building for tomorrow: global enterprise and the u.s. construction industry
TRANSCRIPT
title: BuildingforTomorrow:GlobalEnterpriseandtheU.S.ConstructionIndustry
author: Fisher,JohnW.publisher: NationalAcademiesPress
isbn10|asin: 0309039371printisbn13: 9780309039376ebookisbn13: 9780585168340
language: English
subject
Constructionindustry--UnitedStates,Constructionindustry--Casestudies,Constructionindustry--Internationalcooperation,Competition,International.
publicationdate: 1988lcc: HD9715.A2B841988ebddc: 354.64
Constructionindustry--UnitedStates,
subject: Constructionindustry--Casestudies,Constructionindustry--Internationalcooperation,Competition,International.
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BuildingforTomorrow:GlobalEnterpriseandtheU.S.ConstructionIndustryCommitteeontheInternationalConstructionIndustryBuilding
ResearchBoardCommissiononEngineeringandTechnicalSystems
NationalResearchCouncil
NATIONALACADEMYPRESSWashington,D.C.1988
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NationalAcademyPress2101ConstitutionAvenue,NWWashington,DC20418
NOTICE:TheprojectthatisthesubjectofthisreportwasapprovedbytheGoverningBoardoftheNationalResearchCouncil,whosemembersaredrawnfromthecouncilsoftheNationalAcademyofSciences,theNationalAcademyofEngineering,andtheInstituteofMedicine.Themembersofthecommitteeresponsibleforthereportwerechosenfortheirspecialcompetencesandwithregardforappropriatebalance.
ThisreporthasbeenreviewedbyagroupotherthantheauthorsaccordingtoproceduresapprovedbyaReportReviewCommitteeconsistingofmembersoftheNationalAcademyofSciences,theNationalAcademyofEngineering,andtheInstituteofMedicine.
TheNationalAcademyofSciencesisaprivate,nonprofit,self-perpetuatingsocietyofdistinguishedscholarsengagedinscientificandengineeringresearch,dedicatedtothefurtheranceofscienceandtechnologyandtotheiruseforthegeneralwelfare.UpontheauthorityofthechartergrantedtoitbytheCongressin1863,theAcademyhasamandatethatrequiresittoadvisethefederalgovernmentonscientificandtechnicalmatters.Dr.FrankPressispresidentoftheNationalAcademyofSciences.
TheNationalAcademyofEngineeringwasestablishedin1964,underthecharteroftheNationalAcademyofSciences,asaparallelorganizationofoutstandingengineers.Itisautonomousinitsadministrationandintheselectionofitsmembers,sharingwiththeNationalAcademyofSciencestheresponsibilityforadvisingthefederalgovernment.TheNationalAcademyofEngineeringalsosponsorsengineeringprogramsaimedatmeetingnationalneeds,encourageseducationandresearch,andrecognizesthesuperior
achievementsofengineers.Dr.RobertM.WhiteispresidentoftheNationalAcademyofEngineering.
TheInstituteofMedicinewasestablishedin1970bytheNationalAcademyofSciencestosecuretheservicesofeminentmembersofappropriateprofessionsintheexaminationofpolicymatterspertainingtothehealthofthepublic.TheInstituteactsundertheresponsibilitygiventotheNationalAcademyofSciencesbyitscongressionalchartertobeanadvisertothefederalgovernmentanduponitsowninitiative,toidentifyissuesofmedicalcare,research,andeducation.Dr.SamuelO.TheirispresidentoftheInstituteofMedicine.
TheNationalResearchCouncilwasestablishedbytheNationalAcademyofSciencesin1916toassociatethebroadcommunityofscienceandtechnologywiththeAcademy'spurposesoffurtheringknowledgeandofadvisingthefederalgovernment.FunctioninginaccordancewithgeneralpoliciesdeterminedbytheAcademy,theCouncilhasbecometheprincipaloperatingagencyofboththeNationalAcademyofSciencesandtheNationalAcademyofEngineeringinprovidingservicestothegovernment,thepublic,andthescientificandengineeringcommunities.TheCouncilisadministeredjointlybybothAcademiesandtheInstituteofMedicine.Dr.FrankPressandDr.RobertM.Whitearechairmanandvice-chairman,respectively,oftheNationalResearchCouncil.
ThisreportwassupportedbytheTechnologyAgendaProgramoftheNationalAcademyofEngineeringandfundedunderthefollowingagreementsbetweentheindicatedfederalagencyandtheNationalAcademyofSciences:U.S.TradeandDevelopmentProgram,InternationalDevelopmentCooperationAgencyGrantAgreementTDP7712561;NationalScienceFoundationGrantsNo.MSM-8612738andMSM-8612783underMasterAgreementNo.8618641;DepartmentoftheInteriorBureauofReclamationGrantAgreements
No.6-FG-81-10310and7-FG-81-11950,U.S.DepartmentofAgricultureForestServiceGrantNo.87-G-050.
LIBRARYOFCONGRESSCATALOGCARDNUMBER88-61728INTERNATIONALSTANDARDBOOKNUMBER0-309-03937-1
CoverillustrationbyTomAdams.
PrintedintheUnitedStatesofAmerica
FirstPrinting,July1988SecondPrinting,October1988ThirdPrinting,May1989
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BUILDINGRESEARCHBOARD(1987-1988)
RICHARDT.BAUM,Consultant,Jaros,BaumandBolles,NewYork,NewYork(retired),Chairman
L.GERALDCARLISLE,Secretary-Treasurer,InternationalUnionofBricklayersandAlliedCraftsmen,Washington,D.C.
ROSSB.COROTIS,Chairman,DepartmentofCivilEngineering,JohnsHopkinsUniversity,Baltimore,Maryland
RAYF.DeBRUHL,SeniorVice-President,DavidsonandJonesCorporation,Raleigh,NorthCarolina
C.CHRISTOPHERDEGENHARDT,President,EDAW,Inc.,SanFrancisco,California
DAVIDR.DIBNER,SeniorVice-President,BernardJohnson,Inc.,Bethesda,Maryland
ROBERTC.DOBAN,SeniorVice-PresidentforScienceandTechnology,Owens-CorningFiberglasCorporation,Toledo,Ohio
EZRAD.EHRENKRANTZ,President,TheEhrenkrantzGroupandEckstut,NewYork,NewYork
ELISHAC.FREEDMAN,Consultant,AssociatedPublicSectorConsultantsandUniversityofConnecticut,WestHartford
DENOSC.GAZIS,AssistantDirector,SemiconductorScienceandTechnology,IBMResearchCenter,YorktownHeights,NewYork
GEORGES.JENKINS,President,ConsultationNetworks,Washington,D.C.
RICHARDH.JUDY,Director,DadeCountyAviationDepartment,Miami,Florida
FREDERICKKRIMGOLD,AssociateDeanforResearchandExtension,VirginiaPolytechnicInstituteandStateUniversity,Alexandria
MILTONPIKARSKY,DistinguishedProfessorandDirector,InstituteofTransportationSystems,TheCityCollegeofNewYork
KENNETHF.REINSCHMIDT,Vice-President,StoneandWebsterEngineeringCorporation,Boston,Massachusetts
RICHARDL.TUCKER,Director,ConstructionIndustryInstitute,UniversityofTexas,Austin
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JAMESE.WOODS,SeniorEngineeringManager,BuildingControlsDivision,Honeywell,Inc.,GoldenValley,Minnesota
APRILL.YOUNG,Vice-President,NVRDevelopment,McLean,Virginia
Staff
ANDREWC.LEMER,Director
JOHNP.EBERHARD,FormerDirector
PETERH.SMEALLIE,SeniorProgramOfficer
GRETCHENG.BANK,ProgramAssociate
JULIANK.MORRISON,PrincipalConsultant
PATRICIAM.WHOLEY,AdministrativeCoordinator
DONNAF.ALLEN,SeniorSecretary
JOANNCURRY,SeniorSecretary
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COMMITTEEONTHEINTERNATIONALCONSTRUCTIONINDUSTRY
JOHNW.FISHER,FritzEngineeringLaboratory,LehighUniversity,Bethlehem,Pennsylvania,Chairman
DAVIDP.BILLINGTON,SchoolofEngineeringandAppliedScience,PrincetonUniversity,NewJersey
ARTHURJ.FOX,EngineeringNewsRecord,NewYork,NewYork
DONALDG.ISELIN,SantaBarbara,California
ARNOLDK.JONES,Cary,NorthCarolina
MICHAELMACCOBY,ProjectonTechnology,Work,andCharacter,Washington,D.C.
HENRYL.MICHEL,ParsonsBrinckerhoff,Inc.,NewYork,NewYork
FREDMOAVENZADEH,CenterforConstructionResearchandEducation,DepartmentofCivilEngineering,MassachusettsInstituteofTechnology,Cambridge
WILLIAMW.MOORE,DamesandMoore,SanFrancisco,California
LOUISJ.MULKERN,RMDAssociates,Washington,D.C.
JOHNC.RICHARDS,GovernmentandInternationalAffairs,M.W.KelloggCompany,HiltonHead,SouthCarolina
JOHNH.WINKLER,Skidmore,OwingsandMerrill,NewYork,NewYork
LiaisonRepresentatives
STANLEYBEAN,ForestProductsandHarvestingResearch,ForestService,U.S.DepartmentofAgriculture,Washington,D.C.
MARYSAUNDERS,CapitalGoodsandInternationalConstruction,U.S.DepartmentofCommerce,Washington,D.C.
FRANKA.DIMATTEO,U.S.ArmyCorpsofEngineers,Washington,D.C.
CHARLESM.HESS,U.S.ArmyCorpsofEngineers,Washington,D.C.
CHRISTIANR.HOLMES,InternationalDevelopmentCorporationAgency,Washington,D.C.
BETSYHORSMON,TennesseeValleyAuthority,Washington,D.C.
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THEODORELETTES,SmallBusinessTechnology,U.S.DepartmentofCommerce,Washington,D.C.
RICHARDB.SELF,ExecutiveOfficeofthePresident,Washington,D.C.
DARRELLWEBBER,BureauofReclamation,U.S.DepartmentoftheInterior,Denver,Colorado
AdviserstotheCommittee
FRANKBOSWORTH,VirginiaPolytechnicInstituteandStateUniversity,Blacksburg
MARIONC.DIETRICH,CorporationforInnovationDevelopment,Indianapolis,Indiana
JOHNW.FONDAHL,StanfordUniversity,California
EDGARJ.GARBARINI,BechtelGroup,Inc.,SanFrancisco,California
THOMASP.GUERIN,JR.,Construction/ProjectFinance,BAIIBankingCorporation,NewYork,NewYork
H.PETERGUTTMANN,HPGAssociates,Inc.,Washington,D.C.
GEORGES.JENKINS,ConsultationNetworks,Inc.,Washington,D.C.
JOHNT.JOYCE,InternationalUnionofBricklayersandAlliedCraftsmen,Washington,D.C.
FREDERICKKRIMGOLD,VirginiaPolytechnicInstituteandStateUniversity,Alexandria
NICHOLASLUDLOW,DevelopmentBankAssociates,Inc.,Washington,D.C.
RAYMARSHALL,LBJSchoolofPublicAffairs,UniversityofTexas,Austin
ALFREDT.MCNEILL,TurnerConstructionCompany,NewYork,NewYork
RICHARDTUCKER,DamesandMoore,Bethesda,Maryland
RICHARDL.TUCKER,ConstructionIndustryInstitute,UniversityofTexas,Austin
FRANKM.WARREN,JR.,ConstructionManagementConsultant,Charlotte,NorthCarolina
JOHNWISNIEWSKI,Export-ImportBank,Washington,D.C.
RICHARDN.WRIGHT,CenterforBuildingTechnology,NationalBureauofStandards,Gaithersburg,Maryland
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Observers
JESSEAUSUBEL,NationalAcademyofEngineering,Washington,D.C.
MARLENER.B.BEAUDIN,NationalAcademyofEngineering,Washington,D.C.
WILLIAMBEDDOW,Caterpillar,Inc.,Washington,D.C.
LYNNS.BEEDLE,LehighUniversity,Bethlehem,Pennsylvania
TERRYCHAMBERLIN,AssociatedGeneralContractors,Washington,D.C.
MARKCHALPIN,NationalConstructorsAssociation,Washington,D.C.
ROBERTGOLD,Arlington,Virginia
WILLIAMPETERSON,ConstructionIndustriesManufacturersAssociationWashington,D.C.
CHARLESPINYAN,InternationalConstructionWeek,NewYork,NewYork
MARTINJ.THIBAULT,BureauofReclamation,U.S.DepartmentoftheInterior,Washington,D.C.
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ForewordTheU.S.constructionindustryplaysacrucialroleintheUnitedStatesbysupplyingthestructuresthathouseandfacilitatevirtuallyallothereconomicandsocialactivity.Thisindustryhasahistoricroleabroadaswell,notonlythroughitsdirectexportsofU.S.goodsandservices,butalsothroughitsleadershipinopeningopportunitiesforotherU.S.businessandforintellectualexchangethatimprovesinternationalunderstanding.ReportsofdecliningworkbyU.S.firmsabroadandincreasingpenetrationofforeignfirmsintothedomesticconstructionmarketarethereforetroubling.
AlthoughonlyasmallfractionoftheU.S.constructionindustryisactivelyinvolvedintheinternationalmarket,thisparticipationyieldsabroadrangeofintangiblebenefitsthatgobeyondanydirecteffectontheU.S.tradebalanceorothereconomicstatistic.Thesebenefitsincludebetterknowledgeofforeignfirms'capabilitiesandbusinesspractices,enhancedskillsdevelopmentthroughexposuretoforeignculturesandmanagementstyles,andincreasedunderstandingoftechnicalproblemsarisingfromconstructionundertakenindiversephysicalandsocialconditions.
ThereasonsgivenfordeteriorationoftheU.S.constructionindustry'scompetitivepositioninanincreasinglyglobalmarketplacearevariedandcomplex,buttheimportanceoftechnologicalleadershipiswidelyrecognized.TheseissuesalonewouldjustifyanappraisalofthecompetitivenessoftheU.S.constructionindustry.
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However,inrequestingtheBuildingResearchBoardtoundertakethisstudy,theNationalAcademyofEngineeringhadmoreinmind:Emergingtechnologiesinseveralfieldsofferthepromiseofsignificantadvancesininfrastructureandbuilding,atatimewhenthereisgrowingrecognitionoftheneedtorenewandenhancethesefacilitieshereandabroad.TheopportunitiespresentedtoU.S.industrybythisconvergenceofcapabilityandneedaresubstantial.TheAcademyrequestedthisstudyasoneelementofabroaderefforttoidentifytheseopportunitiesandcontributetothepublicdebateaboutsuchissues.
TheAcademywishestothanktheNationalScienceFoundation,U.S.ArmyCorpsofEngineers,BureauofReclamation,InternationalCooperationAgency,andForestServiceforjoininginthefinancialsupportofthisstudy.
ROBERTM.WHITEPRESIDENTNATIONALACADEMYOFENGINEERING
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AcknowledgmentsThisstudywasconductedintwostagesbycommitteesunderthechairmanshipsofWilliamMoore,ofDamesandMoore,andJohnFisher,ofLehighUniversity.ThesecommitteesandtheirchairmendeservetheparticularappreciationoftheBuildingResearchBoard(BRB)andtheNationalAcademyofEngineering(NAE)fortheirsubstantialworkonthisstudy.FinancialsupportbytheU.S.ArmyCorpsofEngineers,BureauofReclamation,InternationalCooperationAgencythroughitsTradeandDevelopmentProgram,andForestService,combinedwithNAE'sinitiatingfunds,demonstratethegovernment'sbroadconcernabouttheU.S.constructionindustry'sinternationalcompetitivenessandtheimportanceofthecommittee'swork.
ThecommitteeswereablysupportedbyJohnP.Eberhard,formerDirectoroftheBRB,underwhoseguidancethestudywasconductedandwhotookamajorpartinpreparationofthisreport.AndrewC.Lemer,currentlyDirectoroftheBRB,alsoparticipatedsubstantiallyinthereport'spreparation.SpecialthanksareduetoJoannCurryforheroutstandingworkonthefinalmanuscript.
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Contents
ExecutiveSummary 1
1Introduction
10
TheScaleofWorldConstruction 11
TheChangingMarket 15
CaseStudy1:TechnologicalAdvantagePaysOff:M.W.KelloggandtheOilandPetrochemicalIndustry
19
2U.S.ConstructioninInternationalCompetition
23
TheU.S.Industry 23
AShortHistoricPerspective 25
MarketStructure 27
ConstructionMachinery 31
ForeignFirmsintheU.S.Market 33
CaseStudy2:Japan'sOhbayashiGumi:DoingConstructionintheUnitedStatesfor20Years
35
3CompetitionintheGlobalMarket
38
CommonCharacteristics 38
SpecificCases 39
GreatBritain 39
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France 41
Italy 41
Sweden 42
Japan 44
India 45
TheSovietUnion 46
U.S.ResponsetoCompetition 47
CaseStudy3:ShimizuMeetsIBM'sNeeds 50
4ResearchandDevelopmentinConstruction
55
U.S.ConstructionResearchandDevelopment 56
OtherEffortsNeeded 58
CaseStudy4:TheBellTelephoneLaboratories 63
5EducationandTraining
66
ProgramsofStudy 67
Engineering 67
Architecture 69
EngineeringandArchitectureTechnology 69
ContinuingEducation 70
IssuesinCivilEngineering 71
EmphasisonDesign 71
ConstructionManagement 72
IssuesinArchitecture 73
SpecializationandSmallPractices 74
ArchitecturalResearchandEducation 75
SkillsforGlobalEnterprise 76
Cross-CulturalTrainingfortheConstructionIndustry 76
AcquiringForeignLanguages 78
InternationalProjectManagement 79
CaseStudy5:BuildingInternationalRelationships:PhilippHolzmannAGandJ.A.JonesConstructionCompany
81
6PursuitofInnovation
85
NatureofInnovation 85
OpportunityinInfrastructure 88
GlobalPartnershipforInnovation 93
CaseStudy6:CooperativeEffortBetweenU.S.PublicandPrivateSectors:ProposalfortheThreeGorgesProjectinChina
94
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7Needed:InstitutionalStructuretoPromoteGlobalEnterprise
100
OrganizedFocusofDiverseInterests 100
AttitudeofOpportunity 102
ResearchandDevelopmentandInnovation 103
BuildingforTomorrow 104
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ExecutiveSummaryConstructionofhousing,otherbuildings,civilworks,andutilities(highways,sewerandwatersupplysystems,railroads,telephone,gasandelectricsystems)accountsforabout10percentoftheworld'stotaloutputofgoodsandservices,andwelloverhalfoftotaldomesticinvestment.Buildingsandotherconstructedfacilitiesinfluencetheefficiencyofawiderangeofeconomicandsocialactivities,andtheproductivityofnations.
TheConstructionMarketintheUnitedStatesandAbroad
ConstructionisimportanttotheUnitedStates.Leavingasidetherelatedindustriesthatproduceandtransportthematerialsandequipmentofconstruction,newbuildingconstitutesroughly9percentoftheGrossDomesticProduct(GDP)*oftheUnitedStatesandemploys5.5millionpeople,makingtheindustrythelargestsingle
*GrossNationalProduct(GNP)isameasureofthetotalvalueofanation'soutput,andincludespersonalandgovernmentexpendituresongoodsandservicesandinvestment,bothdomesticandforeign.GrossDomesticProduct(GDP),whichdoesnotincludeforeignconsumptionandinvestmentbydomesticenterprises,isusedasanindicationofeconomicactivitywithinthenation.
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componentinnationalaccounts.TheUnitedStates,withanannualdomesticconstructionvolumeof$330billionto$390billion,isabout25percentoftheworldtotal(seeChapter1).
ForeigncompaniesworkingintheUnitedStatesin1986accountedfor1to2percentofthatamount.Industryobserversareconcernedthatthisasyetsmallpenetrationofforeignfirmsmaysignalthedeclineofanotherindustrywecannotaffordtolose.
Muchoftheworld'sconstructioninvolvessmallfacilitiesbuiltbysmallfirms,butasignificantportionisundertakenbylargefirmsininternationalcompetition.Availabledatasuggestthetotalvolumeofinternationalbidconstructionawardedin1986exceeded$74billionfor250majorfirmsfrommorethanadozencountries.U.S.contractorscaptured$22.6billionofthiswork,about31percentofthetotal(seeChapter2).However,constructionbyU.S.firmsabroadhasdeclinedbymorethan40percentsince1983,duebothtosmallertotalconstructionvolumesanddecliningmarketshare.
Inadditiontoactualconstruction,designandconstructionmanagementservicesrepresentanincreasinglyimportantbusinessinpostindustrialeconomies.U.S.designfirms(architects,engineers,andrelatedprofessionswhosemarketsderivefromconstruction)capturedabout26percentoftheestimated$3.5billioninternationalmarketin1986.Again,thisisadeclinefromthe1982peakof36percent.
Internationalconstructionhasdomesticimportancebeyondthecontributionstonationalincomethatthefiguresreflect.Manyofthe800U.S.producersofconstructionequipmentexportmachinerytosome150countries,oftenfollowingtheleadofU.S.constructorswhoopenedtheway.Othertypesofcompaniesmayfollowaswell,takingadvantageofdesigners'andbuilders'propensitytospecifyandusetheequipmentandmaterialstheyknowbest.However,annualU.S.exportsofconstructionequipmenthavedeclinedbytwo-thirdssince
1978toabout$2billion.Employmentintheindustryhasdeclinedsimilarly.
SourcesofChallenges
DecliningforeignmarketsharesexciteconcernabouttheinternationalcompetitivenessoftheU.S.constructionindustry.Whilethereasonsfordeclineliepartlyindecreasedconstruction,particularlybythosecountrieslikeSaudiArabiawhereU.S.firmshaveenjoyedaspecialrelationship,industryleadersciteotherproblems
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thathamperU.S.firmsabroadandreducetheircompetitiveedgeathome:
Somecountriesrestrictforeigncompetitionfordomesticprojects.
Untilrecently,currencyexchangeratesmadeusingU.S.firmsrelativelymoreexpensive.
CoststosupportU.S.professionalsinforeignassignmentsarekepthighbyU.S.individualandcorporateincometaxpolicies.
U.S.antiboycottandbusinesspracticelawsrestrictU.S.firms'abilitiestooperatewithintheforeignbusinessclimateofsomecountries.
ThetechnologicaladvantagesofU.S.firmshavebeenslowlyerodedbyincreasinglycapableforeigners.Someoftheseforeigncompetitorsarebasedincountrieswherelowerwagescalesgiveadditionaladvantage.
Incontrasttootherindustrializednations,theUnitedStateshasnocoordinatedpolicyorsinglegovernmentagencytofosterinternationalsalesofU.S.designandconstructionexpertise.CompaniesbasedinindustrializedEuropeancountriesaswellasnewlyindustrializingcountriesinAsiaandLatinAmericahaveincreasedtheirmarketsharesininternationalconstruction,oftenwiththeaggressivesupportoftheirgovernments(seeChapter3).
Thestrategicimportanceofconstruction-relatedexportopportunitiesisreflectedintheU.S.TradeandDevelopmentProgram'ssupportofU.S.firmsconductingprojectfeasibilitystudies.Knowledgegainedinthefeasibilitystudycanenhancethefirm'schancesofsuccessfullycompetingforthemuchlargerconstructionproject.However,thissupportismuchlessthanmanyothergovernmentshavechosentoprovidetheirnationals,andU.S.suppliersfrequentlyfindthemselves
atadistinctcompetitivedisadvantage.
PrivatePractices
Internationaldesignandconstructionaredominatedbyarelativelysmallandselectgroupoffirms.Reliabledataarelimited,buttheCommitteeontheInternationalConstructionIndustryestimatesthatthetop30constructionfirmsworldwideperform50to60percentofworkavailableforinternationalcompetition,andvirtuallytheentiremarketiscapturedby250majorinternationalfirms.Ofthetop400U.S.contractorsandtop500U.S.designfirmslistedinEngineeringNewsRecordmagazinein1987,54constructionfirms
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andapproximately200architecture/engineeringfirmsareactivelyseekingorconductinginternationalwork.
InrecentyearslargeamountsofforeigninvestmentcapitalhaveenteredtheUnitedStates.Forexample,theLosAngelesTimesindicatesthatincreasinglylargenumbersofdowntownofficebuildingsinLosAngelesareforeignownedorcontrolled.Foreignownershipoftenopensopportunitiesforforeignfirmstoparticipateindesignandconstruction.
Inadditiontothedirectcapturebyforeignfirmsof1to2percentoftheU.S.domesticmarket,foreignfirmsarepurchasingownershipsharesinU.S.constructionanddesignfirmsorareformingstrongassociationsthatmayobscurethetruevolumeofforeignparticipation.From1978through1983,thenumbersofforeigndesignandconstructionfirmsformingU.S.affiliations(includingpurchaseofownership)grewatannualratesof7.7percentand12.8percent,respectively.Totalrevenuesofthesecompanies,whilestilllessthan2percentofthetotalU.S.constructionmarket,grewatanannualrateof35percent.JapaneseconstructionvolumeintheUnitedStatesreachedmorethan$1.5billionin1985.
ResponsestoChallenge
ThechallengesposedbythedecliningU.S.shareofforeignconstructionandincreasingforeignpenetrationofU.S.domesticmarketsaresubstantial.Appropriateresponsemustbebalancedamongthecompaniesoperatingintheglobalmarketplace,educationalandprofessionalinstitutionsthatprepareandsupportU.S.professionalswithinthesecompanies,andgovernmentpolicyandinstitutionalsupportthatcanmotivateandstrengthentheprivatesector.ApartnershipofdiverseinterestsintheU.S.constructionindustryisneededtofocusresourcesinresearchanddevelopment
(R&D),professionaltraining,andgovernmentprograms.
ResearchandDevelopmentandInnovation
Researchanddevelopmentandsubsequentinnovationhavebeenshowninmanyfieldstobevaluableelementsofcompetitiveadvantage.WhilestatisticsforconstructioningeneralandtheU.S.constructionindustryinparticulararelimited,theysuggestthattheU.S.constructionindustryhasfallenbehinditscompetitioninitseffortstomaintaintechnologyleadership(seeChapter4):Other
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countriesareputtingmoreeffortintoconstructionresearchanddevelopment,backinglonger-rangeresearchefforts,andactivelyencouragingtheadoptionofusefulresearchresultstobringinnovationtotheconstructionindustry.
Japanmaybetheleaderintheseefforts.Thatnation'sMinistryofConstructionsetsnationalpoliciesonbehalfoftheconstructionindustry.OneofitsmajorpolicydecisionswastoencourageprivatefirmstoestablishR&DcapabilitycomparabletothatfoundintheUnitedStates,primarilyatuniversities.Asaresultofthisgovernmentpolicy,morethan20ofthelargestfirmsinJapannowinvest1percentoftheirsalesinR&D.Allhavewell-equippedcampus-likeresearchcenters.Researchisintegratedthroughouttheiroperatingdivisionsandhasbecomeamajormarketingtoolforthem.Theirresearchprogramsincludeawidespectrumofshort-termandlong-rangeprojectsoverarangeoftechnicalsubjects.
Incontrast,totalR&DspendingondesignandconstructionintheUnitedStateshasbeenestimatedtobeabout$1.2billionannually,only0.39percentofthesector's$312billionofsalesin1984.ComparedwithR&DspendingbyothermatureindustriesintheUnitedStates(e.g.,appliancesat1.4percent,automobilesat1.7percent,ortextilesat0.8percent),constructionindustrysupportofR&Dissorelylagging.Contractors,architects,andengineersasagroupinvestlessthan0.05percentofsalesinR&D,afractionoftheamounttheyspendonliabilityinsurancealone.
ThecomplexreasonsforthislaggingeffortincludetheinabilityofthemanyfirmsthatmakeuptheU.S.industrytomobilizesufficientresourcesindividuallyortoconsolidatetheireffortseffectivelytosupportmeaningfulresearchortocapturethecommercialbenefitsthatmayresult.Theresearchthatisdoneisconcentratedwithintheuniversitiesandisoftenslowtohaveanimpactonpracticesinavery
competitiveindustrythatisnecessarilywaryofcommercialriskandlegalliability.
Yet,rapidadvancesintechnologiesnowemergingfromresearchlaboratoriesaroundtheworldsuggestthatafterdecadesofrelativetechnologicalstability,aneraoftechnologicalferment,unprecedentedintheconstructionindustry,isfastapproaching.Leadingthesedevelopmentsistheintroductionofcomputerhardwareandsoftwareintoallfacetsofdesignandconstruction.InnovationsinconstructionarelikelytoresultfromnewinventionsemergingfromR&Dlaboratoriesworkinginphotonics,biotechnology,newmaterials,microelectronics,andotherfields(seeChapter6).
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EducationandTrainingforGlobalEnterprise
Experienceworkingabroadandworkingwithforeignfirmsathomesuggeststhatkeyelementsforprofessionalsuccessininternationaldesignandconstructionincludeastrongtechnicalbase,understandingofdesign,understandingoftheintimateconnectionbetweentechnologyandculture,andexperienceinforeignlanguagesandregionalstudies.Theseelementsaregainedthroughacombinationofpracticalexperienceandformaleducationthatcanneverreallybeconsideredcomplete(seeChapter5).
Civilengineeringeducationinthepasttwodecadeshasemphasizedfundamentalstudiesofmechanics,appliedmathematics,andtheanalysisofstructures,withrelativelylessattentiontodesignassynthesis,toconstructionastheprocessofeconomicalbuilding,ortotheperformanceandpermanenceofcivilworksasmeasuredinfieldobservations.Yearsofpracticemayberequiredtogaintheappreciationofdesign,construction,andperformanceneededtocompeteeffectivelyintheworldofbusiness.Changesinprogramsofformaleducationcouldlayastrongerfoundationforthisappreciation:
Designshouldbeintegratedintotheteachingofanalysisandrelateddirectlytoconstructionandperformance.
Youngengineersshouldbeeducatedinthemoderntraditions,culturalimplications,andinternationalpotentialoftheprofession.
Architecturaleducationhasbeenshapedbytraditionthatgivespreeminencetoapprenticeshipanddevelopmentofstrongintuitiveunderstandingoffunctionalandaestheticbasesforbuildingdesign,withlimitedattentiontotechnology.Architecturalpracticeischaracterizedbytheproliferationofsmalldesignfirmsanddependenceonspecializedconsultantstoaddressstructural,mechanical,lighting,acoustics,andeconomicissues.Exceptforafew
largeandverticallyintegratedfirms,theprofessionisill-preparedfortheinternationalmarket.Again,changeinprofessionaltrainingcouldstrengthenourcompetitivestance:
Technologyandtheculturalcharacteristicsofconstructioninothercountriesshouldbeaddedtopresentprograms,includingcoursesthatfosterunderstandingofhowbuildingsareactuallybuilt,notjustthematerialsandequipmentthatgointoabuilding.
Workingexperienceintheuseofcomputersastoolsofdesignandanalysisshouldbeenhanced.
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Youngarchitectsshouldbeexposedtothegrowingbaseofresearchthatcansupportcreativedesigninunfamiliarsituations.
Increasingly,astheU.S.designandconstructionindustrieslooktogreaterparticipationintheglobalenterprise,engineeringandarchitectureschools,professionalsocieties,andbusinessorganizationsmustlookoutsidethemselvestolearnhowtodobusinessinaninternationaleconomy.Onlythroughmoredeliberateexposuretoforeignlanguages,geography,business,andforeignculturewillU.S.designprofessionalsgainrapidandeffectiveaccesstoforeign-originatedtechnologies,anddevelopastrongabilitytodealwithforeignsourcesofbusinessopportunityandfinance.
GovernmentProgramsandPrivateParticipation
Manyobserverscitegovernmentprocurementpracticesthatdiscourageinnovationaswellastaxpoliciesandregulationsonforeignbusinesspracticesasevidenceofgovernment'sfailuretosupportU.S.industry'scompetitiveposition.Despitetheseveryrealshortcomings,thereareexamplesofeffectivegovernmenteffortsinthisarea:
EstablishmentoftheNationalScienceFoundation'sNationalEngineeringResearchCenters,suchastheCenterforAdvancedTechnologyforLargeStructuralSystems(ATLSS)atLehighUniversity.
Growthofthegovernmentlaboratories,suchastheArmy'sConstructionEngineeringResearchLaboratory(CERL),theNavy'sPortHuenemeCivilEngineeringLaboratory,theTyndallAirForceEngineeringandServicesResearchCenter,andtheNationalBureauofStandards'CenterforBuildingTechnology.
U.S.ArmyCorpsofEngineers'grantsformajornewresearchefforts
attheMassachusettsInstituteofTechnologyandtheUniversityofIllinois.
However,morecouldbedonetoencourageprivateresponsetogovernmenteffortsandtoenhancethelinkagebetweenresearchandpracticalinnovation.TheprogramsofothercountriesillustratethevaluetobegainedthroughtruepartnershipofprivateandpublicinterestsintheU.S.constructionindustry.Thispartnershipshouldembraceresearchandinnovationforbothdomesticproductivityandinternationalcompetitivestrength.
Forexample,projectsbuiltwithgovernmentfundscanassume
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thegreatercommercialriskinvolvedinadoptinginnovation,aswasdemonstratedbytheintroductiontoU.S.transitconstructionofprecastconcretesegmentaltunnelliners(seeChapter6).However,governmentcannotactalone.Mechanismsareneededtoencourageprivate-publiccooperationintheU.S.constructionindustry.Precedentsforsuchcooperationexist(theThreeGorgesprojectdescribedinCaseStudy6,forinstance),buttheyhavebeenisolatedexamples.Professionalsocietiesandtradeassociationsdowellrepresentingtheinterestsoftheirmembers,butthereisnoongoingmeansforbringingtheindustry'sdiverseintereststogethertoenhanceourcompetitivestanceinternationallyortofosterresearchandtechnologicalinnovationathome.Asolidinstitutionalfocusisneeded,andwhileanumberofexistinginstitutionscouldplayasignificantroleincreatingthisfocus,aneworganizationmayberequired(seeChapter7).
BuildingforTomorrow
WithintheUnitedStates,asinmostoftheindustrialworld,thereisanopportunitytoincreasetheperformancecharacteristicsofthoseinfrastructuresystemsusedtotransportpeopleandgoods,obtainwater,removewastes,supplyenergy,andfacilitatecommunications.Thereisalsoreasontoincludethosebuildingsusedeitherforpublicpurposes(e.g.,schoolsandhospitals)orbuiltwithpublicfunds(e.g.,governmentoffices,courthouses,andprisons)asapartofthepublicworksinfrastructure.UnderthisbroaddefinitionofinfrastructuretheUnitedStatesin1984invested30percentofitsdesignandconstructionbudgetsinthesefacilities,atotalof$102billion,andothercountriesareinvestingaswell(seeChapter6).
Developmentofadvancedinfrastructureisachallengeworthyofcooperativeinternationaleffort.Itwillbedifficulttostructurethesedevelopmentstomatchtheperformancerequirementsofasociety
utilizingadvancedscienceandtechnology,andmakemorethanincrementalimprovementstothepresentmodaltechnologies.Inthedevelopingpartoftheworld,whichisexperiencingthemostrapidurbanization,thechallengeistodeveloptechnologyappropriatetotheirrequirementsratherthantoimposesolutionsproducedforindustrialnations.
TherearetworeasonsfortheUnitedStatestodomoretowardadvancingthetechnologyofinfrastructure.Wewouldbenefitwithinourownbordersfromnewandhigher-performancesystems,andwe
Page9
couldalsoenhancetheopportunityformarketingourtechnologyonaglobalbasis.Thiscommitteerecognizestheurgencyofmaintainingandextendingtheexistingnetworksofpublicworksthatunderlieournation.However,weneedalsotodevelopnewandhigher-performingtechnologiestoenhanceourcompetitivepositionintheworld.
Wearefacedasanationwithachallengetobuildfortomorrow.Thestrategicandcommercialrewardsofmeetingthischallengewillbesurpassedonlybytherewardsofimprovedqualityoflifeforthecitizensofanincreasinglyglobaleconomy.
Page10
1IntroductionTheprominentroleofconstructioninthewealthofnationsisreadilyapparentinthebuildingsandinfrastructurefacilitiesthatenablemuchofmodernlife.Leavingasidetherelatedindustriesthatproduceandtransportthematerialsandequipmentofconstruction,newbuildingaccountsforroughly9percentoftheGrossDomesticProduct(GDP)oftheUnitedStatesandemploys5.5millionpeople,makingtheindustrythelargestsinglecomponentinnationalaccounts.ComparisonsamongnationsshowthatconstructiontendstoaccountforanincreasingshareofGDPaspercapitaincomesriseinearlystagesofgrowth,anddominatesinvestmentincountriesatalllevelsofdevelopment.
Giventhescaleofconstructionanditsassociateddesign,materials,andequipmentbusinesseswithintheU.S.economy,thereisasurprisinglackofdetailedstatisticsanddefinitiveanalysisofthissector'sstructure,performance,andcontributiontothenation'sgrowthanddevelopment.Knowledgeoftheconstructionindustryinothercountriesispoorerstill.
TheCommitteeontheInternationalConstructionIndustryfounditnecessarytorelyonitsmembers'experienceandaccountstoldbyotherstosupplementthemeagerbaseofstatisticaldata.Thecommitteefoundinsomecasesthattheseaccountstaughtinformativelessonsandmadethemthebasisforthecasestudiespresentedherein.
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Thecommittee'sworkrevealsapicturethatissomewhatimpressionisticinnature,basedonacombinationoftheselimitedstatisticaldataandcasestudies.Thecommitteefound,nevertheless,aneedforchangesineducation,supportforresearch,andenthusiasmforinnovationintheconstructionindustry.Thesechangesareneededtoenhanceboththenation'sabilitytocapturemajornewopportunitiesfromtechnologicalprogressthatseemslikelytoalterinbasicwaysthephysicalinfrastructureofsociety,anditscompetitivestrengthinanincreasinglyglobalmarketforconstructionservices.
TheScaleofWorldConstruction
Estimatesbasedongovernmentalrecordsindicatethattheworldinvestsabout$1,430billioneveryyearintheconstructionofhousing,otherbuildings,civilworks,andutilities(highways,waterandsewer,railroads,telephones,gas,andelectricity),oralittlemorethan10percentoftheworld'sGDP(seeTable1).Actualamountsmaybeevengreater.Constructionisthelargestindustryintheworld.
Asindividualcountriesdevelop,risingpercapitaincomesspurgrowingdemandformoreandbetterbuildingsandinfrastructure,andconstructionaccountsforanincreasinglysignificantshareofnationaleconomicactivity.Someevidencesuggeststhatconstruction'sshareofeconomicactivitymaystabilizeordeclineathigherlevelsofdevelopment,butthelevelremainshigheveninthemostadvancedcountry.TheU.S.annualdomesticconstructionvolumeof$330billionto$390billionisabout25percentoftheworldwidetotal.
Muchoftheworld'sconstructionisdonebysmall-scalebuilderswhoproducesinglehousesormaintainroadsoversmallareas,usingverytraditionalbuildingmaterialsandmethods.Onlyperhapsone-fifthofthetotalvolumeofconstructionisconsistentlycarriedoutbylarge-scaleorganizationsusingmoremodernmethods,aswellastraditional
methodsthatremainpredominantincurrentpractice.
Muchofthissubmarketisinturnlimitedbypoliticalandeconomicreasonstodomesticfirmsorgovernmentagenciesusinglocalmaterials,labor,anddesignandmanagementservices.Totalconstructionundertakeninafullyinternationallycompetitivemarketin1986exceeded$74billion,orabout5percentoftheworld'sconstruction(seeTable2).
Thismarket,whileonlyafractionoftotalconstruction,isneverthelessabigbusinessanditisdominatedbyarelativelyfewmajor
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TABLE1ComparativeStatisticsonBuildingasaComponentinNationalEconomies,1984
BuildingValue
CountryGDPa($million)
PercentageofGDP
Total($million) Source
Low-IncomeEconomies
Ethiopia 4,270 3.0 128Bangladesh 12,320 5.0 616 UNMali 980 3.0 29Zaire 4,700 3.0 141BurkinaFaso 820 3.0 25Nepal 2,290 7.0 160 UNBurma 6,130 3.0 184Malawi 1,090 3.0 33Niger 1,340 3.0 40Tanzania 4,410 3.0 132 UNBurundi 1,020 4.0 41 UNUganda 4,710 3.0 141Togo 420 8.0 34 UNCentralAfricanRepublic 460 4.0 18India 162,280 5.0 8,114 UNMadagascar 2,380 4.0 95Somalia 1,364 4.0 55Benin 900 4.0 36 UNRawanda 1,600 4.0 64China,People'sRepublicof 281,250 4.0 11,250Kenya 5,140 5.0 257 UNSierraLeone 900 4.0 36Haiti 1,820 4.0 73
Guinea 2,100 4.0 84Ghana 4,485 4.0 179SriLanka 5,430 7.0 380 UNSudan 6,730 4.0 269Pakistan 27,730 5.0 1,387 UNSenegal 2,390 4.0 96Afghanistan 3,000 5.0 150 UNBhutan 3,000 4.0 120Chad 360 4.0 14Laos,People'sDemocraticRepublicof 765 4.0 31Mozambique 2,000 4.0 80Vietnam 18,100 4.0 724
Total,Low-incomeeconomies 25,216
Middle-IncomeEconomiesMauritania 660 4.0 26Liberia 980 7.0 69 UNZambia 1,060 4.0 42 UN
Continued
Page13
TABLE1(Continued)
BuildingValue
CountryGDPa($million)
PercentageofGDP
Total($million)Source
Lesotho 360 4.0 14Bolivia 3,610 5.0 181 UNIndonesia 80,590 6.0 4,835 UNYemenArabRepublic 2,940 5.0 147Yemen,People'sDemocraticRepublicof 792 4.0 32Coted'Ivoire 6,690 9.0 602 UNPhilippines 32,840 19.1 6,272 CICAMorocco 13,300 5.0 665Honduras 2,840 5.0 142 UNElSalvador 4,070 5.0 204 UNPapuaNewGuinea 2,360 5.0 118Egypt,ArabRepublic 30,060 5.0 1,503 UNNigeria 73,450 5.0 3,673Zimbabwe 4,580 3.0 137 UNCameroon 7,800 5.0 390Nicaragua 2,830 3.0 85 UNThailand 41,960 5.0 2,098 UNBotswana 990 5.0 50 UNDominicanRepublic 4,910 5.0 246Peru 18,790 2.0 376 UNMauritius 860 5.0 43CongoPeople'sRepublic 2,010 5.0 101Ecuador 9,870 7.0 691 UNJamaica 2,380 5.0 119Guatemala 9,400 5.0 470Turkey 47,460 5.0 2,373 UN
CostaRica 3,560 5.0 178Paraguay 3,870 5.0 194Tunisia 6,940 5.0 347 UNColombia 34,400 4.0 1,376 UNJordan 3,430 12.0 412 UNSyrianArabRepublic 15,930 5.0 797 UNAngola 4,000 5.0 200Cuba 14,900 6.0 894KoreaDemocraticRepublic 23,000 6.0 1,380Lebanon 5,300 6.0 318Mongolia 1,200 5.0 60
Total,Middle-incomeeconomies 31,857
Upper-Middle-IncomeEconomiesChile 19,760 6.0 1,186Brazil 187,130 5.0 9,357 UNPortugal 19,060 11.4 2,173 CICA
Continued
Page14
TABLE1(Continued)
BuildingValue
CountryGDPa($million)
PercentageofGDP
Total($million) Source
Malaysia 29,280 6.0 1,757Panama 4,540 6.0 272Uruguay 4,580 5.0 229 UNMexico 171,300 15.5 26,552 CICAKorea,Republicof 83,220 9.4 7,789 CICAYugoslavia 38,990 11.0 4,289 UNArgentina 76,210 6.0 4,573SouthAfrica 73,390 6.0 4,403Algeria 50,690 6.0 3,041Venezuela 47,500 7.0 3,325 UNGreece 29,550 9.0 2,660 UNIsrael 22,350 10.0 2,235 UNHongKong 30,620 7.0 2,143TrinidadandTobago 8,620 8.0 690 UNSingapore 18,220 23.9 4,355 CICAIranIslamicRepublic 157,630 5.0 7,882Iraq 27,000 5.0 1,350
Total,Upper-middle-incomeeconomies 90,259
High-IncomeOilExportersOman 7,680 8.0 614 UNLibya 30,570 11.0 3,363 UNSaudiArabia 109,380 15.0 16,407 UNKuwait 21,710 3.0 651 UNUnitedArabEmirates 28,840 10.0 2,884 UN
Total,High-incomeoilexporters 23,919
IndustrialMarketEconomies
Spain 160,930 8.0 12,874 UNIreland 18,270 9.0 1,644Italy 348,380 11.4 39,715 CICANewZealand 23,340 4.0 934 UNUnitedKingdom 425,370 8.5 36,156 CICABelgium 77,630 7.0 5,434 CICAAustria 64,460 28.0 18,049 CICANetherlands 132,600 13.0 17,238 CICAFrance 489,380 11.3 55,300 CICAJapan 1,255,006 23.3 292,416 CICAFinland 51,230 10.0 5,123 CICA
Continued
Page15
TABLE1(Continued)
BuildingValue
CountryGDPa($million)
PercentageofGDP
Total($million) Source
Germany,FederalRepublicof
613,160 14.0 85,842 CICA
Denmark 54,640 10.0 5,464 CICAAustralia 182,170 12.0 21,860Sweden 91,880 12.7 11,669 CICACanada 334,110 12.0 40,093Norway 54,720 12.0 6,566UnitedStates 3,634,600 9.0 327,114 CensusSwitzerland 91,110 14.7 13,393 CICA
Total,Industrialmarketeconomies 996,887
EastEuropeanNonmarket
Hungary 20,150 12.0 2,418 UNPoland 75,410 11.0 8,295 UNAlbania 2,700 11.0 297Bulgaria 56,400 8.0 4,512 UNCzechoslovakia 127,900 8.0 10,232GermanDemocraticRepublic
163,700 7.0 11,459 UN
Romania 117,600 10.0 11,760 UNSovietUnion 1,957,600 11.0 215,336 UN
Total,EastEuropeannonmarket 264,309
WorldTotal 13,027,922 1,432,447
aGrossDomesticProduct.Note:DataarefromUnitedNations'(UN)reports,theSwedishindustryreport(CICA),andtheU.S.CensusBureau.
firms.Morethanhalfofthework(indollarvolume)isdonebythetop30contractors.IntheUnitedStates,whichmayhaveahigherproportionofmoderatelysizedfirmsthanothercountries,200firms(about1.7percentofallU.S.constructors)conductabout85percentofthebusiness.
TheChangingMarket
Theneedforconstructionofnewfacilitiescombinedwithpoorlydevelopeddomesticconstructionindustrieshasmadedevelopingcountriestheprimarylocusofinternationalcompetitioninthepast.
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TABLE2SummaryofEstimatedMarketStructureforInternationalConstruction
MarketSegmentAnnualAmount(U.S.$billion)
Estimatedtotalconstructionworldwide 1,430aSmallscaleandrestricted 1,140b
Modernmethodandmanagement 290bRestrictedorcommunistblocprojects 216b
Internationalconstructionmarket 74cForeigncontractsoftop30constructors 44c
Remaininginternationalconstructionmarket
30b
aFromUnitedNations;dataandsurveys.(SeeTable1.)bCommitteestaffestimates.cInternationalconstructionweek,EngineeringNewsRecord,July20,1984.
Theeconomicupheavalofoilandcommoditypricefluctuationsandgrowingdebtburdens,however,hasslowedconstructiongrowthfromtheaverageof6percentannuallybetween1967and1976to1.5percentin1983.Constructionoflargeandtechnicallycomplexprojectshascometoavirtualstandstillinmanycountries.Somecountriesarebeginningtoshowsignsofslowrecovery,butwithoutquestiontheinternationalmarketremainsconstricted.
Atthesametime,largernumbersoffirmsarecompetinginthis
limitedmarket.Thesefirmsfallintofourcategories.First,somefirms(typicallyBritish,French,Dutch,andScandinavian)havelongexperiencewithconstructionexportandextensivecontactsthroughoutdevelopingcountries.Thisexperiencehasbeenfosteredlargelybyeconomicandpoliticalopportunity.Asaresultofformercolonialties,forexample,theFrenchconstructionindustryhasspecialaccesstomanycountriesinWestAfricaandtheMiddleEast,andtheBritishconstructionindustrytothesubcontinentofAsia,SoutheastAsia,theMiddleEast,andEastAfrica.TosomedegreetheUnitedStateshasenjoyedsucharelationshipwithSaudiArabia.Themarketstheserelationshipsprovidearesensitivetochangingeconomicandpoliticalenvironments,butgivethesefirmsadistinctcompetitiveadvantage.
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Thesecondcategoryincludesfirmsbasedinindustrializedcountriesthathavenotpreviouslybeensubstantialexportersofconstruction,butinthepast10to15yearshaveinitiatedeffortstoexporttheirsurplusdomesticcapacity.IncountriessuchasItalyandJapan,reconstructioneffortsfollowingWorldWarIIcreatedextensiveconstructionindustriestomeetdomesticneeds.Suchdemandisnowdroppingoffsharply,andconsiderablesurplusconstructioncapacityexistsintheirdomesticindustries.CompaniesfromtheseindustrializedcountriesareoperatingunderconditionssimilartothoseofAmericanfirms.Theyhaveahighlydevelopedtechnologybase,theyhavesophisticatedmanagementandtechnologyproducts,theirfinancingcapabilityisconsiderable,andtheirarchitecturalandengineeringfeesarecomparabletothoseoftheUnitedStates.Thenatureofthecompetitionamongthesecountriesisbasedonthequalityoftechnologicalabilityandtheadequacyoffinancing.ScheduledremovaloftradebarriersamongnationsoftheEuropeanEconomicCommunity(theEEC,orCommonMarket)willgivethesefirmsadomesticmarketcomparabletothatoftheUnitedStates,andcompetitionmaybeintensified.
Firmsbasedinnewlyindustrializedcountries,suchasKorea,Brazil,Taiwan,Turkey,India,andthePhilippines,constituteathirdformofcompetition.Thesecountrieshavedevelopedconstructioncapacityasanelementoftheirnationaleconomicplanningandhaveinvestedinexportconstructioncapabilityasameansofraisingexportincome.Firmsinthesecountriesarecharacterizedbyadevelopingbutlimitedtechnicalcapacityandbyrelativelylowwages.Advancedtechnologyistypicallyavailablebylicenseorotherarrangement.However,theirfundamentalbasisforcompetingininternationalmarketsisessentiallylowprice,bothforconstructionlaborandforprofessionalservices.Managementskillsandtechnologicalcapabilityareincreasinginthesecountriesataveryrapidrate.Therearenowfewprojectsuponwhich
thenationalconstructionindustriesofthesecountriescannotbidcompetitively.However,wheresophisticatedtechnologyisrequired,therecontinuestobeastrongincentivetoinvolveEuropean,Japanese,orU.S.contractors.
Firmsbasedinthedevelopingcountriesconstituteafourthgroupofcompetitors,buttheycurrentlydonothavethecapabilitytoposeaseriouscommercialthreatinworldmarkets.However,inmanydevelopingcountriesemphasisisbeingplacedonthedevelopmentofabasiclocalconstructionindustryforimportsubstitution.This
Page18
emphasisreduceshardcurrencyexpenditureforgoodsandcommoditiesthatcanbeprovideddomestically,andinmanysuchcountrieshasprovidedavehicleforgradualincreaseintechnologicalcapabilityandlaborskills,andinvestmentinindustrialcapacity.Inthesecountriesthereisoftenastrongefforttoprotectthisdomesticindustry(organizationssuchastheWorldBankhaveinstitutionalizedapolicypreferenceforutilizingthedevelopingcountry'sownsourcesofconstruction).Manydevelopingcountriesthatpreviouslyprovidedopportunitiesforforeignconstructioncompaniesarenolongeropentotheinternationalmarket.
WhilethenumberofU.S.firmsthatcompeteinthisglobalmarketissmallcomparedtothetotalnumberoffirmsinthedesignandconstructionbusiness,thesefirmsaregenerallyverylargeemployers(byconstructionindustrystandards)andarekeyplayersintheinternationalcompetition.Unlikeitsforeigncompetition,theUnitedStateshasbeenslowtodevelopnationaltradeandeconomicpoliciesinsupportofinternationalengineeringandconstruction.Inthiscountrythereisnocentralpolicy-coordinatingagencyforconstruction,incontrastwithmuchoftherestoftheworld,wherethereisacabinet-levelofficerwhoheadsaministryofconstructionoritsequivalent.
Domestically,theconstructionindustryislargelydecentralizedandgenerallyinadefensivemode.Consolidationsaretakingplaceacrosstheindustry,withforeigninvestorsbuyinglargeinterestsinsomefirms,andotherfirmsareclosingshop.Thedesigncommunitynowfindsmergersandacquisitionswithfirmsfromothercountriescommonplace,especiallyforthosefirmsthatbecamevisiblebycompetingintheinternationalarena.Whilesomecompaniesestablishedleadershipthroughcontroloftechnologyvaluabletomanufacturingfirmsthatareclientsforconstruction(seeCaseStudy1),mostU.S.internationalconstructioncompanieshavegrownfrom
aninitialspecializationinoneofthefollowingmarketsegments:electricpowergeneratingfacilities,highways,mining,refineryfacilities,andlargedams.Regardlessoftheirorigins,however,thesefirmsmaintainedleadershipthroughtechnologydevelopmentsandmanagementskillsthatareincreasinglysharedbycompetitors.
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CaseStudy1:TechnologicalAdvantagePaysOff:M.W.KelloggandtheOilandPetrochemicalIndustry
U.S.constructionfirmshavereapedoverseveraldecadesthebenefitsofthenation'stechnologicalleadershipinindustry.SomeU.S.builderssimplyfollowedtheirlong-timedomesticmanufacturerclientswhomovedabroadinaquestforlargermarketsandsupplysources.Otherfirmshaveplayedamoreactiveroleindevelopingthetechnologythatopenedmarketopportunitiesincountriesseekingtoexpandtheirindustrialbases.
Sinceitsformationinthefirstyearofthiscentury,theM.W.KelloggCompanyhasreliedonexperiencedmechanicalandchemicalengineeringtechniquesandlaboratoryresearchanddevelopmenttogrowasanengineeringcontractorbycreatingandimprovingnewprocessesfortheoilandpetrochemicalindustry.Asmallpipefabricationandchimneybusinesssoonevolvedintopowerpiping.Thecompanybeganexperimentingwithanewhammer-forgeweldingtechniqueitlearnedfromGermanindustry,andsubsequentdevelopmentworkimprovedthemethodsused,providingthebasisforentranceintothepetroleumfield.
ApproachedbyRichardFlemingin1919todevelopanewoilcrackingmethod,Kellogghiredtheinventoranddevelopedhisprocess.Flemingunitswereinstalledatseveraloilrefineryunits,providingmuchhighergasolineyieldsthanwithconventionalequipment.
Intheearly1920soilrefinerieswereconvertingonly30percentoftheircrudeoiltogasoline,andtheheavydemandformotorgasolinedictatedaneedforhigherrecovery.Theanswercamein1924withtheintroductionbytheCrossbrothersofanewhigh-pressurethermal
crackingprocess.Underaspecialagreement,Kelloggwasbroughtintohelpdeveloptheprocess,andforthispurposealaboratorywassetupin1926.Oneofthefirstpetroleumlaboratoriesinthecountry,itsstudiesresultedinthesuccessfulcommercializationoftheCrossprocess.Inthe10yearsfollowing,Kelloggbuiltmorethan130CrossunitsintheUnitedStatesandabroad.TwentyCrossunitswerebuiltoverseas:fiveinArgentina;threeinEngland;twoeachinJapan,Poland,andtheDutchWestIndies(Aruba);andoneeachinBrazil,France,Indonesia,Italy,Mexico,andPortugal.
TheCrossprocessdevelopmentwasfollowedbyfurtherdevelopmentofthermalprocessingtechnology.By1939some45percentofthecrudeoilcouldbeconvertedtomotorgasoline.
Page20
Tostudythethermalcrackingprocessinmoredetail,Kelloggsetupanewlaboratoryin1931especiallyforthatpurpose.Thisresearchworkandtherelatedprocessandmechanicalengineeringdesignproducedthecombinationunitconceptthatmadeanimportantcontributiontothermalcrackingprogress.Thisdesignwasafirststepinprocessintegrationforimprovedeconomyandgaveanearlyimpetustocontinuousplantprocessdesignandlarger,moreefficientoilrefineries.
Incooperationwithmajoroilcompanies,Kellogg'sknowledgeofcatalyticprocessinggrewtowardamajoraccomplishmentthetechnicaldevelopmentoffluidcatalyticcrackingofgasoils.PreliminarystudiesinthisfieldwereapartofanexploratoryresearchprogramcosponsoredwithStandardOilofNewJersey,StandardOilofIndiana,andtheTexasCompany.Aseparatelaboratorywasestablishedforthiswork,andby1938Kellogghadinoperationacontinuousfluidmovingbedcatalyticcrackingpilotplantandbegananexchangeofinformationthatledtothecommercializationoftheprocess.TheoriginalideaforusingapowderedcatalystcamefromStandardOilofNewJersey,andKelloggturneditsattentiontoplacingthisuniqueconceptinpracticalapplication.
In1941fluidcatalyticcrackingwasdraftedintowarservicetosatisfythegreatneedforaviationgasolinebeforetheprocesshadgonebeyondthepilotplantstage.Kelloggplaceditsfirstfluidunitinoperationin1942forStandardOilofLouisianaatBatonRougeandhad20unitsinproductionwhenthenation'saviationgasolineprogramendedin1944.TheseearlyunitswerebuiltessentiallyfromKelloggpilotplantdata.
Parallelingthepioneeringactivitiesinthepetroleumareaweretechnicalcontributionsinthefieldofcryogenicsandgasprocessing.Thisbeganin1937withastudyonoxygengenerationtobeusedina
processproducinghydrocarbonliquidsfromcoal.ThisearlyresearchanddevelopmentworkledtotheconstructioninSouthAfricaoftheworld'sfirstsuccessfullarge-scaleplantproducingsyntheticoilandgasfromcoal.
Theseresearchandengineeringactivitiesprovidedstrongtechnicalpositionsingasprocessing,syntheticfuels,andethyleneproduction.TheextensivebasicworkcarriedonthroughtheyearshasprovidedalargeshareofKellogg'sdomesticandinternationalbusinessoverthepastseveraldecades.
Since1975whenKelloggwaseighteenthontheEngineeringNewsRecord(ENR)annuallistof400contractors(theENR400)witha
Page21
totalcontractvolumeof$1billion,Kellogghasincreaseditsbusinessvolumesubstantially.ThecompanyheadedthelistoftheENRTop250InternationalContractorsfor1984,1985,and1986,withtotalcontractvolumesintherangeof$10.9billion(1984)and$6.9billion(1986).Theforeigncontractvolumeasapercentageofthetotalduringthesethreeyearswas60to80percent.
Thisimprovementinbusinessvolumeisbelievedtobelargelyattributabletothecompetitiveedgegainedthroughtheachievementofstrongtechnicalpositionsinseveralproprietaryprocessessuchassyntheticammonia,ethylene,andliquifiednaturalandpetroleumgasprocessing.TheseprocessesweredevelopedandimprovedovermanyyearsthroughthecontinuingactivitiesinKelloggresearchanddevelopmentlaboratoriesandchemicalandmechanicalengineeringgroups.Certainlytheproprietarypositionintheseprocesseshascontributedinlargemeasuretothehigh-percentagevolumeofinternationalbusiness.
PerhapsKellogg'smostimpressivetechnicalachievementwasthemorerecentdevelopmentandcommercializationofaradicallynewprocessplantthatmakespossibletheproductionofammoniainlargequantitiesatsignificantlyreducedcost.Thenewapproachincorporatedearlierprocessandequipmentdesigndevelopmentssuchashighersteamreformingpressure,lowerammoniasynthesispressure,andtheuseofsteam-drivencentrifugalcompressorsinsteadofreciprocatingcompressorsinallmajorservices.Allofthesedesigninnovationsresultedingreatlyimprovedenergyefficiency.Operatingcostswerereducedappreciablybygeneratingsuper-heatedsteamatelevatedpressuresandusingthesteaminaseriesofefficientextractionstepsinvolvingbothprocessusersandsteamturbinedrivesforallmajorpumpsandcompressors.
Thefirsttwoplantsofthenewlarge-scalesingle-trainammoniaplant
designweresoldtoImperialChemicalIndustries(ICI)inEngland.Withinoneyear,10more600-and1,000-ton-per-dayplantswereorderedinEurope,includingathirdduplicate1,000-ton-per-dayplantforICI.IntheUnitedStates,a600-ton-per-dayplantwasplacedinserviceinJuly1965forMonsantoinLouisiana,andwithinoneyearthreemorelarge-scaleplantswerebroughton-streaminLouisianaandMississippi.Theseplantscutthecostofproducingammoniainhalfandsentproducersoffonamajorroundofnewplantexpansionworldwide.
Between1963and1983theKelloggworldwiderecordinlarge-scaleammoniaplantsnumbered132,ofwhich83areinproduction
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outsideNorthandSouthAmerica.Theseplantsnowsupplymorethanhalftheworld'ssyntheticammonia,theprincipalbasematerialformostfertilizers.
AsignificanttechnicalandcommercialbreakthroughwasalsomadeinthePeople'sRepublicofChinathroughthesaleofKellogg'sammoniaandureatechnologyintheearly1970s.FollowingthesigningofthefamousShanghaiCommuniqueof1972,Kelloggsetinmotionamarketingprograminthefalloftheyear.China'sneedfornitrogenwaswellknownandKelloggvolunteeredtosubmitaproposal.Theinitialproposalwasrejectedbecauseofsomeopencostfeatures,andalumpsumproposalwaslateracceptedforoneammoniaplant.Thisagreementwasfollowedbyasurprisingrequestfortwomoreplants,andacontractforthethreeplantswassignedinJune1973.
Concurrently,theChinesewerenegotiatingwithaJapanesefirmforammoniaplantsusingKelloggtechnology.TheJapanesereceivedcontractsfortwoplants,providingtheChinesewithanexcellentbenchmarkinnegotiationswithKellogg,butatthesametimegivingthecompanyadditionalrevenueforammoniadesignknow-how.
AnevengreatersurprisefollowedwithaChineserequestforfivemoreammoniaplants,andcontractsfortheseplantsweresignedinNovember1973.Ataboutthesametimeastheammoniaplantnegotiationswereunderway,Kellogg'sDutchcompanycompletedcontractnegotiationsforeightureaplantsthatusetheammoniaandcarbondioxideproducedintheammoniaplantsateightdifferentsitesinChina.ThecontractvalueofKelloggammoniaandureaworkinChinarepresentedabout$500millioninbusiness.
Page23
2U.S.ConstructioninInternationalCompetitionTheU.S.constructionindustryhasfaredpoorlyinthisdifficultclimateofstagnantmarketsandgrowingcompetition.AmoredetailedlookatthestructureoftheU.S.industryandsomeofitsprincipalcompetitorsininternationalmarketsrevealserosionoftraditionaltechnologicaladvantagesandfailurestokeepupindevelopingtheskillsneededforcompetition.
AvailabledataindicatethatU.S.constructionfirmsin1986captured$22.6billioninnewcontracts,almost31percentoftheinternationalexportmarket(seeTable3).Thisamountrepresentsadeclineofmorethan40percentinsalesdollarssince1982.
U.S.designfirms(engineers,architects,andconstructionmanagerswhosemarketsaredrivenbyconstruction)workinginternationallyoftenprovidesomeadvantageforU.S.constructionfirms.Thesefirmsgarnered$917.8millionin1986billings,about26percentofthemarket(seeTable4).Again,thesefiguresrepresentasharpdeclinefrom1982,whenU.S.firmscaptured36percentofamarketmadefatbythespendingofprosperousoil-producingcountries.
TheU.S.Industry
ThesmallnumberofU.S.firmscompetingintheglobalmarketaregenerallyverylargeemployers(byconstructionindustrystandards)andarekeyplayersintheinternationalcompetition.
Page24
TABLE3InternationalConstructionShares,1986
NationofContractor
NumberofFirms
TotalAwards$Billion Percentage
American 43 22.6 30.6Japanese 29 9.4 12.7Korean 14 2.6 3.5European 126 33.7 45.5Italian 35 7.4 10.0French 18 7.1 9.6British 17 7.0 9.5German 17 5.5 7.5Yugoslavian 6 1.4 1.9Swiss 5 1.3 1.7Dutch 7 1.1 1.5Other 21 2.9 3.9
Turkish 9 2.2 3.0Allother 29 3.4 4.7
Total 250 73.9 100.0
Source:EngineeringNewsRecord,July16,1987.
Note:Dataarebasedonvoluntaryresponsestoasurvey.
In1983,U.S.firmsinvolvedininternationalcontractingemployed45,000Americansand99,000peopleofothernationalities.
Domestically,theconstructionindustryconsistsofmanysmallfirmsthatrespondtoexternallydetermineddemand.Consolidationsaretakingplaceacrosstheindustry,withforeigninvestorsbuyinglargeinterestsinsomefirms,andstillotherfirmsareclosingshop.
Somepeoplebelievethattheseconsolidationsandmergersarean
attemptbythemarketplacetosorttheindustryintotwobroadcategories:theall-purposefirms(notunliketheirJapanesecounterparts),andthespecialized''boutiques"(small,buthighlyspecialized).Overlyingthisrestructuringoftheindustryisaconstantstrugglewithalitigioussocietyinwhicheachpartytoacontracthasfounditselfconfrontedinacourtoflaw.Insuchaclimate,toomanyorganizationsdevoteenergiesandmanagementstructurelargelytominimizingrisks,ratherthanbuildingnewmarketsorapplyinginnovations.
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TABLE4InternationalDesignShares,1986
NationalityofDesigner
NumberofFirms
ForeignBilling$Million Percentage
American 49 917.8 25.9European 106 1,958.4 55.3British 26 481.4 13.6French 15 306.3 8.6German 21 282.1 8.0Dutch 8 259.3 7.3Scandinavian 11 227.1 6.4Swiss 8 174.7 4.9Other 17 227.9 6.5
Canadian 14 204.0 5.8Japanese 12 220.5 6.2Korean 4 54.0 1.5Allother 15 185.1 5.3
TOTAL 200 3,539.9 100.0
Source:EngineeringNewsRecord,August6,1987.
Note:Dataarebasedonvoluntaryresponsestoasurvey.
AShortHistoricPerspective
UntiltheIndustrialRevolution,constructionremainedlittlechangedfromRomantimes.Stone,brick,andtimberwereusedforbuildings,andinfrastructurewasrudimentary.
Bytheendofthenineteenthcentury,a"secondgeneration"ofessentiallyurbaninventions(structuralsteelframes,theelevator,electricalsystems,sewerandwatersystems,indoorplumbing,centralheating,thetelephone,theautomobileandhighway,andthesubway)
wasreadyforworldwidediffusionandinstallation.Mostoftheworld'sconstructionindustryknowntodaycameintobeingtointegratetheseinventionsintoindividualcommunities.
AfterWorldWarIandthesubsequentboomandbustperiodsofthe1920sand1930s,constructioncapabilitiesincreasedtoincludethebuildingofnationalhighways,largereclamationprojects,anddamsforwatercontrolandpowerproduction.TheU.S.ArmyCorpsofEngineersandtheBureauofReclamationplayedmajorrolesinshapingandmanagingsuchprojects.Asthecountrymaturedsodidtheindustriesofconstruction.
AttheendofWorldWarII,thephysicalrestructuringofthe
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world'scities,manyofwhichhadbeendestroyedordamagedbythewar,wasaidedbysuchmajorgovernmentprogramsastheMarshallPlanandPresidentHarryTruman'sPointFourprogramforThirdWorldcountries.ThedevastatedurbanareasoftheEuropeancontinent,theSovietUnion,theMiddleEast,NorthAfrica,manyislandsinthePacific,China,Korea,andJapanweremuchinneedof"construction"and"reconstruction."TheUnitedStatesaloneretainedrelativelyundamagedphysicalfacilities,aneconomicbase,andtheresourcestoaidinthisglobalprogram.Duringthewar,theUnitedStateshadcreatedtheimpressiveorganizationalcapacityofthemilitaryconstructionarmoftheArmyCorpsofEngineersandtheNavySeabees.Withthedevelopmentofmultinationalcorporations,whichbecameclientsforconstructionprojectsinothercountries,afurtherincentivewasaddedforotherU.S.designandconstructionfirmstomoveintotheinternationalarena.
A"military"componenttotheMarshallPlanincludedtheplacementofU.S.militarybasesonforeignsoiltocountertheperceivedSovietthreat.MostofthephysicalinfrastructureforthesemilitarybaseswasoriginallybuiltbytheengineeringelementsoftheU.S.armedforces,whoweresoonsupersededbyanumberofthelargerandmoreaggressivelyprofit-motivatedprivatesectordesignandconstructionfirms.U.S.engineeringandconstructionfirmswereemployedbyEuropeanindustrytoundertakemuchofthereconstructionworkfortheprivatesectoraswell.Inturn,aparalleleffortwasbegunbyEuropeanfirmswhowerereenteringthemarketfollowingaperiodofdormancyduringthewar,andwhowereadoptingmanyofthetechniquesandmuchoftheequipmentoftheirU.S.counterparts.
Thispatternpersistedthroughoutthe1950sand1960s,inbothmilitaryandciviliansectors,firstinKoreaandtheninVietnam.ThephenomenalgrowthoftheSouthKoreanconstructionindustrycanbeattributedinlargeparttothecloseworkingrelationshipbetweenthe
CorpsofEngineersanditsSouthKoreancounterpart.TheKoreanswererapidlearnersandwithinafewyearshadputtogetheranumberoflargeandcapableconstructioncompanies.ThesecompaniesbecameespeciallyprominentandsuccessfulinthelatterdaysoftheconstructionboominSaudiArabia,andbecameaverylucrativesourceofforeignincomeforKorea.Toamuchlesserextent,thesamepatternwasfollowedinJapanandTaiwan.
ThecaseofSaudiArabia,andtoalesserextentotheroil-producingnations,inthe1970sisaspecialoneandnotlikelytoberepeated.Oilandoilpricingmadeavailableanunprecedented
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amountofcapitaltoSaudiArabiaanditsneighborsforimportsandconstructionprojects.TheSaudishadenjoyedacloserelationshipwiththeUnitedStatessincetheearlyphasesofAramcoandduringWorldWarII.BecauseSaudiArabiadidnothaveanyoftherequisitetechnologicalcapabilityorprojectmanagementexpertise,itsnationalleadersturnedtotheUnitedStates.TheresultwasmajorparticipationbyU.S.engineeringandconstructionfirmssuchasBechtel,Fluor,andRalphParsonsincontractsforplanning,civilandmechanicalengineeringdesign,andsomeconstructionmanagement.TheU.S.ArmyCorpsofEngineers,familiarwithlarge-scaleprojects,wasdesignatedtheoverallprojectmanagerformanymilitary-relatedprojects,workingverycloselywiththeSaudiArabianauthorities.PracticallyalldesignandengineeringprojectswereawardedtoU.S.designfirms,sinceU.S.specificationswerebeingused.Theconstructionprojectswereopentointernationalcompetition.Earlyinvolvementinaprojectusuallyincreasestheoddsoflaterworkforthedesignandengineeringteam(seebox),butAmericandesignteamscannotensurethattheconstructionphasewillgotoAmericanfirmswhenpublicfundingisused.Oncetheactualconstructionisunderway,theproductsusedinthebuildingcanbepurchasedfromacountryotherthanthehomecountryofthedesignteam.
InthepastfewyearstheTradeDevelopmentProgramwithintheU.S.StateDepartmenthasprovidedcriticalfundingforalargenumberoffeasibilitystudiesbyU.S.designandconstructionfirms.Thefinancialsupportisgiventothosefirmswhoseprojectsshowtheprospectofamajorreturntotheeconomyiftheyobtainthecontract.
MarketStructure
Construction,thelargestindustryintheUnitedStatesandthemajoremployer,isarelativelydisaggregatedandvolatilemarketthatrespondstointerestratesandlevelsofgeneraleconomicactivity.The
industry's1.2millionfirmsundertakemorethan$360billionincontractseachyearandemploy5.5millionworkers.Whenthesuppliersofmaterials,machinery,insurance,anddesignservices,andtheoperationandmaintenanceofallconstructedfacilitiesareaddedtothistotal,theoverallindustryaccountsfor17percentoftheU.S.workforce.Constructionhastraditionallymadeupsome55to65percentofthenation'scapitalinvestment.
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PROJECTCYCLEFORMAJORCONSTRUCTIONPROJECTS
Aconstructionprojectpassesthroughthreerelativelydistinctphases:feasibilityanalysis,designandengineering,andactualconstruction.Constructionmaterialsandlaboraccountforabout85percentoftypicalprojectcosts,withthebalancebeingprofessionalservices.Asaruleofthumb,feasibilitystudiesareabout1percentofthetotalprojectcost,designandengineeringfeesareabout10percent,constructionmanagementcanrunbetween2and6percent.Operationandmaintenancecostsoverthe20-to50-yearlifeofthefacilitycanapproachseveraltimestheproject'sinitialcosts.
Whileclearlysmallinscope,feasibilitystudiescanprovideaninvaluableopeningwedgeforengineeringcontractstofollow.BoththeWorldBankandtheInter-AmericanDevelopmentBankprovidefor"continuityofwork."Underthispolicyaclientcanawardthedesigncontracttoafirmasafollow-upcontracttothefeasibilityphasewithoutreopeningthecontractingprocessiftheclientissatisfiedwiththeearlierwork.
Thus,thelinkagebetweenfeasibilitystudiesanddesignworkcanbeexploitedasamarketingtool.Feasibilitystudiescanbeunderpricedorfinancedatgeneroustermstolandthedesigncontract.Consultingengineersmaybefacedwiththechallengeofmaintainingobjectivitywhentheoutcomemayinfluencefutureopportunitiesforwork.
Oncethefeasibilitystudyhasbeenacceptedbytheclient,andveryoftenbythefinancingorganization,thedesignfirmischosen.Giventhenatureoftheproject,thedesignfirmmaybe
moreheavilyorientedtowardengineeringthanarchitecture,orviceversa.Oftenthefirmhasbothqualifications.Alsoatthisstage,theprojectmanagementorganizationmightbechosendependingontheproject'scomplexityandtheclient'sdesires.
Duringthedesignphase,thedetailedworkingdrawingsandspecificationsarepreparedforcontractors'bids.Dependingonthecircumstances,abidders'listbasedonprequalificationsmaybeprepared.Anyfirmwiththeabilitytopostaconstructionbondwillnormallybeallowedtobidonpublicprojects.Awardofthecontractisalmostalwaystothecontractorwiththelowestprice.
Procurementofsupplies,materials,buildingcomponents,mechanicalandelectricalequipment,andconstructionlaborwillbedeterminedbyalargenumberoffactors.However,oncetheconstructioncontractisawarded,itiscommonpracticefortheconstructionfirmtoprocuretheseitemsfromsupplierswithintheirhomecountry,thuscreatingan"aftermarket"forreplacementpartsandadditionsbasedonupgradedperformance.
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TABLE5U.S.ConstructionMarketbySector,1985(in$billionsofnewconstruction)
MarketSectorsFederalInformationa
IndustryInformationb
Residential 159 159Officeandcommercial 60 60Institutional 10 10Hotelsandmotels 7 7Allotherprivate 8 8Subtotal 85 85
Industrial 16 54Electricpower 16 20Otherutilities 17 17Subtotal 49 91
Stateandlocalgovernment 50 50
Federalgovernment 12 12
Total 355 397
aU.S.CensusBureaudata.bConstructionIndustryInstitute(CII)adjustmentstodata,basedontheknowledgeoftheirmembers.TheCIIestimatesarelargerfortheindustrialmarketsectorandtheelectricpowersectorbecauseof"force"accounts,thatisworkdonebytheemployedstaffofindustrialfirmsandthereforenotpubliclybidorcountedincensusdatawhicharelargelybasedonrecordsofbuildingpermits.
Thedesignandconstructionindustryisorganizedaroundmarketsectorsthatarewidelydifferentintermsofthetypeofcustomer,themethodoffinancing,theworkforceused,andeventheleveloftechnology.Table5presentsacommonwayofindicatingthese
marketsectors.
The"residential"(housing)designandconstructionsectorisprimarilymadeupofsmallerindependentbuilders.ThelargesthomebuildersanddevelopersintheUnitedStateshavenomorethan$2billionofthis$159billionmarket.Thebalanceofthebusinessisconductedbythethousandsoffirmswithfewerthan100employees.
ThemanufacturedhousingindustryhasgrowntocapturealargershareofthismarketsinceWorldWarII(29percentofthe
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marketin1980),butstillisconfinedlargelytohousingunitsmarketedatthelowestendofthepricespectrum(82percentofallhousingunitssoldforunder$50,000in1983).
ForseveralreasonsthehousingsectoroftheU.S.industryhasalmostnoexperienceininternationalmarkets:
Thesmallsizeofmostcompanieslimitsavailablefundstoexploremarketsinothercountries;
Homebuildingtechnologyisbasedprimarilyonwood-frameconstruction,whichisnotthecaseintherestoftheworld;
Housingprogramsinmostothercountriesarelargelyinfluencedbytheirgovernmentalpolicies,andarenotopentothespeculativebuildingcharacteristicoftheUnitedStates.
Thesectorstermed"officeandcommercial,""institutional,""hotelsandmotels,"and"allotherprivatework"areinfluencedbytheavailabilityofacombinationoflandandfinancingpackages.Inrecentyearsalargeamountofinvestmentcapitalfromothercountrieshasbeenplacedintothissector.Forexample,theLosAngelesTimesindicatesthat75percentofthelarge,downtownofficebuildingsinLosAngelesareforeignownedorcontrolled,whichisupfrom25percentjusteightyearsago.Aswillbediscussed,suchinvestmentsometimesbringswithitforeignconstructors.
Theheavy-constructionsector("industrial,""electricpower,"and"otherutilities")generallyinvolvestheworkoflargefirms,manyofwhichparticipateintheinternationalarena.Foreignheavy-constructionfirms,whichtendtobelargeinsize,arenowlookingtothisareaintheUnitedStatesasasourceofmarketgrowth.
Thefederal,state,andlocalgovernmentsectorsgenerallyattractfirmsthatconcentrateongovernmentworkbecauseofthespecialmarketing
skills,andsometimesspecialpoliticalvisibility,neededtogainworkfromgovernmentalunits.Whilegovernmentcontractingrequiresopenbidding,itisnotalwayspossibleordesirableformanyconstructionfirmstobidonsuchwork.Architecturalandengineeringfirmsdonotbidongovernmentwork(althoughfromtimetotimethereispressurefromlegislatorstohavethemdoso),butqualifyingforconsiderationongovernmentdesignawardstakesaverydifferentbusinessstrategythangettingdesigncontractsintheprivatesector.Ingeneral,themarketsforworkwithgovernmentclientshavebecomeincreasinglyprice-competitive,reducingsomefirms'abilitytoinvestinnewtechnology.
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TABLE6MajorU.S.ContractorsWorkingonaGlobalBasis(in$million),1986
ConstructionContractsCompany Foreign Total
TheM.W.KelloggCompany,Houston,Texas
5,085.0 6,945.0
TheParsonsCorporation,Pasadena,California
3,823.3 6,408.9
BechtelGroup,Inc.,SanFrancisco,California
3,439.0 7,079.0
BrownandRoot,Inc.,Houston,Texas 1,818.3 3,540.6LummusCrest,Inc.,Bloomfield,NewJersey
1,760.0 2,335.0
FosterWheelerCorporation,Livingston,NewJersey
1,219.0 1,847.0
FluorDaniel,Irvine,California 985.3 6,075.3SantaFeBraun,Inc.,Alhambra,California 630.0 710.0StoneandWebsterEngineeringCorporation,Boston,Massachusetts
428.0 1,625.6
JacobsEngineeringGroup,Inc.,Pasadena,California
275.5 982.3
KaiserEngineers,Inc.,Oakland,California 267.7 945.5DillinghamConstructionCorporation,Pleasanton,California
169.3 1,121.6
Fru-ConCorporation,Baldwin,Missouri 159.5 672.5KiewitConstructionGroup,Inc.,Omaha,Nebraska
147.2 1,262.5
Note:Ofthetotalglobalconstructionmarketof$73.9billion(availableforbidsfromoutsideofclientcountry),43Americanfirmsobtained$22.6billion(30.6percent).The14firmsshowninthislisthadmorethan90percentoftheU.S.volume.
MarketsegmentationandthepreponderanceofsmallfirmsprecludemuchoftheU.S.constructionindustryfrominternationalbusiness.Ofthetop400U.S.contractorslistedinEngineeringNewsRecordin1987,54areinvolvedsignificantlyininternationalcompetition.The14largestfirmsaccountformorethan90percentofU.S.constructionworkabroad(seeTable6).
Fortypercentofthe500largestU.S.designfirmsareinvolvedininternationalwork.The22firmslistedinTable7wereresponsibleformorethan85percentofthework.
ConstructionMachinery
TheUnitedStateshasabout800constructionmachineryproducers,manyofwhichexport(ormanufactureabroad)machinerytoabout150foreigncountries.TheprimarymarketsareCanada,SaudiArabia,Australia,andmanynationsinWesternEurope.Thelargeproducershavequiteextensivedealernetworksaroundtheworld,bothforsalesandservice.
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TABLE7PrincipalU.S.DesignFirmsPracticingonaGlobalBasis,1986
InternationalBillings Servicea
$30millionormoreLouisBergerInternational,Inc.,EastOrange,NewJersey CEDaniel,Mann,Johnson,andMendenhall,LosAngeles,California
AE
DeLeuw,CatherandCompany,Washington,D.C. EAGibbsandHill,Inc.,NewYork,NewYork EAHarzaEngineeringCompany,Chicago,Illinois CEHolmesandNarver,Inc.,Orange,California EAMetcalfandEddy,Inc.,Wakefield,Massachusetts EAMorrison-KnudsenEngineers,Inc.,SanFrancisco,California CE
Under$30millionBlackandVeatch,KansasCity,Missouri EACRSSirrine,Inc.,Houston,Texas AECampDresserandMcKee,Inc,Boston,Massachusetts CEDamesandMoore,LosAngeles,California CEA.EpsteinandSons,Inc.,Chicago,Illinois EAGilbertAssociates,Inc.,Reading,Pennsylvania EAFrederickR.HarrisInc.,NewYork,NewYork EALesterB.KnightandAssociates,Inc.Chicago,Illinois AECharlesT.MainInc.,Boston,Massachusetts EAPacificArchitectsandEngineers,Inc.,LosAngeles,California EAParsons,Brinckerhoff,Inc.,NewYork,NewYork EASkidmore,OwingsandMerrill,Chicago,Illinois AESverdrupCorporation,St.Louis,Missouri EAWilliamsBrothersEngineeringCompany,Tulsa,Oklahoma CE
aAE=architect/engineer;EA=engineer/architect;andCE=consultingengineer.
Note:Ofthetotalglobalvolumeof$3,543millionindesignfeesavailabletodesignfirmsfromoutsidetheclientcountry,49Americanfirmscapturedsome$917million(25.9percent)ofthistotal.The22firmsshownonthislistwereresponsibleformorethan85percentoftheU.S.share.
ThevalueofU.S.exportsofconstructionequipmentwasatitspeakof$6.3billionin1978andhasdeclinedsteadilytoabout$2billiontoday.Similarly,U.S.employmentintheequipmentindustryreacheditspeakin1979atabout175,000workersandhasdeclinedbytwo-thirds.
CaterpillarTractorCompanyoftheUnitedStatesistheworld'slargestconstructionmachineryproducer,withKomatsu,Ltd.,ofJapanfollowing.Thereisatpresentsubstantialexcesscapacityintheworld'sconstructionequipmentindustry,andcost-reduction
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measures,moreefficientandlesscostlymanufacturingmethods,andothersimilarmeasuresarebeingundertakenbytheproducers.Whilepricecompetitionwillprobablyremainthedominantfactorintheindustry,investmentsinresearchanddevelopmentmayyieldfutureadvances.Forexample,thedevelopmentofmoreautomatedequipmentextendingtherangeofweatherconditionsunderwhichconstructionispossiblemaybeforthcoming.
ForeignFirmsintheU.S.Market
TheU.S.constructioncommunityfacesanewchallengeintermsofbothcooperationandcompetition.Withthegeneralslowdowninotherpartsoftheworld,designfirmsandcontractorsfromothercountriesseetheverylargeAmericanmarketasanattractivewaytomaintainorincreasetheirbusinessopportunities.AsCaseStudy2illustrates,companiesfromEurope,Japan,andSouthKoreahavebeendevelopingworkingarrangementsinthiscountryforsometime.
Inthefiveyearsfrom1978to1982,thenumberofforeigndesignandconstructionfirmsenteringtheU.S.domesticmarketgrewannuallyatratesofalmost8percentand13percent,respectively(seeTable8).RevenueofforeignfirmsintheUnitedStatesincreased
TABLE8ForeignDesignandConstructionFirmsintheUnitedStates
NumberofU.S.AffiliatesCategory 1978 1980 1983
Designandengineeringservices 40 53 58Construction 45 70 82
U.S.IncometoForeignOwnedfirms($millions)
1978 1980 1983
Designandengineeringaffiliates 669 694 892ConstructionaffiliatesEuropean 1,142 3,896 5,394Canadian 61 243 144Japanese 24 50 81Other 317 415 1,308
Constructiontotal 1,544 4,604 6,927
Source:U.S.CommerceDepartment,BureauofEconomicAnalysis.
Note:By1985theJapaneseconstructionvolumeintheUnitedStateshadincreasedtomorethan$1.5billion,makingJapan'spenetrationoftheU.S.marketthemostdramatic.
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duringthatsameperiodatanannualrateof35percent.Japan'svolumehasshownstunninggrowth,reachingmorethan$1.5billionby1985.WhiletotalforeignworkintheUnitedStatesisonlyabout2percentofthedomesticmarket,itisconcentratedinthelargeandtechnicallycomplexareasofworkthathavebeenthemainstayofU.S.internationalbusiness.Expertsinthefieldfindthesituationalarming.
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CaseStudy2:Japan'sOhbayashiGumi:DoingConstructionintheUnitedStatesfor20Years
Intheearly1920s,theCalifornia-basedFluorCorporationinvitedexecutivesofaJapaneseconstructioncompanytoAmericatostudyadvancedU.S.constructiontechnology.Today,thiscompanyisback,bringingadvancedJapaneseconstructiontechnologywithit.Overthepast20yearsandmore,OhbayashiCorporationhasbuiltdams,tunnels,offices,andresidentialprojectsintheUnitedStates.
Foundedin1892byYoshigoroOhbayashi,thecompanyhasbeenamongtheBigFiveJapaneseconstructioncompanies,whichincludeKajima,Taisei,Shimizu,andTakenakaKomuten.(Today,withKumagaiGumi,theyaretheBigSix.)
Ohbayashiisamongtheworld'smostexperienceddambuilders.Itsfinisheddamsnumberinthesixties.Ithasbeenaleaderinthedevelopmentofroller-compactedconcretedams,aswellastheuseofdeepconcretecut-offwallstocontrolsubsurfaceseepage.
Ohbayashispendssignificantsumsofmoneyonresearchanddevelopment.IthasoneofthefinestresearchfacilitiesinJapan,theOhbayashiTechnicalResearchInstitute,wherethefirmdevelopscleanroomsforhospitalsandsemiconductorfactories;super-strongconcretefornuclearreactors;concreteforuseinundergroundcontinuouswalls;computersoftwareforcomplexengineeringcalculations,analyses,andsimulations;polymersthatpreventcave-ins;energyconservationsystems;andothertechnologies.Thefirmhasdevelopedadynamicsuspensionmethodthatsubstantiallymitigatesdamagetoabuildingduringanearthquake.
Ohbayashihasbuiltareputationformodifyingexistingtechnologytofitthejobathand.Forexample,itreplacedtheshieldonitstunnel
boringmachinewithabackhoe-likeexcavatoronamajorprojectinPhoenix,Arizona.
Ohbayashi'sadaptationoftheNewAustrianTunnelingMethod(NATM)improvesonthattechnique.TheNATMprocessusesrockboltsdrivenintothecircumferenceofthetunneltoprovidereinforcement.ConcreteisthensprayedonthetunnelwallwithanOhbayashi-developedconcretedistributorrobot.
OhbayashididitsfirstworkoutsideJapaninCambodia,buildinganagriculturalcenter.Sincethen,ithasdonemuchworkinSoutheastAsia,includingbuildings,tunnels,anddams.In1984,thecompanywonamajorcontractfromthePeople'sRepublicofChina,
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fortechnicalsupervisionofconstructionworkontheShanghaiInternationalAirport.
OhbayashicametotheUnitedStatesin1966,openinganofficeinHonolulu,Hawaii,andregisteringtodoconstructionthere.Inthesameyear,itbeganconstructionoftheSurfriderHotelinWaikikiasaconstructionmanager.Thehotelwasfinishedin1969.ItalsobuiltthePrincessKaiulaniHotelinHonolulu,whichwascompletedin1970.BothhotelshadJapaneseowners,andthegeneralcontractorsunderconstructionmanagementbyOhbayashiwereAmericans.
In1972,asubsidiarycompany,OhbayashiHawaiiCorporation,wasestablishedtoengageinrealestatedevelopmentinHawaii.Since1972,thisfullyownedsubsidiaryhasbeendevelopingrealestatecomplexesthroughouttheislands.Alsoin1972,OhbayashicametotheWestCoastandestablisheditswhollyownedOhbayashiAmericaCorporation(OAC),ageneralcontractor,inLosAngeles.OACiscurrentlyinvolvedinalow-incomehousingcomplexfortheLosAngelesCityRedevelopmentAuthorityandisdevelopingalarge-scaleshoppingcenterintheLittleTokyoarea.OAC'smajorlocalaffiliatesare2975WilshireCompany,forofficerentalmanagement,andJamesE.Robert,Inc.,forcondominiumandapartmentdevelopmentinnorthernCalifornia.
In1974,aftertwoyearsinLosAngeles,OACwonahotelconstructioncontract,KyotoInn,locatedinSanFrancisco.Theowner,Kintetsu,alsoownsaJapaneserailroadcompany.Followingthehotelproject,OACundertookbanks,offices,restaurants,andhousingcontracts,mostlyforJapaneseclients.
In1976,Ohbayashiparticipatedindevelopingalarge-scaleresidentialcomplexnearSeattle,Washington.ThiswasajointventurewithTokyoCorporation.The11,000-acresiteinMillCreekincludesagolfcourse,shoppingcenter,and3,200housingunits.
In1979,OhbayashiCorporationformedajointventurewithalocalcompanytobidforaSanFranciscosewagetunnelproject,thefirstU.S.publicworkOhbayashiwastoundertake.Expertiseinsoftground,usingtheearthpressurebalanceshieldtunnelingmethod,ledtosuccessinbiddingonthisproject.Themethodcutcostssubstantially,comparedtoalternativemethods.TheownerswerethecityandcountygovernmentsofSanFrancisco.Ohbayashi'sSanFranciscoofficebecameitsheadquartersforheavyconstructionintheUnitedStatesandin1981theheavydivisionsuccessfullybidtheStrawberryTunnelinUtah,afederallyfundedproject.
In1982aNewYorkCityofficeopened,andin1984itwonthe
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constructioncontractfora17-storybuildingforaChinesemaritimecompany.
In1985,OhbayashiestablishedasubsidiaryintheSoutheastnamedCitadelCorporation,headquarteredinAtlanta.Thiswasestablishedfromscratch,staffedandoperatedbyAmericans.Anopen-shop(i.e.,nonunion)contractor,Citadelhasbeenactiveintheregion,completingfiveprojects.ThestaffisAmerican;theownershipisJapanese.
In1986,OhbayashiwasselectedasaconstructionmanagerforthebigToyotamanufacturingplantinKentucky.ItisthelargestprojectOhbayashihasundertakenintheUnitedStates,entailingsupervisionoffiveAmericangeneralcontractors.
In1987thecompanybeatU.S.competitorstowinconstructionoftunnelsforfloodrun-offinSanAntonio,Texas.
JapanesepersonnelinU.S.Ohbayashiofficestotal30to40people.Somehavestudiedengineeringormanagementinthiscountry.
EijiNoma,generalmanagerinNewYorkCity,whostudiedattheUniversityofChicagointhelate1960s,saysitismoredifficultnowtogetJapaneseprofessionalstoworkintheUnitedStates.Itisnolongertheir''hardshippost"withperquisitesandbonuspay,butratheranexpensiveplacetolivewhenpaidindollars,nobetterthanlivingonyenathome."Thatgapofincomehasnarrowed,whilehardshipsneverlessened,"saysNoma.Still,everyyearfourorfiveOhbayashipeoplecometostudyintheUnitedStates,usuallyinthefieldsofengineeringormanagement.
AnOhbayashimanagerstatesthecompany'sU.S.businessobjectivessuccinctly:
TosatisfytraditionalJapaneseclientsneedingcommercialor
industrialbuildingsintheUnitedStates.ToservetheneedsofitsJapaneseclientsismoreimportantthantomakemoneyhere.
TocompeteandtodojointventureswithAmericansforheavyconstructionworkwhereOhbayashimayhaveusefultunnelingordam-buildingexpertise.
In1986Ohbayashicontractedfor$226millionworthofconstructionintheUnitedStates.
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3CompetitionintheGlobalMarketU.S.industryfacesstiffcompetitionintheinternationalconstructionmarket.Foreignfirmsinmanycountriesenjoystrongsupportofcoordinatedgovernmentpoliciesthatencourageexportofservicesandenablethesenations'firmstopresentaunitedfrontincompetition.
CommonCharacteristics
Thecommittee'sexperienceandreviewoflimitedavailabledocumentationrevealseveralcommoncharacteristicsofthesenationalpolicies.Outstandingfeaturesincludecentralgovernmentleadershipandstrongfinancialsupport.
Manycountrieshaveaprimaryagencythattakesresponsibilityforconstructionpolicy.Inmostcases,particularlyinJapanandFrance,agovernmentministryatthecabinetleveloraquasi-governmentalentitydealswithbothdomesticandinternationalconstructionpolicymatters.
Collaborationwithinthefullrangeofrelevantorganizationsisapparentandincludesleadershiprepresentingfinancialinstitutions,constructionfirms,researchorganizations,educationalinstitutions,anddevelopmentandexportagenciesingovernment.Thecompositionofsuchpolicymakinggroupsreflectsthecomprehensiveness
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ofthepolicyformulationprocessandthedepthandbreadthofthepolicyresponse.
Policiestypicallyreflectanumberofconsiderations.Theseincluderamificationsforusingdesignservicestogainfollow-onconstruction,therelationshipofconstructiontofollow-onequipmentsales,therelationshipofconstructiontofollow-oncapitalgoodssales,andoperationsandmaintenanceaspectsaswellasreplacementpartsactivityrelatedtoconstructionprojects.
Policiesalsoattempttoexploitnationalcompetitiveadvantage,thatis,inwhichpartsoftheworldthenationalindustrieshavethemostadvantageouspositionandwhatelementsofthecompetitivepackagearetheirstrongest.Insomecases,thishasledtorankingtechnologiesforfurtheremphasisandinvestmentandidentifyingtargetareasoffocusfornationalinvestment.
Studiesunderlyingpolicyoftenincludesomespecificconsiderationofthenation'spotentialintheU.S.market.TheU.S.marketremainsthelargeststableandopenconstructionmarketintheworld(althoughtheeliminationoftradebarriersinEurope'scommonmarketwillcreateacombinedmarketcomparableinsizetotheUnitedStates).AllofitsAsianandEuropeancompetitorshavestrategicprogramsforpenetratingtheU.S.market.
SpecificCases
Thespecificpoliciesofseveralcountriesareinstructive.
GreatBritain
ThegovernmentofGreatBritainopenlyandclearlyprovidesanumberofmechanismsforsupportingtheeffortsofBritishconstructionandengineeringfirmstoobtainworkonoverseasprojects.AnOverseasProjectFundadministeredbytheDepartment
ofTradeprovidesdirectsubsidies.Inthisarrangement,thegovernmentputsupalimitedamountoffinancingtocoverprebiddingcosts,withthesubsidizedfirmrequiredtoreturnabout20percenttothegovernmentifitisthesuccessfulbidder.
Thegovernmentalsoengagesinprovidingmixedcredit,*usinga"warchest"similartothatrecentlyobtainedbytheU.S.
*Mixedcreditisameansofreducingborrowingcoststhroughprovisionofgovernment-backedloansatconcessionaryratestogetherwithcommercialloansatmarketrates.
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Export-ImportBank.Thiswarchestisalmostalwaysusedasaninterest-balancingsupportandisobtainedfromBritishcommercialbanks.Thefundssocollectedandutilizedareadministeredthroughagovernmentalagency,theOverseasDevelopmentAdministration,which,inmanyrespects,isquitesimilartotheU.S.AgencyforInternationalDevelopment.RequestsforthesemoniesfromprivatesectorcompaniesarechanneledthroughtheDepartmentofTrade.
TheBritishExportCreditGuaranteeDepartment(ECGD)isaninstitutionwhichfundsprojectssimilarlytotheU.S.Export-ImportBankandtheOverseasPrivateInvestmentCorporation.Itsresourcesareavailableforbothengineersandcontractors,andcanbeusedtofinancecapitalgoodspurchases.
TheBritishconstructionandconsultingindustryprosperedinthelate1960sand1970sonprojectsintheMiddleEast,butwiththeseverediminutionofthatmarket,theindustryhasbeenforcedtoscramblefordomesticwork.VeryfewBritishfirmshavecompetedforWorldBankprojectsbecauseofthelengthybidderlistandbecausetheyareaversetothemultilateralarrangementsoftenrequired.MostBritishfirmsareprivatelyowned,andseveralhavemadepartnershipsorotherarrangementswithU.S.counterparts,especiallyinthehousingmarket.Ontheotherhand,anumberofthelargerU.S.constructionindustryfirmsoperateintheUnitedKingdom,especiallyinconnectionwithNorthSeaoilfieldprojects.WithintheEuropeancommunity,theBritishhavefounditquitedifficulttoobtainprojects,becauseofmanyadministrativebarriers,expectationsofreciprocity,andnocommonalityofqualificationsorstandards.TheBritishcurrentlyviewtheUnitedStatesastheirprimaryoverseastargetmarket.
TheBritishhavetwoorganizationswhich,withgovernmentalacquiescenceandassistance,greatlyassisttheirdesignand
constructioncompanies.ThefirstistheBritishConsultingBureau,headedbytheDukeofGloucester,whichisactiveindevelopingsuchpotentialprojectareasasthePeople'sRepublicofChinaandAfrica.Itsmemberfirmsprovideprimarilyengineeringservices,butalsoconsultantservicesinhealth,agriculture,andvariousdevelopmentdisciplines.ThesecondorganizationistheExportGroupfortheConstructionIndustries,whosepurposeistoencourageotherstouseBritishconstructioncompaniesoninternationalprojects.It,likethebureau,closelymonitorsoverseasintelligencereportsonpotentialprojects,andreceivesstrongsupportfromthecommercialsectionsofBritishembassies.Theorganizationsactasacentralintelligence
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pointanddisseminatetheinformationtotheirmembersmuchmorerapidlyandaccuratelythanisdonebytheU.S.DepartmentsofCommerceandState.
France
TheinternationalactivitiesoftheFrenchdesignandconstructionindustryarebackedbyaFrenchMinistryofConstructionconcernedwithexports,constructioneconomics,andglobaldevelopment.Thisministrydealswithsuchmattersascooperationandcoordinationamongtheconstructionfirmsinobtainingforeignprojectsandotherexportmatters.
Theministryhasalsoposted40personsinFrenchembassiesaroundtheworld,wheretheyareconsideredtobeinvestmentsinfutureprojectsofthehostnations.ThepresentinternationalemphasisoftheFrenchconstructionindustryisonurbansystems,suchaswater,transportation,andnuclearpower.Therearealsodetailedanalysesbytheinvolvedtradeassociationsastofuturemarketpotentialandconcentration.
Francehasnospecificgovernment-sanctionedpoliciesoninternationalconstruction,butitdoeshaveaninformalpolicystatementandunderstandingwithindustry.TheFrenchpoliciesarereportedtobebasedonananalysisthatindicatedthecountryreceivesaseven-toten-foldreturnoneachinvestmentmadeindesignandengineeringprojectsinothercountries.Asinothercountries,theFrenchhavefoundthatitsinternationalmarketspeakedin19801982andhavesubsequentlydeclined.
Italy
ThefirstmajorinternationalconstructionprojectbytheItalianswasalargedaminZimbabwe,completedin1956.By1986theItalianinternationalconstructionvolumehadincreasedtoapointwhereit
stoodthirdintheworld,behindonlytheUnitedStatesandJapan.Italy,inrecentyears,hasconcentratedonobtainingplantconstructionprojects,ratherthanonlycivilworksprojects.Itsinternationalconstructionprojectshaveincludeda$1.3billionsteelworksplantintheSovietUnion,apowerdistributionstationinSaudiArabia,arefineryinGreece,andthesecondBosphorusBridgeinTurkey.In1986theItalianswereworkingon240constructionprojectsin76nationsand120designcontractsin62nations.
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Threemajorgroups,whichincludebothdesignandconstructionfirms,dominatetheItalianconstructionsector.TheseareFIAT(throughtheMilan-basedholdingcompanyFiatimpresit);IRI(throughtheRome-basedholdingcompanyItalstat);andtheLeagueofCooperatives.Amongthetop50Italianconstructionfirms,4contractorsbelongingtotheFIATgroup(thelargestprivatecompanyinItaly)accountfor15percentofthetotalcontracts;6firmsbelongingtoIRIaccountforanother15percent;andthe7cooperativecontractorshaveabout12percent.
OneofthereasonsfortheItalians'successistheirabilitytomaintainalastingpresenceinvariousnations,includingAfrica,Turkey,andGreece.Italiancompaniesarefullycompetenttohandleawiderangeofratherspecializedjobs,andclosecooperationexistsbetweenthepublicandprivatesectorsoftheindustry.TheItalianshavealsocometorealizethevitalimportanceof"financialengineering"andtoputforthproposals,bothtechnicalandfinancial,thatarewellsuitedtotheneedsandcapabilitiesofthedevelopingnations.
TheAssociationofItalianEngineeringandTechno-EconomicConsultingOrganizations(OICE,foundedin1966)representsitsmemberstonationalandinternationalclientorganizations.TheeffortsofOICEaredirectedatsupplyingclientswithintegratedtechnicalandcomplexinterdisciplinarysolutionstoplants,infrastructure,andengineeringworksingeneral.Theseservicesarenotlimitedtotechnicalanddesignservices,butincludeorganizationalmanagementandfinancialexpertise,appliedtobothinfrastructureandcommerciallyorientedprojects.
TheItalianshavelongrealizedthattosucceedintheinternationalarena,abasicelementissuccessfulfinancialengineering.Amajorstepwasundertakenin1977whentheItaliangovernmentorganizedacomprehensiveandarticulatedprogram(theOssolaLaw)toprovide
Italianexporterswiththenecessaryfinancialsupporttocompetesuccessfullyattheinternationallevel.However,Italiancompaniesarestillfindingitdifficulttocompeteagainstthemixedcreditprogramsutilizedbysomeothermajornations.Thus,manyItaliancontractorcompaniesusetheinterventionofspecializedItalianinvestmentbankswithexperienceintheexportcreditfield.
Sweden
In1973theSwedishgovernmentembarkedonanambitioushousingprogram.ItsgoalofprovidingdecenthousingforeverySwedish
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familycalledfortheconstructionof1millionhousesperyearfora10-yearperiod.Thisvolumeincreasedthecapacityoftheconstructionindustrywellbeyondthe"normal"marketvolumeofpreviousyears.
In1983areportoftheSwedishCouncilforBuildingResearchentitledTheSwedishBuildingSectorin1990setthefoundationonwhichthenext10yearsofSwedishconstructionactivitywillbebased.The1983reportconcludedthatacontinuedfavorableexpansionofbuildingprogramswouldbepossibleprovidedthereisasubstantialincreaseinexpendituresonresearch,development,experimentalconstruction,anddemonstrationactivity.Eventhoughconstructionhasdeclinedinrecentyears,itstillrepresented12.7percentofSweden'sGDP,or$11.6billion,in1984.
AmatterofconcerninSwedenistheverylowpriorityplacedonresearchanddevelopmenttoretainandfurtherdeveloptechnicalcompetence.TheCouncilforBuildingResearchrecommendedthatsubstantialincreasesinresearchanddevelopmentexpendituresbythegovernmentandtheprivatesectoroverthenext10yearsareessential.
Anumberofareasweresingledoutforattentioninthisresearchprogram:
thedevelopmentofbuildingtechnology;
satisfactoryandeconomicalpropertymanagement;
energyconservation;
municipalplanning;
higherhousingquality;and
theroleoftheconstructionindustryinthenationaleconomy.
TheSwedishgovernmentsupportstechnicalresearchbythebuildingindustryaswellasbytechnologicaluniversities.
From1968to1979,thevalueoftheSwedishexportsurplusofconsultingservices,constructionabroad,andbuildingmaterialsincreasedalmosttenfold.Atthetimeofthe1983report,theexportofbuildingmaterialsandconstructioncapabilitywasofgreatimportancetotheSwedisheconomy,withabout100,000peopledirectlyorindirectlyinvolvedinthismarket.TheSwedishfirmsthatcompeteintheinternationalarenafeeltheircompetitivenessinforeignmarketsisoftenduetolocaltiesandcontactsinthehostcountry(aperceptionsharedbyallmajorinternationalconstructionfirms).TheSwedesarealsoconvincedthatcompaniesexportingconstructionservicesmust,ingeneral,besizabletobecompetitive.
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InSwedenthereisacentralizedpointofcontactfortheconstructionindustry,theMinistryforHousingandPhysicalPlanning,whichisinvolvedinbothdomesticandinternationalmattersandpolicies.OneofitsrolesistoprovideguaranteesforinternationalconstructionactivitiesinordertohelpSwedishfirmscompetewithothernations.
Japan
ThedesignandconstructionindustryofJapanisconsideredauniquephenomenoninbothitsoverseasoperationsandinitsdomesticpractices.ForthepastseveralyearsJapanhasbeenofmajorconcerntothenationswithwhichitcompetesininternationalmarkets.Thisperception,however,isprobablydistortedbythehugeexportsuccessJapanhashadinsuchmanufactureditemsasautomobilesandelectronicsgoods.Therehasbeenanassumptionthatthesamephenomenonwas,orcouldbe,occurringintheconstructionindustry.However,whileGreatBritainandWestGermanyeachhaveover8percentofthetotalinternationaldesignmarket,Japan'ssharein1986wasonly6percent,aneverthelessadmirablefigureinviewofthenation'srelativesize.TheUnitedStates,with30percentoftheinternationalconstructionmarket,competesasmuchwithItaly,France,orBritainaswithJapan(seeTables3and4).
JapanesedomesticpoliciesonconstructionhavebeenthesourceoffrustrationandmisunderstandingonthepartofthosenationswhowishtoworkintheJapanesemarket.TheKansaiAirportprojecthasbeenarecentandlargesymbolofthisfrustrationfortheUnitedStates.Despiteapparentconcessions,therecanbebutlittledoubtthattheJapanesegovernmentisdeterminedtoprotectamajorshareofsuchlargeprojectsforJapaneseconstructors.
InJune1987,theEconomicCouncilofJapanissuedadetailedsetofpolicyrecommendationsforJapan'sEconomicStructuralAdjustments.Oneoftherecurringthemesisaconcernthatthe
economicgrowthofJapanbetrulyreflectedinthequalityoflifeforitscitizens.Forexample,thereportindicatesthatthepresentstateofthenation'sinfrastructureisconsiderablybelowthatwhichtheoverallGNPwouldindicateitcouldbe.Thereis,therefore,apotentialdomesticmarketofrathersizabledimensionsfortheJapaneseconstructionindustry.ThecouncilalsorecommendspositiveeffortstoensurethatforeigncompaniescandobusinessintheJapaneseconstructionmarket,andexpansionoftheGeneralAgreementon
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TariffsandTrade(GATT)frameworktoincludedesignandconstructionservices.
AsintheUnitedStates,Japanhasahandfulofconstructioncompaniesthatdominateboththedomesticandinternationalmarketsandliterallythousandsofmid-sizeandsmallerfirmswhosemarketisstrictlydomestic.TheBigSixconstructioncompaniesincreasedtheirshareoftheinternationalmarketfromabout1980to1985,andthentheirsharebegantodecreasesignificantly.Whiletheworldwideshrinkageofinternationalprojectswaspivotalinthedecrease,anotherfactorwasaself-imposedretrenchment.AreportentitledOverseasConstructionBasicIssues:InvestigationCommittee,sponsoredin1982bytheJapaneseMinistryofConstruction,emphasizedthat"therearemanyproblemsrelatedtotheshorthistoryofouroverseasconstructionactivities.Furtherdevelopmentisexpectedtoyieldagenuineserviceexportindustry.However,theroadisnotnecessarilysmooth."Althoughthisreportonoverseasconstructionwascompiledin1982,itremainsthemainguidancefortheindustryasawhole.Therehasnotbeenareasontoreviseorupdateitintheensuingfiveyears,accordingtotheMinistryofConstructionrepresentativeattheEmbassyofJapaninWashington.EventhoughtheexperienceoftheBigSixcontractorswithU.S.officeshasbeenthatprofitsarepoortononexistent,thecompaniesdonotdare,asyet,abandontheU.S.constructionmarketplace.
India
In1986theIndiangovernmentsetaside$1billionforathree-yearperiodtoboostitsengineeringsector,fundedbyacombinationofWorldBankloansmatchedbyIndia'scontributionsfromboththegovernmentandprivatesectors.Withthesecondlargestpopulationintheworld,thereispotentiallyanenormousbacklogofinfrastructureworkrequiredwithinthecountry.India'sdesignandconstruction
firms,however,aremoreinterestedinworkingonprojectsoutsidethecountry,actingassubcontractorsorjointventurepartnerswithfirmsfromthelargerdevelopednations.Thisemphasisstemsfromtwodesires:technologytransfertotheIndianfirmsinvolved,andanincreaseinforeignexchangeearnings.
Indiahasnocentralauthorityforconstructionandengineering,butthesesectorsarenominallyunderthepurviewoftheMinistryofHousingandPublicWorks.Indiahasanumberofengineeringandconstructioncouncils,mostofwhichareprivate,thatactivelyseek
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projectsbothwithinIndiaandoutsidethecountryfortheirmembercompanies.
TheSovietUnion
TheindustrializationoftheSovieteconomysincethe1930shasgivendesignersandbuildersofplantsandlargecivilengineeringprojectsthecredentialsrequiredtoworkintheinternationalarena.Mostofthisworkisintheless-developedcountries,especiallythosenationswithlargepublicsectorsandsocialistformsofgovernment.
AlldesignandconstructionactivitiesoftheUSSRareorganizedwithinthemammothagencyknownasGosstroy.ToexportthesecapabilitiestheSovietshaveformedaboutadozenforeigntradeorganizations(FTOs)thatare,inreality,largecontractororganizationswithformidablecapabilities.AlthoughgenerallyconfiningthemselvestoprovenSoviettechnologies,theFTOs,onoccasion,willdesignnewplants,equipment,andinfrastructurefortheirclients.Forfundamentallysimplephasesofagivenproject,theFTOwillusuallydependonthelocalcontractingabilitiesoftheclientcountryforbasicconstruction.However,forheavyequipmentandothermorecomplexphases,theFTOsdependontheirownsourcesofsupplies,supplementedsurprisinglyandquitefrequentlywithWesternequipmentandmaterial.
SinceallforeignprojectsareviewedasventuresofgreatprestigetotheUSSR,onlytheverybestengineersandtechniciansaresentabroad.AlthoughcomplaintsareoftenvoicedintheSovietpressconcerningthecalibreorslownessofdomesticprojects,thesecomplaintsareseldomheardonforeignventures,whichareturnkeytypeprojects,withtheprojectmanagementsubcontractedtoAustrianandFinnishcompanies.Ofthe65FTOsintheUSSR,thedozenthatareallowedtoengageinforeignprojectshavebeenlicensedtoformjointventureswithWesternfirmsandtopurchasesupplies,
technology,andequipmentfromWesternsuppliers.
EachFTOthatengagesinoverseasprojectshasonebasicspecialty,withanumberofothercapabilities.ThesespecialtiesincludeanFTOthatisoneoftheworld'slargestsuppliersofpower-generatingandtransmissionequipment,onethathasbuiltmorethan600industrialplantsandcommunicationsfacilities,onespecializingininfrastructureprojects,andonethatisexpertiniron-andsteelmakingequipment.
Themagnitudeofforeignactivitymaybejudgedbythefactthat
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theUSSRhassignedagreementswith83nationsforeconomicandtechnicalcooperation.Atotalof3,054internationalprojectswerecompletedbetweentheendofWorldWarIIand1986.Theseprojectsinclude1,769industrialenterprisesandpower-generatingplants,and329agriculturalprojects.
U.S.ResponsetoCompetition
ExternaleconomicforceshavehadsubstantialinfluenceonhowU.S.constructionhasrespondedtointernationalcompetition.ThehighvalueoftheU.S.dollarininternationalexchangehasuntilrecentlyhadparticularlystrongimpactonthisresponse.Abroad,andathome,U.S.firmshaveappearedrelativelymoreexpensivethantheirforeigncompetition.
ThestrongU.S.dollarbetween1980and1985servedasamagnetforimportedgoodsandinvestment.AseriesofmajortaxcutsandincreasesingovernmentspendingduringthisperiodfueledastrongrecoveryintheUnitedStateswhileotherindustrializednationsconsistentlypursuedslowgrowthpolicies.U.S.industrywasplacedatgreaterdisadvantageinbothdomesticandinternationalmarkets,withtheresultbeingstagnantexportsandarapidgrowthinimportpenetrationoftheU.S.markets.
However,aseconomistRobertJ.SamuelsonwroteintheJanuary26,1987,issueofNewsweek:
Realchangesunderlieourcompetitivenessanxiety.TheUnitedStatesnolongerenjoysunchallengedsuperiorityintradeandtechnology.Someofoursupremacywasartificial:WorldWarIIdestroyedourmostpotentcommercialrivals.Europe'sreconstructionrestoredthiscompetition.Thespreadoftechnology,moderneducationandmultinationalcompaniestoJapanandthedevelopingworldcreatednewcompetitors.Reversingthesetrendsisimpossible.AcompetitivevisionthatreinstatestheUnitedStatessittingastrideglobalmarketsispurenostalgia.
Nevertheless,theexamplesreviewedhereillustratethattheUnitedStateshasbeenslowerthanmanyofitscompetitorstodevelopnationaltradeandeconomicpoliciesinsupportofinternationalengineeringandconstruction.Whileindustryandtradegroupshavebeenvocalinreportingthepracticestheyfaceintheglobalmarket,theindustrylacksbothcentralrepresentationinnationalpolicydiscussionsandthemeanstopulltogetherdiversepublicandprivateintereststopresentaunifiedcompetitivefront.
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Inaddition,therearespecificproblems.ForeignpolicyconsiderationscanmakeU.S.firmsunacceptableinacountryaftersubstantialinvestmentshavebeenmadeinmarketdevelopment.TheU.S.ForeignCorruptPracticesAct(FCPA),enactedbyCongressforimportantethicalreasons,hamperstheabilityofU.S.firmstoconformtolocalbusinessandculturalstandards.CompetitionfromothercountriesnotsubjecttosuchregulationcanputAmericanfirmsatadisadvantageinbusinessnegotiations.
OthermorespecificdisincentivesarefoundinU.S.policy:
IncometaxrequirementsforU.S.citizensworkingabroadimposeagreaterburdenthanthoseofothercountries,makingitmorecostlytoprovideincentivesneededtoattracthigh-qualitypersonneltoforeignassignments.
DoubletaxationoccursondesignworkperformedintheUnitedStatesforoverseasprojects,becauseforeigncorporatetaxesonimportedengineeringservicesmaynotbedeductedfromU.S.earnings.
U.S.antiboycottlawsthatconflictwiththeboycottlawsofothercountriesrestrictopportunitiesopentoU.S.firms.
ThepreviouslydescribedactivitiesoftheU.S.TradeandDevelopmentProgram,Export-ImportBank,andOverseasPrivateInvestmentCorporationprovidevaluablebutseverelylimitedassistancetoU.S.designandconstructionfirmsseekingtoprovidecompetitivefinancingforprojects.TheincreasingimportanceoffinancehasencouragedU.S.firmssuchasBechtel,Fluor,andKelloggtoformconsortiawithBritish,French,German,andJapanesecompanies:
BechtelassociatedwithAmerican,French,andJapanesesuppliersandexportfinancesourcesforthe$450millionRioZuliatoCovenaspipelineandassociatedfacilitiesconstructedforEcopetroland
OccidentalinColombia.
TheFluorCompanybuiltapipelineforthePetroleumAuthorityinThailand(PTT)aspartofaconsortiumthatincludedthefourlargeststeelproducersinJapan,withfundingprovidedbytheBankofTokyo.
TheKelloggCompanydevelopedacooperativeagreementwiththeWestGermanfirmThyssentoundertakea$1billionaromaticsprojectinIndonesia.
U.S.companiesbringspecializedtechnologicalskillsandmanagerialexpertisetotheseconsortia,whiletheirpartnersprovidethefinancialsupportthroughtheirowngovernmentagencies,whichcan
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providemoneyandguaranteestosupporttheexportofservices,materials,andequipment.Indeed,thesespecializedtechnicalskillshavebeenthesourceofU.S.competitiveadvantageinthepast,althoughthisadvantageisnotexclusive,astheworkofShimizuwithIBMillustrates(CaseStudy3).
Americancompaniesstillaregenerallygivenhighmarksfortheirabilitiesindesign,engineering,projectmanagement,andtheoperationandmaintenanceproceduresforfacilities.U.S.firmsstillleadtheworldinthedesignofprocessplantsforthepetroleumandpetrochemicalindustry,aswellasthetechnologiesofchemicalplantsandpowerstations.Thenationleadsintheuseofcomputer-aideddesignanddraftingtechniques,andtheuseofcomputer-basedtoolsforconstructionmanagement,scheduling,andinventorycontrols.However,thepresentshortageoflargeprojectsaroundtheworldreducestheadvantageofthismanagementknow-howaspricebecomesincreasinglydecisiveinclientdecisions.Ofgreaterlong-termimportanceistheconcernofindustryleadersthatothercountriesarecatchingupwithandpassingtheUnitedStates.
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CaseStudy3:ShimizuMeetsIBM'sNeeds
Inthespringof1986,IBMfaceditsgreatestconstructionchallengeinmorethanadecade.ItsprimesemiconductordevelopmentandmanufacturingfacilityinEastFishkill,NewYork,neededanewtechnologycenterofapproximately300,000squarefeet.Andoccupancywasrequiredinlessthantwoyears.
ThenewAdvancedSemiconductorTechnologyCenter(ASTC)wasdescribedbyoperatingmanagementasanimportantmilestone,playingaroleinthefutureofIBManditsabilitytoremaincompetitiveinthedevelopmentandmanufactureofadvancedsemiconductorproducts.Thestatementofrequirementscalledforlevelsofenvironmentalpurityandvibrationresistanceneverbeforeachievedwithinthecompany.IBMmanagementwantedthenewbuildingtobethebestintheworld.
DesignandconstructionofthenewbuildingwouldbetheresponsibilityoftheRealEstateandConstructionDivision(RECD),whichbeganasearchforanoutstandingsemiconductorfacilitydesignfirm.InviewoftheconsiderableaccomplishmentsofJapanesecompaniesinthedesignandconstructionofsemiconductorfacilitiesincludinganIBMplantinYasu,JapanRECDconsideredtwoJapanesefirms,ShimizuandOhbayashi.RECDmanagementalsoconsideredseveralU.S.designandengineeringfirmsfortheproject.
IBMrecognizedthatconsiderabledevelopmentstudieswouldberequiredduringthedesignstageandthatclosecoordinationwouldberequiredbetweenthedesignandconstructionpeople.
RECDrepresentativesvisitedShimizufacilitiesinJapaninthelatespringof1986;theycameawayfavorablyimpressedwithwhattheyhadseenandlearned.
Shimizuisover180yearsoldandoneofthefivelargestdesignandconstructioncompaniesinJapanwithannualsalesofover$6billion.ThecompanyhasofficesintheUnitedStates,includingaNewYorkCitylocation.MostoftheworkShimizuhaddoneherehadbeenforJapanesecompanieswithU.S.operations.
Shimizuhasanannualresearchanddevelopment(R&D)budgetof$60million,whichis1percentofannualcompanysales.ThisistypicalofmajorJapanesedesignandconstructionfirms.Incontrast,RECDfoundonlylimitedresearchateitherdesignorconstructionfirmsintheUnitedStates.AtShimizu,630peopleareengagedinR&Dworkonsystemsdevelopment,producttechnology,infra-
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structureengineering,intelligentbuildings,constructionautomation,robots,andcleanroomdesign.
Shimizu'sworkincleanroomdesignandvibrationpreventionwasparticularlynoteworthy,andapplicabletosemiconductorfacilities.Shimizuhadachievedclass1capabilityforparticlesof0.5to0.3micronsinsize.AconsiderableamountoftheR&Dactivitywasintestingfilters.Thefirmhadalargevibrationtabletoconductseismictestsonstructuresfromwhichitdevelopedstate-of-the-artdesigns.
TheRECDteamalsoreviewedShimizumanagementsystemsforplanning,costestimating,scheduling,andprojectcontrol,whichareverysimilartothoseusedbyU.S.constructioncompanies.Aconstructionjobwasalsoobserved.Shimizuisbasicallyaconstructioncompany.Itwillconstructadesignpreparedbyanotherfirm,butwouldnotproduceadesigntobeconstructedbyanothercompany.RECDalsoreviewedtheoftendifficultworkingconditionsatEastFishkillwithShimizu.
RECDthenrecommendedtoseniorIBMmanagementthatShimizubehiredtodesignandconstructtheASTCproject.Managementagreed,andinJuly1986ShimizubeganworkingwithanRECDengineeringteam.ThegoalwastodevelopadesignconceptbasedontheIBMrequirementsanddesigncriteria.ShimizuestablishedabaseofoperationsacrossthestreetfromRECD'sheadquartersinWhitePlains,NewYork.
Overall,theworkingrelationshipbetweentheIBMandShimizuteamswentwell.Therewerelanguageandculturaldifferencestoovercome;however,astheparticipantsworkedtogether,soundmutualrespectwasdeveloped.IBMwasveryimpressedwiththeskillanddedicationoftheShimizudesigners.Theyoftenworked''roundtheclock"toanswerquestions(anexpedientinviewofthetimedifferencebetweentheUnitedStatesandJapan).Also,workinsupportoftheU.S.team
wasdoneatShimizu'sR&DfacilitiesinJapan.Theturnaroundtimeonmostofthisworkwasexcellent.Intheareaofadministration,thedesigncontracttookmuchlongertonegotiatethanalikecontractwithaU.S.designfirmbecauseoftheunfamiliarityofthepeoplewitheachother.Also,somedifficultieswithShimizu'sbillingswereexperiencedbyIBMbecauseoftheabsenceofsupportingdetail.
ShimizuandIBMspentconsiderableeffortoncostestimates,themutualdefinitionandunderstandingofcosts,andthenegotiationofthecostofwork.Shimizu'sinitialcostofconstructionworkwas
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about10percentmorethantheIBMbudget.Byworkingcloselytogether,IBMandShimizucametoaprojectcostagreementinthesummerof1986,whichwasreiteratedinNovember1986.
Intheearlystagesofdesign,ShimizuhiredaU.S.architecturalengineeringfirm,GiffelsAssociates,Inc.,ofSouthfield,Michigantosharethedesignwork.GiffelswaschoseninpartbyShimizubecauseofknowledgeofconditions,localcodes,andworkingpracticesatEastFishkill,whereduringthepriorfiveyearstheU.S.firmhaddesignedmanyfacilities.AlthoughShimizuprovidedthedesigndirection,aconsiderableamountoftheworkwasdonebyGiffels.ShimizualsosetupaliaisonteaminGiffelsoffices.
TheShimizudesignhadastrongbiastowardinitialcosteffectivenessincontrastwithfuturelowermaintenancecosts.Life-cyclecostappearedtobealesserconsideration.Overall,thedesignworkproceededwellalthoughtheworkingdrawingsfellbehindschedule.
InNovember1986,ShimizuhiredHuberHunt&Nichols(HHN),Inc.,Indianapolis,asgeneralcontractorontheconstructionofthebuilding.ShimizuchoseHHNbecauseofthesuccessfulworkthefirmshaddonetogetheronotherU.S.projects,plusHHN'sfamiliaritywithworkingintheEastFishkillarea.AlthoughasofthatdateIBMandShimizuhadacontractforthedesignworkonly,itwastheintentofbothpartiesthatShimizuwouldmanagetheconstructionphase.
Sufficientdesignhadbeencompletedtobegintheconstructionworkofgrading,footings,andfoundations.InDecember1986,agroundbreakingceremonywasheld.
ThefirstscheduledifficultiesaroseinJanuary1987,when50percentoftheworkingdrawingsweredueforbiddingpurposes;only15percentofthedrawingswerecomplete.Nevertheless,thesubcontractorbiddingprocessbegan.OnFebruary2,Shimizu
reiteratedthebudgetcostwhichhadbeenagreedtoin1986.OnFebruary13,ShimizuandIBMofficialsmetatRECDheadquartersinStamford,Connecticut.Shimizusaidthattheproject'scostofconstructionhadincreasedbynearly40percentoverthecostofrecord.Theycouldnotexplainthecostincreaseexcepttostatethatitwasbasedoninputsofthegeneralcontractorandsubcontractors.Theinitialoccupancyscheduledatehadalsoslipped.InasmuchasIBMhadnotchangedprojectrequirements,thenewShimizucostwasrejectedbyIBM.
Amonthlater,IBM,withinputsfromShimizuandothers,wasabletodefinethereasonsforthecostincrease,whichcanbesummarizedasfollows:
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ShimizuseemedtoexperiencedifficultiesinworkingwiththesubcontractorsintheEastFishkillarea.InJapan,muchworkisdoneonnotmuchmorethanahandshakebetweentheparties.Here,thesubcontractorsappearedapprehensiveaboutworkingforaforeigncontractor.Thelanguageandcustomdifferences,whichwereovercomebyShimizu,IBM,andGiffelsduringthedesignwork,couldnotbesurmountedduringthecomparativelyshortbiddingcycle.TheroleofHHNinthebiddingwaslessthanonewouldexpectofageneralcontractor.
ShimizuseemedtohavelimitedconfidenceinU.S.specialtyproducts,manufacturers,andsupplies.TheirdesignerswishedtospecifymanyitemsfromJapanesesupplierswithwhomtheyhadextensiveexperience.
ShimizuseemedtoexpectthatU.S.clientcompaniessuchasIBMwouldapprovethebudgetcostincrease,trustingShimizu'seffortsasthebestpossible.
ItshouldbenotedthatShimizuacceptedtheEastFishkillarealaborpractices,productivitylevels,andsoonasagiven,whereasIBMbelievedafreshapproachbasedontheJapanesemodelcouldyieldsomeimprovementshere,ashasbeenthecaseintheautomotiveindustry.IBMwasalsodisappointedthatShimizu'sguaranteeswentnofurtherthanHHN'sguarantees,whichinturnwerebasedsolelyontheinputsofthesubcontractors.
IntensenegotiationswithShimizufailedtoresultinacostdecrease.Therefore,IBMrequestedthatShimizucompletethedesignandactasaconsultantduringconstruction,butnotastheconstructionmanager.
ShimizucontinuedwithdesigncompletionwhileIBMbeganintensenegotiationswithU.S.contractorstodotheconstruction.Thesenegotiationsweresuccessful,andtheprojectwasawardedtoWalsh
ConstructionCompanyofTrumbull,Connecticut.TheprojectcostisnowwithintheIBMbudget,albeitatahighernumberthantheoriginalShimizucontractandwithlesscontingency.Theprojectwillbeundertakenonaphasedbasisinviewofthescheduledelaysthatwereexperienced.(Shimizudoesnotrecommendthisapproachasitismoredifficulttoguaranteeprojectquality.)
Initially,Shimizuwasreluctanttoactasaconsultantbecauseofitscorporatepolicynottocontractfordesignworkwithoutactuallymanagingtheconstruction.However,ultimatelyIBMandShimizusignedaconsultingagreement.IBM'spracticeistoretainthedesignfirmtosupporttheconstruction.
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ThevalueofanIBM/Walsh/ShimizurelationshipduringconstructionisthattheinvolvementofShimizuwillbetterensurethattheprojectisbuiltpertheplansandspecifications.ShimizuwillgainvaluableexperienceintheU.S.market,andWalshwillhavethebenefitofaquality-orientedassociatewithanintimateknowledgeofthedesign.
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4ResearchandDevelopmentinConstructionResearchanddevelopment(R&D)inconstructionincludesabroadrangeofactivitiesdirectedtowardimprovingquality,productivity,andefficiencyofthematerials,equipment,labor,andmanagementofconstruction.ThevalueofR&Dactivitiesiswellacceptedasmeansforimprovingproductivityandgeneratingnewideasinelectronics,telecommunications,geneticengineering,andothertechnicalfields.Thelinkagesbetweenconstructionresearchandapplication,however,havebeenmoredifficulttodocument,despiteadvancesmadeduringthetwentiethcenturyinnewequipmentandmaterials,largelybecauseofthegreatnumberofmostlysmall-scalebuildersandequipmentandmaterialsproducers.Forthissamereason,theconstructionindustryhasgreaterdifficultymobilizingresourcesneededtosupportsubstantialresearchprograms.
Asaresult,thecommitteeobservedseveraltroublingtrends:
OthercountriesappeartobeputtingmoreeffortthantheUnitedStatesintoconstructionR&D;
Othercountriesareworkinghardtoimprovethe"hardware"ofconstructionbyimprovingconstructionmethodsanddevelopingtechnologyforautomation(includingrobotics);
AmoreinnovativeenvironmentexistsinmostforeignfirmsbecauseR&Dhasbeenintegratedintooveralloperations;
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Othercountriesarewillingtobacklonger-rangeresearcheffortsthroughtheslowbutmethodicalmethodsneeded;
R&Dinothercountriestendstobeproprietarytothecompanysponsoringit,leadingtosomeduplicationbutincreasingcommercialrewardsforsuccess;
Verticalintegrationwithinlargeforeignconstructionfirmshasmadeeasiertheutilizationofresearchresultsbytheoperatingunitsoftheircompanies;
Thereislessemphasisonresearchrelatedtothe"management"ofconstructionbyfirmsinothercountries,sincetheytendtoacquirethesetechnologiesthroughjointventureswithAmericanfirmsorbysendingtheiryoungprofessionalstoU.S.universitiesfortraining.
U.S.ConstructionResearchandDevelopment
AccurateappraisalsofR&DinvestmentsintheU.S.designandconstructionindustriesarestubbornlyelusive.Availablestatisticsarescarceandoftenrecordedinamannerthatcanbemisleading.Inanotherstudy*donebytheBuildingResearchBoardthefollowingobservationsweremadeonR&DexpendituresintheU.S.designandconstructionindustries:
Constructioncontractors(bothgeneralandspecialty)$54million
Manufacturersofconstructionmaterialsandequipment$838million
Federalagencies(bothconsumersandnonconsumers)$200million
Allothersectors(basedonestimate)$111million
Totalannualconstruction-relatedR&D$1,223million
Basedonatotalvolumeofconstructionofsome$312billionin1984,theseestimatesrepresentabout0.4percentofsalesinvestedinR&D,
farlessthanothermatureindustriessuchasappliancesat1.4percent,automobilesat1.7percent,ortextilesat0.8percent.(ThisexpenditurelevelisalsowellbelowJapaneseconstructionR&Dexpenditurerates.)U.S.contractors,architects,andengineersinvestlessthan0.05percentinR&Dasagroup,afractionoftheamounttheyspendonliabilityinsurancealone.
*ConstructionProductivity,NationalAcademyPress,Washington,D.C.,1986.
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BothlackofresourcesandcompetingprioritiesarefactorsinthislowlevelofR&Dexpenditure.Facedwithintensepricecompetition,manydesignersandconstructorsfinditdifficulttoappropriatesubstantialresourcesforR&D.TaxregulationsthatmayrequirecapitalizationofR&DexpendituresincreasethedemandsR&Dwouldmakeoncurrentcashflows.ThenaturalaversiontoriskofmanybusinessmenmakesR&Dspendingthatmayyieldnoimmediatecommercialbenefitmoredifficulttojustifyevenwhenbusinessisgood,andeasytocutwhentimesarebad.Notoneofthemanymediumandsmallfirmscanaffordameaningfulresearchprogram,andtherearefewmechanismstofacilitatejointfundingofresearchthatwillyielddistinctbenefitstotheparticipatingfirms.
WhattheoptimumlevelofU.S.constructionR&Dspendingoughttobeisacomplexquestionforwhichthecommitteefoundnoreadyanswer.ObservationofU.S.performanceinintroducingtechnologicalinnovationandanerodingcompetitivepositionmakeitapparentthatthelevelofspendingviewedeitherasaninvestmentforincreasedproductivityorasanindicationofopennesstonewideasistoolow.
Directgovernmentinvolvementinconstructionresearchislimitedbutsignificant:
TheNationalScienceFoundation(NSF)hasbeenaprincipalsourceofsupportforuniversity-basedresearchactivitiesfortheU.S.designandconstructionindustries.ThroughtheNSF,NationalEngineeringResearchCentersarebeingestablished,suchastheCenterforAdvancedTechnologyforLargeStructuralSystems(ATLSS)atLehighUniversity.InadditiontoNSFfundsof$10.4millionoverafive-yearperiod,otherstate-relatedinstitutionsandtheprivatesectorareprovidingmatchingfunds.ThemajorgoaloftheATLSScenteristodoresearchanddeveloptechnologybenefittingU.S.structures-relatedindustriesindesign,fabrication,andconstruction,and
inspectionandprotectionofstructuresinservice.
ThefederalgovernmentlaboratoriessuchastheArmy'sConstructionEngineeringResearchLaboratory(CERL),theNavy'sPortHuenemeCivilEngineeringLaboratory,theTyndallAirForceEngineeringandServicesResearchCenter,andtheNationalBureauofStandards'CentersforBuildingTechnologyandFireResearchconductresearchonadiverserangeoftopicswithmilitaryandcivilapplications.
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GrantsfromtheArmyCorpsofEngineershaveproducedmajornewresearchprogramsattheMassachusettsInstituteofTechnologyandtheUniversityofIllinois.
TheConstructionIndustryInstituteattheUniversityofTexasatAustinisanoutstandingexampleofresearchwithoutdirectgovernmentsupport.Morethan65organizationsrepresentingowners,contractors,and25academicinstitutionshavecombinedtheirresourcestotackleadvancedconstructionresearch.Theinstitutethenrepresentsanimportantmodelforbroaderpublic-privatepartnershipinconstructionresearch.
OtherEffortsNeeded
Anexaminationofresearchideasforaddressingsocietalneeds,undertakenbytheTechnicalCouncilonResearchoftheAmericanSocietyofCivilEngineersin1979,indicatesalonglistofresearchsuggestions,mostorientedtowardimprovingthemethodologyofengineering.Thelistincludesalargenumberofprojectsrelatedtoimprovingmethodology,manyofwhichcouldbevaluableintheinternationalarena.*
Thearchitecturalresearchcommunityisbasedalmostexclusivelyinuniversities,sothatthepotentialexistsforlinkingsuchresearchtoteachingprograms.Thecivilengineeringresearchcommunityisalsolargelybasedinuniversities,butthereissomemechanical,electrical,orelectronicresearchofdirectrelevancetotheconstructionsectorsbeingdonebytheseotherdepartments.Toalimitedextentbotharchitecturalandcivilengineeringresearchinstitutionsdoprojectsrelatedtomechanicalandelectricalsystems.Mostresearchinstitutionshaveprojectstiedtocomputer-baseddesignandengineering,butmoreworkisneeded,particularlytobringnewresultsintopractice,throughteachingandprofessionaloutreach
programs.
WhilespendingonresearchoftenexceedsU.S.rates,theworkgoingoninconstructionsectorresearchprogramsinothercountriestendstomirrorprogramsinU.S.universitiesandgovernmentlaboratories,withthreemajorexceptions:
*AddressingSocietalNeedsofthe1980'sThroughCivilEngineeringResearch,TheAmericanSocietyofCivilEngineers,NewYork,NewYork,1979.
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TheworksupportedbytheSwedishgovernmentonbehalfofthebuildingindustrytendstobemuchmorepeople-oriented,describinguserrequirementsandhowtheserequirementsshouldbeaccommodatedindesign.However,theredoesnotappeartobeanybettermatchbetweentheresearchprogramsandtheteachingprogramsintheuniversitiesthanintheUnitedStates.
TheSovietUnionhassixmajorresearchunitswithinitsconstructionagencyGosstroy.Fiveoftheseunitsdotraditionalscienceandengineeringresearchofthetypedoneingovernmentbuildinglaboratoriesaroundtheworld,butoneresearchunitconcentrateson"cybernetics."Notmuchisknownabouttheworkofthisunit,butitpotentiallycouldrepresentaninterestingareaforcollaboration.
Withtheirgovernment'sstrongencouragement,thesixlarge,integratedJapaneseconstructioncompaniesallsupportresearchbyinternalunits.Theseprogramsincludehundredsofpeople,excellentfacilities,andabroadspectrumofsubjects(seebox).
Thiscommitteehasnotundertakentorecommendacompleteagendaforresearchinconstructionanddesign,andplanningofsuchanagendabyasinglecentralizedbodywouldinanycasebeunproductive.However,committeemembersfeelthatcertaintypesofresearchareclearlyneeded,suchasthesetwoexamples:
1.Thegeneralsubjectof"diagnostics"istalkedaboutwithinthearchitecturalresearchcommunityasanareaformethodologicalimprovement.Workonthissubjectcouldbegreatlyenhancedifuniversityresearchersandpracticingarchitectsworkedinparallelwithfirmsthatareinthebusinessofdesigningandmarketingdiagnosticinstruments.Aprogramthatprovidesspecialfundstoresearchunits(ascontrastedwithindividuals)withinuniversitiesthathadalreadyobtainedanagreementformatchingfundsfrominstrumentcompanieswouldencourageverticalintegrationbetween
thearchitecturalsectorandtheequipment-producingsector.
2.Thedevelopmentofsafetymethodsforstructuresduringtheconstructionphasecouldbenefitfromcasestudies.Forexample,theNBSCenterforBuildingTechnologyhasjustcompletedastudyofthecollapseofL'AmbiancePlazainBridgeport,Connecticut,abuildingwhichwasbeingconstructedusingthelift-slabmethod.Thiscollapsecouldserveasacasestudyforastructuralengineeringfacultytodevelopacontinuingeducationcourseforengineersinpractice,thusprovidingalinkamongafederallaboratory,universityresearch,andprofessionals.Whilethissubjectisuniqueandtimely,
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THEJAPANESECONSTRUCTIONINDUSTRYANDR&D
JapanhasestablishedaMinistryofConstructionresponsibleforsettingnationalpoliciesonbehalfoftheconstructionindustry.Oneofitsmajorpolicydecisionswastoencourageprivatefirmstoestablishresearchanddevelopment(R&D)capability.Asaresultmorethan20ofthelargestfirmsinJapannowinvest1percentoftheirsalesinR&D,andintheseconstructionfirmsR&Dhasbecomeawayoflife.Eachhasestablishedwell-equipped,campus-likeresearchcenters,andresearchisintegratedthroughouttheiroperatingdivisions.
ThegovernmentofJapanprovidesataxdeductionforR&Dofupto1percentofrevenues,sometimesprovidesloans,andsometimessponsorsresearchprojectsdirectly.University-basedresearchisrelativelylimitedbyU.S.standards,butthegovernmentfundsandoperatesaBuildingResearchInstituteandaPublicWorksResearchInstitute.
ThelargeprivateconstructionfirmsinJapaninvestasmallportionoftheirresearchfundsineconomicandmarketingstudiesofwhattheyshouldbedesigningandbuilding,butmuchmoregoesintosuchtechnicalsubjectsasnewmaterialsanddesignideas.Theirlaboratoriesarefurnishedwiththelatestequipment:
Shaketablesforearthquakesimulation;
Windtunnelsforanalysisofstructuraldesigns;
Environmentalchambersforevaluatingperformanceofmechanicalequipment;
Soundchambers(bothquietandnoisyconditionchambers);
Structuraltestingdevices;
Firetestingequipment;
Materialsandchemicaltestinglaboratories;
Cleanroomsformorehigh-technologywork;
Hydraulicandgeotechnicallaboratoriesforcivilworksprojects;and
Outdoortestingyardsforlong-termanalysisofweathering.
InadditionJapanesecompaniesdoworktoimprovedesignandconstructionprocessesthroughapplicationsofcomputer-aideddesignandengineeringsystems,newmethodssuchasslurrywallsinfoundationconstruction,andconstructionautomationandrobotics.Theyareworkinginotherfieldsaswell:
Biotechnologytoimprovethequalityoflakeandriverwateranddevelopanewwatertreatmentprocessingsystemforsewageandindustrialwaste;
Mechatronics,includingrobotization,teleoperationtechnology,automaticcontrols,andconstructionworkcontrolsystems;
Applicationoffifth-generationcomputersincludingcomputer-aidedplanning,designandconstruction,maintenance,andengineering;
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Newenergysources,includingcoalgasification,fuelcells,solarcells,solarthermalsystems,coalliquefaction,newbatteriesforenergystorage,andhydrogenenergy;and
Newprimarymaterials,forexample,theadditionofmetals,plastics,ceramics,andelectronicstoconventionalmaterials,suchassoils,rocks,cement,asphalt,andsteel.
Itseemslikely,atthemoment,thatthepeopleoftheUnitedStateswillbenefitmorefromtheJapanesestrategy(byimportingimprovedinfrastructureinthefuture)thanfromexistinginfrastructureresearchintheUnitedStates.
theconceptistohavethisworkserveasamodelforsimilarprojectsonarangeofstructuralsafetyproblemsandsolutions.
AswillbediscussedfurtherinChapter6,thedevelopmentofadvancedconceptsforinfrastructureposesaninternationalchallengeofenormousproportions.Thepresentpracticeofdealingwithurbantransportation,waterandenergysupplies,wastemanagement,andcommunicationsisbasedoninventionsdevelopednearlyacenturyago.Inthelargestcitiesoftheworldtheseoldinventionsareclearlynotwellsuitedtodealingwithpresentproblems,andinthesmallcommunitiesofthedevelopingworldtherehasalwaysbeenakindofhand-me-down,makeshiftqualitytothenatureofinfrastructureinvestments.
NewtechnologyforinfrastructurecouldpossiblyhelptheUnitedStatesavoidtheendlesscuttingandpatchingofour100-year-oldsystems,andcouldalsoprovidewholenewmarketopportunitiesintheinternationalsphere.Thereshouldbespecialprogramstoconcentrateoninfrastructuredevelopmentwithintheuniversityresearchcommunity.Theseprogramsshouldencourageuniversity
unitsthatareskilledintheareasofthe''emergingtechnologies"toexplorewaysofcreatingneworhigher-performingsystemsforinfrastructure.Technologiessuchasnewceramics,advancedmicroelectronics,biotechnology,andgeneticengineeringshouldbeincorporatedintojointprogramswiththearchitecturalandcivilengineeringfaculties,andespeciallytoprovidegraduatestudentsfromthesetechnologicalareastheopportunitiestoworkoninfrastructure.Insuchprogramsuniversitiescouldassociatewithtradeandprofessionalgroups,suchastheAmericanPublicWorksAssociation,tointroduceengineersinpracticetonewtechnologiesandtheircapability.
Thecommitteerecognizesthatsomeengineeringschoolscanbestbeencouragedtoexpendresearchandteachinginconstructionby
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evidenceofemploymentinterestfortheirgraduates.Programsmaybeneededtolinkemployerswithgraduateprogramsinconstructionbyhavingtheuniversityofferspecialgraduateprogramsformatureemployeesofprofessionalfirms.
AstheJapanesemodelillustrates,university-basedactivityisnottheonlywaythatconstructionR&Dcanbeaccomplished,butintheUnitedStates,academicinstitutionshavebecometheprimarycentersofresearch.Thispatternisunlikelytochangeintheforeseeablefuture,norisitclearthatitoughttochange.Whatiscleartothecommittee,however,isthatbettermechanismsforlinkingresearchtoconstructionpracticeareneeded.
Thereisaneedaswelltoincreasethespeedwithwhichideasfromonefieldofresearcharetestedfortheirvalueinotherfields,andwithwhichideasofvalueenterpractice.ThecaseoftheBellLaboratories(CaseStudy4),drawnfromanindustrialsituationverydifferentfromconstruction,isneverthelessinstructivebecauseoftheirgreatsuccessinlinkingresearchtothemarket.Inconstruction,wherethemarketisdistributedamongsomanysuppliersandbuyers,projectsbuiltwithfederalgovernmentfundscanbeusedtodemonstratenewtechnology.AgoodexampleistheintroductiontoU.S.transitconstructionofprecastconcretesegmentaltunnelliners(seeChapter6).
TheU.S.DepartmentofCommercehasnoted,"Overthenexttwentyyearsitistotallyreasonabletoexpectthatwewillseewidespreadapplicationofthefollowingtechnologies:advancedmaterials,microelectronics,automation,biotechnology,computing,membranetechnology,superconductivity,andlasers."*Todayandinthenearfuturemanyothernewtechnologiesmaybeaddedtothelist.Mechanismsareneededtoexposethesenewtechnologiesandconstructiontooneanother,andtoproducedesignandconstructionprofessionalscompetenttomaketheconnectionsrequiredfor
innovation.Besidesinstitutionalresearch,theremustbetrainingandeducation.
*EffectsofStructuralChangeintheU.S.EconomyontheUseofPublicWorksServices,U.S.DepartmentofCommerce,Washington,D.C.,1987.
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CaseStudy4:theBellTelephoneLaboratories
Theinventionofthetelephoneisperhapsthesinglebestmodernexampleofhownewtechnologycanalterbuildingandinfrastructure.TheBellTelephoneLaboratorieshaveformorethan60yearsbeenoneoftheleadingU.S.centersofresearchandinnovationsthathavechangedhowtodesignandbuildindividualstructuresandcities,aswellasthemorebasicstructureoftheeconomyandsociety.
ThecommitteerecognizesthattheBellLabsareaproductofaprivatesectormonopolycompanythathadverticalintegrationandanabilitytomakeeffectivedecisionsaboutresourceallocationandmanagementstrategy,withgreatereasethanisthecaseinU.S.designandconstruction.Nevertheless,manycharacteristicsoftheBellLabscanserveasausefulmodelforinstitutionalarrangementsneededtostrengthenU.S.buildingresearch.Itisinstructivetolookatthehistoryandaccomplishmentsofthisorganization:
Theinventionofthetelephonewasnotinspiredbyapre-existentpopulardemand.Rather,itcameaboutlargelythroughtheingenuityandvisionofonemanAlexanderGrahamBell.Hisbeliefthattherewasagreatpotentialneedfortwo-wayvoicecommunicationoveradistance,aneedofwhichfewmenhadbeenconscious,wasconfirmedbyitsimmediatesuccessandspectaculargrowthinspiteofearlytechnicallimitations.
Bytheendofthefirstfiftyyearsagreatnewindustryhadbeendeveloped.TherewerenearlyseventeenmilliontelephonesintheUnitedStates,almosttwelvemillionofthemintheBellSystem.Andinperhapsnootherfieldhadtheforceofscientificresearchinsupportofengineeringdevelopmentbeensoeffectivelydemonstrated.*
AstheAT&TCompanyAnnualreportfor1913said:
Atthebeginningofthetelephoneindustrytherewasnoartofelectricalengineeringnorwasthereanyschooloruniversityconferringthedegree
ofelectricalengineer.Notwithstandingthisthegeneralengineeringstaffwassoonorganized,callingtotheiraidsomeofthemostdistinguishedprofessorsofscienceinouruniversities.
Asproblemsbecamemoreformidableandincreasedinnumberandcomplexity,theengineeringandscientificstaffwasincreasedinsizeandinitsspecializationsothatwenow(1913)haveworkingatheadquartersontheproblemsoftheassociatedcompaniessome550engineersandscientistscarefullyselectedwithdueregardtothepracticalaswellasthescientificnatureoftheproblemsencountered.
*AHistoryofEngineeringandScienceintheBellSystem,BellLaboratories,MurrayHill,NewJersey,1975.
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Itcanbesaidthatthiscompanyhascreatedtheentireartoftelephonyandthatalmostwithoutexceptionnoneoftheimportantcontributionstothearthasbeenmadebyanygovernmenttelephoneadministrationorbyanyothertelephonecompanyeitherinthiscountryorabroad.
By1924thetechnicalprogramsoftheBellSystemhadsogrowninrangeandintensity,andinnumberofpersonnel,astosuggestformationofasingleneworganizationtohandlemostoralloftheseactivities.SuchanorganizationwasformedonDecember27,1924,andstartedoperationsonJanuary1,1925,underthenameofBellTelephoneLaboratories,Incorporated.ThiscorporationhadadualresponsibilitytotheAT&TCompanyforfundamentalresearchesandtotheWesternElectricCompanyfortheembodimentoftheresultsoftheseresearchesindesignssuitableformanufacture.Atthedateofincorporation,thepersonnelnumberedapproximately3,600,ofwhomabout2,000weremembersofthetechnicalstaff,madeupofengineers,physicists,chemists,metallurgistsandexpertsinvariousfieldsoftechnicalendeavor....
Technologicalinnovationhadformedtheindispensablecorefortelephony'sgrowthupto1925,butwasevenmoresignificanttothefuturebecausesomuchofitwasfundamental:thewaywasbeingpreparedformorepowerfulsystemsyettocome,whichwouldbeessentialtotheenormousexpansionfelttobelyingahead.Perhapsmoresignificantly,theapplicationofscientificmethodstosolvingthe"system"problemsoftelephonysetapatternthatinfluencedindustrialresearchanddevelopmentbydemonstratingthepowerofthesemethodsanddevelopingtechniquesofmanagementthatencouragedtheiruse.
Backinguptheworkonsystems,whichhadlaidthegroundworkforsomuchthatwasyetneeded,werethesuccessfulmanagementtechniqueswhichhadbeendevelopedforconductingandapplyingresearch,themeansforcloselycontrollingthequalityofmanufacturedproduct,andatypeoforganizationprovidingcloseintegrationoftheuser,technicaldeveloper,andmanufacturer.
TheBellLabshaveproducedthetransistor,thelaser,thesolarcell,andthefirstcommunicationssatellite,aswellassoundmotion
pictures,thescienceofradioastronomy,andcrucialevidenceforthetheorythataBigBangcreatedtheuniverse.Whiletheyareaprivatelaboratory(inthedistinctionmadeintheUnitedStatesbetweengovernmentandprivateresearchwork),theirfinancialsupportwaslargelygeneratedfromakindoftaxoneverytelephoneintheUnitedStates(beforethebreakupofAT&Tin1984),whichinturnwasallowedbytheirrateexaminers(apublicinstitutiondesignedtomonitoramonopolyutility).Thepotentialfordirectemulationbyagovernment/industryresearchcenterislimited,therefore,buttheoperatingprincipleofstrivingforincreasedsystemsperformanceby
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teamsofscientists,engineers,manufacturers,andsystemsoperatorsisagoodone.
Today'stelephonecallerusescomponentsBellneverdreamedof,today'sdriverdependsonsystemsDaimlerandBenzneverthoughtof,andtoday'shomeownerswitchesonapowerandlightsystemthatEdisonneverenvisioned.Thesediscoverieshavelongsincebeenembeddedinmammothnetworksoftechnologythatnosingleindividualinvented.
Technologicalsystemsevolvethroughrelativelysmallstepsmarkedbytheoccasionalstubbornobstacleandbycountlessbreakthroughs.Oftenthebreakthroughsarelabeledinventionsandpatented,butmoreoftentheyaresocialinnovationsmadebypersonssoonforgotten.Intheearlydaysofasystemsuchaselectriclightandpower,inventorsplayedtheprominentrole.Thenasthesystemmaturedandexpandedtourbanandregionalnetworks,otherscametothefore.Electriclightandpowersystemstodayarenotjustscaled-upversionsofthePearlStreetstationthatEdisonintroducedinNewYorkCityin1882.Bytheturnofthecentury,forexample,itwastheutilitymanager,nottheinventororengineer,whoplayedthemajorroleinextendinground-the-clockservicetomanydifferentkindsofcustomerstothenightshiftchemicalplantaswellastherush-hourelectricstreetcars.*
*ThomasP.Hughes,Theinventivecontinuum,Science84,November1984.
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5EducationandTrainingAlthoughtheU.S.systemofprofessionaleducationcontinuestoproducehighlyqualifiedengineers,architects,andconstructionmanagers,andtoattractstudentsfromcountriesaroundtheworld,thecommitteeneverthelessfeelsthatchangeisneeded.Experienceintheinternationalconstructionmarketshowsclearlythatyoungprofessionalsneedstrengthinfourkeyareastomeetthechallengesofglobalcompetition:
Astrongtechnicalbase;
Aclearunderstandingofdesign;
Anunderstandingoftheintimateconnectionbetweentechnologyandculture;and
Anunderstandingofforeignlanguagesandregionalstudies.
Strengthinthesefourareascannotbeachievedonlywithinthecontextofformaleducationalprograms.Institutionsofferingundergraduatetrainingnecessarilyfocustheirattentionandlimitedresourcesondevelopingastudent'sbasicskills,understanding,andintellectualoutlookneededtomaintainprofessionalsuccessoverthecourseofseveraldecades.Realworkexperienceisanindispensableelementofeducationandtrainingforinternationalconstruction.
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ProgramsofStudy
Educationincivilengineeringorarchitectureistheprimarycourseofstudyforprofessionalsenteringconstructionanddesignleadingtoconstruction.Otherengineeringandscientificdisciplines,culture,history,art,andtheoftenintuitiveprocessesofdesignarealsoessentialelementsofknowledgefortheconstructionprofessional.However,constructionprofessionalsnotethatconstructioncannotbetaughtinthesamewayasmanufacturingorotheractivitieswithstandardizedproduction.Constructiontrainingneedsthespecificityofcarefullychosencasestobalancethetendencyofformaleducationalprogramstowardabstractionandgeneralization.DespiteJapaneseandEuropeanexperiencewithmodularhousing,thefailureofProjectBreakthroughintheearly1970swasanexampleofthemistakenbeliefthatstructurescouldbebuiltthesamewayasmachines(i.e.,usingthemassproductionlinesoftheautomobileindustry).
Engineering
IntheUnitedStatestoday,267academicinstitutionsoffer1,323engineeringprogramsaccreditedatthebachelor'sleveland30atthemaster'slevel(seeTable9).(Whilethereareamuchlargernumberofgraduateprogramstheydonotrequireaccreditation.)Thegeneralcriteriaforbasicaccreditationofengineeringprogramsrequireatleastoneyear'straininginacombinationofmathematicsandbasicsciences,oneyear'straininginengineeringscience,one-halfyear'straininginengineeringdesign,andone-halfyear'straininginhumanitiesandsocialsciences.Uptooneyearisthenavailableforotherrequiredandelectivecourses.Thecriteriaforaccreditationattheadvancedlevelrequirethecompletionofabasiclevelprogram,plusafifthyear.Intheadditionalyear,atleasttwo-thirdsmustcomprisesomecombinationofadvancedlevelworkinmathematics,basicscience,engineeringscience,andengineeringdesign.Table10
providesaperspectiveontheannualnumberofgraduatesofengineeringprogramsattheB.S.,M.S.,andPh.D.degreelevels.
Therearefouraccreditedprogramsinengineeringmanagement.However,engineeringmanagementprogramsaretypicallyofferedattheM.S.degreelevel,andaccreditationatthegraduatelevelisnotprevalentbecauseofarestrictivepolicywhichseverelylimitstheaccreditationopportunitiesforengineeringprogramsatthatlevel.
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TABLE9TotalAccreditedEngineeringProgramsbyProgramArea,asofOctober1986
ProgramAreaBachelor'sLevel
Master'sLevela
Civil,construction 201 1Engineeringmanagement 3 1Architecturalengineering 10 0Mechanicalengineering 218 2Electricalengineering 238 3Chemicalengineering 142 1Industrialengineering 85 1Allother(24areas) 426 21
Total 1,323 30
aThesearetheaccreditedprogramsatthemaster'slevel.Mostaccreditationoccursatthebachelor'slevel,sothatthereareonlyafewgraduateprogramscountedforaccreditationpurposes.
TABLE10DegreesinEngineeringAwarded,1986
DegreeProgramArea B.S. M.S. Ph.D.
Civilengineering 8,798 3,197 439Engineeringmanagement (N/A) (N/A) (N/A)Architecturalengineering 381 48 0Mechanicalengineering 16,702 3,462 565Electricalengineering 24,514 5,926 779Chemicalengineering 6,148 1,430 534Industrialengineering 4,645 1,798 120Allother(15areas) 16,990 7,164 1,249
Total 78,178 23,025 3,686
Note:Currently,thereare95institutionsofferingfour-yearbachelor'slevelprograms,and155offeringtwo-yearassociatedegreeprogramsinengineeringtechnology.Theseinstitutionsoffer273and460programsatthefour-yearandtwo-yearlevels,respectively.Nopublisheddataareavailableonthenumberofdegreescurrentlyawardedperyearinthetechnologyprograms.
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Atpresent,thereareapproximately20graduatelevelprogramsinengineeringmanagementofferedatU.S.institutions.
Architecture
Thereare103accreditedprofessionalarchitecturedegreeprogramsinNorthAmerica.Aprofessionaldegreeiseitherafive-yearbachelorofarchitectureoramasterofarchitecture.AccordingtostatisticsthatareavailablefromtheNationalArchitecturalAccreditingBoard(NAAB),3,088B.Arch.degreesand1,545M.Arch.degreeswereconferredin19861987.
Althoughithasbeensaidthat"thereexistasmanycurriculaasthereareprogramsinarchitecture,andinmanyschoolsthereareanumberofoptionsthatleadtothecompletionofthedegreerequirements,"professionalarchitectureprogramsactuallysharesimilarcorecurricula.Criteriaforaccreditationrequirecoursesindesign,history,materials,humanbehavior,practice,andsoon,withtheemphasisplacedonthedesignstudio.Othercoursestakeneitherwithinthearchitectureschoolorinotherdepartmentsaremeanttocomplementandenhancethedesigncoreoftheprogram.ThephilosophystatementoftheGraduatePrograminArchitectureatColumbiaUniversityisrepresentativeofmanyarchitectureschoolsinitsdeclarationthat
Columbia'sGraduateSchoolofArchitectureisdedicatedtothepropositionthatarchitecturaldesignhasalwaysbeenandwillcontinuetobethecoreofprofessionaleducation.Behavioral,technological,andarthistoricalcourseworkisofferedassupportforthedesignstudio.Oftenattemptsaremadetointegratetheattitudesinherentinthesedisciplinesintothedesignexercises.However,itistheabilitytosynthesizevast,differentiatedbodiesofknowledgeastheyaffectandmodifythedesigndecision-makingprocessthatisstressed.
Inadditiontothebasiccorerequirements,theremayalsobea
sequenceofcoursesinarchitecturalhistoryandtheory.Manyschoolsalsorequire,oratleastencourage,speechorwritingcourses,andotherworkinthehumanitiesandsocialsciencestoparallelprofessionalcourses.
EngineeringandArchitectureTechnology
Engineeringandarchitecturebothinvolveamixoftechnicalskillandcreativeapplicationofjudgmentabouthowgeneralprinciplesapplyinspecificcases.Therelativebalancebetweeninnovative
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thinkingandstraightforwardanalysisshiftsfromjobtojob,andfromtasktotaskwithinaproject.Opportunitiesarisefordividingthelabor,givingriseinturntoopportunitiesforpersonnelwhofunctionasabridgebetweendesignerandcraftsman.
Engineeringandarchitecturaltechnologyrequiretheapplicationofscientificandengineeringknowledgeandmethodscombinedwithtechnicalskillsinsupportofengineeringandarchitecture.Thetechnologistisapplications-oriented,buildingonabackgroundofappliedmathematics,science,andtechnologytoproducepractical,workableresultsquickly;toinstallandoperatetechnicalsystems;todevisehardwarefromprovenconcepts;todevelopandproduceproducts;toservicemachinesandsystems;tomanageconstructionandproductionprocesses;andtoprovidesalessupportfortechnicalproductsandsystems.
Normally,thetechnologistwillholdadegreefromanaccreditedengineeringorarchitecturetechnologyprogram.Incontrasttothetwo-yearprogramsoftrainingfortechniciansqualifiedtoconductrelativelystandardfieldmeasurementsandlaboratorytests,thetechnologistmayspendanadditionalonetotwoyearsreceivingtraininginbasicprinciples.Becauseofhiskeyroleasanimplementer,thetechnologistiscalledontomakeindependentjudgmentsthatwillexpeditetheworkwithoutjeopardizingitseffectiveness,safety,orcost.Thetechnologistshouldbeabletounderstandthecomponentsofsystemsandbeabletooperatethesystemstoachieveconceptualgoalsestablishedbytheresponsibleengineeringorarchitectureprofessional.
ContinuingEducation
Generallyspeaking,professionalenhancementthroughcontinuingeducationprobablyoffersthemostpromiseforthenear-futuredevelopmentofprofessionalsintheinternationalconstructionfield.
Manyopportunitiesexistforbotharchitectsandengineers,withdiversesubjectmatters,institutions,andlengthsofcourse.Thesubjectmattermayrangefromtechnicaltopicsatahighlevelofsophistication,toadministrationandmanagement.Continuingprofessionaleducationcoursesareofferedprimarilybyeducationalinstitutions,professionalandtechnicalsocieties,largecorporations,andengineeringfirms.
ThepolicyoftheAmericanInstituteofArchitects(AIA)oncontinuingprofessionaleducationstates:
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Theultimateresponsibilityforprofessionaldevelopmentlieswiththeindividualarchitect.Professionaldevelopmentoccursproperlyinbothformalcontinuingeducationandlessformallearningexperiences,includingeverydayprofessionalpractice.TheAIAadvocatestheprofessionaldevelopmentofitsmembersandiscommittedtoprovideresourcesandservicesinitssupport.
Inmanyinstances,courseofferingsinsubjectareasfrequentlynotincludedinformal,university-basededucationaremoreproperlyavailableinacontinuingprofessionaleducationsetting.Economics,costestimating,realestateprinciples,management,andothercoursesthatarenottraditionallyofferedinaprofessionaldegreeprogrammightinfacthavegreaterimpactontheprofessionalstudentwhoalreadyhassomeworkexperienceonwhichtobuild.
IssuesinCivilEngineering
Civilengineeringteachinginthepasttwodecadeshasfocusedonmethodsofanalysis.Theemphasishasbeenonfundamentalstudiesofmechanics,appliedmathematics,andtheanalysisofstructuresorofsystems.Thecomputerhasalreadyinfluencedmuchofthisteachingandthatinfluenceisincreasing.Coursesinsteelandconcretestructuresdoincludecurrentpracticeasexpressedincodesanddofocusontheprinciplesofdetailedproportioningoncetheformandloadsaregiven,butcivilengineeringeducationisalmostexclusivelyanalytic,concentratingoninstillingbasicknowledgeanddependingonsubsequenton-the-jobexperiencetoteachstudentshowtoapplythisknowledge.
EmphasisonDesign
Thisdominanceofanalysismeansthatthereisalmostnoteachingdevotedtodesignasasynthesis,toconstructionastheprocessofeconomicalbuilding,andtotheperformanceandpermanenceofcivilworksasderivedfromfieldobservations.Thepresentthrustof
educationtreatstheworksasobjectsforanalysisratherthanassubjectsforcreatingnewideasindesignandconstruction.
Thisteachingdirectionmirrorscloselythepresentstateofstructuralresearchweightedheavilytowardmethodsofanalysisandoncomputers.Fromadesignstandpointthisresearchispassive;itisorientedtowardimprovementsinanalysisratherthanchangesindesign.Itiscertainlytruethatmoreefficientanalysiscanhelpdesignas
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aprocess,butitishardtoshowhowmorecompetitiveconstructionhasarisenbecausedesignasaprocessismoreefficient.
Designimprovementdependsoneffectiveperformanceevaluation,forwhichfieldobservationsarecrucial.Theperformanceofactualcivilworksisnotcurrentlyapartofeducation.Existingcoursesonanalysisdoprovideasoundbasisforinterpretingtheresultsoffieldobservations,butatpresentthispowerfulpotentialisunrealized.Becauseeducatorsdonotusedatafromrealworksintheirteaching,thereislittleefforttocollectdata,andsuchdata,ifcollected,rarelyarepublished.Intheteachingofconcretestructures,forexample,performancecriteriaaretaughtalmostexclusivelythroughcodeprovisions,whichisofcoursenecessarybutnotsufficient.Designistreatedascontrolledbyageneralizedsetofrulesratherthanasinformedbyspecific,butcharacteristic,examples.
OnedramaticexampleofthetendencytotreatimprovementsincivilworksasarisingfromgeneralanalysisisthehighwaypavementresearchprogrampursuedbytheBureauofPublicRoadsfrom1920to1945.Theprogramtriedtorepresentobservationsofperformanceandconstructedalongseriesoflaboratoryanalyticstudiesdevotedtothefundamentalsofpavementdesign.Thatworkultimatelyhadtobeabandoned,andfollowingWorldWarIIthebureaureturnedtoamajorfull-scalefieldstudyasthebasisfordesignimprovements.However,thelessonslearnedinthisanalyticalworkstillunderliecurrentunderstandingofthematerialsmechanicsofpavementbehavior.
ConstructionManagement
Constructionandconstructionmanagementaretreatedseparatelyfromdesign,andtheultimaterelationshipbetweendesignandconstructionisonlyrarelydiscussed.Also,constructionisoftentreatedasasetofprocessestobeanalyzedandnotasaseriesof
individualuniquecases.ThisdistinctioniswellrecognizedinpracticeandwasrecentlyarticulatedinaneditorialoftheEngineeringNewsRecord(May7,1987)commentingonanApril1987workshopsponsoredbytheNationalScienceFoundationatLehighUniversity:
Thedominantthemewasrejectionoftask-specificrobotsorexpertsystemsandembracingnewmethodstodistributeinformation.Thereasonforbothisthesame:constructionisoneofthemessiestindustriesaround.Eachprojectdiffersfromothersandeachchangesfromdaytoday.Figuringouthowtocompleteaconstructionprojectefficientlyhasnorelationtofiguringouthowtomakethesame
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spotweldinthesamecarchassiseveryfewseconds.Repetitionisirrelevant;coordinationisvital.
Theabsenceofconstructionmanagementinacivilengineeringeducationthusleavesadistinctvoidthathasimportantimplicationsforhoweffectivelytheresultingprofessionalscansupportconstruction.ThisvoidmaytheninfluencetheentireU.S.constructionindustry.
IssuesinArchitecture
Formostofrecordedhistory(goingbacktothetimeoftheEgyptianpharaohs)architectswereeducatedbybecomingapprenticedtoaprofessionalalreadyinpractice.Towardtheendofthenineteenthcentury,formalschoolswereestablishedoutsideofthearchitect'sofficetoprovidespecial''ateliers"forgainingaprofessionaleducation,usuallywithmoreemphasisontheartofarchitecturethanwasaffordedanapprenticeinanormaloffice.TheEcoledesBeauxArtsinParisbecamebytheearlypartofthetwentiethcenturytheleadingplacetostudyarchitecture,ifone'sfamilycouldaffordit.Theinfluenceofthisschool'smethodofteachingspreadaroundtheworldascollegesanduniversitiesbegantoofferarchitecturecourseswithintheirprograms.
BythetimeofWorldWarII,the"designstudio"agroupof10to20studentsunderthedominanceofa"crit"(memberoftheteachingfacultywhocriticizedthestudentswork)formedtheheartofallschoolsofarchitecture,andstilldoestothisday.Themethodofteachingisessentially,therefore,stillaformofapprenticeship,butwithaseriesofmastersandwithnovisiblefinancialconnectionbetweenmasterandapprentice.Whenastudentisfortunateenoughtoworkwithoneormorereallyskilledcrit,theeducationalformatissuperb,butwhenthecritisneitheraskilledpractitionernoragoodteacher(andthisisalltoooftenthecaseinthepastfewyears),the
studentisnotwelleducated.
Further,thecontextoftheuniversitytendstobedominatedandovershadowedbythedemandsofthedesignstudio.Itisacommonsighttofindthelightsinthearchitecturedesignstudiosburningallnightwhenastudentprojectiscomingupforjuriedevaluation.Theterm"encharrette"wascoinedduringtheseperiodsofintenseconcentrationintheEcoledesBeauxArts,becauseatthefinalandformalendofaproject'sschedule,acartor"charrette"wouldbepulledthroughthestudiostocollectthestudents'work.
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Criticsofthearchitectureeducationsystemclaimthatthedesignstudioisoveremphasized,andthattechnicalinstructionsuffersasaresult.Proponentsofthestatusquosuggestthatitispossibleforastudenttoacquireneededspecifictechnicalskillsintheworkplace.
SpecializationandSmallPractices
Whileeducationemphasizescreativedesigninthestudiosetting,architectureaspracticedbyprofessionalswhoarelicensedbyeachstateisasynthesizingactivitywhichconvertstherequirementsofaclientintobuildingspacesthatarestructurallysound,provideasafeandhealthyenvironment,areeconomicallysuitedtotheclient'sneeds,andarestylisticallyinkeepingwithboththeclient'stastesandtheprofessionalcommunity'sstandards.Inpractice,thearchitectwilluseconsultingengineersforsuchspecializeddesignandanalysisasstructuralsystems,heating,ventilating,andair-conditioningsystems,lighting,acoustics,energyefficiency,costestimating,andsoon.Thepracticingprofessionalthenmustbepreparedduringhiseducationalprogramtounderstandandcommunicatewithsuchconsultants,butnotnecessarilytohavetheseanalyticskillshimself.
Asthenovicearchitectmovesintopractice,hewillbeledtofocusondesign,engineering,construction,ortheproductionofworkingdrawingsandspecifications.Inlargefirmsmostemployeeswillendupontheproductionside,anditisthoseskillsthatareaddressedinvaryingdegreesbyschoolsofarchitecture.Thoseschoolsthatareorganizedaroundtwo-orfour-yearprogramsof"architecturaltechnology"aremostclearlyfocusedonprovidingthetrainingforpeoplewhowilldevotetheircareerstodesignproduction.ThereareaboutadozenschoolsintheUnitedStateswithprogramsinarchitecturalengineering,havingastheirpurposethepreparationofprofessionalswhowillfocusonthataspectofpractice(whichalmostalwaysmeansstructuralengineering,however).Thevastmajorityof
studentsarebeingeducatedasthoughtheywillbedesigners.ItisnotsurprisingthatintheUnitedStatessomanysmallarchitecturefirmsexist(themediansizeofarchitecturefirmsis4.2personsonthestaff),sincethedesignerhastobeseenas"gifted"toplaythatroleinalargefirm,andnotmanygraduatesofarchitectureschoolscanmeetthecriteriaassociatedwith"gifted."
Inthepastfewyears,especiallyinhigh-pricedrealestateareassuchasCaliforniaandNewYork,architecturegraduateshavebeenpursuingcareersinthedevelopmentsideofthebuildingindustry.
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Thisisnotonlyamorelucrativecareerchoice,butsinceadevelopmentfirmnormallybuildsfirstandsellsorleaseslater,itprovidesaneasiermeanstobeing"thedesigner"fortheprojects.Asindicatedelsewhere,internationalpractice(outsideoftheUnitedStates)tendstobedominatedbyfirmsthatareverticallyintegratedsothatarchitectsandengineersarestaffmembersoflargefirmsthatprovide"turn-key"servicestotheirclients,asituationpoorlysuitedtothegreatmajorityofU.S.architecturalfirms.
ArchitecturalResearchandEducation
The103schoolsofarchitectureinNorthAmericahavehadaninconsistenthistoryofresearch.Themajorityoftheschoolshavenoformalunitconcernedwithresearch,althoughindividualfacultymembersmightundertakeresearchstudiesthemselves.Itwouldbeunusualforsuchindividualresearcheffortstoincludeundergraduatestudents,anditwouldbedifficulttodocumentthecontributionsthatsuchresearchmakestotheteachingprogramoftheschool.TheArchitecturalResearchCentersConsortium,createdin1976,isagroupofsome30researchunitsattachedtoschoolsofarchitecturethatprovidesameansofexchangingresearchplansandresults.Theconsortium,originallyintendedtomakeitpossibletoundertakelarge-scaleresearcheffortsbycombininginstitutionsintoteams,hashadlimitedsuccess.
Toenhanceprospectsforarchitecturalresearchasacontributiontoeducation,thecommitteerecommendstheinclusionofadvancedtechnologicalcontentinthearchitecturalcurriculum:
Coursesthatprovideanunderstandingofhowbuildingsareactuallybuilt,notjustthematerialsandequipmentthatgointoabuilding,butthetoolsandtechniquesusedforconstructioninthefieldandinthefactory;
Coursesthatprovideworkingexperienceintheuseofcomputersastoolsofdesignandanalysis;and
Designstudiocoursesorganizedaroundmakinguseofthegrowingresearchbase,whichrangesfromresearchonhumanneedstoresearchonindoorairquality.
Unlessprofessionalsinpracticereceiveearlytraininginhowtousetheknowledgebaseavailabletothem,theywillnotlikelydoso.ContinuingeducationprogramsshouldbeofferedbytheAIAandprofessionalschoolstoprovideprofessionalsinpracticeopportunities
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tolearnabout,andexperience,thedesignandconstructionpracticesofothercountries.
SkillsforGlobalEnterprise
Knowledgeofforeignlanguages,culturalenvironmentsofothernations,andsignificanceofhistoricandculturalcharacteristicsforbothbusinesspracticeandbuildingisthebasisforeffectiveperformancewithintheinternationalconstructioncommunity.ThecommitteeobservesthattheUnitedStateshasnotkeptupwithitsforeigncompetitionindevelopingtheseskills.
Forexample,afewarchitecturalschoolsofferstudy-abroadprograms,butfacultyopinionsaboutthevalueoftheseprogramsismixed.Inmostcases,studentsreturnedtotheirhomeinstitutionswithamoresophisticatedandheightenedawarenessofdesignpossibilities;inoneortwoinstances,thisheldtrueforbuildingtechnologyproblemsaswell.Mostoftheprogramsprovideforampleopportunityformixingwithstudents,faculty,andlocalpractitionersinothercountries.
Whileitisgenerallyagreedthatthistypeofexperiencecontributessignificantlytoanyeducation,mostfacultyrespondingtoaquestionnairedistributedbythecommitteefeltthatsuchaprogramdidnotadequatelypreparestudentsforprofessionalinvolvementininternationalconstructionprojects.Therewasuniformagreementthatfewstudentshadforeignlanguageskills,withtheexceptionofaprograminChinaorganizedbyCarnegie-MellonUniversity,forwhichthestudentswererequiredtostudyChineseforoneyearpriortoenrollingintheprogram.
Cross-CulturalTrainingfortheConstructionIndustry
The"AgendaforAmericanCompetitiveness,"issuedbytheBusiness-HigherEducationForum,theNortheast-MidwestCoalition,andthe
CongressionalClearinghousefortheFuture,pointsoutthatabout10,000English-speakingJapanesebusinessexecutivesworkinAmerica,handlingbillionsofdollarsintrade,someofthattradeinconstruction.However,veryfewofthe1,000AmericanbusinessmeninJapancanspeakJapanese.Generallyspeaking,theJapaneseseemtobemuchbetterequippedtocometotheUnitedStatestostudythetechnologiesandpracticesofindustryherethanAmericanswouldbetogotoJapan.
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A1984surveycitedbythe"Agenda"reportdemonstratedthatU.S.studentsareincreasinglyignorantofworldgeography(andinparticular,countrieswhichareofstrategicimportancetotheUnitedStates):fewerthanhalfcouldlocateIran,only30percentcouldlocateAfghanistan,andonly25percentknewwhereElSalvadorwas.
The"Agenda"reportrecommendedthatcollegesanduniversitiessignificantlystrengthentheirinternationalstudiescourseslanguage,cultural,political,andeconomicsandmakethemreadilyavailabletoU.S.businessexecutivesaspartoftheirownlifelonglearningprograms.Certainlybusinessdegreeprogramscannotaffordtoignoretheincreasedglobalizationofbusinessbothdomesticallyandinoverseasmarkets.
Engineeringschoolswoulddowelltoconsiderforeignlanguagedegreerequirementsandinternationalstudiescourses.Onewaytoinvolveengineeringstudentsinsuchstudieswouldbetodesignthecoursessothattheywouldincludeengineeringaspectsofotherculturesandanemphasisontherelationshipbetweentechnologyandculture.Architecturestudentsalreadyreceiveastrongdoseofculturalstudiesinthearchitecturalhistorycoursesthatareapartofthecorecurriculum.ThecommitteesuggestsinparticularthattheFulbrightProgramshouldbeexpandedtoencouragemorearchitectsandengineerstogainexposuretoothercultures.
Accordingtoareport*oftheNationalAcademyofEngineering(NAE),onewayofconnectingU.S.engineerswithforeigntechnologiesisbyincreasingtheirparticipationininternationalactivities,particularlyinthesettingofinternationalstandardsforproductsandservices.Anotherwaywouldbethroughthedevelopmentofcasestudies,researchedandwrittenbyexpertconsultantsfromvariousnations,andthenincorporatedintothecurriculum.
TheNAEreportstatedthat"technologicalisolationwillsurelyunderminethefutureofourindustries."Increasingly,astheU.S.designandconstructionindustrieslooktogreaterparticipationintheglobalenterprise,engineeringschools,professionalsocieties,andbusinessorganizationsmustlookoutsidethemselvestolearnhowtodobusinessinaninternationaleconomy.Onlythroughmoredeliberateexposuretoforeignlanguages,geography,business,andculturewillU.S.designprofessionalsgainaccesstoforeign-originated
*StrengtheningU.S.EngineeringThroughInternationalCooperation:SomeRecommendationsforAction,NationalAcademyPress,Washington,D.C.,1987.
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technologies,fostercooperationwithforeignworkforcesoverseas,anddevelopanincreasedabilitytodealwithforeignsourcesofbusinessopportunitiesandfinance.
AcquiringForeignLanguages
Thestudyofforeignlanguagesisnotgenerallyofconcerninthepresenteducationalprogramsofeitherarchitectsorengineers.Inthecontextofthisstudy,well-developedlanguageskillsarefarmoreimportantforthecomprehensionofaparticularculturethanforthepurposeofdoingbusiness,asEnglishhasvirtuallytakenoverastheinternationallanguage.AccordingtoaModernLanguageAssociation(MLA)LanguageEnrollmentSurveyconductedinthefallof1986,totalenrollmentinlanguagesotherthanEnglishatAmericancollegesanduniversitiesexceeds1millionforthefirsttimein14years.Thesurveyresultsindicateanincreaseofalmost4percentbetween1983and1986,continuingatrendthatbeganin1980.ItisinterestingtonotethatJapaneseandChinesecourseshadthefastest-growingenrollments(45and28percentincreases,respectively),althoughtotalnumbersofstudentsstilltrailthosestudyingSpanish,French,German,orRussian.Figuresarenot,however,brokendownaccordingtofieldsofstudy.
IntheNAEreport,thecommitteestated,"EducationalinstitutionsshouldrespondtotheurgentneedforincreasedcapabilityinAsianlanguagesandcultureforU.S.engineersandtechnologists.Graduatedegreeprogramsinengineeringandappliedsciencesshouldemphasizetheneedforspokenandtechnicalcompetencyinatleastoneforeignlanguage."Thesamechapteralsoemphasizes"theusefulnessofearlystudyoflanguagesandexperiencethatreinforceslanguageskillsneedstobebetterappreciatedbyyoungpeoplewhowishtopursuecareersinengineeringandtechnology."Itisalsosuggestedthatstudyofanylanguagebedoneinconjunctionwith
studyofthetechnologyandthecultureinquestion.Havingsomefamiliaritywithaforeignculture,evenwithoutthelanguage,canbeveryhelpfultothoseprofessionalsworkingoverseas.
Asfarasarchitectureprogramsareconcerned,itissafetosaythatthesameistrue,althoughthisinformationisschool-specific,accordingtotheAssociationofCollegiateSchoolsofArchitecture(ACSA).Forcertainspecialareasorprogramswithinthefield,suchasarchitecturalhistoryortheory,certainlanguagesmaybemandatory(suchasaRensselaerPolytechnicInstituteprograminRome,
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whichhasaprerequisiteofoneyearofItalian),butlanguagesarenotrequiredforgeneraladmissiontomostschools.Inundergraduatearchitectureprograms,thereisgenerallymoretimeforelectivecoursesthaninengineeringschools,asthefirstprofessionaldegreeisoftenstructuredforfiveorsixyearsofstudy.Inmanyarchitectureprograms,studentsarestronglyencouragedbutnotrequiredtotakecoursesinotherlanguages.
Severalfactorsfavorthestudyofforeignlanguagesbyarchitectureandengineeringstudents:
Languageskillsaretransferable;onceoneforeignlanguagehasbeenstudiedand/ormastered,itbecomesmucheasiertotackleanotherone,becausethoseparticularmentalskillshavebeendevelopedandexercised;
Inthestudyofalanguage,thestudentlearnssomethingaboutthecultureofthatnation,whichcanbeveryusefulprofessionally;and
Languageskillsenhanceastudent'saccomplishments,makinghimmoremarketabletointernationalprojectsinthebuildingindustry.
Factorsthatworkagainstthestudyofforeignlanguageshavelargelytodowithtimelimitations.Sincebothengineeringandarchitectureprogramsarefairlyhighlystructured,andsinceinmanycasesthelanguagesthathavebeenstudiedwillnotbeusefulincurrentlydevelopinginternationalmarkets,continuingeducationcoursesmaybetheanswerfortheshortterm.
InternationalProjectManagement
Mosttrainingandeducationininternationalprojectmanagementhavebeenthroughhands-onexperienceobtainedindividuallybymembersofconstructionandengineeringfirmsengagedinexecutingindividualprojects.Theinternationalmarketischaracterizedbyanumberof
uniqueconditionsthatcandramaticallyaffectprojectcost,schedule,andquality.Theseconditionsareverycountry-andsite-specific,andsubstantiallocalmarketresearchisrequiredofprospectiveengineeringandconstructionfirmsseekingoverseaswork.
Americanfirmsperformingoverseasconstructionworkmayhavedifficultyinobtainingtherequiredcommerciallicensing,facepossibletransportationdelays,andencounterdifficultiesinobtainingcustoms
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clearances.Theseissuesmaybefurthercompoundedbylanguagebarriersandin-countryrestrictionsontheemploymentofAmericans.
Firmsenteringtheinternationalmarketplaceneedtobereadytoreacttouniquelaborlaws,requirementsforuseoflocalmaterials,andsignificantdifferencesinqualitystandards.Theymustalsobepreparedtomakesubstantialinvestmentsintechnologytransferandtrainingtodeveloptheskillbasenecessarytocompletetheproject.Thehostcountry'sbusinesspracticesandconstructionprocessconceptsarefrequentlyatoddswithaU.S.contractor'snormalbusinessmethodologiesandprocedures.
Personnelconductingcontractnegotiationsfrequentlydonothavesufficienttimetobecometotallyfamiliarwithnuancesoftheconstructionprocessofagivencountry.Expensivelessonshavebeenlearnedsimplybecauseinexperiencedcontractorshavefailedtotakeintoaccounttheimpactofthehostcountry'scultureontheirstandardoperatingprocedures.
Thedegreetowhichtheclientbecomesinvolvedintheconstructionprojectcanbeapositiveornegativefactordependingonhisfamiliaritywiththeconstructionprocessandtherolehechoosestoplay.Iftheclientchoosestoactasliaisonwiththehostnation'sgovernment,thecontractorwillbeatthemercyoftheclientwhenitcomestoacquiringneededinformation,permits,andotherapprovals.Thiscanhaveasignificantimpactonprojectschedulesandcosts.
Ingeneral,thecommitteeconcludesthatU.S.constructionanddesignfirmsandtheirprofessionalsneedbettertrainingfortheirroleintheglobaleconomy.TherelationshipbuiltbetweenPhilippHolzmannandJ.A.JonesConstructionCompany(seeCaseStudy5)illustrateshow,withcapablepeoplewillingtocooperate,firmsfromdifferentnationscanworktogethertotheirmutualbenefit.Themotivationforthisinquiryhasbeencompetition,butitisbecomingclearthat
cooperationisequallyimportant.Onbothcounts,U.S.skillsarelagging.
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CaseStudy5:BuildingInternationalRelationships:PhilippHolzmannAGandJ.A.JonesConstructionCompany
AlargeGermanfirm'sacquisitionofalargeAmericanconstructionfirmnineyearsagoiscalledasuccessfulmarriagebytheparticipants.Notonlyhavethetwomanagementstylesmixedwell,theysay,butthetransferoftechnologybetweenPhilippHolzmannandJ.A.JonesConstructionCompanyhasbenefitedbothcompaniesbyallowingexpansionofworldwideconstructionhorizons.
PhilippHolzmannAGhadgrownfromasmallfamilybusinessintoaleaderininternationalconstruction.FoundedasarailwaycontractornearFrankfurtamMainin1849,thefirmquicklyextendedactivitiestoincludecivilengineeringandbuildingofalltypes.HolzmannwonitsfirstmajorcontractoutsideGermany,themainrailwaystationinAmsterdam,in1882,andsincethenhasbeenactiveinmanyEuropeancountries,SouthAmerica,Asia,andAfrica.HolzmannnowhasmajoractivitiesongoingintheUnitedStates.
Thecompanydesignsandbuildspublicandcommercialbuildings,manufacturingandindustrialplants,marinestructures,andmasstransitfacilities.Itsrangeofservicesincludesturn-keyprojectsaswellasmaintenanceandoperationoffacilities.Holzmannalsoundertakesreconstructionandmodernizationofbuildingsandindustrialplants.
ThegeneralmanagementandoverseasdepartmentsofPhilippHolzmannareheadquarteredinFrankfurt,WestGermany.Thecompanyoperates30branchofficesthroughoutGermanyandhasmorethan50domesticandforeignsubsidiariesengagedinspecialfieldsofconstructionandconstruction-relatedactivitiesaroundtheworld.
HolzmannisrepresentedintheUnitedStatesthroughitssubsidiary,PhilippHolzmannUSA,byJonesGroup,Inc.,inCharlotte,NorthCarolina,andbyLockwoodGreeneEngineers,Inc.,Spartanburg,SouthCarolina,inadditiontoothersubsidiaries.Jonesisaconstructioncontractor,andLockwoodGreenerepresentsthearchitecturalandengineeringside.
In1986theHolzmanngroupofcompanieshadsalesof$6.6billionworldwide.Approximately48percentofthattotalwasintheUnitedStates.ThedecisiontoentertheU.S.constructionandengineeringmarketwasaresultofeventsaroundtheworld.Sinceitsfirstinternationalexperienceinthelatenineteenthcentury,Philipp
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HolzmannAGhassetcorporatestrategiesbeyondGermanboundaries.Intheearliestyears,thecompanybuiltthelegendaryBaghdadrailroad,theDar-es-SalaamrailroadinAfrica.
ByWorldWarI,HolzmannhadbuiltthefirstskyscraperinBuenosAiresandenteredtheU.S.marketwithconstructionontheBargeCanalinNewYork.Morerecently,itsactivitiescenteredintheMiddleEastwheresomeoftheworld'slargestconstructionprojectshavebeenbuiltwithoilrevenuesincludinghospitalsandasportsstadiuminSaudiArabia.Intheearly1970s,morethan50percentofthecompany'sforeignrevenuescamefromSaudiArabia.ButtheIranianrevolution,Iran-Iraqwar,andthesofteningofoilpricesmadetheprospectsofabloomingconstructionmarketintheMiddleEastseemlesspromising.
Holzmanncarefullyevaluatedthepossibilityoffutureconstructionmarketcollapsesand,inordertoprotectthecompanyfromsuchuncertainties,decidedtodiversifybyinvestinginothercountries.Economicandpoliticalstabilityandaself-sustainingmarketintheUnitedStateswereanattraction.HolzmannsoughtaU.S.companythatwouldcomplementitsstrengthsand,in1979,acquiredtheCharlotte-basedJ.A.JonesConstructionCompanywhichhad90yearsofexperienceintheU.S.constructionindustry.
J.A.Joneshasitsownhistoryandmanysuccesses.FoundedinCharlotte,NorthCarolina,ithasgrowntobecomeaU.S.andinternationalleader.JamesAddisonJonesstartedhisworkasabricklayerin1890,andgotmostofhisearlyexperiencebuildingforthetextileindustrythroughoutthesouthernstates.ButJ.A.Jones'sfirstproject,likeHolzmann's,involvedtherailroads.JonesbuiltthediningcarfacilityinCharlottefortheSouthernRailroadCompany.
Followingthe1930sdepression,Jonessignedoneofthelargestconstructioncontractstothatdate,foranewairbaseinthePanama
CanalZone.Sincethatproject,militaryconstructionhasbeenanimportantfactor,includingconstructionofLibertyshipsduringWorldWarII,followedbywhatwasthenthe"largestconstructionprojectinthehistoryoftheworld"thegaseousdiffusionplantatOakRidge,Tennessee.
FollowingWorldWarII,Jonesbeganalongseriesofheavyandhighwayconstructionworkwhilecontinuingcommercialbuildingthroughoutthecountry.Today,thecompanyisalsoinvolvedinindustrialandenergyworkaswell.Asit,too,lookedtotheMiddleEastforworkinthe1970s,J.A.JonescompetedagainstHolzmann;
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theythenworkedasajointventureonamilitarytrainingcenterprojectinSaudiArabia.
InOctober1978,J.A.JonesConstructionCompanyannounceditsagreementtobeacquiredbyPhilippHolzmannAG.ThepurchaseendedaplanbyJonestobeemployee-owned,aprocessbegunin1968.Stockholderswereassuredthatthefirm'sname,management,andworkforcewouldnotchange.Today,Holzmannisrepresentedonlyontheboardofdirectors.
Atthetimeofthepurchase,Jones'sstockpricewasvaluedat$23.06pershare,whichwasdeterminedbythecompany'sownestimateofitsvalue,sincethestockwasnotwidelytraded.Holzmann'sofferamountedto$40.61pershare.AlthoughitwasstatedthatseveralothercompanieshadaninterestinthepurchaseofJ.A.Jones,Holzmann'sofferwasaccepted.AccordingtoJohnnieH.Jones,thenexecutivevice-presidentandnowchairmanandpresidentofJonesGroup,Inc.,''ThephilosophyandintegrityofHolzmann'smanagementweremostcompatiblewiththeJonesteam."
Threeprimaryreasonsweregivenforthemarriage:(1)thefinancialstrengthofHolzmannwouldenableJonestoresumeitsgrowthandcontinuetogrowfaster;(2)thecombinedinternationalexperienceofthetwocompanieswouldimprovetheircompetitivenessinforeignmarkets;and(3)themergerwouldallowJonesaccesstothelargerfirm'stechnology,withthecombinedinternationalexperienceofthetwocompaniesimprovingtheircompetitivenessinforeignmarkets.AtthattimeHolzmannspentmorethan$3millionayearonresearchandheldseveralpatentsinconcretetechnology.
Overthenineyearssinceacquisition,theHolzmann-Jonespartnershiphasallowedbothcompaniestobidonagreatervarietyofprojectsbecauseofbroadermarketpresenceandsharedtechnologies.Inaddition,thefinancialstrengthofHolzmannhasgivenJones
bondingcapacitytoincreaseitsvolumeofworkandthesizeofitsprojects.
Benefitsofthemergersurfacedearly.Jonesbecamemorecompetitiveinheavyconstruction,whereHolzmannhadfordecadesbeenaworldleader,andenteredthemarinefieldwithasunkentubetunnelcontractandoneforafloatingpontoonbridge.Holzmanngainedexpertiseinthechemicalplantmarketandinhigh-riseconstruction,longaJ.A.JonesstrengthbutatthetimeacostlytypeofconstructioninWestGermany.
TodiversifyfurtherinAmericaonthedesignsideofconstruction,Holzmannin1981purchased80percentofLockwoodGreene
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Engineers,Inc.,ofSpartanburg,SouthCarolina.HolzmannalsoencouragedJonesGroup'sformationofanewservicecompany,whichspecializesinfacilitiesmanagement,similartooneHolzmannfoundedintheearly1980s.
Thetwocompanieshavesetupaninformalemployeesprogramthatenablesyoungengineerstotravelandworksomewhatlikeexchangestudentsabroad.ManagementlevelstaffmembersalsotakepartinorientationprogramsbetweenWestGermanyandtheUnitedStates.
J.A.Joneshasaddedadimensionininternationalconstructionthathasbenefitedtheparentcompany.ByofferingprocurementservicesformaterialsforprojectswheremanyofthedesignscallforAmericanstandards,JonescanhelpHolzmannavoidproblemsofselectinggoodsinaforeigncountry.
Inturn,JohnnieJonessaysthatHolzmann"doesnotinterferewithouroperationbutprovidessupport.KeepingourmanagementintactprovedtousthatHolzmannagreedwithourphilosophythatpeopleareourmostimportantassets."
TheJonesCompanynowcantakeonmajorheavyconstructionprojectswhichheretoforewouldhavebeenundertakenonlyinajointventure.Andinatotallynewdirection,JOnessigneditsfirstcontracttobuild,own,andoperatealignitemineinLouisiana."Itrequiredasubstantialinvestmentinthebeginning,butwewouldn'thavebeenabletodoitwithoutthefinancialsupportofPhilippHolzmann,"saysJones.
Bothcompaniesareintheprocessofdiversifyingintechnicalfields,expandinginotherlocations,andreestablishingpositionsintheinternationalmarket.TheformationofarealestatedevelopmentcompanyinAtlanta,MarkIII,andadditionalactivitiesfromQueensProperties,Inc.,inCharlotte,werestepsindiversification.
Becausethefinancialcapabilitiesofconstructionfirmshavenewimportance,JonesGroupthisyearformedJonesCapitalCorporationtodevelopprojectfinancingandtoholdtheassetsofprojectsinwhichJonesismaintaininganownershipposition.
Whilestillrunasseparateentities,HolzmannandJonescombinedcanpursuethelargestconstructionprojectsintheworld.
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6PursuitofInnovationThecommitteeobservesthattheUnitedStatesandtheworldareexperiencingrapidtechnologicaladvance,butthatapplicationstoconstructionhavebeenrelativelylimited.U.S.constructionanddesignhaveinthepastplayedanimportantworldleadershiprolethatisnowthreatened,inpartduetosociety'sgrowingwillingnesstoassignliabilityonabasisofabilitytopay,andinpartduetothecompetition'scommitmenttoprogress.Inadditiontomakingagreatereffortinresearchanddevelopmentandenhancingeducationandtraining,theU.S.constructionindustrymustrekindleitsenthusiasmforinnovationifitistomaintainitsplaceintheglobaleconomy.
NatureofInnovation
Innovationcanoccurinadesign(e.g.,suspensionbridge)orinamaterial(e.g.,reinforcedconcrete).Itcanoccurbyamajorbreakthroughbasedonanovelinventionthatdramaticallyandsuddenlychangeswhatwebuild(e.g.,theneedforairportswascreatedbytheinventionoftheairplane).However,innovationismorefrequentlyachievedthroughmanyincrementalimprovementsthatservetomakeatechnologyuseful(e.g.,improvedroadwaypavingmaterials).
Mostinnovations(includingthoseininfrastructure)aretheresultofabsorbinganinvention,oftenafterithasbeendevelopedfor
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anotherpurpose.Ineachera,certainprimaryinventionsbecomethebasisformuchoftheinnovationthatoccurs.Atpresent,anumberofnewprimaryinventionsaredrivingchangeinconstruction:
Photonics:thoseinventionsthatproducecoherentlightthatcanbeamplifiedandpropagated,suchaslasers,masers,andfiberoptics.Pathsoflightwillincreasinglyreplacethewiresalongwhichmessagesflow,andlasershavefoundapplicationinfieldsurveyingaswellasinfactorycuttingandwelding.
Biotechnology:geneticengineering,neuroengineering,andtherecodingofmacromoleculesoflivingthingstoproduceneworganicsubstancesthatcanhaveapplicationsinbuildingsandinfrastructure.Pollutioncontrolandhazardouswastedisposalstandtobenefitgreatly.
Materialsscience:fundamentalreformationandfabricationofinorganicmaterialstoprovideperformancecharacteristicsnotfoundinnature,suchashigh-strengthcomposites,rapid-flowmembranetechnology,andsuperconductivity.Thislatestdiscoverymayhavefar-reachingimpactsonthestorageofelectricityandtransporttechnology.
Microlectronics:circuits,switchingmechanisms,datastoragedevices,amplifiers,andsensors.Suchdevicescanextendhumanstrengthanddexteritythroughrobotics;supportdatacollectionandanalysistoenhancethespeedandeffectivenessofhumanactions;andmakepossiblegraphicinputandoutputofdataandsobegintosubstituteapictureforathousandwords.
Suchinnovationsmayhaveprofoundimplicationsforconstruction.Theymaychangeworkingrelationshipsbetweendesignersandconstructors.Buildingsthemselvesarebecomingmore"intelligent"astheyhaveelectronicenhancementsaddedtotheirinformationand
communicationssystemsaswellasthecontrolsformechanicalequipment.Roboticsandotherformsofautomationarebeginningtoprovidepracticalapplicationsforperformingdifficultordangerousjob-sitetasks,andmaywellaltertheeconomicsofmuchworkdoneonthejob.
TheimpressiveeffortsofJapan'sconstructionindustryhavebeendescribed.Europeanfirmsaswellhaveundertakenaggressivesearchesforinnovation,particularlyinthedevelopmentofproprietaryconstructionsystems.Thesenewsystemsarebasedonextensiveintegrationofdesign,fabrication,anderectionprocesses,allofwhicharecarriedoutbyasinglefirm.SeverallargeEuropeanfirms
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havesucceededinverticallyintegratingtheirbusinessstructurestoincludethemanagementofkeymaterialssupplies,designandengineeringexpertise,developmentknow-how,andfinancingcapability.Theeconomicintegrationintoonefirmofthesefunctionsmoreeasilyallowstheconstructionfirmtocapturetheeconomicbenefitsofproductivityandqualityimprovementsthroughtheadoptionofnewtechnologies.Becausethereisbettercontrolofcosts,suchintegratedfirmsdevelopacompetitiveadvantage.
FirmsintheUnitedStatescontinuetotakeapassiveattitudetowardconstructioninnovation.EventhelargestU.S.firms,whichmayhavetheresourcestoundertakesignificantresearchprograms,continuetoputtheirfaithinthestrategyofbeing"technologyfollowers."Indeed,manylargeU.S.constructionfirmshavesuggestedthatbynotbeingcommittedtoanyoneproprietarytechnologytheyareatastrategicadvantageinbeingabletopickandchooseamongthelatesttechnologiesaroundtheworld.Thecommitteequestionsthewisdomofthisstrategy.Inaglobalmarket,thosefirmsthathavedevelopedaproprietarytechnicaladvantageareinapositiontorefusetograntlicensestofirmswithwhichtheydonotwishtocompete.Evenwhenthetechnologyisavailableinprinciple,individualsandfirmsareoftendeterredbytheinitialintellectualandfinancialinvestmentrequiredtoapplyitinpractice.
TherearethreegroundrulesthatseemtobeneededforanyseriousefforttoencourageinnovationintheU.S.constructionindustry:
Formajorinnovationstotakeholdandbecomecommon,theyneedtobefoundedonaconfluenceofbasicresearchandpracticalimprovements.Inotherwords,theyrelyasmuchonbasicresearch(totheextentitisstillusefultousethatterm)astheydoonappliedengineering.Oftentheareaofbasicresearchusedbearsnoobviousrelationtotheeventualpracticalapplication.
Thesearchforinnovationmustallowformajorbreakthroughsfollowedbyincrementaladvances,anditcanincludeimprovmentsindesignaswellasmaterials.Duringtheoverallprocessofinvention,variousimprovementsreinforceoneanotherandencouragepublicdemand,insuchawayastopromotefurtherinnovations.
Mechanismsareneededtocapturethepotentiallysizablepayoffsofinnovationforthosewhoattemptit.EarlyAmericanbridgeinnovations(fromthenineteenthcentury)areagoodexample,becausegenerousroyaltieswerepaidfortheuseoftheideasthathadbeengrantedpatents.
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OpportunityinInfrastructure
WithintheUnitedStates,asinmostoftheworld,thereiswithoutquestionanopportunitytoincreasetheperformancecharacteristicsofthosesystemsusedtotransportpeopleandgoods,obtainwater,removewastes,supplyenergy,andfacilitatecommunications.Thereisalsoreasontoincludethosebuildingsusedeitherforpublicpurposes(e.g.,schoolsandhospitals)orbuiltwithpublicfunds(e.g.,governmentoffices,courthouses,andprisons)asapartofthepublicworksinfrastructure.
Underthisbroaddefinitionofinfrastructure,theUnitedStatesin1984invested$102billion,30percentofitsdesignandconstructionbudgets(seeTables11to13).
Developmentofadvancedinfrastructureisachallenge,worthyofacooperativeinternationaleffort.Itwillbedifficulttostructurethesedevelopmentstomatchtheperformancerequirementsofasocietyutilizingadvancedscienceandtechnology,andmakethemmorethanincrementalimprovementstothepresentmodaltechnologies.Inthedevelopingpartoftheworld,wherethemostrapidurbanizationishappening,thechallengeistodeveloptechnologyappropriatetotheirrequirementsratherthantoimposesolutionsproducedforindustrialnations.
TherearetworeasonsfortheUnitedStatestodomoreaboutadvancingthetechnologyofinfrastructure.Itwouldbenefitwithinitsownbordersfromnewandhigher-performancesystems,anditcouldalsohaveanotheropportunityformarketingitstechnologyonaglobalbasis.ThiscommitteerecognizestheurgencyofmaintainingandextendingtheexistingnetworksofpublicworksthatunderlieU.S.cities.However,thenationalsoneedstodevelopnewandhigher-performingtechnologiestogainthepotentialmarketthatimproved
performancemakespossibleandtoavoidanindefinitefuturedrainonthepublicpursefrommaintainingtheoldersystems.
Theexistinginfrastructureisbasedonasetofinventionsthatemergedtowardtheendofthelastcentury.Theseinventionsproducedasecondgenerationofurbansystemsthatprovidedperformancecharacteristicssubstantiallydifferentfromthosepreviouslyusedinallofhumanhistory:
Structuralsteelframesforbuildings.Whenthismethodofconstructionwasfirstintroducedinthe1880sinChicago,itmadeitpossibletoerectstructuresthatweretallerthanthefive-orsix-floor
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TABLE11EstimatesofPrivateConstructionVolumethatMightBeIncludedWithintheCategoryofInfrastructure(in$million),1984
TypeofPrivateConstruction(bycensuscategory)
TotalValuea
InfrastructureValueb
Residentialbuildings 145,059
Nonresidentialbuildings(organizedbyfunctions)Industrial 13,745Office 25,940Othercommercial(warehouses,silos,retailstoresshoppingmalls,drugstores,parkinggarages,servicestations,barbershops,danceschools)
22,167 10,000
Religious 2,132Educational 1,411 1,411Hospitalandinstitutional 6,297 6,297Miscellaneous(movietheatres,casinos,healthclubs,radioandtelevisionstations,includingbusandairlineterminals,publicutilitybuildings)
2,455 490
Subtotal 74,147 18,198
Farmnonresidentialbuildings 2,860
Publicutilities(organizedbyindustries)Telephoneandtelegraph 7,174 7,174Railroads 3,671 3,671Electriclightandpower 19,473 19,473Gas 3,233 3,233Petroleumpipelines 271 271
Subtotal 33,822 33,822
Allother(privatelyownedstreets,bridges,parkingareas,dams,reservoirs,sewer,waterfacilities,parks,andplaygrounds)
1,912 1,912
Totalc 257,801 53,932
Source:BureauoftheCensusdata,withstaffextensions,1984.
aValueincludescostofmaterials,labor,equipmentrental,contractorprofit,owners'overheadcosts,architectandengineerservices,miscellaneouschargesonowners'books,interest,andtaxesduringconstruction.bInfrastructureisdefinedasincludingallbuildingsusedforpublicpurposes(e.g.,schools)whetherpaidforprivatelyorpublicly,andallconstructionof"networks"forsupportingbuildings(e.g.,roads).Whereexactdataarenotprovidedanestimatehasbeenmade.cSubtotalsmaynotaddtototalsbecauseofrounding.
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TABLE12EstimatesofPublicConstructionVolumethatMightBeIncludedWithintheCategoryofInfrastructure(in$million),1984
TypeofPublicConstruction(bycensuscategory)
TotalValuea
InfrastructureValueb
Buildings(byfunctions)Housingandredevelopment 1,636Industrial 1,828Educational 5,557 5,557Hospital 2,039 82,039Other(administrative;police,fire,bus,andstreetcarstations;subwaygaragesandbarns;jails;parkingfacilities;airportandmarineterminals;electricpowergeneratingbuildings;andsoon)
6,822 6,822
Subtotal 17,883 14,418
Highwaysandstreets 16,294 16,294
Militaryfacilities 2,839
Conservationanddevelopment(waterresourceprotectionandcontrol,fishhatcheries,spillways,pollutioncontrol,levees,seawalls,canals,docks,piers,wharves,berths,andreservoirsbuiltotherthanforpotablewatersupply)
4,654 4,654
Sewersystems 6,241 6,241
Watersupplyfacilities 2,621 2,621
Miscellaneous(recreationalfacilities,powergeneratingfacilities,andotheropenconstructionfor
4,654 4,654
subways,streetcars,airportrunways,parking,andsoon)
Totalc 55,186 48,882
Source:BureauoftheCensusdata,withstaffextensions,1984.
aValueincludescostofmaterials,labor,equipmentrental,contractorprofit,owners'overheadcosts,architectandengineerservices,miscellaneouschargesonowners'books,interest,andtaxesduringconstruction.bInfrastructureisdefinedasincludingallbuildingsusedforpublicpurposes(e.g.,schools)whetherpaidforprivatelyorpublicly,andallconstructionof"networks"forsupportingbuildings(e.g.,roads).Whereexactdataarenotprovidedanestimatehasbeenmade.cSubtotalsmaynotaddtototalsbecauseofrounding.
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TABLE13EstimatesofPrivateandPublicConstructionVolumethatMightBeIncludedWithintheCategoryofInfrastructure(in$million),1984
TypeofConstructionTotalValuea
InfrastructureValueb
Publicandprivatec 312,987 102,184
Privatesectorbuildings 18,198Publicsectorbuildings 14,418Totalbuildingcomponentsofinfrastructurec
32,616
Privatelyfinancedutilitysystems 33,822Publiclyfinancedutilitysystems 34,464Totalutilitycomponentsofinfrastructurec
70,200
Source:BureauoftheCensusdata,withstaffextensions,1984.
aValueincludescostofmaterials,labor,equipmentrental,contractorprofit,owners'overheadcosts,architectandengineerservices,miscellaneouschargesonowners'books,interest,andtaxesduringconstruction.bInfrastructureisdefinedasincludingallbuildingsusedforpublicpurposes(e.g.,schools)whetherpaidforprivatelyorpublicly,andallconstructionof"networks"forsupportingbuildings(e.g.,roads).Whereexactdataarenotprovidedanestimatehasbeenmade.cSubtotalsmaynotaddtototalsbecauseofrounding.
limitationofmasonrywallsthathaddominatedarchitecturaldesignforallofpriorhumanhistory.
Elevatorsformovingpeopleandgoodsverticallyintallbuildings,madepossiblebytheOtisinventionsforsafety.Elevatorsreplacedstairwaysthat,becausetheyrequiredhumanenergytoascend,were
notpracticalbeyondthefive-orsix-floorlimitationofearlierdesigns.
Thesetofinventionsthatmadepossibleindoorplumbingdevicesconnectedtowaterandwastesystems,whichreplacedtheouthouse,theslittrench,andallofthepriordisease-riddenmethodsofdisposingofhumanwaste.
Centralheatingsystemsthat,especiallywhentheybegantousethefluidfossilfuelsofoilandgas,changedthelogisticsofsupplyingfuelforheatsincefuelnolongerhadtobemanuallysuppledtoseparatestovesandfireplaceslocatedthroughoutabuilding(andashesnolongerhadtoberemovedfromeachseparateheatingdevice).
Thediscoveryofelectricity,andthesubsequentinventionof
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generators,amplifiers,distributionmethods,electricmotors,andthelightbulb,whichsubstitutedforthehistoricaluseofcandles,whaleoil,animalpower,andsoon.
ThetelephonesystembasedontheprimaryinventionofAlexanderGrahamBellin1876thatmadevoicecommunicationspossibleacrossgreatdistances,replacingsuchancientmethodsastowncriers,messengers,andmail.
Theautomobile,ormoreappropriatelytheinternalcombustionengine,whichsubstitutedadevicefortheconversionofafossilfueltousefulenergyfortheanimalpowerusedinallofhumanhistory.
Thesubway,ortheundergroundrailway,asfirstintroducedinLondon,whichprovidedformasstransportationwithinacrowdedurbanarea,withoutpollutionoftheairorinterferenceinthearrangementofbuildings.
Therearemanyindicationsoflimitationsoftheperformancecapabilityofthissecondgenerationofinfrastructuretechnologiesrelativetotoday'sdemands.Theirabilitytosupporttheactivitiesofmodernindustryissorelytaxed.WhilethereisthepossibilitythattherecentlycompletedworkoftheNationalCouncilonPublicWorksImprovementwillstimulateCongresstoprovidemajornewsupportforinfrastructureinnovation,thecommitteefeelsthatonlythrougheffectivepublic-privatepartnershipcaninnovationbeachievedinpractice.
Beyondtheobviouspleatobemadeforincreasedgovernmentfundinginthefield,theprogramsofothercountriesillustratethevaluetobegainedthroughtruepartnershipofprivateandpublicinterestsintheU.S.constructionindustry.Thispartnershipshouldembraceresearchandinnovationforbothdomesticproductivityandinternationalcompetitivestrength.
Forexample,projectsbuiltwithgovernmentfundscanassumethegreatercommercialriskinvolvedinadoptinginnovation,aswasdemonstratedbytheintroductionofprecastconcretesegmentaltunnellinerstoU.S.transitconstruction.Thistechnologyhadbeenwidelyusedaroundtheworld(since1936inEngland),butnotintheUnitedStatesbecauseindividualtransitcompanieswerereluctanttotaketheriskofbeingfirst.TheUrbanMassTransportationAdministrationsponsoredaresearchanddevelopmentprojecttoinstallconcretesegmentsinonestretchoftheBaltimoresubway,andsuddenlythisbecamethestandardtechnologyforU.S.transitsystems.NationalScienceFoundationprojectsdoneincooperationwiththe
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constructionprogramsofotherfederalagenciescouldplayasimilarroleforintroducinginnovationsintodesignandconstruction.
Precedentalsoexistsforprivate-publiccooperationincompetitionforinternationalprojects.WhiletheThreeGorgesProjectinthePeople'sRepublicofChinawasnotresolvedastheteammighthavehoped(seeCaseStudy6),theexperienceisavaluablelessondemonstratingU.S.abilitytoemulatetheinstitutionalarrangementsofBritish,French,Dutch,orScandinavianfirmsandtheirgovernments.
However,eventhisprecedentisnotenough.TheU.S.constructionindustries'1.2millionfirmsneedastrongerandmoreeffectivevoiceinnationalpolicy.Existingindustryorganizationsplayanimportantroleinrepresentingtheparticularinterestsoftheirmembership,butthereisnoforumforresolvinginevitableconflictsandinitiatingcooperativeactivity.
GlobalPartnershipforInnovation
Asthefinalchapterofthisreportwilldiscuss,neworalteredinstitutionsareneededtomakethispartnershipofprivateandpublicinterestseffectiveintheUnitedStates.Thecommitteefeelsstrongly,however,thattheopportunitiesforinnovationinconstructionandthepotentialworldeconomicandsocialbenefitsofcapturingtheseopportunitieswarrantpartnershiponaglobalscale,apartnershiptoworkintheUnitedStatesaswellasabroad.
U.S.constructionanddesignfirmshavefounditdesirabletorelyoncomparativeadvantageandpursueastrategyofcooperationratherthancompetition,astheexamplesandcasestudiesgatheredbythecommitteehaveillustrated.Thestrategyisagoodoneforinnovationaswell.Tomakethestrategywork,however,theU.S.constructionindustrymuststrivetomaintainitstraditionalleadershipintechnology,fortwokeyreasons:(1)lossoftechnologicalleadership
maymeanlossofcomparativeadvantageandcompetitivepositionand(2)withoutthestrengthforgoodcompetitiveposition,meaningfulcooperationbecomesnearlyimpossible.
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CaseStudy6:CooperativeEffortBetweenU.S.PublicandPrivateSectors:ProposalfortheThreeGorgesProjectinChina
Forsixweeksin1985agroupofleadersinengineeringdesignandconstructionsequestereditselfinahastilyassembledofficeinWashington,D.C.Thegroup'sgoalwastoaccomplishataskmanymightthinkimpossible:createaproposaltodesignandconstructoneoftheworld'slargestcivilengineeringprojectstheThreeGorgesProjectinthePeople'sRepublicofChina.Theimpetusforthischallengingundertakingwasaninvitationfromhigh-levelChineseofficialsfortheUnitedStatestotakealeadroleinprojectdevelopment.TheenormousnessoftheThreeGorgesProjectandthebrutalproposaldeadlinewerecomplicatedbythefactthatboththeproposalandtheworkwouldbedonethroughacombinationofU.S.privateandpublicsectorgroups.
The''TeamAmerica"effort,asitwasdubbed,resultedinmuchmorethanadocument.TheundertakingshowedthatrealorperceiveddifferencesandbarriersbetweenU.S.governmentagenciesandprivatefirmscanbesurmountedtomeetsharedgoals.InthecaseoftheThreeGorgesProject,whereU.S.involvementwouldhavefar-reachingeffectsforthenationandothers,theaccomplishmentwasadmirableandonethatcanserveasaprototypeforfuturecooperativeefforts.
Anotherlessfavorable,butequallyimportant,lessoncameoutofthisexercise.WhiletheChinesegovernmentacceptedtheproposal,theworkwasnotpursuedduetolackoffinancialsupportfromU.S.governmentand/orprivateindustrysources.Asaresult,proposedfeasibilitystudiesarenowbeingdonebyanationinwhichtheprivateandpublicsectorscooperatetobestadvantageCanada.
TheThreeGorgesProjectwasconceivedearlyinthe1990sbyDr.SunYat-Seninhis"PlanforIndustrializationofChina.""Itisthelong-cherishedwishfortheChinese...toconstructtheThreeGorgesProject....Completionoftheprojectwillbeofgreatsignificancetotheindustrializationofthecountry,"wroteSun,whoisstillhailedasavisionarybyhiscountrymen.
NearlyacenturyafterSun'spredictions,thepowerfulYangtzeRiverfrequentlyravagesthevalleybelowwithfloodsthatendangerhundredsofthousandsofpeopleandmajoragriculturalandindustrialbases.FortypercentofChina'sfoodsupplyisgrowninthis
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valley.Industrytheheartofthecountry'srevitalizationiscrippledas40to60percentofcapacityisidleatanygiventimeduetopowershortages.Harnessingtheworld'sthirdlongestriverwiththeThreeGorgesDamwouldprovideapproximately1,300megawattsofhydroelectric-generatingcapacityandleadtoformationofanationwide,large-scaleelectricpowerpool.
ImprovingnavigationontheriverisofsignificanteconomicimportancetoChina,andtheprojectwouldaidpassageofshipsthesizeofocean-goingvesselsthroughnarrowchannelsingorgeareas.ThreeGorgeswouldbeaconcretegravitydamwithacrestheightof510to575ftandalengthof7,200ft.Thedamwouldincludetwo,four-stepshiplocks,andthenarrowreservoirwouldbackup100milesormore.
FollowingSun'searlyvisionfortheproject,plansproceededslowlyovertheyearsduetoavarietyofchangingconditionsinChina.Pioneeringworkwasdoneinthe1940sbytheBureauofReclamation'schiefdesignengineer,Dr.JohnL.Savage.Inthedecadesofthe1950sand1960s,theChinesemadeadetailedcomparisonofalternativesites,andin1979proposedthecurrentlyfavoredSandoupingsite.In1984,theStateCouncilapprovedtheproject'sfeasibilityreportandinMarch1985,theChinesecompletedapreliminarydesignreport.
InMay1985,formerSecretaryoftheInteriorWilliamClarkvisitedChinaonadiplomaticmissionthatledhigh-levelChinesedignitariestoinvitetheUnitedStatestoproposealeadroleinprojectdevelopment.ClarkmadeacommitmentfortheUnitedStatestoaidChinabydefiningconcretestepsthatcouldbetakentoaddresstechnicalandfinancialissues.
UponhisreturntotheUnitedStatesinJune1985,Clarkbriefedapproximately50representativesfromawidearrayofpublicand
privatesectorengineeringgroupsregardingtheChineseinvitation.HechallengedtherepresentativestorespondastheysawfitandsetatargetdateofJuly15forreply.
Thegrouprosetothechallenge.InitialorganizingeffortsweredonebyacoregroupcomposedofrepresentativesoftheU.S.DepartmentoftheInterior,AmericanConsultingEngineersCouncil,NationalCouncilforU.S./ChinaTrade,andprivateengineeringfirms.Allinterestedpartieswereinvitedtodonateresourcestotheeffort,withnopromiseofreturnontheirinvestment.Theofficialtitleforthegroupthatevolvedwas"TheU.S.ThreeGorgesWorkingGroup"butWilliamClarkalsochosetochristentheeffortas
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"TeamAmerica,"reflectingthegenuinepatrioticspiritmotivatingthegrouponbehalfofthenation'sbestinterests.
Privateandpublicgroupscontributingtotheproposalfurnishedanestimated$1.5millionto$3millioninhuman,financial,andinkindresourcestothisuniqueeffort,whichoneparticipantdescribedasthehighlightofhiscareer.
Participatingfirmsandagenciescalledintheirtoppeople,manyfromoverseasassignments,toworkonajobwithasenseofmissionforthenation,ajobwheretopmanagersrolleduptheirsleeves,hammeredoutfigures,andworkedpastoldrivalriesanddifferences.
Theteamwascomposedofhigh-levelexecutivessuchaschiefexecutiveofficers,vice-presidents,andagencyheadsfrompublicandprivategroupsoftenknownascompetitorsratherthancooperators.Sidebysidetheysharedtheirexpertiseinengineeringdesign,construction,management,andfinancialandeconomicfields.Mostoftheparticipantshad30years'experienceinlarge-scaledamandhydroelectricpowerprojects.
Representativesoftheseprivatesectorfirmsmadeuptheteam:
GuyF.AtkinsonCompany
BechtelCivilandMineralsEngineering,Inc.
CoopersandLybrand
MerrillLynchCapitalMarkets
TheMorganBank
MorrisonKnudsenCorporation
StoneandWebsterEngineeringCorporation
Thefederalgovernment'scontributioncamefromservicesprovidedby
theU.S.DepartmentoftheInterior'sBureauofReclamationandtheU.S.ArmyCorpsofEngineers.
Eachpartymadeanoffering.With85years'experienceindesignandconstructionofmajorwaterresourcesprojects,theBureauofReclamationfurnishedapproximately20expertsinvariousfieldstoadvancetheproposal.Accesstovital,existingdatawaspossiblethroughworkingagreementsbetweenthebureauandChinaandthroughbureauengineerswhowerethenworkingattheThreeGorgessite.TheCorpsofEngineers,oneofthefewexistingbasesofknowledgeintheUnitedStatesforlockdesign,providedinvaluableexpertise.Theprivatefirmscontributedexperienceinpreparingproposalsandoverallknow-howongettingajobdoneontimeandwithinbudget.
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AnofficewassetupinWashington,D.C.,asthebaseofoperations.Theleaderoftheprivatesectorpartiesmovedtothecityforthesix-weekassignment,whilemostotherparticipantscommutedfromtheirofficesaroundthecountry.WorkdaysoftenbecameworknightsasthegrouppropelleditselffromitsfirstmeetingJune10tothemid-Julytargetdate.
Thetightdeadlineprovedtobeagreatmotivator,promptingtheteamtoadoptmoreflexible,creativeworkingmethodsthantypicallyusedinindustryandgovernment.Uncommoneventsoftendemanduncommonapproaches,andoneparticipantcommentedthat,tohisknowledge,ajointpublic-privateeffortofthismagnitudehadneverbeforebeenattempted.
Theexecutiveswerecalledontousealltheknowledgeandabilities,bothtechnicalandmanagerial,thathavemadethemsuccessfulintheirorganizations.Theco-leaders,onefromprivateindustryandonefromafederalagency,foundtheycouldnotmanagethegroupmembersastheywouldtheirownemployees.Withoutthepowerconveyedbytheirrespectiveorganizations,theyhadtoexercisepersonalskillstomotivatethegrouptoaccept,support,andcarryoutsharedobjectives.Theindividualspracticedtheirinterpersonalcommunicationskillsbyofferingconstructivecritiquesasworkprogressed.Managementbooksonthebestsellerlisttalkaboutcasessuchasthisthatbringoutthebestinmanagerstobuildteams,integratediversetalents,andmanagedisputesinpursuitofafirst-classproduct.
ManagerialskillswerealsorequiredtoaddresstheuniqueorganizationalstructurewithinthePeople'sRepublicofChinarelatingtodesign,construction,andmanagementofexistingandplannedwaterresourceprojects.TheChinesegovernmenthadencounteredsubstantialdifficultiesinbuildingtheGezhoubaProject
ontheYangtzeRiverdownstreamfromtheproposedsiteoftheThreeGorgesProject,mainlyduetotheircomplexsystemofinterrelatedministries.TheU.S.teamworkedondevisingamoreeffective,simplifiedmechanismtoavoidarecurrenceoftheseproblemsonThreeGorges.
Theoutcomeofthisintensiveeffortwasacomprehensiveproposalincludinganimplementationplanandeconomicstudyleadingtoafinancialplanallcompletedonscheduleandwithagreatdealofpride.TheproposalrecommendedusingChina'sowntechnicalandhumanresourcestotheextentpossibletohelpthenationdevelopastrongbaseofknowledge.Theeffortproposedwouldfosteran
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unprecedentedlevelofcooperationandtechnologytransferbetweenU.S.privateandpublicsectorsandthePeople'sRepublic.
Theproposal,withasummaryvolumeinbothChineseandEnglish,waspresentedtoChina'sVicePremierLiPengonJuly17atasettingappropriatefortheoccasion,thebureau'smassiveHooverDam.Later,inChina,theproposalwaspresentedtoMadameMinisterQian,headoftheMinistryofWaterResourcesandElectricPower.
WhiletheChinesewerequicktoembracetheproposalinprinciple,thequestionremainedastowhowouldfundafeasibilitystudyontheproject.Thegovernment-to-governmenteffortinitiatedthroughU.S.-ChineseworkingagreementsandfurtheredbyWilliamClark'svisithadopenedthedoortofuturealliances,butneithertheU.S.governmentnorU.S.privateindustrywasabletosurmountthestumblingblockposedbytheestimatedcostof$6millionto$8millionforthefeasibilitystudy.Thetotalcostofconstructingtheprojectisanticipatedtobeapproximately$8billion.
InOctober1985,theCanadiangovernmentsignedanagreementwiththeMinistryofWaterResourcesandElectricPowerforjointparticipationinafeasibilitystudy.TheagreementincludesagrantfromCanadatoChinatofundtheworkofCanadianengineers.Thecostofthestudyisestimatedat$7.5millionto$8.3million,andtheanticipatedcompletiondatewasDecember1987.
Anumberofhigh-levelChineseofficialshavepubliclystatedthattheThreeGorgesProjectwillbebuilt,butdeclinetoestablishspecifictimeframes.Outsideanalystspredictthatworkwillproceedwhenmajorissuesareresolved,suchasprojectfinancing,appropriateheightofthedam,andenvironmentalconcerns.
Whenaskediftheywoulddoitagain,executivesinvolvedwithTeamAmericaanswerwitharesounding"yes."Theparticipantsviewthe
experienceasapositiveoneandachallengefromtechnical,managerial,andpoliticalstandpoints.Thehardhoursmayhavetemporarilyexactedatoll,butthelong-termpayoffisanenduringsenseofsatisfactiononapersonalandaprofessionallevel.
Onespin-offoftheteam'sworkwasexplodingthestereotypessurroundinggovernmentworkersinrelationtotheirprivatesectorcounterparts.Inthetrenches,theteammembersfoundthattalent,determination,andprofessionalismexistinmanyplaces.Theinvolvementofexperiencedseniorprofessionalsfromthepublicandprivatesectorswasthekeyingredientinproducingaqualityproductontime.
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TheinvitationfromthePeople'sRepublicofChinatopreparethisproposalisanindicatoroftheirrespectforthetechnicalandprofessionalexpertisefoundinU.S.privateindustryandgovernment.Throughotherjointprojects,thecountry'sbesthumanresourcescanbemeldedforavarietyofpurposes,includingtechnologytransfertohelpothernationsachievetheirgoals,andenhancingthepositionoftheUnitedStatesininternationalcompetition.
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7Needed:InstitutionalStructuretoPromoteGlobalEnterpriseTheU.S.constructionindustryconsistsof5.5millionindividualsemployedin1.2millionfirms,myriadprofessionsandtrades,andavarietyoforganizationsrepresentingtheseindividuals.ThesemanyparticipantssharecommoninterestsandconcernsaboutthegeneralhealthoftheU.S.economy.Whileonlyasmallfractionoftheseparticipantsareactiveintheinternationalconstructionmarket,theyrecognizetheimplicationsofU.S.weaknessinthismarket,andtheycanunderstandtheopportunitiesthattechnologicalleadershipoffers.
Thecommitteehasnotedthehigh-levelgovernmentfocusforconstructionpolicyandexportactivitythatsomecountrieshaveestablished.Thecommitteehasnotedaswellthesupportforconstructionresearchandtheclosepublic-privatepartnershipthatindustryinsomeothercountriesenjoys.Finally,thecommitteehasnotedtheneedsfortheUnitedStatestocatchupinitsresearchanddevelopment,professionaltraining,andpursuitofinnovationinconstruction.
OrganizedFocusofDiverseInterests
ThecommitteeconcludesthatamoreeffectivewayisneededtobringtogetheronacontinuingbasisthemanydiverseprivateandpublicinterestsintheU.S.constructionindustry,toresolveinevitableconflictsofopinionamongtheseinterests,andthereby
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togivetheindustrystrongervoiceinthenationalpolicyforum.Professionalsocietiesandtradeassociations,suchastheAmericanInstituteofArchitects,AmericanSocietyofCivilEngineers,andAssociationofGeneralContractors,currentlyplayanimportantroleinrepresentingtheinterestoftheirmembers,butthereisnoeffectivemeanstobridgethedifferencesamonggroups.Asolidinstitutionalfocusisneededtoprovidegreaterunitywithintheindustryandtofacilitateconcernsandcoordinatedaction.Existinginstitutionscouldbegivenexpandedmandatestoplaysucharole,butnewinstitutionsmaybeneeded.
ThecommitteehasfounditdifficulttounderstandwhytheUnitedStates,asanation,wasunableorunwillingtoallocatethefundstosupportitsalreadysubstantialprivateinvestmentintheThreeGorgesProject,whileitsmuchsmallernorthernneighborfoundtheallocationtobeinitsnationalinterest.At$8milliontheamountismeagrewhencomparedtogovernmentspendingonanynumberofprogramstosupportvariousothersectorsoftheU.S.economy.
AtradeagreementsignedwithJapaninearly1988offerspossibleresolutionoftheproblemsalreadydescribedregardingU.S.constructionindustryactivityintheJapanesemarket.However,intheheatoflong-runningnegotiations,theUnitedStatesappearstohavelostsightofitsmaininterest:thetechnicallyadvancedsegmentoftheconstructionmarket.ApparentaccesstoarangeofsmallerprojectsthatarelargelylaborandmaterialsintensivewillnotonlyholdlittleattractionforU.S.firms,butwillthenhurtfutureU.S.prospectsbygivingtheappearancethatthenationisnotseriousaboutglobalenterprise.Bothsidesintheagreementarereportedtoholda"show-me"attitude(EngineeringNewsRecord,April7,1988,pp.1213).
WhiletheU.S.-Japanesetradenegotiationsproceeded,theFrenchgovernment-sponsoredconsultingfirmAeroportsdeParis,whichhad
beenhiredtoevaluateproposeddesignsforpassengerterminalsatKansaiInternationalAirport,investeditsresourcesinpreparationofitsownalternativeproposal.Itsinnovativeplanswayedtheairportauthority'sopinionandledtoanewdesigncompetition,creatinganopportunityforwhichFrenchdesigners(andultimately,constructorsandequipmentsuppliersaswell)nowappeartoholdadistinctadvantage.
Thecommitteefeltthesecasesarenotunusual,butratherareexamplesofapatternofpoorlyfocusedattentionandseeminglack
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ofinterestinU.S.constructionwithinanincreasinglyglobalmarketplace.Furtheranalysisisneededtodefinethepatternmoreclearlyandtoidentifywhatshouldbedonetocorrectwhatis,inthecommittee'sview,aproblemthatwillhaveincreasinglyseriousconsequencesforthenation'swell-being.Nevertheless,itisreadilyapparentthattheUnitedStateslacksthemeanstobringtogetherpublicandprivategroupstoofferthebestofU.S.constructionskillsandtechnologyinworldmarkets.TheinstitutionalstructureisneededtofacilitatethecooperationillustratedinthepursuitofChina'sThreeGorgesProject,andthentofollowthroughwiththesupportneededtostrengthenthenation'sabilitytocompeteortodevelopcooperativeventureswithinternationalpartners.
Theinstitutionalstructurecouldtakeanynumberofforms:
Therecouldbeattheapexafederalgovernmentagencyresponsibleforsupportinginternationalanddomesticconstructionenterprise.Thisgovernmentofficecouldproposepolicyinitiativesforlegislativeactionandcoordinategovernmentactivitythatinfluencestheconstructionindustry.
Therecouldbeaquasi-governmentalorganizationthatwouldassembleU.S.constructionexpertsfromavarietyoffirmsandgovernmenttoworkwithcounterpartorganizationsfoundinothercountries.ThisorganizationcouldacttorepresentU.S.interestsininternationalcompetitionformajordesignandconstructionprojects.
Therecouldbeaunitassociatedwithgovernment,butnotanagencyofgovernment,thatwouldmonitortheperformanceoftheU.S.constructionindustryandgovernmentpoliciesthatinfluencethatperformance.Thisunitwouldserveasanobjectiveobserverandforumforidentifyingproblemsanddefiningoptionsforsolvingtheseproblems.
Perhapssomecombinationofsuchorganizationsisappropriate.However,thisinstitutionalfocusisneeded,itsexactformmustbedetermined,andthecommitteerecommendsthatstudyshouldproceed.
AttitudeofOpportunity
ThedesignandconstructionindustriesinWesternsocieties(andinJapan)believetheyarefacedwithdecliningmarketsbecauseofstablepopulations.OthercountrieshavetargetedtheU.S.marketbecauseitissoopenandlargethatitseemsanaturalwaytogainbusinessthatwilloffsettheirownshrinkingvolume.However,an
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internationalcooperativeefforttoadvancethetechnologyofinfrastructurecouldcreatewholenewmarketsforurbanandinterurbansystemswithhigher-performancecharacteristics.
Developmentofadvancedinfrastructureisachallengeworthyofcooperativeinternationaleffort.Itwillbedifficulttostructurethesedevelopmentstomatchtheperformancerequirementsofasocietyutilizingadvancedscienceandtechnology,andmakemorethanincrementalimprovementstothepresentmodaltechnologies.Inthedevelopingpartoftheworld,whichisexperiencingthemostrapidurbanization,thechallengeistodeveloptechnologicalapplicationsappropriatetospecific-caserequirements,ratherthantoimposesolutionsproducedforindustrialnations.
TherearetworeasonsfortheUnitedStatestodomoretowardadvancingthetechnologyofinfrastructure.Thenationwouldbenefitwithinitsownbordersfromnewandhigher-performancesystems,anditcouldalsoenhancetheopportunityformarketingitstechnologyonaglobalbasis.Thiscommitteerecognizestheurgencyofmaintainingandextendingtheexistingnetworksofpublicworksthatunderliethenation.However,theUnitedStatesalsoneedstodevelopnewandhigher-performingtechnologiestoenhanceourcompetitivepositionintheworld.
Thecommitteerecommendsthatactionisneededatanationalleveltodealwiththeissuesofliabilityandsocietalriskaversionthatdiscouragelargecompaniesfromintroducingpotentiallyinnovativetechnologies.Increasedgovernmentcommitmenttoresearchandinnovationareneeded,throughprogramstoapplynewtechnologyaswellasthroughfinancialsupportofconstructionresearchanddevelopment.
ResearchandDevelopmentandInnovation
Thedegreetowhichresearchanddevelopmentactivitywillleaddirectlytoinnovationininfrastructureorinconstructioningeneralmaybeasubjectofdebate,butitisapparenttothecommitteethattheUnitedStatesiscurrentlyspendingtoolittleonconstructionresearchanddevelopment.Meansmustbefoundtoenhancetheapparentadvantagesthatprivatecompaniescanrealizefromthisinvestment,forexample,throughchangesintaxpolicy,risksharingongovernment-sponsoredprojects,ormodificationofprocurementprocedurestosupportpurchaseofinnovativedesignandmaterialsapplications.