The Impact of E-Commerce on the Design and Construction Industry

Historically, the design and construction industry has been slow to innovate. As a result, productivity in the construction industry has declined substantially compared to other industries. Inefficiencies in this industry are well documented. However, the potential for cost savings and increased efficiency through the use of the Internet and e-commerce may not only increase the efficiency of the design and construction industry, but it may also significantly change the structure and composition of the industry. This is suggested because effective implementations of e-commerce technologies are not limited to one aspect of one industry. E-commerce may be most effective when it is thought of and applied to multi-industry enterprises and in a global context. This paper continues the exploration of a concept that we have been working on for several years, namely that “...information technology is evolving from a tool that incrementally improves ‘backoffice’ productivity to an essential component of strategic positioning that may alter the basic economics, organizational structure and operational practices of facility management organizations and their interactions with service providers (architects, engineers and constructors).” (Johnson and Clayton 1998) This paper will utilize the case study methodology to explore these issues as they are affecting the AEC/FM industry. 1 The Problem As figure 1 shows, construction productivity seriously lags behind other industries. It is not hard to see why. According to one article, “inefficiencies, mistakes and delays account for $200 billion of the $650 billion spend on construction in America every year.” (The Economist 2000). This article goes on to say that the typical $100 million building project requires 150,000 separate documents such as working drawings, contracts, change orders, and requests for information. Other industries have improved productivity through investing in information technology. The advent of the Internet and business-to-business e-commerce promises a continued increase in this trend. The definition of e-commerce has evolved as the use of the Internet has evolved. We use ecommerce in this proposal to mean all aspects of business and market processes enabled by the Internet and web technologies, including supporting issues such as data standards for interoperability. However, we also interpret e-commerce as something that is more than a collection of computer technologies. As in our previous study, we view e-commerce as the strategic deployment of technologies. The US Department of Commerce has estimated 1) that high technology has driven more Figure 1. Construction Productivity Index, 1964-1998 (Constant $ of contracts / workhours of hourly workers). This table was developed by Paul Teicholz, Professor Emeritus, Stanford, from data published by the US Bureau of Labor Statistics, Department of Commerce.