How leaders are bridging the gap between challenges and solutions

The property and construction industry is facing numerous challenges that require innovative solutions and collaboration among various stakeholders. Developers, financiers, and construction professionals are currently grappling with a range of challenges, including cost escalation, financing, capacity constraints, risk allocation, labour shortages, productivity concerns, sustainability, and the effective utilisation of technology.

In this article, we delve into the key points discussed at a recent Executive Roundtable in Melbourne amongst Victorian industry experts – aptly titled ‘Reducing Construction Risk in Uncertain Markets’ – hosted by Procore Technologies in partnership with the Victorian arm of The Property Council of Australia. The interactive session explored strategies for mitigating risks; opportunities for the industry in the next 6-12 months; and the role of technology in addressing the stack of challenges.

Attendees included:

Property Council Policy Manager, Lisa Julian

Property Council of Australia Deputy Executive Director, Andrew Lowcock

Property Council of Australia Commercial Director, Nicole Battley

Development Victoria Chief Executive Officer, Angela Skandarajah

Cundall Director of Sustainability, Hannah Blossom

ADP Consulting Group Director, Russell Evans

Beulah International Executive Director, Adelene Teh

Brady Capital Managing Director, Kelvin Cheong

Corrs Chambers Westgarth Partner, Nathaniel Popelianski

DuoProjects Director, Huy Chau

Johnston Winter Slattery Partner, Eleanor Kwak

The APP Group Business & Innovation Lead, Camille Jasson

Landream Development Manager, Dominic Tan

HGW Projects Associate Director, Mitchell Badge

Procore Industry Partnerships Manager, Jeremie Henry

Procore Mid-Market Account Executive, Sarah Goldman

Procore Development Manager, Jace Burgess

Chapter 1: Key Themes

What emerged from the discussion?

Collaboration and breaking down silos: There’s a need for greater collaboration within the construction industry. Working together and sharing knowledge can lead to improved outcomes and project success. Building partnerships and considering the roles of different stakeholders can drive innovation and positive change.

Adoption of technology: The adoption of technology, such as artificial intelligence (AI) and machine learning, holds great potential for the construction industry. AI can be used in various areas, including project design, coordination, and decision-making. However, there’s a need to address the risks associated with relying on AI and ensure transparency and understanding at the board level.

Challenges in the industry: Several challenges were discussed, including the need to build what people want, supply chain issues, skill and talent development, building quality, and the approval process. Addressing these challenges requires a collaborative approach, government support, and a shift in mindset among decision-makers.

Value of data and transparency: The use of data can enhance decision-making, improve quality, minimise rework, and increase transparency in the construction industry. Data-driven approaches, including the measurement of embodied carbon and monitoring project progress, can lead to better outcomes and greater confidence among stakeholders.

Opportunities in existing buildings: With a growing population, there is an opportunity to focus on existing buildings and redevelopment rather than solely constructing new ones. This shift can present new opportunities for the industry and contribute to sustainability goals.

Engaging the next generation: To attract young talent and compete with other industries, the construction industry needs to embrace technology and innovation. Creating an exciting and inclusive workplace, utilising AI, and focusing on sustainability can make the industry more appealing to the younger generation.

Advocacy and policy: There is a need for advocacy and policy support to drive change in the construction industry. Policy alignment, government involvement, and streamlined approval processes can facilitate innovation and improve industry practices.

Chapter 2: Cost Escalation and Financing

In his opening remarks, Jeremie Henry, Industry Growth ANZ Manager at Procore, highlighted a new report – How We Build It Now – that showcased Victoria’s construction sector exhibiting higher confidence levels in comparison to other states. The report also uncovered anecdotal evidence indicating that builders and contractors were becoming more prudent, expressing a desire for upfront assurances and early contractor involvement.

Taking that into consideration, industry experts discussed how developers are experiencing significant cost escalations, leading to budget overruns and financial constraints. Construction prices have risen substantially in recent years, putting pressure on project viability. Builders are reluctant to hold prices for extended periods, which affects long-term planning and financing. Uncertainty regarding future price increases and risk allocation has made it challenging to determine project feasibility and secure funding.

To tackle these issues, developers are exploring partnerships with contractors, adopting early contractor involvement (ECI) models, and implementing early procurement strategies. By collaborating closely with builders and involving them from the outset, developers can better manage cost escalations and secure financing. Additionally, alternative financing models and a fair allocation of risks between parties are being considered to ensure project sustainability.

Similar themes emerged during a conversation held at a Brisbane Roundtable, where developers explored fresh new ways to work with builders. These discussions included strategies such as providing fixed-back guarantees to assist with cash flow, despite the associated costs affecting all parties involved.

Chapter 3: Embracing Technology for Data-driven Insights

The conversation then shifted towards the utilisation of technology, with all participants agreeing the adoption of digital tools and data-driven insights is crucial for the property and construction industry’s future success.

Similar to the sentiments expressed by property leaders at the Brisbane Roundtable, the Victorian counterparts revealed how adopting technology to gain insights from data can enable better project planning, risk assessment, and cost management.

AI, in combination with augmented reality, for example, can revolutionise project design, collaboration, and visualisation, participants explained. What’s more, many businesses are embracing smart technologies – including intelligent construction management platforms – in a bid to improve productivity and profitability, and bolster access to project information.

In fact, leaders strongly believe in the potential of practical technologies to bring about tangible and meaningful improvements for their organisations. Rather than being swayed by flashy and attractive technologies such as drones and robotics – and like their Brisbane colleagues – they prioritise adopting solutions that enhance efficiency, daily operations, and overall effectiveness. If anything, even simple data capture and reporting can help companies get greater visibility into areas of potential risk and reward.

“Construction companies are less likely to be playing in the sandpit with drones, robotics, XR or 3D printing than they were 12 months ago. Instead, more are investing in technologies that support cash flow and smart day-to-day decision making. The objective is clear: maintaining solvency today to secure long-term sustainability tomorrow,” the Procore report reveals.

These sentiments resonated with roundtable participants, who also suggested there are many challenges to overcome in the push towards digital transformation including: data ownership, privacy concerns, and the need for upskilling the workforce. If anything, changing established practices and behaviours continues to be a challenge, particularly for larger companies more often than small companies in this sector.

But by leveraging technology, companies can gain more accurate data, optimise processes, and reduce inefficiencies. Tools such as automated meeting minutes, advanced project management systems, and real-time data analytics can eliminate non-value-added tasks and improve communication and decision-making across teams.

Chapter 4: ‘We need to do things differently’

The industry needs a shakeup – particularly on the technological front. Undoubtedly, there is still much more to accomplish, acknowledged Camille Jasson, Business Lead & Innovation Lead, The APP Group. She cited a Deloitte report that suggested, over the past three decades, Australia and New Zealand have lost $50 billion in potential revenue due to a lack of technology uptake.

“It’s difficult at the moment with everyone trying to keep their head above water; keep the offices open; and keep businesses ticking as usual. But we need to look at how to change things, how to do things differently – and not because we want to, but because we have to.”

Camille Jasson, Business Lead & Innovation Lead at APP Group

There are 300,000 jobs we need to fill over the next five years – and not 300,000 people to fill those roles – so we need to look at technology. We need to be looking at AI. It’s the fastest moving technology of our lifetimes.

“But there’s a role that organisations need to play in order to ensure we do it safely, particularly in the corporate construction space.”

Huy Chau, Director of DuoProjects, agreed, saying there’s a thirst and “significant demand for data,” especially within the property and construction domain. However, he also pointed out that the industry is trailing behind in terms of digital transformation and embracing data.

“I’m incredibly optimistic about data, but we are slow movers to adopt. We’re probably waiting for someone else to punt, and we’ll follow through. Why? There are so many questions to consider: who owns the data; who can disseminate; how do you interpret the information?”

Huy Chau, Director of DuoProjects

Chapter 5: Risk Allocation and Government Involvement

Participants also deliberated on the ongoing paradigm shift in risk allocation within the realm of construction projects.

Traditionally, builders bore the majority of risks, but developers are now being called upon to share this burden. This change is driven by the need to achieve more equitable risk distribution and ensure project success. Government clients are also transitioning from being risk-averse to embracing partnership models with the industry.

“One of the challenges is when you’re the government client, everybody thinks you should take the risk and there’s deep pockets,” according to Angela Skandarajah, Chief Executive Officer, Development Victoria.

“But we don’t have deep pockets anymore. That’s the reality of where we’re at. We might fund the projects, but there’s no ability to change funding. It’s very difficult in this environment. So I think the partnership model is really critical – and that’s one of the things that’s changing: There’s a shift in the way government clients are seeing the world. We’re prepared to partner with the industry to deliver the outcomes.”

“On risk allocation, in particular, it always comes back to who’s best placed to manage the risk. And there has to be a fair discussion about that. I think developers, historically, haven’t been prepared to take any of the risk – it has ended up with contractors – and I think that has to start to change.”

Chapter 6: Labour Shortages and Productivity

Labour shortages, skill gaps, and declining productivity are three top headaches, attendees revealed. The scarcity of skilled workers has led to increased labour costs and project delays. To address this challenge, companies are exploring innovative technologies, such as robotics and AI to augment the workforce and improve efficiency.

For some Victorian companies, robots and AI-powered systems are being utilised for tasks that pose safety risks or are labour-intensive. These technologies can help increase productivity, reduce reliance on manual labour, and enhance overall project outcomes.

Advanced data analytics and AI can streamline processes, improve decision-making, and optimise resource allocation, leading to better project management and cost control. The objective is to leverage data and emerging technologies to achieve smarter and more informed decision-making.

For Russell Evans, Director at ADP Consulting, he asserts that the crucial aspect involves understanding the data. “It’s about having trust in the data – understanding its source – and allowing sufficient time for analysis,” he emphasised.

“We’re currently experiencing significant time losses within the realms of design and collaboration. How can we reclaim this lost time and allocate it towards more effective thinking, designing, and constructing? One strategy is to harness the emerging technologies at our disposal. Our goal is to gain additional time that can be dedicated to enhancing data confidence.”

Hannah Blossom, Director of Sustainability, Cundall, echoed the sentiment, emphasising that rework leads to wastefulness, and waste translates to increased carbon emissions.

“Technology adoption will not only enhance business efficiency and performance but also have a profound and enduring effect on bolstering sustainability efforts.”

Hannah Blossom, Director of Sustainability at Cundall

The Way Forward

By embracing technology and innovative practices, the industry can improve productivity, cost control, and overall project outcomes. While there are hurdles to overcome, the industry’s willingness to adapt and explore new approaches will pave the way for a more resilient and efficient construction sector.

Certainly, enhancing transparency, making data-driven decisions, and harnessing greater “construction intelligence” with the aid of construction management platforms, along with the responsible utilisation of AI, have the potential to empower the industry in delivering smarter, sustainable, more efficient, and higher-quality projects.

Get in touch with Jennifer at jennifer@storiesink.com.au for your next Thought Leadership article.