Demographic Changes Result in Shifting Markets
manner. However, such firms may also see a level of vicarious liability that challenges their professionalism and profitability. They may find that in becoming a conduit of design services, rather than a provider of design expertise, they have created an uncontrollable competitor. The rapid change in technology and the cost pressures resulting from global competition may result in the dissolution of undercapitalized firms, and more consolidation of the industry may result. The increasing integration of design and construction, aided by information technologies, may be submerging the traditional design firm into an integrated project financing, delivery, and operation methodology run by financial and managerial consultants. Growing Reliance on Professional Expertise While the delivery system for professional services may be irrevocably altered in the next decade or less, the need for professional expertise would seem to intensify. Irrespective of how projects will be conceived and completed, there will be a significant increase in the world’s reliance on professional expertise as it is contained in U.S. design disciplines. To stay as independent entities, design firms will need to continue to create a new value proposition for their services. Firms will need to react to three significant factors that will affect their prosperity and stability. Sustainability The demand for creative design solutions incorporating innovative systems will increase. As energy costs continue their rise, the use of energy, both actively and as embedded in products, will increase the focus on green design. Concerns over climate changes will also emphasize efficiency and sustainability in design. The use of professional expertise in responding to the market demand, however, may result not only in an increase in professional liability claims from dissatisfied clients and facility users, but also in contractual, warranty, and statutory exposures that go beyond the scope of professional liability insurance coverage. Still, designing to an increased market acceptance or market demand for sustainable projects in a sustainable economy may represent the most profitable enhancement of professional services.
Demographic changes—the aging of the baby boomer generation born between 1946 and 1964, for example— will require a shifting of project types and create different patterns of facility use in the U.S. Each sector of the construction industry reacts to different demographic and accompanying economic changes. Surveys are published annually that look ahead to the relative strengths of building sectors based on demographic changes. In brief, while the decrease in both the percentage and the total number of adults in the 35-to-50 age category may result in some weakness in new construction markets, the huge growth in the 50-to-65 age category over the next five to ten years indicates that facilities for health care, assisted living, and even hospitality and hotel space will be needed. Expectations of shifting populations centers in the U.S. mean that demand for facilities in the South and West, especially housing, will outpace the rest of the nation. While the percentage increases between 2000 and 2030 in states such as Nevada and Arizona will be significant because of rapid growth on a relatively small base, California, Texas, and Florida will see the greatest demand in absolute numbers. According to U.S. Census projections for 2030, Nevada is expected to grow by 114% and Arizona by 109%, but together, California, Texas, and Florida will house over 30% of all U.S. citizens.
Financial Pressures Result in Project Delivery Changes
Change will not only be rapid, it is also expected to radically alter the way projects are financed, designed, and constructed. The transformation in the design and construction industry will require a shifting of roles. The financial pressure for timely and efficient project delivery— with significant negative consequences to those firms that cannot react productively to the pressure—will recast the industry. The stability of design firms will be increasingly challenged by the demand for new and remodeled facilities in the U.S. and the immense need for development around the world. Many firms may see a negative impact on their traditional operations, resulting from new global business process outsourcing initiatives and direct international competition. Some firms may see outsourcing as a viable method to cut costs and respond to client demands in a more timely
6 • From Risk to Profit - Benchmarking and Claims Studies
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