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"We are facing incredible changes in the construction industry"

Our world is becoming increasingly digital – and this also applies to the construction industry, which is undergoing a transformation the like of which has never been seen before. We talk to Markus Lentzler, Managing Director Architecture and Construction at ECE, about the significance of these changes and their impact on the industry itself as well as the related labor market.

Markus, people are more likely to associate the construction industry with heavy machinery than digital applications at first glance. What kind of impact is digitalization having on the construction industry and what changes has it brought?

In fact, many aspects of digital technology have a massive influence on the construction industry and are bringing changes. The biggest change is the digitalization of the project process. Using digital technologies such as building information modeling (BIM), processes can be mapped out more efficiently and more cost-effectively with fewer errors. All planning documents are listed in a digital process landscape, meaning that everyone can always access the current status and read all the information about a project, processes, and products. Previously, people in the construction industry still worked according to the old “brick by brick” principle. Now we are on the way to becoming an industry with common processes and Standards.

What other changes are there?

The second aspect of digitalization concerns materials. With digital applications and material coding, today we can optimize the supply chain and receive only as much steel, concrete, or wood as we need in deliveries. This is much more sustainable than before. There used to be a large amount of wasted material due to incorrectly ordered quantities and unused materials. Thirdly, machines are becoming increasingly more digital and more intelligent. Great progress has been made on this front through the use of measurement and sensor technology in technical building equipment. Units such as ventilation systems are more energy-efficient or can even send a report when maintenance is required.

An industry in transition

How far away is the industry from greater digitalization?

There are statistics that clearly illustrate the current situation: 93% of players in the construction industry say that digitizing our processes is necessary, but less than 6% actually do so. We still have a long path ahead. However, the goal is obvious. By digitizing processes, we aim to become more efficient in a way that will ultimately drive series construction. Both things help us to simplify processes and to optimize costs. At ECE, we are working intensively on improving processes – and we are already using the BIM method. However, the industry as a whole needs to develop an understanding of new digital methods. Only then can we move forward together.

How has cooperation in the construction industry changed in recent years – with and without digitalization?

The industry is currently undergoing a major upheaval. In the last ten to fifteen years, capacity utilization has risen steadily to 80 per cent at present. This is due to a continuing shortage of skilled workers: there are simply not enough skilled workers and civil engineers in the younger generations. People never used to find the construction industry appealing because it was always surrounded by memories of arguments and conflict. Following the separation of planning and construction in Germany, there was never an emphasis on cooperation. However, in order to continue handling all orders in the future, we need to work together more effectively and with a greater sense of partnership. Many players in the industry have been trying to do this for a long time, for instance by creating preferred partnership models. The trend toward closer and better cooperation is now progressing to an intensive level. Here, too, digitalization can help us.

What does it all look like in practice? Does the plan work?

Yes, we are working hard on this, especially at ECE. The preferred partnership model became established years ago, with mediocre success at first. For this reason, players in the construction industry and clients have come together more closely in the past three years, looking for international role models in terms of positive forms of cooperation that promise high success. At ECE, we have been encouraging this through the “TeamBuilding” initiative for some time. For many years, we have also been awarding single contracts or using a partner model in order to minimize negative effects on construction times, quality, and costs. We now proceed using new types of contract borrowed from the USA and Great Britain, where they have become an established success, introducing new ways of working together in Germany.

"IN GERMANY, TOO, WE ARE introducing new ways of working together"

You are talking about multi-party agreements. What is new about this Concept?

What makes a multi-party agreement so innovative is that a single common goal is shared by the three to seven parties who are bound to the contract for the duration of a project. They all want to successfully complete the project. Despite various models of partnership, previous contracts to date have been bilateral. A multi-party agreement, meanwhile, is multilateral: all partners are bound to each other and benefit from the entrepreneurial success of the project. The target costs are defined at the beginning of the planning phase. Everyone then works together on planning and construction to achieve the target price together. If expenses fall below the budgeted amount, all parties stand to benefit. Likewise, each company also participates in the overall project risk. In a multi-party agreement, direct costs are always paid. For example, planners and architects are paid in line with the actual amount of hours spent on a job. This represents a cultural change for the construction industry in terms of how work is done, although in other industries it has been practiced for some time.

ECE is now putting the multi-party agreement model into practice for the first time in a project in Germany. Is this really the first project of ist kind?

Yes, it really is the first time that this form of cooperation has become a reality in Germany. ECE has been a key instigator and driving force in the process. The trigger was the “TeamBuilding” initiative we launched. In this context, we thought about ways of promoting collaboration of a cooperative nature and transferring international experience to create a German model. We put the idea into practice during ECE’s pilot project at HafenCity. Of course, our goal is that the multi-party agreement will become standard in the market in the medium term with many companies following suit.

What is the role of digital transformation in terms of this model’s feasibility?

The entire multi-party agreement model can only work in the digital world. Digital methods such as BIM and lean management approaches are absolutely essential. These are completely different ways of working compared to the past, when certain procedures were set in stone and people worked on their own tasks. With the new model, there is a complete overview of the entire project from the outset. This means that as soon as the first line is drawn, a project partner can know what impact it will have on costs or supply chains. Forms of cooperation are also different. For the pilot project, we are working together in an interdisciplinary co-working space that fosters dialogue between everyone involved as well as tradesmen. Here people work out what tasks to do in the next few days, discussing and making decisions together. It is a flexible management method that has hardly been used in the construction industry until now.

ECE Editorial Team

Our editorial team reports on interesting facts in and out of ECE and provides up-to-date information about our real estate projects via corporate channels. In addition, we deal intensively with trends and developments in the areas of Marketplaces and Work & Live. In our blog, we give our experts a voice and provide interesting insights into topics that move us.