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Can off-site manufacturing improve productivity in the construction industry?

The Government recently published a report into off-site manufacturing for construction, exploring how construction industry productivity can be improved through the use of off-site manufacturing.

What is off-site manufacturing?

Off-site manufacturing is where buildings, structures or parts are manufactured and assembled away from the building site prior to transportation and installation in their final position. Whilst off-site manufacturing is suitable for various projects including hospitals, schools, prisons, roads, railways, utilities and housing, to date, the use of off-site manufacturing in the construction industry has been limited.

The Government’s inquiry into off-site manufacturing

Low productivity, low profit margins, an ageing workforce and lack of collaboration were highlighted as problems faced by the UK construction industry in 2016 by the Farmer Review of the UK Construction Labour Model: Modernise or Die. Farmer’s report (a report which was commission by the Government) suggests a move to off-site manufacturing is needed to keep the construction industry from decline, prompting the Government’s inquiry into off-site manufacturing.

The Government announced the Construction Sector deal in November 2017. One of the strategic areas arising out of the Construction Sector Deal was the focus on off-site manufacturing technologies to help to minimise wastage, inefficiencies and delays that affect on-site construction and to enable production to happen in parallel with site preparation.

In July 2018, the Government published a report titled ‘Off-site manufacture for construction: building for change’ (the ‘Report’), focussing on Farmer’s recommendation of off-site manufacturing in the UK construction industry. The Report considers if manufacturing buildings and infrastructure off-site could improve productivity in the construction industry and outlines a number of conclusions and recommendations that will facilitate off-site manufacturing.

Potential benefits of off-site manufacturing

The Report sets out a range of benefits of off-site manufacturing which together make a strong case for its use. The benefits include:

  • Better quality buildings and infrastructure;
  • Enhanced client experience and faster delivery;
  • Fewer labourers and increased productivity;
  • Creating more regional jobs away from large conurbations;
  • Improved health and safety for workers;
  • Improved building safety;
  • Improved sustainability of buildings and infrastructure; and
  • Reduced disruption to the local community during construction.

Skills required for off-site manufacturing

The Report considers the difference in skills needed for off-site manufacturing compared to on-site manufacturing and the changes in training that would be required to develop such skills. For off-site manufacturing to work effectively, the Report highlights that the following skills are required:

  • Digital skills;
  • Site implementation skills;
  • Technical planning and collaborative skills;
  • Upskilling the people who have first contact with the client e.g. lawyers or consultants; and
  • Procurement skills.

Sector barriers to uptake

Despite the benefits of off-site manufacturing, the Report considers a range of barriers that the construction industry faces in using off-site manufacturing. These barriers include:

  • A culture lacking in trust and collaboration;
  • Business and procurement models, contracts, assignment of risk and cash flow designed for traditional construction;
  • Client’s failing to consider off-site manufacturing at the start of the design process;
  • Greater upfront finance is required to set up off-site manufacturing;
  • A reluctance in client’s sharing risk with the tier 1 contractor; and
  • Client’s not understanding the products and process.

Government’s actions to overcome barriers

The Report makes various recommendations to the Government to overcome the sector barriers highlighted above. These recommendations include:

  • Collaboration initiatives such as the Construction Leadership Council and the Infrastructure Client Group’s Project 13;
  • Developing new technical qualifications;
  • Ensuring young people entering the work place are equipped with the digital skills needed for off-site manufacturing;
  • Providing a steady pipeline of projects for the construction sector so that companies can plan and make the capital investments necessary for off-site manufacturing;
  • A change in business models as set out in the Construction Sector Deal to include:
  1. improved and standardised approaches to design and procurement of construction projects;
  2. fairer and more sustainable approaches to contractual and payment practices; and
  3. benchmarking the performance of assets so clients and contractors have access to more data to deliver better assets;
  • Identify sources of funding available for contractors to use off-site manufacturing; and
  • Encourage clients to take out project insurance instead of individual consultants on the construction project doing so.

Off-site manufacturing is where buildings, structures or parts are manufactured and assembled away from the building site prior to transportation and installation in their final position.

Improving productivity

Off-site manufacturing could evidently offer solutions to the construction industry’s problems.

The Report highlights that the benefits off-site manufacturing offers creates “better-quality buildings and infrastructure, produced to more consistent and testable standards”. Client’s manufacturing buildings and infrastructure off-site are therefore likely to see increased productivity, improved quality and reduced environmental impacts on their projects.

Off-site manufacturing also has the potential to reduce the current labour and skills shortage, which is likely to worsen as a result of Brexit.

However, as the Government and the wider public sector is the biggest client of the construction industry, the Government has an important role in encouraging and facilitating the uptake of and helping to overcome the barriers to off-site manufacturing. With the Government’s announcement of a ‘presumption in favour’ of off-site manufacture on all publicly funded construction projects from 2019 in the 2017 Autumn budget, to date the Government has shown a strong commitment to investing in off-site manufacturing.

The legal issues

With off-site manufacturing set to increase together with the use of digital technology more generally, the form of contract needs to be geared to facilitate and support the use of off-site manufacture. We have written previously on some of the legal issues in relation to off-site goods and materials.  However, there are further legal issues to consider such as (i) the interrelationship with Building Information Modelling which is seen as a key enabler of offsite manufacturing; and (ii) the need for advance payments and security for such payment in the form of an Advance Payment Bond. In September 2018, NEC published a helpful practice note explaining how the NEC4 suite can be used to support the use of offsite modular construction (available here).

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