The Challenging Reality Of Labor Availability For Capital Projects

The Challenging Reality of Labor Availability For Capital Projects

Finding skilled craft workers to build America’s new petrochemical projects will be a challenge in 2018, driving companies to explore new ways to attract young workers and bolster workforce productivity.
Experts expect craft labor hours to peak at nearly 164 million hours in 2018, as existing mega-projects near completion and capital investment surges due to rising oil prices, continuing access to low-cost feedstocks and renewed political support for the industry.
Industry experts report that $135 billion in American and Canadian downstream projects are presently in the works, led by liquefied natural gas projects (47 percent) and ethylene crackers (34 percent). Add in revived midstream projects like the Keystone XL Pipeline and competition for skilled workers will be fierce.
This increasing demand for labor paired with reduced labor availability will force companies to rethink their strategies for attracting, keeping and maximizing the contributions of skilled workers.
Specifically, a failure to court younger workers could prove expensive for companies embarking on new projects. A 2015 report from the Construction Industry Institute said the industry is facing a “demographic labor cliff,” as the average age of the construction craft workforce is rising “three times faster than the average age of workers in all other U.S. industries.”
CII estimated that a labor shortage driven by these demographic trends could increase labor costs by more than 17 percent, and cause delays of more than 22 percent. CII may not be far off: Last year, Sasol upped the estimated cost of its Louisiana cracker to $11 billion, a 25 percent increase over earlier estimates that was due in large measure to rising labor costs.
The industry has trouble attracting younger workers in part because leaders aren’t working closely enough with the universities, schools and community colleges that have the ability to transition workers into construction. Younger workers also live technology-infused lives and expect modern worksites to embrace technology as well.
Add in declining workforce productivity, and project managers today face a trifecta of labor problems. Experts are divided on the causes of lowered productivity: Some say it is because the tight labor market forces companies to hire more inexperienced workers, others blame the aging workforce, millennials with a poor work ethic and an increased focus on time-consuming safety protocols.
Regardless of what the reasons are, the industry has yet to develop a strategy that systematically takes labor availability and productivity into account when forecasting project investments. The solution is for asset-intensive companies to place worker availability and productivity at the center of their project planning efforts.
Most companies still rely exclusively on industry benchmarks during the planning process, but in the future, the competitive advantage will go to firms that verify assumptions and cost projections on industry data combined with detailed, reliable internal data. Leading companies will transition to monitoring productivity in real-time.
Concord® Project Technologies’ real-time field productivity tools (TRT™) give you the unprecedented ability to collect field productivity data in real-time, in both close and remote construction sites.

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