STRI - A reality check from an engineer

Roger FlanaganReading

University

Construction is not one sector

Ranges from repair and maintenance, dams, power plants, gas pipelines to hospitals, hotels and homes

Local markets are very different

. . . . local construction tools and methods are different

Construction is very different

. . . . and the methods of procurement and delivery are different

Global construction output - US$4.8 trillionGlobal construction output - US$4.8 trillion

Africa70

M East37

S America101

Canada156

Russia90

China

321India81

Hong Kong19

Australia68

USA1163

Europe1487 Japan

436

SAfrica

15

All figures are current with exchange rates as at Jan 2009

Sources of data: Asia Construct, Euroconstruct, and national statistics

Malaysia12

Turkey12.5

N. Africa28

N Zealand14

US$bn

Korea107

SwedenNorwayFinland

78

Integration of design and production

Increasing collaboration

across the supply chain using IT

Companies from emerging markets

seeking work in developed markets

Emphasis on value not price

Winning on technology, finance, safety, and

environmental credentials

Changing landscape of construction

Bigger projects and bigger risks being

undertaken by bigger companies

Greater use of sub-contracting

New ways of procuring projects

(SPV, EPC, BOT etc.)

Hochtief

Turner (USA)

Leightons (Australia)Thiess (Australia)

John Holland (Australia)

C E Marshall (Earthmoving)

ACS

Dragados

ACS Dragados

The big are

getting bigger

-Emmar MGF JV in India-Al Habtoor Leightonin Middle East (25,000 staff)

The industry

Table 1 listing W/120 describes construction services. It fails to describe the way that delivering projects has changed.

Design has become an integrated part of the delivery process with Build-Operate-Transfer (BOT), Public-Private Partnerships (PPP), Design and Build and Engineer-Procure-Construct (EPC) being used more extensively around the world.

The global construction market is huge – US$4.8 trillion, this doesn’t take account of the informal sector

• A very good comprehensive and rigorous report; the

methodology appears robust

• The reliability of the data and its realism is an issue

• Construction has not received as much attention as other

sectors, probably because of its complexity

• Figure 3 has some surprising results - Japan is not known for

being an easy market to enter for construction.

The STRI - some observations

Messages

Thought needs to be given about how the index will be used, updated and ultimately interpreted by the industry.

There is a significant overlap with architectural and engineering and construction services. Hence, if the two indexes give a contradictory message about country entry, there will be a credibility issue.

The restrictions on the movement of people are always capable of being overcome – and IT has made a huge difference in knowledge management.

Messages

The weighting on restrictions of foreign ownership and other market entry conditions (40%) would appear somewhat high, bearing in mind the way that a Special Purpose Vehicle/Joint Venture is used for project delivery.

STRI is about restrictiveness, whereas the business focus is attractiveness and project delivery - contractors are very good hunter-gatherers, weighing up ease of entry against opportunity.

The weightings should be re-visited with a view to fine tuning to better reflect the characteristics of the sector

The contractor – in the face of adversity!