated what firms – with the aid of technology – could do to overcome these. 

In particular, the board imagined a world in which contractors had unlimited access to four areas that are being shaped by technologies that promise tantalising advances: computing power, finance, skills and manufacturing.

Kier chief operating officer Claudio Veritiero was frank about the scale of the challenge facing tier ones when it came to accessing finance. 

“I was looking at a dozen peers’ [share prices in the listed sector], including some of the merchants, and the best-performing was -18 per cent,” he noted. “The worst-performing was [up to] -60 per cent. That’s a reflection of the fact that it’s a difficult sector to bankroll at the moment.”

Lending-landscape shift

Mr Veritiero said that the financial market was now tougher for a number of reasons, but underlined one major step-change.

“The environment is getting tighter and that’s coming from a whole host of perspectives. From the systemic view of the banks (including bonds, sureties, credit insurers), to a sector that has changed [since Carillion’s collapse].

“I’m not sure they [lenders] were reluctant before that. Ten days before Carillion’s profit warning [in July 2017], we extended our [borrowing] facilities. 

“So [the collapse] has fundamentally changed the landscape. You compare that with other sector challenges and it’s made it a more difficult space from a lending perspective.”

He was keen to point out that the future use of different finance mechanisms would likely require a sector-wide shift regarding profit margins.

“There’s a lot more talk with some clients of [using] project bank accounts, which changes the working-capital model of the industry,” he explained. 

“If you run the numbers, the construction industry needs a 5 per cent margin if you move it to a working-capital neutral position – not a 2 per cent margin. You need that change to work through if the market moves to a more working-capital neutral position – and certainly some of the technology we’re seeing potentially allows that.” 

According to Laing O’Rourke group legal and tax director Madeleina Loughrey-Grant, technology will disrupt elements of the industry beyond the most obvious ways; she has been looking at how artificial intelligence could yet “commoditise” the legal sector.

“It’s a challenge because AI isn’t developed enough yet to do contract reviews – it’s getting there, but not quite,” she said.

autodesk white paper future contractor 1

autodesk white paper future contractor 1

Matthew Keen (Autodesk), Steffan Battle (Wates)

“At the moment, all it [technology] can do is provide a summary. It needs to get better because my view is that law firms are going to look completely different in years to come.”

She said the problem lay with the way legal advice is provided, and pointed to the current system, which she claimed “doesn’t work”.

“The model is broken, clients don’t like it and advice is going to move into the tech space,” Ms Loughrey-Grant said.

“Future law firms are going to be heavily tech-based, and in-house teams are going to have to innovate. The technology is nearly there and we’re going to have to embrace it.”

Sir Robert McAlpine chief executive Paul Hamer made it clear that he was an advocate of change through technology, but added that companies needed a clear view of how their business models were likely to change.

“People are quickly jumping into technology acquisition, and we’re standing back and asking ‘where are we going?’ Are we going to go from contractor to constructor or to integrator? We need to figure out what differentiator underpins us and then put a technology roadmap in [place] that says I can now get from A to B and I know which bits I need, and that will define what my capital outlay looks like.”

Because this would entail fundamental changes, he underlined the importance of communicating the reasons behind any shift in strategy.

“[You must] explain the ‘why’ for a transformation journey – it’s about creating the context, teaching your people and letting them develop into it, and then changing your business operating model,” he continued. 

“Future law firms are going to be heavily tech-based, and in-house teams are going to have to innovate. The technology is nearly there and we’re going to have to embrace it.”

Madeleina Loughrey-Grant, Laing O’Rourke

“If you just carry on doing what you’re doing, you get minimal gain. But those big productivity shifts we want are [achieved] by completely changing your operating model.”

Amey project director Paul Timmins added his views on the issue of changing business models. “You need to remove ‘construction company’ as a title and redefine how your business operates,” he argued. “If you don’t embrace technology yourselves and innovate internally, someone else will do it for you and you will pay the price for that.

“You will be buying in the services, whether that’s partnering with individuals or waiting with somebody to provide you with a package. We need to decide whether we’re going to be early adopters or wait for everything to be developed first, and then catch up.” 

In marked contrast to any trepidation around the future of the domestic market, Autodesk senior director, AEC named accounts Europe and ANZ Joerg Winzenhoeller, offered his take as an ‘outsider’

“I think your industry looks better from the outside than you think. German construction engineers come from university and they want to go to the UK, Australia or the US – and it’s not because of the weather.

“In Germany it’s quite well known that there were several infrastructure projects like airports that went ‘south’ and a reform commission has been put in place to discuss with people from industry and universities.

“The example always used is the UK. They say: ‘Look how they did the Olympics in London that was finished [on time and to budget]’.”

Client relationships

The debate moved on to what it might mean to clients if main contractors could offer unlimited access to computing, finance, manufacturing and skills.

“It means you can sell them an output rather than an input,” Mr Veritiero said.

“That means, whether you’ve got to fill a pothole or resurface, you’ve got data to better predict traffic flows. That data, combined with [unlimited] computing power and an analytical capability, means we can take the hassle away from clients who want to be slimmer with [lower] overheads. […] It means we can deliver a more turnkey, sophisticated solution [to do that for them].”

Autodesk construction industry strategist EMEA, Matthew Keen, pointed to a model from outside of construction that illustrated these kinds of arrangement.

“There’s an example of this in that GE sells hours of thrust to the airline industry; it doesn’t sell jet engines anymore, and the other thing it provides to guarantee this is the airline has to use its engineering team. They’re selling the outcome which is ‘this many hours in the air’.

“Rolls Royce has done the same and [other] jet-engine providers [are now] going down this route.”

Mr Hamer provided an example of how this might work in the commercial construction sector: “If you follow Claudio’s train of thought, you’re going to end up with a model of assets being sold as a service. The financing piece goes full circle, where you need capital-intensive injections to get you through the [technologically driven] transformation. 

“You can then turn that into an industry that is so predictable that you can model its risks and outcomes so that people want to lend into that sector.”

He then extended the model to show how even the institutions providing the finance would benefit. “You would then be able to go along to a bank that wants its headquarters in London and say ‘OK, you finance it and then leave it with [me]’ – [you’d] create the asset and do predictive maintenance and turn it into a complete turnkey service.”

autodesk white paper future contractor 2

autodesk white paper future contractor 2

From L-R: Paul Timmins (Amey), Madeleina Loughrey-Grant (Laing O’Rourke) and Paul Hamer (Sir Robert McAlpine)

He finished by posing a question about what this might mean for the traditional commercial property developer and investment company: “What then happens to [organisations such as] Land Securities and British Land that are currently sitting in the middle of that sandwich?”

Wates national pre-construction director Steffan Battle identified another change that this would demand of contractors. “We will have to control design in a much more proactive way,” he said. “To realise that vision (of no external advisers to our clients), we’re [going to have to become] a one-stop shop, effectively. Assuming we’re still building something, it still needs to be designed.”

He suggested that this would remove a major issue with the way the industry is currently set up. “One of the biggest challenges for me is the fact that we’re expected to start our journey of building before the design is complete, which is kind of insane – you wouldn’t do that in any other world.

“So if we’re much more in control of that part of our offering, it’s just an essential evolution.”

This offered an opportunity to get around another sector-wise problem, according to Willmott Dixon commercial director for the South-east, Matthew Wrighton. “At the moment, we start again at the beginning of every job [because], as an industry, we’re horrendous at learning lessons,” he said.

“We do it in isolated areas, but we don’t collectively say ‘we’ve probably made a mistake there and we’re never going to do that again’.”

He added that until the industry was in a place where it could use more standardised designs – which the changing contractor operating models under discussion would offer – the sector was doomed to repeatedly start from scratchon projects.

Envisaging new models

Mr Veritiero said one big area set to change was risk management. “We take risk on, parcel it up and manage it,” he said. “All of those things [that technology is promising] put you in a far better place to manage that risk.”

Mr Battle could see businesses having the opportunity to go in two distinct directions. He said: “If you had access to those things [computing power, access to skills, finance and manufacturing], you could go one of two ways: a very thin business model where, because you’ve got unlimited finance, you just buy everything in when you need it in a gig-economy style; or you go completely the other way and employ everything from the designer through to the operatives on every trade. Assessing which way to turn would be interesting in this unlimited-resources environment.”

“One of the biggest challenges for me is the fact that we’re expected to start our journey of building before the design is complete, which is kind of insane – you wouldn’t do that in any other world”

Steffan Battle, Wates

The virtual board then tackled the question of whether part of a contractor’s fee could be reimbursed over time, against a building’s performance, with the contractor being involved in the operation of that building.

“At the moment, we hand over a building, shut the door and hope it performs as designed – we don’t really monitor it,” said Mr Wrighton. 

“For a customer, it would be a big sell [if we were responsible]. What we’re looking at is the contractor model of the future, and because we don’t [currently] do it, it doesn’t necessarily mean that we shouldn’t.

“I said earlier we’re terrible at learning. But if we’re part of how that building performs, and we take that learning [where something] might not be right [on that building] and feed it back into the process at the beginning, then we’re continually improving because we’ve got better data.”

Questionable insights

The issue of analysing data was a concern for Galliford Try chief information officer Mark Cotton.

“For me, the absolute nugget is getting insight into it,” he said. “We’ve got many systems with petabytes of data, which is providing absolutely no intelligence to us whatsoever. You can question whether there is any insight in it, but unless we push forward and mine that, we’ll never know.”

It was clear that the ‘board’ could see an opportunity as we head toward 2030. But for Mr Battle, that also boiled down to self-preservation: “The Farmer Report said it – modernise or die – so the opportunity is, you either do something now or you fall off the back if we wait for our customer base to change. We’ve got to grab it and change.”

Murphy Group commercial director Peter Tosland said it would require a bold step to move away from the traditional model and evolve.  “We’ve always been slow in that pre-construction and advisory area, and let the consultants take the lead,” he said. “If we can be braver in that place, then we’ve got a chance of setting up the procurement method and everything else.”

For Mr Hamer, it was a case of not wishing to be pigeonholed into accepted roles. “We shouldn’t say clients are here, we’re here and the supply chain is here,” he said.

“Our clients are also in a competitive market for their products. [So developers might say]: ‘what will my office product look like in 15 years’ time?’ They’re [also] going through this whole machination of ‘what will my environment look like’ [and asking themselves] ‘who am I trying to appeal to, what will my buildings be used for and how do I design them in a way in which their personalities can be changed very quickly?’

“Our clients need us as much as we need them, as we’re some of the enablers. We shouldn’t just think they’ll decide.”

autodesk white paper future contractor 3

autodesk white paper future contractor 3

From L to R: Mark Cotton (Galliford Try), Claudio Veritiero (Kier), Matthew Wrighton (Willmott Dixon), Joerg Winzenhoeller (Autodesk)  

Mr Keen felt that the industry was looking in the wrong direction when it came to external threats to the sector.

He said: “Everybody is asking the question ‘when is China going to enter the UK?’ But I think it’s a pretty complex place to come and work. For me, it’s more a question of who is going to come from the tech or manufacturing industry that does something disruptive.

“We’ve seen Amazon enter the construction market, and I’m interested to see what happens from the client perspective when some of those [types of companies] start asking different questions about how they partner, or do something differently, with the contracting market to offer something different to their customers.”

Mr Wrighton agreed. He said: “Do we wait for the disruptors to turn up or, as a construction board here, do we get ahead of the curve and decide what our offering is going to be? 

“Historically, we have a little tickle around the edge and just react when [something] happens. Do we become the offsites and assembly plants of the future; do we facilitate a process; do we have the in-house design expertise; do we get things through planning and then Google turns up and plonks a building on land [we have made ready]?”

On the issue of not waiting for other players to act, there was general agreement. Mr Wrighton concluded the debate on that point: “How do we get ahead of the curve? Because these [tech-led businesses] will make things happen.

“They make a living out of doing that.”

Readers' comments (2)

  • An interesting and forward thinking read. However with only 1 woman represented on the "board", what happened CN? You who spout about more woman in the industry, more woman at the top level - surely you would hope that more woman will be active in the industry by 2030, why did you not choose a broader selection of top personnel?

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  • Apart from the fact there is only one woman, there are no Specialist Contractors (CN - please don't say Murphy are - because with a turnover of £300million and often working as Tier 1's they aren't really are they?)

    A load of irrelevant clap trap, and a meeting that is just a waste of a day!

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