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Technology and Delivery Models are Reshaping Construction

By Carolina D'Alencon | November 2, 2018

Technology and Delivery Models Are Reshaping Construction

The construction industry has historically been slow to innovate, adapt, and change. McKinsey ranked construction among the least digitized global sectors in a June 2016 article, noting cost and schedule overruns in addition to dwindling productivity as the norm. Despite coming slow out of the gate, the construction industry is beginning to make major strides in becoming a technology leader. Technology deployment, changing attitudes among owners and legislators relative to project delivery, and a move to value-added professional services among major contractors are driving the change.

Imagining construction’s digital future

Technology Deployment

The construction industry has gone from an interesting opportunity for innovation to a hotbed for technology investments. McKinsey followed up its 2016 article with a 2018 study of the emerging ecosystem of construction technologies globally. The article sees opportunity around robotics and 3D printing, artificial intelligence and analytics, and supply chain optimization as the areas developing most quickly. The ecosystem includes both tech-focused startups as well as longtime industry players who are making investments in and committing to a technology deployment strategy. At the most basic level, better and more current information is enabling constructors to deliver projects on time, within budgets, and — probably most critically — to adjust when conditions beyond their control, such as weather, material prices, and labor availability, change unexpectedly. Look for more “traditional” construction firms to make headlines with their investments in and use of technology in the coming months and years.

Seizing opportunity in today’s construction technology ecosystem

Delivery Models

Changes in delivery methods have been reshaping the way projects are built for years, but adoption of alternative delivery models appears to be accelerating. A recent article from the Design Build Institute of America indicates that nearly half of all projects delivered nationwide are via the Design-Build method, whereby the project owner has a single contract, typically with the general contractor, who then coordinates directly with architects, engineers, and subcontractors. This delivery method is intended to reduce both project time and conflicts between the contractor and designer. The owner essentially contracts for a “turnkey” delivery of the project.

The other alternative delivery method gaining traction is construction management at risk (CM-at-Risk or CMAR). In this model, the owner has a contract with the designer, as well as a separate contract with the construction manager. The construction manager then subcontracts out the performance and delivery of the individual project elements. In this method, the contractor is selected primarily, if not entirely, based on qualifications, as opposed to price. This method provides for much more accurate cost estimating at earlier stages of the project, creates a collaborative team structure, and allows for a quick and smooth transition from design to construction. By allowing owners to get both an accurate budget of project costs early and to have a single point of contact providing professional construction management services, the result is often higher quality, lower cost, and speedier delivery.

Not all states have adopted these alternative delivery methods for public sector projects, but the tide appears to be turning. Some of the states leading the way include Florida, Georgia, North Carolina, Virginia, Texas, and California. DBIA maintains a map of alternative delivery adoption on a state-by-state basis and there is no question that these methods continue to gain ground.

State – DBIA

Industry Implications

M&A is likely to Heat Up

Strategic buyers are looking to M&A as a way to expand their technology capabilities, integrate design and construction services, and to capitalize on market opportunities. A few recent notable deals include:

Structure Tone’s acquisition of Ajax Building Corporation

Ajax Building Corporation is one of the leading providers of CM-at-Risk and Design-Build services in the Southeastern U.S. With more than 200 employees, the deal brings Structure Tone further diversification in both the Southeast and with a range of public and institutional clients. Ajax Building Corporation marks Structure Tone’s second acquisition and its first in the U.S. since restructuring its ownership in partnership with Global Infrastructure Solutions in 2017. 7 Mile Advisors initiated the transaction and advised Ajax Building Corporation on the deal.

Ajax Building Corporation to Join the Structure Tone Organization

Oaktree Capital Management’s acquisition of MWH Constructors from Stantec

The deal is the second strategic divestiture to a private equity group by Stantec following their 2016 acquisition of MWH Global. They previously had sold Innovyze to EQT. The transaction is an indicator of confidence in the need for water infrastructure upgrade and expansion projects in the near-term.

Stantec signs agreement to sell MWH Constructors – Stantec

Clayco’s acquisition of Lamar Johnson Collaborative

Chicago-based design-build contractor, Clayco, further added to its design capabilities, acquiring Lamar Johnson Collaborative (LJC), an architecture, interiors, and urban design firm serving corporate, developer, and institutional clients. While alternative delivery is still evolving in the public sector, many companies focused on serving private sector clients are moving toward fully integrated design-build capabilities.

Clayco Acquires Lamar Johnson Collaborative

Technology Investments come into Focus

Over the last five years, global investment in construction tech has doubled, growing from $9b during 2008–2012 to $18b from 2013–2018. Companies including Katerra and Procore have successfully raised significant capital and we’ve seen several exits of construction tech firms including Viewpoint, E-builder, Opower, and Textura at $500m+ valuations. Investments are coming from venture capital funds, as well as strategic players from around the industry.

One of the firms emphasizing technology investments is Jacksonville-based, Haskell, which recently hired Cutler Knupp as a Director of Strategy and Technology Investments. Cutler joined from Softvision, a digital services company that recently acquired robotic process automation specialist Arrow Digital and has since signed an agreement to join IT services firm, Cognizant. This unique combination of technology experience in the construction industry demonstrates an enhanced focus on digitization and moving further up the technology curve by Haskell.

With M&A and technology investments on the rise, expect to see rapid change in the construction sector, as the innovation flywheel continues to gain steam. For more on the latest valuation and M&A trends in the space, see 7 Mile Advisors’ latest Sectorwatch report.

About 7 Mile Advisors

7 Mile Advisors provides Investment Banking & Advisory Services to the Architecture, Engineering, and Construction Industries globally. 7 Mile Advisors advises on M&A and private capital transactions, and provides market assessments and benchmarking. As a close-knit team with a long history together and a laser focus on our target markets, 7 Mile Advisors helps its clients sell companies, raise capital, grow through acquisitions, and evaluate new markets. For more information, including research on the M&A markets, visit

All securities transactions are executed by 7M Securities, LLC, member SIPC/FINRA.

Technology and Delivery Models are Reshaping Construction was originally published in 7 Mile Advisors on Medium, where people are continuing the conversation by highlighting and responding to this story.


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