Chronic shortages of skilled labor are increasing costs and schedules and resulting in declining productivity, lower quality, more accidents and missed objectives. However, an industry program is set to cut costs, risks and spur workforce development.

The workforce issue is not so much a shortage of bodies, as it is a shortage of skills. Even some of those in the field now are not truly qualified for the mega projects, trade organizations say.

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Until owners lead, and the industry gives the workforce issue the same attention it gave safety years ago, the issues will simply not be solved, an industry expert told Petrochemical Update.

“It’s the same conversation year after year, decade after decade but we keep marching closer to the demographic cliff in 2029 when all the baby boomers are retired,” said Daniel Groves, director of operations at Construction Users Roundtable (CURT) and CEO of Construction Industry Resources (CIR) said. “Now that we are in the 114th month of growth, this is the sustained challenge driving owners to do something more.”

CURT and Construction Industry Institute (CII) and many others have been working on trying to improve the workforce development issue for a long time. Using empirical evidence, CURT and CIR have put together a program to do for the workforce what was done for safety. The business case for workforce development and prequalification is buttressed by CII research.

In December, CURT and CIR launched the Skilled Labor Risk Management (LRM) Program, a Construction Labor Market Analyzer (CLMA) service providing complete analysis of project labor risk and contractor workforce development programs.

Current forecasts indicate that skilled labor shortages will increase with a growing economy and current industry age trends.

Several owners including Southern Company will be utilizing this program. 

The Issue

The skills gap has reached critical proportions among resourcing the craft labor jobs—technical jobs that require more education and training than a high school diploma, but less than a four-year college degree. Many of these jobs are in construction and manufacturing.

U.S. construction labor demand is expected to outpace labor supply over the next five years, with the total number of unfilled construction jobs growing from 200,000 in 2017 to 856,000 in 2021, according to the U.S. Bureau of Labor Statistics.

According to Forbes magazine, more than 350,000 manufacturing jobs are available now.

“The issue is not a shortage of bodies, so much as it is a shortage of skills,” Groves said. “That is where the challenge is. There are plenty of people in the country. There are not enough people going into the skilled trades.”

For those who have been recruited in, many are not qualified for the job and training is lacking, Groves said.

“Even those who are going into the trades, many are not at the level of skill necessary to effectively and efficiently and productively complete the large chemical and refining and power generation mega projects going on today. These require a tremendous amount of skill.”

Owners are the ones most severely impacted because they are the ones owning and financing the projects.

“It's owners who are dealing with the challenges of the workforce productivity and the cost of it taking more workers, more cost and more time. So there are significant budget, productivity and schedule challenges that accompany a workforce challenge,” Groves said.

Training Cost Benefits

CII completed a research project to demonstrate the positive cost impact of craft training on labor, turnover, absenteeism, injury and rework by applying construction market survey data to two distinct project scenarios: A typical 24-month capital industrial project and a typical ongoing maintenance/small capital contract.

The evidence shows that if one percent (1%) of the total project labor budget were invested in training, it significantly benefits workers and employers. The project assumptions for purposes of developing the research were based on 527,000 labor hours.

Data: CII, Image: CIR

Safety

Dating back to the 1980s, CURT recommended that owners prequalify contractors for their projects in the same ways that owners prequalify contractors for safety. Meaning, focus on contractors who have qualified tradespeople and invest in training.

“But it really was not until owners said ‘thou shalt’ that contractors began to change in regard to safety, because obviously it impacted them directly and that is really when the change occurred,” Groves said.

That change for safety in the workplace unleashed in many ways all the innovation that the industry enjoys now around safety. Work sites are much safer than they have ever been, and everyone promotes having fewer incidents.

Meanwhile, the workforce issue continues to grow, and workers are getting less productive due to the lack of skills. In addition, the workforce challenges are resulting in more safety incidents, so improvement on all fronts is an urgent need.

“The impact on budgets is that they are higher, schedules are longer, and safety is impacted. The less skilled the workforce, the less safe the sites are.

The industry must give the workforce issue the same attention it gave to safety, Groves said.

Solution

The LRM solution involves both contractors and owners.

Owners should include workforce development in prequalification and management of contractors on their worksites, according to the LRM program.

CII research demonstrates up to a $3.00 ROI for every dollar invested in training.

Contractors need to take the initiative to develop their workforce. Every contractor should have a proactive program for workforce development including attracting, recruiting and training future skilled workers. Owners should proactively require contractors to have effective workforce development programs, according to the LRM program.

CURT recommends that “owners should only do business with contractors who invest in training and maintain the skills of their workforce.” CII affirms this approach and states that making workforce training a priority can reduce project costs and improve safety.

Eddie Clayton, Contracting & Workforce Development Strategies Manager for Southern Company, and a user of the LRM program, said that his company asks contractors to assess the skills of their new hires to ensure they have the skills necessary to perform the assigned work safely, efficiently and meet quality expectations. However, not all of the contractors can do that, especially when labor shortages are experienced.

"In the near future, only those contractors that are sufficiently engaged in specific areas of workforce development will be qualified to bid on the larger projects," Clayton said. "Performing skill assessments on craft workers will be one of the areas included in the pre-qualification criteria."

"We hope that eventually all contractors will be engaged in workforce development. When that happens, many of our workforce issues will be resolved," Clayton added.

Thorough prequalification takes time and effort. Most owner construction management organizations are limited and very busy on current projects. They do not have the time and bandwidth required to perform the extra work of prequalification of multiple contractors, or collecting the data needed for this purpose. However, unless owners lead, come alongside contractors and are committed, change isn’t possible.

Labor Risk Management

CLMA has the capability to provide full service contractor prequalification for owners. The Labor Risk Management (LRM) program uses the proven Construction Workforce Development Assessment (CWDA) process to provide industry standard assessment of all the contractors with minimum impact on owner staff. CLMA will perform all the data collection, assessment and reporting and provide the results to the owner.

When the CLMA Labor Risk Management (LRM) is added to CLMA workforce analytics, Owners will have a complete process for managing skilled workforce shortage risks on their projects, and for assuring their contractors have effective programs for staffing the current projects and for developing future skilled workers, Groves said.

“It is about helping contractors understand what the opportunities are for growing, training and improving the workforce, and making them more productive, and then measuring the results and improving them in order to produce a better workforce,” Groves said. “And it’s not just about improving the workforce we have now, but also about growing the workforce and making sure we are bringing in new people. That is where innovation has to take place.”

By Heather Doyle