ite tel Et ess es See aussi ce aS Peete BU is DeenaAfter completing the two projects, the following problem was identified: “The system engineering and Petia Corer ence ae fined d responsibilities for alliances developing LXRP projects resulting in uncertainty, waste, and program risk {1-day Kaizen Event workshop was organised in June 2018, followed by some short workshops with eee i ere tye aan the future. AVR was the first project in which the future state was fully implemented, «Total saving is expected to be between $5.8m and $7.1m for the total 10 work packages. Based on different models, the result varies. For an accurate result, the SESA team used the actual cost (Gystem Engineering System Assurance) and AOC ( Actual Outturn Cost) after the completion of each oer Se ue) ROI: over 10,000%PROCESS - CURRENT STATE (FIRST TWO PROJECTS: KCR ca oscar Cospetonkmsane Speers te cnt eee SEgs9)SESA PROCESS - FUTURE STATEPEN Tel st-9 +Haz Log, including ref to evidence clearly articulated +Haz Log progressively updated ~ at time of incident / at least onc: +RAATM is used only for PRS requirements +Clear roles & responsibilty using RACI See aS se ta IMC for Short Interval Control Progressive assurance through extract of an Hazard Log (SF +Focus on Unique & Novel assets + Material + Construction methods eee eee EteASSUMPTIONS See ae *ABR & KCR are the baseline for the calculation 1. SESA team spent more time on KCR compare to ABR to set up intial processes and forming the team sumed extra 30% - the frst 3 months with more management time), therefore a ratio of 1.3is applied to ce the outcome a e rd 3- DIV and MTM cost is based on $150 hourly rate for managers and $1; hhours per month 4: The average cost of the SESA team on KCR and ABR was 1.168% of the AOC13 The principle of Kaizen utilising a system engineering process can eee re Re eee ed ener eee eu Core OSE ee CEU ct as procurement, scheduling, labour management, financial and Cee een ee ay SOT na eon Coc Cm eteQUESTIONS PRES bene ao CNUs ese ee cosy one rd Pre ee ae ee ee en eu Lean ca ER eee gee eo Re gcse ep need 1 use system engineering as shown above on a single-family house operation - Why? e eC Cee aeSOME ROOT CAUSES The High Court decision in the case of Brookfield Multiplex Limited v The Owners trata 61288 deemed the builder not to be responsible for economic loss sustained by Ree mute ee eC ee me ese eee ee CO There is no requirement for any licence to construct a commercial (residential must have) building in NSW over three stories EMC ee eae Ca architect, ensured quality and compliance to the plan and specifications SE MMM Cente LEO «Apprenticeships have declined over the past few decadesQUESTIONS 1.Would the NSW Construction Regulatory Transformation occur without the Opal and Masec Towers scandals? 2.Has there been an overreaction to Opal and Mascot manfestingin unnecessary regulation and Seep enced cee ee Ceca! Pete ere Eee Caen aca nebac) 3) Sia aie eC ues Ue cC Maegan Cree eee) -RAATM is used only for PRS requirements Secret eM Tm Ce Combined PHA workshops & reports -VMC for Short Interval Control +Progressive assurance through extract of an Hazard Log (SRSR) Focus on Unique & Novel assets + Material + Construction methods abet CMU trae Eee)scarey eee eee ent 2.Has there been an overreaction to Opal and Mascot manifesting in unn ee ure 3.Were there other root causes - not listed ~ that may have enabled these quality problems? Renee ecu) Peers Tere Ce 5.Have system engineering's required effort and detail orientation been justified in the end?SLO 4 - Review the impact of the need for buildings to be adaptable over their useful lifetimes (Te value of Buldingse oro than USD 400tilion-Sn comparison, workwide GDP isapproximaaly USD SO rilion) » Changing Dmograpice Worilfebalanoe demand workers Ccovib 19:0 bourne changorto work eutonthips conditions andstructural porting Rapidurbansation Cimatechangs tacts «Aland Machine Learing (MI effects onthe workspace including securky andenery management + Some specialty structures, such aslearingspeces movement to onlin) and datacentre (not wired forthe new es wb » Breakout Question: Have you witnessed a re-purposing of a building? Can you share what you observed?IThe delivery of innovation involves a significant improvement in a product Unrealised jnventions lor process Adaptive Innovations {Technical innovation in the construction industry incorporates improvements to building materials, lant/equipment and/or building processes. / Innovative inventionsBares Roo acLY: r quality of life. Met eee tert hacer cneacne near sen ties Perret nase sa ea eae Cee cr cence) Tia: ener tee ct once nate ert Meee eter ene torn Groene ethic tentatcc chet ten)Construction Entrepreneurial Behaviour Fiscal Year Ending June, 2021 - Source Australian Bureau of Statistics (Measure [Unit of measure usiness entrepreneurship characteristics - usually he frstin the market Percent innovate 27) usiness entrepreneurship characteristics - often got involved in high Percent panied project i usiness entrepreneurship characteristics - capacity to acquire/exploit Percent See external to business organisation pes entrepreneurship characteristics - initiated change such its Percent 52| smpetitors reacted 23 puree entrepreneurship characteristics - innovation strategy a part of Percent usiness plan 52) usiness entrepreneurship characteristics - continually sought new aay rtners to collaborate 1g, usiness entrepreneurship characteristics - proactive approach to market Percent mpetition 175, _business entrepreneurship characteristics - None ofthe above Percent [ag10 Construction Innovation Barriers © 1. Low percentage of net profit before tax © The construction industry invests in research and development much ess than other parts ofthe economy. ‘This sector invests less than 0.5% of sales in research and development (R&D), while the Australian national average is approximately 4% (Hassell eta. 2008). © Source: Australian Stock Exchange 2022 [Construction ‘Technol ‘Medical Global Construction ‘OFX. Ansell 8.1% 21.0% 35.19% Lendlease ‘Technology One Sonic Healtheare 64% 21.29% 12% ‘Simonds Group Telstra Zenitas 059% 7% 6%3. Low market share for industry leaders ‘The largest construction companies in Australia do not dominate the market. For example, CIMIC's market share of 2.0%, whereas BBPHA I Pty Ltd has approximately 1.0%, and Lendlease is less than 1.0% (IBISWorld 2022). 4, Extreme and nimble competition Construction continues to be the industry with the largest number of businesses in Australia in FYE 2023 and accounts for approximately 16% or 499,00 of all businesses. Additionally, new entrants, which appear to be more aggressive in pricing and promises to customers, numbered most (6.1%) of the nine major industries (ABS 2023). Construction is sometimes referred to as a “cottage” industry; 98.5% of construction firms employ less than 20 people, and only 0.1% of firms have workforces of 200 or more (ABS 2022). These small competitors are far more flexible in meeting customer needs and addressing their wants.'5. The “intersectionality" problem of construction (Classifying construction businesses as homogenous is problematic. Each business’ operation’ ficantly affected by its characteristics. A simple categorising may include: a) trade focus, b) project type, c) region(s) operating in, d) client types, e) contract type(s) working, under, f) publicly or privately owned, g) amount and type of technology used, h) number of, ‘employees, i) accounting basis and j) management culture. Since there are multiple choices for each of these nine areas, itis clear that over 3.6 million (10 factorial) combinations are) ipossible. However, there are 499,000 built environment firms in Australia (ABS 2024); therefore, few organisations are similar Most innovations cannot be economically feasible for the inventor if they appeal to only a few customers ic. if there are few buyers of a construction-specific innovation-its high cost land time investment cannot be formally justified. Projects are also dissimilar, making ‘possible targets less in number.7. The construction industry has problematic employment dynamics ‘The Australian Bureau of Statistics (ABS 2021) documents that 37% of worker services are secured by contract, whereas the next highest — administrative and support services - is slightly over 20%. This seems to indicate that there is little incentive to make employees ‘more productive since they are on contract for a fixed hourly rate, lumpsum outcome or a fee per piece, and thus, there is less need to create or adopt innovation to make them more productive. Similarly, independent contractors have little incentive to invest in large-scale and risky innovation since these arrangements represent employment, not a business ‘opportunity. ‘The Australian government labour statistics show that between 1991 and 2019, involuntary employment separation (Lost Last Job) ranged from 76% to 274% of the total employment population (ABS 2022). This means that the knowledge of a specific innovation may travel with a departing employee, thus disincentivising the creation of a unique task methodology and training to facilitate mastery.Location, Funding Client Type Construction Process eee ‘Number and Type General Factors Residential. Commercial, Industral, Institutional, Civil Marine, and Infrastructure. Urban, Suburban, and Rural Public, Public or PPP Government (Federal, State. And Local), Corporate (Local or International), or Individual. New Construction, Remodeling, Rehabilitation, or Replacement8. A service such as construction is difficult to patent Nagy (2013) notes the difficulty of patenting services and protecting the inventor's intellectual property rights. It is partially due to its intangible nature. In Australia, patents are strong protection for unique tangible products for a legally prescribed 20-year period. However, this can be a protracted and challenging process that is a high risk to the creator of patents. Research by London and Siva (2013) indicates the challenges for those in the construction industry to create and protect their patents. The Australian system affords few rights to the creator of patents and little protection with the onus solely with the creator. Coupled with this, it is not easy to patent a process, construction or otherwise, and protect it from duplication by competitors. The US Supreme Court confirmed this in the Alice decision (2014) about business methods. In preserving a method as intellectual property, it is difficult to prove where the employee's expertise and experience (current or former) stops and the organisational, institutional knowledge rights start.Average utilised to minimise COVID disruption effets. *laciodes ICT Software **Valuation of products les ost to produce -expresed in uent pries in millions AUD Tadusty | Revenue | Valueof | tatellecual | Value | ValueAdded/ | 1PVabe Intellestoal | Property’ Reveane | Added Revense | Added** Propety* Apicukure, | siz0sa | sss osm | ssa 09% Forestry and Fihang ‘Constrstion | $259,030 sissast | 284% 3% Manufsctorng | S724 [Sasi si6o8 | 259% Mining, O@ | S392966 | $1,009 osm | sow | com GasIs “Innovator” Your New Career Path? ere tT ns SST eneInnovators are Made not Born - MuutDebhul1eb Kee fobs bebeloy isle ebelet} pte ey =r ce Itis More Science Buetlee tad the cost of a NASA launch (SpaceX) or thetime it ‘takes to travel from San Francisco to os Angeles (he Boring Company)cay Ceri Creamed prone) pee een Launch Pad Process Map «r2)coe Cerny ooo eee Bvatras Corr Proposton peter od ree odDanae sbabeleyiccin(oyel Client Related Factors « Client Requirements « Improving Project Performance «© Approach of the Project Team « Project Complexity + Project Related Factors «= Improving Firm Performance «© Corporate Social Responsibility + Leadership « Innovation Policy, Industry Related Factors = Competition Level © Regulations and Legisiations » Technology/Design Trends « Environmental Sustainability + Reward SchemesInnovation Spillover RIO NU Te ean eae Petra RS eT PaO ORE See ONT Pa RC EN oO VIREO UT Oat) pee E Lae ONSET TTD INDUSTRIAL CLUSTERS GAIN BENEFITS FROM. BNO on Range nd (canto 2017)Construction Industry 2022 - Survey digital skis or capabilities - Decreased since last year Percent 45 ICT/digital skills or capabilities - Stayed the same since last year. Percent. 24 ICT/digital skills or capabilities - increased since last year Percent aq iCal skis or capabilities - Not applicable Percent eg se of digital technologies - Decreased since last year Percent od Use of digital technologies - Stayed the same as last year_ Percent. - 8 of digital technologies - Increased since last year Percent bs of cigtatchnologies-Not apple pecentSummary and Conclusions » Construction is a resource-poor industry - especially net profit margins and innovation lab facilities - for innovation. » There are many risk factors that make greenfield innovation a hazard © However, adapting other industries’ innovations to construction is more effacious. » Hackathons and incubators sponsored by government, universities, and industry appear to be the logical next stepIThe delivery of innovation involves a significant improvement in a product lor process Adaptive [Technical innovation in the construction industry incorporates improvements to building materials, [plant/equipment Jand/or building processes. Innovations Unrealised jnventions| Innovative inventionseet rabcusomoc ela rganisations and for the industry as a whole Cire ieee etieeatiat Mean Ee nomic and environmental factors are driving the ne5. The “intersectionality" problem of construction Classifying construction businesses as homogenous is problematic. Each business! operation is significantly affected by its characteristics. A simple categorising may include: a) trade focus, Since there are multiple choices for each of these b) project type, nine areas, it is clear that over 3.6 million (10 c) region(s) operating in, factorial) combinations are possible. However, d) client types, there are 499,000 built environment firms in e) contract type(s) working under, Australia (ABS 2024); therefore, few organise f) publicly or privately owned, are similar g) amount and type of technology used, Most innovations cannot be economically feait h) number of employees, for the inventor if they appeal to only a few accounting basis and customers i.e. if there are few buyers of a i) management culture, construction-specific innovation-its high cost and time investment cannot be formally justified. Projects are also dissimilar, making possib targets lass in number.5 continued yracteristic jumber Number and Type General Factors Use Type SCS ——SSSCRsideniial. Commercial, Industral, Institutional, Civil, Marine, and Infrastructure. Location Urban, Suburban, and Rural Funding Public, Public or PPP Client Type 3 Government (Federal, State. And Local), Corporate (Local or International), or Individual. Construction Process 4 New Construction, Remodeling, Rehabilitation, or Replacement6. The industry is precarious The construction industry has a high failure rate when compared to other sectors. Recent data from the ABS (2021) reported 14.0% of the companies that started 2021 exited by the end of the year. The Australian Tax Office (ATO) latest filings report that 78% of Business Owning Households hold some form of debt. Additionally, 54% of Australian companies declared a loss and thus paid no taxes. This appears to point to a financially meagre environment with little means to pay for innovation. It seems to justify an aversion to speculative investment, which characterises research and development. Further demonstrating risk, a bankruptcy study sponsored by Australia's Construction Forestry Maritime Mining Energy Union (CFMEU 2014) concluded that the construction industry outscored all other industries for each deficiency category above $500,000.7. The construction industry has problematic employment dynamics ‘The Australian Bureau of Statistics (ABS 2021) documents that 37% of worker services are secured by contract, whereas the next highest - administrative and support services - is slightly over 20%. This seems to indicate that there is little incentive to make employees more productive since they are on contract for a fixed hourly rate, lumpsum outcome or a fee per piece, and thus, there is less need to create or adopt innovation to make them more productive. Similarly, independent contractors have little incentive to invest in large-scale and risky innovation since these arrangements represent employment, not a business opportunity. The Australian government labour statistics show that between 1991 and 2019, involuntary ‘employment separation (Lost Last Job) ranged from 76% to 274% of the total employment population (ABS 2022). This means that the knowledge of a specific innovation may travel with ‘departing employee, thus disincentivising the creation of a Unique task methodology and training to facilitate mastery.9, The Government is not keeping pace nor encouraging construction innovation Western nations have robust laws governing construction activity and limiting risk to the construction service buyer and end-user. This risk governance is core to the role of industry regulators and appears to lag the rapid pace of invention (oeteman-Hernandez et al. 2019). Few proactive processes conditionally approve the early phase creation of innovative ideas or development. Rose and Manley (2014) noted that regulatory agencies in Australia lack clear procedures for assessing new products. Suprun and Stewart (2015) found repeated "Regulations, public policy, and supporting mechanisms" barriers in many countries.Average utilised to minimise COVID disruption effects. *Includes ICT Software **Valuation of products less cost ‘to produce - expressed in current prices in millions AUD. Industry Revenue | Value of | Intellectual Value Added) | IP/Value Intellectual | Property’ Revenme | Added Revenue Property* ‘Agriculture, | $120,582 sus 03% 295% 09% Forestry and Fishing Construction | $259,030 | $2,000 ose | siasasi 284% 31% Manufacturing | $447,124 | $4,811 1% | st6oos | 289% 41% Mining, 1 | $392,966 [$1,009 03% | szsosas | 63.9% 0.4% Gas ‘Source Goods Producing Industries. ABS 2023Is “Innovator” Your New a's poore Career Path? ro rere err] Ere eeeFirst Step of Innovation is Up To You “Tthinkthat te rst thing sto picka good problem Pick a probiem where you kvow yout ‘make aaiferenceifyou solve t"-Ann Marie say, when somebody has a breaithrough innovation It israrelyone iti thing Its usually a whole bunch of things tat cectively amount toa hugeEneloyment se persone £9 partons 210 parone 210 rmore persone TetClient Related Factors Client Requirements Pinos pnprond Elves i Performance Innovation peercacticd ie rite Team ‘Project Complexity Project Related Factors ‘Improving Firm Performance ‘Corporate Social Responsibility Leadership Innovation Policy Industry Related Factors ‘Competition Level Regulations and Legislations: Technology/Design Trends Environmental Sustainability Reward Schemes