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Labor Inefficiency and the Need for New Strategies

Updated: Mar 1, 2021

Managing construction budgets in the tens and hundreds of millions of dollars, industry professionals are discouraged from taking unnecessary risks. A construction environment that is more difficult each year is perceived as less risk than challenging norms to improve jobsite efficiency. The aversion to new technologies, techniques and the risk of change lead the construction industry to decreased labor productivity and lagging revenue growth.

Construction revenue is climbing due to increased material costs, project complexity, decreased schedule length and increased regulation. Construction labor productivity is on a downward trajectory and has been for over 50 years.

While construction revenues continue to grow at a rate of 1% annually, the continued loss of labor productivity is holding the industry back from matching the manufacturing growth rate of 3.6% or the world economic growth rate of 2.8%. Stanford University Professor Paul Teicholz calculated a labor productivity loss of 0.32% per year from 1964 to 2012. The loss of labor productivity is hurting the construction industry. Without reversing this trend the industry will struggle to attract and retain talent to a profession that performs measurably worse each year.

A portion of the difficulty facing the construction industry is the unique demands placed on the contractors by the building owners and developers.

If vehicles were purchased in the same manner as buildings the buyer would request that a manufacturer build a vehicle and require the following conditions:

  • Design a custom vehicle that has not been built before and may never be built again.

  • Set up a temporary factory for a period of 1-3 years.

  • Demand three prices for each component.

  • Accommodate buyer input on component suppliers without regard to performance, quality and ability to meet schedule demands.

  • Contribute uncompensated engineering, design and cost input on multiple revisions of vehicle design in exchange for the purchase of the vehicle.

  • Guarantee a maximum price with incomplete information.

  • Guarantee a fixed delivery date without restrictions on quantity or timing of design changes.

This simplified comparison highlights the stark difference between purchasing construction services and nearly every other purchase in modern society. Substitute an iPhone, shoes, or furniture in the comparison and the outcome of the exercise will be the same.

The current state of construction is the custom on-site assembly of individual parts. Individual wall studs, screws, sheets of drywall, lengths of conduit, water lines and valves. Each of these items is brought to a jobsite location, cut to fit, assembled per a set of drawings and subject to changing design and continuous owner input. Additional jobsite challenges include variations in weather conditions and workforce availability that affect otherwise unaffiliated trades with different priorities and operating directives.

A vast majority of efficiency efforts in construction have focused on incremental improvement of individual tasks or communication platforms.

Incremental improvements in tools, techniques and materials continue to make the industry more efficient at the fringes without addressing the core industry obstacles to productivity. Increasing drywall installation rates by 50% will not reduce scheduling conflicts and other key obstacles to productivity. The benefits of such improvements rarely impact the critical path of a schedule and are often completely lost in the ebb and flow of a modern project schedule.

Innovations brought to the world by the information age have arrived in the construction industry with mixed results. Advanced cloud-based information systems support information overload, constantly changing drawings and directives have robbed jobsite technicians of planning and productivity. Direct access to rapidly changing information impedes progress on construction sites and increases the liability of those working to harness the chaos unleashed by perpetually incomplete information. The speed of information flow supports an avalanche of information sharing in an effort for project managers to reduce risk. Used improperly, these platforms inundate project members with hundreds of emails, notifications and documents mitigating risk to the project manager without increasing productivity.

These unique variables lead to a jobsite that looks like a traffic jam full of thousands of discrete starts and stops that add up to a slow-moving mass of unrelated parties heading down the highway looking for the nearest exit.


Owners, architects and general contractors building with a kit-of-parts will break up this jobsite traffic jam and create predictable and efficient outcomes for the building construction industry.

Prefabrication and the kit-of-parts can trace its origins to 1908 when Sears Roebuck began selling prepackaged kits of building materials through the company's ubiquitous catalog. The latest actors in this space include high tech startups and traditional material manufacturers pushing towards a more standardized future. The list is long and features strong contenders such as Sto Panel, Katerra, PeerEngine and Project Frog. Each manufacturer and technology platform that enters the kit-of-parts arena brings different strengths. The construction industry expenditures in 2019 were 1,293 billion dollars and employed over 7 million workers. The push to standardize and modernize such a diverse industry will not be winner take all.

With kits-of-parts utilizing standardized assemblies, designers and builders can arrive at a customized product using proven and tested components. Kit-of-parts building assembly allows for design flexibility by allowing standardized components and connections without dictating the outcome of the product. A fact proven by automotive manufacturers’ stunning array of vehicles that share components to lower cost and improve manufacturing efficiency.

The kit-of-parts evolution has already begun with small, complex components giving way to larger and larger assemblies and systems. Building materials themselves have been moving towards standardization for decades. Experienced builders can name components and building materials from memory for many items including rebar, wall studs, sheathing products, standard cabinet sizes, electrical outlets, etc.

To improve labor efficiency, the construction industry needs to embrace optimization of outcomes over minimizing theoretical material costs. In the name of minimizing costs, architecture and contracting teams rely on custom, made to order parts or field modification of materials in order to reduce material costs. These reductions in material cost have a corresponding increased cost for the labor and management related to customized components. These increased costs of customization include delegated design and engineering, project management requirements, jobsite material management, labor for custom fit and material waste.

Kit-of-parts brings standardization and optimization of outputs to the uncertain field of building construction. It encourages collaboration and decision making to ensure systems compatibility during design. Interchangeable parts repeatedly used from project to project will create efficiency in design, engineering, installation and building performance. Offsite fabrication of these interchangeable sub-assemblies will reduce time at the jobsite, improve safety and avoid inclement weather delays.

On December 1, 1913 the Ford Motor Company started the first moving assembly line. Four key principles revolutionized the automotive industry: Interchangeable parts, continuous flow, division of labor and reducing wasted effort. The automobile has evolved and matured since 1913 and there is no reason to believe that design and building aesthetics will suffer greatly from standardization. The aesthetic desires of owners and architects will create variance from available kits-of-parts and drive construction cost. Kit-of-parts Standardized Building cost will be on a spectrum from the highly standardized “Toyota Camry” to the highly custom “McLaren 765LT”.

Harnessing building design with kit-of-parts strategies, generative design and variety in building materials will lead to better outcomes for building owners, architects, engineers, facility managers and contractors. The market will continue to evolve to meet demand. Pricing will vary based upon a building developer’s willingness to accept standardized systems. Materials manufacturers will be incentivized to develop kits-of-parts with high levels of flexibility, a variety of aesthetic choices and competitive pricing. Architects will apply their creativity to a new set of design criteria allowing them to spend more time creating solutions for their customers than managing the integration of every building component and material.

Each instance where a building designer or building contractor uses a proven solution to construct their next project will increase efficiency, quality, performance and outcomes for the end user.

Using a kit-of-parts strategy, building construction will exit the doldrums of inefficiency and restore customer satisfaction, labor efficiency and predictable outcomes to an industry that has struggled to improve labor productivity for decades.

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