#1- Construction Labor Productivity

The construction industry has long had a productivity problem. Building design continues to increase in complexity, and to be effective, management of labor and supply chain must keep pace. Unfortunately, as an industry we have struggled to do so.

What is productivity and how is it measured in construction?

According to the U.S Bureau of Labor Statistics (2021), “Labor productivity is a measure of economic performance that compares the amount of goods and services produced (output) with the number of hours worked to produce those goods and services.” In the context of construction, a simple formula could be as follows:

Since the construction industry has struggled to create an increasingly productive labor force, this means that onsite manhours continue to increase at a higher rate than contract value. The National Institute of Building Science produced a report (2007) noting that from 1964 to 2003, construction was the only non-farm industry to have a decline in labor productivity during that timeframe. Meanwhile, all other non-farm industries increased by over 100%! Figure 1 illustrates this divide.

Figure 1: Labor productivity index for US construction industry and all non-farm industries from 1963 through 2003. National Institute of Building Science (NIBS) 2007

Further, according to a U.S. Bureau of Labor Statistics report (2020), productivity has declined in the single-family and multi-family construction markets from 2007 to 2019.  Meanwhile, the industrial and civil construction industries have shown some gains, but still lag the total economy (Figure 2).

Figure 2: U.S. Bureau of Labor Statistics, Office of Productivity and Technology

Why is this the case?

Lack of adoption of technology is an obvious answer to the productivity problem; most large general contractors are addressing the technology gap, but a significant number of specialty subcontractors are struggling to keep pace. 

Another reason is that the way contracts trickle down from owner to general contractor to trade subcontractor is highly inefficient- they often create silos that incentivize each party to look out for their best interests rather than promoting collaboration and teamwork. A subcontractor may fear that pointing out a problem with a detail will lead to owning the more expensive alternative, so instead they install as Contract Documents show, knowing there will be an issue.  Then, manhours and materials are wasted as each party must go through the motions of satisfying their contractual obligations rather than letting logic and transparency reign supreme from the outset.

So, what do we do about it?

In my opinion, being aware of all the waste in our industry is the first step; be vigilant and identify when it is creeping into your projects.  Pay attention to how the typical, secretive nature of the owner-general contractor-subcontractor relationship serves short-term needs but causes long-term inefficiencies and delay. Then, once you recognize it, work to establish better lines of communication with those contractual parties. Set your own boundaries that are based on trust and fairness. If you must field measure prior to releasing materials, create a well-documented dimension control program that everyone buys into! Don’t just send an email saying, “You’re still not ready to measure and you have therefore caused me delay” (does that sound familiar to anyone?- I know I’m guilty). Obviously, we still need to follow our contracts, but no one is stopping us from getting the work done without bringing the contract into the fold every time there is an issue. For the sake of our industry’s productivity problem, it is imperative that this changes. But first, we need to learn to trust each other.

Authored by:

Matt Verderamo

21 September 2021

Works cited:

U.S. Bureau of Labor Statistics. (2020, September 29). Focus on productivity: Construction industries. U.S. Bureau of Labor Statistics. Retrieved September 20, 2021, from https://www.bls.gov/lpc/construction.htm.

U.S. Bureau of Labor Statistics. (n.d.). Learn about productivity. U.S. Bureau of Labor Statistics. Retrieved September 21, 2021, from https://www.bls.gov/lpc/.

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