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Disrupting Construction

Can Silicon Valley Disrupt How We Build?

Flush with venture capital, the startup Katerra wants to revolutionize the construction industry. But as history shows, it’s harder than it looks.

CityLab, June 25, 2018

From the end of the Second World War until a few years ago, when it cooled off, productivity surged across the U.S. economy, giving rise to what’s often called the “productivity miracle.” From manufacturing to agriculture to retail, industry after industry became cheaper, faster, more mechanized, and more efficient.

But the same can’t be said of construction. Productivity in construction has not only not risen, it’s actually lower now than it was in 1968.

The way that most large buildings get built hasn’t changed much from 50 years ago. It goes by a deceptively straightforward name, “design-bid-build.” First, a developer or owner hires an architect, who comes up with a rough design. To flesh this out, the architect brings in consultants such as engineers and landscape architects, and sometimes niche consultants like food-service specialists.

When the design is finished, the owner puts it out for bids from general contractors, and hires one of them—often the lowest bidder—to supervise construction. The GC issues its own bids, and farms out the pieces of the project (for example, the HVAC system and the concrete work) to subcontractors. It’s not uncommon for the subcontractors to bid out work, as well, hiring sub-subcontractors. Then, when construction begins, the architect runs interference between the owner and the GC, trying to ensure that every detail is built correctly without blowing the owner’s budget. (Much of the time, the budget gets blown anyway.)

Not surprisingly, having so many cooks in the kitchen leads to misunderstandings and finger-pointing. Add volatile material prices and a skilled labor shortage, and you have, in the now-familiar parlance of Silicon Valley, an industry waiting to be disrupted.

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