By Carlos Valverde
November 12, 2020
The author is Vice President of Development at Silverstein Properties, a privately-held, full-service real estate development, investment, and management firm based in New York.
Construction hasn’t evolved much in the past century. The Empire State Building finished almost 90 years ago, has recognizable construction techniques still used today: masonry blocks installed, piece by piece with hand tools; cranes erecting steel, beam-by-beam and column-by-column with ironworkers using hand signals; the concrete recipe they used (lime, sand, water, and aggregate) is similar to the one used by today’s builders…unchanged since the ancient Greeks.
To be fair, we’ve seen advances over the last few decades that have improved: the ability of fabricators to produce larger pieces of glass; elevators to have more controls and algorithms such as ‘destination dispatch’, and in the mid-80’s the adoption of drafting using CAD (computer-aided design). More recently, BIM (building information modeling) has picked up adoption. Related loosely to construction, technological advances in the field of electronic and mechanical engineering – like SCADA (supervisory control and data acquisition) and BMS (building management system) – is notable. Nowhere near the hundreds of technological advances that the microprocessor, airplane manufacturing, or the car assembly line have enjoyed. It seems like Moore’s Law does not apply in construction.
So, the question remains: Why is construction technology slow to adapt? And how can we make construction more economical, practical, and less risky? No one aspect of construction is more important than the other, but construction is all about risk management. The focus of this article that very often gets dismissed or not addressed when we sit through hundreds of design, construction, and development pitches by technology firms: How does your product help me mitigate risk? The question you should be asking me is not “what are you pain points?” but rather “what is the riskiest phase in your project?”.
There are several phases where risk exists in a real estate development project, but none riskier than construction. Within the construction phase of a project, one example that is filled with uncertainty is the foundation and excavation phase of a project. Engineers and contractors never know with a high degree of accuracy what to expect when excavating the ‘hole in the ground.’ Geotechnical construction documents prepared from a couple of dozen test-borings drilled into the earth provide only a small sample of data. The data represents a generalized interpretation of the widely spaced borings that vary in type, location, elevation, and other engineering properties between the points of exploration. Geotechnical engineering, as one example, might not have enough capital chasing these innovations because the returns are unclear, highly specialized, or worse, insufficient. Like the aforementioned example, other aspects of construction management exist that are riddled with risk and yet go mostly unattended by technology start-ups such as concrete placement, steel erection and electrical installation to name a few.
So, it’s unfortunate that risk management solutions often go unaddressed in the pitches I’ve sat through with hundreds of tech startup firms. The few that do speak to it, however, tend to come from entrepreneurs that were once in the design or construction industry.
If I had to bet, this is where the founding partners of the next construction tech ‘unicorn’ will come from. I find it hard to believe that it will be computer scientists and coders who will improve our industry, from the outside-in. My humble advice to them would be to collaborate with an experienced developer, construction manager, contractor, architect, or engineer. These ‘victims of delays and blown budgets’ are the ones who are looking to make tomorrow less risky than today.
It won’t surprise me when an engineer who used to analyze test borings in the earth finds a way to leverage AI and machine learning to solve the excavation and foundation problem. And it will delight me when that technology is used to build the next Empire State Building.
