CII Emerging Trends Research

1. CII Emerging Trends Research NCCER Board of Trustees November 17-18, 2009 Wayne A. Crew, Director

2. A research institute of leading owners, contractors, and academics working together to advance the business effectiveness and sustainability of the world’s capital facilities.

3. CII Purpose CII’s purpose is to measurably improve the capital delivery process.

4. History Established as a recommendation from The BusinessRoundtable Construction Industry Cost Effectiveness (CICE) Project to address: - construction research - fragmentation of the industry Founded in 1983 by 28 companies; now over 100 members. First to bring research to the engineering-construction world. First owner-contractor-academic research collaboration for the constructed project. The industry forum for the engineer-procure-construct process.

5. CII Principles • Place a premium on safety, ethics, continuousimprovement (cost, schedule and quality), and leadership. • Owner / contractor member balance and influence. • Promote a high level of knowledge transfer. • Provide leadership development through member participation. • High member involvement; small professional staff.

6. CII Knowledge Processes Knowledge Creation Research to define best practices, breakthroughs, & industry norms. Management, organization, and assessment of the 500-plus CII documents and publications. Knowledge Management Dissemination through publications, implementation guides, educational materials, workshops, and conferences. Knowledge Assessment Knowledge Dissemination Assessment of the impact of CII practices through benchmarking.

7. CII Member Benefits Research results and Best Practices Implementation resources, information, and tools Benchmarking & Metrics Development opportunities for employees Opportunity to shape the industry with other world class companies Safer, less costly, faster, project outcomes

8. Owner Members Abbott Air Products and Chemicals Alcoa Ameren American Transmission Co. Amgen Anheuser-Busch InBev Aramco Services Company Archer Daniels Midland BP America Bristol-Myers Squibb Cargill Chevron CITGO Petroleum Codelco-Chile ConocoPhillips DFW International Airport Dow Chemical DuPont Eastman Chemical Eli Lilly ExxonMobil General Motors GlaxoSmithKline Hovensa Intel International Paper Kaiser Permanente Marathon Oil NASA Naval Facilities Engineering Cmd. NOVA Chemicals Occidental Petroleum Ontario Power Generation Petrobras Praxair Procter & Gamble Progress Energy Sasol Technology Shell Oil Company Smithsonian Institution Solutia Southern Company Sunoco Tennessee Valley Authority Tyson Foods U.S. Architect of the Capitol U.S. Army Corps of Engineers U.S. Dept. of Commerce/NIST/BFRL U.S. Dept. of Energy U.S. Dept. of Health & Human Srvcs. U.S. Dept. of State U.S. General Services Administration Vale

9. Contractor Members Oracle USA Pathfinder Pegasus Global Holdings R. J. Mycka S&B Engineers and Constructors The Shaw Group Siemens Energy SNC-Lavalin Technip URS Corporation Victaulic Company Walbridge The Weitz Company WorleyParsons Zachry Zurich Day & Zimmermann dck worldwide Dresser-Rand Company Emerson Process Management Entech Solar Fluor Foster Wheeler USA Grinaker-LTA/E+PC Gross Mechanical Contractors GS Engineering & Construction Hargrove and Associates Hill International Hilti Jacobs JMJ Associates KBR Kiewit Power Lauren Engineers & Constructors M. A. Mortenson McDermott International Mustang Adolfson & Peterson Construction Aker Solutions Alstom Power AMEC Atkins Faithful & Gould Autodesk AZCO Baker Concrete Construction Barton Malow Bateman Engineering Bechtel Group Bentley Systems BIS Frucon Industrial Services Black & Veatch Bowen Engineering Burns & McDonnell CB&I CCC Group CDI Engineering Solutions CH2M HILL CSA Group

10. University of Alabama Arizona State University Auburn University Bucknell University Carnegie Mellon University University of Cincinnati Clemson University University of Colorado-Boulder Colorado State University University of California-Berkeley East Carolina University University of Florida Georgia Institute of Technology University of Houston University of Illinois Iowa State University University of Kansas University of Kentucky Lehigh University University of Maryland University of Michigan Mississippi State University Universities involved 1983-2009 University of New Mexico North Carolina State University North Dakota State University Oklahoma State University Oregon State University The Pennsylvania State University University of Pittsburgh Purdue University Polytechnic University San Diego State University San Jose State University Stanford University State University of New York-Albany Vanderbilt University Virginia Polytechnic Institute and State University Texas A&M University The University of Texas at Austin University of Washington University of Waterloo University of Wisconsin-Madison Worcester Polytechnic Institute

11. 2009 Emerging Trends – items with potential to impact the capital facility delivery process in the next 3-5 years.

12. Emerging Trends Process

13. Trend Categories Workforce and Human Capability Project Delivery Corporate Strategy Technology and Innovation Markets and Demand Drivers Social and Political Influences

14. Major Changes – 2009 vs 2008 • Global Recession • Financial instability • Lower / more selective consumer spending • Surplus of skilled labor and management in U.S. • Large government stimulus spending • Lower trust environment between government and business

15. Trend HighlightsWorkforce and Human Capability • Talent shortage no longer single most important issueas construction unemployment rises. • Companies reducing staff to “low water levels” • World Economic Forum CEOs predict that the shortage of skilled trade workers may return

16. Trend HighlightsWorkforce and Human Capability • Increase in outsourcing operations(accounting and finance, HR, conceptual engineering and R&D) to “Best Value” locations. • Not just production engineering anymore! • Information and communications technology enabling distribution of knowledge work. • Growing challenge to attract and retain best and brightest individuals in E&C industry. • “Facebook Generation” attracted to “sexier” fields (IT, nano- and bio-technologies) … meeting societal needs. • Increased mentoring a “must” for new employees

17. Trend HighlightsProject Delivery • Increase in “Green Consumers”and the movement toward sustainable construction. • Use of Lean practicesand the application of prefabrication and modular systems.

18. Trend HighlightsCorporate Strategy • Managing through the current economic recessionresides among the highest concerns of the E&C members of WEF. • A growing trend of the purchase of domestic engineering and construction companies by foreign owners(FMI).

19. Trend Highlights Technology and Innovation • Role of virtual teamswill grow as budgets tighten. • Experts see increasing movement from work in a centralized office to production from a network of virtual teams, globally distributed and working 24/7. • Integrated project management systemscontinue to grow with interoperability of systems still a challenge.

20. Trend HighlightsTechnology and Innovation Source: Mortenson website • Growing interest in Virtual Design and Construction, specifically in the area of Building Information Modeling (BIM). • Government entities accelerating BIM use. • Half of the industry is now using BIM or BIM-related tools (75% more than in 2007). • Convergence of BIM, Lean, and Green?

21. Trend HighlightsMarkets and Demand Drivers • Abrupt fall in consumer spending • Businesses must prepare for slower long-term growth in global consumption, shift investment to Asia, focus on older consumers and find ways to offer luxuries on a budget (Harvard Business Review)

22. Trend HighlightsMarkets and Demand Drivers • Majority of “giga” projects constructed outside U.S. • Ethics-related issues will become even more prevalent as work is pushed internationally.

23. Trend HighlightsMarkets and Demand Drivers • Bigger government • U.S. government infusing large amounts of money through stimulus packages into “shovel-ready” infrastructure projects. • Greater need for Public Private Partnerships due to aging infrastructure

24. Trend HighlightsMarkets and Demand Drivers • Greater use of alternative sources of energy and renewable energy. • Construction of power production facilities will lead all other sectors of construction (% growth in 2009). • FMI forecasts a10% power construction increase in 2009.

25. Trend HighlightsSocial and Political Influences • Precipitous decline in trust(in government, banks, insurance companies, etc.) since beginning of recession • Leading to higher transaction costs, lower brand value and greater difficulty in attracting, retaining and managing talent. (Harvard Business Review) • Due to increasingly interconnected global construction industry, many leaders fear corruption will negatively impact the success of international projects.

26. 2009 Trends Summary • Trend Environment is drastically different as a result of the global recession. • Lower consumer spending, labor surplus, large government stimulus spending, and lower trust environment. • Some trends remain on track and continue to accelerate. • Outsourcing, green, lean, BIM, virtual teams, integrated project management systems, growth outside U.S., and alternative energy.

27. Questions? www.construction-institute.org