1: External Threats
1. Transformation of the Economic Development Model
In the “Twelfth Five Year Plan,” it is clear that adjusting the industrial structure, transforming the development model, and deepening economic reform are no longer mere slogans. The central government is willing to accept a slower GDP growth rate to deepen reforms, signaling an irreversible shift from investment-driven to technology-driven economic growth. Real estate and urban infrastructure investments will gradually slow, impacting the construction and consulting industries closely tied to these sectors. Consequently, the number of engineering projects will decline, intensifying market competition.
2. Changes in Consulting Business Models
Historically, most cost consulting firms relied heavily on customer relationships for marketing. The new government leadership’s anti-corruption campaign is not a passing trend but a long-term policy that will profoundly impact various industries. This will reshape the business models of cost consulting firms, weakening relationship-based markets and shifting the focus toward survival through quality service.
3. Growing Competition from Foreign Consulting Firms
Previously, foreign consulting companies were thought to be limited to foreign investment projects, while domestic firms focused on government and private investments. However, foreign firms such as Libi, Weining Xie, and Weilixin have started to capture the high-end domestic market, participating in projects for major enterprises like Greenland, Vanke, Wanda, and Greentown. Some have even entered government investment projects. The presence of these “wolves” in the market is now undeniable.
2: Internal Challenges of Engineering Cost Consulting Firms
Engineering cost consulting firms are knowledge-driven enterprises where talent is the core asset. Currently, there are three main talent-related challenges: scarcity of skilled professionals, low professional standards among employees, and issues with integrity.
Talent Shortage
The cost consulting industry is labor-intensive, requiring substantial manpower for inventory preparation, on-site tracking, auditing, and settlement reviews to meet project deadlines. An analysis of registered cost engineers and government audit projects in Nanjing shows that only 70-80% of these engineers are frontline workers, averaging about 8-9 per firm. This staffing level only meets city-level demands and is insufficient for district or enterprise projects, resulting in a shortage of qualified personnel. This leads to situations such as uncertified personnel working on projects or certified engineers lacking assigned roles.
Most firms rely on external recruitment rather than in-house training, considering training costly and slow. This has led many firms to become “training grounds for novices.” Due to industry characteristics, few firms have specialized HR management or experience in talent retention, causing high turnover and talent scarcity—major barriers to industry growth.
Low Professionalism
The overall professional level remains low, limiting the value delivered to clients. Engineering cost consulting requires creativity and a blend of expertise in engineering, economics, law, and management. However, low-level services fail to attract highly educated talent, and practitioners’ quality does not meet industry needs. Heavy workloads and performance-based pay structures discourage investing time in training, while existing training programs often appear theoretical and impractical. This focus on immediate returns hinders the development of comprehensive professional skills and restricts expansion into new business areas.
Integrity Issues
Talent integrity is another significant challenge. Employee loyalty is weak, and maintaining long-term employment relationships with skilled staff is difficult. Current labor contracts offer limited protection for integrity, and the low cost of dishonest behavior threatens sustainable operations. Given the discretion cost engineers have over project costs, especially amid frequent changes and material substitutions, this poses risks to firms.
Low-Level Competition
This is evident in low-value services, low-end service types, and underpriced contracts. Over the past 15 years, the industry has only transitioned from manual calculations to pricing software, with graphic calculation software used for about eight years. Despite shortcomings, domestic firms lag behind foreign counterparts, who employ advanced management systems and extensive data libraries to rapidly estimate costs and analyze data. Most domestic firms operate like assembly lines, with cost engineers functioning as cost workers, unable to meet high standards demanded by major developers. This has led to fierce price wars due to a lack of research on consulting products, advanced technologies, and valuable services like early-stage investment cost planning, value engineering, and cost management.
Weak Theoretical Research
Cost consulting agencies should combine consulting and research functions, but both firms and individuals neglect R&D, and the industry lacks emphasis on innovation.
Small Scale and Low Business Level
For example, in Henan Province, no independent cost consulting agency has revenues exceeding 100 million yuan, and only a few have over 100 employees. The low entry barriers have led to many firms, but even among those with equivalent qualifications, there is vast disparity in strength, service quality, and scale. The top ten firms account for only 5% of total industry revenue, indicating low concentration.
Poor Internal Management
Two main issues exist: unclear quality monitoring standards make operational consistency difficult, and firms lack motivation to adhere to standards, resulting in a “good enough” attitude. This leads to irregular management, inability to standardize workflows, and excessive arbitrariness.
3: Industry Integrity
Enterprise Integrity
As impartial intermediaries, cost consulting firms face increasing issues with dishonesty. Some firms bid low prices to secure contracts, devaluing the industry and harming development. Others violate ethics by profiting through unethical means while competing on price, damaging the industry’s image. Weak penalties, incomplete social integrity systems, and low costs of dishonest behavior encourage risky conduct, leading to inefficient “dual track” verification and resource waste.
Cost Engineer Integrity
The personal integrity of cost engineers is challenged by their discretionary power over project costs. Factors such as vague industry standards, high appraisal costs, lax management, and improper incentives contribute to misconduct like abuse of power and intentional cost inflation. Their strong professionalism makes dishonesty hard to detect, with higher-level engineers sometimes becoming “counterfeiters.” The main issues are weak risk awareness and poor responsibility.
4: Countermeasure Analysis
1. Impact of Information Technology on the Cost Industry
Information technology offers three major benefits: reducing service costs, improving service quality, and enabling differentiated services. Despite widespread recognition of its importance, the industry remains passive toward informatization, often due to high upfront costs and intangible benefits. The engineering cost industry, being information- and knowledge-driven, clearly requires informatization, which mainly manifests in three areas:
(1) Modernization of Consulting Tools: The industry has evolved from manual calculations to pricing software and graphic computing. With BIM technology, cost engineers can perform graphical quantity analysis, improving efficiency, accuracy, and communication.
(2) Enterprise Management Informatization: Implementing Enterprise Resource Planning (ERP) systems standardizes administrative and business processes, reducing personal discretion, improving fairness, and enhancing integrity. It also enables virtual office spaces, allowing work from anywhere with internet access, thereby boosting efficiency.
(3) Big Data Mining and Utilization: The industry has traditionally relied on individual experience stored in employees’ minds, leading to significant data loss when staff leave. Companies currently underutilize data such as market prices and budgets. Developing scientific data systems and leveraging modern technologies can increase data value, improve consulting quality, and require collaboration with software firms to develop management systems that facilitate information management and data processing.
Key Factors for Successful Information Construction
- Adhere to the “One Line” Principle: Avoid parallel online and offline operations; delay hinders informatization.
- Top Leadership Involvement: Success depends on active participation and determination from enterprise leaders.
2. Breaking Traditional Mindsets and Cultivating Talent-Friendly Environments
(1) Talent Development: Authorities and industry associations should increase continuing education and vocational training, while firms should implement internal training and evaluation systems. Training should focus on core pricing knowledge, broadening expertise, and expanding skills in laws, regulations, preliminary consulting, and bidding. Enterprises are central to talent cultivation and must offer career development, compensation incentives, and emotional retention. Collaboration with universities and research institutions is vital to establish internship bases and practical evaluation systems to ensure sustainable talent supply.
(2) Talent Retention: Many enterprises adopt a utilitarian approach, paying only for talent without investing in development due to fear of turnover. Industry regulators should facilitate orderly talent mobility and promote paid transfer systems to encourage investment in talent development, which in turn reduces turnover and fosters healthy growth.
(3) Consulting Billing Model Reform: The current model charges based on project scope, ignoring consultant time, causing resistance to tracking audit projects requiring onsite personnel. A shift to a time-based billing model, similar to engineering supervision, with differentiated rates based on consultant expertise, would better align investment and income.
3. Encouraging Technological Innovation
(1) Incorporate scientific research capacity into consulting firms’ credit assessments, evaluating the number, quality, and impact of research projects.
(2) Expand school-enterprise cooperation beyond talent cultivation to new service product R&D, leveraging firms’ data resources and universities’ research capabilities.
(3) Attract highly educated professionals and strengthen high-level talent training through provincial associations, establishing expert teams.
(4) Promote customized, private consulting services that deliver valuable homeowner benefits.
4. Building an Integrity System
(1) Include integrity topics in engineer certification exams and continuing education.
(2) Use enterprise information systems to limit cost engineers’ discretion, increase process transparency, and build social trust.
(3) Strengthen penalties for dishonesty and raise its cost. Industry supervisors and associations should enforce stricter sanctions and establish an insurance system to cover losses caused by consulting. Foreign firms often operate as partnerships with unlimited liability, and insurance mechanisms protect industry integrity by financially penalizing dishonest behavior.
(4) Improve professionalism across four areas: skills, image, attitude, and ethics. Currently, professionalism is low. Enhanced training and IT adoption can improve skills and image, while talent transfer systems can foster better attitudes and ethics. Cost engineers will strive to raise professional standards and preserve their value.
Looking Ahead: Key Focus Areas for the Next Decade
- Resource Integration: Success depends on the ability to integrate resources and channels.
- Leveraging Information: Competing on order and speed in the information society.
- Lifelong Learning: Staying current prevents being left behind.
- Mindset Change: Adapting to the times and trends is essential.
For example, the 2014 priorities of the Standard Quota Department of the Ministry of Housing and Urban-Rural Development include completing reform work, assessing the impact of replacing business tax with VAT on construction valuation, adjusting cost bases, researching pricing systems and BIM impacts, promoting informatization, and enhancing practitioner professionalism.
In summary, whether facing internal or external challenges, only by strengthening our own capabilities can we adapt to the rapidly changing market. Industry development leads to market recognition, which in turn validates cost engineers’ value. Individual integrity does not equal company integrity, nor does one company’s integrity define the whole industry. Similarly, one firm’s informatization does not mean industry-wide informatization. As the saying goes, to change your pocket, you must first change your head. In the coming decade, all cost firms and practitioners must confront challenges together and seek common growth.
Must log in before commenting!
Sign Up