CUE CONSTRUCTION 4.0: MAKE-OR BREAK TIME

KPMG 2023 Construction Industry Digital Maturity survey takes an in-depth look at technology adoption in Canada’s construction industry.

The past few years have been, to say the least, challenging for the construction industry. The pandemic, supply chain disruptions, labour shortages, and the surge in material costs disrupted lives and business activity. In response to these challenges, many construction companies came to realize that investments in technology were needed to respond to the new market realities, and improve productivity, workflow inefficiencies, and worker safety.

According to research gathered by KPMG in collaboration with the Canadian Construction Association (CCA) for the 2023 KPMG Construction Industry Digital Maturity survey, two thirds of construction companies say the pandemic prompted them to make “moderate” to “great or considerable” new investments in technology. Most organizations today feel they must adapt their digital strategy to succeed in the new market landscape.

Although only 13 per cent of respondents feel that their company has realized full integration across their value chain from supplier to customer, and 59 per cent feel they are partially integrated, more than eight in 10 companies believe that disruptive technologies can generate savings and efficiencies and make them more competitive.

“This is all about doing more with less,” says Jordan Thomson, a senior manager within KPMG’s Global Infrastructure Advisory group. “There is an amazing level of demand for infrastructure from all sectors that is facing a constrained construction industry and increasing costs. New technologies will help us bridge the gap and deliver more projects more efficiently.”

The decisions that construction companies make today have never been more important, for they will determine how well their organizations will be able to weather the unexpected and seize the coming opportunities.

When KPMG conducted its first version of the survey in 2020, digital and technological maturity in the construction industry was “fairly low.” The 2023 survey reveals the industry has made headway, but more needs to be done. COVID-19 hastened many digital journeys: Over two thirds (67 per cent) of respondents say the pandemic spurred new investment in, or assessment of, new technologies for their business. Of the 67 per cent, nearly a third (32 per cent) say the pandemic influenced them to a “great” and “considerable” extent, while 35 per cent say it had influenced them to “a moderate extent.”

Compared to 2020, companies are now shifting more investment dollars into technologies to support project management, project execution, and bid development.

“Technology can help the construction industry address Canada’s housing and infrastructure challenges,” explains Tom Rothfischer, partner, and national industry leader for building, construction, and real estate at KPMG in Canada. “Digital tools, if used smartly, save time and money, reduce waste, and improve worker safety and productivity. In short, they help get projects done on time or ahead of schedule and on budget.”

Industry Outlook

The industry has tremendous growth potential across the industrial, commercial, institutional, and civil construction sectors, in part fuelled by housing demand, needed maintenance and repairs, government investments, and the transition to the green economy.

In Ontario alone, where the construction industry contributes 7.7 per cent to the provincial economy, construction projects in public transportation, nuclear refurbishment, and other infrastructure and institutional projects will contribute to the growth in non-residential construction, according to StatsCan.

However, the industry is divided in its outlook for the next five years, despite the anticipated need for infrastructure asset replacement and repair, renewable energy projects, and new residential housing.

In the near term, the construction industry is buckling in for a possible recession. Over two-thirds (67 per cent) of construction companies expect an economic downturn in the next 12 months, with a nearly 50-50 split in expectations on whether it will be shallow or deep.

Just over half (54 per cent) believe the downturn will be mild and short- lived, lasting one or two quarters at most. Forty-six per cent anticipate a more prolonged recession. investment in projects will flow to the rest of the industry.

Either way, the prospect of a possible recession has not deterred their digital transformation plans.

Nearly seven in 10 survey respondents (69 per cent) who expect a recession are currently either accelerating their digital transformation strategies (60 per cent) or staying the course on their digitalization timetables (40 per cent).

Fewer than a third (31 per cent) are pausing or reprioritizing their digital plans largely to cut their operating expenses and alleviate economic stresses.

Hitting The Labour Wall

The construction industry must find a way to do more with less.

The pandemic hastened the industry’s impending retirement crisis, prompting older workers to retire early and contributing to a tightening in the labour market. As many as 62,000 jobs nationwide currently need to be filled, estimates the CCA, and approximately 156,000 workers are expected to retire by 2028, according to BuildForce Canada.

While 42 per cent of respondents to the 2023 Construction Industry Digital Maturity survey are significantly or somewhat more optimistic about the sector’s five-year outlook, a third are significantly or somewhat more pessimistic; and a quarter are neutral.

Owners and suppliers have a more optimistic view of the future than general contractors, subcontractors, and consultants like architects, engineers, etc. Nearly half of owners (49 per cent) and two thirds of suppliers (66 per cent) have a significantly or somewhat optimistic five-year industry outlook, compared to only 37 per cent of general contractors, 29 per cent of subcontractors, and 31 per cent of engineers, architects, etc.

KPMG notes the high level of optimism with owners is important, as they represent the first link in the construction value chain. Their optimism suggests continued

As it stands today, the industry can’t keep up with today’s labour force requirements. Nine in 10 companies said that they are currently experiencing a labour shortage. That jumps to 94 per cent in Québec. Almost as many – 86 per cent nationally –say that the labour crunch is impacting their ability to bid on projects and/or meet project deadlines. In Québec, 94 per cent are also struggling to bid on new work and/or their projects are behind schedule. As many as 90 per cent of B.C. construction companies say their projects are also being impacted. Technology offers ways for companies to weather the scarcity of labour. Eighty-six per cent of the companies surveyed – and again 94 per cent in Québec – say that they are considering prefabrication, modularization and innovative new tools and machinery to improve their efficiency and address the labour shortage. Nearly nine in 10 (89 per cent) agree that “better project management tools, that is, analytics, building information modelling (BIM), digital twins, etc., make labour more effective and help address shortages.”

The KPMG poll also finds that 91 per cent of construction companies across Canada believe the education system needs to be “much more flexible” to allow young people to pursue the trades. In Québec, that figure jumps sharply to 97 per cent.

The industry realizes that it’s not attracting the talent it needs and it can’t entirely rely on immigration to fill the gap. While education is one lever, technology