Challenges in Indian Construction Industry

Major research works on key challenges in India and how Baevr mitigates them

It is obvious from Google that construction industry is the second largest industry in India, employs over 32 million people, or 16% of the working population, adding about a million per year, contributes 5.7% of GDP and constitutes 40% of investments. [Iyer, K.C., Jha, K.N., 2005] However, formal project management is rarely evident in the Indian construction industry and there is little planning for capability and professionalization [Sreepuram and Rao 2006]. We have conducted an extensive literature survey, and based on the studies conducted by universities in India and abroad, an exhaustive list of key challenges in the Indian construction industry is listed below. The list also provides our proposed mitigation strategies using Baevr software and Book of Knowledge from Adept Algorithms.

Executive Summary of Key Challenges & Mitigation Measures

Key challenge	Mitigation using Baevr
Shortfalls in proper standards for better project formulation	Project formulation can be measurably standardized using Baevr
Cash flow management Payment Delays by clients Bad debts and outstanding payments Inadequate working capital	A proprietary extension of earned value analysis is used for cash flow management in Baevr, which updates the cash flow calculations d=for every deviation in plan.
Lack of client involvement and competence Lack of top management support	Baevr enables a smooth communication means with the client and top management
Need for better contractor selection system Substandard and one-sided contracts Focus of low prices at tender stage	Contract organization can be standardized with complete clarity
Lack of trust between stakeholders Inadequate governance by owners and transparency	Baevr forms a transparent system of management information
Lack of proper facilities for workers Lack of safety measures to workers	Baevr global database enumerates the facilities for workers and lists the provision of proper facilities in the project cost.
Lack of productivity benchmarks, standards/norms and KPIs Low productivity Lack of lean practices	Baevr benchmarks and measures productivity, in fact, being a lean-management-based system
Inadequate quality	Knowledge management systems at Baevr is incorporating quality objectives in the reporting structure.
Lack of professional advisors and consultants Need for up-skilling construction professionals Lack of systems and processes	The BOK and reporting procedures establish a much-needed discipline for construction site
Lack of innovation Lack of technology adoption Reluctance to adopt new work practices such as lean practices	Adept algorithms compile existing technologies and methods in the construction industry, making it simpler to showcase and disseminate new technology.
Improper supply chain management	Baevr has a unique procurement planning system to control the irregularities in the supply chain
Monitoring, feedback, coordination, conflict and knowledge of the project participants	Baevr uses the same database for all project participants such as QS, planners, contract management, site reporting, billing and business development. This enables clear coordination among the participants.
Non-completion of projects on time Cost overruns Waste of time, money and resources	Control of schedule and budget are the prime prerogatives of Baevr software
Competition	Following the systematic procedures make construction companies competitive
Fluctuations in material cost	Adept algorithms work on AI-based predictive mining of price fluctuations, using our Global resources cost database
Acute shortage of skilled workmen Adverse climatic conditions Weak economy and consumer demand Government bureaucracy	Not in scope

The references that we used in this study in the order of citation are as follows:

1. Iyer, K.C., Jha, K.N., 2005, Factors affecting cost performance: evidence from Indian construction projects, International Journal of Project Management, 23(4)
2. Sreepuram and Rao 2006 Proceedings of the World Conference for Design and Construction, INCITE/ITCSED 2006, New Delhi, India, November 2006, Vol. 4
3. Santhosh Loganathan, Purushothaman Srinath, Mohan Kumaraswamy, Satyanarayana Kalidindi and Koshy Varghese. (2017) Identifying and addressing critical issues in the Indian construction industry: Perspectives of large building construction clients. Journal of Construction in Developing Countries, 22(Supp. 1)
4. Shibani, A. and Sukumar, D. (2015); Coventry University, Coventry, England  The Role of the Project Manager in Construction Projects in India. Chinese Business Review, volume 14 (6)
5. Prof. V Srinivasa Raghavan and Karthik Kumar V [Problems faced by Small Scale Construction Contractors in India, International Research Journal of Engineering and Technology, (IRJET), May 2015]

Some MIS Reports produced in Baevr

A brief description of the findings in these researches is being discussed in forthcoming sections.

Findings by Construction Industry Improvement Initiative CI3 India

Santhosh Loganathan et al (2017) expect large investments to flow into infrastructure for rapid urbanization in recent future. However it is also observed that, in most of the developing countries, the construction industry has failed to play its expected role as an “engine of growth” by providing the basis for socio-economic development as even some of the rudimentary issues are still not being addressed adequately (World Bank, 1984; Wells, 1986; Ofori, 2006; Ofori, 2015).

To overcome this, it was contemplated to form a central body in the lines of Construction Industry Institute (CII) USA, Construction Industry Council (CIC) UK, Canadian Construction Innovation Council (CICC) and Construction Industry Development Board (CIDC) Singapore. The objectives of this body, called Construction Industry Improvement Initiative India – CI3 India were

1. To identify current and imminent critical issues in the construction industry in India.
2. To compile a roadmap for industry improvements in strategic high (and wide) impact domains.
3. To launch (a) system improvement initiatives and (b) demonstration projects, in prioritized focus areas within the above strategic domains.

Ci3 India was kick-started with an inaugural first Regional Roundtable in Chennai at IIT Madras in October 2015. A second Regional Developers’ Roundtable was conducted in Mumbai in February 2016. The participants of the two Regional Roundtable were large building construction clients from Chennai, Bangalore, and Mumbai regions.

In the two Roundtables, CI3A identified the following challenges in the construction industry in the order of decreasing importance:

Procurement & Delivery

1. Shortfalls in proper standards for better project formulation
2. Lack of client involvement and competence
3. Need for better contractor selection system
4. Lack of trust between stakeholders
5. Substandard and one-sided contracts

Productivity, Quality & Sustainability

1. Acute shortage of skilled workmen
2. Lack of proper facilities for workers
3. Low productivity
4. Lack of productivity benchmarks, standards/norms and KPIs
5. Lack of innovation
6. Hindrance to off-site (pre-cast/pre-fab) construction
7. Inadequate quality
8. Inadequate governance by owners and transparency

Construction Project Eco System

1. Need for up-skilling construction professionals
2. Improper supply chain management
3. Lack of technology adoption
4. Reluctance to adopt new work practices such as lean practices

Additional critical issues in the Second Round Table

1. Inefficient design process management
2. Uneconomical design codes and operational standards
3. Outdated operational design codes

Other Studies in India

The study by Iyer & Jha identifies that the industry does not have the structure required for executing projects but, with some variation in opinion, this can be provided by project management. They also observe that the implementation of PM is/will be appreciated by clients, end-users and stakeholders, although some difficulty was foreseen in the acceptance of PM by the Indian construction industry. Coordination amongst project participants was found to be the most significant of all factors governing cost performance of projects, other factors being adverse climatic and economic conditions; unfavourable project-specific attributes; lack of top management support; monitoring, feedback, coordination, conflict and knowledge of the project participants; and reluctance to make timely decisions.

Shibani, A. and Sukumar, D. (2015) at Coventry University, England enumerated key challenges in the Indian construction industry, based on a survey of project managers as:

Non-completion of projects on time	Achieving customer satisfaction
Competition	Lack of systems and processes
Cost overruns	Waste of time, money and resources
Conflict between parties	Government bureaucracy
Lack of finance/capital	Weak global economy
Weak consumer demand	Lack of manpower

Gadekar and Pimplikar (2015) identified the success and failure factors of Indian construction companies. A survey was carried out among 30 construction companies. The ranking of the factors has been determined by using the point rating techniques. The finding from the research is cash flow management, insufficient capital and inadequate sales are the most important factors for the success of the construction companies among the large, medium and small-scale firms respectively. Prof. V Srinivasa Raghavan and Karthik Kumar V [Problems faced by Small Scale Construction Contractors in India, International Research Journal of Engineering and Technology, (IRJET), May 2015] identified, following problems faced by small scale construction contractors:

Payment Delays by clients	Fluctuations in material cost	Owners involvement in construction
Cash flow management	Increased competition	Absenteeism of workers
Focus of low prices at tender stage	Lack of safety measures to workers	Lack of management skills
[Many] employees leaving the company	Bad debts and outstanding payments	Ability to compete
Lack of experience in the construction field	Ability to develop long term strategy	Inadequate working capital
Access to updated information and technology	Poor location of business	High rate of interest on loans
Insufficient profit	Govt. policy	Lack of capital equipment
Unskilled employees in company	Lack of professional advisors and consultants	Bank policy
	Non-cooperative suppliers