Buildoffsite – Written evidence (OMC0036)

Background on offsite methods

There are many forms and descriptions of offsite construction but the common denominator involves elements of construction projects that would normally take place on a construction site using a set of commodity products, being manufactured in factories using modern manufacturing methods and technologies. Given the right investment and with sufficient market demand there is no reason why the manufacture of offsite elements should not match the levels of productivity achieved in the automotive, aerospace or consumer goods industries.

There are numerous forms of offsite construction but the common examples include walling, flooring, ceiling and roofing systems, building services, glazing and cladding systems, modules/volumetric and pods. The degree and quality of fit out will depend on client requirements. Understanding of offsite terminology is generally poor across many in the client and traditional contracting community. Buildoffsite has produced Guidance on Terminology

To date very few buildings and structures are constructed wholly through offsite methods. Most construction projects will include some use of offsite methods to deliver elements where quality, accuracy and assured delivery are business and project critical. However, in most cases much of the construction will still be delivered on site by constructors through traditional methods.

How big is the offsite industry?

Frankly we don’t have access to accurate numbers. Government stopped collecting data some years ago. It would be most helpful if robust data was available. However, Buildoffsite’s experience in this area has demonstrated that efforts to collect and analyse such data need to be well designed to avoid double counting projects e.g. from customer, main contractor and specialist contractor perspectives

We believe that almost all offsite production is being applied to new build projects. Our best guess is that over the last 10 years or so the use of offsite construction has grown from virtually nothing (around 2%) to approaching something like 10% of the new build market. Rapid growth is continuing as the industry and clients become more aware of the benefits of offsite methods and more comfortable to switch over from traditional methods.

Background on Buildoffsite

Buildoffsite is a unique non-commercial organisation set up almost 15 years ago with the support of Government to promote improved understanding of the potential for offsite solutions to increase the quality, sustainability and performance of the UK construction industry and delivered built assets in all markets. In line with the rapid increase in client and industry acceptance of the benefits of offsite solutions the Buildoffsite role is now also focusing on enabling the innovative use of offsite solutions to meet the developing needs of clients.

The Buildoffsite Membership brings together organisations from across the supply chain and the client communities to share knowledge and best practice in the use of offsite construction methods, to collaborate on innovation, to showcase leading edge examples of game changing applications of offsite construction and also to challenge the supply chain to continuously improve. Buildoffsite promotes the intelligent application of offsite solutions through its programme of events, through publication (all media), in discussion with a wide range of industry and public organisations and through industry activities.

Our work to help make the case for offsite solutions also regularly embraces the issues and questions raised by the Select Committee.

Our Evidence

Informed by our 15 years of experience working with some of the UK’s most innovative construction clients and offsite suppliers we would like to respond to your invitation to submit evidence - as follows:

Question1: Construction is a manufacturing industry and for the most part the construction process is still dominated by traditional construction trades working on site. The inevitable consequence of reliance on traditional methods is the intractably low levels of productivity of the industry, inconsistent and often poor first time quality of build and buildings and structures and a performance in use that often fails to match the performance requirements set out in project specifications. The construction industry is still characterised in terms of projects that generally run late, generally overspend and deliver poor value for most clients.

Alongside the adoption of digital engineering, DFMA and lean production methods, the adoption of offsite construction methods with manufacturing taking place in controlled factory conditions offers the best opportunity to ensure product quality, predictability of cost and delivery, minimise waste of all types and to boost productivity. Lower costs will follow as designs are refined, supply chains invest and the offsite industry is able to operate at scale.

The primary drawback is that investing in offsite factories is an expensive business that may be difficult to justify when in most cases sales are not assured. Multiple routes to market are essential for such enterprises to be sustainable.

For the shift to offsite there needs to be a compelling reason to change. In many cases the offsite proposition has not been sufficient to convince a risk averse and sceptical industry to try new solutions, except in areas where there is a compelling business need e.g. Prisons/Airports/Utilities – looking to minimise site labour for security reasons. Retail, hotels and student living – where highly repeatable designs are acceptable and rapid completion to a high standard is a business imperative to deliver revenue flows as soon as possible.

The Buildoffsite website (www.buildoffsite.com) contains case studies that demonstrate that offsite enabled construction is considerably faster and of better quality than comparable traditional forms of construction.

Key influences on the decision to use offsite:

• The cost and availability of good quality traditional labour is an increasing problem for contractors. As skilled labour becomes scarce and costs increase: the attractiveness of offsite solutions which minimise the residual need for onsite traditional labour is increasing.
• A client requirement for rapid project delivery will drive the take up of offsite.
• The need for improved security (fewer people on site) and safety will drive higher levels of offsite.
• A client need for higher build quality and greater assurance of performance tips the balance towards offsite. Particularly for clients who have a long term interest in the performance of their assets, their longevity and performance in use. An emerging industry and public policy issue is the disconnect between design performance of traditionally built assets and performance achieved in practice.

An offsite approach will ensure a much closer link between digital models and as built construction with implications for certainty regarding performance of the completed construction in use. Materials and other wastes will also be substantially reduced.

The widespread use of offsite methods along with digital engineering, a DFMA approach to design and construction, and the application of lean production techniques to drive efficiency into construction processes provide the key to bring about a step-change in industry productivity.

Drawbacks:

• The up-front cost of setting up a factory with no assurance regarding sales
• Ongoing lack of awareness of offsite solutions and the value to be gained from rethinking the design and construction process among clients, designers and constructors
• Unless driven by a demanding client there may be few incentives for designers and constructors to change practice – particularly if market conditions are benign and decision taking individuals are unwilling to adopt new ways of working.
• Getting the best out of offsite solutions requires a more planned, better organised, more intelligent approach to design and project delivery.

Question 2: For the most part there is plenty of evidence for faster delivery, improved quality and lower construction cost through published Case Studies.

However, increased productivity may be more difficult to demonstrate because in most projects the specific benefits of offsite may be masked by the overall performance where the bulk of the construction is still being delivered by traditional means. Achieving increased productivity in a factory environment is easier to achieve with the availability of substantial production runs which may be available only on the largest projects where the client (usually through a main contractor) is willing to enter into a long term supply relationship eg Hinkley Point C. Factory productivity is driven by good manufacturing systems design which is well aligned with market requirements. However, even the most productive factories cannot remain viable if there are significant boom / bust periods in construction

Regarding Health and Safety the HSE has indicated that they regard an offsite approach to construction based on fewer people working on site, reduced requirements for working at height and a factory approach to construction as most likely to deliver substantially improved H&S outcomes – including improved occupational health. This accords with the evidence from UK manufacturing industries

The use of offsite methods is likely to have the potential to increase housing supply where the benefits of offsite approach can be delivered at scale.

For established social housing investors (eg Homes England, LAs & HAs) willing to take ownership of the full investment, rather than relying on private developers, there will be a direct cost benefit from offsite solutions as repetition of build improves delivery and leads to reduced programme and cost.

The link between construction methods and affordability of housing is complicated and is unlikely to be impacted significantly as a consequence of the selected construction method. However, build quality and performance in use are likely to benefit from offsite enabled construction. Efficient construction is a means to delivering value from a land bank for many developers. The lower the construction cost for a given market price, potentially the higher the land value rather than a lower price for a building.

Question 3: Offsite methods are unlikely to be cost effective alternatives for traditional methods for one-off small scale projects or where the design is still to be settled (until there are a range of suitably configurable products and systems available in the market that can be economically manufactured with small batch sizes). In particular this is likely to be the case where clients and constructors are less interested in the wider benefits of offsite but are focused mostly on first price.

There are probably still too few offsite manufacturers able to offer customisation to meet the specific needs of projects although this situation is changing as more agile manufacturing techniques are being introduced.

Capacity and resilience of the offsite supply side is also a potential drawback. The offsite supply side is still small although new entrants are coming on stream. Clients and constructors will usually look to manage risk on the largest projects by contracting with suppliers who have the capacity and balance sheet to give confidence that they will be able to deliver the contract. As a relatively new industry there are still too few offsite suppliers able to operate at scale.

Current forms of contract that provide for offsite suppliers to be paid only when the works are complete can also create significant financial difficulties for smaller manufacturers.

Design and build type contracts put the detailed decision making in the hands of the main contractor and sub-contracting work to a manufacturer may lead to reduced margin opportunities for their business ie self-interest working against best methods.

Clients and their commercial advisers tend to ask for designs, which can be constructed by multiple suppliers using traditional methods so as to ensure competitive tension. This puts the offsite suppliers at a disadvantage as they need to respond with a redesign and a “non-compliant” offer in challenging tendering time frames.

Routinely tendering packages can effectively prevent clients and supply chains working with each other to improve productivity and performance over time. Supply chain development is under-developed in the construction sector, probably due to the nature of contracts used and the way in which clients need to demonstrate value for money in regulated industries.

Increasing interest in collaborative forms of working is a positive trend in this area. The Government could drive supplier development through its contracts in a similar way to its stimulation of the use of Building Information Modelling (BIM) in public construction projects.

Question 4: The use of offsite methods is not simply an alternative to traditional means of construction.

The use of offsite methods in association with a DFMA approach to design and construction and adoption of lean methods for project delivery have in combination the potential to bring about radical transformation in the productivity of the UK construction industry.

With an industrialised approach, shifting away from artisan trades, there is the potential for much more rapid training of ‘assembly’ operators that skilled crafts people. This is achievable in a matter of weeks versus the years for tradespeople. The reskilling that is required will have as much impact on clients, designers, consultants and constructors as it does on the industry work force. Increased awareness and understanding of offsite needs to embrace the entire industry if the use of offsite is to increase on site.

The Professional Institutions are starting to introduce an awareness of offsite into professional training and development but more needs to be done. CITB are also looking to increase the provision of offsite training at management and technical level. Buildoffsite is supporting these developments and is involved in the Offsite Management School - now part of The Supplychain School.

Question 5: There is plenty of evidence in the form of Case Studies that provided there is early project engagement between the design team and offsite suppliers the relevant architectural ambitions of the client and the design team can invariably be met. Clients can play a key role in establishing positive relationships and Buildoffsite has produced guidance for clients.

However, it needs to be noted that many elements of the construction will not necessarily require special architectural consideration. For example many house builders have a “type approved” catalogue of house designs, which could be delivered using offsite methods.

Similarly the repetitive nature of student accommodation, hotel rooms and prison residential wings has meant that offsite manufacture has been the dominant delivery method in these markets.

Factory production should be capable of delivering optimised solutions combining different materials and associated technologies. This should unlock design flexibility and innovation.

Many very tall buildings (towers) and long buildings (e.g. airport piers) contain a lot of repetition of structure and content, which in turn opens up opportunities for offsite manufacture and associated cost savings.

The paradigm that offsite will stifle aesthetics is as untrue in construction as it is in the fashion industry: There will always be an appetite for iconic ‘haut couture’ buildings but that should not mean that there is not a high quality aesthetic on the high street for mass scale housing, schools and infrastructure.

This can be achieved by the supply chain investing time to understand what their chosen markets value in terms of design before the tender stage and demonstrating how their technical solutions can be customised to supply. There is no one offsite solution for all construction projects; just as there is no one solution for clothing retail.

Question 6: Offsite manufacturers and technology providers such as those offering digital engineering technologies are already investing significantly in offsite methods and manufacturing capacity. Research is needed to provide evidence of the tangible benefits of offsite methods compared to traditional methods. Buildoffsite is currently involved in an evidence gathering and assessment project in collaboration with the Construction Industry Research and Information Association.

However, it is often the case that even an authoritative evidence base is insufficient to convince clients and their consultants to change.

There is a sizeable programme of University led research into the use of offsite methods and in product technologies that are most suitable for incorporation into offsite products. Similarly research is being carried out in collaboration with the National Composites Centre and the Manufacturing Technology Centre.

The biggest single investment is required to support awareness raising and skills development in all sectors of the market. Skills such as Systems Engineering’s ways of defining performance requirements for contracted work packages could help transform the open-ness of tender opportunities.

We believe that if the UK invests successfully in developing Intellectual Property in design, engineering and manufacturing systems there will be a substantial international appetite for export of services and technical know-how. Notwithstanding commercial challenges in the domestic market in many overseas markets the UK is seen as a global leader in the development and implementation of offsite construction capabilities. For many years Buildoffsite has been supporting international collaboration.

Question 7: Based on a clear understanding of the challenges facing the UK construction industry the Government’s Construction Sector Deal provides a mechanism to support collaborative research that the offsite industry and the construction industry at large will be able to benefit from. Buildoffsite will be looking to play a role in supporting offsite suppliers to establish consortia to tap into this funding to drive innovation and increased productivity.

Government could review how regulators for major infrastructure sectors assess value for money of investments in constructed facilities, the types of contracts used and the promotion of medium term supply chain development processes that have been well proven in other sectors.

Much product development in the construction sector is initiated by lower tier suppliers or the major materials suppliers. The Government should continue to support such R&D through R&D Tax Credits, Patent Box, Innovate UK funding competitions and through the use of selection criteria for Government projects.

Project managers and commercial advisers need to be well educated in this area as they are often the ultimate gate keepers who make the assessments and manage the risks associated with adopting innovation.

Government could support innovation that combines different and new materials technologies and methods to accelerate the progress of DfMA.

Question 8:

Current procurement practice in both public and private sectors tends to perpetuate traditional solutions; this is because tenders are written as a technical ‘input’ specification: e.g. ‘We require a 56kn power floated concrete floor’.

Shifting procurement to an output / outcomes specification will enable more sustainable and cost-effective offsite solutions: e.g. we require a high quality surface finish for a school floor with a design life of at least 25yrs and a whole life cost of below £XX m2.

Public procurement rules tend to favour the comparison of quoted prices rather than probable (invariably higher) out-turn price. Offsite has been demonstrated to be more predictable in terms of price, time and quality than traditional delivery methods, but this is not generally reflected in selection criteria.

In practice the form of contract often provides for payment to suppliers on completion of the works. This practice in combination with the need for offsite suppliers to finance manufacturing and material investments over a potentially long period can discourage the offsite supply side from competing. This is an area that requires more attention.

Often the use of offsite and other innovations needs to be incorporated early in the project planning process. Once main contractors have been appointed, the potential opportunity to improve productivity etc through the incorporation of offsite construction will have already been constrained.

The Government should consider more ways of incentivising main contractors to support and introduce innovation to projects (in a generally risk averse and conservative sector).

The Infrastructure Industry Innovation Platform (i3P) initiative is a good initiative involving public sector clients but is arguably late for some of the participating projects to gain direct benefit or for some suppliers to develop solutions quickly enough to respond to invitations. Product and system development cycles tend to last a couple of years or more, rather than the weeks and months that projects can accommodate, particularly when durability and certification aspects are factored in.

25 April 2018