Why GMP should stand for Guaranteed Minimum Price
The Temporary Enterprise: Why Construction Demands Industry Transformation, Not Company Transformation
Abstract
The global construction industry manages approximately $10 trillion annually in capital projects, yet it remains the only major sector with declining productivity over the past four decades. While technology transformation has revolutionized manufacturing, information services, and countless other industries, construction continues to deliver buildings using methods fundamentally unchanged since the 1950s. This paper argues that traditional approaches to “digital transformation”—which focus on changing individual companies—are structurally incapable of solving construction’s fundamental problems because each building project constitutes a temporary enterprise with no persistent system of record. Drawing on primary research including 101 structured interviews with owners, designers, builders, and manufacturers, we demonstrate that no single system of record can persist across the lifecycle of a building project, that knowledge is systematically destroyed at project completion, and that industry-level transformation—rather than company-level transformation—represents the only viable path forward.
1. Introduction: The Paradox of Progress
Buildings are the world’s most essential physical network. They shelter humanity, enable commerce, house our institutions, and define our communities. Yet we still deliver them with 1950s-era methods. This stagnation squanders 40 percent of global energy, drains more than $10 trillion in capital each year, and delays the very spaces where life unfolds.
The construction industry now represents 13% of global GDP, making it the largest industry in the world economy. Despite this massive economic footprint, the industry has experienced a phenomenon unique among major economic sectors: sustained productivity decline. According to U.S. Department of Labor data tracking total factor productivity by industry from 1980 to 2022, construction stands alone as the only industry with declining productivity over four decades. During the same period, manufacturing productivity roughly doubled, and information services productivity increased by a factor of three.
This productivity paradox presents a fundamental puzzle. The same decades that saw construction stagnate witnessed unprecedented technological advancement: the personal computer revolution, the internet, mobile computing, cloud services, and now artificial intelligence. Construction companies adopted CAD software, then BIM (Building Information Modeling), then project management platforms like Procore, then countless point solutions for field operations, safety, quality control, and scheduling. Technology investment in the sector has been substantial and sustained. Yet productivity continued to decline.
The conventional explanation—that construction is simply resistant to change—fails to account for the evidence. This paper advances a different thesis: construction has a structural problem that company-level transformation cannot solve. The industry’s fundamental organizing unit is not the company but the project, and each project constitutes a temporary enterprise that forms, executes, and dissolves without leaving behind a persistent system of record. Any transformation strategy that fails to account for this structural reality is destined to fail.
2. The Anatomy of Failure: Empirical Evidence
2.1 Research Methodology
To understand the construction industry’s systemic challenges, we conducted 101 structured interviews between April and May 2025 with stakeholders across the building delivery ecosystem: 41 owners, 25 designers, 23 builders, and 12 manufacturers. These interviews generated approximately 2,450 pages of transcripts, with an average interview length of 42 minutes. The research captured perspectives across project types, geographies, and organizational scales to identify patterns that transcend individual circumstances.
2.2 The Scale of Value Destruction
The research findings reveal pervasive, system-wide value destruction. From the very outset, there is an expectation of failure: more than 70 percent of capital projects exceed budget, and 30 percent of schedules are not met. One builder summarized the industry’s waste problem starkly: “What we found was that on average, about 40 percent of capital dollars on a project are non-value-add, they’re wasted on inefficiencies in the supply chain, and that takes many forms.”
The industry loses an estimated $1.6 trillion annually to poor communication, rework, and misalignment. Projects routinely run 80% over budget and 20 months behind schedule. These are not outliers or exceptional cases—they represent the expected baseline performance of an industry that has normalized failure.
2.3 The Consensus on Root Causes
Across all four stakeholder groups, ineffective cross-team dialogue emerged as the recurring cause of waste. As one owner observed, “All problems in design and construction are social.” The challenges are not primarily technical—they are informational and communicative. The research identified eight consistent findings that illuminate the structural nature of these problems.
First, owners lack in-house project literacy. Many owners admit they cannot read plans or reconcile design intent with constructability. As one builder noted, “You see, that’s the problem, though, because they didn’t even know what they didn’t know to ask the right questions to prompt their consultant. Anyone can do it, but the owner lacked the necessary knowledge.”
Second, talent shortages slow decisions. Owners highlight a missing middle management layer and resistance to paying market rates for technical leadership, particularly in areas like BIM coordination.
Third, budgets and schedules drift without early scope control. Three-quarters of owner interviewees rely on guaranteed maximum price (GMP) or fixed-price contracts yet still face overruns. The contractual mechanisms designed to protect against cost escalation systematically fail.
Fourth, contractual misalignment fuels adversarial behavior. Designers and builders both cite risk-averse contracts that punish collaboration. The legal structures intended to assign responsibility instead create incentives for defensive behavior and information hoarding.
Fifth, lifecycle thinking is missing at the start of design. Facility managers are seldom involved early, leading to disjointed operations and maintenance outcomes. Buildings are optimized for construction rather than for the 30-50 years of operations that follow.
Sixth, designers and builders spoke about inconsistent, inaccurate, and outdated product information as a source of problems. Stakeholders describe how inaccurate product information and specifications undermine project success, create risk, and result in Requests for Information (RFIs) and delays.
Seventh, data handover falls into a digital void. Builders report that roughly 40 percent of owner-useful asset data ends up stranded in PDFs at project completion, never to be accessed again. The information that cost millions of dollars to generate becomes inaccessible precisely when it is most needed.
Eighth, there is consensus on communication as the root problem. Across all four stakeholder groups, ineffective cross-team dialogue is the recurring cause of waste. The technical problems are downstream symptoms; the upstream cause is consistent failure to share information effectively across organizational boundaries.
3. The Temporary Enterprise Problem
3.1 Film Production, Not Manufacturing
Many have thought about building a building as a manufacturing process. It looks much more like producing a movie. A temporary cast of players gathers, writes a script, films, produces, finances, and distributes—and then at the end of the project, all of the knowledge base is left behind and they start from scratch on the next production. Sure, some producers, actors, and writers work together frequently and develop best practices, but by far it’s mostly Groundhog Day.
This analogy illuminates construction’s structural uniqueness. A single building project may engage hundreds of companies to execute a single structure. The architecture firm, the structural engineer, the MEP (mechanical, electrical, plumbing) consultants, the general contractor, dozens of specialized subcontractors, material suppliers, equipment manufacturers, code officials, inspectors, and eventually facilities managers—each operates as an independent business entity that comes together temporarily for one project and then disperses.
Unlike a manufacturing company where the same organization produces the same product repeatedly, refining processes over time, construction creates a new organizational entity for each project. The “company” that builds a hospital is not the same “company” that builds the next hospital, even if some of the constituent firms overlap. The temporary enterprise forms, executes, and dissolves—taking its accumulated knowledge with it.
3.2 The Historical Context: From Master Builder to Fragmentation
Throughout history, there was no distinction between architects, engineers, and builders. An individual—the master builder—conceived of the form and materials of a building at the outset and followed it through until construction came to an end, taking responsibility for all challenges that arose during the project. This continuity throughout the life of a project is intuitively beneficial: engineering and construction requirements shape the approach long before ground is broken, and design decisions must be made until the final touches are in place. Many of the world’s great monuments, from the Parthenon to Brunelleschi’s Dome at the Florence Cathedral, were built this way.
The contrast between historical and modern construction timelines is stark. In 1931, the Empire State Building was built in 13 months—19 months including planning and demolition. In 2017, Salesforce Tower took 5 years to build—7 years including planning and demolition. The Empire State Building, at 102 stories, was delivered by a relatively integrated team working under a master builder model. Salesforce Tower, at 61 stories, required coordination among 30+ companies operating in specialized silos.
Over centuries, buildings became too complex for a single overseer. Modern building sciences—structural engineering, mechanical systems, electrical systems, fire protection, acoustics, and countless subspecialties—demanded expertise no individual could master. Complexity drove specialization, and specialization drove fragmentation. The unintended consequence was the loss of integrated orchestration that the master builder once provided.
3.3 The Impossibility of a Single System of Record
The Architecture, Engineering, and Construction (AEC) industry is one of the world’s most decentralized sectors. A single building project involves hundreds of stakeholders—architects, engineers, contractors, subcontractors, suppliers, code officials, and more. Each maintains their own “system of record,” from sophisticated platforms like Procore to spreadsheets and field notebooks. There is no single source of truth. Critical decisions happen in emails, text messages, and meetings—not in software.
This fragmentation is not a failure of technology adoption—it is a structural feature of how the industry operates. Each actor in the temporary enterprise has legitimate reasons to maintain their own systems. The architect’s Revit model serves different purposes than the contractor’s Procore instance, which serves different purposes than the subcontractor’s scheduling software. These are not duplicative systems that could be consolidated; they serve fundamentally different functions for different stakeholders with different contractual responsibilities.
The dream of a single, authoritative system of record across all actors and phases is structurally impossible for three reasons. First, governance, liability, and authority are distributed across independent organizations, each with their own fiduciary responsibilities and legal exposure. Second, different phases of the project require fundamentally different types of information management—programming, schematic design, design development, construction documents, bidding, construction, commissioning, and operations each have distinct data requirements. Third, the temporary nature of the enterprise means that any system of record would need to persist beyond the organizational relationships that created it.
4. The Failure of Company-Level Transformation
4.1 The SaaS Paradigm and Its Limits
Most mainstream Software-as-a-Service (SaaS) applications function as archival systems of record rather than systems of decision. In domains characterized by heterogeneous actors and non-linear workflows—exemplified by building design and construction—there can be no single, authoritative system of record. Organizations invest heavily in SaaS platforms to structure work, yet critical decisions continue to be negotiated and finalized in email, chat, and meetings. The result is a persistent gap: decisions happen “here,” while records live “there.”
The distinction between systems of record, systems of engagement, and systems of decision illuminates why technology investment has failed to improve productivity. Systems of record provide persistence, compliance, and audit capabilities—but they lag real-time decision-making. Systems of engagement—email, Slack, Teams, meetings—are where ambiguity is processed and agreements are forged, but they are ephemeral, unstructured, and siloed. The missing investment is in systems of decision that operate where conversations occur.
Traditional SaaS solutions treat AEC projects like other industries. They create static systems of record designed to archive completed work, not support real-time decision-making. Worse, they force 100+ project stakeholders to input data into unfamiliar systems, creating adoption barriers and generating data paralysis rather than intelligence.
4.2 The Digital Transformation Trap
Despite decades of software solutions promising transformation, the fundamental problems persist. Existing solutions like BIM and Procore attempted to solve fragmentation through platform dominance: force everyone into a single system. These platforms create adoption barriers, force unfamiliar workflows, and generate data paralysis rather than intelligence. The result is another system to manage, not a solution.
The problem is structural. Every building project involves 100+ independent stakeholders—architects, engineers, contractors, subcontractors, suppliers, and inspectors—each with their own systems, workflows, and incentives. No single entity has the authority to mandate a solution across all actors. You cannot force behavior change across a fragmented, dynamic ecosystem.
The deployment of technology in the design and construction space has digitized manual processes while entrenching existing inefficiencies and deepening those silos. The technological solutions deployed lack quality and novelty, partially because data in the industry is retained by professional service firms—not necessarily to create the best product, but to protect intellectual capital and minimize liability.
4.3 Why Process Reform Has Failed
There have been attempts to create new design and construction methods, such as Design-Build, Progressive Design-Build, Integrated Project Delivery, and more. These have had incremental success. Industrialization of the building industry has also resulted in isolated achievements, whether for a specific building type (e.g., housing) or a building system (e.g., mechanical, electrical, or plumbing). However, these successes do not scale because the knowledge is project-specific, and the people deploying the knowledge cannot scale like technology.
Clayton Christensen observed that “the reason why it is so difficult for existing firms to capitalize on disruptive innovations is that their processes and business models that make them good at the existing business make them bad at competing for the disruption.” Construction epitomizes this dilemma: the incentive structures that keep projects afloat in a fragmented environment obstruct the more profound changes necessary to drive genuine efficiency and reliability.
Modern technological tools—CAD/BIM software, project management platforms, and field-based point solutions—have produced only incremental improvements because they reinforce legacy workflows rather than unifying them. Attempts to modernize processes offer only incremental gains because they cannot overcome the persistent communication and information gaps whenever multiple specialties work without a single orchestrator.
5. The Information Gap Problem
5.1 Failure Starts at Inception
Building projects fail at the beginning when scope is poorly defined. Owners cannot effectively understand scope, price, and budget ahead of hiring design and construction teams. This early misalignment cascades downstream, resulting in delays, cost overruns, and rework that compound throughout the project lifecycle.
The problem is informational. When an owner initiates a project, they typically know what business outcome they need but not how that translates into building requirements. The gap between business need and technical specification must be bridged by professionals—architects and engineers—who are hired after the project begins. But the process of translating requirements generates the information needed to accurately price and schedule the work. By the time accurate information exists, major commitments have already been made.
5.2 The Cascade of Information Gaps
At the heart of current failures is the lack of integrated orchestration. Each stage—Programming, Design, Construction, Operations—passes incomplete information to the next, forcing participants to fill in details midstream. Because so many players operate in silos, the same pieces of data are often re-created or revised repeatedly.
The gaps of information between Programming, Design (and within design phases), Construction (and within construction), and Operations create vast amounts of waste in how information is shared, often duplicating efforts for multiple members of the same team. Within each step, there is an interaction of information and communication to fill in the blanks. Much of this happens while the project is under construction, when all pricing leverage has been lost because the contractor is already selected.
It is common for a contractor to low-bid a job and then make up profit on change orders. The change orders are typically the result of a lack of information—missing design details or coordination issues discovered late. These changes are commonly caused by the owner’s belief in the need for silos rather than an integrated approach where information can be shared and leveraged by all parties.
5.3 The Digital Void at Turnover
When projects complete, owners rarely possess the information needed to operate and maintain their buildings for 20-50 years. Design intent, equipment specifications, assembly instructions, and performance data are scattered across PDFs, never to be accessed again. Each project becomes a film production with a temporary cast that disbands at completion.
Owners pay hundreds of millions of dollars to construct a building but lack data and information to manage the building for its lifecycle. Builders report that roughly 40 percent of owner-useful asset data ends up stranded in PDFs. The handover process—when the building transitions from construction to operations—represents a systematic destruction of project knowledge.
This is not merely an inconvenience. The operational phase represents the vast majority of a building’s total lifecycle cost and environmental impact. Decisions made without access to design intent and as-built conditions lead to suboptimal maintenance, premature equipment replacement, and higher operating costs. The information that could enable better decisions exists—it was created during design and construction—but it is effectively inaccessible.
6. The Case for Industry Transformation
6.1 Distinguishing Industry from Company Transformation
Company transformation focuses on changing how an individual organization operates—its processes, technologies, culture, and capabilities. Industry transformation focuses on changing how organizations interact with each other across the value chain. In most industries, company transformation can yield significant results because the company is the primary unit of value creation. In construction, the temporary enterprise is the primary unit of value creation, and no single company controls it.
This distinction explains why construction has been so resistant to improvement despite substantial technology investment. When an architecture firm adopts new software, it may improve that firm’s internal efficiency—but the firm represents a small fraction of the temporary enterprise. The gains cannot propagate across organizational boundaries because each organization in the temporary enterprise operates independently.
Industry transformation requires changing the interactions between organizations, not just the operations within them. It requires solving problems that no individual company has the incentive or authority to solve alone.
6.2 The Information Orchestration Imperative
Change will happen when there is a single orchestration of information—not necessarily a single system of record owned by one company, but an orchestration layer that bridges the fragmented systems that each stakeholder legitimately maintains. The ability to answer all the questions upfront instead of through iteration would solve massive information gaps.
The construction industry needs systems of decision that operate within systems of engagement and bind back to multiple records. This approach automatically captures decision rationale and reduces decision latency without imposing unrealistic process unification. Rather than forcing everyone into a single platform, effective decision support must occur where conversations already happen.
The path forward is not to force unification but to strengthen systems of decision that operate within systems of engagement, binding conversations to the federated systems of record with timely context, explainable recommendations, and durable rationale. This reframes technology from archival endpoints into active participants in the moment decisions are made.
6.3 Learning Across Enterprises
The structural challenge of the temporary enterprise creates an opportunity: if information could persist across projects, the industry could learn at scale. Each completed project generates knowledge about what works, what fails, what costs what, and how long things take. Currently, that knowledge dissipates when the temporary enterprise dissolves.
An industry transformation approach would capture knowledge from each project and make it available to future projects—regardless of which companies participate. This creates a learning loop that no individual company can create alone. Project-specific knowledge becomes industry knowledge, and each new project benefits from the accumulated intelligence of all previous projects.
This represents a fundamental shift from optimizing individual companies to optimizing the interactions between companies. It requires technology that adapts to existing workflows rather than forcing behavioral change, that captures information where it naturally flows rather than requiring manual entry into unfamiliar systems, and that persists beyond the lifecycle of any single temporary enterprise.
7. Implications and Recommendations
7.1 For Building Owners
Owners sit at the center of the construction ecosystem. They are the only participants present from project inception through decades of operations. This persistence gives owners unique leverage—and unique responsibility—to drive industry transformation.
Owners should recognize that they contractually own the project data, even when that data is generated by designers and builders. Establishing clear data ownership expectations and handover requirements at project inception can help ensure that knowledge persists beyond construction completion. Owners should demand transparency into project communication and decision-making, not just outcomes.
Most importantly, owners should understand that their individual interests align with industry transformation. Better information flow, clearer decision-making, and preserved knowledge benefit every project. Owners willing to invest in these capabilities will see returns in reduced cost overruns, shortened schedules, and buildings that perform better throughout their operational lives.
7.2 For Technology Providers
Technology providers serving the construction industry should reframe their approach from company transformation to industry transformation. This means designing for interoperability rather than platform dominance, for decision support rather than record-keeping, and for intelligence extraction from existing workflows rather than workflow replacement.
The most impactful technology will meet teams where they work—in email, in chat, in meetings—rather than requiring them to work in unfamiliar systems. It will translate between the different “languages” spoken by owners, designers, builders, and operators. It will persist beyond individual projects to enable learning across the temporary enterprises that constitute the industry.
7.3 For Policymakers and Industry Bodies
The construction industry’s productivity problem has macroeconomic consequences. Buildings consume 40% of global energy and represent the largest category of capital investment. Improved construction productivity would accelerate infrastructure development, reduce housing costs, and contribute to climate goals.
Policymakers should consider the structural barriers to improvement when designing regulations and incentives. Building codes that evolve without consideration for information continuity impose hidden costs. Procurement practices that optimize for lowest bid rather than lifecycle value perpetuate adversarial relationships. Insurance and liability frameworks that punish collaboration undermine the coordination that complex buildings require.
Industry bodies and standards organizations have a role in establishing common data formats, shared taxonomies, and interoperability protocols that enable information to flow across the boundaries of temporary enterprises. These are collective action problems that individual companies cannot solve alone.
8. Conclusion: The Path Forward
The construction industry’s four-decade productivity decline is not a failure of technology adoption, process reform, or management attention. It is a structural consequence of an industry organized around temporary enterprises with no persistent system of record. Each building project creates a new organizational entity, executes, and dissolves—taking its accumulated knowledge with it. Traditional approaches to transformation, which focus on changing individual companies, cannot solve problems that emerge from the interactions between companies.
Industry transformation—rather than company transformation—offers the only viable path forward. This requires technology that orchestrates information across organizational boundaries without requiring process unification, that captures decisions where they are made rather than requiring transcription into unfamiliar systems, and that enables learning across projects rather than within them.
The prize is substantial. The industry loses $1.6 trillion annually to poor communication, rework, and misalignment. Forty percent of capital dollars on the average project are non-value-add waste. Buildings are delivered late, over budget, and without the information needed to operate them effectively. These outcomes are not inevitable—they are the predictable result of an industry structure that systematically destroys knowledge.
At the heart of successful projects, people communicating and collaborating are what delivers the best outcomes. The root cause of failures is the lack of integrated orchestration of process with clarity of end goals and methods for executing them. The technology exists to provide this orchestration. The question is whether the industry will adopt an approach that changes not just how companies work, but how they work together.
The construction industry stands at a turning point. As capital projects become more complex, more regulated, and higher-stakes, the costs of the current approach will only increase. The opportunity lies in recognizing that the fundamental problem is structural—and that structural problems require structural solutions.
References and Methodology Note
This paper draws on primary research conducted in April-May 2025, comprising 101 structured interviews with industry stakeholders: 41 owners, 25 designers, 23 builders, and 12 manufacturers. Interviews averaged 42 minutes and generated approximately 2,450 pages of transcripts. The research methodology prioritized capturing perspectives across all major stakeholder groups to identify patterns that transcend individual circumstances or organizational viewpoints.
Industry statistics on productivity trends are drawn from U.S. Department of Labor data on Total Factor Productivity by Industry (1980-2022). Project performance statistics are compiled from multiple industry sources including academic research on construction project outcomes. The historical comparison between the Empire State Building and Salesforce Tower construction timelines is based on publicly documented project records.
This paper is intended to advance understanding of structural barriers to construction industry productivity and to promote dialogue about industry-level transformation approaches. The analysis and recommendations reflect the authors’ interpretation of primary research and industry data.