BLP Insurance – Written evidence (OMC0072)
This is a submission by BLP Insurance to the call for evidence in respect of an inquiry into off-site manufacture for construction.
BLP Insurance is a leading warranty provider to the UK residential sector and a stakeholder in BOPAS, the Buildoffsite Property Assurance Scheme and has much experience in assessing and warranting various forms of offsite construction.
BOPAS which was launched in March 2013, was developed by Buildoffsite, Lloyds Register and BLP Insurance with RICS, the Council of Mortgage Lenders and the Building Societies Association. The BOPAS process gives an independent assessment of quality and reassurance from inception through to construction for investors, developers and owners. http://www.bopas.org/
Perceived advantages of offsite manufacture for construction
The UK is facing a chronic housing supply shortage. We must deliver an increase in housing supply at a time when the average age of the construction workforce is increasing – a potential time bomb that will play out over the next 10 years with net loss of 25% of workforce.
We are finding it increasingly difficult to attract new talent into the industry and to replenish the level of leavers. This is resulting in a massive skills shortage across the industry. According to a report from the Union of Construction, Allied Trade and Technicians (UCATT) – ‘Constructions skills shortages a result of 30 years of failure’ (http://bit.ly/1KoWh3Y) – the UK is facing its biggest skills shortage for a generation, with estimates showing that the construction industry needs 35,000 new entrants just to stand still. With a huge shortage of skilled workers in the UK, building firms have been forced to double the wages for tradespeople from abroad, increasing the cost of traditionally built homes.
Not only is this situation reducing output and increasing cost, quality is also suffering with an increase in construction defects and buildings not performing as designed. This is leading to consumer dissatisfaction in the quality of new homes as evidenced by recent articles condemning the quality of homes delivered by leading UK housebuilders.
The industry must look beyond traditional forms of construction. The requirement to fill the supply and demand gap must be met with housing that is both sustainable and of the highest quality. The traditional housebuilding community is neither able nor willing to change their business process and increase output to solve the problem.
There is a simple solution if the industry embraces off-site or non-traditional forms of construction and brings new players into the housing market.
We must modernise the industry in a way which will:
• Increase attraction to new entrants & offset attrition & shrinkage
• Improve productivity so we can increase output with constrained labour
Prefabrication in a factory setting is by no means a new concept and the benefits are clear: speed of construction, reliability of materials and manufacture, improved performance and potential reduction in construction costs if units can be delivered at scale and to repeatable design.
Potential barriers to wider use of offsite manufacture
To date, the real level of innovation and modernisation in the industry has been limited, constrained by reticence to invest in a cyclical, short term thinking sector and low levels of capitalisation.
While the benefits of Smart Construction are clear, they do not come without challenges. Concerns about systematic failure, fire spread and water ingress, have been raised around the use of off-site techniques, both during and after construction. These concerns are being addressed by the Buildoffsite Property Assurance Scheme (BOPAS) which provides long-term assurance to mortgage lenders, valuers, funders, landlords and homeowners that properties built using non-traditional forms of construction will be durable for at least 60 years, without the need for disproportionate maintenance.
We are now seeing schemes being built using off-site systems that have been through the BOPAS accreditation process and benefitting from a BLP Insurance 10-year structural warranty.
Running parallel to the structural warranty assessments, BOPAS accreditation addresses the concerns of funders and valuers. It combines both the design checks undertaken as part of the BOPAS assessment and site-specific design with the workmanship checks forming part of the BLP Insurance Structural Warranty.
A summary of systems that have received BOPAS Certification, those going through the process, and the pipeline of those in discussion re accreditation can be found below.
The manufacturer’s in the table represent a mixture of established providers, those moving from other sectors and start up companies.
It is imperative that in all cases the manufacturing process and the relationship with the onsite activities are closely aligned as this is often where difficulties can occur. This coordination is at the heart of the BOPAS process and which delivers confidence to the lending and funding community.
It is worth recording the type and origin of construction system that has either been approved under BOPAS or is going through the approval process.
These are depicted in the graphs below.
The above charts demonstrate a number of significant issues that suggest that offsite, after several false starts since the 1990’s is finally fulfilling its potential.
1/. There has been a significant growth in BOPAS registrations over the last two to three years with the potential for 2018 to outperform all previous years.
2/. Modular is by far the most popular form of offsite construction being developed. This addresses key issues around skills shortages in traditional construction and represents a greater PMV (Pre Manufacture Value).
3/. There is a much greater impact from manufacturer’s in the UK than from overseas which can only be positive for the UK construction sector and UK PLC.
Government Actions
Mainstreaming offsite manufacturing for the UK housing sector will require coordinated action from Central Government and from the construction industry. It will need both policy from Government and persuasion from clients, together with decisive action from both the private and public sectors to enable manufacturing to mobilise.
Government support for offsite manufacturing is critical in keeping the momentum going, and in its Residential policy paper (http://bit.ly/1PEt7zf), RICS urges ministers to support non-traditional construction and endorses BOPAS as an independent assessment process to ensure that such systems are durable for at least 60 years.
BLP Insurance and BOPAS are working with the Housing Minister’s MMC working group chaired by Mark Farmer to deliver a unified accreditation and warranty platform that will follow the principles created by BOPAS and which can only be of benefit to the off-site construction industry.
Finally, it is clear that traditional procurement practices are not best suited to many off-site solutions where a more collaborative and cost effective approach is required.
The IPI collaborative approach to project procurement would appear to be a much better fit for clients wishing to deliver an offsite solution for their projects.
26 April 2018