High quality construction could put the Finnish economy back on the growth track

High quality construction could put the Finnish economy back on the growth track

Many wonder what is wrong with Finnish construction. It is beset by quality problems, a backward-looking approach, the grey economy, lack of transparency, and it commands little respect. The productivity of construction has also developed poorly. It has hardly improved over the last 30 years while industrial productivity has quadrupled.

Jussi-AhoAt worst, as much as 60 percent of the work time in construction is unproductive due to poor organization of work and weakly compatible and deficient plans. Moreover, in recent years costs have outpaced inflation.

Unproductive work increases prices and rents. The owners of construction companies also suffer since the return on invested capital is not adequate.

Construction is an important sector of the Finnish economy. We spend more on it than many other nations.

The Finnish construction sector’s share of GDP is about 15 percent at nearly EUR 30 billion. In Great Britain, for instance, the share is clearly smaller – only about 6 percent.

The problems faced by the sector provide huge, untapped opportunities. That’s why construction reform is a national issue.

Great Britain has devised a national construction strategy. The goal is to cut construction costs by a third by 2025 and halve construction times and emissions while increasing construction exports considerably.

Construction is a growth sector globally. It is expected to grow more than 70 percent by the mid-2020s. Yet, the growth prospects that offer a great opportunity also for Finnish construction companies are discussed very little here.

Massive problems require a mindset shift. It can lead to success if the construction sector as a whole starts to change. Lack of leadership is the main problem, not competence.

Construction must become a service business. That requires competition based on quality and service instead of price.

Service-based competition gives true value to the end-client and society at large by creating spaces and homes that people really need. Thereby, the construction industry is not a burden on the national economy but boosts it.

Serving construction is more effective than the traditional kind: in the former the focus of company management is construction according to the end-client’s needs – not selling, buying and financing properties and lots owned by the company.

An integrative approach is essential. Construction should move away from the division of work typical to it that leads to downtime – such as dividing a large contract into one-off subcontracts – to integrative activity where the intermediary client, main contractor, subcontractors and end-client design and build the project together from the start.

One solution is to form a construction alliance based on long-term business relationships where the contract includes an implementation and contract model that supports cooperation as well as organization.

An alliance contract ties the end-client, the intermediary client, the architects and engineers, and the building contractors to common goals. The parties are engaged in the project as early as possible which allows transfer of resources to the planning of the use of buildings.

The alliance contract strengthens the common vision and makes the parties play together. It optimizes solutions to the advantage of the end-client and the project, reduces wastage and increases efficiency. The end-client gets just the home or work space that he/she needs.

Transparency and openness are essential. The parties know the income and expenses of each other, and no one turns a profit, for instance, by trading in building materials. That curtails the gray economy and corruption.

The construction site is modeled in advance with the help of information technology, and even the end result is visualized for the end-client. That reduces the waste that lowers productivity.

Construction alliances have already been used by the Finnish Transport Agency and University of Helsinki. As public operators, they have shown a new direction for the construction sector. The Tampere Road Tunnel is an example of a successful alliance project.

Jussi Aho
The author is the CEO of Fira Oy.

The article was published in the newspaper Helsingin Sanomat on Oct. 27, 2014