The offsite manufacturing revolution is gaining traction but barriers remain, says Robert Meakin, Partner at global law firm Clyde & Co's Global Projects & Construction team. The firm's recent report into offsite manufacture provides a fascinating legal and commercial perspective.
The construction industry is at a critical juncture. For years it has struggled with deeply ingrained structural flaws, giving rise to low margins and low productivity. To this can now be added the looming uncertainties of Brexit, which promise to exacerbate the skill shortages and to accelerate the threat of a demographic time bomb for industry's labour force.
The silver lining is that hard times often provide the catalyst for real and lasting change. There is a growing perception that technological advances and new methods of construction are gaining traction, and have the potential to drive productivity gains and increase capacity, while still delivering on quality.
But the tipping point has not yet come, particularly when it comes to using advanced offsite manufacturing (OSM) techniques to deliver cutting-edge buildings. Despite several notable pioneers, the traditional onsite construction approach remains the norm while the industry grapples with how best to embrace the opportunities - and mitigate the risks - that OSM presents.
That could be about to change. From next year the government is committed to adopting a 'presumption in favour of offsite construction' across several key departments, including transport, defence, health and education. In addition, the Construction Sector Deal launched this summer with a view: "to transform the sector's productivity through innovative technologies and a more highly skilled workforce." It identified offsite manufacture (OSM) as one of its key areas of focus, in the belief that it will: "minimise the wastage, inefficiencies and delays that affect onsite construction, and enable production to happen in parallel with site preparation - speeding up construction and reducing disruption."
Meeting those objectives will necessitate a paradigm shift in how projects are developed and implemented, requiring greater collaboration between clients, architects, contractors and suppliers, and further investment in R&D and production processes. Other innovations such as artificial intelligence (AI), robotics, 3D printing, and blockchain digital supply ledgers could also increasingly come into play a role in finally bringing the industry into the 21st century.
For many in the industry, however, offsite manufacturing and its implications remain unchartered territory - or at least a work in progress - which is why we carried out a survey and in-depth interviews with a broad cross-section of industry players, to better understand the key technical, commercial, legal and regulatory implications that businesses need to consider.
The cost of investment and lack of relevant knowledge within organisations are the two primary barriers stopping the development of offsite manufacturing in the construction sector, according to our survey. 59% of 31 C-suite executives from the UK's top 50 construction firms believe investment costs are the primary factor hindering the implementation of OSM, followed by a lack of relevant expertise within their organisation (48%). The construction industry is yet to reach critical mass as far as the use of OSM techniques is concerned. The vast majority (80%) of survey respondents' organisations only use OSM for between 1-20% of the construction work they carry out.
However, its use is expected to increase within the next five years. 61% say they expect to double the amount of construction work that they carry out using OSM. Using it for between 20-40% of the construction work they carry out. It's a similar picture with plans for investment. Just over half (55%) of survey respondents invested only 0-2% of revenue on OSM in the last five years, while in five years' time just 6% expect to invest at this low level. The majority plan to invest much more - 39% plan to invest between 3-5% and 42% between 6-20% of revenue in OSM.
Of course, one persistent problem that needs to be addressed is the lack of a secure pipeline of projects. Since the decline of PFI/PPP at the beginning of the decade, the industry has been dismayed by a severely limited flow of new schemes. As industry experts told us in our report, it would be a very difficult commercial decision to invest seriously in OSM technology without a clear plan of how and when it will deliver a return.
According to the research, the top three reasons cited for investing in OSM are:
- To improve efficiency and reduce costs (97%)
- To overcome new challenges in construction (84%)
- To help overcome the skills shortage (61%)
The primary driver for investing in OSM is clearly about improving productivity and using new techniques to overcome fresh challenges. Down the line it should also help to reduce the skills shortage, using modern production line techniques where traditional manual labour might previously have been required.
However, it is ironic that so many would invest in OSM to overcome the skills shortage, when one of the key barriers to implementation is a lack of relevant expertise. This will not be missed by UK construction's boardrooms. It is something of a chicken and egg situation. Those who find a solution are likely to gain a clear advantage over their competition. We may soon find the construction industry starting to look to the manufacturing sector for new recruits.
To keep all this innovation on track, a robust legal framework will be essential, from contract terms for supply and installation to professional indemnity and product liability, and effective regulation of environmental, health and safety and employment issues. As the risk landscape changes, organisations need to ensure they understand the new threats they could face as a result of embracing new technologies and working practices.
You can download and read the full report 'Innovation in Construction Report 2018: Embracing the revolution: legal and industry perspectives as offsite manufacturing gains traction' at: www.clydeco.com/insight/reports/innovation-in-construction-report-2018
Original Link - Offsite Magazine
