Author Note
Jeffrey C Kadlowec, Architect
ART-IS-ZEN® architecture & engineering
1101 E Tropicana Ave, Box 2125
Las Vegas, NV 89119-6629

Abstract

Controlling costs by utilizing various project delivery methods will increase productivity and enhance performance. This has become of greater importance due to the current shortage of skilled tradespersons and inflation of material prices. Technologies from a variety of market sectors are being integrated into the construction industry to improve efficiency and reduce waste. These added benefits align with sustainable development goals focused on quality of life and reducing environmental impact. Various tools from construction estimating and financial analysis provide a better understanding of the scope and quality constraints imposed by cost and schedule demands. Focusing on a collaborative design and build processes will increase the overall value of construction projects.

Keywords:  Construction Estimating, Delivery Methods, Labor Shortage, Sustainability

1. Introduction

During the past decade, collaborative project delivery models (CPDMs) including project partnering (PP), project alliancing (PA), integrated project delivery (IPD) and lean project delivery (LPD) were developed to improve project performance with greater predictability [Nwajei 2022]. The common goal of these contracts is to increase value to the owner by reducing waste and maximizing efficiency. Labor shortages and inflation are compounding the problems experienced from rapid growth in urban centers. Emerging technologies offer some potential solutions while sustainable development goals focus efforts towards improving living standards around the world.

2. Delivery Methods

Understanding of project delivery method (PDM) is essential in cost estimating for it will affect construction performance and impact overall success. Selection of the appropriate construction contract will define roles, responsibilities and relationships of stakeholders, aiding in decision-making as risk and uncertainty increase with the size, scope and complexity of a project. Design-Bid-Build (DBB), Construction Manager at Risk (CMAR) and Design-Build (DB) are the three primary project delivery methods [Zuber 2018]. The latter two emerged as alternatives to DBB, allowing for more coordination between team members, take advantage of construction innovation, improve cost and schedule performance, and reduce claims and conflicts.

PDM (see Fig 1) is defined as a comprehensive process for the design and construction of a scope of work for a building or facility through a sequence of project phases [Zuber 2018]. DBB is considered the traditional method with project phases separated in linear manner. CMAR focuses on schedule and price through a fixed lump sum or guaranteed maximum price. DB integrates the designers and contractors into a single entity through joint venture (JV). This allows for earlier involvement of both parties and encourages team collaboration to address constructability, budgeting and financing.

Figure 1. Project Delivery Methods [Zuber 2018]

Most construction claims and disputes are caused by poor communication, making selection of suitable PDM vital to the success of a project. This critical decision should occur at the initiation of the project and certainly before final design. Design-manufacture-construct (DMC) is a novel technique in modular prefabrication currently suitable for freestanding-emergency-department (FSED) buildings [Peng 2022]. Public-private partnerships (PPP) and build-operate-transfer (BOT) have gained recent attention due to shortages in required capital necessary to fund projects [Mahdi 2024]. Guaranteed maximum price (GMP) contracts with shared risks and rewards has been found to be the preferred method for achieving sustainable goals over DDB, DBB and engineering, procurement, and construction (EPC). This leads to the conclusion that a JV agreement and CMAR contract utilizing integrated project delivery (IPD) principles will provide the best project outcome for all parties.

Risk management plays a crucial role throughout the project lifecycle for identifying, assessing and monitoring risks (see Fig 2). Quantitative and qualitative analysis is a systematic approach to decision-making by stakeholders at different stages. Project managers can prevent dangerous circumstances, mitigate potential risks, and eliminate damage or waste by reviewing and understanding uncertainty [Mahdi 2024]. Monitoring these threats will reduce overall costs by removing hazardous conditions, while providing the means to manage disastrous events and avoid catastrophic failures.

Figure 2: Risk Management Process [Mahdi 2024]

3. Construction Costs

Recent challenges faced by the construction industry have led to decreased productivity and substantial cost overruns. Qualitative analysis should be utilized to determine the most appropriate delivery method to implement in project planning. Streamlining of the entire process can be accomplished by thorough review of key performance indicators (KPIs). These include information about the client, users, project size, schedule, cost, and contract divided into categories such as milestones, targets, actions and deliverables [Nilssen 2023]. This data compiled into a model maturity index (MMI) is an effective way of identifying the critical areas to reduce waste, control design and improve quality.

Accurate cost estimating of construction remains challenging to project stakeholders. Multiple studies have been completed, hypotheses and arguments made about their precision, and various tools and methods developed to aid in cost estimation [Yazıcıoğlu 2020]. In a rapidly changing world due to technological advancements and sociopolitical conditions, construction businesses must be focused as part of the larger industry and understand the microeconomic drivers and macroeconomic indicators surrounding them. To become competitive and remain successful, they must develop efficient solutions, maintain reliable systems and update cost data.

Inflation rates cause cost overruns in construction by increasing the price of materials, labor and equipment. Cost overruns are estimated at 21% to 55% [Musarat 2024] which should be factored into the project budget during initial planning. Negligent handling of associated risks and the additional capital often required to complete projects can lead to project failure. Understanding of business, economics, and finance along with forecasting by means of time series analysis provides a model of price fluctuations and budget deviations. Utilizing artificial intelligence (AI) tools can better predict costs. Maintaining a large cash reserve by the owner or contingency fund through a lending agency will address this uncertainty. Designers and builders would benefit from similar financial practices.

For owners to avoid increased project costs, contractors must increase productivity leading to safety issues and worker burnout, accept reduced profit margins which sacrifices growth and sustainability, or comprise quality which damages reputation and decreases their market value. Exponential smoothing (ES) is effective forecasting tool utilizing moving average (MA) of an economic time series. The autoregressive integrated moving average (ARIMA) model with the incorporation of advanced machine learning algorithms has gained popularity with remarkable performance to accurately predict future values [Musarat 2024]. Inflation rates are not incorporated into most project budgets. Practical application of economic and financial models will reduce construction contingency costs and the risk of overruns due to inflation.

4. Labor Shortage

New developments in construction are currently constrained by a shortage of skilled labor. Technological progress remains a key factor towards sustainable growth. Promoting construction labor professionalization is an effective means to resolve this issue [Chen 2023]. Transforming unskilled laborers into skilled workers requires training. Virtual reality combined with building information modeling (BIM) allows for navigation of construction sites and inspection of hazards, though added cost to stakeholders and conflicting interests. This complex activity can be achieved through the collaborative efforts of government, enterprises and associations.

The majority of workers are employed by general contractors through subcontractors to complete construction operations. Contingent laborers are temporary, while standard workers maintain ongoing employment receiving greater investment of human resources by a firm. Vocational education and training (VET) is a skills-based program to prepare people for a variety of specific occupations. It provides workers with technical knowledge necessary to compete in a changing labor market [Chen 2023]. Employing contingent laborers provides adjustment of staffing, reduced fixed costs and avoids turnover. A standard workforce offers improved quality, eases turnover, and alleviates skill shortages, though at an added cost, risk of losing workers, and uncertainty in future projects.

The construction industry in the United States must recruit hundreds of thousands of skilled workers and professionals each year to meet growing demands for built environment. In 2021, the Associated Builders and Contractors Organization estimated that 430,000 jobs needed to be filled in addition to the normal hires, increasing to 650,000 in 2022, around 546,000 in 2023, and still 342,000 more in 2024. In 2023, the Associated General Contractors of America reported that 89% of construction companies faced challenges in hiring skilled workers. The average age of construction workers is 42.5 years old according to the US Bureau of Labor Statistics. The National Center for Construction Education and Research has predicted that 41 percent of the current workforce will retire by 2031 [Abdulhafedh 2023]. Not only are there not enough qualified applicants, employers are having difficulty finding employees with the necessary qualifications, and those they do employee are heading towards retirement.

The impact of these labor shortages are having an adverse effect on business owners, builders and contractors, and design firms. Owners are seeing project delays, increased costs, and lower-quality workmanship. The escalating costs of materials and labor, growing supply chain issues, and smaller profit margins lead to greater financial risks, uncertain completion dates, and can result in project cancellations. Contractors and builders struggle with quality control against defects, maintaining productivity while avoiding losses, and ensuring workplace safety for a strained workforce. With the diminished focus on skilled trades by educational institutions, fewer young employees are available, forcing contractors to hire less-skilled workers to meet demands [Abdulhafedh 2023]. Architecture, engineering and design firms are facing increased workloads and burdened by a smaller staff with less experience. This requires personnel to take on additional tasks and responsibilities, and work more overtime leading to mental fatigue, reduced productivity and possible burnout.

Research by multiple sources has concluded that several factors have contributed to shortage of skilled labor in the US construction industry. The global pandemic resulted in layoffs as companies tried to reduce expenses and concerns for public safety rose throughout most industries. The construction labor force was significantly reduced during the Great Recession of 2008, leading to many searching other sectors for employment opportunities. Younger generations are avoiding the work they consider low-paying, physically demanding and inherently dangerous. They are seeking value positions offering higher wages and flexible schedules, in safe environments or remote employment with plenty of job perks [Abdulhafedh 2023]. The impacts from the supply of labor decreasing relative to the demand for work and the loss of knowledge and skills of experienced workers entering retirement is becoming more apparent.

Implementing a multi-faceted approach to address the labor shortage is suggested in a study [Abdulhafedh 2023], which should include 1) raising pay scales, 2) providing competitive benefits, 3) rewarding current employees, 4) making job application easier, 5) creating internship and apprenticeship programs, 6) offering flexible schedules and work environments, 7) introducing employee referrals, 8) embracing remote work, 9) limiting hours of operation, 10) ensuring efficient onboarding, 11) providing continuous training and education, 12) regular status checks, 13) improving work-life balance, 14) investing in technology, 15) improving accessibility, 16) career growth and advancement opportunities, 17) promoting diversity and positive culture in the workplace, 18) mentoring and sponsorships, 19) partnering with trade unions, 20) better communication, and 21) off-site construction. Unfortunately, all of these solutions with require additional investment of time and capital by construction companies cutting into profitability and adversely affecting their bottom line, without necessarily increasing productivity or performance. To measure the effectiveness of any of these programs, key performance indicators (KPIs) should be established as metrics and the results reviewed periodically. The research [Abdulhafedh 2023] recommends analysis of 1) unit labor cost (ULC), 2) existing labor data, 3) schedule performance, 4) cost performance, 5) labor productivity, 6) equipment and asset utilization, 7) overhead costs and expenses, 8) profit margins, 9) amount of time to hiring, 10) worker downtime, 11) deficiency and defect rates, 12) costs of rework, 13) income from labor rates, 14) client satisfaction, 15) accidents and related incidents, and 16) variance from budget. These ideas though potential beneficial again come with extra administrative costs and may not be financially feasible for small organizations.

Gender inclusion and ethnic diversity are currently being promoted in almost every industry and throughout the education system. An aging labor force has led to a worker shortage in the construction trades. The need for young workers to perform a wide variety of skilled tasks is causing industry leaders to explore external solutions and even unconventional approaches. Most industry leaders expect the construction field to be experience radical changes over the next twenty years due to rapid growth and the implementation of new technologies [Ramadan 2023]. The transition from paper documents to digital information has already drastically changed workflow in the design and administration.

Low productivity and inadequate performance still persist, which can be improved through better supervision, support and motivation of workers. Women still face disrespect and discrimination throughout the construction industry, often experiencing derogatory remarks and unprofessional treatment. Various studies have shown mixed results from the impact of ethnic diversity in the workplace. Productivity is negatively affected poor communication and exchange of information caused by language and cultural barriers. Diverse groups tend to outperform uniform ones in problem-solving ability and completion of specialized tasks [Ramadan 2023].

5. Workplace Safety

Proving a safe and healthy environment for all workers is crucial in completing construction projects on time and within budget. One of the responsibilities of construction management firms is to ensure project safety by establishing plans and procedures to mitigate risks [Pulver 2022]. Action plans are an essential part to organize team members in the event of jobsite accidents, natural disasters and national emergencies. Standards are set by Part 1926 – Safety and Health Regulations for Construction of the Occupational Safety and Health Administration (OSHA) under the US Department of Labor. Alert systems including air horns, remote devices and associated technology provide fast and efficient delivery of emergency notifications.

The hazardous nature of construction leaves workers vulnerable to jobsite injuries and fatalities, almost 20% each year according to OSHA and highest of all industries. Most policies and procedures are focused towards preventative safety to remove hazards and reduce risks with limited preparation for events occurring after a failure. Interruptions due to inclement weather, material delays and labor shortages are common and can be anticipated. Unexpected scenarios involving loss of life require dedicated resources and crisis management. Crisis emergency risk communication (CERC) requires education and training before the actual event followed by maintenance and resolution phases to be summarized through evaluation [Hinsberg 2023].

Engineering and construction risk assessment should account for war and terrorism given the growing threats in many areas and regions. Certain projects require restrictions to avoid work stoppages, attempts to persuade or kidnap for financial or political gain, and prevent attacks on resources, utilities and infrastructure, high-profile organizations, government agencies, law enforcement, and military forces [Radevsky 2016]. The security of construction sites and worker camps may necessitate the use of walls or fences, guard posts, double gates, flood lights, motion sensors, CCTV cameras, and dedicated personnel for escort or transport duties. Special consideration might also be need for removal of hazardous materials, contaminated aggregate and unexploded ordnance. These measures come at an added cost with potential delays; risk-based analysis should be implemented to discern the level of protection and prevention against probable threats and repair of possible damage.

6. Emerging Technology

Construction remains labor-intensive, highly dependent upon the manual contributions of skilled workers. Though productivity has been improving, it is not keeping up with the increasing demands of urbanization nor substantially integrating automation methods and robotic technology that have greatly benefitted the manufacturing industry. Implementing prefabrication and assembly methods along with construction robots will improve economic performance, reduce many risks encountered on jobsites, and prevent occupational injuries resulting from dangerous or repetitive tasks [Wei 2023]. Human-robot collaboration (HRC) is a proposed concept to deploy robotics to assist workers through manual operation. The complexity and uniqueness of construction tasks however still limits these innovations.

Smart construction seeks to improve design, construction and management through the implementation of related technologies and integration of these processes. Building information modeling (BIM) combines data modeling and virtual reality to simulate the entire lifecycle of construction projects [Wang 2024]. Organizations can evaluate criteria, discuss building systems, and analyze results in multi-dimensional models. Smart management coordinates and unifies technical and economic data with production, operation and administrative tasks (see Fig 3). The standardized format allows for better transfer of information between and throughout project teams.

Figure 3: Standard Processes in Smart Construction [Wang 2024]

7. Sustainability

As rapid economic growth exerts stress on the ecological world, global concerns over resource depletion, environmental degradation, and climate change have gaining greater attention. Preserving the environment while maintaining economic development is the primary challenge that requires a focus toward equilibrium to achieve long-term sustainability. Responsible and efficient use of resources is a crucial strategy by corporations and governments for a ‘green’ economy [Yu 2024]. The United Nations 2030 Agenda for Sustainable Development outlines this vision through seventeen Sustainable Development Goals (SDGs). This action plan for people, planet, prosperity and peace (see Fig 4) seeks to end poverty & hunger; ensure health & well-being, and inclusive & equitable education; achieve gender equality; ensure management of water & sanitation, affordable & reliable energy; promote economic growth, productive employment & decent work; build infrastructure, industrialization & innovation; reduce inequality, make safe cities & settlements; ensure sustainable consumption & production; take action against climate change; conserve oceans & seas; protect & restore ecosystems; promote peaceful & just societies and effective & accountable institutions; and strengthen & revitalize global partnerships [Transforming 2015].

Figure 4: Sustainable Development Goals [Transforming 2015]

The construction industry consumes 40% of natural resources used in the world, generates 40% of the waste produced worldwide and emits 33% of total emissions. Circular economy (CE) is the concept of a system that is restorative and regenerative, promoting reuse and recycling of resources to reduce dependency and minimize waste [Amarasinghe 2024]. Maximizing use and minimizing waste through design, production and consumption strategies replaces the ‘cradle-to-grave’ life cycle model with material circularity (MC) focused recovery and repurposing. The World Economic Forum estimates that applying MC principles to building and construction could result in an annual saving of over one trillion dollars with the added benefit of value retention.

The whole-life cycle costs must be analyzed through value management (VM) and total quality management (TQM) before integrating sustainable construction (SC). Though the construction industry has a significant impact towards improving quality of life, capital cost barriers exist that prevent implementation on a broad scale. Negative perceptions around these initial costs also create additional challenges in delivering sustainable design [Nasereddin 2021]. Measuring the triple-bottom line (TBL) which includes social, environmental and financial aspects better accounts for these factors over traditional profitability and return on investment (ROI) calculations. Evaluating the benefits of ‘green’ buildings and sustainable construction may motivate stakeholders and provide strategic advantages through increased efficiency, lower emissions, reduced operating and maintenance costs, greater overall satisfaction, and enhanced reputation.

8. Conclusion

Integrated project delivery (IPD) is becoming the preferred method for construction projects, combining people, practices, systems, and businesses into a collaborative process utilizing skills and opinions of all participants to increase value, reduce waste and maximize results. The early contributions of expert knowledge and new technologies offers the most potential and greatest value throughout the project lifecycle [Asad 2023]. This allows for more precise analysis of costs and schedules, preventing overruns and delays while also improving productivity and performance.

Construction has always been demanding industry in terms of labor requirements, accounting between 20% and 40% of total project cost. Current market demands compounded by effects of the pandemic and an inflationary cycle will only increase these costs for years. Refocusing the direction of education and training towards the skilled trades while actively recruiting young talent into the construction-related fields will eventually alleviate these pressures. Implementing new technologies and techniques provides solutions in the interim and will guide the industry in the coming decades.

Cultural shifts from an aging veteran and male-dominant workforce towards a younger diverse and inclusive mindset of the coming generations requires adapting ideologies to address global concerns and meet sustainable goals. Fast-track construction is one approach that allows owners and developers shorten design and construction schedules while experiencing rapid return on their investments [Naji 2023]. Efficient utilization of materials and resources guided by professional and experienced management ensures successful project delivery. Special attention is required in sequencing work and monitoring quality to avoid disruptions and related financial impacts. Relative importance index (RII) is a reliable measure to evaluate these KPIs, and the Spearman’s rank correlation can be used to determine the precision of this data. Finance, logistics, management and legal were found are the most important factors of consideration.

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