International Journal of Strategic Property Management (2006) 10, 169-184

MOVING FROM PRODUCTION TO SERVICES:A BUILT ENVIRONMENT CLUSTER FRAMEWORK

Jean CARASSUS 1, Niclas ANDERSSON 2, Artiiras KAKLAUSKAS 3, JorgeLOPES 4, Andre MANSEAU 5, Les RUDDOCK 6 and Gerard de VALENCE 7

1 Economics and Human Sciences Department, Centre Scientifique et Technique du Btitiment;4 Avenue du Recteur Poincare, 75782 Paris Cedex 16, France. E-mail: carassus@CStb.fr

2 Department of Civil Engineering, Technical University of Denmark, Building 115, DK-2800,Kgs. Lyngby, Denmark. E-mail: na@byg.dtu.dk

3 Department of Construction Economics and Property Management, Vilnius GediminasTechnical University, Sauletekio al. 11, 10223 Vilnius, LithuaniaE-mail: Arturas.Kaklauskas@st.vtu.lt

4 Department of Construction and Planning, Polytechnic Institute of Braganca, Apartado 134,5301-857 Braganca, Portugal. E-mail: Lopes@ipb.pt

5 Uniuersite du Quebec en Outaouais, CanadaE-mail: andre.manseau@uqo.ca

6 Research Institute for the Built and Human Environment, University of Salford, Salford M54WT, United KingdomE-mail: L.Ruddock@Salford.ac.uk

7 Department of Project Management, University of Technology Sydney, Broadway NSW 2007,Australia. E-mail: g.devalence®uts.edu.au

Received 24 January 2006; accepted 10 April 2006

ABSTRACT. The construction industry is no longer focused on providing a single product- i.e. a building or a physical infrastructure, but a variety of services and improvement tothe human environment. Major trends such as Performance-based Building as well asSustainable Built Environment are calling for major changes. These changes mean additionalroles for the industry as well as the need for new indicators to measure its performance andits economic impact. This paper proposes a new approach based on the development of aframework for the analysis of the entire construction and property sector - the "built en-vironment cluster". It extends the analysis of an international study based on nine countries-Australia, Canada, Denmark, France, Germany, Lithuania, Portugal, Sweden, and the UnitedKingdom. The need for improving statistical data is stressed particularly in the context ofenlarging the scope of the industry. This new approach provides an excellent starting pointfor developing new performance indicators that will take into account the changing natureof the industry, for an integrative perspective providing a basis for strategic management,for studying sustainable development in construction and for understanding innovationprocesses and changes. A comprehensive perspective of the industry performance is crucialfor policy initiatives as well as for strategic analysis of firms.

KEYWORDS: Built environment cluster; Construction and property sector; Developed coun-tries; International comparison; Mesoeconomics

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International Journal of Strategic Property ManagementISSN 1648-715X print I ISSN 1648-9179 online © 2006 Vilnius Gediminas Technical UniversityhttpJlwww.ijspm.vgtu.lt

170

1. INTRODUCTION

J. Carassus et at.

The built environment cluster analysis pro-vides an innovative and exciting approach toanalyse operations and functions of the con-struction sector within a country's overalleconomy.

Carassus (1998, 2000) put forward initialideas for developing a framework for the analy-sis of the entire construction and property sec-tor of the economy. A Project Group was laterset up by Working Commissions W55 (Build-ing Economics) and W65 (Organisation andManagement of Construction) of the crn (In-ternational Council for Research and Innova-tion in Building and Construction) to considerthe framework in the context of a set of casestudy applications. The membership of theGroup was also drawn from a team workingin a crn Task Group (TG31 MacroeconomicData for the Construction Industry), as it wasrecognised that the proposed mesoeconomicapproach supplemented existing methods ofviewing the industry in order to cover the en-tire construction and property sector.

The work of the Project Group resulted inthe mesoeconomic approach being tested innine diverse countries. (The final report isavailable at www.cibworld.nllpages/-begin/Pub293.pdf). Each country's specific situationand characteristics are considered in the analy-sis and the notion of the built environmentcluster presents a unifying approach.

This paper summarises the key findingsfrom the ern Report and extends its analysisproviding a more comprehensive perspectiveand additional implications for strategic man-agement, innovation processes and policy de-velopment. The CIB report and Carassus workput forward the "construction sector system"notion. This notion can be interpreted as fo-cusing the analysis on production and on con-struction firms. This paper extends the ap-proach to the "built environment cluster" no-tion, which underlines both the importance ofthe stock (built structures) and services activi-

ties (cluster of firms and organizations involvedin developing and maintaining the built envi-ronment).

2. FROM THE CONSTRUCTIONINDUSTRY TO THE BUILTENVIRONMENT CLUSTER

The rationale for the new approach is basedon the fact that the construction and propertysector is now playing a new role within theeconomy of developed countries. It is no longerfocused on large-scale production but on theservices provided by the built environment.The economic growth experienced by most de-veloped countries between the late 1940s andthe beginning of the 1970s was succeeded by arecession lasting until the beginning of the1990s in the United States and until the endof the last decade in Europe. This period ofrecession was a time of transformation.

In the general evolution of the economy,what kind of transformation did the construc-tion industry in developed countries face dur-ing those changing times? Between the late1940s and the beginning of the 1970s, the roleof the construction industry was to complementthe significant and relatively regular economicgrowth through the development oflarge-scalehousing projects, non-residential buildings andcivil engineering infrastructures.

The dimension of the construction stockdeveloped within the growth phase has becomehighly significant in several developed coun-tries. Recently, the refurbishment and main-tenance works of such stock in France, theUnited Kingdom, Italy and the Scandinaviancountries, amounts to approximately half ofconstruction organisations' business, includingcivil engineering projects. Furthermore, bothfirms and public authorities have turned theupgrading and management of their stock intoan area of increasing concern. The quality andthe reasonable cost of the service rendered bytheir buildings and civil engineering infrastruc-tures have become of the essence. The stock isbecoming a research object (Kohler and

Moving from Production to Services: a Built Environment Cluster Framework 171

Hassler, 2002). The popularity gained by the'Facilities Management' trend translates thisconcern, while the professionalisation of in-house building management or the outsourcingof this management are being fostered. Flex-ibility of use and maintenance cost are becom-ing two criteria for managing large facilities.

The expansion of processes not only incharge of production but also built environmentmanagement, over long periods oftime, reflectsthe same evolution. In fact, several mecha-nisms such as the Private Finance Initiative(PFI) and Private and Public Partnership(PPP) have been created to foster such a trend.Such evolution is all the more marked as theprofitability of service activities related tomaintenance and management is higher andless cyclic than construction site activities.

It is apparent, therefore, that the changefaced by the construction industry in the 1990schanged its role within the economy. Whilst,until the 1970s, the goal of construction wasto massively build all the works necessary tomeet the needs of the economy,since the nine-ties, the emphasis has been placed on the man-agement of the service rendered by such worksall along their life cycle.

Performance-based buildings approachhighlights the service to be provided (Ham-mond et al, 2005; Sexton and Barrett, 2005).

The requirements of sustainable develop-ment, which focus on the need to increasinglymaster medium and long-term consequences,not only regarding production, but also man-agement of the works during their whole lifecycle have strengthened this change of rolewithin the economy(Curwell and Cooper, 1998;Bourdeau, 1999; Brandon, 1999).This focus onthe service rendered by the works calls for anew approach for the analysis of the construc-tion and property sector.

Economic analysis has to take into accountsuch recent evolution and all the participantsinvolved in the life cycle of building structures(not only procurement, design and productionbut also operation, maintenance, refurbish-ment and demolition). Traditional construction

industry analyses deal with construction firmsprincipally. Some research analyses have in-cluded the industry professions and the mate-rials industry, but not the service aspects andthe stock management firms. The aim of thiswork is: To present the built environment clus-ter framework, which includes the production,service, management and stock aspects of con-struction and test this framework in nine de-veloped countries.

3. AN OVERVIEW OF PREVIOUSSTUDIES

The study of the construction industry andits role in the national economy has been ex-tensively researched. At the macro level, ex-isting assumptions persist that structuralchanges will emerge in the construction indus-try of a particular country as the nationaleconomy develops over time. Turin (1973), inhis analysis of the role of the construction sec-tor in economic development presented a de-velopment pattern of the construction indus-try based on stages in an economy's develop-ment. The main aspects of the developmentpattern were that, in the early stages of devel-opment, the share of construction in nationaloutput first grows at an increasing rate andthen at a decreasing rate compared with thelevel of national income. This 'S' shape pat-tern contrasts with Bon's (1992) inverse 'U'shape pattern in which the share of construc-tion in national output increases in the earlystages of development but ultimately will de-crease in absolute and relative tennsin moreadvanced industrial countries. Another impor-tant aspect of the development pattern derivedfrom the latter work is that, whilst the shareallotted to improvement and maintenance intotal construction increases, the proportion fornew construction decreases in the latest stagesof development. Ruddock (1999), using morerecent data collected from a large sample ofcountries representing all stages of economicdevelopment corroborated this proposition.

The role of the construction industry in the

172 J. Carassus et al

national economy has also been explored byseveral writers through the use of input-out-put tools. Because of its double accountingframework, input -output tables are wellsuited to the analysis of the interdependencebetween the construction industry and otherindustries forming the national economy.Someof these works (Bon, 1991;Bon and Pietroforte,1993; Pietroforte and Gregory, 2002, amongstothers) have focused on the change in sectoralshares, and also on the study of the direct andindirect resource utilisation by the construc-tion sector, both at country level and in com-parative historical analysis across advancedindustrial countries.

Differing views on the role of the construc-tion industry in the national economy havebeen put forward. De Long and Summers(1991), using data drawn from more than 60countries of all continents, and for the period1960-1985, found no significant associationbetween construction investment and economicgrowth. Lopes (1998), in his study of the con-struction sector of developing countries in M-rica, posited that the growth in the construc-tion sector should follow that of the generaleconomy. These somewhat contrasting viewson the role the construction sector plays in thenational economy are perhaps associated withthe issues derived from data definitions andmeasurement problems pertaining to the con-struction industry, both at country and inter-national levels. The development of a single-agency responsibility for data collectionand thesetting up of regional construction databasesare pertinent in this context (Ruddock, 2000).

At the sectoral level, writers often analysethe way the construction firm operates withinthe sector's particular environment(Hillebrandt, 1985; Briscoe, 1988; Manser,1994). Experts' reports are centred on the re-lationship between the construction firm andits client and the designer (Latham, 1994;crn,1997; Egan, 1998). The approach in terms of asupply chain integrates materials manufactur-ers (London and Russell, 1999). Studies deal-ing with the construction industry (Finkel,

1997), occasionally include the industry's professions (Ball, 1988). Overall or cluster ap-proaches are rarer (Atkins, 1993;AEGIS, 1999;Ive and Gruneberg, 2000a and 2000b). Stud-ies in the French language deal with the con-struction industry taking into account in par-ticular the problem of land (Ascher andLacoste, 1972; Lipietz, 1974), on-site work pro-cesses (Campinos-Dubernet, 1984, 1996; duTertre, 1989, 1991) and demand (Berthier,1992). Some studies, using the notion of theproduction chain, have stressed the technicaldimension (Chemillier, 1977), the developmentaspect (Vincent, 1986) or are based on an over-all approach (Boublil, 1980; Carassus, 1987).

The cluster approach has also been usefulin studying innovation processes in construc-tion (Bernstein, 1996; Manseau, 1998; Slaugh-ter,2000).

4. MESOECONOMICS: AN UNUSUALAPPROACH

Mesoeconomicsis the intermediate level (inGreek, meso means "median") between themicroeconomicone and the macroeconomic one(Holland, 1987). Microeconomics deals withindividuals and firms being profitable in amarket of scarcity. Further, it explains howactions of all buyers and sellers determineprices and how prices influence the decisionsand actions of individual buyers and sellers(PerlofI, 2001).

The mesoeconomic approach proposed im-plies a system analysis of the construction andproperty sector i.e. the built environment clus-ter, which is constituted by economic and par-ticipant institutions that are to solve a pro-duction issue concerning socially necessarygoods or services. The built environment clus-ter analysis is based on the notions of aim ofthe construction activity, shaping characteris-tics, groups of activities, profit formation, frag-mentation, operational configurations of play-ers and institutional regulations (Carassus,1998, 1999). Table 1 summarises the main dif-ferences between the usual construction indus-

Moving from Production to Services: a Built Environment Cluster Framework 173

try analysis and the built environment clusterapproach.

5. METHODOLOGY

The built environment cluster is made upof interacting components that perform eco-nomic activities during the lifetime of a struc-ture under the external influence of the envi-ronment of the system. The design of the builtenvironment cluster rests on the assumptionthat the general framework has the samestructure and contents for more than one con-struction and property system (Andersson,2003). This implies that the main economicactivities of manufacture, production and as-

set management as well as the life cycle andthe phases of the construction process are thesame for construction sectors in different coun-tries. The principle follows the line of thoughtthat every building or construction goesthrough the same process of activities. On theother hand, the components of the built envi-ronment cluster, i.e. the actors who carry outthe economic activities, may differ from onecountry to another.

The economic activities are described alongthe vertical axis in the framework, dividing itinto three sections: construction life cycle,builtenvironment cluster, institutional environment.

The various actors constitute the compo-nents of the framework according to the con-

Table 1. Main differencesbetweenconstructionindustry analysis and the built environmentclusterapproach

Construction industryanalysis

Built environment cluster approach

To produce and to manage the services provided by the structuresthroughout their life-cycleVery important role of the existing stock:- Weight of the stock- Large part of the repair & maintenance works- Important role of stock managementDiversity and heterogeneity of ordersImmobile products (prototype, site)Stock management firmsProject/site (clients, engineering, construction) firmsIndustry (materials, machinery) and distributorsStock management: recurrent, non cyclical, highProject/site: cyclical, lowIndustry: depends on the industry, linked to the cycle

Weight of SMEs and self - Differentiated fragmentation depending on:employed - Fragmentation of the order

- Degree of technical complexity- Capital intensity

Especially new construction Three kinds of construction business systems:- Production- Production & management- ManagementStructures regulations (building permits, construction codes, productand service certification)Firms regulations (firms standards, labour management, prices)Environment of the firms' regulations (procurement methods, funding,tax, R&D support, education and training),

The industry aim To build buildings andinfrastructuresNot taken into accountRole of the existing

stock

Shaping characteristics PrototypeSiteConstruction firmsActivities

Profit formation Depending on cycles

Fragmentation

Processes

Institutionalregulations

Often taken into account

174 J. Carassus et al

struction activities they perform, and thephases of the life cycle they support. The clus-ter is presented as a matrix crossing threetypes of firms (services firms, on site produc-tion firms, manufacturing firms) and threetypes of economic activities (firstly asset, prop-erty, facilities and transaction management,secondly project management and on site pro-duction, thirdly manufacturing and distribu-tion). Services firms are present in the threetypes of activities, on site production firmsmainly in one type, manufacturing in one type(see Figure 1).

The matrix highlights the difference be-tween the construction sector approach limitedto the construction firms and the built envi-ronment cluster including the manufacturingfirms and all the services firms.

Figure 2 describes the main functions andregulations of a built environment cluster. As-set, property, facilities and transaction man-agement is undertaken by services firms in-volved in ownership, operation, maintenance,purchase, sales activities. Project managementand on site production are provided by servicesfirms dealing with briefing, design, technicalstudies, co-ordination, control and by construc-tion firms involved in new construction, major

repairs, refurbishment and demolition worksManufacturing and distribution are made bymaterials, components, equipment, and ma-chinery manufacturers and by services firmsfor distribution.

As the cluster is described as an open sys-tem, the external environment (i.e. the sur-rounding market and regulations) influencesit. Mesoeconomics specifically takes into con-sideration influence of the institutional envi-ronment to the industry cluster. Different in-stitutional actors, including the internationalinstitutions down to trade unions and tenants'associations, represent the institutional envi-ronment (see Table 2).

Due to the fact, in particular, that struc-tures are large and static on site for manyyears, with all the implications for users andneighbourhood (quality of life and the environ-ment, safety, high cost of defaults) the clusteris mediated by a large number of institutionalregulations. These regulations may concern thestructures (building permits, constructioncodes, product and service certification), thefirms (firms' standards, labour management,prices), the environment of the firms (procure-ment methods, funding, tax, R&D support,education and training). They are defined and

Construction life cvcleBuiltenvironmentclusterServicesfirms Onsite Manufacturing

production firms

'" firms.~ Asset,property,.•..:~ facilities,transaction X•..I.l'::l management.:: Projectmanagement~ andon site X Xl::<:l production~

ManufacturingandX Xdistribution

Institutional environment

Figure 1. Outline of the built environmentcluster

Moving from Production to Services: a Built Environment Cluster Framework 175

Legend: ---+ Stock management ---+ Brief ------.~ Design _._.~ Works, Materials, Machinery

New Construction(Service to Users)

Life Cycle of Built Environment

I Management of the Service Provided by theStructures to Users

Demolition

i!_¥.!!i!L~£!iYit=.~.~=~==::::::;1 Continuous Asset, 1i Property and Facilities i! Management and i! Transactions Activities 1i ~.~. ;

~

I Short-lived Briefing, II Project Management ~i and On-site Production IIActivities II Manufacturing andIDistribution Activities

L--- ~~~

t...~t~l f: r: l lu~ ·•.• 6 § .y I I Is u-s e s~ t~ '-•..; - I I I~ .5~ ~a 8. ca i I :~..Q..£...Q.. ~': ~!_._._._._._._._._J_. ._~_.L.__ '_~_'I..........................................................................~ : i

Design,Technical Studies,Coordination,Control

New Construction,Major Repairs,Refurbishment,Demolition Works

Briefing

--_.~....._._ ...._._._._ .._-_._._-_. __ . ._._--" ._.._- .- --Building and Infrastructure Firms Regulations: Firm environment ;Regulations: - Professional rules and firms regulations:

,

- Construction, refurbishment, standards - Competition anddemolition permits - Employee management procurement systems- Building and infrastructure (wages, working conditions) - Financing, taxation

, regulations - Prices of products and - R&D support- Materials, components and services - Training, education,

~equipment regulationsL ._. ._. . _.- .. '_.0- . _ . _ .._._- ._. - '_-0' . .__ .... _.. .._ ...... ..._._--

,

II....J

Figure 2. Built environment cluster: the main functions and regulations

176 J. Carassus et al.

Building and Materials

Table 2. Institutional participants and main types of regulations (schematic matrix)

Environment of the Finns

Regional and localauthorities

Regulations

Institutions

Firms

InternationalinstitutionsGovernment

Client, industrial,professionalorganisations

Users associationsTrade unions

applied by a complex system of public institu-tions (international, national, regional, and lo-cal) and private institutions (industrial, unions,and consumer organisations).

Table 2 sums up, in a schematic matrix, themain types of regulations and institutions con-cerned in the built environment cluster ap-proach.

6. KEY FINDINGS OF THE CASE-STUDYBUILT ENVIRONMENT CLUSTERS

The test of the built environment clusteranalysis shows that the approach is applicablefor the analysis of the construction sectors inthe nine studied countries. Furthermore, thecommon cluster framework provides a basis forinternational comparisons.

The case study of the nine countries high-lights differences related to institutional con-texts, clients' orders and actors. But it empha-sizes significant similarities about the growthof services, the relative decline of the construc-tion industry, the importance of the built envi-ronment cluster, the significance of the stockand of its maintenance and the coexistence ofbig companies with a very fragmented system.

Institutional contexts are differentAmong the nine countries, the institutional

contexts are different. Using Boyer (1996) ty-pology, implemented by Winch (2000a) for theanalysis of construction business systems inEurope, four main institutional contexts canbe differentiated.

The characteristic of the anglo-saxon con-text is the reliance upon liberal market val-ues, the relatively low state regulation, thereliance on the stock market for industrial fi-nance and the relatively low levels of workerprotection. This characterises the context of thebuilt environment clusters in the UK, Canadaand Australia, even if differences are signifi-cant between the three countries.

The social-democrat context is characterisedby the reliance on tripartite agreements (state-employers-unions), the reliance on strongunions and the high levels of worker protec-tion. This is the institutional context of theDanish and Swedish built environment clus-ters.

The German context can be termed corpo-ratist with negotiated coordination between thesocial partners, greater willingness to inter-vene in the market to protect social values,

Moving from Production to Services: a Built Environment Cluster Framework 177greater reliance on banks for industrial financeand relatively high levels of worker protection.

The French and Portuguese institutionalcontexts are public, because the state has avital role in coordinating and financing theeconomy. The protection of worker conditionsis relatively strong.

Finally, a transitional institutional contextcan be added, where an economy is in transi-tion from a planned economy to a marketeconomy.Public firms are massively privatisedand a new public regulation has to be set up.Lithuania is in that situation.

In spite of strong differences among the fiveinstitutional contexts, the significance of thegovernment regulation in the construction sec-tor system is a common characteristic amongthe nine countries.

Concerning international regulation, thereis considerable distinction between EuropeanUnion countries and the others. Among theanglo-saxon group, this explains the differencesbetween the UK on the one hand, and Canadaand Australia on the other. The role of the Eu-ropean Union in regulating the built environ-ment cluster is increasing. This role is espe-cially high in materials regulation, competitionand procurement systems, safety and environ-mental issues, financing and R&D.

Among the anglo-saxon group, in spite of themarket-oriented context, the role ofgovernmentregulations is very significant in construction.

Among the social-democrat group, the roleof regional and local authorities' regulation inDenmark and in Sweden principally concernsthe urban planning process, building permis-sions etc. The role of central government has

historically been strong in both Denmark andSweden, e.g. through rules and regulations,subsidies and supporting measures. However,both countries deregulated the constructionsector in the 1990s.

In Germany, the role of central and regionalgovernment in industrial and professionalorganisations regulation is great. In the Frenchand Portuguese public context, central govern-ment and industrial organisations are strong,but the role of the unions and user associa-tions is weak. In the Lithuanian transitionalcontext, a new role of central government andindustrial organisations has to be specified.The role played by unions and user associa-tions' is very weak.

Clients and orders are variedThe part played by civil engineering is very

strong in Canada and in Lithuania for differ-ent reasons. The high level of new engineer-ing works in Canada can be explained by theindustrial and economic structure of the coun-try. An important share of industrial activitiesis based on exploiting natural resources, suchas gas and oil, mining and forestry activities,as well as on transforming these raw materialinto added-value products, such as pulp andpaper, primary metal and alloys, and chemicalindustries. Canada is also a large country,which still has a rather low density of popula-tion in comparison with many other countries.New roads, bridges and various municipal andcommunication infrastructures are still ex-panding in the country. In Lithuania the civilengineering sector is strong, but the housingsector is presently very weak (see Table 3).

Table 3. Residential,non-residential,civilengineeringshares of total constructionoutput

% Australia Canada Denmark France Germany Lithuania Portugal Sweden UK(2003) (2004) (2004) (2003) (1999) (2003) (2002) (2002) (2003)

Residential 44 36 54 43 57 10 52 33 39Non 21 18 29 34 27 51 21 37residential

61Civil 35 45 17 23 16 39 27 30engineering

178 J. Carassus et al.

The civil engineering sector is quite strongin Australia, which has common characteris-tics with Canada. Among the building worksin Europe, the share of residential works iscurrently high in Germany, Denmark and Por-tugal (see Table 3).

The repartition of construction works ischanging in each country. It depends on theevolution of the demand of the different cli-ents. Currently, the share of government (cen-tral and especially local government) variesfrom 15 to 28 %, if the specificcase ofLithuaniais excluded. The share of household demandis particularly weak in Sweden (see Table 4).

The functions of the cluster are the same,but the actors are different

The functions of the cluster are the samein the nine countries, but the actors imple-menting those functions may be different. Forinstance, general contracting has been thedominant business system in UK since thebeginning of the 19th century (Winch, 2000b),while separated trades are common in conti-nental Europe. Additional to dealing with thegeneral contractor, the anglo-saxon client isadvised by quantity surveyors. Apart fromAustralia, this profession does not exist in theother countries in the study.

Controllers are often public, but are privatein France. French "Bureaux de controle" haveno equivalent in other countries. In France,land developers are different from buildingsdevelopers. Such distinction does not exist inthe UK. Cooperatives for building and manag-ing built facilities are strong in Denmark, Ger-many and Sweden. They are weak or absentin the other countries.

Even when an actor has the same name in

Table 4. Totalconstructionoutput accordingto demand

the different countries, hislher role may be dif-ferent. The role of the architect is stronger inthe UK, Germany and Denmark than inFrance or Sweden. In Canada, the role of ar-chitects and design engineers has been increas-ingly important. In addition to design and theincreasing popularity of design and build con-tracts, they are usually responsible for qualitycontrol throughout the entire building process.

The construction business systems may bevery different. "Perhaps the most radical in-novation in the UK construction industry for200 years is the introduction of concession con-tracting" (Winch, 2000b, p. 153), whereas con-cession contracting has been implemented inFrance since the 16th century.

The importance of the construction indus-try is declining. The built environment clusteris twice as large

The share of construction value-added inGDP is declining in all the countries, exceptPortugal and Lithuania. Bon (1997) and Rud-dock (1999) noticed the link between the levelof economic development and construction in-dustry weight. Most of the time, the construc-tion industry's share is declining in very de-veloped countries and is increasing in othercountries. The Portuguese and Lithuanian con-struction levels are lower than in the othercountries.

The general trend is simultaneous with therise of the tertiary sector. In several countries(France, Germany, UK), manufacturing indus-try also represents a declining share ofthe GDP.

Within this common trend, conjuncture maybe different from one country to another, de-pending on the construction business cycle. In1997-1999, construction value-added increased

% Australia France Germany Lithuania Sweden UK(2003) (2003) (2000) (2003) (1999) (2003)

Households 31 35* 25 59 14 24Firms 54 39 47 61 49Government 15 26 28 41 25 27

* households and real estate developers

Moving from Production to Services: a Built Environment Cluster Framework 179

in Australia, but shrunk in Canada, Swedenand Denmark. Even between two neighbouringcountries, construction cycles can be very dif-ferent. In 2000-2003, the cyclewas upward inFrance, but declining in Germany (see Fi-gure 3).

At the beginning of the 21st century, theconstruction industry share of GDP is around4 to 6 % in the more developed countries inthe study. The built environment cluster isabout twice as big as the narrowly-defined con-struction industry. In Canada, for instance,construction firms value-added was 5.4 % ofGDP in 1999. Building products, constructionequipment, design, technical services, built fa-cilities operation and maintenance count forabout 6 %.

The construction share of national employ-ment has increased in Portugal till 2000, but

not, until recently, in Lithuania. A construc-tion boom began in 2002 and has continuedunderpinned by favourable financial condi-tions. In the most developed countries, theshare of construction employment is steady(see Figure 4).

In the more developed countries of thestudy, construction industry employment rep-resents around 6 % oftotal employment (a littlemore in Australia). The built environment clus-ter employment is more than twice as big. Inthe Canadian construction industry, the work-force in 2000 was 900 000. Design and engi-neering employed 180 000, building productsand equipment 275000 and facilities servicesemployed 400 000. To these should be addedin-house construction and maintenance activi-ties, which represent roughly one-third of to-tal construction.

9% +---\-------cA---------------------j

8%

:~E~~si~i~~:~i~~~-~---=--~-~--S------;--~~~~~~~:~ Am - -;, ~.k---'--~=-- -~!::~=-:::.;;,;;..~:...:::::~::!I

-+- Australia

-+-Canada

Denmark

~France

-lIE- Germany

--.- Lithuania-+- Portugal-Sweden

-UK3% l----,._---,. __ ....,...._.,....-....,...._...,-__ ....,....--....,....-_----...,--!

R><:;) R>" R>'" R>"> * R>~ R>CO ~ R>CO R>C!> 5::><:;)5::>" 5::>'" ,,<:;)">~ 0 ~ ~ ~ ~ ~ ~ 0 ~ ~ ~ ~ ~

Figure 3. Construction value - added (construction firms only) share in GDP(1990-2003 constant prices)

_Australia__ Canada

Denmark--+<-- France__ Germany

-Lithuania---<- Portugal

--Sweden

--UK

4% L-_-_- -_- ---'

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Figure 4. Construction employment share (construction firms only)in national employment (1990- 2003)

180 J. Carassus et al.

Increasing importance of managing the exis-ting stock

Repair and maintenance represent morethan 45 % of construction work in most of thecountries studied. This percentage is lower inGermany and Canada, but is not less than23 %. However, it seems much lower in Portu-gal. Repair and maintenance activity is not aswell represented in the official statistics as newconstruction due to do-it-yourself activity andthe black economy. In Western Europe, it pro-bably represents half of construction works. Itis especially important in the housing sector(see Table 5).

Beyond repair and maintenance, managingthe existing stock is becoming a strategic is-sue for companies and government. The im-pact of Facilities Management and Public Pri-vate Partnership are strong signs of this trend.

For housing, the value of the existing stockis easy to assess. Non-residential buildings andcivil engineering infrastructures are difficultto evaluate and are often underestimated. Es-timation methods are not the same from onecountry to another. Total construction stockrepresents from 1.6 times (in Sweden) to 4times the GDP (in Germany).

Big companies coexist with a very frag-mented built environment cluster

Fragmentation of the construction industry

and the built environment cluster is a com-mon characteristic of all countries.

In 2000, in the European Union, the rela-tive importance of firms with less than 10 em-ployees firms varied from 82 % of the totalfirms (Germany) to 95 % (United Kingdom)(Ministere de l'Equipement, des Transports etdu Logement, 2003).

In Australia, 94 % of construction compa-nies had less than 5 employees in 1997. InCanada, 96 % of firms had annual revenue un-der Canadian $2M in 2000. This fragmenta-tion characterises the construction industry ina market economy. In Lithuania, which hasbeen moving from a planned economy to amarket economy, the number of constructionfirms exploded from 1 286 to 3 452 between1991 and 1999.

In 2001, in Europe, the part of the produc-tion of the companies with less than 10 em-ployees varied from 24 % (Italy) to 54 %(United Kingdom). The one with companieswith more than 250 employees accounted forbetween 8 % (United Kingdom) and 35 %(Spain). (Ministere de l'Equipement, des Trans-ports et du Logement, 2003).

Instead of speaking of the fragmentation ofthe cluster, should we not speak of differentia-tion of a cluster characterised by its adapta-tion to the local demand? Most of the time,building (it is less true for civil engineering)

Table 5. Newconstructionand repair & maintenance (percentagesofthe value ofthe total constructionproduction)

% Australia Canada Denmark FranceEstimate (1997)* (2000) (2003)

Portugal Sweden UK(2000) (2000) (2003}

Germany(1999)

Lithuania(2003)

36 41 33 41 51 28 68 25 43New constructionBuildingRepair & maintenance 38BuildingNew constructionCivil engineeringRepair & maintenance 6Civil engineering

21 38

36 1720

2 12 8 4 23**

36 23**34 34 6 53

15 1111 13 24 17

25 2 5

* No longer available in Canada - discontinued

** Figures for building include only residential R&M, and the figures for civil engineering include all non-residentialR&M (including commercial etc).

Moving from Production to Services: a Built Environment Cluster Framework 181

deals with local markets, local clients and lo-cal firms.

Whilst small firms prevail in the industry,the industry is also characterised by, at theother extreme, some very large companies. In2002, in Europe, two companies employed over100 000 employees (Vinci and Bouygues), andthirteen had a turnover of more than> 4.2 bil-lion. Most of those big companies have a "builtenvironment cluster" approach, including ser-vices activities. To get more recurrent profits,they develop road construction and mainte-nance, electricity works, concession contract-ing and facilities management.

7. LESSONS LEARNED ANDIMPLICATIONS

The built environment cluster approachbrings at least four major implications for stra-tegic management of construction firms andpolicy development.

Firstly, despite repeated efforts by govern-ments in many countries, the performance ofthe industry using measurements such as therate of productivity growth, levels of researchand innovation, training and process improve-ment, is often seen as poor. An important partof the explanation for this failure of industrypolicy was, in the past, a misunderstanding ofthe industry's extent, due to inadequate deter-mination of the size and scope of the buildingand construction industry, and the implicationof that for policy initiatives. The built envi-ronment cluster approach is a convenient ba-sis to build new performance indicators thatwill take into account the changing nature ofthe industry. The built environment clusterapproach highlights the need to improve sta-tistical data about construction and to linkbuilding and property economics. The maindeficiencies in statistical data concern the non-residential stock on the one hand and compa-

nies and government in-house construction andmaintenance departments on the other. Thesedeficiencies are crucially important, as, at thebeginning of the 21st century, one new role forthe construction industry is to improve the ef-ficiencyof this stock and its managing systems.Improving those statistical data will facilitateinternational comparisons. From an academicpoint of view, separation between building eco-nomics and property economics is becomingobsolete. Recent Public Private Partnershipcontracts, underline the needs of clients, deal-ing not only with design and build, but alsowith stock demolition, project financing andlong-term maintenance-.

Secondly, strategic management of construc-tion firms and projects requires an integrat-ing perspective from client needs, design, sup-ply of customized material and assemblies toservices for operations and maintenance - tak-ing into consideration the overall built envi-ronment cluster. The use of Web-based infor-mation and intelligent systems helps in devel-oping an integrative approach for the manage-ment of complex construction projects.

Thirdly, the built environment cluster ap-proach, based on the built facilities' life-eycleand its comprehensive players system, is anexcellent starting point for sustainable devel-opment analysis in the construction field.Safety, health and environmental issues willbe essential during the 21st century. Publicregulation is currently focused on new con-struction rules. The sector system analysisemphasizes the importance of existing stockfor real improvement in the safety, health andenvironmental issues. It gives a new frame-work for sustainable development, not only interms of analysis but also in terms of publicregulation.

Fourthly, a built environment cluster ap-proach is particularly helpful for understand-ing innovation processes and changes in the

1 See for instance the recently completed 705 Euros millions British Home Office contract involving HSBC and Bouygues.concerning the demolition of a property in London, design and build of new headquarters and housing estate, financingthrough bond loans and 26 years facilities management of the new property.

182 J. Carassus et al.

industry. We may briefly mention the key rolesof the following related sectors to construction:

Architects and engineers in designing newstructures integrating new materials and us-ing new construction equipment. Facility own-ers and managers in demanding new types ofbuildings or facilities for new functionality orusage as well as for improved performance inoperating and maintaining these facilities.Public authorities and policies in promotingimproved practices and products for securityand environmental aspects.

Manufacturing suppliers - with competitionfrom other material and suppliers - in devel-oping new construction products and services.Research and education institutions for ensur-ing development of a sustainable competitiveindustry, with the help of developing strategicknowledge, new technologies and highly skilledpersonnel.

Without taking into consideration these ac-tors, changes and improvement in the construc-tion industry can hardly be understood. Theseactors are closely linked and work together aspartners in a number of projects.

The built environment cluster analysis of-fers a framework which is the starting pointof new analysis taking into account the chang-ing nature of the construction industry at thebeginning of the 21st century.

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SANTRAUKA

PEREJIMAS NUO GAMYBOS PRiE PASLAUG1): {SISAVINTOS APLiNKOS KLASTERIO STRUKTURA

Jean CARASSUS, Niclas ANDERSSON, Artiiras KAKLAUSKAS,Jorge LOPES, Andre MANSEAU,Les RUDDOCK, Gerard de VALENCE

Statybos pramone jau nebera sutelkta i vieno produkto tiekima, t. y. j pastata ar fizine infrastruktiira, ° teikiadaugybe paslaugu ir siiilo tobulinti zmogaus aplinka, Pagrindines tendencijos, tokios kaip subalansuota statyba irsubalansuotas aplinkos apstatymas, yra susijusios su reiksmingais pokyciais. Tokie pokyCiai reiskia papildomus siospramones sakes vaidmenis ir naujq rodikliu, kuriais biitq galima jvertinti jos rezultatus ir ekonomin] poveik], poreiki.Siame darbe siiilomas naujas metodas, pagrjstas struktiiros sukiirimu viso statybos ir nuosavybes sektoriaus analizei -jsisavintos aplinkos klasteris. Tai dalis tarptautinio tyrimo, atlikto devyniose salyse: Australijoje, Kanadoje, Danijoje,Pranciizijoje, Vokietijoje, Lietuvoje, Portugalijoje, Svedijoje ir Jungtineje Karalysteje. Poreikis patobulinti statistiniusduomenis yra ypac pabreziamas sios pramones sakes aprepties didinimo kontekste. Sis naujas metodas tampa puikiuiSeitiestasku kuriant naujus rezultatyvumo rodiklius, kurie vertina kintanti pramones sakes pobiid], nustatant integracineperspektyva, suteikiancia pagrinda strateginiam valdymui, studijuojant subalansuota pletra statyboje ir siekiant suprastiinovacinius procesus ir pokycius, Visapuse statybos sakes veiklos perspektyva yra biitina ir politikos iniciatyvoms,ir strateginei firmu analizei.