3. Procedures of shifting workflows

Return to December 2020 Update

 Includes the following 6 subcategories:

• 3.a) Current situation
• 3.b) Remote work; Work from home (WFH)
• 3.c) Site procedures
• 3.d) Supply chain
• 3.e) Workspace re-entry
• 3.f) Financials; cashflow / Contracts/ Litigations

Length: 18 min read;  3,683 words.

Note: The following paragraphs summarize the category of Procedures of shifting workflows observed in December. More information about the specific category from December (and previous months) can be found in the downloaded report(s).The number in square brackets (e.g., [X]) refers to a reference where the reader can find more information about a specific statement.  The references can be found in the References list below, Systematized References page or in the downloaded report.

This category had again the highest interest with 26.3% representation in the selected references. This category has taken the number one position for the sixth time in the past 9 months and we expect it to remain of the highest interest in the following months, due to challenges contractors are facing such as market conditions and issues with cash and working capital, contracting and potential litigations; delayed and/or canceled projects. Two subcategories only, Current situation and Supply chain, have been discussed more in December than in September.

a) Current situation

The increase of interest in this subcategory, that covers quantitative and qualitative market changes globally, are due to yearend recapitulations and 2021 prediction analyses. The construction industry was one of many that was forced to switch up its workflow and get creative this year with the drastic changes, uncertainties, restrictions and additional safety protocols that were put in place amid the COVID-19 pandemic. Even those with a healthy backlog of projects at the beginning of 2020 had to adapt to a changing market and new restrictions to stay viable. Remobilization after the construction shutdowns proved difficult as everything was out of sequence, we had to keep our finger on the pulse of material availability. The virus spread also exacerbated the industry’s talent shortage, especially when employees contracted COVID-19 or were exposed to the virus and had to quarantine. [235] The Chamber of Commerce's quarterly report shows contractors face increasing challenges due to COVID-19: 83% experiencing product delays; 71% struggling to meet schedule requirements; 68% experiencing delays expected into Q2 of 2021; 58% putting in higher bids on projects; 53% saying major project shutdowns/delays are a top concern; 41% saying material shortages is a severe consequence of COVID-19; and 39% turning down work opportunities. [236] Employee vaccination rate will become a new KPI. [18]

Accelerated digitalization is permanently transforming the industry into more standardized, consolidated, integrated and project-based one, but due to backlog shrinking and more competitive bidding environments, even construction tech players had to lay off employees and cut costs to manage cash flow.[237] Viatechnik ‘s 2020 trends and challenges include: 1) vast amount of distribution centers; 2) robotics; 3) cloud computing; 4) digital transformation (the buzzword of 2020); 5) science (is industry winner); 6) digital twins and user experience; and 7) ESG impact (environmental, social, governance). [238] Gensler highlighted 5 greatest 2020 trends: 1) Our new hybrid reality and its influence on workplace design; 2)  How the pandemic is impacting the commercial real estate market; 3) A call to action for decreasing the impact buildings have on the planet; 4) A renewed focus on global wellness; and 5) A closer look at how design can create a more equitable and inclusive world. [239]

Although all statistical construction indicators such as Construction jobs, Architecture Billing Index, Construction starts, Construction Confidence Index and Backlog indicator have been down since October and November [240], construction has been one of the most resilient industries in light of the COVID-19 outbreak. The Dodge Momentum Index, a backlog indicator, is about 13% below the February 2020 level. Construction organizations provide bleak outlook for the next months. The nonresidential construction employment in the US added 11,900 jobs in November, but still only recouped 58% of the jobs it lost during the initial phase of the pandemic.[241] Disparate views of similar data illustrate the bifurcated impact of the coronavirus crisis on the $1.3 trillion construction industry. Contractors have dealt with a range of challenges this year, including layoffs, government shutdowns, canceled projects and the increased costs of keeping sites open during the pandemic. For example, despite enjoying essential business status in most of the country, the construction industry still lost jobs across 58% of metro areas year-over-year through October, due to the broader impacts of the coronavirus pandemic, according to the Associated General Contractors (AGC) of America. Construction employment is likely to continue falling in many parts of the country unless Congress quickly passes new coronavirus relief measures, AGC CEO Stephen Sandherr said in the statement; Boosting infrastructure projects, preserving the benefits of the Paycheck Protection Program and protecting businesses from predatory attorneys will help stabilize the economy and demand for construction. [246] Contractors brace for more lockdowns as coronavirus cases spike nationwide. After the announcements of multiple vaccines coming to market in November, there were a few weeks of optimism in the construction industry that on-hold projects would soon start up again. But the December case-spike brought a growing realization among contractors that more shutdowns may be necessary even for ongoing projects, and that it may be a while before they open up again. I have clients right now that are thinking March and April to come up with the re-mobilization plan, and then getting people on the ground again in May and June. The last thing you want to do is start and then have to stop again; Joe Natarelli, leader of the construction practice at New York City-based national accounting firm Marcum. According to Anirban Basu, ABC’s chief economist, this viral spread is so intense, it is conceivable that policymakers will decide in a more significant fraction of the country that construction is not an essential industry. If I'm looking at this scenario as a contractor and saying, 'OK, what do I do?' I basically have to put my business in hibernation and preserve cash. It's winter, we're shut down. Once a vaccine liberates the economy and allows for more rapid growth, the question boils down to how many contractors will survive to take advantage of it. [242]

According to Euroconstruct Europe’s construction market will shrink by 7.8% this year and will not recover fully until 2023, with forecast growth of 4.1% in 2021, 3.4% in 2022 and 2.4% in 2023. The forecast for this year is an improvement on previous estimates of -11.5% made in June and -9.1% in August. Total construction output is expected to reach €1.73 trillion in 2023, which will exceed by €28 billion the pre-corona level of 2019. [243] The Russian government is reported to be eyeing a plan for a RUB1.4 trillion (US$18.4 billion) rail project in the south of the country, according to the Russian media. Russia’s Gross Domestic Product (GDP) is predicted to decline by 4.3% in 2020 so a large-scale infrastructure project such as this could boost the country’s economy. Africa: Although Covid-19 and the resulting economic turmoil undoubtedly caused a sharp downturn, southern Africa’s construction outlook has experienced an up-and-down trajectory over the past few years. Angola is experiencing renewable energy boom. Mine projects are paused given funding questions. [218] Global construction equipment sales will grow in 2021, according to specialist market research and forecasting company, Off-Highway Research (OHR). The rebound is expected to be strong thanks to stimulus spending plans. The global markets excluding China fell more than 20% in 2020 to a level last seen in 2016. In that context the downturn could have been much worse – it certainly was not on a par with the 2008-9 financial crisis. In 2021, the Chinese market is expected to fall back from its peak, but other countries around the world will see strong growth following their declines this year. Growth in the world excluding China next year should be of the order of 10%. [244]

(More 2021 predictions for global building industry are in the September report.)

b) Remote work; Work from home (WFH)

The future of (hybrid) workplace have been extensively discussed in December. The interest in remote work topics has decreased since September, as WFH and lockdowns continue globally and we all adjusted to a new work normal. The longer we work remotely, the more it not only affects how we work, but also shapes our future expectations for the office. Across the globe, workers now want a hybrid work model, e.g., remote work for approximately 2-3 days and then have in-person deliberative and collaborative interactions in the office. Employees outline benefits of remote work: ability to focus, improved wellbeing and work-life balance, and empowering workers with flexibility. [300]  In 2021, the 9-to-5 will become the '3-2-2,' (three days in office, two days remote, and then two days off ). [301] Going remote was initially a difficult transition for AEC industry employees, but the virtual communication brought a renewed emphasis on the importance of communication among team members and clients to keep everyone on the same page. In-person activities are still missed, but sometimes it’s been even better than before just because people are so respectful of everyone’s time and everybody has more of an opportunity to contribute when you are meeting virtually. [235] Remote employees are working an extra hour per day (in some sources “an extra hour per week”). Screen fatigue and burnout are common. The remote work “feels lonely” for most of the remote workers. [300] Videoconferencing practicality and novelty wore off during the past 8 months.[73] Students are feeling the weight of less structure and more time alone.[302] Although the benefits of hybrid work models are emerging, the WFH varies among employees as not all homes are equal. Many homes do not have strong internet access, enough space for a work desk, ergonomic chairs, conducive environmental factors, or just enough silence to accommodate focused work. Employers should  support all workers allowing for more equity and equal access to resources (when working at home) and space when working in the physical office. [303] The silver lining of our WFH is that digital transformation is no longer a fringe pursuit, but a necessity. [271]

c) Site procedures

The interest in Site procedures has been almost as low as in September. The site protocols have been established and tested early on in the pandemic. December brings discussions on timing for construction workers to get vaccinated given the industry’s (essential) status. CDC recommends construction workers get coronavirus vaccine after grocery workers (1c group). [16] Contractors brace for more lockdowns as coronavirus cases spike nationwide in the U.S. – again depends on the essentiality of the status across the U.S. [242] Recapitulation publications highlight jobsite safety requirements established early on in April/May: 1) onsite nurse; 2) daily exercise; 3) health screening/ education; and 4) COVID-19 procedures and resource center. [304] Turner was awarded a Company of the Year title due to its leadership role in the battle against racism. Turner further leads an initiative to include the topic of substance use/misuse as well as mental health, resilience and physical well-being - promote employee health and wellness, rather than only taking measures to treat illnesses and injuries onsite. [285][305] Essential construction workers were awarded a People of the Year title due to their fearlessness to continue working even as other businesses shut down and no matter the risks to themselves and their families. They scrambled for protective gear like N95 masks and gloves, committed to frequent handwashing and tool disinfection, and quickly got up to speed on the importance of social distancing and staggered work shifts. [278] The award is well-deserved since a new study shows construction has the highest COVID-19 rate of nearly any industry. The study tracked the results of more than 730,000 COVID-19 tests and found that construction workers had the highest positivity rates for asymptomatic cases of any occupation, including healthcare staff, first responders, correctional personnel, elderly care workers, grocery store workers and food service employees. [77]

The NEXT Coalition was awarded the title of Innovator of the Year due to its joint efforts to pilot, test and tweak technology solutions in the areas of contact tracing, safety oversight and cleaner jobsites. A recapitulation article highlights 5 technologies the NEXT Coalition  [297]: Smartvid.io [306], Kwant.ai [307], GoContractor [308], Opal [309] and Versatile’s CraneView [310]. (We covered these technologies in the previous reports.) The community continue to discuss the best methods to track H&S onsite including daily self-check and a jobsite check-in with crew. Some are using the checklists developed by relevant institutions (such as the NECA Safety Meeting App – “they have been adequate thus far, fairly simple to use and can be transmitted as a PDF if requested”) or Formstack daily screening app (“…Pushed it down to everyone's iPhone home screens as a web app. Working fantastic.”). Others report using thermal imaging (“We've had very good success with one of our OEM partners (Vicon). It's a thermal imaging (FLIR) camera that looks at the entire area and is able to take quick snapshots of individual/s with a temperature read. It can be used to store that information or used as an observant / pro-active tool.”) [311]

d) Supply chain

Supply chain news in December are focused on holiday delays, unprecedented cargo volumes, vaccine distribution, continued automation efforts, and construction material shortages that will continue in 2021.
Manufacturers report 'significant delays' due to port congestion and rising coronavirus cases: suppliers continued to struggle with deliveries in November as the Institute for Supply Management Supplier Deliveries Index rose to 61.7% for the month, up from 60.5% in October, according to the ISM manufacturing report released Tuesday. Readings above 50 indicate slowing deliveries. Port congestion is the result of high import volumes. Those levels are expected to continue. Import levels at the Port of Los Angeles are expected to be more than 29% higher this week compared to the same week last year. And the week before Christmas, volume at the port is expected to be up more than 47% YoY. [312] Ocean carriers push shippers to use 20-foot containers with 40-foot in short supply. [313] Christmas, coronavirus and fear of no-deal Brexit push Europe's warehouses to the limit [314]. Supply chain delays are expected due to Brexit (e.g., Port of Rotterdam reports no transport in Brexit paperwork incomplete) [315].

Preparations for vaccine distribution in the U.S. have been the focus of the supply chain news. When transporting coronavirus vaccine doses that require ultra-freezing temperatures, trucking will be able to draw on years of experience in logistics, specialized deliveries and even transporting ice cream, according to industry officials. Carriers will have to use special containers and specialized transportation for Pfize/BioNTech vaccine as it requires a storage temperature of -94 ℉. This puts Pfizer at a logistical disadvantage, as COVID-19 vaccines from AstraZeneca can be stored for half a year at temperatures between 36 - 46℉, according to Fierce Pharma. And Moderna has a mRNA-type vaccine that can be stored for 30 days at those same temperatures which is a standard range for a reefer. Three carriers, DHL, UPS and FedEx, have won Pfizer's vaccine routes. The companies have large supply chain networks of their own, and they have the means to transport ultra-cold cargo. The U.S. Department of Transportation will support supply chain networks by granting a nationwide exemption to hours-of-service regulations for trucking companies and commercial drivers providing direct emergency assistance. [316] FedEx will partner with McKesson on vaccine distribution, expand cold storage locations by 28% in 2021. [317]

According to a Honeywell survey companies are determined to improve warehouse automation. [318] Eli Pharma industry is trending toward robotics. [319] LaserShip added automation to increase throughput and meet skyrocketing demand for last-mile delivery, the carrier announced Thursday. [320] (More information about supply chain automation is in the Adoption of (new) technologies section.) Walmart reported layoffs of 1,200 employees in omnichannel reorganization, but it also announced in September plans to hire more than 20,000 seasonal associates for its e-commerce fulfillment centers. [321] FedEx's ShopRunner acquisition provides access to e-commerce marketplace data [322]; while XPO spins off contract logistics and splits into two companies. [323] As e-commerce demand hits all-time highs, retailers are scrambling to find ways to get items to customers as quickly and cheaply as possible - one potential solution is micro-fulfillment centers. [324]

Commercial contractors continue to battle material shortages brought on by the coronavirus pandemic, according to the Q4 2020 U.S. Chamber of Commerce Commercial Construction Index (CCI):  the index increased by three points (from 57 in Q3 to 60 in Q4) but is still far beneath 74, the first-quarter score prior to the pandemic. Fuel, copper, steel and aluminum have each experienced modest price increases, while concrete’s price has slightly decreased. Steel and lumber price increases have been steep, jumping up several times this fall. In early December, the U.S. Commerce Department lowered the tariff on Canadian-imported lumber from 20% to 9%, which could impact pricing. However, increasing demand from home builders and remodelers could keep costs higher. [236]

e) Workspace re-entry

The workspace re-entry and hybrid workplace models have been extensively discussed in December. The longer employees work remotely, the more it not only affects how we work, but also shapes our future expectations for the office. Across the globe, workers want a hybrid work model; meaning work a couple of days per week remotely and then have collaborative and deliberative interactions in-person in the office. Employees want greater access to privacy when they come back to office. When asked about their ideal workspace, 46% preferred an open environment and 47% a private environment. [325] The office is still the place to connect, collaborate and socialize. [300] The concept of office is changing permanently. Gensler found 5 trends driving the new post-pandemic workplace: mobility, worker’s choice where and when to work, privacy, unassigned seating, and health & wellbeing. [326] Every company has its own culture and should rethink post-pandemic work models. For example, Google is testing a flexible workweek pilot that would have employees come into the office at least three days a week for "collaboration days", while Microsoft views working from home less than half of the time as "standard" for most roles. [327] A hybrid approach is the only way going forward for AEC as well; “approximately 60% of the workforce can WFH” [328]. Only some tech companies can afford 100% WFH indefinitely such as Twitter and Dropbox.

According to Gensler’s U.S. Workplace Survey 2020, based on input from the 19% of workers who are already working partially from the office and partially from home, the benefits of the hybrid work model include greater personal creativity, greater satisfaction with job, and greater empowerment to experiment with new means of collaborating and working. [303] To enhance the future of the workplace and create an inspiring and inviting atmosphere for all in the physical office, the workspace re-entry should plan for a) triggered interactions; b) secured shared workplace for all; c) a platform for authenticity; and d) celebration of our differences. [303] Private offices are not the only way to achieve a low-risk environment for COVID-19 exposure. Risk of transmission is related to whether employees with COVID-19 are in the office and the dose of exposure. The former can be modified by sick leave policies and vaccination rates, and the latter by policies around facemasks, distancing, time, number of people, and activity. [325] 2021 will see application rationalization combined with a renewed set of tools supporting seamless end-to-end automated/ digital process support. CRE will capitalize on new digital workplace experience capabilities to better support a new working paradigm: new spaces that support unassigned, non-reservable seating, expanded collaboration spaces and other building amenities reflecting a workforce who may no longer be 100% in office. [271] (More information can be found in the Building operations section.)

f) Financials; cashflow / Contracts/ Litigations

Financial and legal questions are trending. For example, to sue or not to sue regarding unpaid bills, defects and schedule. Construction legal experts suggest 1) determining when court intervention is needed; 2) figuring out the costs; 3) withdrawing from a lawsuit (because it may not be easy to reverse course and drop it or alternative dispute resolution, like negotiation, mediation and expert determinations used for technical issues could be more appropriate); and 4) avoiding litigations (by invoking statutory remedies, including filing mechanics liens and claims against surety bonds which are putting all involved parties, contractors and the owner, on notice; and there are prelitigation tools that can create enough leverage to facilitate a settlement. [329] Vaccine rollout brought a question if contractors can require COVID-19 vaccinations for jobsite workers. The answer is “yes”, according to lawyers [330][25].

The U.S. construction is relying on COVID-19 relief package that should fund infrastructure projects and help small business thorough PPP loans. [331] In December, The Associated General Contractors of America (AGC) has filed lawsuits against the US Small Business Administration (SBA) and the US Office of Management and Budget seeking a revision of a questionnaire being used to reassess whether companies were eligible for Paycheck Protection Program (PPP) loans. [332][333] Globally, the financial fallout from the pandemic does not respect differences by region or income status. Financial institutions are facing (and will face for some time) a marked rise in non-performing loans (NPLS). The run-up to the credit crunch in 2021 does not fit the historical boom-bust pattern in many countries. It is not predicated on having experienced an economic expansion or an asset-price bubble like in previous recessions. The common threads to the evolving balance-sheet crisis and the credit crunch that will follow are the historic magnitudes and likely persistence of the slump in economic activity. A range of policies has been introduced by governments across the world to provide liquidity to the many businesses that have been shuttered and to support households hit by a sudden loss of income and employment. By 2021 policy grace periods will come to an end and it will become apparent whether the problem facing countless firms and households is insolvency rather than illiquidity. An extended credit crunch has been a major headwind to economic re¬covery in the past and it is expected the same in the post-pandemic landscape. [83] Currently in 15 major metro area in the U.S., construction professional need to work overtime to afford a home. [334] Contractors should consult tax experts given new tax changes on horizon. [335]

Investment increase examples follow. Johnson Controls' annual Energy Efficiency Indicator survey finds that more than half of organizations plan to increase investment in energy efficiency, renewable energy and smart building technology next year, comparable with investment trends after the 2010 recession. [336] Investments in construction technologies are on the rise in line with the accelerated digital transformation (although top construction companies were already investing heavily in technology prepandemic [237]). The application increase of contech will continue after the pandemic in line with expected labor shortages and wages rise. [337][266] This year’s most prolific construction sector investor were BDC Capital, Blackhorn Ventures, Brick & Mortar Ventures, JLL Spark, Khosla Ventures, and Suffolk. [338] (Supply chain) companies are investing in automation and e-commerce channels. [322] Renewables, Nuclear, Hydrogen are gaining cost competitiveness. [294]

See September Category Summary

References