Review of Richard Langlois' The Corporation and the Twentieth Century

 Langlois, R. 2023. The Corporation and the Twentieth Century: The history of American business enterprise, Princeton University Press. 

 

An exhaustive, detailed history of US business that continues Richard Langlois long-running dialogue with Alfred Chandler’s work on managerial capitalism. Ranging across all major C20 industries like railways, automobiles, aircraft, electrical appliances and computers, and loosely organised into periods of a couple of decades covering pre WW1, pre WW2, post WW2, stagflation and the final decades, each chapter looks at the political context, the development of key industries and the relevant technological innovations that drove the process: ‘It has been a central theme of the book that the large integrated corporation in the twentieth century owed its rise to prominence in significant part to the eclipse of the market and the growth of state power during the Depression and the World wars’ (p. 478). In the 1980s the wheel turned, market forces began to reassert themselves, new corporate structures emerged, and the boundaries of the firm shifted again. 

 

A focus of the book is the effects of regulation on industry. The early contest between Populists and Progressives that played out in anti-trust cases and Supreme Court decisions often led to regulations ‘misaligned’ with technology and market opportunity. In many cases consumer interest was secondary, with lower prices seen as evidence of anti-competitive behaviour as ‘American regulatory policy worked to segment markets, generally along lines of supply technology not market demand’ (p. 466). 

 

The institutional origins of regulators in key industries and their role in creating and maintaining cartels or oligopolies contradicts the view that the US favoured large corporations. In fact, the large, vertically integrated firm was an outcome of legal constraints on contracting that were intended to favour small businesses but had the opposite effect. Many regulated firms then underinvested in maintenance and innovation, leading to spectacular collapses like Penn State Railroad, Chrysler Corp and Pan Am, and the demise of other once great corporations like IT&T, RCA, Westinghouse and US Steel.

 

The role of technological opportunity, R&D and innovation is emphasised, battles over patents and standards discussed, and how disruptive tech eventually overcame regulatory barriers in industries like transport (containerisation and air freight), radio (AM and FM) and TV (broadcast networks and cable). Disruption in computing (transistors and integrated circuits), manufacturing (consolidation and lean production) and the near death experiences of IBM, Apple and GE are detailed: ‘The most disruptive new entry has often come not in the form of a small start-up but a large firm in a related area’ (p. 549). 

Intellectual contests of ideas and the increasing use of economics in regulation get short, non-technical explanations. Important business leaders and given credit when due and their failures dissected. For those interested in regulation and the role of government agencies, business history, and the interplay of technology and industry, this is a great read. 

The Fourth Industrial Revolution and Construction

 Technological Change and Constructing the Built Environment

I was once attacked by a colleague for, as he put it, ‘not considering the great mass of people employed in construction’. We were working for a government inquiry into collusive tendering and discussing recommendations to improve productivity and efficiency in the final report. At the time there were significant changes affecting the Australian industry that had far more impact than the legislative and regulatory reforms the inquiry led to. The industrial relations system was moving from a centralised award based one to a more decentralised system with enterprise bargaining and site agreements. International contractors were entering the market and the larger engineering and architecture practices consolidating. As the industry began to recover from a speculative office building bubble and the economy rebounded from a deep recession, construction employment increased and continued to grow for the next few decades. Construction as used here refers to all the firms and organizations involved in design, construction, repair and maintenance of the built environment.

 

Where these longer run trends were going was not obvious at the time. There have been significant changes in the range of activities and types of firms involved in construction of the built environment over the last few decades. Two trends underpinning those changes were the increasing use of multi-disciplinary project teams as the boundaries between professional disciplines became less distinct, and the inhouse versus outsourced decision about provision more common. Facilities management is an example, an activity that used to be done internally but is now often outsourced, sometimes but not always to construction contractors. Consultants bid for work as contractors, and contractors do consultancy and project management. Urban planning was once primarily associated with design, but is now linked to real estate and development. The process of structural change in industry occurs as technology, institutional and firm capabilities develop and change over decades.

Figure 1.

When considering the relationship between construction of the built environment and technological change the past is really the only guide available, so the starting point for this discussion is the first industrial revolution in England at the beginning of the nineteenth century when modern construction and its distinctive culture began to form, followed by the twentieth century’s attempts to industrialise construction. This history is important because, after more than 200 years of development, construction of the built environment happens today within an established system of production based on a complex framework of rules, regulations, institutions, traditions and habits that have evolved over this long period of time.

 

But how useful is history and how can it be used? Are there appropriate historical examples or cases to study to see if there are lessons relevant to the present? The answers depend to a large extent on context, because a key characteristic of the history of technology is the importance of institutions and the political and social context of economic outcomes. Also, understanding how policies were developed in the past and how effective they were requires understanding the changing context of policy implementation. However, as economist Paul Samuelson pointed out ‘history doesn't tell its own story and ‘conjectures based on theory and testing against data’ are needed to uncover it. Drawing the right lessons from history is a nuanced exercise. 

 

Over time industries and products evolve and develop as their underlying knowledge base and technological capabilities increase. The starting point for a cycle of development is typically a major new invention, something that is significant enough to lead to fundamental changes in demand (the function, type and number of buildings), design (the opportunities new materials offer), or delivery (through project management). Major inventions give a ‘technological shock’ to an existing system of production, which leads to a transition period where incumbent firms have to adjust to the new business environment and new entrants appear to take advantage of the new technology. Economist Joseph Schumpeter called this process creative destruction, and it leads to the restructuring and eventually consolidation of industries. That is what happened to construction and related suppliers of professional services, materials and components after the first industrial revolution. 

 

The drivers of development for industries in the twenty-first century are emerging technologies such as augmented reality, nanotechnology, machine intelligence, digital fabrication, robotics, automation, exoskeletons and possibly human augmentation. Collectively, these digital technologies are described as a fourth industrial revolution, and their capabilities can be expected to significantly improve as new applications and programs emerge with the development of intelligent machines trained in specific tasks. Innovation and technological change is pushing against what are now long-established customs and practices of the industries in the diverse value chain that designs and delivers the projects that become the built environment.

 

How technological change affects these industries differs from more widely studied industries like computers, automobiles or aerospace because of the number and diversity of firms involved in designing, constructing and managing the built environment. With the range of separate industries these firms come from, construction of the built environment is the output of a broad industrial sector made up of over a dozen individual industries. Not an ‘industry’ narrowly defined, but a broad industrial sector that is organised into a system of production with distinctive characteristics. A second difference is the age of these industries, many of which are mature industries in late stages of their life cycle. These differences create a different context for questions about industry, innovation and technological change, about how firms compete and how the system of production is organised as fourth industrial revolution technologies like digital twins and drones spread through construction and the pace of digitization increases. 

 

As well as the contractors, subcontractors and suppliers for new builds, there are also many firms and people mainly engaged in the alteration, repair and maintenance of the built environment. The broad base of small firms is a distinctive feature of construction, and these family-owned firms engaged in repair and maintenance work will largely continue to use the materials and processes they are familiar with. Old technologies can survive long after the innovations that eventually replace them arrived, such as the telegraph, fax machine and vinyl records with telephones, email and CDs. Stone, tile, brick and wood have been widely used materials for millennia, and industrialized materials like corrugated iron and concrete are ubiquitous. For maintaining and repairing the existing stock of buildings and structures, many of the skills, technologies and materials found today will continue to be used far into the future. That does not mean firms mainly involved in repair and maintenance will not be affected in some way by the fourth industrial revolution. 

Figure 2. 

Construction of the built environment has characteristic organizational and institutional features because it is project-based with complex professional and contractual relationships. How firms utilise technology and develop technological capabilities differentiates them within this location-based system of production. Emerging technologies in design, fabrication and control have the potential to transform construction over the next few decades, possibly less, and the book suggests firms will follow low, medium or high-tech technological trajectories, determined by their investment in the emerging technologies of the fourth industrial revolution. 

 

A broad view of what future construction might look like is based on successful solutions being found for the many institutional and technical problems involved in transferring fourth industrial revolution technologies to construction. Without downplaying the difficulty of those problems, similar challenges have been met in the past, but those solutions led in turn to a reorganization of the system of production. 

 

There are very many possible futures that could unfold over the next few decades as technologies like artificial intelligence (AI), automation and robotics develop. However, the key technology underpinning these further developments is intelligent machines operating in a connected but parallel digital world with varying degrees of autonomy. These are machines that have been trained to use data in specific but limited ways, turning data into information to interact with each other and work with humans. The tools, techniques and data sets needed for machine learning are becoming more accessible for experiment and model building, and new products like generative design for buildings plans, drone monitoring of onsite work and 3D concrete printers are available.

 

Intelligent machines are moving from controlled environments, like car manufacturing or social media, to unpredictable environments, like driving a truck. In many cases, like remote trucks and trains on mining sites, the operations are run as a partnership between humans and machines. There are also autonomous machines like autopilots in aircraft and the Mars rovers. As well as rapid development of machine intelligence, technological change in the form of new materials, new production processes and organizational systems is also happening. Sensors and scanners are widely used, 3D concrete printing is no longer experimental, cloud-based digital twins are available as a service, and online platforms coordinate design, manufacture and delivery of building components using digital twins. 

 

A period of restructuring of construction occurred in the second half of the 1800s when the new industrial materials of glass, steel and reinforced concrete arrived, bringing with them new business models, new entrants and an expanded range of possibilities. The development of modern construction was not, however, a smooth upward path of progress and betterment. It went in fits and starts as new inventions and innovations arrived, slowly then quickly, often against critics of the modern system of production and workers, fearing technological unemployment and lack of government support during a time of technological transition, who resisted new technology and sometimes sabotaged equipment. The issue in the past, like today, was in fact not the availability of jobs but the quality of skills during the diffusion of new technologies through industry. 

 

The only previous comparable period of disruptive technological change in construction of the built environment is the second half of the nineteenth century. Between 1850 and 1900 construction saw the rise of large, international contractors, who reorganized project management and delivery around steam powered machinery and equipment. In particular, the disruptive new technologies of steel, glass and concrete, which came together in the last decades of the century, led to fundamental changes in both processes and products. If that is any guide, we can expect technological changes to operate today over the same three areas of industrialization of production, mechanization of work, and organization of projects that they did then. And today, just as in 1820 when no-one knew how different construction would be and what industry would look like in 1900, we can’t see construction in 2100. That is a long way out, and we can only guess at the level of future technology. We can, however, use what we already know from both history and the present to form a view of what is possible over the next few decades based on what is currently understood to be technologically feasible.

It should be clear that the role of fourth industrial revolution technologies will be to augment human labour in construction of the built environment, not replace it. Generative design software does not replace architects or engineers. Optimization of logistics or maintenance by AI does not replace mechanics. Onsite construction is a project-based activity using standardized components to deliver a specific building or structure in a specific location. The nature of a construction site means automated machinery and equipment will have to be constantly monitored and managed by people, with many of their current skills still relevant but applied in a different way. Nevertheless, in the various forms that building information models, digital twins, AI, 3D printing, digital fabrication and procurement platforms take on their way to the construction site, they will become central to many of the tasks and activities involved. Education and training pathways and industry policies with incentives for labour-friendly technology will be needed.

Figure 3.

 

Because construction involves so many firms and people the technology driven changes discussed here will have significant and profound economic and social consequences. This would be a good opportunity for government and industry to work together to develop policies and roadmaps for those firms, and to support ‘the great mass of people’ employed in construction of the built environment who will be affected by them. The future is not determined, although technological change and creative destruction continue to reshape and restructure industry and the economy, decisions made today create the future.

 

 

From the Introduction to my new book available from Amazon on technological change and construction. 

BIM Mandates and Construction Industry Policy

BIM as Industrial Strategy 

 

Construction of the built environment is subject to many government regulations, legislation and policies. On the demand side interest rates, taxes, public infrastructure spending, urban development and housing policies are all important, but are also external to the built environment sector itself and they determined by a wide range of factors beyond the sector. There are the effects of planning and environmental regulations, and restrictions limiting the supply of new housing or infrastructure, an issue that has featured in recent debates and spills over into other issues around affordability of housing and the cost of major projects. All costs the complex institutional and policy environment entail are crystalised at the moment a contract is signed for a new building or construction project, as part of a total cost that typically includes finance and land, or access to it. The remaining share of the project cost is design and delivery, so that is what built environment industries can affect. On the supply side the issues are about efficiency, productivity and production costs.

 

A brief, general discussion on BIM and industry policy follows, before discussing the importance of BIM mandates. The pervious post was on the experience of the UK after 2011 in promoting use of BIM. That is an example of an industry policy that has worked, after the UK government launched a new broad-based industrial strategy to improve competitiveness with a BIM mandate for public construction included. 

 

 

Promoting Building Information Modelling

 

BIM had its origins in 1960s 2D drawing programs that developed into architectural drawing software. Two companies dominate the market, Autodesk was founded in 1982 and Bentley Systems in 1984. The first version of ArchiCAD’s file exchange solution was released in 1997, which allowed multiple designers to work on a collaborative platform. At this point enthusiasts began believing in BIM as a universal panacea for the problems and issues endemic to construction. Twenty-five years later they are still waiting, despite the fact that BIM is no longer a new technology but an application widely used in construction, one that is now offered as a cloud-based software-as-a-service (SaaS) to manage and maintain project digital twins.

 

Countries took different approaches to promoting BIM. Broadly, Scandinavian and western European countries, Singapore and the UK followed a government-driven approach, but Australia and the United States (US) a more industry-driven approach. However, the US General Services Administration (GSA) established the first public sector program in 2003, the National 3D-4D-BIM Program, on best practices for design and construction teams. The GSA was also the first client to require mandatory use of BIM in 2007, for program verification. The first government BIM roadmap was from Singapore, for 2010-2015, by the Building and Construction Authority, with a second in 2016 that included BIM for facility and asset management and the BIM for DfMA Essential Guide for integrating BIM and DfMA.[i]

 

The UK Government Construction Strategy 2011–2015 mandated fully collaborative 3D BIM for all public projects by 2016. Importantly, the UK also began publishing BIM standards to provide guidance for industry on how to produce, exchange and use information in BIM. In 2015 standards BS 8541-5 and 6 on offsite construction and modular buildings were released. The Construction Strategy was extended to 2016–2020, with a single shared building model to be held in a centralized repository for operation of assets over their life cycle[ii]. By 2020 most western and northern European countries had plans to mandate BIM in some way, although the level of use varied greatly between countries, with BIM adoption in the UK, Denmark, Germany and France similar to the US, Canada and Singapore, but Southern European use much lower. 

 

In the US many land use and building codes are local,  and a range of different approaches has been followed. The US also has standards and guides from both government and industry. The GSA 2009 Guides were on 3D imaging and 4D schedule management, extended to life-cycle management in 2011. The American Institute of Architects published six series of guidelines after 2007 for the use of BIM in the design and operations of projects for architects. The National BIM Standard was published in 2009, updated in 2012, and is in its third version. The US followed an industry-driven approach and, compared to Singapore and the UK with their BIM mandates, the government was less involved.

 

In Australia, the Commonwealth Government released a national BIM initiative in 2012 and recommended requiring full 3D collaborative BIM for all Australian government projects by 2016. However, with no mandates or targets for use nothing actually happened. As in the US, policies and uptake varies across the states. In 2018 the Queensland government started mandating BIM, to be expanded to all built assets by 2023[iii]. Other states are following.

 

Industry Policy and Industrial Strategy

 

 These is little practical difference between a country’s industry policy and national industrial strategy. They are both typically framed around competitiveness and productivity, focus on innovation and R&D, and follow pathways and roadmaps through scenarios and scoping studies. Some industries like agriculture, steel and automobiles are regarded as strategic and have always been surrounded by rules and regulations and subject to government intervention. Governments’ have science and technology policies that influence industrial structure and macroeconomic policies that affect economic development. For many countries the emphasis in industry policy has shifted to industry 4.0 technologies and AI, as governments and industry respond to these technologies.   

 

Government policies targeting supply side issues are not as high profile as others, they don’t get regular updates like monthly unemployment or quarterly GDP statistics and capture attention like announcements of interest rate changes. Because productivity has become the measure used for industry performance, despite the statistical questions that raises, it has often been the target for government policy. However, many policy measures affect productivity in the long run, such as education, training, infrastructure, innovation and R&D, tax and capital expenditure subsidies, and pilot or demonstration projects. When the intention of such policies is to influence a country’s economic structure and performance they are described as industrial strategy or industry policy.  

 

Industry policy was out of favour for a couple of decades before the financial crisis in 2007-08, especially in countries like the US, UK and Australia, although the European Union and many Asian countries followed well developed national strategic plans. In the West this was partly ideological, a view that it is about government intervention and picking winners, and partly because some issues traditionally addressed by industry policy like tariffs and market access moved into negotiations around trade policy, at both the global level with the WTO rounds and in the increasing number of bilateral trade agreements. Traditionally manufacturing was the focus for industry policy, but after 2007 the approach became more about coordinating a wide range of policies to achieve objectives across the economy and society. The rollout of protective equipment and vaccines during the Covid pandemic in 2020-21 both tested and accelerated this new approach.

 

Following the financial crisis governments looking for sources of economic growth and employment creation began focusing on specific sectors in manufacturing and services where they saw opportunity in global value chains. Industries like pharmaceuticals and biotechnology, semiconductors, aerospace, IT, AI, cars and steel have featured in the industry policies of many countries since then. Any policy intervention intended to strengthen the economy is an industry policy, and governments establish priorities and target industries. Countries protect or favour industries with legislation for many reasons but some of them are strategic and long term, like innovation programs with their associated challenges, roadmaps and milestones, and many of these programs currently involve digitisation in some form. 

 

While it is a fact that governments can have major impacts through regulation, tax, and R&D these policies are spread across departments, there are significant institutional constraints on government buying power. What history generally does show is that it is hard to get industry strategy right, implementation is difficult and outcomes are uncertain in dynamically evolving economies. There is also the problem that results take time to happen and thus take longer than the electoral cycle to develop, and there is often little benefit to the government of the day even if a policy is working well. Although inquiries in the UK, US and Australia into construction industry performance recommended leveraging purchases of materials, machinery and equipment and buildings and structures to push industry reform this was not widely used, despite being common practice in Asian countries like Singapore and Japan. 

 

Infrastructure is often found within a country’s national strategy for science and technology, required for building out the networks underpinning modern society and the economy. There is unrelenting pressure from public sector clients for the lowest possible cost of work, given the circumstances of the industry, and in many countries the public sector is the largest single client for construction work. Housing is another area with complex overlapping issues that affects the cost of delivery. The cost of major projects and lack of productivity growth in construction has been an issue for governments and major clients for decades, since productivity statistics first became available in the 1960s.

 

BIM Mandates and Industry Policy 

 

Building information modelling (BIM) has been promoted as the solution to the problems of poor documentation, fragmentation and lack of collaboration in building and construction for many years. It has not, however, been disruptive as we understand the idea, at least not so far. BIM has its origins in 1960s drawing programs, and Autodesk was founded in 1982, so this is not a new technology. Therefore, BIM does not qualify as transformative, rather it is the required enabler of further developments, a necessary foundation for the transition to the construction technological system in the digital age. BIM is more like digital plumbing underpinning digital construction than an elevator to higher performance.

 

BIM is plumbing because the digitized construction data it generates gets shared across the different built environment industries. At a basic level this is just sharing files and managing documentation. However, BIM can run on platforms, it allows access to cloud manufacturing, it is being combined with virtual reality (VR) and augmented reality (AR) systems for a holographic 3D virtual project that contains every detail of a building, and that information can be shared through a project management platform with all project participants. At this point the expectation is that VR will be used more on the design side by architects, planners and engineers, while AR will have a larger footprint on construction sites, although some construction firms have started looking at using VR in areas like safety and training. BIM is obviously central to these technologies. Other uses include drones matching site work to BIM plans for buildings and excavators measuring earthworks. Some clients are demanding as-built digital twins to manage their buildings with. 

 

Two reasons why BIM is not more widely used are inertia of industry culture and the incremental process followed by clients in requiring BIM. These are both discussed in the context of the UK below, which provides a good example of the policy approach now being followed by many governments. These policies broadly follow roadmaps with stages for BIM adoption, using both level of use and size of project as targets, that are intended to allow time for industry to adjust. A small number of countries have implemented national BIM mandates:[iv]

2004 Singapore for public construction projects 

2007 Finland for all public projects over 1 million euros 

2007 US General Service Administration and the Army Corps of Engineers required use 

2010 South Korea public construction over KRW 500 million from 2016

2011 UK for public building

2018 Spain for public construction

2019 Abu Dhabi for all major projects 

2020 Germany for Federal infrastructure projects

 

Many countries have published roadmaps, standards and guidelines since 2015 without so far following up with a mandate, for example Austria, Australia, France, Switzerland and Japan are at this stage. In every case the underlying assumption is that BIM will become business as usual over the decade of the 2020s, but at the beginning of the decade countries that were early movers like Singapore, Finland and the UK have the highest use of BIM.There are also state and city level mandates in the US and Australia. Wisconsin required BIM for projects over $5 million in 2010, and Queensland for public projects in 2018. By 2021 most major projects for both public private clients worldwide are done with BIM.

 

BIM mandates are important because the use of BIM unlocks the potential of digital construction, and affects the organisation of suppliers of materials, products and services for construction of the built environment as well. The deeply embedded nature of the culture and processes of this production system, and the large number of small firms involved, slows technological diffusion and limits voluntary uptake of new technologies like BIM. Therefore, government mandates in particular and client’s mandating BIM in general are needed. The experience of the UK is a good example.

 

 

Conclusion

 

The UK construction strategy applied to all firms involved in projects, and thus included designers, consultants and suppliers as well as contractors and subcontractors, and targeted technology adoption not the separate industries of residential building, non-residential building and engineering construction and the distinctive characteristics of each of those industries. The differences in the subcultures of these separate industries accounts for the differing rates of uptake found across firms in the UK since the launch of the strategy. Also, national and local governments, universities, regulators and industry bodies were all given significant but loosely specified roles in these policies to support industry engagement. 

 

Achieving industry policy goals requires a great deal of coordination, determination and long-term commitment,[v]qualities not always associated with government policy. Over the decade after the UK government launched the new Industry Strategy in 2011 and the Construction Industry Strategy in 2015 there was investment in capability, new standards were developed, and BIM requirements increased usage. This new conception and practice of industry policy was about collaboration between the public and private sectors,[vi] rather than imposing unrealistic outcomes on the industry. Industry policies do not have to be original or innovative to be useful and effective, as the success of the UK after 2011 in promoting use of BIM shows. 

 

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[i] See Jiang et al. Government efforts and roadmaps for building information modelling implementation, 2021. BCA, BIM Essential Guide for DfMA. 2016.

[ii] UK Cabinet Office. Government Construction Strategy 2016-2020.

[iii] Queensland Government, Digital Enablement for Queensland Infrastructure, 2018.

[iv] Lee and Borrmann, BIM policy and management, 2020. Links to the relevant documents for each country can be found in the article. 

[v] Aiginger and Rodrik, Rebirth of Industrial Policy and an Agenda for the Twenty-first Century, 2020.

[vi] Chang and Andreoni, Industrial Policy in the 21st Century, 2020.

Industry Policy and the UK Construction Reform Movement

 Policy Effectiveness and Industry Culture

 

The broad categories of residential building, non-residential building and civil engineering have wide ranges of customers and projects and are different enough to call for different types of contractors and delivery processes. Therefore, they should be regarded as separate industries. The distribution of projects, firms and output all support the idea that construction is a collection of industries, not one single industry, albeit with overlaps between them.  The combinations of products, parties and processes are distinct, so it is important to recognise that these differences exist and they need to be taken into account by government, industry and researchers. Considering construction as a single industry leads to analyses and prescriptions that may be appropriate to some parts of construction but are certainly not applicable to all. Government policy needs to recognise their differences.

 

Separating construction into three industries provides a different perspective on the long history of attempts to reform or transform construction in the UK. The UK reform movement is particularly well documented, there are a dozen reports between 1944 and 1998 summarised and discussed in Murray and Langford (2003), who concluded those reports agreed on the poor performance of construction with minor differences between their explanations for poor performance and recommendations for improvement. The last two of those reports by Latham in 1994 and Egan in 1998 became particularly influential as the UK government became the leading advocate of reform.

 

The public sector is typically the largest client of construction, although procurement is typically widely distributed across departments and levels of government, so it is not surprising the construction reform movement was led by government with inquiries, commissioned research and funding for demonstration projects. Although the reports discussed many issues, such as productivity, quality, training, contracting and documentation, the fundamental issue was the cost of construction, reflecting the UK government’s role as both a major client and the initiator of the inquiries and research. However, contractors typically had limited involvement in the inquiries and reports, and private sector clients largely stayed at arm’s length from the public sector’s reform strategies.

 

That this series of reports (and many others not included in Murray and Langford 2003) were required, averaging over two a decade for 50 years, shows how ineffective they were in developing policies to address the issues raised. The explanation for this policy ineffectiveness offered by Latham and Egan is industry culture, broadly seen as the custom and practices underlying the business model in UK construction. Latham focused on procurement and contractual relations with recommendations to change an adversarial culture, calling for more collaboration between clients, contractors, subcontractors and consultants, and more cooperative practices. He recommended ‘Partnering’ between clients and contractors to realise this. 

 

Egan began his report arguing industry improvement required changing the industry culture, recommending lean production methods using examples from car manufacturing, steel-making, grocery retailing and offshore engineering by promoting offsite manufacturing in the Modernising Construction (National Audit Office, 2001) and Accelerating Change (Strategic Forum for Construction, 2002) reports, and supported the reform movement with legislation and by establishing Rethinking Construction, Construction Best Practice and the Movement for Innovation, which were brought together in 2004 as Constructing Excellence “to achieve a step change in construction productivity by tackling the market failures in the sector and selling the business case for continuous improvement. Through focused programmes in Innovation, Best Practice Knowledge, Productivity and Engagement, Constructing Excellence has developed a strategy to deliver the process, product and cultural changes that are needed to drive major productivity improvements in the sector.” 

 

Prior to Egan the reform movement relied on industry participation, with little effect on how projects were procured and delivered. Contractual relationships were the focus of much of the reform agenda to improve industry performance. Egan introduced benchmarking against best practice to improve productivity, and Constructing Excellence documented demonstration projects. Murray and Langford thought the “demands on the industry cannot be met and so lead to an industry that cannot attract staff to deliver buildings on time, with increased costs and questionable quality.” (2003: 7). Other critics attacked the reform movement for its technocratic and managerial approach (Green et al. 2002) and the language used (Fernie et al. 2006). More relevant was a review of progress since Egan by Wolstenholme (2009), which found there had been little change in the industry: clients still awarded projects to the lowest bidder while contractors offloaded risks and maximised profits.

 

Sixty-five years after the Simon Committee report on building contracts (the first in Murray and Langford)Wolstenholme again called for cultural change “to integrate and embrace the complex picture of how clients and contractors interact” (2009: 8). Industry culture is clearly important, but it is also clear that culture is not malleable and does not change easily or quickly. A better explanation for the lack of impact of these reports, their recommendations, and the ineffectiveness of public policy in reforming construction is required. Simmons (2015) blames the policy making process as resistant to evidence and subject to ministerial whims and churn, with issues becoming politicised once they enter public debate. Carroll (2010) suggests that regulatory proposals typically don’t have a convincing evidence base and there is poor integration of impact assessment with policy development processes. Wond and Macaulay (2010) argue that generic ‘problem-inspired’ strategies developed by central policy-makers have to be interpreted by the ‘problem-solving’ implementers responding to nuances of local context and capability. 

 

Construction is better viewed as three industries when the differences between residential building, non-residential building and engineering construction are taken into account. If the culture in each of the three industries is different, recommendations and policy directed at construction as a single industry are unlikely to be relevant across the three, and will thus be disregarded by many firms and clients. Clients are also different and can be generalised as households, businesses and the public sector, and their relationships with contractors varies accordingly. Another example is design, where house builders have pattern books, commercial building uses architects, and infrastructure is designed by engineers. These structural differences between the three industries affects the way clients, contractors, designers and suppliers will interact, thus each industry has developed individual characteristics over time that become that industry’s culture. The specific nature of these industry cultures makes recommendations and policy directed at construction as a single industry ineffective.

 

With separate industries and separate cultures, separate policies are required. A broad industry policy of the sort that targets construction as a single industry will be challenged by three deeply entrenched cultures with limited similarities.Research and reports that treat construction as a single industry have the same problem, although there is an economic activity called construction in the SIC the characteristics of the three sectors makes them different industries.The manufacturing SIC includes glass, wood products, steel, plastics and concrete, but they are regarded as separate industries and are not grouped together under a construction products SIC. An industry policy for the steel industry is not thought to apply to plastics or concrete because it is not relevant to those industries. 

 

More recent construction policies in the UK have moved on from the industry culture debate, although the government’s objective to improve construction productivity through better procurement remains. With the launch of the Government Construction Strategy 2011-2015 and the Government Construction Strategy 2016-20 increasing the use of BIM became the target. The 2011 policy required BIM Level 2 across centrally funded construction projects by 2016, with BIM operating within the existing construction contractual framework using a legal agreement (the CIC BIM Protocol) added to professional services and construction contracts. The 2016 strategy required Level 3 BIM for public projects. BIM maturity levels were defined as: 

·       No BIM: Information is generated manually by hand

·       Level 0: Basic 2D Computer-Aided Design (CAD) use for minimal collaboration.

·       Level 1: Use of 3D and 2D CAD for documentation and works information.

·       Level 2: Models are shared between the project team using a common data environment.

·       Level 3: Wholly integrated information model across the project, with the team working collaboratively in real-time.

 

The Government Construction Strategy was within the broader UK Industrial Strategy, which included Construction 2025 and targeted a 33% cost reduction in the initial costs of construction and whole life cost of built assets, 50% faster delivery from inception to completion for new build and refurbished assets, 50% lower greenhouse emissions on construction projects, and a 50% reduction in the trade gap for construction products and materials. Further initiatives to support the policy were the Centre for Digital Built Britain in 2017, at the University of Cambridge, and the Construction Innovation Hub in 2018, a collaboration between the Centre for Digital Built Britain, BRE and the Manufacturing Technology Centre with £72m in government funding develop digital and manufacturing technologies in construction. The UK Industrial Strategy was revised in 2017 and included funding for a Construction Sector Deal, with the government committed to using Modern Methods of Construction through offsite construction for relevant departments from 2019. This was followed by the publication of Transforming Infrastructure Performance by the Infrastructure and Projects Authority (2017, updated 2021), setting out a long term programme to improve performance and delivery. Finally, in 2018 a BIM Framework based on a new ISO 19650 series of standards was released.

 

Ten years after the launch of the Construction Strategy progress towards BIM Level 3 remains patchy. Architects, engineers and large contractors in the UK have adopted BIM faster than services engineers, facilities managers and smaller contractors employing less than 50 people. One annual survey found nearly half the 200 respondents used BIM infrequently and thought adoption of was proceeding slowly, the other half used BIM often or very often. Only 6% thought progress was rapid, although 14% were using ISO 19650. Another 2021 survey by the UK BIM Alliance with over 1,100 respondents found 65% were implementing BIM and used it on around half their projects and 30% were using ISO 19650. However, over half the subcontractors and cost consultants, and over 40% of project managers and facility managers, were not implementing BIM. Nevertheless, 56% of respondents thought BIM would become business as usual in 3-5 years and the other 44% thought it would take longer. Any industry strategy that approaches a technology adoption target of 100% in less than two decades has to be regarded as effective. 

 

Compared to the limited effects of the construction reform movement’s promotion of MCM and offsite manufacture, which remains confined to niche markets, the BIM strategy has seen a significant increase in the use of BIM and the UK is seen as a leader in adoption. The government mandate on use of BIM on public projects has been much more effective in 10 years than six decades of exhortations and recommendations to change industry culture. Recognising this, the provision of clauses covering contentious issues in construction contracts (such as intellectual property and data ownership) worked with rather than against industry practice and culture. The BIM Framework provided a roadmap for the firms and clients and the development of standards provided a toolkit. 

 

Industry culture is a complex outcome of social (Beamish and Biggart 2012), institutional (Davis 1999) and economic (Powell 1990) factors. Because of the range and dynamic interplay of those factors it is not an appropriate target for industry policy, as the history of construction reform efforts that argued cultural change was necessary for industry improvement in the UK, documented over decades in a series of reports, clearly shows. When a new construction strategy was launched in 2011 the focus shifted from using public procurement to foster cultural change to requiring BIM on public projects, and over the next decade succeeded in increasing the use of BIM to around half of firms and the majority of public projects. Despite all the claims made for BIM changing industry culture and increasing collaboration (BCG 2017), if it were to come about it would be as a consequence not a cause of industry improvement from the construction strategy. 

 

Policies that bring together issues around productivity, innovation, skills and technology do not have to be original or innovative to be useful and effective (Chang and Andreoni 2020). The construction strategy applied to all firms involved in projects, and thus included designers, consultants and suppliers as well as contractors and subcontractors, and targeted technology adoption not their separate cultures. The differences in the cultures account for the differing rates of uptake found across these firms and industries. Also, national and local governments, universities, regulators and industry bodies were all given significant but loosely specified roles in these policies to support industry engagement. Achieving policy goals requires a great deal of coordination, determination and long-term commitment (Aiginger and Rodrik 2020), qualities not always associated with government industry policy, and over the decade since the UK government launched a new Industry Strategy and the Construction Industry Strategy there was investment in capability, new standards were developed and BIM requirements increased. This new conception and practice of industry policy was about collaboration between the public and private sectors, rather than imposing unrealistic outcomes on the industry. 

 

 

References

Aiginger, K. and Rodrik, D. (2020). Rebirth of Industrial Policy and an Agenda for the Twenty-first Century, Journal of Industry, Competition and Trade, 20:189–207.

 

Beamish, T. D and Biggart, N. W. (2012) The role of social heuristics in project-centred production networks: insights from the commercial construction industry, Engineering Project Organization Journal, 2:1-2, 57 70. 

 

BCG, (2017). Digital in Engineering and Construction: The Transformative Power of Building Information Modeling, Boston Consulting Group.

 

Carroll, P. (2010) Does regulatory impact assessment lead to better policy? Policy & Society, 29:2, 113-122.

 

Chang, H-J. and Andreoni, A. (2020). Industrial Policy in the 21^st Century, Development and Change, 51(2): 324–351. 

 

Davis, H. (1999). The Culture of Building, New York: Oxford University Press. 

 

 Fernie, S., Leiringer, R. and Thorpe, T. (2006). Rethinking change in construction: a critical perspective. Building Research & Information, 34(2), 91-103.

 

Murray, M. and Langford, D. (2003). Construction Reports, Oxford: Wiley-Blackwell.

 

National Audit Office (2001) Modernising Construction, National Audit Office London: The Stationery Office.

 

Powell, W. (1990). Neither market nor hierarchy: network forms of organization. Research in Organizational Behavior, 12: 295–336. 

 

Simmons, R. (2015) Constraints on evidence-based policy: insights from government practices, Building Research & Information, 43:4, 407-419.

 

Strategic Forum for Construction, (2002) Accelerating Change, Rethinking Construction. London:

 

Wolstenholme, A. (2009). Never Waste a Good Crisis: A review of progress since rethinking construction and thoughts for our future, London: Construction Excellence.

 

Wond, T. and Macaulay, M. (2010). Evaluating local implementation: An evidence-based approach. Policy & Society, 29:2, 161-169.