Construction Vs. Manufacturing. Who Wins?

poole_3

Construction Costs: In control? - taken from constructonomics


I found myself very interested in the cost of construction work today, so I made a very ambitious choice of looking at the cost of construction vs. the cost of another industry. And what industry should that be? Automobiles? Good choice, we'll compare the cost of construction from 1967 to 2o09 between construction and automobiles in the United States.

For construction, I used the Turner Construction Cost Index, put out by none other than Turner Construction. The index has been tracking construction costs every quarter since 1967. In 1967 the benchmark of 100 was set and now the index sits at about 900. Our industry has brought us an increase of 900% since 1967. So that's a lot...I mean, not that much...I mean, what is that?

I whipped out the spreadsheet and buckled down for an intense 60 seconds of figuring out the yearly increase in construction costs that this index is suggesting, and as a result, I came to the conclusion that according to Turner Construction, costs have increased 5.5% since 1967. Ok, I guess that's not terrible since inflation typically sits around 3%.

Now on to our friends and colleagues, the automakers. I took a rather crude approach to estimating this appreciation by looking at the average price of a new car in 1967 compared to 2009. In 1967 the average price of a new car was $2,750 (must have been nice) and the price of a new car now is $27,958. And this works out to........a 5.8% yearly appreciation. Hmm, I was expecting construction costs to far exceed autos in that time period.

There are some very obvious flaws to this methodology, for example, while construction costs and auto costs have increased at about the same rate, the auto industry has made tremendous strides in costs cutting and productivity improvements since 1967 while construction has lagged miserably. Perhaps an eventual look at earnings or profit margins between construction and automobiles could present a better picture as to what is actually happening.

These numbers could also be thrown off by a supply and demand difference between 1967 and now. For example, people now surely buy more cars per person and probably spend more as a percentage of income than they did in 1967, while this phenomenon may or may not be true for construction. I can see why it is nearly impossible to come to any clear conclusions when comparing things that are very different. Try controlling for all the variables in construction that differ from manufacturing - in fact, be my guest.

Anyway, I think a look at profits and productivity could be a good indication of what may be going on between auto makers and builders (maybe next time), and what I think we'll find is that manufacturing is kicking our severely fragmented, uncontrollable, disorganized, finger pointing, and litigating rear end. Perhaps we can pull ourselves off the canvas at the count of nine and fight back in a battle that would improve costs, quality, safety, and even profits to the construction industry.

tommytwo

Man this looks familiar.

willworkforbeer

Told you dropping acid would come back to haunt you.

SLSTech

Not that I am picking on you - but double posting is frowned on here & most other forums out there, or it could just be me having a flashback from to much acid

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poole_3

You're correct. Sorry about that. I posted to another forum as well, and didn't realize I posted to this as well. So I doubt it's the acid. However, I still haven't gotten any insight on this issue. Is anyone interested? Thanks.

Jason Whipple

So your spamming the forums tonight?

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willworkforbeer

I always thought construction was manufacturing.

poole_3

If this was span the title would be: Viagra or herbal tea. Who wins?

And yes, construction is manufacturing in a much larger and more fragmented sense. However, we have lacked woefully when it comes to productivity and cost. It's really a shame.

willworkforbeer

Who's crew you been on? That sounds crazy.

rbsremodeling

Who is WE?? M.F.

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poole_3

We as in we the construction industry. I've worked for commercial GCs and subs - so yes, we.