building for tomorrow: global enterprise and the u.s. construction industry

title: BuildingforTomorrow:GlobalEnterpriseandtheU.S.ConstructionIndustry

author: Fisher,JohnW.publisher: NationalAcademiesPress

isbn10|asin: 0309039371printisbn13: 9780309039376ebookisbn13: 9780585168340

language: English

subject

Constructionindustry--UnitedStates,Constructionindustry--Casestudies,Constructionindustry--Internationalcooperation,Competition,International.

publicationdate: 1988lcc: HD9715.A2B841988ebddc: 354.64

Constructionindustry--UnitedStates,

subject: Constructionindustry--Casestudies,Constructionindustry--Internationalcooperation,Competition,International.

Pagei

BuildingforTomorrow:GlobalEnterpriseandtheU.S.ConstructionIndustryCommitteeontheInternationalConstructionIndustryBuilding

ResearchBoardCommissiononEngineeringandTechnicalSystems

NationalResearchCouncil

NATIONALACADEMYPRESSWashington,D.C.1988

Pageii

NationalAcademyPress2101ConstitutionAvenue,NWWashington,DC20418

NOTICE:TheprojectthatisthesubjectofthisreportwasapprovedbytheGoverningBoardoftheNationalResearchCouncil,whosemembersaredrawnfromthecouncilsoftheNationalAcademyofSciences,theNationalAcademyofEngineering,andtheInstituteofMedicine.Themembersofthecommitteeresponsibleforthereportwerechosenfortheirspecialcompetencesandwithregardforappropriatebalance.

ThisreporthasbeenreviewedbyagroupotherthantheauthorsaccordingtoproceduresapprovedbyaReportReviewCommitteeconsistingofmembersoftheNationalAcademyofSciences,theNationalAcademyofEngineering,andtheInstituteofMedicine.

TheNationalAcademyofSciencesisaprivate,nonprofit,self-perpetuatingsocietyofdistinguishedscholarsengagedinscientificandengineeringresearch,dedicatedtothefurtheranceofscienceandtechnologyandtotheiruseforthegeneralwelfare.UpontheauthorityofthechartergrantedtoitbytheCongressin1863,theAcademyhasamandatethatrequiresittoadvisethefederalgovernmentonscientificandtechnicalmatters.Dr.FrankPressispresidentoftheNationalAcademyofSciences.

TheNationalAcademyofEngineeringwasestablishedin1964,underthecharteroftheNationalAcademyofSciences,asaparallelorganizationofoutstandingengineers.Itisautonomousinitsadministrationandintheselectionofitsmembers,sharingwiththeNationalAcademyofSciencestheresponsibilityforadvisingthefederalgovernment.TheNationalAcademyofEngineeringalsosponsorsengineeringprogramsaimedatmeetingnationalneeds,encourageseducationandresearch,andrecognizesthesuperior

achievementsofengineers.Dr.RobertM.WhiteispresidentoftheNationalAcademyofEngineering.

TheInstituteofMedicinewasestablishedin1970bytheNationalAcademyofSciencestosecuretheservicesofeminentmembersofappropriateprofessionsintheexaminationofpolicymatterspertainingtothehealthofthepublic.TheInstituteactsundertheresponsibilitygiventotheNationalAcademyofSciencesbyitscongressionalchartertobeanadvisertothefederalgovernmentanduponitsowninitiative,toidentifyissuesofmedicalcare,research,andeducation.Dr.SamuelO.TheirispresidentoftheInstituteofMedicine.

TheNationalResearchCouncilwasestablishedbytheNationalAcademyofSciencesin1916toassociatethebroadcommunityofscienceandtechnologywiththeAcademy'spurposesoffurtheringknowledgeandofadvisingthefederalgovernment.FunctioninginaccordancewithgeneralpoliciesdeterminedbytheAcademy,theCouncilhasbecometheprincipaloperatingagencyofboththeNationalAcademyofSciencesandtheNationalAcademyofEngineeringinprovidingservicestothegovernment,thepublic,andthescientificandengineeringcommunities.TheCouncilisadministeredjointlybybothAcademiesandtheInstituteofMedicine.Dr.FrankPressandDr.RobertM.Whitearechairmanandvice-chairman,respectively,oftheNationalResearchCouncil.

ThisreportwassupportedbytheTechnologyAgendaProgramoftheNationalAcademyofEngineeringandfundedunderthefollowingagreementsbetweentheindicatedfederalagencyandtheNationalAcademyofSciences:U.S.TradeandDevelopmentProgram,InternationalDevelopmentCooperationAgencyGrantAgreementTDP7712561;NationalScienceFoundationGrantsNo.MSM-8612738andMSM-8612783underMasterAgreementNo.8618641;DepartmentoftheInteriorBureauofReclamationGrantAgreements

No.6-FG-81-10310and7-FG-81-11950,U.S.DepartmentofAgricultureForestServiceGrantNo.87-G-050.

LIBRARYOFCONGRESSCATALOGCARDNUMBER88-61728INTERNATIONALSTANDARDBOOKNUMBER0-309-03937-1

CoverillustrationbyTomAdams.

PrintedintheUnitedStatesofAmerica

FirstPrinting,July1988SecondPrinting,October1988ThirdPrinting,May1989

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BUILDINGRESEARCHBOARD(1987-1988)

RICHARDT.BAUM,Consultant,Jaros,BaumandBolles,NewYork,NewYork(retired),Chairman

L.GERALDCARLISLE,Secretary-Treasurer,InternationalUnionofBricklayersandAlliedCraftsmen,Washington,D.C.

ROSSB.COROTIS,Chairman,DepartmentofCivilEngineering,JohnsHopkinsUniversity,Baltimore,Maryland

RAYF.DeBRUHL,SeniorVice-President,DavidsonandJonesCorporation,Raleigh,NorthCarolina

C.CHRISTOPHERDEGENHARDT,President,EDAW,Inc.,SanFrancisco,California

DAVIDR.DIBNER,SeniorVice-President,BernardJohnson,Inc.,Bethesda,Maryland

ROBERTC.DOBAN,SeniorVice-PresidentforScienceandTechnology,Owens-CorningFiberglasCorporation,Toledo,Ohio

EZRAD.EHRENKRANTZ,President,TheEhrenkrantzGroupandEckstut,NewYork,NewYork

ELISHAC.FREEDMAN,Consultant,AssociatedPublicSectorConsultantsandUniversityofConnecticut,WestHartford

DENOSC.GAZIS,AssistantDirector,SemiconductorScienceandTechnology,IBMResearchCenter,YorktownHeights,NewYork

GEORGES.JENKINS,President,ConsultationNetworks,Washington,D.C.

RICHARDH.JUDY,Director,DadeCountyAviationDepartment,Miami,Florida

FREDERICKKRIMGOLD,AssociateDeanforResearchandExtension,VirginiaPolytechnicInstituteandStateUniversity,Alexandria

MILTONPIKARSKY,DistinguishedProfessorandDirector,InstituteofTransportationSystems,TheCityCollegeofNewYork

KENNETHF.REINSCHMIDT,Vice-President,StoneandWebsterEngineeringCorporation,Boston,Massachusetts

RICHARDL.TUCKER,Director,ConstructionIndustryInstitute,UniversityofTexas,Austin

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JAMESE.WOODS,SeniorEngineeringManager,BuildingControlsDivision,Honeywell,Inc.,GoldenValley,Minnesota

APRILL.YOUNG,Vice-President,NVRDevelopment,McLean,Virginia

Staff

ANDREWC.LEMER,Director

JOHNP.EBERHARD,FormerDirector

PETERH.SMEALLIE,SeniorProgramOfficer

GRETCHENG.BANK,ProgramAssociate

JULIANK.MORRISON,PrincipalConsultant

PATRICIAM.WHOLEY,AdministrativeCoordinator

DONNAF.ALLEN,SeniorSecretary

JOANNCURRY,SeniorSecretary

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COMMITTEEONTHEINTERNATIONALCONSTRUCTIONINDUSTRY

JOHNW.FISHER,FritzEngineeringLaboratory,LehighUniversity,Bethlehem,Pennsylvania,Chairman

DAVIDP.BILLINGTON,SchoolofEngineeringandAppliedScience,PrincetonUniversity,NewJersey

ARTHURJ.FOX,EngineeringNewsRecord,NewYork,NewYork

DONALDG.ISELIN,SantaBarbara,California

ARNOLDK.JONES,Cary,NorthCarolina

MICHAELMACCOBY,ProjectonTechnology,Work,andCharacter,Washington,D.C.

HENRYL.MICHEL,ParsonsBrinckerhoff,Inc.,NewYork,NewYork

FREDMOAVENZADEH,CenterforConstructionResearchandEducation,DepartmentofCivilEngineering,MassachusettsInstituteofTechnology,Cambridge

WILLIAMW.MOORE,DamesandMoore,SanFrancisco,California

LOUISJ.MULKERN,RMDAssociates,Washington,D.C.

JOHNC.RICHARDS,GovernmentandInternationalAffairs,M.W.KelloggCompany,HiltonHead,SouthCarolina

JOHNH.WINKLER,Skidmore,OwingsandMerrill,NewYork,NewYork

LiaisonRepresentatives

STANLEYBEAN,ForestProductsandHarvestingResearch,ForestService,U.S.DepartmentofAgriculture,Washington,D.C.

MARYSAUNDERS,CapitalGoodsandInternationalConstruction,U.S.DepartmentofCommerce,Washington,D.C.

FRANKA.DIMATTEO,U.S.ArmyCorpsofEngineers,Washington,D.C.

CHARLESM.HESS,U.S.ArmyCorpsofEngineers,Washington,D.C.

CHRISTIANR.HOLMES,InternationalDevelopmentCorporationAgency,Washington,D.C.

BETSYHORSMON,TennesseeValleyAuthority,Washington,D.C.

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THEODORELETTES,SmallBusinessTechnology,U.S.DepartmentofCommerce,Washington,D.C.

RICHARDB.SELF,ExecutiveOfficeofthePresident,Washington,D.C.

DARRELLWEBBER,BureauofReclamation,U.S.DepartmentoftheInterior,Denver,Colorado

AdviserstotheCommittee

FRANKBOSWORTH,VirginiaPolytechnicInstituteandStateUniversity,Blacksburg

MARIONC.DIETRICH,CorporationforInnovationDevelopment,Indianapolis,Indiana

JOHNW.FONDAHL,StanfordUniversity,California

EDGARJ.GARBARINI,BechtelGroup,Inc.,SanFrancisco,California

THOMASP.GUERIN,JR.,Construction/ProjectFinance,BAIIBankingCorporation,NewYork,NewYork

H.PETERGUTTMANN,HPGAssociates,Inc.,Washington,D.C.

GEORGES.JENKINS,ConsultationNetworks,Inc.,Washington,D.C.

JOHNT.JOYCE,InternationalUnionofBricklayersandAlliedCraftsmen,Washington,D.C.

FREDERICKKRIMGOLD,VirginiaPolytechnicInstituteandStateUniversity,Alexandria

NICHOLASLUDLOW,DevelopmentBankAssociates,Inc.,Washington,D.C.

RAYMARSHALL,LBJSchoolofPublicAffairs,UniversityofTexas,Austin

ALFREDT.MCNEILL,TurnerConstructionCompany,NewYork,NewYork

RICHARDTUCKER,DamesandMoore,Bethesda,Maryland

RICHARDL.TUCKER,ConstructionIndustryInstitute,UniversityofTexas,Austin

FRANKM.WARREN,JR.,ConstructionManagementConsultant,Charlotte,NorthCarolina

JOHNWISNIEWSKI,Export-ImportBank,Washington,D.C.

RICHARDN.WRIGHT,CenterforBuildingTechnology,NationalBureauofStandards,Gaithersburg,Maryland

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Observers

JESSEAUSUBEL,NationalAcademyofEngineering,Washington,D.C.

MARLENER.B.BEAUDIN,NationalAcademyofEngineering,Washington,D.C.

WILLIAMBEDDOW,Caterpillar,Inc.,Washington,D.C.

LYNNS.BEEDLE,LehighUniversity,Bethlehem,Pennsylvania

TERRYCHAMBERLIN,AssociatedGeneralContractors,Washington,D.C.

MARKCHALPIN,NationalConstructorsAssociation,Washington,D.C.

ROBERTGOLD,Arlington,Virginia

WILLIAMPETERSON,ConstructionIndustriesManufacturersAssociationWashington,D.C.

CHARLESPINYAN,InternationalConstructionWeek,NewYork,NewYork

MARTINJ.THIBAULT,BureauofReclamation,U.S.DepartmentoftheInterior,Washington,D.C.

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ForewordTheU.S.constructionindustryplaysacrucialroleintheUnitedStatesbysupplyingthestructuresthathouseandfacilitatevirtuallyallothereconomicandsocialactivity.Thisindustryhasahistoricroleabroadaswell,notonlythroughitsdirectexportsofU.S.goodsandservices,butalsothroughitsleadershipinopeningopportunitiesforotherU.S.businessandforintellectualexchangethatimprovesinternationalunderstanding.ReportsofdecliningworkbyU.S.firmsabroadandincreasingpenetrationofforeignfirmsintothedomesticconstructionmarketarethereforetroubling.

AlthoughonlyasmallfractionoftheU.S.constructionindustryisactivelyinvolvedintheinternationalmarket,thisparticipationyieldsabroadrangeofintangiblebenefitsthatgobeyondanydirecteffectontheU.S.tradebalanceorothereconomicstatistic.Thesebenefitsincludebetterknowledgeofforeignfirms'capabilitiesandbusinesspractices,enhancedskillsdevelopmentthroughexposuretoforeignculturesandmanagementstyles,andincreasedunderstandingoftechnicalproblemsarisingfromconstructionundertakenindiversephysicalandsocialconditions.

ThereasonsgivenfordeteriorationoftheU.S.constructionindustry'scompetitivepositioninanincreasinglyglobalmarketplacearevariedandcomplex,buttheimportanceoftechnologicalleadershipiswidelyrecognized.TheseissuesalonewouldjustifyanappraisalofthecompetitivenessoftheU.S.constructionindustry.

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However,inrequestingtheBuildingResearchBoardtoundertakethisstudy,theNationalAcademyofEngineeringhadmoreinmind:Emergingtechnologiesinseveralfieldsofferthepromiseofsignificantadvancesininfrastructureandbuilding,atatimewhenthereisgrowingrecognitionoftheneedtorenewandenhancethesefacilitieshereandabroad.TheopportunitiespresentedtoU.S.industrybythisconvergenceofcapabilityandneedaresubstantial.TheAcademyrequestedthisstudyasoneelementofabroaderefforttoidentifytheseopportunitiesandcontributetothepublicdebateaboutsuchissues.

TheAcademywishestothanktheNationalScienceFoundation,U.S.ArmyCorpsofEngineers,BureauofReclamation,InternationalCooperationAgency,andForestServiceforjoininginthefinancialsupportofthisstudy.

ROBERTM.WHITEPRESIDENTNATIONALACADEMYOFENGINEERING

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AcknowledgmentsThisstudywasconductedintwostagesbycommitteesunderthechairmanshipsofWilliamMoore,ofDamesandMoore,andJohnFisher,ofLehighUniversity.ThesecommitteesandtheirchairmendeservetheparticularappreciationoftheBuildingResearchBoard(BRB)andtheNationalAcademyofEngineering(NAE)fortheirsubstantialworkonthisstudy.FinancialsupportbytheU.S.ArmyCorpsofEngineers,BureauofReclamation,InternationalCooperationAgencythroughitsTradeandDevelopmentProgram,andForestService,combinedwithNAE'sinitiatingfunds,demonstratethegovernment'sbroadconcernabouttheU.S.constructionindustry'sinternationalcompetitivenessandtheimportanceofthecommittee'swork.

ThecommitteeswereablysupportedbyJohnP.Eberhard,formerDirectoroftheBRB,underwhoseguidancethestudywasconductedandwhotookamajorpartinpreparationofthisreport.AndrewC.Lemer,currentlyDirectoroftheBRB,alsoparticipatedsubstantiallyinthereport'spreparation.SpecialthanksareduetoJoannCurryforheroutstandingworkonthefinalmanuscript.

Pagexiii

Contents

ExecutiveSummary 1

1Introduction

10

TheScaleofWorldConstruction 11

TheChangingMarket 15

CaseStudy1:TechnologicalAdvantagePaysOff:M.W.KelloggandtheOilandPetrochemicalIndustry

19

2U.S.ConstructioninInternationalCompetition

23

TheU.S.Industry 23

AShortHistoricPerspective 25

MarketStructure 27

ConstructionMachinery 31

ForeignFirmsintheU.S.Market 33

CaseStudy2:Japan'sOhbayashiGumi:DoingConstructionintheUnitedStatesfor20Years

35

3CompetitionintheGlobalMarket

38

CommonCharacteristics 38

SpecificCases 39

GreatBritain 39

Pagexiv

France 41

Italy 41

Sweden 42

Japan 44

India 45

TheSovietUnion 46

U.S.ResponsetoCompetition 47

CaseStudy3:ShimizuMeetsIBM'sNeeds 50

4ResearchandDevelopmentinConstruction

55

U.S.ConstructionResearchandDevelopment 56

OtherEffortsNeeded 58

CaseStudy4:TheBellTelephoneLaboratories 63

5EducationandTraining

66

ProgramsofStudy 67

Engineering 67

Architecture 69

EngineeringandArchitectureTechnology 69

ContinuingEducation 70

IssuesinCivilEngineering 71

EmphasisonDesign 71

ConstructionManagement 72

IssuesinArchitecture 73

SpecializationandSmallPractices 74

ArchitecturalResearchandEducation 75

SkillsforGlobalEnterprise 76

Cross-CulturalTrainingfortheConstructionIndustry 76

AcquiringForeignLanguages 78

InternationalProjectManagement 79

CaseStudy5:BuildingInternationalRelationships:PhilippHolzmannAGandJ.A.JonesConstructionCompany

81

6PursuitofInnovation

85

NatureofInnovation 85

OpportunityinInfrastructure 88

GlobalPartnershipforInnovation 93

CaseStudy6:CooperativeEffortBetweenU.S.PublicandPrivateSectors:ProposalfortheThreeGorgesProjectinChina

94

Pagexv

7Needed:InstitutionalStructuretoPromoteGlobalEnterprise

100

OrganizedFocusofDiverseInterests 100

AttitudeofOpportunity 102

ResearchandDevelopmentandInnovation 103

BuildingforTomorrow 104

ExecutiveSummaryConstructionofhousing,otherbuildings,civilworks,andutilities(highways,sewerandwatersupplysystems,railroads,telephone,gasandelectricsystems)accountsforabout10percentoftheworld'stotaloutputofgoodsandservices,andwelloverhalfoftotaldomesticinvestment.Buildingsandotherconstructedfacilitiesinfluencetheefficiencyofawiderangeofeconomicandsocialactivities,andtheproductivityofnations.

TheConstructionMarketintheUnitedStatesandAbroad

ConstructionisimportanttotheUnitedStates.Leavingasidetherelatedindustriesthatproduceandtransportthematerialsandequipmentofconstruction,newbuildingconstitutesroughly9percentoftheGrossDomesticProduct(GDP)*oftheUnitedStatesandemploys5.5millionpeople,makingtheindustrythelargestsingle

*GrossNationalProduct(GNP)isameasureofthetotalvalueofanation'soutput,andincludespersonalandgovernmentexpendituresongoodsandservicesandinvestment,bothdomesticandforeign.GrossDomesticProduct(GDP),whichdoesnotincludeforeignconsumptionandinvestmentbydomesticenterprises,isusedasanindicationofeconomicactivitywithinthenation.

componentinnationalaccounts.TheUnitedStates,withanannualdomesticconstructionvolumeof$330billionto$390billion,isabout25percentoftheworldtotal(seeChapter1).

ForeigncompaniesworkingintheUnitedStatesin1986accountedfor1to2percentofthatamount.Industryobserversareconcernedthatthisasyetsmallpenetrationofforeignfirmsmaysignalthedeclineofanotherindustrywecannotaffordtolose.

Muchoftheworld'sconstructioninvolvessmallfacilitiesbuiltbysmallfirms,butasignificantportionisundertakenbylargefirmsininternationalcompetition.Availabledatasuggestthetotalvolumeofinternationalbidconstructionawardedin1986exceeded$74billionfor250majorfirmsfrommorethanadozencountries.U.S.contractorscaptured$22.6billionofthiswork,about31percentofthetotal(seeChapter2).However,constructionbyU.S.firmsabroadhasdeclinedbymorethan40percentsince1983,duebothtosmallertotalconstructionvolumesanddecliningmarketshare.

Inadditiontoactualconstruction,designandconstructionmanagementservicesrepresentanincreasinglyimportantbusinessinpostindustrialeconomies.U.S.designfirms(architects,engineers,andrelatedprofessionswhosemarketsderivefromconstruction)capturedabout26percentoftheestimated$3.5billioninternationalmarketin1986.Again,thisisadeclinefromthe1982peakof36percent.

Internationalconstructionhasdomesticimportancebeyondthecontributionstonationalincomethatthefiguresreflect.Manyofthe800U.S.producersofconstructionequipmentexportmachinerytosome150countries,oftenfollowingtheleadofU.S.constructorswhoopenedtheway.Othertypesofcompaniesmayfollowaswell,takingadvantageofdesigners'andbuilders'propensitytospecifyandusetheequipmentandmaterialstheyknowbest.However,annualU.S.exportsofconstructionequipmenthavedeclinedbytwo-thirdssince

1978toabout$2billion.Employmentintheindustryhasdeclinedsimilarly.

SourcesofChallenges

DecliningforeignmarketsharesexciteconcernabouttheinternationalcompetitivenessoftheU.S.constructionindustry.Whilethereasonsfordeclineliepartlyindecreasedconstruction,particularlybythosecountrieslikeSaudiArabiawhereU.S.firmshaveenjoyedaspecialrelationship,industryleadersciteotherproblems

thathamperU.S.firmsabroadandreducetheircompetitiveedgeathome:

Somecountriesrestrictforeigncompetitionfordomesticprojects.

Untilrecently,currencyexchangeratesmadeusingU.S.firmsrelativelymoreexpensive.

CoststosupportU.S.professionalsinforeignassignmentsarekepthighbyU.S.individualandcorporateincometaxpolicies.

U.S.antiboycottandbusinesspracticelawsrestrictU.S.firms'abilitiestooperatewithintheforeignbusinessclimateofsomecountries.

ThetechnologicaladvantagesofU.S.firmshavebeenslowlyerodedbyincreasinglycapableforeigners.Someoftheseforeigncompetitorsarebasedincountrieswherelowerwagescalesgiveadditionaladvantage.

Incontrasttootherindustrializednations,theUnitedStateshasnocoordinatedpolicyorsinglegovernmentagencytofosterinternationalsalesofU.S.designandconstructionexpertise.CompaniesbasedinindustrializedEuropeancountriesaswellasnewlyindustrializingcountriesinAsiaandLatinAmericahaveincreasedtheirmarketsharesininternationalconstruction,oftenwiththeaggressivesupportoftheirgovernments(seeChapter3).

Thestrategicimportanceofconstruction-relatedexportopportunitiesisreflectedintheU.S.TradeandDevelopmentProgram'ssupportofU.S.firmsconductingprojectfeasibilitystudies.Knowledgegainedinthefeasibilitystudycanenhancethefirm'schancesofsuccessfullycompetingforthemuchlargerconstructionproject.However,thissupportismuchlessthanmanyothergovernmentshavechosentoprovidetheirnationals,andU.S.suppliersfrequentlyfindthemselves

atadistinctcompetitivedisadvantage.

PrivatePractices

Internationaldesignandconstructionaredominatedbyarelativelysmallandselectgroupoffirms.Reliabledataarelimited,buttheCommitteeontheInternationalConstructionIndustryestimatesthatthetop30constructionfirmsworldwideperform50to60percentofworkavailableforinternationalcompetition,andvirtuallytheentiremarketiscapturedby250majorinternationalfirms.Ofthetop400U.S.contractorsandtop500U.S.designfirmslistedinEngineeringNewsRecordmagazinein1987,54constructionfirms

andapproximately200architecture/engineeringfirmsareactivelyseekingorconductinginternationalwork.

InrecentyearslargeamountsofforeigninvestmentcapitalhaveenteredtheUnitedStates.Forexample,theLosAngelesTimesindicatesthatincreasinglylargenumbersofdowntownofficebuildingsinLosAngelesareforeignownedorcontrolled.Foreignownershipoftenopensopportunitiesforforeignfirmstoparticipateindesignandconstruction.

Inadditiontothedirectcapturebyforeignfirmsof1to2percentoftheU.S.domesticmarket,foreignfirmsarepurchasingownershipsharesinU.S.constructionanddesignfirmsorareformingstrongassociationsthatmayobscurethetruevolumeofforeignparticipation.From1978through1983,thenumbersofforeigndesignandconstructionfirmsformingU.S.affiliations(includingpurchaseofownership)grewatannualratesof7.7percentand12.8percent,respectively.Totalrevenuesofthesecompanies,whilestilllessthan2percentofthetotalU.S.constructionmarket,grewatanannualrateof35percent.JapaneseconstructionvolumeintheUnitedStatesreachedmorethan$1.5billionin1985.

ResponsestoChallenge

ThechallengesposedbythedecliningU.S.shareofforeignconstructionandincreasingforeignpenetrationofU.S.domesticmarketsaresubstantial.Appropriateresponsemustbebalancedamongthecompaniesoperatingintheglobalmarketplace,educationalandprofessionalinstitutionsthatprepareandsupportU.S.professionalswithinthesecompanies,andgovernmentpolicyandinstitutionalsupportthatcanmotivateandstrengthentheprivatesector.ApartnershipofdiverseinterestsintheU.S.constructionindustryisneededtofocusresourcesinresearchanddevelopment

(R&D),professionaltraining,andgovernmentprograms.

ResearchandDevelopmentandInnovation

Researchanddevelopmentandsubsequentinnovationhavebeenshowninmanyfieldstobevaluableelementsofcompetitiveadvantage.WhilestatisticsforconstructioningeneralandtheU.S.constructionindustryinparticulararelimited,theysuggestthattheU.S.constructionindustryhasfallenbehinditscompetitioninitseffortstomaintaintechnologyleadership(seeChapter4):Other

countriesareputtingmoreeffortintoconstructionresearchanddevelopment,backinglonger-rangeresearchefforts,andactivelyencouragingtheadoptionofusefulresearchresultstobringinnovationtotheconstructionindustry.

Japanmaybetheleaderintheseefforts.Thatnation'sMinistryofConstructionsetsnationalpoliciesonbehalfoftheconstructionindustry.OneofitsmajorpolicydecisionswastoencourageprivatefirmstoestablishR&DcapabilitycomparabletothatfoundintheUnitedStates,primarilyatuniversities.Asaresultofthisgovernmentpolicy,morethan20ofthelargestfirmsinJapannowinvest1percentoftheirsalesinR&D.Allhavewell-equippedcampus-likeresearchcenters.Researchisintegratedthroughouttheiroperatingdivisionsandhasbecomeamajormarketingtoolforthem.Theirresearchprogramsincludeawidespectrumofshort-termandlong-rangeprojectsoverarangeoftechnicalsubjects.

Incontrast,totalR&DspendingondesignandconstructionintheUnitedStateshasbeenestimatedtobeabout$1.2billionannually,only0.39percentofthesector's$312billionofsalesin1984.ComparedwithR&DspendingbyothermatureindustriesintheUnitedStates(e.g.,appliancesat1.4percent,automobilesat1.7percent,ortextilesat0.8percent),constructionindustrysupportofR&Dissorelylagging.Contractors,architects,andengineersasagroupinvestlessthan0.05percentofsalesinR&D,afractionoftheamounttheyspendonliabilityinsurancealone.

ThecomplexreasonsforthislaggingeffortincludetheinabilityofthemanyfirmsthatmakeuptheU.S.industrytomobilizesufficientresourcesindividuallyortoconsolidatetheireffortseffectivelytosupportmeaningfulresearchortocapturethecommercialbenefitsthatmayresult.Theresearchthatisdoneisconcentratedwithintheuniversitiesandisoftenslowtohaveanimpactonpracticesinavery

competitiveindustrythatisnecessarilywaryofcommercialriskandlegalliability.

Yet,rapidadvancesintechnologiesnowemergingfromresearchlaboratoriesaroundtheworldsuggestthatafterdecadesofrelativetechnologicalstability,aneraoftechnologicalferment,unprecedentedintheconstructionindustry,isfastapproaching.Leadingthesedevelopmentsistheintroductionofcomputerhardwareandsoftwareintoallfacetsofdesignandconstruction.InnovationsinconstructionarelikelytoresultfromnewinventionsemergingfromR&Dlaboratoriesworkinginphotonics,biotechnology,newmaterials,microelectronics,andotherfields(seeChapter6).

EducationandTrainingforGlobalEnterprise

Experienceworkingabroadandworkingwithforeignfirmsathomesuggeststhatkeyelementsforprofessionalsuccessininternationaldesignandconstructionincludeastrongtechnicalbase,understandingofdesign,understandingoftheintimateconnectionbetweentechnologyandculture,andexperienceinforeignlanguagesandregionalstudies.Theseelementsaregainedthroughacombinationofpracticalexperienceandformaleducationthatcanneverreallybeconsideredcomplete(seeChapter5).

Civilengineeringeducationinthepasttwodecadeshasemphasizedfundamentalstudiesofmechanics,appliedmathematics,andtheanalysisofstructures,withrelativelylessattentiontodesignassynthesis,toconstructionastheprocessofeconomicalbuilding,ortotheperformanceandpermanenceofcivilworksasmeasuredinfieldobservations.Yearsofpracticemayberequiredtogaintheappreciationofdesign,construction,andperformanceneededtocompeteeffectivelyintheworldofbusiness.Changesinprogramsofformaleducationcouldlayastrongerfoundationforthisappreciation:

Designshouldbeintegratedintotheteachingofanalysisandrelateddirectlytoconstructionandperformance.

Youngengineersshouldbeeducatedinthemoderntraditions,culturalimplications,andinternationalpotentialoftheprofession.

Architecturaleducationhasbeenshapedbytraditionthatgivespreeminencetoapprenticeshipanddevelopmentofstrongintuitiveunderstandingoffunctionalandaestheticbasesforbuildingdesign,withlimitedattentiontotechnology.Architecturalpracticeischaracterizedbytheproliferationofsmalldesignfirmsanddependenceonspecializedconsultantstoaddressstructural,mechanical,lighting,acoustics,andeconomicissues.Exceptforafew

largeandverticallyintegratedfirms,theprofessionisill-preparedfortheinternationalmarket.Again,changeinprofessionaltrainingcouldstrengthenourcompetitivestance:

Technologyandtheculturalcharacteristicsofconstructioninothercountriesshouldbeaddedtopresentprograms,includingcoursesthatfosterunderstandingofhowbuildingsareactuallybuilt,notjustthematerialsandequipmentthatgointoabuilding.

Workingexperienceintheuseofcomputersastoolsofdesignandanalysisshouldbeenhanced.

Youngarchitectsshouldbeexposedtothegrowingbaseofresearchthatcansupportcreativedesigninunfamiliarsituations.

Increasingly,astheU.S.designandconstructionindustrieslooktogreaterparticipationintheglobalenterprise,engineeringandarchitectureschools,professionalsocieties,andbusinessorganizationsmustlookoutsidethemselvestolearnhowtodobusinessinaninternationaleconomy.Onlythroughmoredeliberateexposuretoforeignlanguages,geography,business,andforeignculturewillU.S.designprofessionalsgainrapidandeffectiveaccesstoforeign-originatedtechnologies,anddevelopastrongabilitytodealwithforeignsourcesofbusinessopportunityandfinance.

GovernmentProgramsandPrivateParticipation

Manyobserverscitegovernmentprocurementpracticesthatdiscourageinnovationaswellastaxpoliciesandregulationsonforeignbusinesspracticesasevidenceofgovernment'sfailuretosupportU.S.industry'scompetitiveposition.Despitetheseveryrealshortcomings,thereareexamplesofeffectivegovernmenteffortsinthisarea:

EstablishmentoftheNationalScienceFoundation'sNationalEngineeringResearchCenters,suchastheCenterforAdvancedTechnologyforLargeStructuralSystems(ATLSS)atLehighUniversity.

Growthofthegovernmentlaboratories,suchastheArmy'sConstructionEngineeringResearchLaboratory(CERL),theNavy'sPortHuenemeCivilEngineeringLaboratory,theTyndallAirForceEngineeringandServicesResearchCenter,andtheNationalBureauofStandards'CenterforBuildingTechnology.

U.S.ArmyCorpsofEngineers'grantsformajornewresearchefforts

attheMassachusettsInstituteofTechnologyandtheUniversityofIllinois.

However,morecouldbedonetoencourageprivateresponsetogovernmenteffortsandtoenhancethelinkagebetweenresearchandpracticalinnovation.TheprogramsofothercountriesillustratethevaluetobegainedthroughtruepartnershipofprivateandpublicinterestsintheU.S.constructionindustry.Thispartnershipshouldembraceresearchandinnovationforbothdomesticproductivityandinternationalcompetitivestrength.

Forexample,projectsbuiltwithgovernmentfundscanassume

thegreatercommercialriskinvolvedinadoptinginnovation,aswasdemonstratedbytheintroductiontoU.S.transitconstructionofprecastconcretesegmentaltunnelliners(seeChapter6).However,governmentcannotactalone.Mechanismsareneededtoencourageprivate-publiccooperationintheU.S.constructionindustry.Precedentsforsuchcooperationexist(theThreeGorgesprojectdescribedinCaseStudy6,forinstance),buttheyhavebeenisolatedexamples.Professionalsocietiesandtradeassociationsdowellrepresentingtheinterestsoftheirmembers,butthereisnoongoingmeansforbringingtheindustry'sdiverseintereststogethertoenhanceourcompetitivestanceinternationallyortofosterresearchandtechnologicalinnovationathome.Asolidinstitutionalfocusisneeded,andwhileanumberofexistinginstitutionscouldplayasignificantroleincreatingthisfocus,aneworganizationmayberequired(seeChapter7).

BuildingforTomorrow

WithintheUnitedStates,asinmostoftheindustrialworld,thereisanopportunitytoincreasetheperformancecharacteristicsofthoseinfrastructuresystemsusedtotransportpeopleandgoods,obtainwater,removewastes,supplyenergy,andfacilitatecommunications.Thereisalsoreasontoincludethosebuildingsusedeitherforpublicpurposes(e.g.,schoolsandhospitals)orbuiltwithpublicfunds(e.g.,governmentoffices,courthouses,andprisons)asapartofthepublicworksinfrastructure.UnderthisbroaddefinitionofinfrastructuretheUnitedStatesin1984invested30percentofitsdesignandconstructionbudgetsinthesefacilities,atotalof$102billion,andothercountriesareinvestingaswell(seeChapter6).

Developmentofadvancedinfrastructureisachallengeworthyofcooperativeinternationaleffort.Itwillbedifficulttostructurethesedevelopmentstomatchtheperformancerequirementsofasociety

utilizingadvancedscienceandtechnology,andmakemorethanincrementalimprovementstothepresentmodaltechnologies.Inthedevelopingpartoftheworld,whichisexperiencingthemostrapidurbanization,thechallengeistodeveloptechnologyappropriatetotheirrequirementsratherthantoimposesolutionsproducedforindustrialnations.

TherearetworeasonsfortheUnitedStatestodomoretowardadvancingthetechnologyofinfrastructure.Wewouldbenefitwithinourownbordersfromnewandhigher-performancesystems,andwe

couldalsoenhancetheopportunityformarketingourtechnologyonaglobalbasis.Thiscommitteerecognizestheurgencyofmaintainingandextendingtheexistingnetworksofpublicworksthatunderlieournation.However,weneedalsotodevelopnewandhigher-performingtechnologiestoenhanceourcompetitivepositionintheworld.

Wearefacedasanationwithachallengetobuildfortomorrow.Thestrategicandcommercialrewardsofmeetingthischallengewillbesurpassedonlybytherewardsofimprovedqualityoflifeforthecitizensofanincreasinglyglobaleconomy.

1IntroductionTheprominentroleofconstructioninthewealthofnationsisreadilyapparentinthebuildingsandinfrastructurefacilitiesthatenablemuchofmodernlife.Leavingasidetherelatedindustriesthatproduceandtransportthematerialsandequipmentofconstruction,newbuildingaccountsforroughly9percentoftheGrossDomesticProduct(GDP)oftheUnitedStatesandemploys5.5millionpeople,makingtheindustrythelargestsinglecomponentinnationalaccounts.ComparisonsamongnationsshowthatconstructiontendstoaccountforanincreasingshareofGDPaspercapitaincomesriseinearlystagesofgrowth,anddominatesinvestmentincountriesatalllevelsofdevelopment.

Giventhescaleofconstructionanditsassociateddesign,materials,andequipmentbusinesseswithintheU.S.economy,thereisasurprisinglackofdetailedstatisticsanddefinitiveanalysisofthissector'sstructure,performance,andcontributiontothenation'sgrowthanddevelopment.Knowledgeoftheconstructionindustryinothercountriesispoorerstill.

TheCommitteeontheInternationalConstructionIndustryfounditnecessarytorelyonitsmembers'experienceandaccountstoldbyotherstosupplementthemeagerbaseofstatisticaldata.Thecommitteefoundinsomecasesthattheseaccountstaughtinformativelessonsandmadethemthebasisforthecasestudiespresentedherein.

Thecommittee'sworkrevealsapicturethatissomewhatimpressionisticinnature,basedonacombinationoftheselimitedstatisticaldataandcasestudies.Thecommitteefound,nevertheless,aneedforchangesineducation,supportforresearch,andenthusiasmforinnovationintheconstructionindustry.Thesechangesareneededtoenhanceboththenation'sabilitytocapturemajornewopportunitiesfromtechnologicalprogressthatseemslikelytoalterinbasicwaysthephysicalinfrastructureofsociety,anditscompetitivestrengthinanincreasinglyglobalmarketforconstructionservices.

TheScaleofWorldConstruction

Estimatesbasedongovernmentalrecordsindicatethattheworldinvestsabout$1,430billioneveryyearintheconstructionofhousing,otherbuildings,civilworks,andutilities(highways,waterandsewer,railroads,telephones,gas,andelectricity),oralittlemorethan10percentoftheworld'sGDP(seeTable1).Actualamountsmaybeevengreater.Constructionisthelargestindustryintheworld.

Asindividualcountriesdevelop,risingpercapitaincomesspurgrowingdemandformoreandbetterbuildingsandinfrastructure,andconstructionaccountsforanincreasinglysignificantshareofnationaleconomicactivity.Someevidencesuggeststhatconstruction'sshareofeconomicactivitymaystabilizeordeclineathigherlevelsofdevelopment,butthelevelremainshigheveninthemostadvancedcountry.TheU.S.annualdomesticconstructionvolumeof$330billionto$390billionisabout25percentoftheworldwidetotal.

Muchoftheworld'sconstructionisdonebysmall-scalebuilderswhoproducesinglehousesormaintainroadsoversmallareas,usingverytraditionalbuildingmaterialsandmethods.Onlyperhapsone-fifthofthetotalvolumeofconstructionisconsistentlycarriedoutbylarge-scaleorganizationsusingmoremodernmethods,aswellastraditional

methodsthatremainpredominantincurrentpractice.

Muchofthissubmarketisinturnlimitedbypoliticalandeconomicreasonstodomesticfirmsorgovernmentagenciesusinglocalmaterials,labor,anddesignandmanagementservices.Totalconstructionundertakeninafullyinternationallycompetitivemarketin1986exceeded$74billion,orabout5percentoftheworld'sconstruction(seeTable2).

Thismarket,whileonlyafractionoftotalconstruction,isneverthelessabigbusinessanditisdominatedbyarelativelyfewmajor

TABLE1ComparativeStatisticsonBuildingasaComponentinNationalEconomies,1984

BuildingValue

CountryGDPa($million)

PercentageofGDP

Total($million) Source

Low-IncomeEconomies

Ethiopia 4,270 3.0 128Bangladesh 12,320 5.0 616 UNMali 980 3.0 29Zaire 4,700 3.0 141BurkinaFaso 820 3.0 25Nepal 2,290 7.0 160 UNBurma 6,130 3.0 184Malawi 1,090 3.0 33Niger 1,340 3.0 40Tanzania 4,410 3.0 132 UNBurundi 1,020 4.0 41 UNUganda 4,710 3.0 141Togo 420 8.0 34 UNCentralAfricanRepublic 460 4.0 18India 162,280 5.0 8,114 UNMadagascar 2,380 4.0 95Somalia 1,364 4.0 55Benin 900 4.0 36 UNRawanda 1,600 4.0 64China,People'sRepublicof 281,250 4.0 11,250Kenya 5,140 5.0 257 UNSierraLeone 900 4.0 36Haiti 1,820 4.0 73

Guinea 2,100 4.0 84Ghana 4,485 4.0 179SriLanka 5,430 7.0 380 UNSudan 6,730 4.0 269Pakistan 27,730 5.0 1,387 UNSenegal 2,390 4.0 96Afghanistan 3,000 5.0 150 UNBhutan 3,000 4.0 120Chad 360 4.0 14Laos,People'sDemocraticRepublicof 765 4.0 31Mozambique 2,000 4.0 80Vietnam 18,100 4.0 724

Total,Low-incomeeconomies 25,216

Middle-IncomeEconomiesMauritania 660 4.0 26Liberia 980 7.0 69 UNZambia 1,060 4.0 42 UN

Continued

TABLE1(Continued)

BuildingValue


PercentageofGDP

Total($million)Source

Lesotho 360 4.0 14Bolivia 3,610 5.0 181 UNIndonesia 80,590 6.0 4,835 UNYemenArabRepublic 2,940 5.0 147Yemen,People'sDemocraticRepublicof 792 4.0 32Coted'Ivoire 6,690 9.0 602 UNPhilippines 32,840 19.1 6,272 CICAMorocco 13,300 5.0 665Honduras 2,840 5.0 142 UNElSalvador 4,070 5.0 204 UNPapuaNewGuinea 2,360 5.0 118Egypt,ArabRepublic 30,060 5.0 1,503 UNNigeria 73,450 5.0 3,673Zimbabwe 4,580 3.0 137 UNCameroon 7,800 5.0 390Nicaragua 2,830 3.0 85 UNThailand 41,960 5.0 2,098 UNBotswana 990 5.0 50 UNDominicanRepublic 4,910 5.0 246Peru 18,790 2.0 376 UNMauritius 860 5.0 43CongoPeople'sRepublic 2,010 5.0 101Ecuador 9,870 7.0 691 UNJamaica 2,380 5.0 119Guatemala 9,400 5.0 470Turkey 47,460 5.0 2,373 UN

CostaRica 3,560 5.0 178Paraguay 3,870 5.0 194Tunisia 6,940 5.0 347 UNColombia 34,400 4.0 1,376 UNJordan 3,430 12.0 412 UNSyrianArabRepublic 15,930 5.0 797 UNAngola 4,000 5.0 200Cuba 14,900 6.0 894KoreaDemocraticRepublic 23,000 6.0 1,380Lebanon 5,300 6.0 318Mongolia 1,200 5.0 60

Total,Middle-incomeeconomies 31,857

Upper-Middle-IncomeEconomiesChile 19,760 6.0 1,186Brazil 187,130 5.0 9,357 UNPortugal 19,060 11.4 2,173 CICA

Continued

TABLE1(Continued)

BuildingValue


PercentageofGDP


Malaysia 29,280 6.0 1,757Panama 4,540 6.0 272Uruguay 4,580 5.0 229 UNMexico 171,300 15.5 26,552 CICAKorea,Republicof 83,220 9.4 7,789 CICAYugoslavia 38,990 11.0 4,289 UNArgentina 76,210 6.0 4,573SouthAfrica 73,390 6.0 4,403Algeria 50,690 6.0 3,041Venezuela 47,500 7.0 3,325 UNGreece 29,550 9.0 2,660 UNIsrael 22,350 10.0 2,235 UNHongKong 30,620 7.0 2,143TrinidadandTobago 8,620 8.0 690 UNSingapore 18,220 23.9 4,355 CICAIranIslamicRepublic 157,630 5.0 7,882Iraq 27,000 5.0 1,350

Total,Upper-middle-incomeeconomies 90,259

High-IncomeOilExportersOman 7,680 8.0 614 UNLibya 30,570 11.0 3,363 UNSaudiArabia 109,380 15.0 16,407 UNKuwait 21,710 3.0 651 UNUnitedArabEmirates 28,840 10.0 2,884 UN

Total,High-incomeoilexporters 23,919

IndustrialMarketEconomies

Spain 160,930 8.0 12,874 UNIreland 18,270 9.0 1,644Italy 348,380 11.4 39,715 CICANewZealand 23,340 4.0 934 UNUnitedKingdom 425,370 8.5 36,156 CICABelgium 77,630 7.0 5,434 CICAAustria 64,460 28.0 18,049 CICANetherlands 132,600 13.0 17,238 CICAFrance 489,380 11.3 55,300 CICAJapan 1,255,006 23.3 292,416 CICAFinland 51,230 10.0 5,123 CICA

Continued

TABLE1(Continued)

BuildingValue


PercentageofGDP


Germany,FederalRepublicof

613,160 14.0 85,842 CICA

Denmark 54,640 10.0 5,464 CICAAustralia 182,170 12.0 21,860Sweden 91,880 12.7 11,669 CICACanada 334,110 12.0 40,093Norway 54,720 12.0 6,566UnitedStates 3,634,600 9.0 327,114 CensusSwitzerland 91,110 14.7 13,393 CICA

Total,Industrialmarketeconomies 996,887

EastEuropeanNonmarket

Hungary 20,150 12.0 2,418 UNPoland 75,410 11.0 8,295 UNAlbania 2,700 11.0 297Bulgaria 56,400 8.0 4,512 UNCzechoslovakia 127,900 8.0 10,232GermanDemocraticRepublic

163,700 7.0 11,459 UN

Romania 117,600 10.0 11,760 UNSovietUnion 1,957,600 11.0 215,336 UN

Total,EastEuropeannonmarket 264,309

WorldTotal 13,027,922 1,432,447

aGrossDomesticProduct.Note:DataarefromUnitedNations'(UN)reports,theSwedishindustryreport(CICA),andtheU.S.CensusBureau.

firms.Morethanhalfofthework(indollarvolume)isdonebythetop30contractors.IntheUnitedStates,whichmayhaveahigherproportionofmoderatelysizedfirmsthanothercountries,200firms(about1.7percentofallU.S.constructors)conductabout85percentofthebusiness.

TheChangingMarket

Theneedforconstructionofnewfacilitiescombinedwithpoorlydevelopeddomesticconstructionindustrieshasmadedevelopingcountriestheprimarylocusofinternationalcompetitioninthepast.

TABLE2SummaryofEstimatedMarketStructureforInternationalConstruction

MarketSegmentAnnualAmount(U.S.$billion)

Estimatedtotalconstructionworldwide 1,430aSmallscaleandrestricted 1,140b

Modernmethodandmanagement 290bRestrictedorcommunistblocprojects 216b

Internationalconstructionmarket 74cForeigncontractsoftop30constructors 44c

Remaininginternationalconstructionmarket

30b

aFromUnitedNations;dataandsurveys.(SeeTable1.)bCommitteestaffestimates.cInternationalconstructionweek,EngineeringNewsRecord,July20,1984.

Theeconomicupheavalofoilandcommoditypricefluctuationsandgrowingdebtburdens,however,hasslowedconstructiongrowthfromtheaverageof6percentannuallybetween1967and1976to1.5percentin1983.Constructionoflargeandtechnicallycomplexprojectshascometoavirtualstandstillinmanycountries.Somecountriesarebeginningtoshowsignsofslowrecovery,butwithoutquestiontheinternationalmarketremainsconstricted.

Atthesametime,largernumbersoffirmsarecompetinginthis

limitedmarket.Thesefirmsfallintofourcategories.First,somefirms(typicallyBritish,French,Dutch,andScandinavian)havelongexperiencewithconstructionexportandextensivecontactsthroughoutdevelopingcountries.Thisexperiencehasbeenfosteredlargelybyeconomicandpoliticalopportunity.Asaresultofformercolonialties,forexample,theFrenchconstructionindustryhasspecialaccesstomanycountriesinWestAfricaandtheMiddleEast,andtheBritishconstructionindustrytothesubcontinentofAsia,SoutheastAsia,theMiddleEast,andEastAfrica.TosomedegreetheUnitedStateshasenjoyedsucharelationshipwithSaudiArabia.Themarketstheserelationshipsprovidearesensitivetochangingeconomicandpoliticalenvironments,butgivethesefirmsadistinctcompetitiveadvantage.

Thesecondcategoryincludesfirmsbasedinindustrializedcountriesthathavenotpreviouslybeensubstantialexportersofconstruction,butinthepast10to15yearshaveinitiatedeffortstoexporttheirsurplusdomesticcapacity.IncountriessuchasItalyandJapan,reconstructioneffortsfollowingWorldWarIIcreatedextensiveconstructionindustriestomeetdomesticneeds.Suchdemandisnowdroppingoffsharply,andconsiderablesurplusconstructioncapacityexistsintheirdomesticindustries.CompaniesfromtheseindustrializedcountriesareoperatingunderconditionssimilartothoseofAmericanfirms.Theyhaveahighlydevelopedtechnologybase,theyhavesophisticatedmanagementandtechnologyproducts,theirfinancingcapabilityisconsiderable,andtheirarchitecturalandengineeringfeesarecomparabletothoseoftheUnitedStates.Thenatureofthecompetitionamongthesecountriesisbasedonthequalityoftechnologicalabilityandtheadequacyoffinancing.ScheduledremovaloftradebarriersamongnationsoftheEuropeanEconomicCommunity(theEEC,orCommonMarket)willgivethesefirmsadomesticmarketcomparabletothatoftheUnitedStates,andcompetitionmaybeintensified.

Firmsbasedinnewlyindustrializedcountries,suchasKorea,Brazil,Taiwan,Turkey,India,andthePhilippines,constituteathirdformofcompetition.Thesecountrieshavedevelopedconstructioncapacityasanelementoftheirnationaleconomicplanningandhaveinvestedinexportconstructioncapabilityasameansofraisingexportincome.Firmsinthesecountriesarecharacterizedbyadevelopingbutlimitedtechnicalcapacityandbyrelativelylowwages.Advancedtechnologyistypicallyavailablebylicenseorotherarrangement.However,theirfundamentalbasisforcompetingininternationalmarketsisessentiallylowprice,bothforconstructionlaborandforprofessionalservices.Managementskillsandtechnologicalcapabilityareincreasinginthesecountriesataveryrapidrate.Therearenowfewprojectsuponwhich

thenationalconstructionindustriesofthesecountriescannotbidcompetitively.However,wheresophisticatedtechnologyisrequired,therecontinuestobeastrongincentivetoinvolveEuropean,Japanese,orU.S.contractors.

Firmsbasedinthedevelopingcountriesconstituteafourthgroupofcompetitors,buttheycurrentlydonothavethecapabilitytoposeaseriouscommercialthreatinworldmarkets.However,inmanydevelopingcountriesemphasisisbeingplacedonthedevelopmentofabasiclocalconstructionindustryforimportsubstitution.This

emphasisreduceshardcurrencyexpenditureforgoodsandcommoditiesthatcanbeprovideddomestically,andinmanysuchcountrieshasprovidedavehicleforgradualincreaseintechnologicalcapabilityandlaborskills,andinvestmentinindustrialcapacity.Inthesecountriesthereisoftenastrongefforttoprotectthisdomesticindustry(organizationssuchastheWorldBankhaveinstitutionalizedapolicypreferenceforutilizingthedevelopingcountry'sownsourcesofconstruction).Manydevelopingcountriesthatpreviouslyprovidedopportunitiesforforeignconstructioncompaniesarenolongeropentotheinternationalmarket.

WhilethenumberofU.S.firmsthatcompeteinthisglobalmarketissmallcomparedtothetotalnumberoffirmsinthedesignandconstructionbusiness,thesefirmsaregenerallyverylargeemployers(byconstructionindustrystandards)andarekeyplayersintheinternationalcompetition.Unlikeitsforeigncompetition,theUnitedStateshasbeenslowtodevelopnationaltradeandeconomicpoliciesinsupportofinternationalengineeringandconstruction.Inthiscountrythereisnocentralpolicy-coordinatingagencyforconstruction,incontrastwithmuchoftherestoftheworld,wherethereisacabinet-levelofficerwhoheadsaministryofconstructionoritsequivalent.

Domestically,theconstructionindustryislargelydecentralizedandgenerallyinadefensivemode.Consolidationsaretakingplaceacrosstheindustry,withforeigninvestorsbuyinglargeinterestsinsomefirms,andotherfirmsareclosingshop.Thedesigncommunitynowfindsmergersandacquisitionswithfirmsfromothercountriescommonplace,especiallyforthosefirmsthatbecamevisiblebycompetingintheinternationalarena.Whilesomecompaniesestablishedleadershipthroughcontroloftechnologyvaluabletomanufacturingfirmsthatareclientsforconstruction(seeCaseStudy1),mostU.S.internationalconstructioncompanieshavegrownfrom

aninitialspecializationinoneofthefollowingmarketsegments:electricpowergeneratingfacilities,highways,mining,refineryfacilities,andlargedams.Regardlessoftheirorigins,however,thesefirmsmaintainedleadershipthroughtechnologydevelopmentsandmanagementskillsthatareincreasinglysharedbycompetitors.

CaseStudy1:TechnologicalAdvantagePaysOff:M.W.KelloggandtheOilandPetrochemicalIndustry

U.S.constructionfirmshavereapedoverseveraldecadesthebenefitsofthenation'stechnologicalleadershipinindustry.SomeU.S.builderssimplyfollowedtheirlong-timedomesticmanufacturerclientswhomovedabroadinaquestforlargermarketsandsupplysources.Otherfirmshaveplayedamoreactiveroleindevelopingthetechnologythatopenedmarketopportunitiesincountriesseekingtoexpandtheirindustrialbases.

Sinceitsformationinthefirstyearofthiscentury,theM.W.KelloggCompanyhasreliedonexperiencedmechanicalandchemicalengineeringtechniquesandlaboratoryresearchanddevelopmenttogrowasanengineeringcontractorbycreatingandimprovingnewprocessesfortheoilandpetrochemicalindustry.Asmallpipefabricationandchimneybusinesssoonevolvedintopowerpiping.Thecompanybeganexperimentingwithanewhammer-forgeweldingtechniqueitlearnedfromGermanindustry,andsubsequentdevelopmentworkimprovedthemethodsused,providingthebasisforentranceintothepetroleumfield.

ApproachedbyRichardFlemingin1919todevelopanewoilcrackingmethod,Kellogghiredtheinventoranddevelopedhisprocess.Flemingunitswereinstalledatseveraloilrefineryunits,providingmuchhighergasolineyieldsthanwithconventionalequipment.

Intheearly1920soilrefinerieswereconvertingonly30percentoftheircrudeoiltogasoline,andtheheavydemandformotorgasolinedictatedaneedforhigherrecovery.Theanswercamein1924withtheintroductionbytheCrossbrothersofanewhigh-pressurethermal

crackingprocess.Underaspecialagreement,Kelloggwasbroughtintohelpdeveloptheprocess,andforthispurposealaboratorywassetupin1926.Oneofthefirstpetroleumlaboratoriesinthecountry,itsstudiesresultedinthesuccessfulcommercializationoftheCrossprocess.Inthe10yearsfollowing,Kelloggbuiltmorethan130CrossunitsintheUnitedStatesandabroad.TwentyCrossunitswerebuiltoverseas:fiveinArgentina;threeinEngland;twoeachinJapan,Poland,andtheDutchWestIndies(Aruba);andoneeachinBrazil,France,Indonesia,Italy,Mexico,andPortugal.

TheCrossprocessdevelopmentwasfollowedbyfurtherdevelopmentofthermalprocessingtechnology.By1939some45percentofthecrudeoilcouldbeconvertedtomotorgasoline.

Tostudythethermalcrackingprocessinmoredetail,Kelloggsetupanewlaboratoryin1931especiallyforthatpurpose.Thisresearchworkandtherelatedprocessandmechanicalengineeringdesignproducedthecombinationunitconceptthatmadeanimportantcontributiontothermalcrackingprogress.Thisdesignwasafirststepinprocessintegrationforimprovedeconomyandgaveanearlyimpetustocontinuousplantprocessdesignandlarger,moreefficientoilrefineries.

Incooperationwithmajoroilcompanies,Kellogg'sknowledgeofcatalyticprocessinggrewtowardamajoraccomplishmentthetechnicaldevelopmentoffluidcatalyticcrackingofgasoils.PreliminarystudiesinthisfieldwereapartofanexploratoryresearchprogramcosponsoredwithStandardOilofNewJersey,StandardOilofIndiana,andtheTexasCompany.Aseparatelaboratorywasestablishedforthiswork,andby1938Kellogghadinoperationacontinuousfluidmovingbedcatalyticcrackingpilotplantandbegananexchangeofinformationthatledtothecommercializationoftheprocess.TheoriginalideaforusingapowderedcatalystcamefromStandardOilofNewJersey,andKelloggturneditsattentiontoplacingthisuniqueconceptinpracticalapplication.

In1941fluidcatalyticcrackingwasdraftedintowarservicetosatisfythegreatneedforaviationgasolinebeforetheprocesshadgonebeyondthepilotplantstage.Kelloggplaceditsfirstfluidunitinoperationin1942forStandardOilofLouisianaatBatonRougeandhad20unitsinproductionwhenthenation'saviationgasolineprogramendedin1944.TheseearlyunitswerebuiltessentiallyfromKelloggpilotplantdata.

Parallelingthepioneeringactivitiesinthepetroleumareaweretechnicalcontributionsinthefieldofcryogenicsandgasprocessing.Thisbeganin1937withastudyonoxygengenerationtobeusedina

processproducinghydrocarbonliquidsfromcoal.ThisearlyresearchanddevelopmentworkledtotheconstructioninSouthAfricaoftheworld'sfirstsuccessfullarge-scaleplantproducingsyntheticoilandgasfromcoal.

Theseresearchandengineeringactivitiesprovidedstrongtechnicalpositionsingasprocessing,syntheticfuels,andethyleneproduction.TheextensivebasicworkcarriedonthroughtheyearshasprovidedalargeshareofKellogg'sdomesticandinternationalbusinessoverthepastseveraldecades.

Since1975whenKelloggwaseighteenthontheEngineeringNewsRecord(ENR)annuallistof400contractors(theENR400)witha

totalcontractvolumeof$1billion,Kellogghasincreaseditsbusinessvolumesubstantially.ThecompanyheadedthelistoftheENRTop250InternationalContractorsfor1984,1985,and1986,withtotalcontractvolumesintherangeof$10.9billion(1984)and$6.9billion(1986).Theforeigncontractvolumeasapercentageofthetotalduringthesethreeyearswas60to80percent.

Thisimprovementinbusinessvolumeisbelievedtobelargelyattributabletothecompetitiveedgegainedthroughtheachievementofstrongtechnicalpositionsinseveralproprietaryprocessessuchassyntheticammonia,ethylene,andliquifiednaturalandpetroleumgasprocessing.TheseprocessesweredevelopedandimprovedovermanyyearsthroughthecontinuingactivitiesinKelloggresearchanddevelopmentlaboratoriesandchemicalandmechanicalengineeringgroups.Certainlytheproprietarypositionintheseprocesseshascontributedinlargemeasuretothehigh-percentagevolumeofinternationalbusiness.

PerhapsKellogg'smostimpressivetechnicalachievementwasthemorerecentdevelopmentandcommercializationofaradicallynewprocessplantthatmakespossibletheproductionofammoniainlargequantitiesatsignificantlyreducedcost.Thenewapproachincorporatedearlierprocessandequipmentdesigndevelopmentssuchashighersteamreformingpressure,lowerammoniasynthesispressure,andtheuseofsteam-drivencentrifugalcompressorsinsteadofreciprocatingcompressorsinallmajorservices.Allofthesedesigninnovationsresultedingreatlyimprovedenergyefficiency.Operatingcostswerereducedappreciablybygeneratingsuper-heatedsteamatelevatedpressuresandusingthesteaminaseriesofefficientextractionstepsinvolvingbothprocessusersandsteamturbinedrivesforallmajorpumpsandcompressors.

Thefirsttwoplantsofthenewlarge-scalesingle-trainammoniaplant

designweresoldtoImperialChemicalIndustries(ICI)inEngland.Withinoneyear,10more600-and1,000-ton-per-dayplantswereorderedinEurope,includingathirdduplicate1,000-ton-per-dayplantforICI.IntheUnitedStates,a600-ton-per-dayplantwasplacedinserviceinJuly1965forMonsantoinLouisiana,andwithinoneyearthreemorelarge-scaleplantswerebroughton-streaminLouisianaandMississippi.Theseplantscutthecostofproducingammoniainhalfandsentproducersoffonamajorroundofnewplantexpansionworldwide.

Between1963and1983theKelloggworldwiderecordinlarge-scaleammoniaplantsnumbered132,ofwhich83areinproduction

outsideNorthandSouthAmerica.Theseplantsnowsupplymorethanhalftheworld'ssyntheticammonia,theprincipalbasematerialformostfertilizers.

AsignificanttechnicalandcommercialbreakthroughwasalsomadeinthePeople'sRepublicofChinathroughthesaleofKellogg'sammoniaandureatechnologyintheearly1970s.FollowingthesigningofthefamousShanghaiCommuniqueof1972,Kelloggsetinmotionamarketingprograminthefalloftheyear.China'sneedfornitrogenwaswellknownandKelloggvolunteeredtosubmitaproposal.Theinitialproposalwasrejectedbecauseofsomeopencostfeatures,andalumpsumproposalwaslateracceptedforoneammoniaplant.Thisagreementwasfollowedbyasurprisingrequestfortwomoreplants,andacontractforthethreeplantswassignedinJune1973.

Concurrently,theChinesewerenegotiatingwithaJapanesefirmforammoniaplantsusingKelloggtechnology.TheJapanesereceivedcontractsfortwoplants,providingtheChinesewithanexcellentbenchmarkinnegotiationswithKellogg,butatthesametimegivingthecompanyadditionalrevenueforammoniadesignknow-how.

AnevengreatersurprisefollowedwithaChineserequestforfivemoreammoniaplants,andcontractsfortheseplantsweresignedinNovember1973.Ataboutthesametimeastheammoniaplantnegotiationswereunderway,Kellogg'sDutchcompanycompletedcontractnegotiationsforeightureaplantsthatusetheammoniaandcarbondioxideproducedintheammoniaplantsateightdifferentsitesinChina.ThecontractvalueofKelloggammoniaandureaworkinChinarepresentedabout$500millioninbusiness.

2U.S.ConstructioninInternationalCompetitionTheU.S.constructionindustryhasfaredpoorlyinthisdifficultclimateofstagnantmarketsandgrowingcompetition.AmoredetailedlookatthestructureoftheU.S.industryandsomeofitsprincipalcompetitorsininternationalmarketsrevealserosionoftraditionaltechnologicaladvantagesandfailurestokeepupindevelopingtheskillsneededforcompetition.

AvailabledataindicatethatU.S.constructionfirmsin1986captured$22.6billioninnewcontracts,almost31percentoftheinternationalexportmarket(seeTable3).Thisamountrepresentsadeclineofmorethan40percentinsalesdollarssince1982.

U.S.designfirms(engineers,architects,andconstructionmanagerswhosemarketsaredrivenbyconstruction)workinginternationallyoftenprovidesomeadvantageforU.S.constructionfirms.Thesefirmsgarnered$917.8millionin1986billings,about26percentofthemarket(seeTable4).Again,thesefiguresrepresentasharpdeclinefrom1982,whenU.S.firmscaptured36percentofamarketmadefatbythespendingofprosperousoil-producingcountries.

TheU.S.Industry

ThesmallnumberofU.S.firmscompetingintheglobalmarketaregenerallyverylargeemployers(byconstructionindustrystandards)andarekeyplayersintheinternationalcompetition.

TABLE3InternationalConstructionShares,1986

NationofContractor

NumberofFirms

TotalAwards$Billion Percentage

American 43 22.6 30.6Japanese 29 9.4 12.7Korean 14 2.6 3.5European 126 33.7 45.5Italian 35 7.4 10.0French 18 7.1 9.6British 17 7.0 9.5German 17 5.5 7.5Yugoslavian 6 1.4 1.9Swiss 5 1.3 1.7Dutch 7 1.1 1.5Other 21 2.9 3.9

Turkish 9 2.2 3.0Allother 29 3.4 4.7

Total 250 73.9 100.0

Source:EngineeringNewsRecord,July16,1987.

Note:Dataarebasedonvoluntaryresponsestoasurvey.

In1983,U.S.firmsinvolvedininternationalcontractingemployed45,000Americansand99,000peopleofothernationalities.

Domestically,theconstructionindustryconsistsofmanysmallfirmsthatrespondtoexternallydetermineddemand.Consolidationsaretakingplaceacrosstheindustry,withforeigninvestorsbuyinglargeinterestsinsomefirms,andstillotherfirmsareclosingshop.

Somepeoplebelievethattheseconsolidationsandmergersarean

attemptbythemarketplacetosorttheindustryintotwobroadcategories:theall-purposefirms(notunliketheirJapanesecounterparts),andthespecialized''boutiques"(small,buthighlyspecialized).Overlyingthisrestructuringoftheindustryisaconstantstrugglewithalitigioussocietyinwhicheachpartytoacontracthasfounditselfconfrontedinacourtoflaw.Insuchaclimate,toomanyorganizationsdevoteenergiesandmanagementstructurelargelytominimizingrisks,ratherthanbuildingnewmarketsorapplyinginnovations.

TABLE4InternationalDesignShares,1986

NationalityofDesigner

NumberofFirms

ForeignBilling$Million Percentage

American 49 917.8 25.9European 106 1,958.4 55.3British 26 481.4 13.6French 15 306.3 8.6German 21 282.1 8.0Dutch 8 259.3 7.3Scandinavian 11 227.1 6.4Swiss 8 174.7 4.9Other 17 227.9 6.5

Canadian 14 204.0 5.8Japanese 12 220.5 6.2Korean 4 54.0 1.5Allother 15 185.1 5.3

TOTAL 200 3,539.9 100.0

Source:EngineeringNewsRecord,August6,1987.

Note:Dataarebasedonvoluntaryresponsestoasurvey.

AShortHistoricPerspective

UntiltheIndustrialRevolution,constructionremainedlittlechangedfromRomantimes.Stone,brick,andtimberwereusedforbuildings,andinfrastructurewasrudimentary.

Bytheendofthenineteenthcentury,a"secondgeneration"ofessentiallyurbaninventions(structuralsteelframes,theelevator,electricalsystems,sewerandwatersystems,indoorplumbing,centralheating,thetelephone,theautomobileandhighway,andthesubway)

wasreadyforworldwidediffusionandinstallation.Mostoftheworld'sconstructionindustryknowntodaycameintobeingtointegratetheseinventionsintoindividualcommunities.

AfterWorldWarIandthesubsequentboomandbustperiodsofthe1920sand1930s,constructioncapabilitiesincreasedtoincludethebuildingofnationalhighways,largereclamationprojects,anddamsforwatercontrolandpowerproduction.TheU.S.ArmyCorpsofEngineersandtheBureauofReclamationplayedmajorrolesinshapingandmanagingsuchprojects.Asthecountrymaturedsodidtheindustriesofconstruction.

AttheendofWorldWarII,thephysicalrestructuringofthe

world'scities,manyofwhichhadbeendestroyedordamagedbythewar,wasaidedbysuchmajorgovernmentprogramsastheMarshallPlanandPresidentHarryTruman'sPointFourprogramforThirdWorldcountries.ThedevastatedurbanareasoftheEuropeancontinent,theSovietUnion,theMiddleEast,NorthAfrica,manyislandsinthePacific,China,Korea,andJapanweremuchinneedof"construction"and"reconstruction."TheUnitedStatesaloneretainedrelativelyundamagedphysicalfacilities,aneconomicbase,andtheresourcestoaidinthisglobalprogram.Duringthewar,theUnitedStateshadcreatedtheimpressiveorganizationalcapacityofthemilitaryconstructionarmoftheArmyCorpsofEngineersandtheNavySeabees.Withthedevelopmentofmultinationalcorporations,whichbecameclientsforconstructionprojectsinothercountries,afurtherincentivewasaddedforotherU.S.designandconstructionfirmstomoveintotheinternationalarena.

A"military"componenttotheMarshallPlanincludedtheplacementofU.S.militarybasesonforeignsoiltocountertheperceivedSovietthreat.MostofthephysicalinfrastructureforthesemilitarybaseswasoriginallybuiltbytheengineeringelementsoftheU.S.armedforces,whoweresoonsupersededbyanumberofthelargerandmoreaggressivelyprofit-motivatedprivatesectordesignandconstructionfirms.U.S.engineeringandconstructionfirmswereemployedbyEuropeanindustrytoundertakemuchofthereconstructionworkfortheprivatesectoraswell.Inturn,aparalleleffortwasbegunbyEuropeanfirmswhowerereenteringthemarketfollowingaperiodofdormancyduringthewar,andwhowereadoptingmanyofthetechniquesandmuchoftheequipmentoftheirU.S.counterparts.

Thispatternpersistedthroughoutthe1950sand1960s,inbothmilitaryandciviliansectors,firstinKoreaandtheninVietnam.ThephenomenalgrowthoftheSouthKoreanconstructionindustrycanbeattributedinlargeparttothecloseworkingrelationshipbetweenthe

CorpsofEngineersanditsSouthKoreancounterpart.TheKoreanswererapidlearnersandwithinafewyearshadputtogetheranumberoflargeandcapableconstructioncompanies.ThesecompaniesbecameespeciallyprominentandsuccessfulinthelatterdaysoftheconstructionboominSaudiArabia,andbecameaverylucrativesourceofforeignincomeforKorea.Toamuchlesserextent,thesamepatternwasfollowedinJapanandTaiwan.

ThecaseofSaudiArabia,andtoalesserextentotheroil-producingnations,inthe1970sisaspecialoneandnotlikelytoberepeated.Oilandoilpricingmadeavailableanunprecedented

amountofcapitaltoSaudiArabiaanditsneighborsforimportsandconstructionprojects.TheSaudishadenjoyedacloserelationshipwiththeUnitedStatessincetheearlyphasesofAramcoandduringWorldWarII.BecauseSaudiArabiadidnothaveanyoftherequisitetechnologicalcapabilityorprojectmanagementexpertise,itsnationalleadersturnedtotheUnitedStates.TheresultwasmajorparticipationbyU.S.engineeringandconstructionfirmssuchasBechtel,Fluor,andRalphParsonsincontractsforplanning,civilandmechanicalengineeringdesign,andsomeconstructionmanagement.TheU.S.ArmyCorpsofEngineers,familiarwithlarge-scaleprojects,wasdesignatedtheoverallprojectmanagerformanymilitary-relatedprojects,workingverycloselywiththeSaudiArabianauthorities.PracticallyalldesignandengineeringprojectswereawardedtoU.S.designfirms,sinceU.S.specificationswerebeingused.Theconstructionprojectswereopentointernationalcompetition.Earlyinvolvementinaprojectusuallyincreasestheoddsoflaterworkforthedesignandengineeringteam(seebox),butAmericandesignteamscannotensurethattheconstructionphasewillgotoAmericanfirmswhenpublicfundingisused.Oncetheactualconstructionisunderway,theproductsusedinthebuildingcanbepurchasedfromacountryotherthanthehomecountryofthedesignteam.

InthepastfewyearstheTradeDevelopmentProgramwithintheU.S.StateDepartmenthasprovidedcriticalfundingforalargenumberoffeasibilitystudiesbyU.S.designandconstructionfirms.Thefinancialsupportisgiventothosefirmswhoseprojectsshowtheprospectofamajorreturntotheeconomyiftheyobtainthecontract.

MarketStructure

Construction,thelargestindustryintheUnitedStatesandthemajoremployer,isarelativelydisaggregatedandvolatilemarketthatrespondstointerestratesandlevelsofgeneraleconomicactivity.The

industry's1.2millionfirmsundertakemorethan$360billionincontractseachyearandemploy5.5millionworkers.Whenthesuppliersofmaterials,machinery,insurance,anddesignservices,andtheoperationandmaintenanceofallconstructedfacilitiesareaddedtothistotal,theoverallindustryaccountsfor17percentoftheU.S.workforce.Constructionhastraditionallymadeupsome55to65percentofthenation'scapitalinvestment.

PROJECTCYCLEFORMAJORCONSTRUCTIONPROJECTS

Aconstructionprojectpassesthroughthreerelativelydistinctphases:feasibilityanalysis,designandengineering,andactualconstruction.Constructionmaterialsandlaboraccountforabout85percentoftypicalprojectcosts,withthebalancebeingprofessionalservices.Asaruleofthumb,feasibilitystudiesareabout1percentofthetotalprojectcost,designandengineeringfeesareabout10percent,constructionmanagementcanrunbetween2and6percent.Operationandmaintenancecostsoverthe20-to50-yearlifeofthefacilitycanapproachseveraltimestheproject'sinitialcosts.

Whileclearlysmallinscope,feasibilitystudiescanprovideaninvaluableopeningwedgeforengineeringcontractstofollow.BoththeWorldBankandtheInter-AmericanDevelopmentBankprovidefor"continuityofwork."Underthispolicyaclientcanawardthedesigncontracttoafirmasafollow-upcontracttothefeasibilityphasewithoutreopeningthecontractingprocessiftheclientissatisfiedwiththeearlierwork.

Thus,thelinkagebetweenfeasibilitystudiesanddesignworkcanbeexploitedasamarketingtool.Feasibilitystudiescanbeunderpricedorfinancedatgeneroustermstolandthedesigncontract.Consultingengineersmaybefacedwiththechallengeofmaintainingobjectivitywhentheoutcomemayinfluencefutureopportunitiesforwork.

Oncethefeasibilitystudyhasbeenacceptedbytheclient,andveryoftenbythefinancingorganization,thedesignfirmischosen.Giventhenatureoftheproject,thedesignfirmmaybe

moreheavilyorientedtowardengineeringthanarchitecture,orviceversa.Oftenthefirmhasbothqualifications.Alsoatthisstage,theprojectmanagementorganizationmightbechosendependingontheproject'scomplexityandtheclient'sdesires.

Duringthedesignphase,thedetailedworkingdrawingsandspecificationsarepreparedforcontractors'bids.Dependingonthecircumstances,abidders'listbasedonprequalificationsmaybeprepared.Anyfirmwiththeabilitytopostaconstructionbondwillnormallybeallowedtobidonpublicprojects.Awardofthecontractisalmostalwaystothecontractorwiththelowestprice.

Procurementofsupplies,materials,buildingcomponents,mechanicalandelectricalequipment,andconstructionlaborwillbedeterminedbyalargenumberoffactors.However,oncetheconstructioncontractisawarded,itiscommonpracticefortheconstructionfirmtoprocuretheseitemsfromsupplierswithintheirhomecountry,thuscreatingan"aftermarket"forreplacementpartsandadditionsbasedonupgradedperformance.

TABLE5U.S.ConstructionMarketbySector,1985(in$billionsofnewconstruction)

MarketSectorsFederalInformationa

IndustryInformationb

Residential 159 159Officeandcommercial 60 60Institutional 10 10Hotelsandmotels 7 7Allotherprivate 8 8Subtotal 85 85

Industrial 16 54Electricpower 16 20Otherutilities 17 17Subtotal 49 91

Stateandlocalgovernment 50 50

Federalgovernment 12 12

Total 355 397

aU.S.CensusBureaudata.bConstructionIndustryInstitute(CII)adjustmentstodata,basedontheknowledgeoftheirmembers.TheCIIestimatesarelargerfortheindustrialmarketsectorandtheelectricpowersectorbecauseof"force"accounts,thatisworkdonebytheemployedstaffofindustrialfirmsandthereforenotpubliclybidorcountedincensusdatawhicharelargelybasedonrecordsofbuildingpermits.

Thedesignandconstructionindustryisorganizedaroundmarketsectorsthatarewidelydifferentintermsofthetypeofcustomer,themethodoffinancing,theworkforceused,andeventheleveloftechnology.Table5presentsacommonwayofindicatingthese

marketsectors.

The"residential"(housing)designandconstructionsectorisprimarilymadeupofsmallerindependentbuilders.ThelargesthomebuildersanddevelopersintheUnitedStateshavenomorethan$2billionofthis$159billionmarket.Thebalanceofthebusinessisconductedbythethousandsoffirmswithfewerthan100employees.

ThemanufacturedhousingindustryhasgrowntocapturealargershareofthismarketsinceWorldWarII(29percentofthe

marketin1980),butstillisconfinedlargelytohousingunitsmarketedatthelowestendofthepricespectrum(82percentofallhousingunitssoldforunder$50,000in1983).

ForseveralreasonsthehousingsectoroftheU.S.industryhasalmostnoexperienceininternationalmarkets:

Thesmallsizeofmostcompanieslimitsavailablefundstoexploremarketsinothercountries;

Homebuildingtechnologyisbasedprimarilyonwood-frameconstruction,whichisnotthecaseintherestoftheworld;

Housingprogramsinmostothercountriesarelargelyinfluencedbytheirgovernmentalpolicies,andarenotopentothespeculativebuildingcharacteristicoftheUnitedStates.

Thesectorstermed"officeandcommercial,""institutional,""hotelsandmotels,"and"allotherprivatework"areinfluencedbytheavailabilityofacombinationoflandandfinancingpackages.Inrecentyearsalargeamountofinvestmentcapitalfromothercountrieshasbeenplacedintothissector.Forexample,theLosAngelesTimesindicatesthat75percentofthelarge,downtownofficebuildingsinLosAngelesareforeignownedorcontrolled,whichisupfrom25percentjusteightyearsago.Aswillbediscussed,suchinvestmentsometimesbringswithitforeignconstructors.

Theheavy-constructionsector("industrial,""electricpower,"and"otherutilities")generallyinvolvestheworkoflargefirms,manyofwhichparticipateintheinternationalarena.Foreignheavy-constructionfirms,whichtendtobelargeinsize,arenowlookingtothisareaintheUnitedStatesasasourceofmarketgrowth.

Thefederal,state,andlocalgovernmentsectorsgenerallyattractfirmsthatconcentrateongovernmentworkbecauseofthespecialmarketing

skills,andsometimesspecialpoliticalvisibility,neededtogainworkfromgovernmentalunits.Whilegovernmentcontractingrequiresopenbidding,itisnotalwayspossibleordesirableformanyconstructionfirmstobidonsuchwork.Architecturalandengineeringfirmsdonotbidongovernmentwork(althoughfromtimetotimethereispressurefromlegislatorstohavethemdoso),butqualifyingforconsiderationongovernmentdesignawardstakesaverydifferentbusinessstrategythangettingdesigncontractsintheprivatesector.Ingeneral,themarketsforworkwithgovernmentclientshavebecomeincreasinglyprice-competitive,reducingsomefirms'abilitytoinvestinnewtechnology.

TABLE6MajorU.S.ContractorsWorkingonaGlobalBasis(in$million),1986

ConstructionContractsCompany Foreign Total

TheM.W.KelloggCompany,Houston,Texas

5,085.0 6,945.0

TheParsonsCorporation,Pasadena,California

3,823.3 6,408.9

BechtelGroup,Inc.,SanFrancisco,California

3,439.0 7,079.0

BrownandRoot,Inc.,Houston,Texas 1,818.3 3,540.6LummusCrest,Inc.,Bloomfield,NewJersey

1,760.0 2,335.0

FosterWheelerCorporation,Livingston,NewJersey

1,219.0 1,847.0

FluorDaniel,Irvine,California 985.3 6,075.3SantaFeBraun,Inc.,Alhambra,California 630.0 710.0StoneandWebsterEngineeringCorporation,Boston,Massachusetts

428.0 1,625.6

JacobsEngineeringGroup,Inc.,Pasadena,California

275.5 982.3

KaiserEngineers,Inc.,Oakland,California 267.7 945.5DillinghamConstructionCorporation,Pleasanton,California

169.3 1,121.6

Fru-ConCorporation,Baldwin,Missouri 159.5 672.5KiewitConstructionGroup,Inc.,Omaha,Nebraska

147.2 1,262.5

Note:Ofthetotalglobalconstructionmarketof$73.9billion(availableforbidsfromoutsideofclientcountry),43Americanfirmsobtained$22.6billion(30.6percent).The14firmsshowninthislisthadmorethan90percentoftheU.S.volume.

MarketsegmentationandthepreponderanceofsmallfirmsprecludemuchoftheU.S.constructionindustryfrominternationalbusiness.Ofthetop400U.S.contractorslistedinEngineeringNewsRecordin1987,54areinvolvedsignificantlyininternationalcompetition.The14largestfirmsaccountformorethan90percentofU.S.constructionworkabroad(seeTable6).

Fortypercentofthe500largestU.S.designfirmsareinvolvedininternationalwork.The22firmslistedinTable7wereresponsibleformorethan85percentofthework.

ConstructionMachinery

TheUnitedStateshasabout800constructionmachineryproducers,manyofwhichexport(ormanufactureabroad)machinerytoabout150foreigncountries.TheprimarymarketsareCanada,SaudiArabia,Australia,andmanynationsinWesternEurope.Thelargeproducershavequiteextensivedealernetworksaroundtheworld,bothforsalesandservice.

TABLE7PrincipalU.S.DesignFirmsPracticingonaGlobalBasis,1986

InternationalBillings Servicea

$30millionormoreLouisBergerInternational,Inc.,EastOrange,NewJersey CEDaniel,Mann,Johnson,andMendenhall,LosAngeles,California

AE

DeLeuw,CatherandCompany,Washington,D.C. EAGibbsandHill,Inc.,NewYork,NewYork EAHarzaEngineeringCompany,Chicago,Illinois CEHolmesandNarver,Inc.,Orange,California EAMetcalfandEddy,Inc.,Wakefield,Massachusetts EAMorrison-KnudsenEngineers,Inc.,SanFrancisco,California CE

Under$30millionBlackandVeatch,KansasCity,Missouri EACRSSirrine,Inc.,Houston,Texas AECampDresserandMcKee,Inc,Boston,Massachusetts CEDamesandMoore,LosAngeles,California CEA.EpsteinandSons,Inc.,Chicago,Illinois EAGilbertAssociates,Inc.,Reading,Pennsylvania EAFrederickR.HarrisInc.,NewYork,NewYork EALesterB.KnightandAssociates,Inc.Chicago,Illinois AECharlesT.MainInc.,Boston,Massachusetts EAPacificArchitectsandEngineers,Inc.,LosAngeles,California EAParsons,Brinckerhoff,Inc.,NewYork,NewYork EASkidmore,OwingsandMerrill,Chicago,Illinois AESverdrupCorporation,St.Louis,Missouri EAWilliamsBrothersEngineeringCompany,Tulsa,Oklahoma CE

aAE=architect/engineer;EA=engineer/architect;andCE=consultingengineer.

Note:Ofthetotalglobalvolumeof$3,543millionindesignfeesavailabletodesignfirmsfromoutsidetheclientcountry,49Americanfirmscapturedsome$917million(25.9percent)ofthistotal.The22firmsshownonthislistwereresponsibleformorethan85percentoftheU.S.share.

ThevalueofU.S.exportsofconstructionequipmentwasatitspeakof$6.3billionin1978andhasdeclinedsteadilytoabout$2billiontoday.Similarly,U.S.employmentintheequipmentindustryreacheditspeakin1979atabout175,000workersandhasdeclinedbytwo-thirds.

CaterpillarTractorCompanyoftheUnitedStatesistheworld'slargestconstructionmachineryproducer,withKomatsu,Ltd.,ofJapanfollowing.Thereisatpresentsubstantialexcesscapacityintheworld'sconstructionequipmentindustry,andcost-reduction

measures,moreefficientandlesscostlymanufacturingmethods,andothersimilarmeasuresarebeingundertakenbytheproducers.Whilepricecompetitionwillprobablyremainthedominantfactorintheindustry,investmentsinresearchanddevelopmentmayyieldfutureadvances.Forexample,thedevelopmentofmoreautomatedequipmentextendingtherangeofweatherconditionsunderwhichconstructionispossiblemaybeforthcoming.

ForeignFirmsintheU.S.Market

TheU.S.constructioncommunityfacesanewchallengeintermsofbothcooperationandcompetition.Withthegeneralslowdowninotherpartsoftheworld,designfirmsandcontractorsfromothercountriesseetheverylargeAmericanmarketasanattractivewaytomaintainorincreasetheirbusinessopportunities.AsCaseStudy2illustrates,companiesfromEurope,Japan,andSouthKoreahavebeendevelopingworkingarrangementsinthiscountryforsometime.

Inthefiveyearsfrom1978to1982,thenumberofforeigndesignandconstructionfirmsenteringtheU.S.domesticmarketgrewannuallyatratesofalmost8percentand13percent,respectively(seeTable8).RevenueofforeignfirmsintheUnitedStatesincreased

TABLE8ForeignDesignandConstructionFirmsintheUnitedStates

NumberofU.S.AffiliatesCategory 1978 1980 1983

Designandengineeringservices 40 53 58Construction 45 70 82

U.S.IncometoForeignOwnedfirms($millions)

1978 1980 1983

Designandengineeringaffiliates 669 694 892ConstructionaffiliatesEuropean 1,142 3,896 5,394Canadian 61 243 144Japanese 24 50 81Other 317 415 1,308

Constructiontotal 1,544 4,604 6,927

Source:U.S.CommerceDepartment,BureauofEconomicAnalysis.

Note:By1985theJapaneseconstructionvolumeintheUnitedStateshadincreasedtomorethan$1.5billion,makingJapan'spenetrationoftheU.S.marketthemostdramatic.

duringthatsameperiodatanannualrateof35percent.Japan'svolumehasshownstunninggrowth,reachingmorethan$1.5billionby1985.WhiletotalforeignworkintheUnitedStatesisonlyabout2percentofthedomesticmarket,itisconcentratedinthelargeandtechnicallycomplexareasofworkthathavebeenthemainstayofU.S.internationalbusiness.Expertsinthefieldfindthesituationalarming.

CaseStudy2:Japan'sOhbayashiGumi:DoingConstructionintheUnitedStatesfor20Years

Intheearly1920s,theCalifornia-basedFluorCorporationinvitedexecutivesofaJapaneseconstructioncompanytoAmericatostudyadvancedU.S.constructiontechnology.Today,thiscompanyisback,bringingadvancedJapaneseconstructiontechnologywithit.Overthepast20yearsandmore,OhbayashiCorporationhasbuiltdams,tunnels,offices,andresidentialprojectsintheUnitedStates.

Foundedin1892byYoshigoroOhbayashi,thecompanyhasbeenamongtheBigFiveJapaneseconstructioncompanies,whichincludeKajima,Taisei,Shimizu,andTakenakaKomuten.(Today,withKumagaiGumi,theyaretheBigSix.)

Ohbayashiisamongtheworld'smostexperienceddambuilders.Itsfinisheddamsnumberinthesixties.Ithasbeenaleaderinthedevelopmentofroller-compactedconcretedams,aswellastheuseofdeepconcretecut-offwallstocontrolsubsurfaceseepage.

Ohbayashispendssignificantsumsofmoneyonresearchanddevelopment.IthasoneofthefinestresearchfacilitiesinJapan,theOhbayashiTechnicalResearchInstitute,wherethefirmdevelopscleanroomsforhospitalsandsemiconductorfactories;super-strongconcretefornuclearreactors;concreteforuseinundergroundcontinuouswalls;computersoftwareforcomplexengineeringcalculations,analyses,andsimulations;polymersthatpreventcave-ins;energyconservationsystems;andothertechnologies.Thefirmhasdevelopedadynamicsuspensionmethodthatsubstantiallymitigatesdamagetoabuildingduringanearthquake.

Ohbayashihasbuiltareputationformodifyingexistingtechnologytofitthejobathand.Forexample,itreplacedtheshieldonitstunnel

boringmachinewithabackhoe-likeexcavatoronamajorprojectinPhoenix,Arizona.

Ohbayashi'sadaptationoftheNewAustrianTunnelingMethod(NATM)improvesonthattechnique.TheNATMprocessusesrockboltsdrivenintothecircumferenceofthetunneltoprovidereinforcement.ConcreteisthensprayedonthetunnelwallwithanOhbayashi-developedconcretedistributorrobot.

OhbayashididitsfirstworkoutsideJapaninCambodia,buildinganagriculturalcenter.Sincethen,ithasdonemuchworkinSoutheastAsia,includingbuildings,tunnels,anddams.In1984,thecompanywonamajorcontractfromthePeople'sRepublicofChina,

fortechnicalsupervisionofconstructionworkontheShanghaiInternationalAirport.

OhbayashicametotheUnitedStatesin1966,openinganofficeinHonolulu,Hawaii,andregisteringtodoconstructionthere.Inthesameyear,itbeganconstructionoftheSurfriderHotelinWaikikiasaconstructionmanager.Thehotelwasfinishedin1969.ItalsobuiltthePrincessKaiulaniHotelinHonolulu,whichwascompletedin1970.BothhotelshadJapaneseowners,andthegeneralcontractorsunderconstructionmanagementbyOhbayashiwereAmericans.

In1972,asubsidiarycompany,OhbayashiHawaiiCorporation,wasestablishedtoengageinrealestatedevelopmentinHawaii.Since1972,thisfullyownedsubsidiaryhasbeendevelopingrealestatecomplexesthroughouttheislands.Alsoin1972,OhbayashicametotheWestCoastandestablisheditswhollyownedOhbayashiAmericaCorporation(OAC),ageneralcontractor,inLosAngeles.OACiscurrentlyinvolvedinalow-incomehousingcomplexfortheLosAngelesCityRedevelopmentAuthorityandisdevelopingalarge-scaleshoppingcenterintheLittleTokyoarea.OAC'smajorlocalaffiliatesare2975WilshireCompany,forofficerentalmanagement,andJamesE.Robert,Inc.,forcondominiumandapartmentdevelopmentinnorthernCalifornia.

In1974,aftertwoyearsinLosAngeles,OACwonahotelconstructioncontract,KyotoInn,locatedinSanFrancisco.Theowner,Kintetsu,alsoownsaJapaneserailroadcompany.Followingthehotelproject,OACundertookbanks,offices,restaurants,andhousingcontracts,mostlyforJapaneseclients.

In1976,Ohbayashiparticipatedindevelopingalarge-scaleresidentialcomplexnearSeattle,Washington.ThiswasajointventurewithTokyoCorporation.The11,000-acresiteinMillCreekincludesagolfcourse,shoppingcenter,and3,200housingunits.

In1979,OhbayashiCorporationformedajointventurewithalocalcompanytobidforaSanFranciscosewagetunnelproject,thefirstU.S.publicworkOhbayashiwastoundertake.Expertiseinsoftground,usingtheearthpressurebalanceshieldtunnelingmethod,ledtosuccessinbiddingonthisproject.Themethodcutcostssubstantially,comparedtoalternativemethods.TheownerswerethecityandcountygovernmentsofSanFrancisco.Ohbayashi'sSanFranciscoofficebecameitsheadquartersforheavyconstructionintheUnitedStatesandin1981theheavydivisionsuccessfullybidtheStrawberryTunnelinUtah,afederallyfundedproject.

In1982aNewYorkCityofficeopened,andin1984itwonthe

constructioncontractfora17-storybuildingforaChinesemaritimecompany.

In1985,OhbayashiestablishedasubsidiaryintheSoutheastnamedCitadelCorporation,headquarteredinAtlanta.Thiswasestablishedfromscratch,staffedandoperatedbyAmericans.Anopen-shop(i.e.,nonunion)contractor,Citadelhasbeenactiveintheregion,completingfiveprojects.ThestaffisAmerican;theownershipisJapanese.

In1986,OhbayashiwasselectedasaconstructionmanagerforthebigToyotamanufacturingplantinKentucky.ItisthelargestprojectOhbayashihasundertakenintheUnitedStates,entailingsupervisionoffiveAmericangeneralcontractors.

In1987thecompanybeatU.S.competitorstowinconstructionoftunnelsforfloodrun-offinSanAntonio,Texas.

JapanesepersonnelinU.S.Ohbayashiofficestotal30to40people.Somehavestudiedengineeringormanagementinthiscountry.

EijiNoma,generalmanagerinNewYorkCity,whostudiedattheUniversityofChicagointhelate1960s,saysitismoredifficultnowtogetJapaneseprofessionalstoworkintheUnitedStates.Itisnolongertheir''hardshippost"withperquisitesandbonuspay,butratheranexpensiveplacetolivewhenpaidindollars,nobetterthanlivingonyenathome."Thatgapofincomehasnarrowed,whilehardshipsneverlessened,"saysNoma.Still,everyyearfourorfiveOhbayashipeoplecometostudyintheUnitedStates,usuallyinthefieldsofengineeringormanagement.

AnOhbayashimanagerstatesthecompany'sU.S.businessobjectivessuccinctly:

TosatisfytraditionalJapaneseclientsneedingcommercialor

industrialbuildingsintheUnitedStates.ToservetheneedsofitsJapaneseclientsismoreimportantthantomakemoneyhere.

TocompeteandtodojointventureswithAmericansforheavyconstructionworkwhereOhbayashimayhaveusefultunnelingordam-buildingexpertise.

In1986Ohbayashicontractedfor$226millionworthofconstructionintheUnitedStates.

3CompetitionintheGlobalMarketU.S.industryfacesstiffcompetitionintheinternationalconstructionmarket.Foreignfirmsinmanycountriesenjoystrongsupportofcoordinatedgovernmentpoliciesthatencourageexportofservicesandenablethesenations'firmstopresentaunitedfrontincompetition.

CommonCharacteristics

Thecommittee'sexperienceandreviewoflimitedavailabledocumentationrevealseveralcommoncharacteristicsofthesenationalpolicies.Outstandingfeaturesincludecentralgovernmentleadershipandstrongfinancialsupport.

Manycountrieshaveaprimaryagencythattakesresponsibilityforconstructionpolicy.Inmostcases,particularlyinJapanandFrance,agovernmentministryatthecabinetleveloraquasi-governmentalentitydealswithbothdomesticandinternationalconstructionpolicymatters.

Collaborationwithinthefullrangeofrelevantorganizationsisapparentandincludesleadershiprepresentingfinancialinstitutions,constructionfirms,researchorganizations,educationalinstitutions,anddevelopmentandexportagenciesingovernment.Thecompositionofsuchpolicymakinggroupsreflectsthecomprehensiveness

ofthepolicyformulationprocessandthedepthandbreadthofthepolicyresponse.

Policiestypicallyreflectanumberofconsiderations.Theseincluderamificationsforusingdesignservicestogainfollow-onconstruction,therelationshipofconstructiontofollow-onequipmentsales,therelationshipofconstructiontofollow-oncapitalgoodssales,andoperationsandmaintenanceaspectsaswellasreplacementpartsactivityrelatedtoconstructionprojects.

Policiesalsoattempttoexploitnationalcompetitiveadvantage,thatis,inwhichpartsoftheworldthenationalindustrieshavethemostadvantageouspositionandwhatelementsofthecompetitivepackagearetheirstrongest.Insomecases,thishasledtorankingtechnologiesforfurtheremphasisandinvestmentandidentifyingtargetareasoffocusfornationalinvestment.

Studiesunderlyingpolicyoftenincludesomespecificconsiderationofthenation'spotentialintheU.S.market.TheU.S.marketremainsthelargeststableandopenconstructionmarketintheworld(althoughtheeliminationoftradebarriersinEurope'scommonmarketwillcreateacombinedmarketcomparableinsizetotheUnitedStates).AllofitsAsianandEuropeancompetitorshavestrategicprogramsforpenetratingtheU.S.market.

SpecificCases

Thespecificpoliciesofseveralcountriesareinstructive.

GreatBritain

ThegovernmentofGreatBritainopenlyandclearlyprovidesanumberofmechanismsforsupportingtheeffortsofBritishconstructionandengineeringfirmstoobtainworkonoverseasprojects.AnOverseasProjectFundadministeredbytheDepartment

ofTradeprovidesdirectsubsidies.Inthisarrangement,thegovernmentputsupalimitedamountoffinancingtocoverprebiddingcosts,withthesubsidizedfirmrequiredtoreturnabout20percenttothegovernmentifitisthesuccessfulbidder.

Thegovernmentalsoengagesinprovidingmixedcredit,*usinga"warchest"similartothatrecentlyobtainedbytheU.S.

*Mixedcreditisameansofreducingborrowingcoststhroughprovisionofgovernment-backedloansatconcessionaryratestogetherwithcommercialloansatmarketrates.

Export-ImportBank.Thiswarchestisalmostalwaysusedasaninterest-balancingsupportandisobtainedfromBritishcommercialbanks.Thefundssocollectedandutilizedareadministeredthroughagovernmentalagency,theOverseasDevelopmentAdministration,which,inmanyrespects,isquitesimilartotheU.S.AgencyforInternationalDevelopment.RequestsforthesemoniesfromprivatesectorcompaniesarechanneledthroughtheDepartmentofTrade.

TheBritishExportCreditGuaranteeDepartment(ECGD)isaninstitutionwhichfundsprojectssimilarlytotheU.S.Export-ImportBankandtheOverseasPrivateInvestmentCorporation.Itsresourcesareavailableforbothengineersandcontractors,andcanbeusedtofinancecapitalgoodspurchases.

TheBritishconstructionandconsultingindustryprosperedinthelate1960sand1970sonprojectsintheMiddleEast,butwiththeseverediminutionofthatmarket,theindustryhasbeenforcedtoscramblefordomesticwork.VeryfewBritishfirmshavecompetedforWorldBankprojectsbecauseofthelengthybidderlistandbecausetheyareaversetothemultilateralarrangementsoftenrequired.MostBritishfirmsareprivatelyowned,andseveralhavemadepartnershipsorotherarrangementswithU.S.counterparts,especiallyinthehousingmarket.Ontheotherhand,anumberofthelargerU.S.constructionindustryfirmsoperateintheUnitedKingdom,especiallyinconnectionwithNorthSeaoilfieldprojects.WithintheEuropeancommunity,theBritishhavefounditquitedifficulttoobtainprojects,becauseofmanyadministrativebarriers,expectationsofreciprocity,andnocommonalityofqualificationsorstandards.TheBritishcurrentlyviewtheUnitedStatesastheirprimaryoverseastargetmarket.

TheBritishhavetwoorganizationswhich,withgovernmentalacquiescenceandassistance,greatlyassisttheirdesignand

constructioncompanies.ThefirstistheBritishConsultingBureau,headedbytheDukeofGloucester,whichisactiveindevelopingsuchpotentialprojectareasasthePeople'sRepublicofChinaandAfrica.Itsmemberfirmsprovideprimarilyengineeringservices,butalsoconsultantservicesinhealth,agriculture,andvariousdevelopmentdisciplines.ThesecondorganizationistheExportGroupfortheConstructionIndustries,whosepurposeistoencourageotherstouseBritishconstructioncompaniesoninternationalprojects.It,likethebureau,closelymonitorsoverseasintelligencereportsonpotentialprojects,andreceivesstrongsupportfromthecommercialsectionsofBritishembassies.Theorganizationsactasacentralintelligence

pointanddisseminatetheinformationtotheirmembersmuchmorerapidlyandaccuratelythanisdonebytheU.S.DepartmentsofCommerceandState.

France

TheinternationalactivitiesoftheFrenchdesignandconstructionindustryarebackedbyaFrenchMinistryofConstructionconcernedwithexports,constructioneconomics,andglobaldevelopment.Thisministrydealswithsuchmattersascooperationandcoordinationamongtheconstructionfirmsinobtainingforeignprojectsandotherexportmatters.

Theministryhasalsoposted40personsinFrenchembassiesaroundtheworld,wheretheyareconsideredtobeinvestmentsinfutureprojectsofthehostnations.ThepresentinternationalemphasisoftheFrenchconstructionindustryisonurbansystems,suchaswater,transportation,andnuclearpower.Therearealsodetailedanalysesbytheinvolvedtradeassociationsastofuturemarketpotentialandconcentration.

Francehasnospecificgovernment-sanctionedpoliciesoninternationalconstruction,butitdoeshaveaninformalpolicystatementandunderstandingwithindustry.TheFrenchpoliciesarereportedtobebasedonananalysisthatindicatedthecountryreceivesaseven-toten-foldreturnoneachinvestmentmadeindesignandengineeringprojectsinothercountries.Asinothercountries,theFrenchhavefoundthatitsinternationalmarketspeakedin19801982andhavesubsequentlydeclined.

Italy

ThefirstmajorinternationalconstructionprojectbytheItalianswasalargedaminZimbabwe,completedin1956.By1986theItalianinternationalconstructionvolumehadincreasedtoapointwhereit

stoodthirdintheworld,behindonlytheUnitedStatesandJapan.Italy,inrecentyears,hasconcentratedonobtainingplantconstructionprojects,ratherthanonlycivilworksprojects.Itsinternationalconstructionprojectshaveincludeda$1.3billionsteelworksplantintheSovietUnion,apowerdistributionstationinSaudiArabia,arefineryinGreece,andthesecondBosphorusBridgeinTurkey.In1986theItalianswereworkingon240constructionprojectsin76nationsand120designcontractsin62nations.

Threemajorgroups,whichincludebothdesignandconstructionfirms,dominatetheItalianconstructionsector.TheseareFIAT(throughtheMilan-basedholdingcompanyFiatimpresit);IRI(throughtheRome-basedholdingcompanyItalstat);andtheLeagueofCooperatives.Amongthetop50Italianconstructionfirms,4contractorsbelongingtotheFIATgroup(thelargestprivatecompanyinItaly)accountfor15percentofthetotalcontracts;6firmsbelongingtoIRIaccountforanother15percent;andthe7cooperativecontractorshaveabout12percent.

OneofthereasonsfortheItalians'successistheirabilitytomaintainalastingpresenceinvariousnations,includingAfrica,Turkey,andGreece.Italiancompaniesarefullycompetenttohandleawiderangeofratherspecializedjobs,andclosecooperationexistsbetweenthepublicandprivatesectorsoftheindustry.TheItalianshavealsocometorealizethevitalimportanceof"financialengineering"andtoputforthproposals,bothtechnicalandfinancial,thatarewellsuitedtotheneedsandcapabilitiesofthedevelopingnations.

TheAssociationofItalianEngineeringandTechno-EconomicConsultingOrganizations(OICE,foundedin1966)representsitsmemberstonationalandinternationalclientorganizations.TheeffortsofOICEaredirectedatsupplyingclientswithintegratedtechnicalandcomplexinterdisciplinarysolutionstoplants,infrastructure,andengineeringworksingeneral.Theseservicesarenotlimitedtotechnicalanddesignservices,butincludeorganizationalmanagementandfinancialexpertise,appliedtobothinfrastructureandcommerciallyorientedprojects.

TheItalianshavelongrealizedthattosucceedintheinternationalarena,abasicelementissuccessfulfinancialengineering.Amajorstepwasundertakenin1977whentheItaliangovernmentorganizedacomprehensiveandarticulatedprogram(theOssolaLaw)toprovide

Italianexporterswiththenecessaryfinancialsupporttocompetesuccessfullyattheinternationallevel.However,Italiancompaniesarestillfindingitdifficulttocompeteagainstthemixedcreditprogramsutilizedbysomeothermajornations.Thus,manyItaliancontractorcompaniesusetheinterventionofspecializedItalianinvestmentbankswithexperienceintheexportcreditfield.

Sweden

In1973theSwedishgovernmentembarkedonanambitioushousingprogram.ItsgoalofprovidingdecenthousingforeverySwedish

familycalledfortheconstructionof1millionhousesperyearfora10-yearperiod.Thisvolumeincreasedthecapacityoftheconstructionindustrywellbeyondthe"normal"marketvolumeofpreviousyears.

In1983areportoftheSwedishCouncilforBuildingResearchentitledTheSwedishBuildingSectorin1990setthefoundationonwhichthenext10yearsofSwedishconstructionactivitywillbebased.The1983reportconcludedthatacontinuedfavorableexpansionofbuildingprogramswouldbepossibleprovidedthereisasubstantialincreaseinexpendituresonresearch,development,experimentalconstruction,anddemonstrationactivity.Eventhoughconstructionhasdeclinedinrecentyears,itstillrepresented12.7percentofSweden'sGDP,or$11.6billion,in1984.

AmatterofconcerninSwedenistheverylowpriorityplacedonresearchanddevelopmenttoretainandfurtherdeveloptechnicalcompetence.TheCouncilforBuildingResearchrecommendedthatsubstantialincreasesinresearchanddevelopmentexpendituresbythegovernmentandtheprivatesectoroverthenext10yearsareessential.

Anumberofareasweresingledoutforattentioninthisresearchprogram:

thedevelopmentofbuildingtechnology;

satisfactoryandeconomicalpropertymanagement;

energyconservation;

municipalplanning;

higherhousingquality;and

theroleoftheconstructionindustryinthenationaleconomy.

TheSwedishgovernmentsupportstechnicalresearchbythebuildingindustryaswellasbytechnologicaluniversities.

From1968to1979,thevalueoftheSwedishexportsurplusofconsultingservices,constructionabroad,andbuildingmaterialsincreasedalmosttenfold.Atthetimeofthe1983report,theexportofbuildingmaterialsandconstructioncapabilitywasofgreatimportancetotheSwedisheconomy,withabout100,000peopledirectlyorindirectlyinvolvedinthismarket.TheSwedishfirmsthatcompeteintheinternationalarenafeeltheircompetitivenessinforeignmarketsisoftenduetolocaltiesandcontactsinthehostcountry(aperceptionsharedbyallmajorinternationalconstructionfirms).TheSwedesarealsoconvincedthatcompaniesexportingconstructionservicesmust,ingeneral,besizabletobecompetitive.

InSwedenthereisacentralizedpointofcontactfortheconstructionindustry,theMinistryforHousingandPhysicalPlanning,whichisinvolvedinbothdomesticandinternationalmattersandpolicies.OneofitsrolesistoprovideguaranteesforinternationalconstructionactivitiesinordertohelpSwedishfirmscompetewithothernations.

Japan

ThedesignandconstructionindustryofJapanisconsideredauniquephenomenoninbothitsoverseasoperationsandinitsdomesticpractices.ForthepastseveralyearsJapanhasbeenofmajorconcerntothenationswithwhichitcompetesininternationalmarkets.Thisperception,however,isprobablydistortedbythehugeexportsuccessJapanhashadinsuchmanufactureditemsasautomobilesandelectronicsgoods.Therehasbeenanassumptionthatthesamephenomenonwas,orcouldbe,occurringintheconstructionindustry.However,whileGreatBritainandWestGermanyeachhaveover8percentofthetotalinternationaldesignmarket,Japan'ssharein1986wasonly6percent,aneverthelessadmirablefigureinviewofthenation'srelativesize.TheUnitedStates,with30percentoftheinternationalconstructionmarket,competesasmuchwithItaly,France,orBritainaswithJapan(seeTables3and4).

JapanesedomesticpoliciesonconstructionhavebeenthesourceoffrustrationandmisunderstandingonthepartofthosenationswhowishtoworkintheJapanesemarket.TheKansaiAirportprojecthasbeenarecentandlargesymbolofthisfrustrationfortheUnitedStates.Despiteapparentconcessions,therecanbebutlittledoubtthattheJapanesegovernmentisdeterminedtoprotectamajorshareofsuchlargeprojectsforJapaneseconstructors.

InJune1987,theEconomicCouncilofJapanissuedadetailedsetofpolicyrecommendationsforJapan'sEconomicStructuralAdjustments.Oneoftherecurringthemesisaconcernthatthe

economicgrowthofJapanbetrulyreflectedinthequalityoflifeforitscitizens.Forexample,thereportindicatesthatthepresentstateofthenation'sinfrastructureisconsiderablybelowthatwhichtheoverallGNPwouldindicateitcouldbe.Thereis,therefore,apotentialdomesticmarketofrathersizabledimensionsfortheJapaneseconstructionindustry.ThecouncilalsorecommendspositiveeffortstoensurethatforeigncompaniescandobusinessintheJapaneseconstructionmarket,andexpansionoftheGeneralAgreementon

TariffsandTrade(GATT)frameworktoincludedesignandconstructionservices.

AsintheUnitedStates,Japanhasahandfulofconstructioncompaniesthatdominateboththedomesticandinternationalmarketsandliterallythousandsofmid-sizeandsmallerfirmswhosemarketisstrictlydomestic.TheBigSixconstructioncompaniesincreasedtheirshareoftheinternationalmarketfromabout1980to1985,andthentheirsharebegantodecreasesignificantly.Whiletheworldwideshrinkageofinternationalprojectswaspivotalinthedecrease,anotherfactorwasaself-imposedretrenchment.AreportentitledOverseasConstructionBasicIssues:InvestigationCommittee,sponsoredin1982bytheJapaneseMinistryofConstruction,emphasizedthat"therearemanyproblemsrelatedtotheshorthistoryofouroverseasconstructionactivities.Furtherdevelopmentisexpectedtoyieldagenuineserviceexportindustry.However,theroadisnotnecessarilysmooth."Althoughthisreportonoverseasconstructionwascompiledin1982,itremainsthemainguidancefortheindustryasawhole.Therehasnotbeenareasontoreviseorupdateitintheensuingfiveyears,accordingtotheMinistryofConstructionrepresentativeattheEmbassyofJapaninWashington.EventhoughtheexperienceoftheBigSixcontractorswithU.S.officeshasbeenthatprofitsarepoortononexistent,thecompaniesdonotdare,asyet,abandontheU.S.constructionmarketplace.

India

In1986theIndiangovernmentsetaside$1billionforathree-yearperiodtoboostitsengineeringsector,fundedbyacombinationofWorldBankloansmatchedbyIndia'scontributionsfromboththegovernmentandprivatesectors.Withthesecondlargestpopulationintheworld,thereispotentiallyanenormousbacklogofinfrastructureworkrequiredwithinthecountry.India'sdesignandconstruction

firms,however,aremoreinterestedinworkingonprojectsoutsidethecountry,actingassubcontractorsorjointventurepartnerswithfirmsfromthelargerdevelopednations.Thisemphasisstemsfromtwodesires:technologytransfertotheIndianfirmsinvolved,andanincreaseinforeignexchangeearnings.

Indiahasnocentralauthorityforconstructionandengineering,butthesesectorsarenominallyunderthepurviewoftheMinistryofHousingandPublicWorks.Indiahasanumberofengineeringandconstructioncouncils,mostofwhichareprivate,thatactivelyseek

projectsbothwithinIndiaandoutsidethecountryfortheirmembercompanies.

TheSovietUnion

TheindustrializationoftheSovieteconomysincethe1930shasgivendesignersandbuildersofplantsandlargecivilengineeringprojectsthecredentialsrequiredtoworkintheinternationalarena.Mostofthisworkisintheless-developedcountries,especiallythosenationswithlargepublicsectorsandsocialistformsofgovernment.

AlldesignandconstructionactivitiesoftheUSSRareorganizedwithinthemammothagencyknownasGosstroy.ToexportthesecapabilitiestheSovietshaveformedaboutadozenforeigntradeorganizations(FTOs)thatare,inreality,largecontractororganizationswithformidablecapabilities.AlthoughgenerallyconfiningthemselvestoprovenSoviettechnologies,theFTOs,onoccasion,willdesignnewplants,equipment,andinfrastructurefortheirclients.Forfundamentallysimplephasesofagivenproject,theFTOwillusuallydependonthelocalcontractingabilitiesoftheclientcountryforbasicconstruction.However,forheavyequipmentandothermorecomplexphases,theFTOsdependontheirownsourcesofsupplies,supplementedsurprisinglyandquitefrequentlywithWesternequipmentandmaterial.

SinceallforeignprojectsareviewedasventuresofgreatprestigetotheUSSR,onlytheverybestengineersandtechniciansaresentabroad.AlthoughcomplaintsareoftenvoicedintheSovietpressconcerningthecalibreorslownessofdomesticprojects,thesecomplaintsareseldomheardonforeignventures,whichareturnkeytypeprojects,withtheprojectmanagementsubcontractedtoAustrianandFinnishcompanies.Ofthe65FTOsintheUSSR,thedozenthatareallowedtoengageinforeignprojectshavebeenlicensedtoformjointventureswithWesternfirmsandtopurchasesupplies,

technology,andequipmentfromWesternsuppliers.

EachFTOthatengagesinoverseasprojectshasonebasicspecialty,withanumberofothercapabilities.ThesespecialtiesincludeanFTOthatisoneoftheworld'slargestsuppliersofpower-generatingandtransmissionequipment,onethathasbuiltmorethan600industrialplantsandcommunicationsfacilities,onespecializingininfrastructureprojects,andonethatisexpertiniron-andsteelmakingequipment.

Themagnitudeofforeignactivitymaybejudgedbythefactthat

theUSSRhassignedagreementswith83nationsforeconomicandtechnicalcooperation.Atotalof3,054internationalprojectswerecompletedbetweentheendofWorldWarIIand1986.Theseprojectsinclude1,769industrialenterprisesandpower-generatingplants,and329agriculturalprojects.

U.S.ResponsetoCompetition

ExternaleconomicforceshavehadsubstantialinfluenceonhowU.S.constructionhasrespondedtointernationalcompetition.ThehighvalueoftheU.S.dollarininternationalexchangehasuntilrecentlyhadparticularlystrongimpactonthisresponse.Abroad,andathome,U.S.firmshaveappearedrelativelymoreexpensivethantheirforeigncompetition.

ThestrongU.S.dollarbetween1980and1985servedasamagnetforimportedgoodsandinvestment.AseriesofmajortaxcutsandincreasesingovernmentspendingduringthisperiodfueledastrongrecoveryintheUnitedStateswhileotherindustrializednationsconsistentlypursuedslowgrowthpolicies.U.S.industrywasplacedatgreaterdisadvantageinbothdomesticandinternationalmarkets,withtheresultbeingstagnantexportsandarapidgrowthinimportpenetrationoftheU.S.markets.

However,aseconomistRobertJ.SamuelsonwroteintheJanuary26,1987,issueofNewsweek:

Realchangesunderlieourcompetitivenessanxiety.TheUnitedStatesnolongerenjoysunchallengedsuperiorityintradeandtechnology.Someofoursupremacywasartificial:WorldWarIIdestroyedourmostpotentcommercialrivals.Europe'sreconstructionrestoredthiscompetition.Thespreadoftechnology,moderneducationandmultinationalcompaniestoJapanandthedevelopingworldcreatednewcompetitors.Reversingthesetrendsisimpossible.AcompetitivevisionthatreinstatestheUnitedStatessittingastrideglobalmarketsispurenostalgia.

Nevertheless,theexamplesreviewedhereillustratethattheUnitedStateshasbeenslowerthanmanyofitscompetitorstodevelopnationaltradeandeconomicpoliciesinsupportofinternationalengineeringandconstruction.Whileindustryandtradegroupshavebeenvocalinreportingthepracticestheyfaceintheglobalmarket,theindustrylacksbothcentralrepresentationinnationalpolicydiscussionsandthemeanstopulltogetherdiversepublicandprivateintereststopresentaunifiedcompetitivefront.

Inaddition,therearespecificproblems.ForeignpolicyconsiderationscanmakeU.S.firmsunacceptableinacountryaftersubstantialinvestmentshavebeenmadeinmarketdevelopment.TheU.S.ForeignCorruptPracticesAct(FCPA),enactedbyCongressforimportantethicalreasons,hamperstheabilityofU.S.firmstoconformtolocalbusinessandculturalstandards.CompetitionfromothercountriesnotsubjecttosuchregulationcanputAmericanfirmsatadisadvantageinbusinessnegotiations.

OthermorespecificdisincentivesarefoundinU.S.policy:

IncometaxrequirementsforU.S.citizensworkingabroadimposeagreaterburdenthanthoseofothercountries,makingitmorecostlytoprovideincentivesneededtoattracthigh-qualitypersonneltoforeignassignments.

DoubletaxationoccursondesignworkperformedintheUnitedStatesforoverseasprojects,becauseforeigncorporatetaxesonimportedengineeringservicesmaynotbedeductedfromU.S.earnings.

U.S.antiboycottlawsthatconflictwiththeboycottlawsofothercountriesrestrictopportunitiesopentoU.S.firms.

ThepreviouslydescribedactivitiesoftheU.S.TradeandDevelopmentProgram,Export-ImportBank,andOverseasPrivateInvestmentCorporationprovidevaluablebutseverelylimitedassistancetoU.S.designandconstructionfirmsseekingtoprovidecompetitivefinancingforprojects.TheincreasingimportanceoffinancehasencouragedU.S.firmssuchasBechtel,Fluor,andKelloggtoformconsortiawithBritish,French,German,andJapanesecompanies:

BechtelassociatedwithAmerican,French,andJapanesesuppliersandexportfinancesourcesforthe$450millionRioZuliatoCovenaspipelineandassociatedfacilitiesconstructedforEcopetroland

OccidentalinColombia.

TheFluorCompanybuiltapipelineforthePetroleumAuthorityinThailand(PTT)aspartofaconsortiumthatincludedthefourlargeststeelproducersinJapan,withfundingprovidedbytheBankofTokyo.

TheKelloggCompanydevelopedacooperativeagreementwiththeWestGermanfirmThyssentoundertakea$1billionaromaticsprojectinIndonesia.

U.S.companiesbringspecializedtechnologicalskillsandmanagerialexpertisetotheseconsortia,whiletheirpartnersprovidethefinancialsupportthroughtheirowngovernmentagencies,whichcan

providemoneyandguaranteestosupporttheexportofservices,materials,andequipment.Indeed,thesespecializedtechnicalskillshavebeenthesourceofU.S.competitiveadvantageinthepast,althoughthisadvantageisnotexclusive,astheworkofShimizuwithIBMillustrates(CaseStudy3).

Americancompaniesstillaregenerallygivenhighmarksfortheirabilitiesindesign,engineering,projectmanagement,andtheoperationandmaintenanceproceduresforfacilities.U.S.firmsstillleadtheworldinthedesignofprocessplantsforthepetroleumandpetrochemicalindustry,aswellasthetechnologiesofchemicalplantsandpowerstations.Thenationleadsintheuseofcomputer-aideddesignanddraftingtechniques,andtheuseofcomputer-basedtoolsforconstructionmanagement,scheduling,andinventorycontrols.However,thepresentshortageoflargeprojectsaroundtheworldreducestheadvantageofthismanagementknow-howaspricebecomesincreasinglydecisiveinclientdecisions.Ofgreaterlong-termimportanceistheconcernofindustryleadersthatothercountriesarecatchingupwithandpassingtheUnitedStates.

CaseStudy3:ShimizuMeetsIBM'sNeeds

Inthespringof1986,IBMfaceditsgreatestconstructionchallengeinmorethanadecade.ItsprimesemiconductordevelopmentandmanufacturingfacilityinEastFishkill,NewYork,neededanewtechnologycenterofapproximately300,000squarefeet.Andoccupancywasrequiredinlessthantwoyears.

ThenewAdvancedSemiconductorTechnologyCenter(ASTC)wasdescribedbyoperatingmanagementasanimportantmilestone,playingaroleinthefutureofIBManditsabilitytoremaincompetitiveinthedevelopmentandmanufactureofadvancedsemiconductorproducts.Thestatementofrequirementscalledforlevelsofenvironmentalpurityandvibrationresistanceneverbeforeachievedwithinthecompany.IBMmanagementwantedthenewbuildingtobethebestintheworld.

DesignandconstructionofthenewbuildingwouldbetheresponsibilityoftheRealEstateandConstructionDivision(RECD),whichbeganasearchforanoutstandingsemiconductorfacilitydesignfirm.InviewoftheconsiderableaccomplishmentsofJapanesecompaniesinthedesignandconstructionofsemiconductorfacilitiesincludinganIBMplantinYasu,JapanRECDconsideredtwoJapanesefirms,ShimizuandOhbayashi.RECDmanagementalsoconsideredseveralU.S.designandengineeringfirmsfortheproject.

IBMrecognizedthatconsiderabledevelopmentstudieswouldberequiredduringthedesignstageandthatclosecoordinationwouldberequiredbetweenthedesignandconstructionpeople.

RECDrepresentativesvisitedShimizufacilitiesinJapaninthelatespringof1986;theycameawayfavorablyimpressedwithwhattheyhadseenandlearned.

Shimizuisover180yearsoldandoneofthefivelargestdesignandconstructioncompaniesinJapanwithannualsalesofover$6billion.ThecompanyhasofficesintheUnitedStates,includingaNewYorkCitylocation.MostoftheworkShimizuhaddoneherehadbeenforJapanesecompanieswithU.S.operations.

Shimizuhasanannualresearchanddevelopment(R&D)budgetof$60million,whichis1percentofannualcompanysales.ThisistypicalofmajorJapanesedesignandconstructionfirms.Incontrast,RECDfoundonlylimitedresearchateitherdesignorconstructionfirmsintheUnitedStates.AtShimizu,630peopleareengagedinR&Dworkonsystemsdevelopment,producttechnology,infra-

structureengineering,intelligentbuildings,constructionautomation,robots,andcleanroomdesign.

Shimizu'sworkincleanroomdesignandvibrationpreventionwasparticularlynoteworthy,andapplicabletosemiconductorfacilities.Shimizuhadachievedclass1capabilityforparticlesof0.5to0.3micronsinsize.AconsiderableamountoftheR&Dactivitywasintestingfilters.Thefirmhadalargevibrationtabletoconductseismictestsonstructuresfromwhichitdevelopedstate-of-the-artdesigns.

TheRECDteamalsoreviewedShimizumanagementsystemsforplanning,costestimating,scheduling,andprojectcontrol,whichareverysimilartothoseusedbyU.S.constructioncompanies.Aconstructionjobwasalsoobserved.Shimizuisbasicallyaconstructioncompany.Itwillconstructadesignpreparedbyanotherfirm,butwouldnotproduceadesigntobeconstructedbyanothercompany.RECDalsoreviewedtheoftendifficultworkingconditionsatEastFishkillwithShimizu.

RECDthenrecommendedtoseniorIBMmanagementthatShimizubehiredtodesignandconstructtheASTCproject.Managementagreed,andinJuly1986ShimizubeganworkingwithanRECDengineeringteam.ThegoalwastodevelopadesignconceptbasedontheIBMrequirementsanddesigncriteria.ShimizuestablishedabaseofoperationsacrossthestreetfromRECD'sheadquartersinWhitePlains,NewYork.

Overall,theworkingrelationshipbetweentheIBMandShimizuteamswentwell.Therewerelanguageandculturaldifferencestoovercome;however,astheparticipantsworkedtogether,soundmutualrespectwasdeveloped.IBMwasveryimpressedwiththeskillanddedicationoftheShimizudesigners.Theyoftenworked''roundtheclock"toanswerquestions(anexpedientinviewofthetimedifferencebetweentheUnitedStatesandJapan).Also,workinsupportoftheU.S.team

wasdoneatShimizu'sR&DfacilitiesinJapan.Theturnaroundtimeonmostofthisworkwasexcellent.Intheareaofadministration,thedesigncontracttookmuchlongertonegotiatethanalikecontractwithaU.S.designfirmbecauseoftheunfamiliarityofthepeoplewitheachother.Also,somedifficultieswithShimizu'sbillingswereexperiencedbyIBMbecauseoftheabsenceofsupportingdetail.

ShimizuandIBMspentconsiderableeffortoncostestimates,themutualdefinitionandunderstandingofcosts,andthenegotiationofthecostofwork.Shimizu'sinitialcostofconstructionworkwas

about10percentmorethantheIBMbudget.Byworkingcloselytogether,IBMandShimizucametoaprojectcostagreementinthesummerof1986,whichwasreiteratedinNovember1986.

Intheearlystagesofdesign,ShimizuhiredaU.S.architecturalengineeringfirm,GiffelsAssociates,Inc.,ofSouthfield,Michigantosharethedesignwork.GiffelswaschoseninpartbyShimizubecauseofknowledgeofconditions,localcodes,andworkingpracticesatEastFishkill,whereduringthepriorfiveyearstheU.S.firmhaddesignedmanyfacilities.AlthoughShimizuprovidedthedesigndirection,aconsiderableamountoftheworkwasdonebyGiffels.ShimizualsosetupaliaisonteaminGiffelsoffices.

TheShimizudesignhadastrongbiastowardinitialcosteffectivenessincontrastwithfuturelowermaintenancecosts.Life-cyclecostappearedtobealesserconsideration.Overall,thedesignworkproceededwellalthoughtheworkingdrawingsfellbehindschedule.

InNovember1986,ShimizuhiredHuberHunt&Nichols(HHN),Inc.,Indianapolis,asgeneralcontractorontheconstructionofthebuilding.ShimizuchoseHHNbecauseofthesuccessfulworkthefirmshaddonetogetheronotherU.S.projects,plusHHN'sfamiliaritywithworkingintheEastFishkillarea.AlthoughasofthatdateIBMandShimizuhadacontractforthedesignworkonly,itwastheintentofbothpartiesthatShimizuwouldmanagetheconstructionphase.

Sufficientdesignhadbeencompletedtobegintheconstructionworkofgrading,footings,andfoundations.InDecember1986,agroundbreakingceremonywasheld.

ThefirstscheduledifficultiesaroseinJanuary1987,when50percentoftheworkingdrawingsweredueforbiddingpurposes;only15percentofthedrawingswerecomplete.Nevertheless,thesubcontractorbiddingprocessbegan.OnFebruary2,Shimizu

reiteratedthebudgetcostwhichhadbeenagreedtoin1986.OnFebruary13,ShimizuandIBMofficialsmetatRECDheadquartersinStamford,Connecticut.Shimizusaidthattheproject'scostofconstructionhadincreasedbynearly40percentoverthecostofrecord.Theycouldnotexplainthecostincreaseexcepttostatethatitwasbasedoninputsofthegeneralcontractorandsubcontractors.Theinitialoccupancyscheduledatehadalsoslipped.InasmuchasIBMhadnotchangedprojectrequirements,thenewShimizucostwasrejectedbyIBM.

Amonthlater,IBM,withinputsfromShimizuandothers,wasabletodefinethereasonsforthecostincrease,whichcanbesummarizedasfollows:

ShimizuseemedtoexperiencedifficultiesinworkingwiththesubcontractorsintheEastFishkillarea.InJapan,muchworkisdoneonnotmuchmorethanahandshakebetweentheparties.Here,thesubcontractorsappearedapprehensiveaboutworkingforaforeigncontractor.Thelanguageandcustomdifferences,whichwereovercomebyShimizu,IBM,andGiffelsduringthedesignwork,couldnotbesurmountedduringthecomparativelyshortbiddingcycle.TheroleofHHNinthebiddingwaslessthanonewouldexpectofageneralcontractor.

ShimizuseemedtohavelimitedconfidenceinU.S.specialtyproducts,manufacturers,andsupplies.TheirdesignerswishedtospecifymanyitemsfromJapanesesupplierswithwhomtheyhadextensiveexperience.

ShimizuseemedtoexpectthatU.S.clientcompaniessuchasIBMwouldapprovethebudgetcostincrease,trustingShimizu'seffortsasthebestpossible.

ItshouldbenotedthatShimizuacceptedtheEastFishkillarealaborpractices,productivitylevels,andsoonasagiven,whereasIBMbelievedafreshapproachbasedontheJapanesemodelcouldyieldsomeimprovementshere,ashasbeenthecaseintheautomotiveindustry.IBMwasalsodisappointedthatShimizu'sguaranteeswentnofurtherthanHHN'sguarantees,whichinturnwerebasedsolelyontheinputsofthesubcontractors.

IntensenegotiationswithShimizufailedtoresultinacostdecrease.Therefore,IBMrequestedthatShimizucompletethedesignandactasaconsultantduringconstruction,butnotastheconstructionmanager.

ShimizucontinuedwithdesigncompletionwhileIBMbeganintensenegotiationswithU.S.contractorstodotheconstruction.Thesenegotiationsweresuccessful,andtheprojectwasawardedtoWalsh

ConstructionCompanyofTrumbull,Connecticut.TheprojectcostisnowwithintheIBMbudget,albeitatahighernumberthantheoriginalShimizucontractandwithlesscontingency.Theprojectwillbeundertakenonaphasedbasisinviewofthescheduledelaysthatwereexperienced.(Shimizudoesnotrecommendthisapproachasitismoredifficulttoguaranteeprojectquality.)

Initially,Shimizuwasreluctanttoactasaconsultantbecauseofitscorporatepolicynottocontractfordesignworkwithoutactuallymanagingtheconstruction.However,ultimatelyIBMandShimizusignedaconsultingagreement.IBM'spracticeistoretainthedesignfirmtosupporttheconstruction.

ThevalueofanIBM/Walsh/ShimizurelationshipduringconstructionisthattheinvolvementofShimizuwillbetterensurethattheprojectisbuiltpertheplansandspecifications.ShimizuwillgainvaluableexperienceintheU.S.market,andWalshwillhavethebenefitofaquality-orientedassociatewithanintimateknowledgeofthedesign.

4ResearchandDevelopmentinConstructionResearchanddevelopment(R&D)inconstructionincludesabroadrangeofactivitiesdirectedtowardimprovingquality,productivity,andefficiencyofthematerials,equipment,labor,andmanagementofconstruction.ThevalueofR&Dactivitiesiswellacceptedasmeansforimprovingproductivityandgeneratingnewideasinelectronics,telecommunications,geneticengineering,andothertechnicalfields.Thelinkagesbetweenconstructionresearchandapplication,however,havebeenmoredifficulttodocument,despiteadvancesmadeduringthetwentiethcenturyinnewequipmentandmaterials,largelybecauseofthegreatnumberofmostlysmall-scalebuildersandequipmentandmaterialsproducers.Forthissamereason,theconstructionindustryhasgreaterdifficultymobilizingresourcesneededtosupportsubstantialresearchprograms.

Asaresult,thecommitteeobservedseveraltroublingtrends:

OthercountriesappeartobeputtingmoreeffortthantheUnitedStatesintoconstructionR&D;

Othercountriesareworkinghardtoimprovethe"hardware"ofconstructionbyimprovingconstructionmethodsanddevelopingtechnologyforautomation(includingrobotics);

AmoreinnovativeenvironmentexistsinmostforeignfirmsbecauseR&Dhasbeenintegratedintooveralloperations;

Othercountriesarewillingtobacklonger-rangeresearcheffortsthroughtheslowbutmethodicalmethodsneeded;

R&Dinothercountriestendstobeproprietarytothecompanysponsoringit,leadingtosomeduplicationbutincreasingcommercialrewardsforsuccess;

Verticalintegrationwithinlargeforeignconstructionfirmshasmadeeasiertheutilizationofresearchresultsbytheoperatingunitsoftheircompanies;

Thereislessemphasisonresearchrelatedtothe"management"ofconstructionbyfirmsinothercountries,sincetheytendtoacquirethesetechnologiesthroughjointventureswithAmericanfirmsorbysendingtheiryoungprofessionalstoU.S.universitiesfortraining.

U.S.ConstructionResearchandDevelopment

AccurateappraisalsofR&DinvestmentsintheU.S.designandconstructionindustriesarestubbornlyelusive.Availablestatisticsarescarceandoftenrecordedinamannerthatcanbemisleading.Inanotherstudy*donebytheBuildingResearchBoardthefollowingobservationsweremadeonR&DexpendituresintheU.S.designandconstructionindustries:

Constructioncontractors(bothgeneralandspecialty)$54million

Manufacturersofconstructionmaterialsandequipment$838million

Federalagencies(bothconsumersandnonconsumers)$200million

Allothersectors(basedonestimate)$111million

Totalannualconstruction-relatedR&D$1,223million

Basedonatotalvolumeofconstructionofsome$312billionin1984,theseestimatesrepresentabout0.4percentofsalesinvestedinR&D,

farlessthanothermatureindustriessuchasappliancesat1.4percent,automobilesat1.7percent,ortextilesat0.8percent.(ThisexpenditurelevelisalsowellbelowJapaneseconstructionR&Dexpenditurerates.)U.S.contractors,architects,andengineersinvestlessthan0.05percentinR&Dasagroup,afractionoftheamounttheyspendonliabilityinsurancealone.

*ConstructionProductivity,NationalAcademyPress,Washington,D.C.,1986.

BothlackofresourcesandcompetingprioritiesarefactorsinthislowlevelofR&Dexpenditure.Facedwithintensepricecompetition,manydesignersandconstructorsfinditdifficulttoappropriatesubstantialresourcesforR&D.TaxregulationsthatmayrequirecapitalizationofR&DexpendituresincreasethedemandsR&Dwouldmakeoncurrentcashflows.ThenaturalaversiontoriskofmanybusinessmenmakesR&Dspendingthatmayyieldnoimmediatecommercialbenefitmoredifficulttojustifyevenwhenbusinessisgood,andeasytocutwhentimesarebad.Notoneofthemanymediumandsmallfirmscanaffordameaningfulresearchprogram,andtherearefewmechanismstofacilitatejointfundingofresearchthatwillyielddistinctbenefitstotheparticipatingfirms.

WhattheoptimumlevelofU.S.constructionR&Dspendingoughttobeisacomplexquestionforwhichthecommitteefoundnoreadyanswer.ObservationofU.S.performanceinintroducingtechnologicalinnovationandanerodingcompetitivepositionmakeitapparentthatthelevelofspendingviewedeitherasaninvestmentforincreasedproductivityorasanindicationofopennesstonewideasistoolow.

Directgovernmentinvolvementinconstructionresearchislimitedbutsignificant:

TheNationalScienceFoundation(NSF)hasbeenaprincipalsourceofsupportforuniversity-basedresearchactivitiesfortheU.S.designandconstructionindustries.ThroughtheNSF,NationalEngineeringResearchCentersarebeingestablished,suchastheCenterforAdvancedTechnologyforLargeStructuralSystems(ATLSS)atLehighUniversity.InadditiontoNSFfundsof$10.4millionoverafive-yearperiod,otherstate-relatedinstitutionsandtheprivatesectorareprovidingmatchingfunds.ThemajorgoaloftheATLSScenteristodoresearchanddeveloptechnologybenefittingU.S.structures-relatedindustriesindesign,fabrication,andconstruction,and

inspectionandprotectionofstructuresinservice.

ThefederalgovernmentlaboratoriessuchastheArmy'sConstructionEngineeringResearchLaboratory(CERL),theNavy'sPortHuenemeCivilEngineeringLaboratory,theTyndallAirForceEngineeringandServicesResearchCenter,andtheNationalBureauofStandards'CentersforBuildingTechnologyandFireResearchconductresearchonadiverserangeoftopicswithmilitaryandcivilapplications.

GrantsfromtheArmyCorpsofEngineershaveproducedmajornewresearchprogramsattheMassachusettsInstituteofTechnologyandtheUniversityofIllinois.

TheConstructionIndustryInstituteattheUniversityofTexasatAustinisanoutstandingexampleofresearchwithoutdirectgovernmentsupport.Morethan65organizationsrepresentingowners,contractors,and25academicinstitutionshavecombinedtheirresourcestotackleadvancedconstructionresearch.Theinstitutethenrepresentsanimportantmodelforbroaderpublic-privatepartnershipinconstructionresearch.

OtherEffortsNeeded

Anexaminationofresearchideasforaddressingsocietalneeds,undertakenbytheTechnicalCouncilonResearchoftheAmericanSocietyofCivilEngineersin1979,indicatesalonglistofresearchsuggestions,mostorientedtowardimprovingthemethodologyofengineering.Thelistincludesalargenumberofprojectsrelatedtoimprovingmethodology,manyofwhichcouldbevaluableintheinternationalarena.*

Thearchitecturalresearchcommunityisbasedalmostexclusivelyinuniversities,sothatthepotentialexistsforlinkingsuchresearchtoteachingprograms.Thecivilengineeringresearchcommunityisalsolargelybasedinuniversities,butthereissomemechanical,electrical,orelectronicresearchofdirectrelevancetotheconstructionsectorsbeingdonebytheseotherdepartments.Toalimitedextentbotharchitecturalandcivilengineeringresearchinstitutionsdoprojectsrelatedtomechanicalandelectricalsystems.Mostresearchinstitutionshaveprojectstiedtocomputer-baseddesignandengineering,butmoreworkisneeded,particularlytobringnewresultsintopractice,throughteachingandprofessionaloutreach

programs.

WhilespendingonresearchoftenexceedsU.S.rates,theworkgoingoninconstructionsectorresearchprogramsinothercountriestendstomirrorprogramsinU.S.universitiesandgovernmentlaboratories,withthreemajorexceptions:

*AddressingSocietalNeedsofthe1980'sThroughCivilEngineeringResearch,TheAmericanSocietyofCivilEngineers,NewYork,NewYork,1979.

TheworksupportedbytheSwedishgovernmentonbehalfofthebuildingindustrytendstobemuchmorepeople-oriented,describinguserrequirementsandhowtheserequirementsshouldbeaccommodatedindesign.However,theredoesnotappeartobeanybettermatchbetweentheresearchprogramsandtheteachingprogramsintheuniversitiesthanintheUnitedStates.

TheSovietUnionhassixmajorresearchunitswithinitsconstructionagencyGosstroy.Fiveoftheseunitsdotraditionalscienceandengineeringresearchofthetypedoneingovernmentbuildinglaboratoriesaroundtheworld,butoneresearchunitconcentrateson"cybernetics."Notmuchisknownabouttheworkofthisunit,butitpotentiallycouldrepresentaninterestingareaforcollaboration.

Withtheirgovernment'sstrongencouragement,thesixlarge,integratedJapaneseconstructioncompaniesallsupportresearchbyinternalunits.Theseprogramsincludehundredsofpeople,excellentfacilities,andabroadspectrumofsubjects(seebox).

Thiscommitteehasnotundertakentorecommendacompleteagendaforresearchinconstructionanddesign,andplanningofsuchanagendabyasinglecentralizedbodywouldinanycasebeunproductive.However,committeemembersfeelthatcertaintypesofresearchareclearlyneeded,suchasthesetwoexamples:

1.Thegeneralsubjectof"diagnostics"istalkedaboutwithinthearchitecturalresearchcommunityasanareaformethodologicalimprovement.Workonthissubjectcouldbegreatlyenhancedifuniversityresearchersandpracticingarchitectsworkedinparallelwithfirmsthatareinthebusinessofdesigningandmarketingdiagnosticinstruments.Aprogramthatprovidesspecialfundstoresearchunits(ascontrastedwithindividuals)withinuniversitiesthathadalreadyobtainedanagreementformatchingfundsfrominstrumentcompanieswouldencourageverticalintegrationbetween

thearchitecturalsectorandtheequipment-producingsector.

2.Thedevelopmentofsafetymethodsforstructuresduringtheconstructionphasecouldbenefitfromcasestudies.Forexample,theNBSCenterforBuildingTechnologyhasjustcompletedastudyofthecollapseofL'AmbiancePlazainBridgeport,Connecticut,abuildingwhichwasbeingconstructedusingthelift-slabmethod.Thiscollapsecouldserveasacasestudyforastructuralengineeringfacultytodevelopacontinuingeducationcourseforengineersinpractice,thusprovidingalinkamongafederallaboratory,universityresearch,andprofessionals.Whilethissubjectisuniqueandtimely,

THEJAPANESECONSTRUCTIONINDUSTRYANDR&D

JapanhasestablishedaMinistryofConstructionresponsibleforsettingnationalpoliciesonbehalfoftheconstructionindustry.Oneofitsmajorpolicydecisionswastoencourageprivatefirmstoestablishresearchanddevelopment(R&D)capability.Asaresultmorethan20ofthelargestfirmsinJapannowinvest1percentoftheirsalesinR&D,andintheseconstructionfirmsR&Dhasbecomeawayoflife.Eachhasestablishedwell-equipped,campus-likeresearchcenters,andresearchisintegratedthroughouttheiroperatingdivisions.

ThegovernmentofJapanprovidesataxdeductionforR&Dofupto1percentofrevenues,sometimesprovidesloans,andsometimessponsorsresearchprojectsdirectly.University-basedresearchisrelativelylimitedbyU.S.standards,butthegovernmentfundsandoperatesaBuildingResearchInstituteandaPublicWorksResearchInstitute.

ThelargeprivateconstructionfirmsinJapaninvestasmallportionoftheirresearchfundsineconomicandmarketingstudiesofwhattheyshouldbedesigningandbuilding,butmuchmoregoesintosuchtechnicalsubjectsasnewmaterialsanddesignideas.Theirlaboratoriesarefurnishedwiththelatestequipment:

Shaketablesforearthquakesimulation;

Windtunnelsforanalysisofstructuraldesigns;

Environmentalchambersforevaluatingperformanceofmechanicalequipment;

Soundchambers(bothquietandnoisyconditionchambers);

Structuraltestingdevices;

Firetestingequipment;

Materialsandchemicaltestinglaboratories;

Cleanroomsformorehigh-technologywork;

Hydraulicandgeotechnicallaboratoriesforcivilworksprojects;and

Outdoortestingyardsforlong-termanalysisofweathering.

InadditionJapanesecompaniesdoworktoimprovedesignandconstructionprocessesthroughapplicationsofcomputer-aideddesignandengineeringsystems,newmethodssuchasslurrywallsinfoundationconstruction,andconstructionautomationandrobotics.Theyareworkinginotherfieldsaswell:

Biotechnologytoimprovethequalityoflakeandriverwateranddevelopanewwatertreatmentprocessingsystemforsewageandindustrialwaste;

Mechatronics,includingrobotization,teleoperationtechnology,automaticcontrols,andconstructionworkcontrolsystems;

Applicationoffifth-generationcomputersincludingcomputer-aidedplanning,designandconstruction,maintenance,andengineering;

Newenergysources,includingcoalgasification,fuelcells,solarcells,solarthermalsystems,coalliquefaction,newbatteriesforenergystorage,andhydrogenenergy;and

Newprimarymaterials,forexample,theadditionofmetals,plastics,ceramics,andelectronicstoconventionalmaterials,suchassoils,rocks,cement,asphalt,andsteel.

Itseemslikely,atthemoment,thatthepeopleoftheUnitedStateswillbenefitmorefromtheJapanesestrategy(byimportingimprovedinfrastructureinthefuture)thanfromexistinginfrastructureresearchintheUnitedStates.

theconceptistohavethisworkserveasamodelforsimilarprojectsonarangeofstructuralsafetyproblemsandsolutions.

AswillbediscussedfurtherinChapter6,thedevelopmentofadvancedconceptsforinfrastructureposesaninternationalchallengeofenormousproportions.Thepresentpracticeofdealingwithurbantransportation,waterandenergysupplies,wastemanagement,andcommunicationsisbasedoninventionsdevelopednearlyacenturyago.Inthelargestcitiesoftheworldtheseoldinventionsareclearlynotwellsuitedtodealingwithpresentproblems,andinthesmallcommunitiesofthedevelopingworldtherehasalwaysbeenakindofhand-me-down,makeshiftqualitytothenatureofinfrastructureinvestments.

NewtechnologyforinfrastructurecouldpossiblyhelptheUnitedStatesavoidtheendlesscuttingandpatchingofour100-year-oldsystems,andcouldalsoprovidewholenewmarketopportunitiesintheinternationalsphere.Thereshouldbespecialprogramstoconcentrateoninfrastructuredevelopmentwithintheuniversityresearchcommunity.Theseprogramsshouldencourageuniversity

unitsthatareskilledintheareasofthe''emergingtechnologies"toexplorewaysofcreatingneworhigher-performingsystemsforinfrastructure.Technologiessuchasnewceramics,advancedmicroelectronics,biotechnology,andgeneticengineeringshouldbeincorporatedintojointprogramswiththearchitecturalandcivilengineeringfaculties,andespeciallytoprovidegraduatestudentsfromthesetechnologicalareastheopportunitiestoworkoninfrastructure.Insuchprogramsuniversitiescouldassociatewithtradeandprofessionalgroups,suchastheAmericanPublicWorksAssociation,tointroduceengineersinpracticetonewtechnologiesandtheircapability.

Thecommitteerecognizesthatsomeengineeringschoolscanbestbeencouragedtoexpendresearchandteachinginconstructionby

evidenceofemploymentinterestfortheirgraduates.Programsmaybeneededtolinkemployerswithgraduateprogramsinconstructionbyhavingtheuniversityofferspecialgraduateprogramsformatureemployeesofprofessionalfirms.

AstheJapanesemodelillustrates,university-basedactivityisnottheonlywaythatconstructionR&Dcanbeaccomplished,butintheUnitedStates,academicinstitutionshavebecometheprimarycentersofresearch.Thispatternisunlikelytochangeintheforeseeablefuture,norisitclearthatitoughttochange.Whatiscleartothecommittee,however,isthatbettermechanismsforlinkingresearchtoconstructionpracticeareneeded.

Thereisaneedaswelltoincreasethespeedwithwhichideasfromonefieldofresearcharetestedfortheirvalueinotherfields,andwithwhichideasofvalueenterpractice.ThecaseoftheBellLaboratories(CaseStudy4),drawnfromanindustrialsituationverydifferentfromconstruction,isneverthelessinstructivebecauseoftheirgreatsuccessinlinkingresearchtothemarket.Inconstruction,wherethemarketisdistributedamongsomanysuppliersandbuyers,projectsbuiltwithfederalgovernmentfundscanbeusedtodemonstratenewtechnology.AgoodexampleistheintroductiontoU.S.transitconstructionofprecastconcretesegmentaltunnelliners(seeChapter6).

TheU.S.DepartmentofCommercehasnoted,"Overthenexttwentyyearsitistotallyreasonabletoexpectthatwewillseewidespreadapplicationofthefollowingtechnologies:advancedmaterials,microelectronics,automation,biotechnology,computing,membranetechnology,superconductivity,andlasers."*Todayandinthenearfuturemanyothernewtechnologiesmaybeaddedtothelist.Mechanismsareneededtoexposethesenewtechnologiesandconstructiontooneanother,andtoproducedesignandconstructionprofessionalscompetenttomaketheconnectionsrequiredfor

innovation.Besidesinstitutionalresearch,theremustbetrainingandeducation.

*EffectsofStructuralChangeintheU.S.EconomyontheUseofPublicWorksServices,U.S.DepartmentofCommerce,Washington,D.C.,1987.

CaseStudy4:theBellTelephoneLaboratories

Theinventionofthetelephoneisperhapsthesinglebestmodernexampleofhownewtechnologycanalterbuildingandinfrastructure.TheBellTelephoneLaboratorieshaveformorethan60yearsbeenoneoftheleadingU.S.centersofresearchandinnovationsthathavechangedhowtodesignandbuildindividualstructuresandcities,aswellasthemorebasicstructureoftheeconomyandsociety.

ThecommitteerecognizesthattheBellLabsareaproductofaprivatesectormonopolycompanythathadverticalintegrationandanabilitytomakeeffectivedecisionsaboutresourceallocationandmanagementstrategy,withgreatereasethanisthecaseinU.S.designandconstruction.Nevertheless,manycharacteristicsoftheBellLabscanserveasausefulmodelforinstitutionalarrangementsneededtostrengthenU.S.buildingresearch.Itisinstructivetolookatthehistoryandaccomplishmentsofthisorganization:

Theinventionofthetelephonewasnotinspiredbyapre-existentpopulardemand.Rather,itcameaboutlargelythroughtheingenuityandvisionofonemanAlexanderGrahamBell.Hisbeliefthattherewasagreatpotentialneedfortwo-wayvoicecommunicationoveradistance,aneedofwhichfewmenhadbeenconscious,wasconfirmedbyitsimmediatesuccessandspectaculargrowthinspiteofearlytechnicallimitations.

Bytheendofthefirstfiftyyearsagreatnewindustryhadbeendeveloped.TherewerenearlyseventeenmilliontelephonesintheUnitedStates,almosttwelvemillionofthemintheBellSystem.Andinperhapsnootherfieldhadtheforceofscientificresearchinsupportofengineeringdevelopmentbeensoeffectivelydemonstrated.*

AstheAT&TCompanyAnnualreportfor1913said:

Atthebeginningofthetelephoneindustrytherewasnoartofelectricalengineeringnorwasthereanyschooloruniversityconferringthedegree

ofelectricalengineer.Notwithstandingthisthegeneralengineeringstaffwassoonorganized,callingtotheiraidsomeofthemostdistinguishedprofessorsofscienceinouruniversities.

Asproblemsbecamemoreformidableandincreasedinnumberandcomplexity,theengineeringandscientificstaffwasincreasedinsizeandinitsspecializationsothatwenow(1913)haveworkingatheadquartersontheproblemsoftheassociatedcompaniessome550engineersandscientistscarefullyselectedwithdueregardtothepracticalaswellasthescientificnatureoftheproblemsencountered.

*AHistoryofEngineeringandScienceintheBellSystem,BellLaboratories,MurrayHill,NewJersey,1975.

Itcanbesaidthatthiscompanyhascreatedtheentireartoftelephonyandthatalmostwithoutexceptionnoneoftheimportantcontributionstothearthasbeenmadebyanygovernmenttelephoneadministrationorbyanyothertelephonecompanyeitherinthiscountryorabroad.

By1924thetechnicalprogramsoftheBellSystemhadsogrowninrangeandintensity,andinnumberofpersonnel,astosuggestformationofasingleneworganizationtohandlemostoralloftheseactivities.SuchanorganizationwasformedonDecember27,1924,andstartedoperationsonJanuary1,1925,underthenameofBellTelephoneLaboratories,Incorporated.ThiscorporationhadadualresponsibilitytotheAT&TCompanyforfundamentalresearchesandtotheWesternElectricCompanyfortheembodimentoftheresultsoftheseresearchesindesignssuitableformanufacture.Atthedateofincorporation,thepersonnelnumberedapproximately3,600,ofwhomabout2,000weremembersofthetechnicalstaff,madeupofengineers,physicists,chemists,metallurgistsandexpertsinvariousfieldsoftechnicalendeavor....

Technologicalinnovationhadformedtheindispensablecorefortelephony'sgrowthupto1925,butwasevenmoresignificanttothefuturebecausesomuchofitwasfundamental:thewaywasbeingpreparedformorepowerfulsystemsyettocome,whichwouldbeessentialtotheenormousexpansionfelttobelyingahead.Perhapsmoresignificantly,theapplicationofscientificmethodstosolvingthe"system"problemsoftelephonysetapatternthatinfluencedindustrialresearchanddevelopmentbydemonstratingthepowerofthesemethodsanddevelopingtechniquesofmanagementthatencouragedtheiruse.

Backinguptheworkonsystems,whichhadlaidthegroundworkforsomuchthatwasyetneeded,werethesuccessfulmanagementtechniqueswhichhadbeendevelopedforconductingandapplyingresearch,themeansforcloselycontrollingthequalityofmanufacturedproduct,andatypeoforganizationprovidingcloseintegrationoftheuser,technicaldeveloper,andmanufacturer.

TheBellLabshaveproducedthetransistor,thelaser,thesolarcell,andthefirstcommunicationssatellite,aswellassoundmotion

pictures,thescienceofradioastronomy,andcrucialevidenceforthetheorythataBigBangcreatedtheuniverse.Whiletheyareaprivatelaboratory(inthedistinctionmadeintheUnitedStatesbetweengovernmentandprivateresearchwork),theirfinancialsupportwaslargelygeneratedfromakindoftaxoneverytelephoneintheUnitedStates(beforethebreakupofAT&Tin1984),whichinturnwasallowedbytheirrateexaminers(apublicinstitutiondesignedtomonitoramonopolyutility).Thepotentialfordirectemulationbyagovernment/industryresearchcenterislimited,therefore,buttheoperatingprincipleofstrivingforincreasedsystemsperformanceby

teamsofscientists,engineers,manufacturers,andsystemsoperatorsisagoodone.

Today'stelephonecallerusescomponentsBellneverdreamedof,today'sdriverdependsonsystemsDaimlerandBenzneverthoughtof,andtoday'shomeownerswitchesonapowerandlightsystemthatEdisonneverenvisioned.Thesediscoverieshavelongsincebeenembeddedinmammothnetworksoftechnologythatnosingleindividualinvented.

Technologicalsystemsevolvethroughrelativelysmallstepsmarkedbytheoccasionalstubbornobstacleandbycountlessbreakthroughs.Oftenthebreakthroughsarelabeledinventionsandpatented,butmoreoftentheyaresocialinnovationsmadebypersonssoonforgotten.Intheearlydaysofasystemsuchaselectriclightandpower,inventorsplayedtheprominentrole.Thenasthesystemmaturedandexpandedtourbanandregionalnetworks,otherscametothefore.Electriclightandpowersystemstodayarenotjustscaled-upversionsofthePearlStreetstationthatEdisonintroducedinNewYorkCityin1882.Bytheturnofthecentury,forexample,itwastheutilitymanager,nottheinventororengineer,whoplayedthemajorroleinextendinground-the-clockservicetomanydifferentkindsofcustomerstothenightshiftchemicalplantaswellastherush-hourelectricstreetcars.*

*ThomasP.Hughes,Theinventivecontinuum,Science84,November1984.

5EducationandTrainingAlthoughtheU.S.systemofprofessionaleducationcontinuestoproducehighlyqualifiedengineers,architects,andconstructionmanagers,andtoattractstudentsfromcountriesaroundtheworld,thecommitteeneverthelessfeelsthatchangeisneeded.Experienceintheinternationalconstructionmarketshowsclearlythatyoungprofessionalsneedstrengthinfourkeyareastomeetthechallengesofglobalcompetition:

Astrongtechnicalbase;

Aclearunderstandingofdesign;

Anunderstandingoftheintimateconnectionbetweentechnologyandculture;and

Anunderstandingofforeignlanguagesandregionalstudies.

Strengthinthesefourareascannotbeachievedonlywithinthecontextofformaleducationalprograms.Institutionsofferingundergraduatetrainingnecessarilyfocustheirattentionandlimitedresourcesondevelopingastudent'sbasicskills,understanding,andintellectualoutlookneededtomaintainprofessionalsuccessoverthecourseofseveraldecades.Realworkexperienceisanindispensableelementofeducationandtrainingforinternationalconstruction.

ProgramsofStudy

Educationincivilengineeringorarchitectureistheprimarycourseofstudyforprofessionalsenteringconstructionanddesignleadingtoconstruction.Otherengineeringandscientificdisciplines,culture,history,art,andtheoftenintuitiveprocessesofdesignarealsoessentialelementsofknowledgefortheconstructionprofessional.However,constructionprofessionalsnotethatconstructioncannotbetaughtinthesamewayasmanufacturingorotheractivitieswithstandardizedproduction.Constructiontrainingneedsthespecificityofcarefullychosencasestobalancethetendencyofformaleducationalprogramstowardabstractionandgeneralization.DespiteJapaneseandEuropeanexperiencewithmodularhousing,thefailureofProjectBreakthroughintheearly1970swasanexampleofthemistakenbeliefthatstructurescouldbebuiltthesamewayasmachines(i.e.,usingthemassproductionlinesoftheautomobileindustry).

Engineering

IntheUnitedStatestoday,267academicinstitutionsoffer1,323engineeringprogramsaccreditedatthebachelor'sleveland30atthemaster'slevel(seeTable9).(Whilethereareamuchlargernumberofgraduateprogramstheydonotrequireaccreditation.)Thegeneralcriteriaforbasicaccreditationofengineeringprogramsrequireatleastoneyear'straininginacombinationofmathematicsandbasicsciences,oneyear'straininginengineeringscience,one-halfyear'straininginengineeringdesign,andone-halfyear'straininginhumanitiesandsocialsciences.Uptooneyearisthenavailableforotherrequiredandelectivecourses.Thecriteriaforaccreditationattheadvancedlevelrequirethecompletionofabasiclevelprogram,plusafifthyear.Intheadditionalyear,atleasttwo-thirdsmustcomprisesomecombinationofadvancedlevelworkinmathematics,basicscience,engineeringscience,andengineeringdesign.Table10

providesaperspectiveontheannualnumberofgraduatesofengineeringprogramsattheB.S.,M.S.,andPh.D.degreelevels.

Therearefouraccreditedprogramsinengineeringmanagement.However,engineeringmanagementprogramsaretypicallyofferedattheM.S.degreelevel,andaccreditationatthegraduatelevelisnotprevalentbecauseofarestrictivepolicywhichseverelylimitstheaccreditationopportunitiesforengineeringprogramsatthatlevel.

TABLE9TotalAccreditedEngineeringProgramsbyProgramArea,asofOctober1986

ProgramAreaBachelor'sLevel

Master'sLevela

Civil,construction 201 1Engineeringmanagement 3 1Architecturalengineering 10 0Mechanicalengineering 218 2Electricalengineering 238 3Chemicalengineering 142 1Industrialengineering 85 1Allother(24areas) 426 21

Total 1,323 30

aThesearetheaccreditedprogramsatthemaster'slevel.Mostaccreditationoccursatthebachelor'slevel,sothatthereareonlyafewgraduateprogramscountedforaccreditationpurposes.

TABLE10DegreesinEngineeringAwarded,1986

DegreeProgramArea B.S. M.S. Ph.D.

Civilengineering 8,798 3,197 439Engineeringmanagement (N/A) (N/A) (N/A)Architecturalengineering 381 48 0Mechanicalengineering 16,702 3,462 565Electricalengineering 24,514 5,926 779Chemicalengineering 6,148 1,430 534Industrialengineering 4,645 1,798 120Allother(15areas) 16,990 7,164 1,249

Total 78,178 23,025 3,686

Note:Currently,thereare95institutionsofferingfour-yearbachelor'slevelprograms,and155offeringtwo-yearassociatedegreeprogramsinengineeringtechnology.Theseinstitutionsoffer273and460programsatthefour-yearandtwo-yearlevels,respectively.Nopublisheddataareavailableonthenumberofdegreescurrentlyawardedperyearinthetechnologyprograms.

Atpresent,thereareapproximately20graduatelevelprogramsinengineeringmanagementofferedatU.S.institutions.

Architecture

Thereare103accreditedprofessionalarchitecturedegreeprogramsinNorthAmerica.Aprofessionaldegreeiseitherafive-yearbachelorofarchitectureoramasterofarchitecture.AccordingtostatisticsthatareavailablefromtheNationalArchitecturalAccreditingBoard(NAAB),3,088B.Arch.degreesand1,545M.Arch.degreeswereconferredin19861987.

Althoughithasbeensaidthat"thereexistasmanycurriculaasthereareprogramsinarchitecture,andinmanyschoolsthereareanumberofoptionsthatleadtothecompletionofthedegreerequirements,"professionalarchitectureprogramsactuallysharesimilarcorecurricula.Criteriaforaccreditationrequirecoursesindesign,history,materials,humanbehavior,practice,andsoon,withtheemphasisplacedonthedesignstudio.Othercoursestakeneitherwithinthearchitectureschoolorinotherdepartmentsaremeanttocomplementandenhancethedesigncoreoftheprogram.ThephilosophystatementoftheGraduatePrograminArchitectureatColumbiaUniversityisrepresentativeofmanyarchitectureschoolsinitsdeclarationthat

Columbia'sGraduateSchoolofArchitectureisdedicatedtothepropositionthatarchitecturaldesignhasalwaysbeenandwillcontinuetobethecoreofprofessionaleducation.Behavioral,technological,andarthistoricalcourseworkisofferedassupportforthedesignstudio.Oftenattemptsaremadetointegratetheattitudesinherentinthesedisciplinesintothedesignexercises.However,itistheabilitytosynthesizevast,differentiatedbodiesofknowledgeastheyaffectandmodifythedesigndecision-makingprocessthatisstressed.

Inadditiontothebasiccorerequirements,theremayalsobea

sequenceofcoursesinarchitecturalhistoryandtheory.Manyschoolsalsorequire,oratleastencourage,speechorwritingcourses,andotherworkinthehumanitiesandsocialsciencestoparallelprofessionalcourses.

EngineeringandArchitectureTechnology

Engineeringandarchitecturebothinvolveamixoftechnicalskillandcreativeapplicationofjudgmentabouthowgeneralprinciplesapplyinspecificcases.Therelativebalancebetweeninnovative

thinkingandstraightforwardanalysisshiftsfromjobtojob,andfromtasktotaskwithinaproject.Opportunitiesarisefordividingthelabor,givingriseinturntoopportunitiesforpersonnelwhofunctionasabridgebetweendesignerandcraftsman.

Engineeringandarchitecturaltechnologyrequiretheapplicationofscientificandengineeringknowledgeandmethodscombinedwithtechnicalskillsinsupportofengineeringandarchitecture.Thetechnologistisapplications-oriented,buildingonabackgroundofappliedmathematics,science,andtechnologytoproducepractical,workableresultsquickly;toinstallandoperatetechnicalsystems;todevisehardwarefromprovenconcepts;todevelopandproduceproducts;toservicemachinesandsystems;tomanageconstructionandproductionprocesses;andtoprovidesalessupportfortechnicalproductsandsystems.

Normally,thetechnologistwillholdadegreefromanaccreditedengineeringorarchitecturetechnologyprogram.Incontrasttothetwo-yearprogramsoftrainingfortechniciansqualifiedtoconductrelativelystandardfieldmeasurementsandlaboratorytests,thetechnologistmayspendanadditionalonetotwoyearsreceivingtraininginbasicprinciples.Becauseofhiskeyroleasanimplementer,thetechnologistiscalledontomakeindependentjudgmentsthatwillexpeditetheworkwithoutjeopardizingitseffectiveness,safety,orcost.Thetechnologistshouldbeabletounderstandthecomponentsofsystemsandbeabletooperatethesystemstoachieveconceptualgoalsestablishedbytheresponsibleengineeringorarchitectureprofessional.

ContinuingEducation

Generallyspeaking,professionalenhancementthroughcontinuingeducationprobablyoffersthemostpromiseforthenear-futuredevelopmentofprofessionalsintheinternationalconstructionfield.

Manyopportunitiesexistforbotharchitectsandengineers,withdiversesubjectmatters,institutions,andlengthsofcourse.Thesubjectmattermayrangefromtechnicaltopicsatahighlevelofsophistication,toadministrationandmanagement.Continuingprofessionaleducationcoursesareofferedprimarilybyeducationalinstitutions,professionalandtechnicalsocieties,largecorporations,andengineeringfirms.

ThepolicyoftheAmericanInstituteofArchitects(AIA)oncontinuingprofessionaleducationstates:

Theultimateresponsibilityforprofessionaldevelopmentlieswiththeindividualarchitect.Professionaldevelopmentoccursproperlyinbothformalcontinuingeducationandlessformallearningexperiences,includingeverydayprofessionalpractice.TheAIAadvocatestheprofessionaldevelopmentofitsmembersandiscommittedtoprovideresourcesandservicesinitssupport.

Inmanyinstances,courseofferingsinsubjectareasfrequentlynotincludedinformal,university-basededucationaremoreproperlyavailableinacontinuingprofessionaleducationsetting.Economics,costestimating,realestateprinciples,management,andothercoursesthatarenottraditionallyofferedinaprofessionaldegreeprogrammightinfacthavegreaterimpactontheprofessionalstudentwhoalreadyhassomeworkexperienceonwhichtobuild.

IssuesinCivilEngineering

Civilengineeringteachinginthepasttwodecadeshasfocusedonmethodsofanalysis.Theemphasishasbeenonfundamentalstudiesofmechanics,appliedmathematics,andtheanalysisofstructuresorofsystems.Thecomputerhasalreadyinfluencedmuchofthisteachingandthatinfluenceisincreasing.Coursesinsteelandconcretestructuresdoincludecurrentpracticeasexpressedincodesanddofocusontheprinciplesofdetailedproportioningoncetheformandloadsaregiven,butcivilengineeringeducationisalmostexclusivelyanalytic,concentratingoninstillingbasicknowledgeanddependingonsubsequenton-the-jobexperiencetoteachstudentshowtoapplythisknowledge.

EmphasisonDesign

Thisdominanceofanalysismeansthatthereisalmostnoteachingdevotedtodesignasasynthesis,toconstructionastheprocessofeconomicalbuilding,andtotheperformanceandpermanenceofcivilworksasderivedfromfieldobservations.Thepresentthrustof

educationtreatstheworksasobjectsforanalysisratherthanassubjectsforcreatingnewideasindesignandconstruction.

Thisteachingdirectionmirrorscloselythepresentstateofstructuralresearchweightedheavilytowardmethodsofanalysisandoncomputers.Fromadesignstandpointthisresearchispassive;itisorientedtowardimprovementsinanalysisratherthanchangesindesign.Itiscertainlytruethatmoreefficientanalysiscanhelpdesignas

aprocess,butitishardtoshowhowmorecompetitiveconstructionhasarisenbecausedesignasaprocessismoreefficient.

Designimprovementdependsoneffectiveperformanceevaluation,forwhichfieldobservationsarecrucial.Theperformanceofactualcivilworksisnotcurrentlyapartofeducation.Existingcoursesonanalysisdoprovideasoundbasisforinterpretingtheresultsoffieldobservations,butatpresentthispowerfulpotentialisunrealized.Becauseeducatorsdonotusedatafromrealworksintheirteaching,thereislittleefforttocollectdata,andsuchdata,ifcollected,rarelyarepublished.Intheteachingofconcretestructures,forexample,performancecriteriaaretaughtalmostexclusivelythroughcodeprovisions,whichisofcoursenecessarybutnotsufficient.Designistreatedascontrolledbyageneralizedsetofrulesratherthanasinformedbyspecific,butcharacteristic,examples.

OnedramaticexampleofthetendencytotreatimprovementsincivilworksasarisingfromgeneralanalysisisthehighwaypavementresearchprogrampursuedbytheBureauofPublicRoadsfrom1920to1945.Theprogramtriedtorepresentobservationsofperformanceandconstructedalongseriesoflaboratoryanalyticstudiesdevotedtothefundamentalsofpavementdesign.Thatworkultimatelyhadtobeabandoned,andfollowingWorldWarIIthebureaureturnedtoamajorfull-scalefieldstudyasthebasisfordesignimprovements.However,thelessonslearnedinthisanalyticalworkstillunderliecurrentunderstandingofthematerialsmechanicsofpavementbehavior.

ConstructionManagement

Constructionandconstructionmanagementaretreatedseparatelyfromdesign,andtheultimaterelationshipbetweendesignandconstructionisonlyrarelydiscussed.Also,constructionisoftentreatedasasetofprocessestobeanalyzedandnotasaseriesof

individualuniquecases.ThisdistinctioniswellrecognizedinpracticeandwasrecentlyarticulatedinaneditorialoftheEngineeringNewsRecord(May7,1987)commentingonanApril1987workshopsponsoredbytheNationalScienceFoundationatLehighUniversity:

Thedominantthemewasrejectionoftask-specificrobotsorexpertsystemsandembracingnewmethodstodistributeinformation.Thereasonforbothisthesame:constructionisoneofthemessiestindustriesaround.Eachprojectdiffersfromothersandeachchangesfromdaytoday.Figuringouthowtocompleteaconstructionprojectefficientlyhasnorelationtofiguringouthowtomakethesame

spotweldinthesamecarchassiseveryfewseconds.Repetitionisirrelevant;coordinationisvital.

Theabsenceofconstructionmanagementinacivilengineeringeducationthusleavesadistinctvoidthathasimportantimplicationsforhoweffectivelytheresultingprofessionalscansupportconstruction.ThisvoidmaytheninfluencetheentireU.S.constructionindustry.

IssuesinArchitecture

Formostofrecordedhistory(goingbacktothetimeoftheEgyptianpharaohs)architectswereeducatedbybecomingapprenticedtoaprofessionalalreadyinpractice.Towardtheendofthenineteenthcentury,formalschoolswereestablishedoutsideofthearchitect'sofficetoprovidespecial''ateliers"forgainingaprofessionaleducation,usuallywithmoreemphasisontheartofarchitecturethanwasaffordedanapprenticeinanormaloffice.TheEcoledesBeauxArtsinParisbecamebytheearlypartofthetwentiethcenturytheleadingplacetostudyarchitecture,ifone'sfamilycouldaffordit.Theinfluenceofthisschool'smethodofteachingspreadaroundtheworldascollegesanduniversitiesbegantoofferarchitecturecourseswithintheirprograms.

BythetimeofWorldWarII,the"designstudio"agroupof10to20studentsunderthedominanceofa"crit"(memberoftheteachingfacultywhocriticizedthestudentswork)formedtheheartofallschoolsofarchitecture,andstilldoestothisday.Themethodofteachingisessentially,therefore,stillaformofapprenticeship,butwithaseriesofmastersandwithnovisiblefinancialconnectionbetweenmasterandapprentice.Whenastudentisfortunateenoughtoworkwithoneormorereallyskilledcrit,theeducationalformatissuperb,butwhenthecritisneitheraskilledpractitionernoragoodteacher(andthisisalltoooftenthecaseinthepastfewyears),the

studentisnotwelleducated.

Further,thecontextoftheuniversitytendstobedominatedandovershadowedbythedemandsofthedesignstudio.Itisacommonsighttofindthelightsinthearchitecturedesignstudiosburningallnightwhenastudentprojectiscomingupforjuriedevaluation.Theterm"encharrette"wascoinedduringtheseperiodsofintenseconcentrationintheEcoledesBeauxArts,becauseatthefinalandformalendofaproject'sschedule,acartor"charrette"wouldbepulledthroughthestudiostocollectthestudents'work.

Criticsofthearchitectureeducationsystemclaimthatthedesignstudioisoveremphasized,andthattechnicalinstructionsuffersasaresult.Proponentsofthestatusquosuggestthatitispossibleforastudenttoacquireneededspecifictechnicalskillsintheworkplace.

SpecializationandSmallPractices

Whileeducationemphasizescreativedesigninthestudiosetting,architectureaspracticedbyprofessionalswhoarelicensedbyeachstateisasynthesizingactivitywhichconvertstherequirementsofaclientintobuildingspacesthatarestructurallysound,provideasafeandhealthyenvironment,areeconomicallysuitedtotheclient'sneeds,andarestylisticallyinkeepingwithboththeclient'stastesandtheprofessionalcommunity'sstandards.Inpractice,thearchitectwilluseconsultingengineersforsuchspecializeddesignandanalysisasstructuralsystems,heating,ventilating,andair-conditioningsystems,lighting,acoustics,energyefficiency,costestimating,andsoon.Thepracticingprofessionalthenmustbepreparedduringhiseducationalprogramtounderstandandcommunicatewithsuchconsultants,butnotnecessarilytohavetheseanalyticskillshimself.

Asthenovicearchitectmovesintopractice,hewillbeledtofocusondesign,engineering,construction,ortheproductionofworkingdrawingsandspecifications.Inlargefirmsmostemployeeswillendupontheproductionside,anditisthoseskillsthatareaddressedinvaryingdegreesbyschoolsofarchitecture.Thoseschoolsthatareorganizedaroundtwo-orfour-yearprogramsof"architecturaltechnology"aremostclearlyfocusedonprovidingthetrainingforpeoplewhowilldevotetheircareerstodesignproduction.ThereareaboutadozenschoolsintheUnitedStateswithprogramsinarchitecturalengineering,havingastheirpurposethepreparationofprofessionalswhowillfocusonthataspectofpractice(whichalmostalwaysmeansstructuralengineering,however).Thevastmajorityof

studentsarebeingeducatedasthoughtheywillbedesigners.ItisnotsurprisingthatintheUnitedStatessomanysmallarchitecturefirmsexist(themediansizeofarchitecturefirmsis4.2personsonthestaff),sincethedesignerhastobeseenas"gifted"toplaythatroleinalargefirm,andnotmanygraduatesofarchitectureschoolscanmeetthecriteriaassociatedwith"gifted."

Inthepastfewyears,especiallyinhigh-pricedrealestateareassuchasCaliforniaandNewYork,architecturegraduateshavebeenpursuingcareersinthedevelopmentsideofthebuildingindustry.

Thisisnotonlyamorelucrativecareerchoice,butsinceadevelopmentfirmnormallybuildsfirstandsellsorleaseslater,itprovidesaneasiermeanstobeing"thedesigner"fortheprojects.Asindicatedelsewhere,internationalpractice(outsideoftheUnitedStates)tendstobedominatedbyfirmsthatareverticallyintegratedsothatarchitectsandengineersarestaffmembersoflargefirmsthatprovide"turn-key"servicestotheirclients,asituationpoorlysuitedtothegreatmajorityofU.S.architecturalfirms.

ArchitecturalResearchandEducation

The103schoolsofarchitectureinNorthAmericahavehadaninconsistenthistoryofresearch.Themajorityoftheschoolshavenoformalunitconcernedwithresearch,althoughindividualfacultymembersmightundertakeresearchstudiesthemselves.Itwouldbeunusualforsuchindividualresearcheffortstoincludeundergraduatestudents,anditwouldbedifficulttodocumentthecontributionsthatsuchresearchmakestotheteachingprogramoftheschool.TheArchitecturalResearchCentersConsortium,createdin1976,isagroupofsome30researchunitsattachedtoschoolsofarchitecturethatprovidesameansofexchangingresearchplansandresults.Theconsortium,originallyintendedtomakeitpossibletoundertakelarge-scaleresearcheffortsbycombininginstitutionsintoteams,hashadlimitedsuccess.

Toenhanceprospectsforarchitecturalresearchasacontributiontoeducation,thecommitteerecommendstheinclusionofadvancedtechnologicalcontentinthearchitecturalcurriculum:

Coursesthatprovideanunderstandingofhowbuildingsareactuallybuilt,notjustthematerialsandequipmentthatgointoabuilding,butthetoolsandtechniquesusedforconstructioninthefieldandinthefactory;

Coursesthatprovideworkingexperienceintheuseofcomputersastoolsofdesignandanalysis;and

Designstudiocoursesorganizedaroundmakinguseofthegrowingresearchbase,whichrangesfromresearchonhumanneedstoresearchonindoorairquality.

Unlessprofessionalsinpracticereceiveearlytraininginhowtousetheknowledgebaseavailabletothem,theywillnotlikelydoso.ContinuingeducationprogramsshouldbeofferedbytheAIAandprofessionalschoolstoprovideprofessionalsinpracticeopportunities

tolearnabout,andexperience,thedesignandconstructionpracticesofothercountries.

SkillsforGlobalEnterprise

Knowledgeofforeignlanguages,culturalenvironmentsofothernations,andsignificanceofhistoricandculturalcharacteristicsforbothbusinesspracticeandbuildingisthebasisforeffectiveperformancewithintheinternationalconstructioncommunity.ThecommitteeobservesthattheUnitedStateshasnotkeptupwithitsforeigncompetitionindevelopingtheseskills.

Forexample,afewarchitecturalschoolsofferstudy-abroadprograms,butfacultyopinionsaboutthevalueoftheseprogramsismixed.Inmostcases,studentsreturnedtotheirhomeinstitutionswithamoresophisticatedandheightenedawarenessofdesignpossibilities;inoneortwoinstances,thisheldtrueforbuildingtechnologyproblemsaswell.Mostoftheprogramsprovideforampleopportunityformixingwithstudents,faculty,andlocalpractitionersinothercountries.

Whileitisgenerallyagreedthatthistypeofexperiencecontributessignificantlytoanyeducation,mostfacultyrespondingtoaquestionnairedistributedbythecommitteefeltthatsuchaprogramdidnotadequatelypreparestudentsforprofessionalinvolvementininternationalconstructionprojects.Therewasuniformagreementthatfewstudentshadforeignlanguageskills,withtheexceptionofaprograminChinaorganizedbyCarnegie-MellonUniversity,forwhichthestudentswererequiredtostudyChineseforoneyearpriortoenrollingintheprogram.

Cross-CulturalTrainingfortheConstructionIndustry

The"AgendaforAmericanCompetitiveness,"issuedbytheBusiness-HigherEducationForum,theNortheast-MidwestCoalition,andthe

CongressionalClearinghousefortheFuture,pointsoutthatabout10,000English-speakingJapanesebusinessexecutivesworkinAmerica,handlingbillionsofdollarsintrade,someofthattradeinconstruction.However,veryfewofthe1,000AmericanbusinessmeninJapancanspeakJapanese.Generallyspeaking,theJapaneseseemtobemuchbetterequippedtocometotheUnitedStatestostudythetechnologiesandpracticesofindustryherethanAmericanswouldbetogotoJapan.

A1984surveycitedbythe"Agenda"reportdemonstratedthatU.S.studentsareincreasinglyignorantofworldgeography(andinparticular,countrieswhichareofstrategicimportancetotheUnitedStates):fewerthanhalfcouldlocateIran,only30percentcouldlocateAfghanistan,andonly25percentknewwhereElSalvadorwas.

The"Agenda"reportrecommendedthatcollegesanduniversitiessignificantlystrengthentheirinternationalstudiescourseslanguage,cultural,political,andeconomicsandmakethemreadilyavailabletoU.S.businessexecutivesaspartoftheirownlifelonglearningprograms.Certainlybusinessdegreeprogramscannotaffordtoignoretheincreasedglobalizationofbusinessbothdomesticallyandinoverseasmarkets.

Engineeringschoolswoulddowelltoconsiderforeignlanguagedegreerequirementsandinternationalstudiescourses.Onewaytoinvolveengineeringstudentsinsuchstudieswouldbetodesignthecoursessothattheywouldincludeengineeringaspectsofotherculturesandanemphasisontherelationshipbetweentechnologyandculture.Architecturestudentsalreadyreceiveastrongdoseofculturalstudiesinthearchitecturalhistorycoursesthatareapartofthecorecurriculum.ThecommitteesuggestsinparticularthattheFulbrightProgramshouldbeexpandedtoencouragemorearchitectsandengineerstogainexposuretoothercultures.

Accordingtoareport*oftheNationalAcademyofEngineering(NAE),onewayofconnectingU.S.engineerswithforeigntechnologiesisbyincreasingtheirparticipationininternationalactivities,particularlyinthesettingofinternationalstandardsforproductsandservices.Anotherwaywouldbethroughthedevelopmentofcasestudies,researchedandwrittenbyexpertconsultantsfromvariousnations,andthenincorporatedintothecurriculum.

TheNAEreportstatedthat"technologicalisolationwillsurelyunderminethefutureofourindustries."Increasingly,astheU.S.designandconstructionindustrieslooktogreaterparticipationintheglobalenterprise,engineeringschools,professionalsocieties,andbusinessorganizationsmustlookoutsidethemselvestolearnhowtodobusinessinaninternationaleconomy.Onlythroughmoredeliberateexposuretoforeignlanguages,geography,business,andculturewillU.S.designprofessionalsgainaccesstoforeign-originated

*StrengtheningU.S.EngineeringThroughInternationalCooperation:SomeRecommendationsforAction,NationalAcademyPress,Washington,D.C.,1987.

technologies,fostercooperationwithforeignworkforcesoverseas,anddevelopanincreasedabilitytodealwithforeignsourcesofbusinessopportunitiesandfinance.

AcquiringForeignLanguages

Thestudyofforeignlanguagesisnotgenerallyofconcerninthepresenteducationalprogramsofeitherarchitectsorengineers.Inthecontextofthisstudy,well-developedlanguageskillsarefarmoreimportantforthecomprehensionofaparticularculturethanforthepurposeofdoingbusiness,asEnglishhasvirtuallytakenoverastheinternationallanguage.AccordingtoaModernLanguageAssociation(MLA)LanguageEnrollmentSurveyconductedinthefallof1986,totalenrollmentinlanguagesotherthanEnglishatAmericancollegesanduniversitiesexceeds1millionforthefirsttimein14years.Thesurveyresultsindicateanincreaseofalmost4percentbetween1983and1986,continuingatrendthatbeganin1980.ItisinterestingtonotethatJapaneseandChinesecourseshadthefastest-growingenrollments(45and28percentincreases,respectively),althoughtotalnumbersofstudentsstilltrailthosestudyingSpanish,French,German,orRussian.Figuresarenot,however,brokendownaccordingtofieldsofstudy.

IntheNAEreport,thecommitteestated,"EducationalinstitutionsshouldrespondtotheurgentneedforincreasedcapabilityinAsianlanguagesandcultureforU.S.engineersandtechnologists.Graduatedegreeprogramsinengineeringandappliedsciencesshouldemphasizetheneedforspokenandtechnicalcompetencyinatleastoneforeignlanguage."Thesamechapteralsoemphasizes"theusefulnessofearlystudyoflanguagesandexperiencethatreinforceslanguageskillsneedstobebetterappreciatedbyyoungpeoplewhowishtopursuecareersinengineeringandtechnology."Itisalsosuggestedthatstudyofanylanguagebedoneinconjunctionwith

studyofthetechnologyandthecultureinquestion.Havingsomefamiliaritywithaforeignculture,evenwithoutthelanguage,canbeveryhelpfultothoseprofessionalsworkingoverseas.

Asfarasarchitectureprogramsareconcerned,itissafetosaythatthesameistrue,althoughthisinformationisschool-specific,accordingtotheAssociationofCollegiateSchoolsofArchitecture(ACSA).Forcertainspecialareasorprogramswithinthefield,suchasarchitecturalhistoryortheory,certainlanguagesmaybemandatory(suchasaRensselaerPolytechnicInstituteprograminRome,

whichhasaprerequisiteofoneyearofItalian),butlanguagesarenotrequiredforgeneraladmissiontomostschools.Inundergraduatearchitectureprograms,thereisgenerallymoretimeforelectivecoursesthaninengineeringschools,asthefirstprofessionaldegreeisoftenstructuredforfiveorsixyearsofstudy.Inmanyarchitectureprograms,studentsarestronglyencouragedbutnotrequiredtotakecoursesinotherlanguages.

Severalfactorsfavorthestudyofforeignlanguagesbyarchitectureandengineeringstudents:

Languageskillsaretransferable;onceoneforeignlanguagehasbeenstudiedand/ormastered,itbecomesmucheasiertotackleanotherone,becausethoseparticularmentalskillshavebeendevelopedandexercised;

Inthestudyofalanguage,thestudentlearnssomethingaboutthecultureofthatnation,whichcanbeveryusefulprofessionally;and

Languageskillsenhanceastudent'saccomplishments,makinghimmoremarketabletointernationalprojectsinthebuildingindustry.

Factorsthatworkagainstthestudyofforeignlanguageshavelargelytodowithtimelimitations.Sincebothengineeringandarchitectureprogramsarefairlyhighlystructured,andsinceinmanycasesthelanguagesthathavebeenstudiedwillnotbeusefulincurrentlydevelopinginternationalmarkets,continuingeducationcoursesmaybetheanswerfortheshortterm.

InternationalProjectManagement

Mosttrainingandeducationininternationalprojectmanagementhavebeenthroughhands-onexperienceobtainedindividuallybymembersofconstructionandengineeringfirmsengagedinexecutingindividualprojects.Theinternationalmarketischaracterizedbyanumberof

uniqueconditionsthatcandramaticallyaffectprojectcost,schedule,andquality.Theseconditionsareverycountry-andsite-specific,andsubstantiallocalmarketresearchisrequiredofprospectiveengineeringandconstructionfirmsseekingoverseaswork.

Americanfirmsperformingoverseasconstructionworkmayhavedifficultyinobtainingtherequiredcommerciallicensing,facepossibletransportationdelays,andencounterdifficultiesinobtainingcustoms

clearances.Theseissuesmaybefurthercompoundedbylanguagebarriersandin-countryrestrictionsontheemploymentofAmericans.

Firmsenteringtheinternationalmarketplaceneedtobereadytoreacttouniquelaborlaws,requirementsforuseoflocalmaterials,andsignificantdifferencesinqualitystandards.Theymustalsobepreparedtomakesubstantialinvestmentsintechnologytransferandtrainingtodeveloptheskillbasenecessarytocompletetheproject.Thehostcountry'sbusinesspracticesandconstructionprocessconceptsarefrequentlyatoddswithaU.S.contractor'snormalbusinessmethodologiesandprocedures.

Personnelconductingcontractnegotiationsfrequentlydonothavesufficienttimetobecometotallyfamiliarwithnuancesoftheconstructionprocessofagivencountry.Expensivelessonshavebeenlearnedsimplybecauseinexperiencedcontractorshavefailedtotakeintoaccounttheimpactofthehostcountry'scultureontheirstandardoperatingprocedures.

Thedegreetowhichtheclientbecomesinvolvedintheconstructionprojectcanbeapositiveornegativefactordependingonhisfamiliaritywiththeconstructionprocessandtherolehechoosestoplay.Iftheclientchoosestoactasliaisonwiththehostnation'sgovernment,thecontractorwillbeatthemercyoftheclientwhenitcomestoacquiringneededinformation,permits,andotherapprovals.Thiscanhaveasignificantimpactonprojectschedulesandcosts.

Ingeneral,thecommitteeconcludesthatU.S.constructionanddesignfirmsandtheirprofessionalsneedbettertrainingfortheirroleintheglobaleconomy.TherelationshipbuiltbetweenPhilippHolzmannandJ.A.JonesConstructionCompany(seeCaseStudy5)illustrateshow,withcapablepeoplewillingtocooperate,firmsfromdifferentnationscanworktogethertotheirmutualbenefit.Themotivationforthisinquiryhasbeencompetition,butitisbecomingclearthat

cooperationisequallyimportant.Onbothcounts,U.S.skillsarelagging.

CaseStudy5:BuildingInternationalRelationships:PhilippHolzmannAGandJ.A.JonesConstructionCompany

AlargeGermanfirm'sacquisitionofalargeAmericanconstructionfirmnineyearsagoiscalledasuccessfulmarriagebytheparticipants.Notonlyhavethetwomanagementstylesmixedwell,theysay,butthetransferoftechnologybetweenPhilippHolzmannandJ.A.JonesConstructionCompanyhasbenefitedbothcompaniesbyallowingexpansionofworldwideconstructionhorizons.

PhilippHolzmannAGhadgrownfromasmallfamilybusinessintoaleaderininternationalconstruction.FoundedasarailwaycontractornearFrankfurtamMainin1849,thefirmquicklyextendedactivitiestoincludecivilengineeringandbuildingofalltypes.HolzmannwonitsfirstmajorcontractoutsideGermany,themainrailwaystationinAmsterdam,in1882,andsincethenhasbeenactiveinmanyEuropeancountries,SouthAmerica,Asia,andAfrica.HolzmannnowhasmajoractivitiesongoingintheUnitedStates.

Thecompanydesignsandbuildspublicandcommercialbuildings,manufacturingandindustrialplants,marinestructures,andmasstransitfacilities.Itsrangeofservicesincludesturn-keyprojectsaswellasmaintenanceandoperationoffacilities.Holzmannalsoundertakesreconstructionandmodernizationofbuildingsandindustrialplants.

ThegeneralmanagementandoverseasdepartmentsofPhilippHolzmannareheadquarteredinFrankfurt,WestGermany.Thecompanyoperates30branchofficesthroughoutGermanyandhasmorethan50domesticandforeignsubsidiariesengagedinspecialfieldsofconstructionandconstruction-relatedactivitiesaroundtheworld.

HolzmannisrepresentedintheUnitedStatesthroughitssubsidiary,PhilippHolzmannUSA,byJonesGroup,Inc.,inCharlotte,NorthCarolina,andbyLockwoodGreeneEngineers,Inc.,Spartanburg,SouthCarolina,inadditiontoothersubsidiaries.Jonesisaconstructioncontractor,andLockwoodGreenerepresentsthearchitecturalandengineeringside.

In1986theHolzmanngroupofcompanieshadsalesof$6.6billionworldwide.Approximately48percentofthattotalwasintheUnitedStates.ThedecisiontoentertheU.S.constructionandengineeringmarketwasaresultofeventsaroundtheworld.Sinceitsfirstinternationalexperienceinthelatenineteenthcentury,Philipp

HolzmannAGhassetcorporatestrategiesbeyondGermanboundaries.Intheearliestyears,thecompanybuiltthelegendaryBaghdadrailroad,theDar-es-SalaamrailroadinAfrica.

ByWorldWarI,HolzmannhadbuiltthefirstskyscraperinBuenosAiresandenteredtheU.S.marketwithconstructionontheBargeCanalinNewYork.Morerecently,itsactivitiescenteredintheMiddleEastwheresomeoftheworld'slargestconstructionprojectshavebeenbuiltwithoilrevenuesincludinghospitalsandasportsstadiuminSaudiArabia.Intheearly1970s,morethan50percentofthecompany'sforeignrevenuescamefromSaudiArabia.ButtheIranianrevolution,Iran-Iraqwar,andthesofteningofoilpricesmadetheprospectsofabloomingconstructionmarketintheMiddleEastseemlesspromising.

Holzmanncarefullyevaluatedthepossibilityoffutureconstructionmarketcollapsesand,inordertoprotectthecompanyfromsuchuncertainties,decidedtodiversifybyinvestinginothercountries.Economicandpoliticalstabilityandaself-sustainingmarketintheUnitedStateswereanattraction.HolzmannsoughtaU.S.companythatwouldcomplementitsstrengthsand,in1979,acquiredtheCharlotte-basedJ.A.JonesConstructionCompanywhichhad90yearsofexperienceintheU.S.constructionindustry.

J.A.Joneshasitsownhistoryandmanysuccesses.FoundedinCharlotte,NorthCarolina,ithasgrowntobecomeaU.S.andinternationalleader.JamesAddisonJonesstartedhisworkasabricklayerin1890,andgotmostofhisearlyexperiencebuildingforthetextileindustrythroughoutthesouthernstates.ButJ.A.Jones'sfirstproject,likeHolzmann's,involvedtherailroads.JonesbuiltthediningcarfacilityinCharlottefortheSouthernRailroadCompany.

Followingthe1930sdepression,Jonessignedoneofthelargestconstructioncontractstothatdate,foranewairbaseinthePanama

CanalZone.Sincethatproject,militaryconstructionhasbeenanimportantfactor,includingconstructionofLibertyshipsduringWorldWarII,followedbywhatwasthenthe"largestconstructionprojectinthehistoryoftheworld"thegaseousdiffusionplantatOakRidge,Tennessee.

FollowingWorldWarII,Jonesbeganalongseriesofheavyandhighwayconstructionworkwhilecontinuingcommercialbuildingthroughoutthecountry.Today,thecompanyisalsoinvolvedinindustrialandenergyworkaswell.Asit,too,lookedtotheMiddleEastforworkinthe1970s,J.A.JonescompetedagainstHolzmann;

theythenworkedasajointventureonamilitarytrainingcenterprojectinSaudiArabia.

InOctober1978,J.A.JonesConstructionCompanyannounceditsagreementtobeacquiredbyPhilippHolzmannAG.ThepurchaseendedaplanbyJonestobeemployee-owned,aprocessbegunin1968.Stockholderswereassuredthatthefirm'sname,management,andworkforcewouldnotchange.Today,Holzmannisrepresentedonlyontheboardofdirectors.

Atthetimeofthepurchase,Jones'sstockpricewasvaluedat$23.06pershare,whichwasdeterminedbythecompany'sownestimateofitsvalue,sincethestockwasnotwidelytraded.Holzmann'sofferamountedto$40.61pershare.AlthoughitwasstatedthatseveralothercompanieshadaninterestinthepurchaseofJ.A.Jones,Holzmann'sofferwasaccepted.AccordingtoJohnnieH.Jones,thenexecutivevice-presidentandnowchairmanandpresidentofJonesGroup,Inc.,''ThephilosophyandintegrityofHolzmann'smanagementweremostcompatiblewiththeJonesteam."

Threeprimaryreasonsweregivenforthemarriage:(1)thefinancialstrengthofHolzmannwouldenableJonestoresumeitsgrowthandcontinuetogrowfaster;(2)thecombinedinternationalexperienceofthetwocompanieswouldimprovetheircompetitivenessinforeignmarkets;and(3)themergerwouldallowJonesaccesstothelargerfirm'stechnology,withthecombinedinternationalexperienceofthetwocompaniesimprovingtheircompetitivenessinforeignmarkets.AtthattimeHolzmannspentmorethan$3millionayearonresearchandheldseveralpatentsinconcretetechnology.

Overthenineyearssinceacquisition,theHolzmann-Jonespartnershiphasallowedbothcompaniestobidonagreatervarietyofprojectsbecauseofbroadermarketpresenceandsharedtechnologies.Inaddition,thefinancialstrengthofHolzmannhasgivenJones

bondingcapacitytoincreaseitsvolumeofworkandthesizeofitsprojects.

Benefitsofthemergersurfacedearly.Jonesbecamemorecompetitiveinheavyconstruction,whereHolzmannhadfordecadesbeenaworldleader,andenteredthemarinefieldwithasunkentubetunnelcontractandoneforafloatingpontoonbridge.Holzmanngainedexpertiseinthechemicalplantmarketandinhigh-riseconstruction,longaJ.A.JonesstrengthbutatthetimeacostlytypeofconstructioninWestGermany.

TodiversifyfurtherinAmericaonthedesignsideofconstruction,Holzmannin1981purchased80percentofLockwoodGreene

Engineers,Inc.,ofSpartanburg,SouthCarolina.HolzmannalsoencouragedJonesGroup'sformationofanewservicecompany,whichspecializesinfacilitiesmanagement,similartooneHolzmannfoundedintheearly1980s.

Thetwocompanieshavesetupaninformalemployeesprogramthatenablesyoungengineerstotravelandworksomewhatlikeexchangestudentsabroad.ManagementlevelstaffmembersalsotakepartinorientationprogramsbetweenWestGermanyandtheUnitedStates.

J.A.Joneshasaddedadimensionininternationalconstructionthathasbenefitedtheparentcompany.ByofferingprocurementservicesformaterialsforprojectswheremanyofthedesignscallforAmericanstandards,JonescanhelpHolzmannavoidproblemsofselectinggoodsinaforeigncountry.

Inturn,JohnnieJonessaysthatHolzmann"doesnotinterferewithouroperationbutprovidessupport.KeepingourmanagementintactprovedtousthatHolzmannagreedwithourphilosophythatpeopleareourmostimportantassets."

TheJonesCompanynowcantakeonmajorheavyconstructionprojectswhichheretoforewouldhavebeenundertakenonlyinajointventure.Andinatotallynewdirection,JOnessigneditsfirstcontracttobuild,own,andoperatealignitemineinLouisiana."Itrequiredasubstantialinvestmentinthebeginning,butwewouldn'thavebeenabletodoitwithoutthefinancialsupportofPhilippHolzmann,"saysJones.

Bothcompaniesareintheprocessofdiversifyingintechnicalfields,expandinginotherlocations,andreestablishingpositionsintheinternationalmarket.TheformationofarealestatedevelopmentcompanyinAtlanta,MarkIII,andadditionalactivitiesfromQueensProperties,Inc.,inCharlotte,werestepsindiversification.

Becausethefinancialcapabilitiesofconstructionfirmshavenewimportance,JonesGroupthisyearformedJonesCapitalCorporationtodevelopprojectfinancingandtoholdtheassetsofprojectsinwhichJonesismaintaininganownershipposition.

Whilestillrunasseparateentities,HolzmannandJonescombinedcanpursuethelargestconstructionprojectsintheworld.

6PursuitofInnovationThecommitteeobservesthattheUnitedStatesandtheworldareexperiencingrapidtechnologicaladvance,butthatapplicationstoconstructionhavebeenrelativelylimited.U.S.constructionanddesignhaveinthepastplayedanimportantworldleadershiprolethatisnowthreatened,inpartduetosociety'sgrowingwillingnesstoassignliabilityonabasisofabilitytopay,andinpartduetothecompetition'scommitmenttoprogress.Inadditiontomakingagreatereffortinresearchanddevelopmentandenhancingeducationandtraining,theU.S.constructionindustrymustrekindleitsenthusiasmforinnovationifitistomaintainitsplaceintheglobaleconomy.

NatureofInnovation

Innovationcanoccurinadesign(e.g.,suspensionbridge)orinamaterial(e.g.,reinforcedconcrete).Itcanoccurbyamajorbreakthroughbasedonanovelinventionthatdramaticallyandsuddenlychangeswhatwebuild(e.g.,theneedforairportswascreatedbytheinventionoftheairplane).However,innovationismorefrequentlyachievedthroughmanyincrementalimprovementsthatservetomakeatechnologyuseful(e.g.,improvedroadwaypavingmaterials).

Mostinnovations(includingthoseininfrastructure)aretheresultofabsorbinganinvention,oftenafterithasbeendevelopedfor

anotherpurpose.Ineachera,certainprimaryinventionsbecomethebasisformuchoftheinnovationthatoccurs.Atpresent,anumberofnewprimaryinventionsaredrivingchangeinconstruction:

Photonics:thoseinventionsthatproducecoherentlightthatcanbeamplifiedandpropagated,suchaslasers,masers,andfiberoptics.Pathsoflightwillincreasinglyreplacethewiresalongwhichmessagesflow,andlasershavefoundapplicationinfieldsurveyingaswellasinfactorycuttingandwelding.

Biotechnology:geneticengineering,neuroengineering,andtherecodingofmacromoleculesoflivingthingstoproduceneworganicsubstancesthatcanhaveapplicationsinbuildingsandinfrastructure.Pollutioncontrolandhazardouswastedisposalstandtobenefitgreatly.

Materialsscience:fundamentalreformationandfabricationofinorganicmaterialstoprovideperformancecharacteristicsnotfoundinnature,suchashigh-strengthcomposites,rapid-flowmembranetechnology,andsuperconductivity.Thislatestdiscoverymayhavefar-reachingimpactsonthestorageofelectricityandtransporttechnology.

Microlectronics:circuits,switchingmechanisms,datastoragedevices,amplifiers,andsensors.Suchdevicescanextendhumanstrengthanddexteritythroughrobotics;supportdatacollectionandanalysistoenhancethespeedandeffectivenessofhumanactions;andmakepossiblegraphicinputandoutputofdataandsobegintosubstituteapictureforathousandwords.

Suchinnovationsmayhaveprofoundimplicationsforconstruction.Theymaychangeworkingrelationshipsbetweendesignersandconstructors.Buildingsthemselvesarebecomingmore"intelligent"astheyhaveelectronicenhancementsaddedtotheirinformationand

communicationssystemsaswellasthecontrolsformechanicalequipment.Roboticsandotherformsofautomationarebeginningtoprovidepracticalapplicationsforperformingdifficultordangerousjob-sitetasks,andmaywellaltertheeconomicsofmuchworkdoneonthejob.

TheimpressiveeffortsofJapan'sconstructionindustryhavebeendescribed.Europeanfirmsaswellhaveundertakenaggressivesearchesforinnovation,particularlyinthedevelopmentofproprietaryconstructionsystems.Thesenewsystemsarebasedonextensiveintegrationofdesign,fabrication,anderectionprocesses,allofwhicharecarriedoutbyasinglefirm.SeverallargeEuropeanfirms

havesucceededinverticallyintegratingtheirbusinessstructurestoincludethemanagementofkeymaterialssupplies,designandengineeringexpertise,developmentknow-how,andfinancingcapability.Theeconomicintegrationintoonefirmofthesefunctionsmoreeasilyallowstheconstructionfirmtocapturetheeconomicbenefitsofproductivityandqualityimprovementsthroughtheadoptionofnewtechnologies.Becausethereisbettercontrolofcosts,suchintegratedfirmsdevelopacompetitiveadvantage.

FirmsintheUnitedStatescontinuetotakeapassiveattitudetowardconstructioninnovation.EventhelargestU.S.firms,whichmayhavetheresourcestoundertakesignificantresearchprograms,continuetoputtheirfaithinthestrategyofbeing"technologyfollowers."Indeed,manylargeU.S.constructionfirmshavesuggestedthatbynotbeingcommittedtoanyoneproprietarytechnologytheyareatastrategicadvantageinbeingabletopickandchooseamongthelatesttechnologiesaroundtheworld.Thecommitteequestionsthewisdomofthisstrategy.Inaglobalmarket,thosefirmsthathavedevelopedaproprietarytechnicaladvantageareinapositiontorefusetograntlicensestofirmswithwhichtheydonotwishtocompete.Evenwhenthetechnologyisavailableinprinciple,individualsandfirmsareoftendeterredbytheinitialintellectualandfinancialinvestmentrequiredtoapplyitinpractice.

TherearethreegroundrulesthatseemtobeneededforanyseriousefforttoencourageinnovationintheU.S.constructionindustry:

Formajorinnovationstotakeholdandbecomecommon,theyneedtobefoundedonaconfluenceofbasicresearchandpracticalimprovements.Inotherwords,theyrelyasmuchonbasicresearch(totheextentitisstillusefultousethatterm)astheydoonappliedengineering.Oftentheareaofbasicresearchusedbearsnoobviousrelationtotheeventualpracticalapplication.

Thesearchforinnovationmustallowformajorbreakthroughsfollowedbyincrementaladvances,anditcanincludeimprovmentsindesignaswellasmaterials.Duringtheoverallprocessofinvention,variousimprovementsreinforceoneanotherandencouragepublicdemand,insuchawayastopromotefurtherinnovations.

Mechanismsareneededtocapturethepotentiallysizablepayoffsofinnovationforthosewhoattemptit.EarlyAmericanbridgeinnovations(fromthenineteenthcentury)areagoodexample,becausegenerousroyaltieswerepaidfortheuseoftheideasthathadbeengrantedpatents.

OpportunityinInfrastructure

WithintheUnitedStates,asinmostoftheworld,thereiswithoutquestionanopportunitytoincreasetheperformancecharacteristicsofthosesystemsusedtotransportpeopleandgoods,obtainwater,removewastes,supplyenergy,andfacilitatecommunications.Thereisalsoreasontoincludethosebuildingsusedeitherforpublicpurposes(e.g.,schoolsandhospitals)orbuiltwithpublicfunds(e.g.,governmentoffices,courthouses,andprisons)asapartofthepublicworksinfrastructure.

Underthisbroaddefinitionofinfrastructure,theUnitedStatesin1984invested$102billion,30percentofitsdesignandconstructionbudgets(seeTables11to13).

Developmentofadvancedinfrastructureisachallenge,worthyofacooperativeinternationaleffort.Itwillbedifficulttostructurethesedevelopmentstomatchtheperformancerequirementsofasocietyutilizingadvancedscienceandtechnology,andmakethemmorethanincrementalimprovementstothepresentmodaltechnologies.Inthedevelopingpartoftheworld,wherethemostrapidurbanizationishappening,thechallengeistodeveloptechnologyappropriatetotheirrequirementsratherthantoimposesolutionsproducedforindustrialnations.

TherearetworeasonsfortheUnitedStatestodomoreaboutadvancingthetechnologyofinfrastructure.Itwouldbenefitwithinitsownbordersfromnewandhigher-performancesystems,anditcouldalsohaveanotheropportunityformarketingitstechnologyonaglobalbasis.ThiscommitteerecognizestheurgencyofmaintainingandextendingtheexistingnetworksofpublicworksthatunderlieU.S.cities.However,thenationalsoneedstodevelopnewandhigher-performingtechnologiestogainthepotentialmarketthatimproved

performancemakespossibleandtoavoidanindefinitefuturedrainonthepublicpursefrommaintainingtheoldersystems.

Theexistinginfrastructureisbasedonasetofinventionsthatemergedtowardtheendofthelastcentury.Theseinventionsproducedasecondgenerationofurbansystemsthatprovidedperformancecharacteristicssubstantiallydifferentfromthosepreviouslyusedinallofhumanhistory:

Structuralsteelframesforbuildings.Whenthismethodofconstructionwasfirstintroducedinthe1880sinChicago,itmadeitpossibletoerectstructuresthatweretallerthanthefive-orsix-floor

TABLE11EstimatesofPrivateConstructionVolumethatMightBeIncludedWithintheCategoryofInfrastructure(in$million),1984

TypeofPrivateConstruction(bycensuscategory)

TotalValuea

InfrastructureValueb

Residentialbuildings 145,059

Nonresidentialbuildings(organizedbyfunctions)Industrial 13,745Office 25,940Othercommercial(warehouses,silos,retailstoresshoppingmalls,drugstores,parkinggarages,servicestations,barbershops,danceschools)

22,167 10,000

Religious 2,132Educational 1,411 1,411Hospitalandinstitutional 6,297 6,297Miscellaneous(movietheatres,casinos,healthclubs,radioandtelevisionstations,includingbusandairlineterminals,publicutilitybuildings)

2,455 490

Subtotal 74,147 18,198

Farmnonresidentialbuildings 2,860

Publicutilities(organizedbyindustries)Telephoneandtelegraph 7,174 7,174Railroads 3,671 3,671Electriclightandpower 19,473 19,473Gas 3,233 3,233Petroleumpipelines 271 271

Subtotal 33,822 33,822

Allother(privatelyownedstreets,bridges,parkingareas,dams,reservoirs,sewer,waterfacilities,parks,andplaygrounds)

1,912 1,912

Totalc 257,801 53,932

Source:BureauoftheCensusdata,withstaffextensions,1984.

aValueincludescostofmaterials,labor,equipmentrental,contractorprofit,owners'overheadcosts,architectandengineerservices,miscellaneouschargesonowners'books,interest,andtaxesduringconstruction.bInfrastructureisdefinedasincludingallbuildingsusedforpublicpurposes(e.g.,schools)whetherpaidforprivatelyorpublicly,andallconstructionof"networks"forsupportingbuildings(e.g.,roads).Whereexactdataarenotprovidedanestimatehasbeenmade.cSubtotalsmaynotaddtototalsbecauseofrounding.

TABLE12EstimatesofPublicConstructionVolumethatMightBeIncludedWithintheCategoryofInfrastructure(in$million),1984

TypeofPublicConstruction(bycensuscategory)

TotalValuea


Buildings(byfunctions)Housingandredevelopment 1,636Industrial 1,828Educational 5,557 5,557Hospital 2,039 82,039Other(administrative;police,fire,bus,andstreetcarstations;subwaygaragesandbarns;jails;parkingfacilities;airportandmarineterminals;electricpowergeneratingbuildings;andsoon)

6,822 6,822

Subtotal 17,883 14,418

Highwaysandstreets 16,294 16,294

Militaryfacilities 2,839

Conservationanddevelopment(waterresourceprotectionandcontrol,fishhatcheries,spillways,pollutioncontrol,levees,seawalls,canals,docks,piers,wharves,berths,andreservoirsbuiltotherthanforpotablewatersupply)

4,654 4,654

Sewersystems 6,241 6,241

Watersupplyfacilities 2,621 2,621

Miscellaneous(recreationalfacilities,powergeneratingfacilities,andotheropenconstructionfor

4,654 4,654

subways,streetcars,airportrunways,parking,andsoon)

Totalc 55,186 48,882



TABLE13EstimatesofPrivateandPublicConstructionVolumethatMightBeIncludedWithintheCategoryofInfrastructure(in$million),1984

TypeofConstructionTotalValuea


Publicandprivatec 312,987 102,184

Privatesectorbuildings 18,198Publicsectorbuildings 14,418Totalbuildingcomponentsofinfrastructurec

32,616

Privatelyfinancedutilitysystems 33,822Publiclyfinancedutilitysystems 34,464Totalutilitycomponentsofinfrastructurec

70,200



limitationofmasonrywallsthathaddominatedarchitecturaldesignforallofpriorhumanhistory.

Elevatorsformovingpeopleandgoodsverticallyintallbuildings,madepossiblebytheOtisinventionsforsafety.Elevatorsreplacedstairwaysthat,becausetheyrequiredhumanenergytoascend,were

notpracticalbeyondthefive-orsix-floorlimitationofearlierdesigns.

Thesetofinventionsthatmadepossibleindoorplumbingdevicesconnectedtowaterandwastesystems,whichreplacedtheouthouse,theslittrench,andallofthepriordisease-riddenmethodsofdisposingofhumanwaste.

Centralheatingsystemsthat,especiallywhentheybegantousethefluidfossilfuelsofoilandgas,changedthelogisticsofsupplyingfuelforheatsincefuelnolongerhadtobemanuallysuppledtoseparatestovesandfireplaceslocatedthroughoutabuilding(andashesnolongerhadtoberemovedfromeachseparateheatingdevice).

Thediscoveryofelectricity,andthesubsequentinventionof

generators,amplifiers,distributionmethods,electricmotors,andthelightbulb,whichsubstitutedforthehistoricaluseofcandles,whaleoil,animalpower,andsoon.

ThetelephonesystembasedontheprimaryinventionofAlexanderGrahamBellin1876thatmadevoicecommunicationspossibleacrossgreatdistances,replacingsuchancientmethodsastowncriers,messengers,andmail.

Theautomobile,ormoreappropriatelytheinternalcombustionengine,whichsubstitutedadevicefortheconversionofafossilfueltousefulenergyfortheanimalpowerusedinallofhumanhistory.

Thesubway,ortheundergroundrailway,asfirstintroducedinLondon,whichprovidedformasstransportationwithinacrowdedurbanarea,withoutpollutionoftheairorinterferenceinthearrangementofbuildings.

Therearemanyindicationsoflimitationsoftheperformancecapabilityofthissecondgenerationofinfrastructuretechnologiesrelativetotoday'sdemands.Theirabilitytosupporttheactivitiesofmodernindustryissorelytaxed.WhilethereisthepossibilitythattherecentlycompletedworkoftheNationalCouncilonPublicWorksImprovementwillstimulateCongresstoprovidemajornewsupportforinfrastructureinnovation,thecommitteefeelsthatonlythrougheffectivepublic-privatepartnershipcaninnovationbeachievedinpractice.

Beyondtheobviouspleatobemadeforincreasedgovernmentfundinginthefield,theprogramsofothercountriesillustratethevaluetobegainedthroughtruepartnershipofprivateandpublicinterestsintheU.S.constructionindustry.Thispartnershipshouldembraceresearchandinnovationforbothdomesticproductivityandinternationalcompetitivestrength.

Forexample,projectsbuiltwithgovernmentfundscanassumethegreatercommercialriskinvolvedinadoptinginnovation,aswasdemonstratedbytheintroductionofprecastconcretesegmentaltunnellinerstoU.S.transitconstruction.Thistechnologyhadbeenwidelyusedaroundtheworld(since1936inEngland),butnotintheUnitedStatesbecauseindividualtransitcompanieswerereluctanttotaketheriskofbeingfirst.TheUrbanMassTransportationAdministrationsponsoredaresearchanddevelopmentprojecttoinstallconcretesegmentsinonestretchoftheBaltimoresubway,andsuddenlythisbecamethestandardtechnologyforU.S.transitsystems.NationalScienceFoundationprojectsdoneincooperationwiththe

constructionprogramsofotherfederalagenciescouldplayasimilarroleforintroducinginnovationsintodesignandconstruction.

Precedentalsoexistsforprivate-publiccooperationincompetitionforinternationalprojects.WhiletheThreeGorgesProjectinthePeople'sRepublicofChinawasnotresolvedastheteammighthavehoped(seeCaseStudy6),theexperienceisavaluablelessondemonstratingU.S.abilitytoemulatetheinstitutionalarrangementsofBritish,French,Dutch,orScandinavianfirmsandtheirgovernments.

However,eventhisprecedentisnotenough.TheU.S.constructionindustries'1.2millionfirmsneedastrongerandmoreeffectivevoiceinnationalpolicy.Existingindustryorganizationsplayanimportantroleinrepresentingtheparticularinterestsoftheirmembership,butthereisnoforumforresolvinginevitableconflictsandinitiatingcooperativeactivity.

GlobalPartnershipforInnovation

Asthefinalchapterofthisreportwilldiscuss,neworalteredinstitutionsareneededtomakethispartnershipofprivateandpublicinterestseffectiveintheUnitedStates.Thecommitteefeelsstrongly,however,thattheopportunitiesforinnovationinconstructionandthepotentialworldeconomicandsocialbenefitsofcapturingtheseopportunitieswarrantpartnershiponaglobalscale,apartnershiptoworkintheUnitedStatesaswellasabroad.

U.S.constructionanddesignfirmshavefounditdesirabletorelyoncomparativeadvantageandpursueastrategyofcooperationratherthancompetition,astheexamplesandcasestudiesgatheredbythecommitteehaveillustrated.Thestrategyisagoodoneforinnovationaswell.Tomakethestrategywork,however,theU.S.constructionindustrymuststrivetomaintainitstraditionalleadershipintechnology,fortwokeyreasons:(1)lossoftechnologicalleadership

maymeanlossofcomparativeadvantageandcompetitivepositionand(2)withoutthestrengthforgoodcompetitiveposition,meaningfulcooperationbecomesnearlyimpossible.

CaseStudy6:CooperativeEffortBetweenU.S.PublicandPrivateSectors:ProposalfortheThreeGorgesProjectinChina

Forsixweeksin1985agroupofleadersinengineeringdesignandconstructionsequestereditselfinahastilyassembledofficeinWashington,D.C.Thegroup'sgoalwastoaccomplishataskmanymightthinkimpossible:createaproposaltodesignandconstructoneoftheworld'slargestcivilengineeringprojectstheThreeGorgesProjectinthePeople'sRepublicofChina.Theimpetusforthischallengingundertakingwasaninvitationfromhigh-levelChineseofficialsfortheUnitedStatestotakealeadroleinprojectdevelopment.TheenormousnessoftheThreeGorgesProjectandthebrutalproposaldeadlinewerecomplicatedbythefactthatboththeproposalandtheworkwouldbedonethroughacombinationofU.S.privateandpublicsectorgroups.

The''TeamAmerica"effort,asitwasdubbed,resultedinmuchmorethanadocument.TheundertakingshowedthatrealorperceiveddifferencesandbarriersbetweenU.S.governmentagenciesandprivatefirmscanbesurmountedtomeetsharedgoals.InthecaseoftheThreeGorgesProject,whereU.S.involvementwouldhavefar-reachingeffectsforthenationandothers,theaccomplishmentwasadmirableandonethatcanserveasaprototypeforfuturecooperativeefforts.

Anotherlessfavorable,butequallyimportant,lessoncameoutofthisexercise.WhiletheChinesegovernmentacceptedtheproposal,theworkwasnotpursuedduetolackoffinancialsupportfromU.S.governmentand/orprivateindustrysources.Asaresult,proposedfeasibilitystudiesarenowbeingdonebyanationinwhichtheprivateandpublicsectorscooperatetobestadvantageCanada.

TheThreeGorgesProjectwasconceivedearlyinthe1990sbyDr.SunYat-Seninhis"PlanforIndustrializationofChina.""Itisthelong-cherishedwishfortheChinese...toconstructtheThreeGorgesProject....Completionoftheprojectwillbeofgreatsignificancetotheindustrializationofthecountry,"wroteSun,whoisstillhailedasavisionarybyhiscountrymen.

NearlyacenturyafterSun'spredictions,thepowerfulYangtzeRiverfrequentlyravagesthevalleybelowwithfloodsthatendangerhundredsofthousandsofpeopleandmajoragriculturalandindustrialbases.FortypercentofChina'sfoodsupplyisgrowninthis

valley.Industrytheheartofthecountry'srevitalizationiscrippledas40to60percentofcapacityisidleatanygiventimeduetopowershortages.Harnessingtheworld'sthirdlongestriverwiththeThreeGorgesDamwouldprovideapproximately1,300megawattsofhydroelectric-generatingcapacityandleadtoformationofanationwide,large-scaleelectricpowerpool.

ImprovingnavigationontheriverisofsignificanteconomicimportancetoChina,andtheprojectwouldaidpassageofshipsthesizeofocean-goingvesselsthroughnarrowchannelsingorgeareas.ThreeGorgeswouldbeaconcretegravitydamwithacrestheightof510to575ftandalengthof7,200ft.Thedamwouldincludetwo,four-stepshiplocks,andthenarrowreservoirwouldbackup100milesormore.

FollowingSun'searlyvisionfortheproject,plansproceededslowlyovertheyearsduetoavarietyofchangingconditionsinChina.Pioneeringworkwasdoneinthe1940sbytheBureauofReclamation'schiefdesignengineer,Dr.JohnL.Savage.Inthedecadesofthe1950sand1960s,theChinesemadeadetailedcomparisonofalternativesites,andin1979proposedthecurrentlyfavoredSandoupingsite.In1984,theStateCouncilapprovedtheproject'sfeasibilityreportandinMarch1985,theChinesecompletedapreliminarydesignreport.

InMay1985,formerSecretaryoftheInteriorWilliamClarkvisitedChinaonadiplomaticmissionthatledhigh-levelChinesedignitariestoinvitetheUnitedStatestoproposealeadroleinprojectdevelopment.ClarkmadeacommitmentfortheUnitedStatestoaidChinabydefiningconcretestepsthatcouldbetakentoaddresstechnicalandfinancialissues.

UponhisreturntotheUnitedStatesinJune1985,Clarkbriefedapproximately50representativesfromawidearrayofpublicand

privatesectorengineeringgroupsregardingtheChineseinvitation.HechallengedtherepresentativestorespondastheysawfitandsetatargetdateofJuly15forreply.

Thegrouprosetothechallenge.InitialorganizingeffortsweredonebyacoregroupcomposedofrepresentativesoftheU.S.DepartmentoftheInterior,AmericanConsultingEngineersCouncil,NationalCouncilforU.S./ChinaTrade,andprivateengineeringfirms.Allinterestedpartieswereinvitedtodonateresourcestotheeffort,withnopromiseofreturnontheirinvestment.Theofficialtitleforthegroupthatevolvedwas"TheU.S.ThreeGorgesWorkingGroup"butWilliamClarkalsochosetochristentheeffortas

"TeamAmerica,"reflectingthegenuinepatrioticspiritmotivatingthegrouponbehalfofthenation'sbestinterests.

Privateandpublicgroupscontributingtotheproposalfurnishedanestimated$1.5millionto$3millioninhuman,financial,andinkindresourcestothisuniqueeffort,whichoneparticipantdescribedasthehighlightofhiscareer.

Participatingfirmsandagenciescalledintheirtoppeople,manyfromoverseasassignments,toworkonajobwithasenseofmissionforthenation,ajobwheretopmanagersrolleduptheirsleeves,hammeredoutfigures,andworkedpastoldrivalriesanddifferences.

Theteamwascomposedofhigh-levelexecutivessuchaschiefexecutiveofficers,vice-presidents,andagencyheadsfrompublicandprivategroupsoftenknownascompetitorsratherthancooperators.Sidebysidetheysharedtheirexpertiseinengineeringdesign,construction,management,andfinancialandeconomicfields.Mostoftheparticipantshad30years'experienceinlarge-scaledamandhydroelectricpowerprojects.

Representativesoftheseprivatesectorfirmsmadeuptheteam:

GuyF.AtkinsonCompany

BechtelCivilandMineralsEngineering,Inc.

CoopersandLybrand

MerrillLynchCapitalMarkets

TheMorganBank

MorrisonKnudsenCorporation

StoneandWebsterEngineeringCorporation

Thefederalgovernment'scontributioncamefromservicesprovidedby

theU.S.DepartmentoftheInterior'sBureauofReclamationandtheU.S.ArmyCorpsofEngineers.

Eachpartymadeanoffering.With85years'experienceindesignandconstructionofmajorwaterresourcesprojects,theBureauofReclamationfurnishedapproximately20expertsinvariousfieldstoadvancetheproposal.Accesstovital,existingdatawaspossiblethroughworkingagreementsbetweenthebureauandChinaandthroughbureauengineerswhowerethenworkingattheThreeGorgessite.TheCorpsofEngineers,oneofthefewexistingbasesofknowledgeintheUnitedStatesforlockdesign,providedinvaluableexpertise.Theprivatefirmscontributedexperienceinpreparingproposalsandoverallknow-howongettingajobdoneontimeandwithinbudget.

AnofficewassetupinWashington,D.C.,asthebaseofoperations.Theleaderoftheprivatesectorpartiesmovedtothecityforthesix-weekassignment,whilemostotherparticipantscommutedfromtheirofficesaroundthecountry.WorkdaysoftenbecameworknightsasthegrouppropelleditselffromitsfirstmeetingJune10tothemid-Julytargetdate.

Thetightdeadlineprovedtobeagreatmotivator,promptingtheteamtoadoptmoreflexible,creativeworkingmethodsthantypicallyusedinindustryandgovernment.Uncommoneventsoftendemanduncommonapproaches,andoneparticipantcommentedthat,tohisknowledge,ajointpublic-privateeffortofthismagnitudehadneverbeforebeenattempted.

Theexecutiveswerecalledontousealltheknowledgeandabilities,bothtechnicalandmanagerial,thathavemadethemsuccessfulintheirorganizations.Theco-leaders,onefromprivateindustryandonefromafederalagency,foundtheycouldnotmanagethegroupmembersastheywouldtheirownemployees.Withoutthepowerconveyedbytheirrespectiveorganizations,theyhadtoexercisepersonalskillstomotivatethegrouptoaccept,support,andcarryoutsharedobjectives.Theindividualspracticedtheirinterpersonalcommunicationskillsbyofferingconstructivecritiquesasworkprogressed.Managementbooksonthebestsellerlisttalkaboutcasessuchasthisthatbringoutthebestinmanagerstobuildteams,integratediversetalents,andmanagedisputesinpursuitofafirst-classproduct.

ManagerialskillswerealsorequiredtoaddresstheuniqueorganizationalstructurewithinthePeople'sRepublicofChinarelatingtodesign,construction,andmanagementofexistingandplannedwaterresourceprojects.TheChinesegovernmenthadencounteredsubstantialdifficultiesinbuildingtheGezhoubaProject

ontheYangtzeRiverdownstreamfromtheproposedsiteoftheThreeGorgesProject,mainlyduetotheircomplexsystemofinterrelatedministries.TheU.S.teamworkedondevisingamoreeffective,simplifiedmechanismtoavoidarecurrenceoftheseproblemsonThreeGorges.

Theoutcomeofthisintensiveeffortwasacomprehensiveproposalincludinganimplementationplanandeconomicstudyleadingtoafinancialplanallcompletedonscheduleandwithagreatdealofpride.TheproposalrecommendedusingChina'sowntechnicalandhumanresourcestotheextentpossibletohelpthenationdevelopastrongbaseofknowledge.Theeffortproposedwouldfosteran

unprecedentedlevelofcooperationandtechnologytransferbetweenU.S.privateandpublicsectorsandthePeople'sRepublic.

Theproposal,withasummaryvolumeinbothChineseandEnglish,waspresentedtoChina'sVicePremierLiPengonJuly17atasettingappropriatefortheoccasion,thebureau'smassiveHooverDam.Later,inChina,theproposalwaspresentedtoMadameMinisterQian,headoftheMinistryofWaterResourcesandElectricPower.

WhiletheChinesewerequicktoembracetheproposalinprinciple,thequestionremainedastowhowouldfundafeasibilitystudyontheproject.Thegovernment-to-governmenteffortinitiatedthroughU.S.-ChineseworkingagreementsandfurtheredbyWilliamClark'svisithadopenedthedoortofuturealliances,butneithertheU.S.governmentnorU.S.privateindustrywasabletosurmountthestumblingblockposedbytheestimatedcostof$6millionto$8millionforthefeasibilitystudy.Thetotalcostofconstructingtheprojectisanticipatedtobeapproximately$8billion.

InOctober1985,theCanadiangovernmentsignedanagreementwiththeMinistryofWaterResourcesandElectricPowerforjointparticipationinafeasibilitystudy.TheagreementincludesagrantfromCanadatoChinatofundtheworkofCanadianengineers.Thecostofthestudyisestimatedat$7.5millionto$8.3million,andtheanticipatedcompletiondatewasDecember1987.

Anumberofhigh-levelChineseofficialshavepubliclystatedthattheThreeGorgesProjectwillbebuilt,butdeclinetoestablishspecifictimeframes.Outsideanalystspredictthatworkwillproceedwhenmajorissuesareresolved,suchasprojectfinancing,appropriateheightofthedam,andenvironmentalconcerns.

Whenaskediftheywoulddoitagain,executivesinvolvedwithTeamAmericaanswerwitharesounding"yes."Theparticipantsviewthe

experienceasapositiveoneandachallengefromtechnical,managerial,andpoliticalstandpoints.Thehardhoursmayhavetemporarilyexactedatoll,butthelong-termpayoffisanenduringsenseofsatisfactiononapersonalandaprofessionallevel.

Onespin-offoftheteam'sworkwasexplodingthestereotypessurroundinggovernmentworkersinrelationtotheirprivatesectorcounterparts.Inthetrenches,theteammembersfoundthattalent,determination,andprofessionalismexistinmanyplaces.Theinvolvementofexperiencedseniorprofessionalsfromthepublicandprivatesectorswasthekeyingredientinproducingaqualityproductontime.

TheinvitationfromthePeople'sRepublicofChinatopreparethisproposalisanindicatoroftheirrespectforthetechnicalandprofessionalexpertisefoundinU.S.privateindustryandgovernment.Throughotherjointprojects,thecountry'sbesthumanresourcescanbemeldedforavarietyofpurposes,includingtechnologytransfertohelpothernationsachievetheirgoals,andenhancingthepositionoftheUnitedStatesininternationalcompetition.

7Needed:InstitutionalStructuretoPromoteGlobalEnterpriseTheU.S.constructionindustryconsistsof5.5millionindividualsemployedin1.2millionfirms,myriadprofessionsandtrades,andavarietyoforganizationsrepresentingtheseindividuals.ThesemanyparticipantssharecommoninterestsandconcernsaboutthegeneralhealthoftheU.S.economy.Whileonlyasmallfractionoftheseparticipantsareactiveintheinternationalconstructionmarket,theyrecognizetheimplicationsofU.S.weaknessinthismarket,andtheycanunderstandtheopportunitiesthattechnologicalleadershipoffers.

Thecommitteehasnotedthehigh-levelgovernmentfocusforconstructionpolicyandexportactivitythatsomecountrieshaveestablished.Thecommitteehasnotedaswellthesupportforconstructionresearchandtheclosepublic-privatepartnershipthatindustryinsomeothercountriesenjoys.Finally,thecommitteehasnotedtheneedsfortheUnitedStatestocatchupinitsresearchanddevelopment,professionaltraining,andpursuitofinnovationinconstruction.

OrganizedFocusofDiverseInterests

ThecommitteeconcludesthatamoreeffectivewayisneededtobringtogetheronacontinuingbasisthemanydiverseprivateandpublicinterestsintheU.S.constructionindustry,toresolveinevitableconflictsofopinionamongtheseinterests,andthereby

togivetheindustrystrongervoiceinthenationalpolicyforum.Professionalsocietiesandtradeassociations,suchastheAmericanInstituteofArchitects,AmericanSocietyofCivilEngineers,andAssociationofGeneralContractors,currentlyplayanimportantroleinrepresentingtheinterestoftheirmembers,butthereisnoeffectivemeanstobridgethedifferencesamonggroups.Asolidinstitutionalfocusisneededtoprovidegreaterunitywithintheindustryandtofacilitateconcernsandcoordinatedaction.Existinginstitutionscouldbegivenexpandedmandatestoplaysucharole,butnewinstitutionsmaybeneeded.

ThecommitteehasfounditdifficulttounderstandwhytheUnitedStates,asanation,wasunableorunwillingtoallocatethefundstosupportitsalreadysubstantialprivateinvestmentintheThreeGorgesProject,whileitsmuchsmallernorthernneighborfoundtheallocationtobeinitsnationalinterest.At$8milliontheamountismeagrewhencomparedtogovernmentspendingonanynumberofprogramstosupportvariousothersectorsoftheU.S.economy.

AtradeagreementsignedwithJapaninearly1988offerspossibleresolutionoftheproblemsalreadydescribedregardingU.S.constructionindustryactivityintheJapanesemarket.However,intheheatoflong-runningnegotiations,theUnitedStatesappearstohavelostsightofitsmaininterest:thetechnicallyadvancedsegmentoftheconstructionmarket.ApparentaccesstoarangeofsmallerprojectsthatarelargelylaborandmaterialsintensivewillnotonlyholdlittleattractionforU.S.firms,butwillthenhurtfutureU.S.prospectsbygivingtheappearancethatthenationisnotseriousaboutglobalenterprise.Bothsidesintheagreementarereportedtoholda"show-me"attitude(EngineeringNewsRecord,April7,1988,pp.1213).

WhiletheU.S.-Japanesetradenegotiationsproceeded,theFrenchgovernment-sponsoredconsultingfirmAeroportsdeParis,whichhad

beenhiredtoevaluateproposeddesignsforpassengerterminalsatKansaiInternationalAirport,investeditsresourcesinpreparationofitsownalternativeproposal.Itsinnovativeplanswayedtheairportauthority'sopinionandledtoanewdesigncompetition,creatinganopportunityforwhichFrenchdesigners(andultimately,constructorsandequipmentsuppliersaswell)nowappeartoholdadistinctadvantage.

Thecommitteefeltthesecasesarenotunusual,butratherareexamplesofapatternofpoorlyfocusedattentionandseeminglack

ofinterestinU.S.constructionwithinanincreasinglyglobalmarketplace.Furtheranalysisisneededtodefinethepatternmoreclearlyandtoidentifywhatshouldbedonetocorrectwhatis,inthecommittee'sview,aproblemthatwillhaveincreasinglyseriousconsequencesforthenation'swell-being.Nevertheless,itisreadilyapparentthattheUnitedStateslacksthemeanstobringtogetherpublicandprivategroupstoofferthebestofU.S.constructionskillsandtechnologyinworldmarkets.TheinstitutionalstructureisneededtofacilitatethecooperationillustratedinthepursuitofChina'sThreeGorgesProject,andthentofollowthroughwiththesupportneededtostrengthenthenation'sabilitytocompeteortodevelopcooperativeventureswithinternationalpartners.

Theinstitutionalstructurecouldtakeanynumberofforms:

Therecouldbeattheapexafederalgovernmentagencyresponsibleforsupportinginternationalanddomesticconstructionenterprise.Thisgovernmentofficecouldproposepolicyinitiativesforlegislativeactionandcoordinategovernmentactivitythatinfluencestheconstructionindustry.

Therecouldbeaquasi-governmentalorganizationthatwouldassembleU.S.constructionexpertsfromavarietyoffirmsandgovernmenttoworkwithcounterpartorganizationsfoundinothercountries.ThisorganizationcouldacttorepresentU.S.interestsininternationalcompetitionformajordesignandconstructionprojects.

Therecouldbeaunitassociatedwithgovernment,butnotanagencyofgovernment,thatwouldmonitortheperformanceoftheU.S.constructionindustryandgovernmentpoliciesthatinfluencethatperformance.Thisunitwouldserveasanobjectiveobserverandforumforidentifyingproblemsanddefiningoptionsforsolvingtheseproblems.

Perhapssomecombinationofsuchorganizationsisappropriate.However,thisinstitutionalfocusisneeded,itsexactformmustbedetermined,andthecommitteerecommendsthatstudyshouldproceed.

AttitudeofOpportunity

ThedesignandconstructionindustriesinWesternsocieties(andinJapan)believetheyarefacedwithdecliningmarketsbecauseofstablepopulations.OthercountrieshavetargetedtheU.S.marketbecauseitissoopenandlargethatitseemsanaturalwaytogainbusinessthatwilloffsettheirownshrinkingvolume.However,an

internationalcooperativeefforttoadvancethetechnologyofinfrastructurecouldcreatewholenewmarketsforurbanandinterurbansystemswithhigher-performancecharacteristics.

Developmentofadvancedinfrastructureisachallengeworthyofcooperativeinternationaleffort.Itwillbedifficulttostructurethesedevelopmentstomatchtheperformancerequirementsofasocietyutilizingadvancedscienceandtechnology,andmakemorethanincrementalimprovementstothepresentmodaltechnologies.Inthedevelopingpartoftheworld,whichisexperiencingthemostrapidurbanization,thechallengeistodeveloptechnologicalapplicationsappropriatetospecific-caserequirements,ratherthantoimposesolutionsproducedforindustrialnations.

TherearetworeasonsfortheUnitedStatestodomoretowardadvancingthetechnologyofinfrastructure.Thenationwouldbenefitwithinitsownbordersfromnewandhigher-performancesystems,anditcouldalsoenhancetheopportunityformarketingitstechnologyonaglobalbasis.Thiscommitteerecognizestheurgencyofmaintainingandextendingtheexistingnetworksofpublicworksthatunderliethenation.However,theUnitedStatesalsoneedstodevelopnewandhigher-performingtechnologiestoenhanceourcompetitivepositionintheworld.

Thecommitteerecommendsthatactionisneededatanationalleveltodealwiththeissuesofliabilityandsocietalriskaversionthatdiscouragelargecompaniesfromintroducingpotentiallyinnovativetechnologies.Increasedgovernmentcommitmenttoresearchandinnovationareneeded,throughprogramstoapplynewtechnologyaswellasthroughfinancialsupportofconstructionresearchanddevelopment.

ResearchandDevelopmentandInnovation

Thedegreetowhichresearchanddevelopmentactivitywillleaddirectlytoinnovationininfrastructureorinconstructioningeneralmaybeasubjectofdebate,butitisapparenttothecommitteethattheUnitedStatesiscurrentlyspendingtoolittleonconstructionresearchanddevelopment.Meansmustbefoundtoenhancetheapparentadvantagesthatprivatecompaniescanrealizefromthisinvestment,forexample,throughchangesintaxpolicy,risksharingongovernment-sponsoredprojects,ormodificationofprocurementprocedurestosupportpurchaseofinnovativedesignandmaterialsapplications.

building for tomorrow: global enterprise and the u.s. construction industry

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