Recent economic figures for the construction industry have not been very encouraging during 2009, and by most accounts the outlook for 2010 isn’t any better. The residential market is less than 600,000 houses per year from a peak of more than 2.4 million in 2005. The large inventory of existing homes will dampen any demand for new construction until inventory is absorbed. During the past 12 months, private nonresidential construction has been down 21 percent and is likely to continue to shrink as existing projects wind down. With overbuilt office space and retail buildings, a rebound will be slow. Of course, some areas of the country are faring better than others. The only relative bright spot in 2009 was infrastructure, where there was a slight increase because of the stimulus package.

However, with state funds almost totally dried up around the country and no sign of a major investment in infrastructure at the national level, even those figures will experience declines in 2010. A recent survey of infrastructure contractors indicated that many expect to lay off workers during 2010, pushing industry unemployment to more than 20 percent.

While the figures might give reason for doom and gloom, I think the industry is poised for positive changes. Harvard Professor John Kotter declares that the need for a sense of urgency is critical in creating sustainable change. The current economic recession has definitely heightened the sense of urgency throughout the industry.

Mark Casso, president of the Construction Industry Round Table, told me in an interview that a survey of CIRT members revealed that 15 percent felt the current construction industry model is obsolete. He added that another 35 percent of CIRT members felt major changes are needed. When 50 percent of an industry’s leaders believe that major change is needed, change will occur.

Daniel H. Pink has made another critical observation that will have significant impact on the construction industry. In his book A Whole New Mind, he wrote, Today the defining skills of the previous era—the left-brain capabilities that powered the Information Age—are necessary but no longer sufficient. And the capabilities we once disdained or thought frivolous—the right-brain qualities of inventiveness, empathy, joyfulness and meaning—increasingly will determine who flourishes and who flounders.

Pink’s statement leads me to believe my first prediction could easily be that his comment will make a lot of people uncomfortable within the construction industry because of the strong right-brained alignment of most people within the industry. To add fuel to that fire, instead of making analytical predictions, I will focus on a few right-brained predictions for 2010.

Doug Woods, founder of DPR Construction, has said our industry hasn’t altered in more than 100 years, but that’s about to change because the consensus within the industry is that modification is needed.

Prediction #1: Individuals will become more involved in their local communities

In conversations with CEOs of some of the leading infrastructure contractors and industry leaders such as Patrick Natale, Executive Director of the American Society of Civil Engineers, I have heard that companies are strongly encouraging their employees to become involved in their communities. This encouragement combined with people’s natural tendency to want to improve their communities will create a trend that is only going to grow.

Prediction #2: The construction industry is going to become more involved in establishing infrastructure priorities.

In addition to the individual efforts by our colleagues, the construction industry is and will continue to increase its effort to direct the nation’s priorities. The industry is mobilizing its experience and expertise to help address the nation’s needs. This is important because Congressman John Mica, ranking Republican on the Transportation and Infrastructure Committee, said in an interview that our problem is we haven’t had a goal since the Interstate Highway System. Jerry Gorski, the 2009 National Chairman of Associated Builders and Contractors, added in another interview that the industry needs to ensure that the projects that are built are in the best interests of our communities and nation, not just a project that the contractor can get.

ASCE’s report card is pretty well known in the industry, but educating the public about this report is essential because information without action is useless.

Prediction #3: The construction industry’s role in raising the capital for construction projects will continue to increase.

The events of the past 18 months or so have drastically changed the worldwide capital markets and probably altered them permanently. The construction industry is being coaxed into taking a more active role in the process of acquiring the funding for its projects—both private and public. P3s, or public-private-partnerships, have been evolving for years and will continue to expand because states and local communities don’t have enough revenue to pay for all their infrastructure needs.

Another reason this trend will continue and expand is because it’s good for the both contractors and the taxpayer. P3s tend to reward contractors for performance instead of just price, but even though contractors make a higher profit, the total lifetime costs of projects are less to taxpayers. P3 projects save taxpayers between 18 and 30 percent on total lifetime costs because they allow contractors to use their inventiveness, as Pink suggests.

The private industry is facing the same challenges raising capital. Many contractors have offered funding for projects such as additions, residential renovations, energy-improvement projects and swimming pools. This concept is a new idea, but the approach is going to expand because it makes sense.

Prediction #4: The residential marketplace is going to improve its efficiency and the value it delivers.

Doyle Wilson, a Texas homebuilder, attempted to introduce lean construction into the housing industry in the early 1990s. He told me he gave up because once the housing business took off in the 1990s, no one cared, but the depth of the current recession in the housing market is causing homebuilders to try new approaches. As homebuilders find that lean can help them be more profitable, as others have discovered in other industries, this trend will grow.

The combined impact of increased difficulty in qualifying for home mortgages and a more realistic approach to personal finances has caused homebuyers to become more conservative in their purchases. Consumers are demanding greater value, not just bigger and fancier. Homebuilders who are learning how to adapt their approach to the demands are seeing success. I see this trend continuing as the nation enters a more conservative personal financial era.

In The Art of War, Sun Tzu emphasizes that what is needed is a superior strategy. The above predictions are strategies that add value. They allow the construction industry to compete based on better ideas instead of great muscle. Therefore, the silver lining of the current recession is that it has allowed contractors and the industry to step back and reevaluate where it’s heading. As the trends produce solid results, they will continue to grow and improve the industry and the value it delivers to its clients.

* * * * THE END * * * * *

Ted Garrison, president of Garrison Associates, is a catalyst for change. As a consultant, author and speaker he provides breakthrough strategies for the construction industry by focusing on critical issues in leadership, project management, strategic thinking, strategic alliances and marketing. He can be reached at 800-861-0874 or by email at Growing@TedGarrison.com. For further information see his web page at www.TedGarrison.com.