Two years ago a team of construction industry executives, civil engineers and academics made a little-publicized pilgrimage to Japan to learn more about the Japanese construction industry and to better understand how U.S. companies stacked up.
It was an eye-popping experience-both because of what they saw, and what they learned.
For example, Harvey M. Bernstein, president of the Civil Engineering Research Foundation, recalls ”a computer-controlled, fully automated construction system used in high-rise building construction. It was fully integrated with robotics and a system of alternating hydraulic lifts so that when it finished one floor it lifted itself to the next floor.
”It was like watching a factory build a building.”
That was just one outward sign of an industry that was pushing leading-edge technology into practice at a rate unheard of in the U.S., and using that technology as a major marketing tool.
At the time, the Japanese construction industry was rapidly outpacing its American competitors in research and development. A single Japanese construction company, Shimizu Corp., in one year had invested more ($90 million) in research and development than the entire U.S. industry (about $54 million).
Two years later, what`s most disconcerting for many on the team is their sobering opinion that the U.S. construction industry in 1992 is a lot like the U.S. auto industry in 1972-complacent, overconfident and vulnerable.
In 1972 the U.S. auto industry heard the distant footsteps of Japanese and European competitors who were using new technologies and manufacturing processes. It chose largely to ignore them, and today Japanese automakers alone control 30 percent of the U.S. market.
Today, ”I don`t think the American construction industry understands fully that the footsteps are already marching up their backs . . . that their competitors are already here . . . armed with better technology,” said Neil M. Hawkins, head of the University of Illinois Department of Civil Engineering and a member of the team sent to Japan by the Civil Engineering Research Foundation.
The Washington, D.C.-based foundation was established in 1989 by the American Society of Civil Engineers after its members became alarmed at the American construction industry`s apparent ignorance of the speed and direction global competitors were moving.
There are 1.2 million construction companies in the United States, with gross revenues of more than $500 billion, according to the foundation. They employ about 10 percent of the U.S. labor force and account for about 10 percent of the gross domestic product-a major ingredient in the American economic stew.
But critics say the global and domestic competitiveness of the U.S. construction industry is being undermined by a combination of factors, including an unwillingness to change, the inhibiting effect of the web of local codes and regulations and unsettled issues of liability and
accountability.
In Japan, 25 of the 30 largest construction companies have their own research and development laboratories. In the U.S., not one construction company has a research and development lab or an ”identifiable R & D budget,” said the Civil Engineering Research Foundation report.
”We have an R & D organization and I manage it, but we don`t have a laboratory with scientists sitting around doing research the way the Japanese do,” said Larry Papay, vice president and manager for research and development at Bechtel Group Inc. ”The top five Japanese construction companies are spending maybe $500 million a year on R & D. The bottom line is they are spending money on R & D and we aren`t. So you have to wonder what will happen to our industry.”
Or what is happening right now as America begins to rebuild its crumbling infrastructure following a recent Federal Highway Administration report that 41 percent of the nation`s 575,000 bridges are ”structurally deficient” or
”obsolete” and that 64 percent of the nation`s highways need to be resurfaced.
”With the emphasis on infrastructure upgrading that is coming in this country, it will require new technologies, and we just aren`t there . . . we don`t have it,” said Hawkins. ”The Japanese, using leading-edge technology, can build structures twice as fast as the American industry can.”
That is an especially frustrating admission for people like Hawkins, whose department of civil engineering is regarded in the industry as one of the best in the United States, if not the world.
The problem, says Hawkins, is the American construction industry has largely ignored technology developed at facilities like the University of Illinois and Stanford University`s Center for Integrated Facilities Engineering, while the Japanese are lining up to fund new research and reap the benefits of technology transfer.
”We have hardly any ties to our own industry,” said Hawkins. ”But we often have two to three visiting scholars from Japanese construction companies here, looking around, picking up new technologies and taking it back to Japan. U.S. construction companies never send people to us.”
Bill Michalerya agrees. As manager of industry liaison and technology for Lehigh University`s Advanced Technology for Large Structural Systems center, one of 19 engineering research centers funded by the National Science Foundation, he says the U.S. industry is hardly beating down the doors of the center.
Indeed, since it opened in 1989 in Bethlehem, Pa., the Lehigh center, which boasts the world`s largest fixed reaction wall for testing large-scale structures, has attracted more Japanese interest-especially in the areas of automated construction techniques-than U.S. industry interest.
The reason, says Michalerya, is the nature of the issue. It is not perceived as a crisis. Instead it is more a matter of benign attrition, like a colony of ants that slowly and imperceptibly erodes the foundation of a structure until it collapses.
”It`s like going to the moon,” he said. ”If it`s identified by the government as a strategic priority, we can be competitive with the rest of the world. If it is not, then. . . .”
The problem, those in the industry insist, is not a lack of will but a lack of money.
”This is a business of narrow margins,” said Bert Lewitt, president of Morely Construction Co. in Santa Monica, Calif., which last year rang up $100 million in high-rise construction in the Los Angeles area but spent barely $5,000 on research and development. ”Making money in this industry is like being in the top five in tennis: You have to be constantly on top of your game or you`ll fall.”
Being on top of the game in the American industry often means low-balling your competition to the point that the difference between a profit and loss is infinitesimal on the balance sheet, Lewitt says.
In its report, the Civil Engineering Research Foundation was sensitive to that issue, pointing out that in Japan pre-bidding conferences are routinely held in which subcontractors are awarded jobs based on their experience with the prime contractor, rather than on how low their bids are. That allows Japanese subcontractors to channel more money into research and development, rather than into absorbing losses after low-balling competitors.
Among the foundation`s recommendations was one that called on the construction industry to press Congress to ”formally acknowledge the need for federal leadership in conducting, funding and coordinating general construction-related R & D, just as it has in agriculture, medicine and transportation.”
It also suggested a system of tax-based research and development credits and incentives as well as requirements for research and development investments as a part of a pre-bid qualification process for certain government construction jobs. Those jobs, the report suggested, should be singled out for ”designated contractors,” thus providing some guarantees and special consideration for companies willing to make research and development investment in new technologies and processes. But lack of money isn`t the only issue.
The foundation report called for a national system for certifying innovative construction methods and technologies that would ”minimize legal risks” and allow participants to ”share accountability.” Because of the intensely litigious nature of American society, the report said, few contractors will dare use innovative, independently developed technology because of the legal risks associated with it under the current system of contractor liability.
Another problem, adds Michalerya, is that when a company does develop technology, the openness of the construction site means you can`t hide it the way a manufacturer can conceal proprietary technology behind factory walls.
”Your competitors can simply walk away with it,” said Michalerya.
”That`s why partnerships in the industry are critical.”
There needs to be more joint testing and development of new ideas, as well as risk-sharing, if the American construction industry hopes to keep up with global competitors, the foundation`s report continued. That could be accomplished through cooperative agreements with federal agencies, using existing federal laboratories and university-based research institutes.
The creation of industry consortia prepared to use technology produced in this manner would go a long way in offsetting the competitive advantages of Japanese and European firms-advantages that will become more pronounced over the next several years.
”The problem is that the American industry is so fragmented and fractured,” said Lewitt. ”It consists of thousands and thousands of small companies who are very local in their mentality. The concept of working as part of a global consortium is so alien it`s hardly ever discussed.
”Yet, I know from personal experience that the global market is very important to the industry and to the American economy in general,” he said.
”If you have a consortium of Japanese construction companies, each with state-of-the-art technology and reliable financing, and it is bidding on the Hong Kong airport, for example . . . well individual American companies just can`t compete with that.”
The more immediate issue, however, is not the Hong Kong airport, but the high-rise in Philadelphia, the stadium in Milwaukee, the suspension bridge over the Mississippi River Delta and perhaps the new subdivision in San Diego. ”We have to wake up our boys . . . make them understand what is going on . . . get information to the guy who builds 10 and 20 homes a year,” said Joseph Chudnow, vice president of Chudnow Construction Corp., with offices in 15 cities in Wisconsin, Florida and Minnesota.
”There hasn`t been enough communication about the new technologies that are available,” said Chudnow, who is past chairman of the construction and codes committee of the National Association of Home Builders. As a result, a lot of our builders don`t take advantage of it or are very slow at taking advantage of it. They are fixed in their ways.”
That`s what worries those charged with keeping the industry competitive.
”Our industry is vulnerable . . . there is a false sense of security that what happened to other American industries, like the automobile industry or the steel industry or the electronics industry, can`t happen to the construction industry,” said Liza Bowles, president of the National Research Center, a wholly owned subsidiary of the National Association of Home Builders in Upper Marlboro, Md.
”I think a lot of people believe that because the industry is so fragmented, with so many local codes and standards, that nobody can come in from the outside and hurt them,” said Bowles.
Henry Michel, chairman of New York engineering firm Parsons Brinckerhoff Inc., is convinced much of the industry hasn`t progressed beyond 1940 in its thinking or application of technology.
”The construction industry in this country is living day-to-day,” said Michel, who heads a special committee of the Construction Industry Presidents Forum charged with charting a course into the 21st Century. ”It has never looked at the future . . . never looked abroad to see what it could learn. The fact is in Japan and Europe they are doing a lot of things better than we are. We should be over there learning from them. Instead, many are pooh-poohing international competitors.”
The industry, Liza Bowles adds, is not prepared for global competition because it isn`t active enough in developing new technologies and improving quality.
”People tell me that they build quality, but they don`t understand that it is a process change,” she said. ”It isn`t just looking at the end product, but at the whole process of technology and how it is applied to construction.”
Unlike home building after World War II, when Joseph Chudnow entered the business, new processes are coming into play such as factory-produced components, walls, panels and other forms of fabrication, Bowles said.
”The big issue for the American construction industry may not even be that Japanese and European competitors are coming into the U.S. market to build, but the components and processes they have developed that will ultimately make much of our industry obsolete,” she said.
”We`re holding our own right now,” said Bernstein, who is readying another industry pilgrimage, this time to six European countries. ”But it isn`t going to last very long. Technologies being developed in Japan and Europe will change things. Some of the technologies are not cost-effective right now, but they are investing in the future. In America, R & D is not one of the things high on the agenda of construction companies.
”The answer is to find ways of uniting our fragmented industry . . . to bring it together in more consortia, more cooperative research between the academic community, the private sector and government,” Bernstein said.
