HA BITA T INTL. Vol. 8, No. 34. pp. 2% 42. 1984. Printed in Great Britain.

OlY7-3Y7S~84 $3.00 + 0.00 Pcrjy~non Prc\\ Ltd.

Construction Productivity

SIVAGURU GANESAN” University of Hong Kong

ABSTRACT

Constraints impeding the growth of construction productivity, originating largely from the fragmented structure of the construction industry are reviewed. Technological advances in design and construction have always contributed to significant increases in productivity at all levels. However, recent trends with regard to total industria1 productivity (TIP) are disturbing, and may reflect the dominant but adverse influence of external economic factors, and their interference with the construction process; there seems a definite connection between low productivity and low industrial output. There is always a potential conflict between enhancing TIP and efforts to improve productivity in the various segments of the industry. Stagnation or further decline in TIP will lead to still higher construction costs, and reduced demand on the industry in the future. The need is for an integrated management approach to strengthen the total industrial framework, especially to resist the unfavourable effects of frag- mentation and unpredictable economic conditions. An example of such an approach from Japan’s sector is described. managerial efforts aiming solely at greater efficiency on job sites or in firms will produce only marginal benefits, especially if contemporary economic conditions continue.

INTRODUCTION

The level of construction activity in a country is mainly a reflection of the ‘needs’ of the population. 1 Inadequate increases in productivity will mean sharper rises in construction costs, with adverse social implications and declining work for the construction industry.2 This paper attempts to review major constraints impeding the growth of construction productivity, especially of the manner in which they are influenced by the fragmented structure of the construction industry, and suggests approaches to improve overall industrial productivity and output. Numerous factors are known to influence productivity of different stages of the construction process; availability of design data may be such a factor at the detailed design stage, while the degree of plant utilisation may be crucial during construction. However, there is strong evidence that direct and consequential effects of the fragmentation of the construction process slow down speed of construction work, prevent systematic product development of the type that is responsible for major productivity gains in other industries and thus affect productivity trends significantly. Detailed analysis reveals that many of the developments towards higher productivity in the industry, such as the use of

* Address for correspondence: School of Architecture. University of Hong Kong, Pokfttiam Road. Hong Kong.

’ See Ret? Bhalla and Edmonds (1987). ’ See Ref: Gorynski (1978).

NAB 8:3,4-C

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30 Sivuguru Ganesan

plant and equipment, organisational initiatives, information technology or industrialised building systems possess as one of their attributes a tendency to reduce the extent of fragmentation or at least resist the negative effects of such disorganisation. Effective management of the industry would need to recognise more measures in this direction.

It will also be shown that there can often be conflicts between: (a) attempts to increase productivit,y _at the level of a construction sub-sector (e.g. highway construction) or indlvldual projects; and (b) goals to increase total productivity or output of the industry at any time. Resolution of this conflict requires practical measures to maximise the productivity of scarce resources available to the industry, especially where the different sub-sectors and projects compete for such resources. The approach is in principle the same, whether the resource is skilled labour, plant, materials, finance or time. A mathematical application to maximise industrial output, when selected resources are restricted, is presented as an example of an integrated approach towards enhancing total construction productivity.

Commencing with a definition of productivity, this paper will review some special characteristics of the industry affecting productivity and stress the need for an integrated or systems approach for managing the construction process, underlining this concept with some practical approaches for Japan’s construction industry. The theoretical arguments developed are influenced by submissions in two important contributions to the complex issue of construction productivity.3 The paper avoids fine discrimination between civil engineering and building activities, and is not concerned exclusively with one country.

MEASUREMENT OF PRODUCTIVITY

Notwithstanding immense difficulties in measurement and interpretation, the basic concept of productivity as a ratio of output to input can be extended to measure: (1) resource productivity of any construction input such as labour, plant or materials, e.g. labour productivity = outputllabour; or (2) total factor productivity (TFP), i.e. output/labour and all other measurable factor inputs such as materials, capital, energy etc. For convenience of measurement, TFP has been taken as the ratio of output to labour, physical capital, energy and materials. Strictly speaking, overheads and profits also constitute an input. In the context of this discussion, measures of TFP would make sense if output is measured in physical terms, since different combination of resources can produce different outputs at different prices.4 The concepts can be applied to the total industry or to a sub-sector of the market (e.g. highways) or to a project site (i.e. any sub-system in Fig. 1). Two other concepts of productivity are also used in this paper: (1) total industrial productivity (TIP) refers to TFP as applied to the total industry. This is a true measure of industrial efficiency. A higher TIP means the industry is making optimal use of the resources available; (2) net output per construction employee, net output being the value of construction expenditure less materials including fuel, or value added by construction.5

At a highly disaggregated level, i.e. for a simple activity or a related group of activities (e.g. brickwork or excavation at a site), it is possible to measure, say, labour productivity in terms of physical output and monetary value of output per unit of input. It is also possible to estimate trends in unit costs (e.g. US$ per cu.m of excavation). Such measurements enable advances over time in design and construction techniques including innovations in equipment to be assessed

-’ See Refs: Bishop (1975) and Kellogg ei ul. (1981 j. ’ Set Refs: Koch and Maovcnzadch (1979) and Meadows (1978). ’ See Ref: Hilfehrandt (1981).

Construction Productivity 31

t t t t t Construction inputs

_ _ . I 1

Output of endproducts

SINGLE LEVEL INTERDEPENDENCE a *

Fig. I. The construction process: fragmentation and interaction.

quantitatively. But this approach becomes increasingly difficult as the construc- tion tasks to be measured become complex, numerous and more inter-dependent as in a major project. Nevertheless, cost effectiveness must remain a yardstick of productivity evaluations; escalating construction costs and projects exceeding budget continues to be a major problem.6

STRUCTURE OF THE INDUSTRY

New construction output accounts for 4560% of gross domestic capital formation in most countries. In the United States, it is reported to account for 11% of the gross national product and 14% of the work force.7 The construction industry is structurally one of the most complex. The industry possesses many special characteristics which all influence the productivity of its operations.’

Almost any construction end-product is unique in terms of location, constituent materials and resources, and method of assembly. It is heavy and bulky, expensive, takes long to produce and is also long-lasting. The structures are becoming more complex and widely dispersed and a complex system of financing involving repayment over a long period is in operation. More importantly, many sectors of the construction market depend on advance orders and do not normally produce for stock; civil engineering works are largely of this pattern, while speculative housing and industrial estates are examples of the contrary trend. Further, the industry is large, and a complicated system of production has evolved to accommodate the special characteristics of its end- products. Figure 1 represents the resulting industrial fragmentation in a simplified form. Some features of this structure that will facilitate a discussion on productivity are listed below.

6 See Ref: Howell (1981). ’ See Ref: Kellogg et al., op. cit., p. 138. ’ See Refs: Bishop, op. cit., pp. 62-72; Ganesan (1982a) pp. 10, 166, 190; Turin (1980) pp. 280-281

(1) The construction industry may be assumed to consist of a number of sub- sectors (highways, nuclear power plant, commercial buildings, etc.), each sub- sector consisting of numerous projects, and each project involving different stages of activities from conception of a project to its completion.

(2) The basic project conception to execution phase is regarded as an input-output process. Materials, labour, plant, finance, information and institutional resources result in output of various end-products (e.g. airports, bridges, buildings). The inputs and outputs of this process are heterogeneous.

(3) This input-output activity can be conceived to take place within an extended production system representing total construction process covered by levels 1 to 5. Here a component of this system (i.e. a sub-system) may be a construction sub-sector, a stage in project execution or an organisation or a specialist supplying a construction resource. Some, such as suppliers of building materials and components, are more involved than others.

(4) The diagram illustrates the extensive interaction taking place between sub- systems, at one or more levels, and also underlines the influences from the national economy, which supplies vital resources to construction, and from the overall construction sector on the performance and productivity of those closely involved with project planning and implementation at levels 3 and 4.

(5) Wide fluctuation in demand is almost a regular feature of the construction market, and in consequence organisations in the industry structure their activities so as to minimise the total cost of this uncertainty to them. Firms are reluctant to invest in resources, especially fixed assets, which require a commitment to future work. The fear of having to redeploy current resources, once on-going projects are completed, aggravates this uncertainty, and leads to inadequate resources on present jobs. Furthermore, organisations tend to maintain a stable but minimum level of resources and spread them over as many jobs as they can procure, causing slower progress on site.’ The resulting slower growth of output also means the industry is denied the benefits of greater economies of scale, higher research and development expenditure and innovations, and continuous training faci1ities.r”

(6) Fragmentation, especially sub-contracting in design and construction, is a structural response to this uncertainty. Specialised firms have better chances of continuity of work. Sub-contracting has many advantages: it enables expansion of overall construction capacity, rationalisation of the management of larger organisations employing these sub-contractors, specialisation leading to tech- nical advances, and finally flexible and efficient allocation of construction resources. These have had in general a favourable contribution to productivity because they improve utilisation of resources albeit at the sacrifice of part of ‘improvement’ through repetition. ”

(7) On the other hand, large-scale sub-contracting implies that an organisation (e.g. design or construction) has the formidable task of co-ordinating the work of these sub-contractors, and at the same time lacks direct control over the total resources committed to the project it is ultimately responsible for. For instance, sub-contractors on construction sites are known to require a headway before they enter a site or deploy resources to a site as late as they can get away with. All these lead to non-productive time.

(8) Design and construction are mostly separated, resulting in increased complexity and resource needs. Partly due to this separation, and also due to the intricacy of the projects, construction activities demand a high level of knowledge and skill from workers, compared to most manufacturing in-

’ See Ref: Bishop, op. cit., pp. 62-64. ” See Ref: Meadows (1978). ” See Ref: Ganesan. op. cit.. p. 166.

Construction Productivity 33

dustries. l2 This is also one reason why productivity in construction generally lags behind manufacturing industry.13

It is apparent that the character of construction products and the framework of their assembly present major impediments to efforts to improve productivity, especially TIP.

OVERALL INDUSTRIAL PRODUCTIVITY

The extent of interdependence between one sub-system and another would vary with each, as well as with the type of end-product. For instance, performance of a specialist sub-contractor (level 4) at a construction site (level 3) may depend on the nature of contractual relationship with the main contractor (level 4) or a specific input from the design team (level 3) or on availability of credit and interest rate (level 0). The influence of design (level 3) on construction (level 3) is well recognised, and generally increases with the complexity of a project.

Within the system, it is not difficult to appreciate the concept of productivity for each sub-system, though measurement difficulties are considerable. At level 4, one would be concerned, say, with the productivity of a contracting firm, or of its performance and profits at a particular construction site. At level 3, a design manager would evaluate productivity of the design team or, at times, of the cost effectiveness of the design itself. At level 2, evaluation of investments in a particular sub-sector, e.g. highway construction, would be required, and so on.

In the light of the above fragmented and conflicting concerns with produc- tivity, what is TIP? This is a measure of the efficiency of using inputs or resources to achieve specified targets of construction end-products at levels 1 and 2. (e.g. x m of highways, y sq. m of buildings, z hospital beds etc.) Without this overriding concern for optimal use of resources, at the total industry level, conflicts between the different sub-systems are unavoidable. For instance, a sub- contractors investment in plant would be unproductive, if shortage of materials or another sub-contractor, who is inefficient, perhaps due to lack of some resource, holds up his work. The “Hierarchy Model” of Kellog et aE. demonstrates a thorough appreciation of the importance of and the problem involved in promoting total productivity. I4 The argument therein that “maximiz- ing total productivity is more important than achieving high productivity in the component parts”, though presented for a project, is equally valid considering the total construction industry and its sub-systems as in Fig. 1.

Referring to Fig. 1, in principle, there can be a conflict between productivity maximisation in the total system and the component sub-systems. This may arise due to competing demand for scarce resources, or due to operational conflicts between the sub-systems. Translated to the industry, this implies that objectives of increasing TIP and total output are not always in harmony with comparable objectives for an individual sub-sector or project and vice versal’ The practical importance of this is readily appreciated in the less industriaiised countries (LIC’s), though this is true for all countries.

AREAS FOR PRODUCTIVITY IMPROVEMENT

Problems related to construction productivity and management may be viewed from levels 1 to 4 in Fig. 1. However, most of the problems identified are at

‘* See ReE: Mintzberg (1979). ” See Ref: Turin (1978), p. 38. ia See Ref: Kellogg et ai., op. cit. ” See Ref: Kellogg et al., op. cit.

34 Sivaguru Ganesan

levels 3 and 4. Ninety-nine Engineering-News-Record contractors surveyed in 1978 reported a high opportunity for productivity improvement in planning and scheduling in their headquarters operation and in cost control, supervision and improved engineering design on job sites; l6 others in North America have called for more efficient contract arrangements (e.g. a target price system for design and construct contracts),” effective designs. l8

or a new fee system to produce efficient and cost Project management on sites has been a favoured area of

educationists and professionals concerned with construction management training. The issues can be easily identified and advanced knowledge in management related disciplines readily integrated with such training pro- grammes. Clearly, these are important, as survival of the mass of contractors depends on site efficiency. Further, productivity at site is always an important determinant of TIP.

Unfortunately, any gains in site productivity can be easily eliminated by disruptions caused by incompetent management of the industry or the firms. It is also evident, on the basis of surveys of several countries in Asia, that poor management of the industry and its construction agencies, whether these are public or private, is a prime cause of low construction productivity, even in countries where substantial expertise of project management at sites has been acquired through programmed training or decades of experience. It is also true that efficient management of construction agencies is nearly impossible within an industrially backward sector; in many countries, the industrial framework for construction is quite under-developed.” Further, many issues occurring at levels 0, 1 or 2 can affect productivity at levels 3 or 4. Influence of stable or unstable markets on productivity in different sub-sectors (e.g. the role of interstate highway program on productivity in this sector in the USA), or of the violent fluctuations in advance orders for construction firms, in export sensitive Japanese economy in times of international recession, on the productivity of these firms, are examples. In such situations, planning and management of the total industry poses the greatest challenge to those concerned with increases in construction productivity.

PRODUCTIVITY TRENDS IN SELECTED COUNTRIES

Productivity in construction in the USA is reported to be on the decline since the early 197Os, following noticeable growth in labour productivity in the earlier decades after World War II.2o Significantly, growth in TFP (‘measuring output per unit of input of labour, capital, energy and materials’) has been described as ‘miniscule’ for the period 1947-1973.21 The UK scene is no better.22 First, it is important to recognise that these are based on monetary values of total construction output and almost certainly obscure more or less favourable productivity trends in respect of specific sub-sectors, projects or locations. Several factors would have contributed to the overall industry trend, and results from two empiricial studies provide useful insight into the above trends.

(1) Analysis of productivity trends in highway construction in the United States since 1920s revealed that “. . . gains in both labour and capital productivity and efficiency . . . have been substantial, resulting in a certain

I6 See Ref: Chromokos and Mckee (1981). I7 See Refs: Cowie (1981) and Tatum (1983). ” See Ref: Biggs (1981). I9 See Ref: Edmonds (1979) and Ganesan, op. cit. ” See Refs: Kellogg el al., op. cil., p. 137; Chromokos, op. cit., p. 135. ” See Ref: Kellogg et al., op. cif. p. 137. ** See Ref: Hillebrandt (1984).

Construction Productivity 35

offsetting of factor price increases”.*” Technological efficiency in design and construction had led to substantial reduction in quantities of labour and capital required. However, the researchers reported that: (a) “the magnitude and rate of the decrease in resource requirements attributable to efficiency has lessened over time; the percentage decrease between the 1950s and 1970s is only half that between 1920s and 1950s”; and (b) there were indications that labour saving bias, leading to more expenditure on equipment, and efficiency’s reducing effect on capital needs was inevitably lowering capital productivity in certain stages of construction.*” One potential consequence of these trends, if they continue, is to deter growth in labour productivity and TFP in the highway construction sector. If the same trends prevail in all or most construction sub-sectors, then the total industry would reflect similar productivity declines.

(2) A study of 50 countries revealed that net construction output per person employed in construction grows with gross national product (GNP) per capita, and, in the more developed countries (at 2,000-3,000 US$ per capita at around 1970 figures, or at or above $7,500 at today’s prices), “. . . output per man in construction tends to grow in direct proportion to income per cupita”.25 More recent studies based on 116 countries suggest this relation to be less clearcut. Hillebrandt uses UK construction data to suggest “a very definite connection between low productivity and low (industrial) output”.27 All these lend support to the position that fluctuating performance of the national economy as a whole may have contributed to the stagnation in construction productivity in recent years. This tends to reinforce the central concern of this paper that the structure of the industry and its interaction with the national economy influence TIP significantly. It should be noted however that even during an acute slump, many firms do operate at high efficiency; projects can be more resource-intensive and firms can discharge unwanted resources speedily.

A study by the author in Asia revealed that significant productivity increases were recorded in the fast-developing construction intensive countries, Japan, Singapore and Hong Kong. Japan recorded 6.9% per annum during 1960-1973, Hong Kong, 5% per annum during 1971-1979 and Singapore, 6.5% per urmum during 3966-1977. Mechanisation of construction operations has been a major factor in all these countries. Industrialised buildings, the development of labour saving components technology and continuous efforts to rationalise the construction process were also major influences in Japan. Hong Kong gained especially from repetitive building construction (conventional systems) and a skilled labour force.28 In LIC’s of Asia, evidence points towards positive trends mainly during sustained periods of construction boom. Productivity analyses in these countries are hampered by inadequate statistics, idle labour and capital equipment due to managerial difficulties, a bias towards capital often promoted by tax concessions and hidden subsidies to capital and difficulties in assessing technological efficiency.2”

OPTIMISATION OF INDUSTRIAL RESOURCES

A study on Sri Lanka’s construction sector (covering civil engineering and building works3’) was prompted by the need to improve total construction

” See Ref: Koch (1979) D. 365 24 See Ref: Koch,‘op. &I, pp. 363-364 ” See Ref: Turin. on. cit. ” See Ref: Bhalla akd Edmonds, op. cit. ” See Ref: Hillebrandt, op. cit. Lx See Refs: Ganesan, op. cit. ; Hillebrandt, op. cit. “’ See Rcf: Ganesan, op. cit. “I See Ref: Ganesan (1979).

36 Sivaguru Ganesan

capacity of the sector while there are severe resource scarcities. Foreign exchange, skilled labour, management specialists, imported materials, and local materials, are also often in short supply. Unskilled labour is an abundant resource. A model using linear programming techniques and a large capacity computer program was built up for this purpose. Realistic resource constraints were fed into this model. In order to achieve annual increases of 6% in total construction output over a 10 year period, the model operations led to a minimising of the use of scarce resources in the different construction sub-sectors (or maximising their productivity), and increase in absorption of labour into the construction process. The results from one of the models analysed are in Appendix A. Any construction end product satisfies functional needs to a greater or lesser extent and there are usually a variety of design options available to satisfy such a need. These involve choice of materials and assembly at the design stage, and to a lesser extent, alternative construction techniques at job sites reflecting different resource needs.

Two inferences from this study are significant to an appreciation of the productivity issues raised in Fig. 1.

(1) If a resource available (e.g. finance) to the total construction industry is finite, there would naturally be competition for this resource among the various sub-sectors at level 2, and the outcome will directly influence total industry output and TIP.

(2) At any of levels 1 to 4, there is no definite relationship between TFP of a sub-system and productivity of an individual resource used therein. For example, labour productivity may decline in, say, a major reclamation project, while TFP increases due to a more ‘productive’ combination of resources. Such a combination may be the result of availability, cost or simply a designer’s choice of resources. The above inferences reinforce the previous comments about the productivity trends in interacting sub-systems and provide further support to the ‘Hierarchy Model’.

IMPORTANCE OF PLANNING/DESIGN

The planning and design activities involve the most critical decisions concerning the resources and cost of a project, and have therefore by implication a high impact on construction productivity.

(a) Once a society’s or a client’s goals are established, the designer has usually a significant choice in terms of the end-product (a steel or reinforced concrete bridge), he thus influences the nature of resources to be employed.

(b) Design would be influenced by production considerations, both direct production methods and auxiliary items such as transport storage, etc., technical and operational resources on site and speed of construction.

In effect, a designer determines the nature of the end-product, and by his power to manipulate the type and quantum of various resources, and also the efficiency of their application, influences the final cost and productivity considerably. Kellogg et al. claim that designers control 70% of project costs and that the planning and design level is “the single most important level for improvement of construction productivity”. They lament that there may be a general lack of awareness among designers of this fact.“’ In general, the larger and more complex a project, the greater is the likelihood of the potential influence of designers on productivity.

There is evidence that designers have attempted to control costs through varied efforts at repetitive designs, standardisation performance specification,

‘I See Ref: Kellogg et al.. op. cit.

Construction Producrivitv 37

and in the area of building construction through prefabrication and components technology.32 Speculative housebuilding in the UK appears to be benefiting to some extent from continuous product development, through evolution of proven design solutions, repetitive works and greater cooperation among specialist sub- contractors who often work together on different projects.33 A survey by the author of Japan’s construction industry34 revealed that the share of prefabricated houses in annual output had fallen from 20% in 1973-1974 to around 10% in 1980. There are difficulties: mass production and cost reduction are not always possible because of insufficient demand; erection time is often longer because of less productive preparatory works and finishes. On the other hand, some 30-40% of the materials by value in a traditional house are supplied as factory- made building components - e.g. kitchen or bathroom systems. The benefits include transfer of ultra-modern technology into widely dispersed traditional housing, reduction of scarce skilled craftsmen’s time, increase in productivity in the sector.

The potential for control of costs, and the need for coordination between detailed design and site construction have promoted integrated organisational forms such as design and construct contracts, management contracting etc. In Japan, design and construct packages account for 2535% of the work of their largest contractors reflecting considerable progress in this regard.

BASIC APPROACH TO MANAGEMENT OF THE INDUSTRY

The key activity in the construction process is the project conception to completion phase (level 3 in Fig. 1). The primary task of management from the angle of improving productivity would be: (a) to identify the constraints while recognising this phase as an input-output activity; and (b) to make this phase as efficient as possible. Because the industry is vast, one may consider sub-sectors of the market or locations individually. Unfortunately, this task is complicated by the following.

(3) Excessive fragmentation is observed in levels 3 and 4, in Fig. 1. Efficient performance demands an exacting degree of resource and time coordination; further, the productivity of a fragmented system depends on the performance of its components.

(2) The natural economy influences the construction sector in many ways, but two of these are particularly important: (a) at times of economic uncertainty, the industry’s clients in the public and private sectors can cause wild fluctuations in advance orders; (b) the cost of construction may be influenced a good deal by the overall economic and production framework (e.g. interest rate, regulations). The extent of this interaction should vary from country to country, and within a country from one sector to another. For instance, Kellogg et ~2.~~ pinpoint allocation of Federal funds and environmental factors such as pollution, safety, regulation, etc. , as being significant in the USA. In the less industrialised countries, external trade performance, foreign credit and debts .have important impact. In general, the fragmentation of the industry aggravates the problems generated by such interaction, although it is not a direct cause.

Management should generate responses to minimise the adverse impact of the two factors mentioned above. Within the current structure of the industry and contemporary economic realities, it is not possible to eliminate them altogether. For instance, during a construction slump intense and unhealthy competition

” See Ref: Bishop, op. cit. .” See Ref: Leopold et ul. (1983). ” See Rcf: Ganesan, O/I. cit. I5 See Ref: Kellogg ei a(., O,T. cit.

38 Sivaguru Ganesan

leading to perilously low profit margins is a common occurrence among contractors in some countries; the industry should seek regulations to prevent the award of contracts on unrealistic tender sums. An example from Japan illustrates the above approach.

Japan’s expenditure on construction accounts for around 20% of GNP, nearly twice that of many industrialised countries, and productivity is high. The Ministry of Construction is extremely sensitive to the construction industry’s problems, and is responsible for the rationalisation of the construction process, and to ensure a steady growth of the sector. Under this framework, Japanese construction planners periodically review the problems of the construction sector, and identify major constraints and remedial measures; some years back, the Central Council on Contractors (set up under Construction and Business Law) set out as a main goal, to improve the corporate structure of each individual contractor, and to ensure ultimately a growth in the turnover of these enterprises within reasonable bounds of competition. Over 90% of more than 460,000 contractors are small in size, employing less than 20 persons in each. Most of them work as sub-contractors. Within a general policy to assist all contractors, the Government’s effort to help especially the small/medium enterprises or the sub-contractors is motivated by the recognition of the following considerations.

The high discrepancy between the firms in terms of productivity turnover investment, etc., which leads to management instability in the smaller firms, and the (consequent) disadvantages suffered by the employees in these establishments.

The adverse effects on the smaller firms resulting from changes in market conditions concerning both the resources required for construction and construction end-products. Under the Construction Contractors’ Law for regulation and development of

contractors’ activities, the Government has developed legal, administrative and institutional support to both large and small firms. These cover the areas of licencing of contractors, advance payment to contractors, equipment mortgage and leasing, promotion of sub-contracting and joint venture work; of particular benefit to the small firms are regulations dealing with procurement of work, joint venture, formation of cooperatives to rationalise all possible joint activities, credit facilities with guarantee systems, equipment leasing and management development. For example, some 31% of public works orders are allocated to medium and small contractors; joint ventures of small and medium sized firms secured nearly half of all contracts, reflecting a rise in their share by value to 16.6% in 1977 from 7.9% in 1973. This is mainly to ensure a continuity in the work load of smaller firms during periods of market uncertainty and to protect them from unfair competition. Without this effort, the primary goal of “improving the corporate structure of each individual contractor” will become an empty rhetoric. Reverting to Fig. 1, this Japanese initiative deals with sub- systems at level 4 - the contractors/sub-contractors, but the approach certainly responds to negative influences arising from levels 0 to 3, on their performance and productivity. It is a concrete example of the integrated approach to enhance productivity.3”

MANAGEMENT OF FIRMS

A large number of institutions in the construction sector are small; many domestic contractors have a weak economic and structural base. Therefore low

36 See Ref: Bishop, op. cit. pp. 153-182.

Construction Productivity 39

productivity of a firm - e.g., on one of its construction sites - may be (a) due to poor organisation of work or (b) exogenous influences over which the firm as a small business unit has little control, e.g., delays in receipts of design details, effect of regulations or fluctuating workload on the firm. Scarce managerial resources are often depleted by the time taken to sort out the problem arising from the disorganisation in the industry, e.g. contractual disputes over allocation of risk due to unforeseen site conditions. Systems of awarding jobs, under the attractive guise of open competition, often place too much risk on the contractor. Contractors in LIC’s complain that construction is denied the status and privileges, accorded to manufacturing, while the range of complaints in the USA include regulation, taxation, inflation, labour laws.37 The approach to management of a firm has to be similar to the one described in the preceding section, one that specifically responds to the demand and influences of the industry on the firm.

MANAGEMENT OF CONSTRUCTION SITES

Bishop argues convincingly that “the problems of site management are deter- mined largely b

Y the nature, number, and inter-relatedness of the tasks defined

by the design”.-s Kellogg et al. point out that considerable progress has already been achieved in improving work execution that “productivity improvements henceforth are likely to be marginal at best”.39 This may be true of most industrialised countries, but in others there is still considerable scope for improvement through better organisation of materials, labour and plant. Even in the former countries, the evidence is confusing. Whether the design is cost effective or extravagant, target costs are often exceeded. The reasons for this are numerous: shortages of basic work elements including engineering design decisions, delays caused by poor site organisation, lack of motivation of workers, idle plant, tight quality control, regulations etc.40

The cumulative effective of these is non-productive time on the site. Since labour and plant resources deployed account for over 50% of the total expenditure on many projects, non-productive time is perhaps the most serious issue on sites. Estimates of non-productive time on some sites have been as high as 70-80%.41 Non-productive time can arise due to (1) human inefficiency and lack of skill in the use of resources deployed on a site, (2) inbalance in such resources, and (3) the fragmentation imposed on construction tasks by (i) the nature of the design and (ii) the structure of the industry. A substantial volume of management efforts have gone into development of techniques in respect of (1) and (2) (CPM methods, incentive schemes etc.). The response of analysts to issue (3) is to suggest means of reducing the degree of fragmentation imposed on the site and introducing greater control by the main contractor over the site.

Bishop has suggested reducing the number of stages in construction organisation; for the building sector, component building, requiring a structure to be designed as fewer components, so that each forms a substantial part of the building, and to be executed by the main contractor or a substantial sub- contractor.42 The Japanese efforts on ‘components technology’ described earlier is a successful example. In all sites, there is the potential for site staff and craftsmen to influence design by altering it on site or advising design personnel.

37 See Refs: Kellogg et al., op. cit., p. 141; Ganesan (1982b). 38 See Ref: Bishop, op. cit. 39 See Ref: Kellogg et al. op. cit., p. 146. 4” See Refs: Borcherding and Garner (1981); Meadows, op. cit.; Laufer et al. (1982). 4’ See Refs: Bishop, op. cit. p. 74; Borcherding, op. cit., p. 444. 42 See Ref: Bishop, op. cit., p. 78.

40 Sivaguru Ganesan

Nevertheless, as long as construction remains a site assembly industry, retaining its special characteristics, the ability to influence TIP significantly through better organisation of site operations alone remains restricted.

CONCLUSIONS

(1) Important factors that influence total industrial productivity (TIP) in the construction industry are technological advances in design and construction; the structure of the construction industry which influences the pace and complexity of design and construction; and the state of the national economy which affects in particular demand for construction and cost.

(2) Sub-contracting in the industry has promoted specialisation. Despite tremendous progress achieved due to this, fragmentation continues to be a major impediment to improving overall productivity. This difficulty, though clearly marked in the separation of design and construction, haunts the productivity analyst in every phase of the construction process.

(3) The relative influence on TIP of each of the factors mentioned above may vary depending on (i) state of development of the industry, and (ii) the national economic and production framework within which construction activities take place. TIP trends since early 1970s are particularly disturbing, and seem to point towards the current dominance of influences arising from the national economy on TIP. Especially unfavourable are fluctuations in construction demand caused by economic uncertainty and rising construction costs which dampen demand further.

(4) Fragmentation of the construction process implies that there is always a potential conflict between TIP and attempts to enhance productivity in the various components of the construction industry, e.g. due to competition for common resources. Recent TIP trends confirm the urgency of measures to assess the performance and problem of the industry as a whole. Besides, it is difficult to insulate any component of the industry, however productive it may be at present, from the impact of adverse trends in TIP.

(5) Efforts to improve TIP will have to overcome (a) the ill effects of excessive fragmentation of the industry, imposed by the nature of the construction process and (b) the influences of the national and international economies on the workload and performance of the construction industry. Integrated structural approaches, at the level of the total industry, similar to the example cited from the Japanese construction industry in the text, are necessary.

(6) The majority of organisations in the construction sector are small, and management initiatives in regard to them must protect them from the disturbing effects arising from internal and external changes affecting the total industry.

(7) Despite significant developments in site management techniques, non- productive time on site appears to be the major issue still. Greater integration of design and construction may possess considerable potential to reduce this idle time. And the high proportion of managerial efforts directed towards the job sites, dictated by the need for firms to remain financially viable and competitive, appears to be having limited influence on TIP.

(8) Technological advances will no doubt continue to promote productivity in selected components of the industry, and they possess the potential to improve TIP. Yet, current indications are that the structural features of the industry and the sector’s response to external economic influences will dominate productivity changes in the coming years, while greater design/construction coordination and effective design reduction in non-productive time on site remain potentially beneficial areas. Still, many important decisions on the construction process are taken internally, by professionals and others with firms and job sites. These

Construction Producfivity 41

decisions would continue to be in~uentia~ in improving productivity within their units.

Acknowledgements - I am grateful to Professor D. Bishop, Dr P.H. Hillebrandt and Mr Steven Groak, all from University College London, for making many valuable comments on the text; and to MS Catherina Lok for assistance in preparing the manuscript on a word processor.

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Bishop, D. “Productivity in the Construction Industry”, in Aspects o,f the Economics qf Construciion, Turin, D.A.. (Editor), pp. 59-96. George Godwin, London, 1975.

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Ganesan, S., Growth of lousing and Construction Sectors: Key to Em~lo~~lent Creation, p. 79, 1979. Pergamon Press, Oxford, Progress in ~~an~?~ng 12, No. 1, Diamond, D. and McLou~hlin. J.B. (Editors).

Ganesan, S., ~~~~7ugemerzt of Small Co~trt~cf~on Firms, Tokyo, Asian Productivity Or~anisation, 240 pp. (Chap. 9, Construction Section in Japan, pp. 153-182) 1982a.

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42 Sivaguru Ganesan

APPENDIX A

Output and employment maximisation in the housing and construction sectors, 1974-1983 - Model No. 1 1973 = 100.0 Total Const. output in 1973 = Rs.1264.58 M. Total emp. = 342.490 persons

Total const. output Gain in

Target From Maximum total emp. Year minimum model emp. o/o Constraints* Resources used up

- ~._~ -. ..--- __.

1974 106.0 107.8 108.5 0.6 1) PE 2) FE 1975 112.4 115.3 116.3 0.9 1) SW 1) PE 2) FE 1976 119.1 123.2 124.7 1.2 1) SKL 1) PE 2) FE 1977 126.3 129.6 131.2 1.2 1) PE 2) FE 1978 133.8 139.8 142.4 1.9 1) TL 2) PE 3) FE 1Q7Q 141.9 149.2 152.4 2.1 1) T 2) B 3) TL l)TL2)PE3)MAN4)FE 1980 150.4 159.4 163.3 2.5 1) CE 2) MAN 1) TL 2) PE 3) FE 1981 159.4 171.7 176.1 2.6 1) TL I) TL 2) PE 3) FE 1982 169.0 183.5 1X8.7 2.8 1) TL 1) PE 2) FE 1983 179.1 196.0 202. I 3.1 1) PE 2) FE

Key: CE, cement; T, timber; B, bricks; TL, tiles; PE, plant and equipment; MAN, management; FE, foreign exchange; SW, sanitaryware.

* This column refers to those resources additional quantities of which have to be provided during the year in order to achieve target output.