There is no shortage in challenges that the Canadian construction industry faces. From varying terrain and harsh winters, to labour shortages, a global pandemic, and now, an increasingly changing climate. To add to the pressure, the Expert Panel on Climate Change Risk and Adaptation Potential found physical infrastructure to be one of the six most vulnerable areas to risks posed by climate change.
The Canadian construction industry, which contributes $141 billion (B) to Canada’s gross domestic product (GDP) annually and employs over 1.4 million people, has plenty of room to innovate and adopt new technologies. The challenges are clear, and, although they are capital-intensive and require long-term commitment, so are the solutions.
Skills and labour shortages
BuildForce Canada, an organization providing labour market information to advance the needs of the Canadian construction industry, forecasts that 259,100 workers will retire by 2030 while only 228,100 workers 30 years old or younger will enter the construction workforce. Estimated growth in labour demand of 49,900 will increase the employment gap to 81,000.
As the industry enters the recruitment phase, it will need to appeal to a young, tech savvy pool of talent. Recent reports by KPMG and the Canadian Construction Association (CCA) emphasize the importance of modernizing the image of the construction industry. As baby boomers retire, companies must pique the interest of younger workers who are “[…] increasingly reluctant to work for companies that don’t make optimal use of technology.”
Per Statistics Canada, lack of skills was the most cited (32.2%) obstacle for innovation by construction companies between 2017 and 2019. Furthermore, 11.3% of companies highlighted a lack of technical skills as a reason for not adopting or using advanced technologies.
KPMG found that 66% of Canadian construction businesses felt they only possessed the necessary competencies to undergo a digital transformation to a little or moderate extent.
Source: Statistics Canada. Table: 27-10-0364-01
Innovation and technology adoption in construction has lagged compared to other Canadian industries as well as foreign construction industries. It is time for Canadian construction companies to realize the benefits of new technologies by leveraging a tech savvy workforce. Adoption of technologies such as AI or robotics has the potential to maintain or increase productivity and efficiency despite a decrease in the number of workers.
Innovation and Technology
While lack of skills helps explain why only 25% of companies say they are in a considerable or great digital-maturity position relative to competitors, or that 59% say their organization needs to moderately or considerably adapt their digital strategy, there are several other challenges preventing innovation and technology utilization in the industry.
In the construction market, companies compete for the lowest cost bid to acquire projects. Projects with the public sector yield low margins due to, among other things, public spending scrutiny, and private sector projects embrace the competitive nature of the market, also driving down margins. This system, which exclusively rewards the minimization of costs and risks, disincentivizes investments and adoption of innovations as they are perceived as risky and – particularly in the current construction landscape – unnecessary.
Between 2017 and 2019, 25.2% of construction companies opted to not adopt advanced technologies on the premise that such investments in technology are unnecessary for continuing operations. 16.9% made the same decision as they were unconvinced of the economic benefits. Additionally, 23.1% of construction enterprises cited uncertainty and risk as an obstacle to innovation.
The competitive construction market puts the costs and risks of innovation and adoption of new technologies entirely on companies. These conditions are even tougher on small businesses, which made up 99% of construction enterprises in December 2019, as they cannot afford risky investments without clear financial benefit.
Source: Statistics Canada. Table: 27-10-0368-01
From a climate change lens, a 2021 CCA report states, “In a competitive landscape, it is unrealistic to think that construction companies will add costs to their bids to take into account long-term resilience if the client, whether within the public or private sectors, does not explicitly consider it a requirement of the bid.” The same reasoning can be applied to innovation in construction. Without the support for businesses to develop and adopt innovations, whether it be through larger research grants, tax incentives, or mandatory conditions within contracts, the industry will continue operating with the sole goal of minimizing short-term costs.
While some methods are in place to support the innovative aspect of the industry, they are not necessarily being leveraged by companies. Only 5.8% of construction enterprises used tax incentives or tax credits for their innovation activities, and 6.6% of companies used grants or contributions. Another report by CCA released this month mentions that, although construction contributes to 7% of GDP, only 0.7% of total SR&ED credits approved each year are claimed by construction companies.
Source: Statistics Canada. Table: 27-10-0238-01; Statistics Canada. Table: 27-10-0280-01
Initial steps have already been taken to advance innovation and use of technologies in construction. To encourage the use of government programs and incentives for innovation, the CCA launched the SR&ED credit writing initiative. To promote the current usage and potential of innovation in construction among industry leaders, the CCA created the Construction R&D Portal, while the Construction R&D Showcase allows said leaders to discuss discoveries that can help them succeed with researchers.
Ultimately, tech adoption leads to greater success
A workforce shortage, larger emphasis on the environment, and the need to succeed in a very competitive market all lead construction companies to one thing: a need for technology adoption.
Big data, powered by Internet of Things and data analytics, as well as automation can deliver more predictable results and better manage resources and cost estimates. Robotics and additive manufacturing allow businesses to maintain productivity with a lower labour force. Building information modelling and virtual reality can significantly improve project management.
A more skilled and technologically proficient workforce will get construction companies in the room of improvement. The capacity and growth of that room will be determined by companies’ openness to new technologies, collaboration with each other and academic institutions, and ability to leverage government programs and incentives.
Source: KPMG
