the construction cluster in finland - eurofound

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The construction cluster in Finland

European Foundation for the Improvement of Living and Working Conditions

This report has not been submitted to the Foundation standard editorial procedures.

Introduction

Construction industry in Finland

Industry challenges

Cluster collaboration

Vision 2010 – sector implications

PRO-IT: An example of a public-private partnership

Conclusion

Contact details

Source list

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Introduction

This report looks at the Finnish construction cluster. It reviews the industry’s recent development, which, coupled withsocio-economic changes, sets the current agenda and the challenges that cluster collaboration address.

The Finnish construction industry is currently changing greatly. If it is to keep its competitive edge, it must upgrade,especially skills, use of information technology (IT), and partnerships based on inclusion. One of its strengths is theinvolvement of public and semi-public organisations and its private-public partnerships. This is an extension oftraditional Scandinavian industrial development policy.

This report outlines the background for cluster collaboration, the parties involved, the goals, and how intentions andvisions have been turned into action. It includes a discussion and presentation of the core document The Finnish RealEstate and Construction Cluster’s Vision 2010

1that the Confederation of Finnish Construction Industries,

Rakennusteollisuus (RT) implemented in the document Construction Industry Technology Strategy2.

The cluster started a number of development projects in order to promote the Vision 2010 – Construction IndustryTechnology Strategy. The projects involve construction companies, RT, the National Technology Agency of Finland,TEKES

3(which provided funding), and research organisations such as the semi-public Technical Research Centre of

Finland, VTT4.

One of the most important projects is PRO-IT5, which focuses on achieving a national data management method based

on product modelling for the construction process. The report describes this work, the project content, and its relation tothe vision and the cluster’s strategy. Special attention is paid to the cost and benefits to participating companies, that is,the cost and benefits for each company compared to those for the cluster as a whole.

PRO-IT is only one project among many and should be seen as an example of collaboration taking place in the cluster.However, respondents particularly identified PRO-IT as very important.

Construction industry in Finland

Currently, the outlook for the Finnish construction industry is relatively positive in terms of newly scheduledconstruction projects, employment, and expected profitability. However, the sector has seen huge fluctuations since thebeginning of the 1990s.

This section introduces the Finnish construction industry, its history, present situation, and future challenges. It sets thescene for the construction industry cluster initiative, which started in the mid-1990s. Vision 2010, the most formal partof the cluster initiative, has its roots in the challenges of the 1994 economic and construction recession, as described inthe section on investment. The Vision 2010 strategy should be seen as the industry’s response to the challenges.

© European Foundation for the Improvement of Living and Working Conditions, 2005

1http://www.visio2010.org/documents/rakli_english.pdf

2http://www.rakennusteollisuus.fi/english/aboutindustry/teknostrat.pdf

3http://www.tekes.fi/eng/

4http://www.vtt.fi/indexe.htm

5http://www.vtt.fi/rte/cmp/projects/proit_eng/indexe.htm

http://www.visio2010.org/documents/rakli_english.pdf

http://www.rakennusteollisuus.fi/english/aboutindustry/teknostrat.pdf

http://www.tekes.fi/eng/

http://www.vtt.fi/indexe.htm

http://www.vtt.fi/rte/cmp/projects/proit_eng/indexe.htm




http://www.tekes.fi/eng/



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Note on statistical materialAll statistical material presented in this section comes from Construction Industry Statistics

6, made available online

by RT. The data was collected by Statistics Finland and VTT.

Revenue sourcesIt is difficult to give the precise size of the Finnish construction cluster, because it varies according to the number andtypes of companies included for a particular project. However, according to VTT, the total gross value of constructionin 2003 was €18.9 billion.

Figure 1: Construction sector output, €18.9 billion

Source: RT, Statistics Finland, VTT, 2004

As the figure shows, 21% of construction revenue comes from civil engineering projects, and 79% from buildingconstruction. Note that within civil engineering 33% of turnover comes from maintenance, while the correspondingproportion for building and construction is 43%.

This is a central theme in Vision 2010, which forms the policy and basis for the cluster collaboration. The recent increasein maintenance is expected to continue, because buildings are of higher quality today and have a longer life cycle. Thisimplies two challenges for construction companies:

They must be ready to do repair and maintenance work.

They should recognise that customers might not be interested in the current construction project only, but instead inthe total package: the construction together with repair and maintenance when the building is in use. This requires thatmaintenance activities be included in the project plan, either by the company doing the construction or by partners.

InvestmentConstruction is expensive so it makes sense to measure the health of the sector in terms of construction investment asshare of gross domestic product (GDP), as shown in Figure 2.



6http://www.rakennusteollisuus.fi/tilastot_julkaisut/tilastot_suhdanteet/kuvio_39.pdf

http://www.rakennusteollisuus.fi/tilastot_julkaisut/tilastot_suhdanteet/kuvio_39.pdf


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Figure 2: Construction investments as a share of GDP


The Finnish construction industry has historically been very active, peaking in 1975 when almost 20% of the GDP camefrom construction investments.

Until the 1990s an average of 15% of the GDP came from construction. This changed between 1990 and 1994, whenit dropped from 15% to 8%. Jukka Pekkanen, RT’s director of technology, explained the background: a generalslowdown in the economy and the fact that too much capacity was built up during the 1980s. The construction sectorhas generally recovered from the 1994 recession. It is not yet near the levels of the 1970s or 1980s, but the industry isrecovering, and according to Pekkanen and Pekka Pajakkala, a research manager with VTT, it is now relatively stableand can be kept so.

However, the industry still has challenges to overcome if it is to maintain stability and certainly if it is to expand. Thesechallenges are expressed in the policies and actions outlined in the Vision 2010 for the construction cluster.

Domestic ordersThe trend shown in Figure 2 is reflected in other indicators included in this report. Figure 3 shows that change ininvestment is reflected in changes in the order pipeline and invoicing: positive development during the 1980s, crisis atthe start of the 1990s, and recovery at the end of the 1990s.


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Figure 3: Domestic orders in the construction industry, fourth quarter moving total


Migration, housing, and house price indexThe general economic slowdown at the start of the 1990s also influenced migration patterns, house prices, and thedemand for new housing. Figures 4, 5, and 6 illustrate this slowdown.

Figure 4: Migration between municipalities in Finland, fourth quarter moving total


The figures show that the very high level of house building (‘houses for private households’) in the 1980s was notreflected in the migration pattern, which was relatively stable. In that period of stable migration and significant buildingactivity, house prices rose. That is when excess capacity was built up.



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Figure 5: New dwellings


By the start of the 1990s investment in the construction industry had come to an almost complete halt. Nationalmigration, an indicator of a slowdown in the general economic situation, also slowed down. A decline in house prices atthat time is, therefore, not surprising. The demand for houses was low because of low migration rates and the largenumber of new homes built in the 1980s. Thus, even when construction companies started building new houses, the lowdemand reduced profitability. This put pressure on them to operate very efficiently, and some companies did not survivethis recession.

Figure 6: House price index


After the recession, migration more or less exploded and this is reflected in the house price index. However, it is notequally reflected in the number of new houses. One interpretation is that the boom in houses before the recession filledthe market and balanced demand and supply. The Vision 2010 analysis supports this interpretation, emphasising that inthe near future construction companies should look to maintenance and repair as a source of income, rather than relyingsolely on building new houses.


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Other types of construction projectsFigure 7 and Figure 8 show a similar pattern in other types of construction projects.

Figure 7: Public buildings, fourth quarter moving total


Figure 8: Industrial and warehouse buildings, fourth quarter moving total


The figures show a lot of activity and high levels of building during the 1980s, followed by a recession in the early 1990sand general recovery afterwards. Note that this trend also applies to commercial and agricultural construction projects.The decline in one type of project is not because of more demand for other types; this represents a real crisis and anoverall decline in activity.



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EmploymentFigure 9 shows the employment trends in the construction sector.

Figure 9: Employment in construction


In the early 1990s, more than 200,000 persons were employed in the construction industry (including sub-contractorsand suppliers of raw materials). This accounts for around 20% of the Finnish labour force. The recession causedemployment rates to decline. After the recession the number of people in construction rose but is still far from the 1980slevel. This might be because in the 1980s companies had too many employees for market capacity and size. At that time,too, productivity was low, and improvements after the recession reduced manpower demands.

Industry challenges

This section looks at some of the most recent challenges in the Finnish construction industry. The Vision 2010 initiative,which led to the cluster initiative, was developed to address these challenges.

Construction versus maintenanceFocus is shifting from constructing new buildings to maintaining and repairing them (as shown in Figure 10).

Figure 10: Index: renovation and modernisation of building construction, fourth quarter moving average



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This figure shows the 1990s recession, but the overall growth rate is high and continuing, suggesting a positiveprognosis. While new construction levels are expected to be stable, the projected growth rate for renovation andmodernisation is higher than in the golden era of Finnish construction in the 1980s.

Thus, companies have to change their focus that they not only offer basic construction services but rather a whole life-cycle package, including maintenance. This will also include data management, that is, collecting data on buildings andbeing able to react to this data.

InternationalisationInternational competition has two interrelated aspects: being able to compete and win projects in foreign markets, andbeing ready to face foreign competition in the home market.

In relation to competing for projects in foreign markets, Figure 11 shows the increasing revenue the Finnish constructionindustry generates abroad.

Figure 11: International operations of Finnish construction industry, net invoicing (in million euro)


The figure shows that since the start of the 1990s, and especially since 2002, revenue earned in foreign markets hasincreased greatly, and the forecast for 2005 is particularly positive. International growth is mostly in nearby markets:Scandinavia, the Baltic States, and Russia. These are countries where the industry traditionally had the strongest bondsand where it made most sense to concentrate according to RT. The expansion of the EU internal market also contributed.

There are two aspects to the construction industry earning money abroad: the export of raw materials, and the export ofknowledge in the form of project management. The Finnish Confederation for Construction Industries, RT, sees anespecially bright future for knowledge export, where Finnish construction companies have competitive advantages overthose from other countries. Finnish construction companies have developed expertise in using information andcommunication technologies (ICT) for project management and data storing and sharing, which improve efficiency.Thus, Finnish construction companies working abroad can use the methods for cost-efficient production andcollaborative work learned in the home market.

Efficiency helps in the home market, too. It is expected that as big foreign companies gain a foothold in Finland,competition will intensify. Finnish construction companies must be ready to face this competition; if they cannot



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compete in the home market, they have no future abroad. Although many Finnish companies are rather small comparedto their international competitors, if specialised contractors can work together they have a chance of competing and evenwinning. However, this requires a change towards a more collaborative culture and it also requires methods for dataexchange. This is another application area for the PRO-IT project, which is described later.

Labour and educationIn Finland, as in other EU Member States, there has been intense debate over how EU enlargement could result in aninflow of low-wage foreign labour that would undermine labour-market structures and agreements. RT’s representativePekkanen explained that the worst predictions from this debate proved unfounded. There is a ‘grey market’ in Finlandfor cheap labour from eastern and central European countries, but the unions are very active in ensuring that foreignworkers in Finland get the same wages and labour conditions as Finnish workers. Thus, the grey market is estimated tobe minimal. This is also related to the fact that Finland is hardly the first country foreigners come to when looking for ajob; the climate is simply too harsh and cold, and countries such as Germany are more attractive.

The average age of construction workers is very high, and the sector does not have a very glamorous image. Therefore,recruitment, especially of highly skilled engineers, is likely to be difficult. Currently, construction has such a poor imagethat few students at polytechnic schools study building and construction and dropout rates are high. There are enoughcivil engineers for office work, but there is a great need for more engineers to work as on-site managers. Furthermore,the mismatch between what students learn at the polytechnics and real life is a problem. According to RT’srepresentative, the daily life of engineers working on-site requires certain competencies, primarily ICT competencies,that are not being given enough attention in the schools. This is why RT offers more than 15,000 man-hours of trainingto engineers each year.

Low levels of investmentConstruction companies generally pay too little attention to research and development, and reserve only limited fundsfor development projects. This is partly due to the business structure and partly due to company conservatism.

One of the ways the construction industry can build its future is through collaboration in research and developmentprojects. Many companies are too small to have funds available for research and development. More important is thefact that placing research projects in a company might take second place to the core issue of how companies can worktogether and share data.

Collaboration requires partners to meet and share viewpoints. This applies not only to companies that do the same kindof work, but also to all organisations who contribute to satisfying customer needs and are part of the value chain.Organisations such as VTT (and universities or polytechnic schools), RT and TEKES should have a facilitator role inlinking research to construction processes and should function as arbitrators in disputes over ownership of consortiumproducts and inventions.

Cluster collaboration

The construction industry has now partly recovered from the 1990s recession. However, the crisis put focus on theindustry and started a process of collaboration. It is difficult to establish a clear cause for the cluster initiative, but therecession forced people with insight and power to start discussing the future and strategy of the sector. On the other hand,there has been a general focus on cluster building as a source of competition in Finland and in other Scandinaviancountries at the start of the 1990s. It was only natural in that context to look at the construction industry, which is centralto the Finnish economy, accounting for a significant level of investment and labour.

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7It is possible that this took place in prolongation of professor Michael Porter’s work with his analysis outlined in The competitiveadvantage of nations, where Finland was one of the seven case study countries.

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The nature and origin of the clusterThere are many definitions of a cluster, and there has been much policy debate and research focusing on whether acluster can be created by strategic action, or if clusters evolve, based on trust coupled with collaboration on sharedinterests. The nature of the Finnish cluster is somewhat elusive and in some ways ‘virtual.’ It can be seen as acombination of strategy formulation, common development projects, and a focus on creating the foundations for amuch-needed collaborative synergy between Finnish contractors. The cluster contains an outline of the main issues thataffect the construction sector, so it can help generate a clear sense of industry direction. It can also be seen in a lessformal way, as a series of projects that develop and implement the tools and methods necessary for industrydevelopment and collaboration.

Whatever about its causes and definition, the Finnish cluster initiative started when a high-level group shared somecommon interests and concerns about the future of the sector and considered what could be done about them. This isoutlined in Vision 2010 – the Finnish real estate and construction cluster’s vision for 2010 (May 2001). The membersof the high-level group came from a number of different organisations, and included the following:

Aulis Kohvakka, President of Senaatti-Kiinteistöt (Senate properties8);

Pertti Rantanen, real-estate director of Nokia Oyj;

Rauno Saari, secretary of state with the council of state office;

Antero Lehtinen, commercial director of ABB installaatiot Oy,

Veli-Pekka Saarnivaara, CEO of TEKES.

The members had varied backgrounds: direct and practical industry experience, government institutions, thegovernment, and the research community. Vision 2010 outlines the major trends and strategies; however it might reflectmore of a tendency towards ‘much word and little action.’ This might be the reason for the subsequent establishment ofa steering group and multiple working groups where plans of action about the Vision 2010 statements are formulated.

Composition of the clusterTEKES was involved in the high-level formulation of Vision 2010, and has since been very active in acquiring projectfunding. RT was not formally involved in the high-level group, but is now active in project consortiums, participates inthe working groups, and is working on strategy implementation through projects and dissemination of results.

RT also provides some of the funding. VTT has a role somewhat like that of a consortium, contributing to the strategyand participating in project research and implementation. Companies invited to participate in projects are not paid to doso. They co-finance the development projects through their work contribution, gaining in return first-hand access to theknowledge acquired in the projects.



8http://www.senaatti.com/index.asp?siteID=2

http://www.senaatti.com/index.asp?siteID=2

http://www.senaatti.com/index.asp?siteID=2

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Vision 2010 – sector implications

The Vision 2010 initiative identifies the following as particularly important challenges:

Changes in competitive conditionsDemand for turnkey services is growing and maintenance is becoming part of the construction package. The argumentfor this follows directly from the discussion on sector characteristics and challenges.

Increasing use of partnership-based operational models. The construction industry is characterised by manyspecialised small and medium-sized companies. Providing customers with a full package requires close collaborationif companies are to present customers with a full picture of costs and services, helping them avoid having to work withseveral independent contractors. Collaboration can be optimised significantly through data sharing.

Increasing competition in design solution and expertise of the construction team. This gives collaborative groups acompetitive advantage over large companies, which typically do not have the same level of skill flexibility.

Prequalification of contractors is becoming more common in competitive bidding for contracts. This means thatcontractors must be able to present an offer that includes data from several partners. This requires fast and smoothaccess to data.

Foreign operators will gain a higher profile in the Finnish market. Therefore, Finnish companies must compete onscope rather than on size.

Changes in operational environmentThe ratio of new construction to renovation varies among regions. If a company is to act as a national (or international)player it must have several competencies or at least must be able to collect a consortium with the right competencies.This implies a focus on networks and on flexible specialisation through the networks.

Changes in building regulations promote quality but often increase costs. If prices go up, contractors must be able towork more efficiently.

Growing competition for skilled labour, greater need for training, and competition for the brightest students.

Changes in final construction productsIT infrastructure will become a standard accessory in homes. This requires new competencies for contractors andperhaps partnerships with new types of enterprises, such as IT suppliers.

Increased emphasis on health and safety in the selection of materials and structural components. Contractors must haveaccess to the right data and the skills to analyse and apply this data.

Changes in customers’ needsProfessional owners are interested in the whole package and its profitability, not the details of the construction. Thecontractor must act as an intelligent interface between the customer and the consortium of specialised subcontractors.IT plays an important role in this so that the contractor can access data from different partners and present it clearly tocustomers.

Customers’ business needs often require the rapid completion of construction projects. IT can play a role.

The ability to carry out and deliver turnkey products, and the commitment to their smooth running becomesincreasingly important.


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Changes in demand for constructionGrowth in new construction is slowing and is likely to go into a slight decline towards the end of the decade. Thismeans that construction companies must handle maintenance and repair and be ready to compete internationally.

As quality and equipment requirements continue to increase, the value rather and the volume of new construction willshow a positive trend. This means that the future will bring fewer but bigger projects, and that specialised contractorsface extinction unless they can operate in a consortium.

Renovation of real estate and infrastructure will increase greatly in the future.

These are the most significant global trends that the Vision 2010 group identified as likely to affect the constructionindustry. It is evident that there are many answers to these challenges. However, the Vision 2010 interpretation is thatsome of the answers can be found in collaborative work and strategic application of ICT.

Response to Vision 2010Vision 2010 has been used in many ways. Before describing the PRO-IT example, which can be seen as a concreteresponse to some of the trends identified, this report briefly presents the global answers as outlined in the ConstructionIndustry Technology Strategy. It is unclear whether the technology strategy is a direct extension of the Vision 2010, butit has adopted the Vision’s global trends in outlining operational strategic development goals. Figure 13 shows this.

Figure 13: Vision 2010 and the construction industry technology strategy



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Construction output and productsDevelopment of the construction process: Development of new organisational modes and management techniques foron-site production to improve quality, schedule management, productivity, and occupational safety.

Networking and partnerships: Collaborative networks create consortiums of companies with proven competencies.With partnership-based implementation networks, subcontractors become subassembly producers, providingcommercially packaged solutions.

Development of construction products, technologies, and systems: materials, products, and compatible productsystems that meet customers’ needs while improving quality are developed collaboratively by construction companies,the building materials industry, and subassembly producers. The supply chain of industrialised construction can beenriched by increasing the degree of prefabrication in new product solutions.

Life-cycle expertiseLife-cycle design methods; development of utilisation plans and assessment models for environmental impact lifespan;

Development of methods and tools for value management;

Development of programming and methods for building maintenance.

Development of data management and information technologyDevelopment of product model-based building design methods as well as use of product model data among projectparticipants during construction, operation, and maintenance phases;

Development of project, production, and maintenance data management and data transfer among project participants;

Development of electronic commerce methods and supply logistics.

Integration of design and constructionRestructuring the planning process to take better account in functional planning of users’ needs. This will helpformulate performance requirements for structural components and systems, and streamline tender and contract designand production planning.

The development of turnkey services will streamline the organisation of participating designer networks andpartnership-based modes of operation.

Operational models for total servicesDevelopment of tools and methods for identifying customer needs and for designing and implementing alterations,using an interactive planning process.

Development of alternative models of quality that take responsibility for design, implementation, occupation,servicing, and maintenance.

Total service models lead to longer-lasting and more economically viable life-cycle implementation solutions whilereducing operational and economic risks for both occupants and owner-customers.

The next section focuses on the PRO-IT project as an example of the development work taking place in the clustercollaboration. This is only one example; there are others. The intention is to show what is happening in real life, who isinvolved, and especially why they are involved, that is, the costs and benefits.


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PRO-IT: An example of a public-private partnership

The overall objective of the broad-based PRO-IT development project is to define a national data managementapproach and guidelines for the construction process, based on product modelling. RT initiated the project, whichinvolves a number of partners: the Association of Finnish Architects offices (ATL), the Finnish Association ofConsulting Firms (SKOL), TEKES, and the Finnish Ministry of Environment. Construction companies are representedby Lemminkäinen Construction Ltd., NCC Rakennus Oy, and SRV Viitoset Oy. VTT is involved in the project as anIT and modelling expert.

Figure 14: PRO-IT overview

Source: PRO-IT website9

The development of PRO-IT will enable different organisations contributing to a construction process to share data in acommon system. For instance, architects have their own proprietary drawing systems. When these are connected to thePRO-IT system, architects have immediate access to data from other sources so that they can, for instance, avoid makingdrawings that require components that must be built from scratch or already exist but are very expensive.

The PRO-IT system also makes it much easier to present to the customer a final plan that includes data from differentcontractors, thus accommodating the customer who wants the full package but is not interested in the details from all thesubspecialties. Following the global trends outlined in the Vision 2010, the system can also accommodate contractorswho participate in competitive bidding and prequalification. PRO-IT offers rapid data collection facilities to help tenderpresentation. The system’s main objective is to make collaborative work between different partners, even competitors,much easier. This helps groups of small, specialised contractors act as an entity and thus makes the entity more valuableto the customer than the sum of the parts.



9http://www.vtt.fi/rte/cmp/projects/proit_eng/indexe.htm



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The PRO-IT project sees its main benefits as:

Improved customer service by generating useful information to support decision-making and by visualising andcomparing function and cost alternatives. This has two advantages: it can contribute to increased customer loyalty andit can facilitate customer-contractor negotiations and understanding.

Better and faster design by generating more precise information, reducing design errors, improving plan compatibility,and promoting collaboration between designers.

Improved construction quality and productivity by generating more practically usable information for productionplanning, cost management, and scheduling, and for the manufacture and procurement of building products (e-commerce).

Promotion of life-cycle management by improving product data management and generating information about abuilding’s entire life-cycle, making it easier to integrate considerations of life-cycle costs and environmental impactsin the design phase. This can be used in many ways to support the use and maintenance of buildings.

Figure 15 shows PRO-IT’s content and benefits.

Figure 15: PRO-IT content and benefits

Source: PRO-IT web-site

It is evident that the PRO-IT system serves many useful functions, but the core questions remain as to whycompanies should participate in this work instead of doing it themselves. Why should they undertake projects thatdo not solely serve themselves, might contribute to their competitors and expose their own business secrets, andhave uncertain ownership?

Finally, questions about public-private partnerships (PPP) as effective instruments for running development projectsmust be answered: Is the PPP structure as a driving mechanism behind the cluster beneficial, or can clusters be drivenmore effectively?


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Costs and benefits as perceived by company participantsThe SRV group is actively involved in the PRO-IT project and Matti Kärnä, Vice President for corporate developmentwith the group, provided insight into the costs and benefits of these types of collaborative projects.

Kärnä generally supports the PRO-IT project and sees many advantages that greatly outweigh the disadvantages. Heexplained that certain types of developmental work are possible only in consortiums, but participating companies mustdistinguish between the company’s core business, which must be dealt with internally, and work that can be done mostbeneficially in collaboration with others.

The SRV group has a very strong strategic focus on the use of ICT for customer involvement and, generally, on using itto run construction projects and project planning smoothly and effectively. This focus is at the core of the group’scompetitive advantage, and the company devotes resources to the continual upgrading of its ICT strategy andimplementation. SVR’s corporate development office, which Kärnä heads, is directly responsible for this. There areformal plans for this development process, which the company keeps confidential and internal.

However, the SRV group recognises that collaboration with other companies in construction projects is the way forwardand this can be made effective and competitively viable only if these companies’ proprietary IT systems cancommunicate through data sharing.

Involvement in the PRO-IT project thus makes sense as the whole industry, direct and indirect competitors, begins tocollaborate and agree on certain standards and methods for data exchange. The SRV group defines what is included incollaborative projects. The company finds competitive advantage in the way it uses data internally, and keeps this out ofthe collaborative work while it shares external data.

The SRV group knows that by participating in a collaborative project it devotes resources to a tool that can not only bringthe group competitive advantages, but also upgrade the whole industry. It sees the benefits as outweighing the negativeimplications. One could say that the competitive situation within the industry is raised to a level that benefits the clusterin comparison to external (international) competitors.

The development of PRO-IT takes place in a PPP with participation by different members and public funding, TEKES,co-financed by the participating companies. Two issues arise from this partnership: ownership, and the implications ofshared ownership.

The confederation’s representative Pekkanen explained that it is difficult to talk about ownership in the normal way. Noone owns the outcomes of the PRO-IT project, while at the same time everybody owns them. All construction companiescan use PRO-IT’s products and results, and RT is active in promoting it. The SRV group does not see ownership as aproblem and feels that the benefits of financial contribution to a common industry system that enables industrycollaboration repay the energy SRV puts into the project.

Companies participating directly in collaborative projects, and thus indirectly in their financing, have better access toproject results than non-participant companies who get the results when they are released to the public. This means thatparticipating companies have a head start on implementing project results. The companies directly involved caninfluence the course of projects, that is, they can ensure that projects take a direction that favours them. For instance,participant companies can ensure that PRO-IT follows standards that are compatible with their existing systems,avoiding the cost of buying new software when PRO-IT is released from the project stage.



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When asked why the data management should take place in a PPP instead of privately, and why SRV did not just start asimilar PRO-IT if the benefits are that great, SRV’s vice president answered that this would not be realistic or possiblebecause of problems with funding and access to knowledge. Size limitations and the capacity to translate R&D tooperational practice could also be issues.

The following additional points were raised:

Because the PRO-IT project is about data sharing between companies, a consortium is required to find out into howdata is handled by different participants. A neutral organisation like VTT was considered more suitable than a singlecompany for putting together such a consortium.

The ultimate success of the PRO-IT system is directly proportional to its uptake among companies. If PRO-IT wasdeveloped solely by SRV in collaboration with a few selected partners, it is likely that the consortium would claim fullownership of the system, thus inhibiting wider uptake. Because the project is partly sponsored by public funds, thisproblem is minimised and the incentive for wider industry uptake is not hampered by companies’ financialconsiderations.

A condition for gaining public financial support is the active involvement of experts such as VTT or universityresearchers. This ensures that experts are closely involved in the projects and development work.

Taking these points into consideration, PPPs in Finland work beneficially, the most positive aspect being that partnerscollaborate on neutral ground where all can benefit equally.

All the respondents also added that cooperation is part of the Finnish culture. They noted that Finland has a goodtradition of companies, including those in the public sector, working together. They also added that there is a very thinline between the public and the private sector and it is often difficult to distinguish between competitors andcollaborators. They regarded this cooperative culture as being important for the success of joint collaborative projectsthat benefit the companies and contributed to upgrading the cluster.

Internationalisation of development workThe success of a project like PRO-IT is directly influenced by the uptake among construction industries. RT activelypromotes PRO-IT’s results, but the VTT representative Pajakkala emphasised that projects like it are taking place inother countries, for instance in Denmark. According to RT, it would make sense to undertake a common Europeanproject, but that this was beyond the scope of the Finnish initiative.

This led to a short discussion about how the European Union could contribute to upgrading the construction industry,particularly focusing on the R&D programmes. Both Pajakkala and Pekkanen highlighted the sixth frameworkprogramme for research and development. They saw the framework programmes as possible instruments forinternational development projects in the construction industry, but thought that the current design of the programmesdid not suit the industry particularly well.

They observed that the construction industry seems to have a poor image and thus has not really been included in theframework programmes, which focus mainly on high-technology industries. Pekkanen thought that even if a place werefound for international projects within the framework programme, bureaucratic problems would arise in running such aproject because of the complex administrative requirements.


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Thus, the respondents did see international collaboration as a way of adding volume to national collaborative projects,but in terms of the EU programmes there were bureaucratic problems and the respondents were busy enough workingwith the national industry.

Conclusion

This report discusses the Finnish construction industry and related arguments for working together in a cluster asexemplified by the PRO-IT project. It is difficult to pinpoint what the cluster is, because this is not well defined.

In Finland, the construction industry is very important to the general economy. In response to the mid-1990s recession,a group of high-level people formulated a common vision for the industry in 2010. This is the core, the formal part, ofthe cluster initiative. Subsequently, the Confederation of Finnish Construction Industries, RT, and others establishedworking groups to develop and implement projects related to that vision. The cluster vision has spurred the birth of theseprojects, which involve new forms of changing collaboration between companies, researchers, and the public sector.

Contact details

Jukka Pekkanen, Director, Technology, R&DConfederation of Finnish Construction IndustriesUnioninkatu 14FI-001311FinlandPhone: (+358 9) 1299 253Fax: (+358 9) 628 264Email: [email protected] address: http://www.rakennusteollisuus.fi/english/

Pekka Pajakkala, Research ManagerVTT – Technical Research Centre of Finland; VTT Building and TransportHermiankatu 8GFI-33101 TampereFinlandPhone: (+358 3) 316 3404Fax: (+358 20) 722 7001Email: [email protected]: http://www.vtt.fi/indexe.htm

Matti Kärnä, Vice President, Corporate developmentSRV GroupNiitytaival 13FI-02201 EspooFinlandPhone: (+358 201) 455 241Email: [email protected]: http://www.srv.fi/en/index.html



http://www.rakennusteollisuus.fi/english/


http://www.srv.fi/en/index.html

19


Source list

InterviewsThe background material for this report came from several interviews, written material received during the interviews,and web research. In order to write a report on an industry cluster, a multi-actor approach was taken in the interviewdesign. All interviews took place at RT’s premises at Unioninkatu 14, Helsinki, on 19 November 2004. The interviewslasted approximately one hour and followed a prepared semi-structured interview guide.

IntervieweesJukka Pekkanen (Lic. Tech)Director, technology, research.

RT is involved in outlining the strategy for the cluster and in making this operational and implementing developmentprojects. RT is not directly involved in development, but acts as a facilitator, bringing together consortiums, providingfunding (with TEKES), and disseminating results and best practice. RT acts as a bridge between overall strategy andresearch and the construction business community.

Pekka Pajakkala (MSc. Tech)Research Manager of VTT, Building and Transport division.

VTT is a large, semi-public research and testing organisation that focuses on applied research, bridging basic researchby universities and other institutions and the business community. VTT employs around 2.800 and has a turnover of €210million. The Building and Transport division has 430 employees, of whom around 50 work in Pajakkala’s researchoffice. The division has a turnover of €37 million. VTT has a variety of roles in the cluster network. It is involved inpolicy work, outlining and following up on strategy papers, and is a central player in project development, in closecollaboration with RT and the participating companies.

Matti Kärnä (MSc. Tech)Vice President, Corporate development, SRV Oy

The SRV Group is Finland’s leading project management contractor and specialises in commercial and businessconstruction. Currently, it is involved in two major construction projects, the New Kamppi in Helsinki and the ViruCentre in Tallin, Estonia. The group has 524 full-time employees, of whom 22% are female. The average age is 46 years.The SRV group is profitable, with a net profit of €5.1 million in 2002 and €7.1 million in 2003. The SRV group is partof the construction cluster and participates in the PRO-IT project.

References

Construction Industry Finland, Yearbook 2003, available at:http://www.rakennusteollisuus.fi/english/aboutindustry/yearb2004.pdf

Construction Industry Technology Strategy, available at: http://www.rakennusteollisuus.fi/english/aboutindustry/teknostrat.pdf

Homepage with information of the construction project: http://www.kampinkeskus.fi/english/new_kamppi/index.html


http://www.rakennusteollisuus.fi/english/aboutindustry/yearb2004.pdf


http://www.kampinkeskus.fi/english/new_kamppi/index.html

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Homepage of Rakennusteollisuus (RT), Confederation of Finnish Construction Industries, available at: http://www.rakennusteollisuus.fi/

Homepage of VTT, available at: http://www.vtt.fi/

Homepage of SRV Yhtiöt, available at: http://www.srv.fi/

Homepage of the PRO-IT project, available at: http://www.vtt.fi/rte/cmp/projects/proit_eng/indexe.htm

PRO-IT, Product model-based data management for a construction project, Project leaflet, available at:http://www.vtt.fi/rte/cmp/projects/proit_eng/indexe.htm

SRV group, The new Kamppi – it’s where the city flows, Promotional leaflet.

Rakennusteollisuus (RT), Statistics Finland, VTT, Construction Industry Statistics, 2004, available at: http://www.rakennusteollisuus.fi/tilastot_julkaisut/tilastot_suhdanteet/kuvio_39.pdf

Rakennusteollisuus (RT), Confederation of Finnish Construction Industries, Vision 2010 – The Finnish real estate andconstruction cluster’s vision for 2010, Helsinki, May 2001, available at:http://www.visio2010.org/documents/rakli_english.pdf

Rakennusteollisuus (RT), Confederation of Finnish Construction Industries, Vision 2010 – Construction IndustryTechnology Strategy, Helsinki, May 2002, available at:http://www.rakennusteollisuus.fi/english/aboutindustry/teknostrat.pdf



EF/05/66/ENC-2

http://www.rakennusteollisuus.fi/

http://www.vtt.fi/

http://www.srv.fi/






the construction cluster in finland - eurofound

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