Stumbling blocks of off-site construction

23/05/2017

Significant investment and increased use of off-site construction methods has been seen in the last few years.  According to the Building and Engineering Services Association, off-site construction is being used in over 90% of UK construction projects (as of April 2015), including in commercial, industrial, health care, housing, education and retail sectors.  

Richard Ogden, chairman of the organisation Buildoffsite, believes there is a current shift in the construction industry, referring to 2016 as “the year of off-site”. 

What is off-site construction?

Off-site construction is a modern method of construction (MMC) under which certain construction elements in a project are carried out under factory conditions and later transported to site.  Often off-site construction involves the production of modules or units which are subsequently assembled on-site. 

Some notable off-site construction projects include:

•  the pre-fabricated 30 storey Ark hotel in Changsha China, built in 2012 and assembled on-site in just 15 days;            

• Swan Housing Association plans to set up its own off-site factory to build up to 700 new homes;            

• Manchester developer Urban Splash has launched an impressive factory-built, highly customisable house product;            

• insurance fund L&G is constructing the biggest off-site factory in Europe to build homes for its private rental housing developments;             

• 80% of London’s Cheesegrater was constructed off-site by Laing O’Rourke resulting in a 50% reduction of deliveries to the Leadenhall Building site; and            

• the use of “flying factories” by Skanska and Costain for phase one of the Battersea power station redevelopment, cut costs by 44% and time by 60%.

Advantage off-site

 The advantage of off-site construction is a faster build, to a higher standard with fewer defects:

•  speed and efficiency – moving from a construction to a manufacturing approach using production line techniques, producing replicated assets which can be used efficiently, within a controlled environment with advanced equipment to increase productivity;           

• quality and sustainability – increased reliability and higher quality of products are generally produced;            

• improved working conditions – construction is taken to a clean, controlled environment, with stringent health and safety requirements;           

• more accurate planning – traditional construction timeframes and costs can be significantly impacted by adverse weather.  More accurate project timescale and cost planning can be achieved in factory conditions;           

• less disruption – reduced on-site construction time and deliveries cause less disruption for neighbours of a development site;            

• solution to growing skills crisis – MMC replaces skilled tradesmen with a much smaller number of semi-skilled factory operatives;            

• industry enhancement – increased design and development of product using different and more modern techniques over traditional construction methods, incorporating and enhancing new design and innovation; and            

• some cost advantages – traditional build costs can fluctuate depending on location whereas MMC is more stable.  Although off-site construction costs are generally higher, the recent rise in traditional construction costs has fuelled a renewed interest in MMC driving down costs and converging prices between the two methods.  

Out of site, out of mind, the disadvantages

 The main disadvantages to off-site construction include:

•  limitations – pre-fabrications may need to be limited in size due to transportation restrictions, maximum road widths, low bridges, weight restrictions and general disruption to traffic;           

• inflexible design – due to the modular nature of the construction, the designer’s ability to adopt innovative approaches could be limited.  The agreed design needs to be finalised earlier in the construction process and adapting the design may not be possible;            

• not always a success – despite a number of successful projects, there have been many off-site failures.  Laing O’Rourke has recently written off £61m against problems from just three off-site jobs;            

• investment dampened – growth in off-site construction has been dampened by high costs, fluctuating demand, concerns over mortgageability and a general lack of acceptance for the new construction method; and            

• once bitten, twice shy – several house builders invested into MMC before the last recession were seriously burnt when left with empty factories as the credit crunch bit.    

Precautions, process and practicalities

 Practical and legal consideration should be given to the following points when considering off-site construction as part of a project:

 1.    How does the manufacturer of the off-site construction fit into the project supply chain?  Traditional building contracts or sub-contracts may not be suitable for an off-site manufacturer due to the different process and risks involved.  The off-site construction will relate to a product, rather than works and services.  Obligations under the contract must reflect this.

 2.    Off-site construction is less visible.  The contract must provide for the project manager to have relevant off-site access and include a timetable for manufacturing and delivery of the product.

 3.    The contract should provide for the transfer of legal ownership of the product and materials.  Consideration should be given to responsibility for insurance.

 4.    Consider the relationship and division of responsibilities between the manufacturer and constructor if they are different entities.

 5.    Off-site construction requires an earlier lock-down in design, with less flexibility on any subsequent design changes reflect this.

 6.    More haste, less speed!  There is no advantage in building houses quicker than they can be sold.

Fad or future?

The jury is out on whether the recent increase in off-site construction is part of a cyclical trend or the start of a revolution in the construction industry.  Time will tell whether the current interest and investment in off-site construction is sufficient to enable it to endure the next economic downturn.

Fisher Scoggins Waters is a London based law firm with expertise in construction, manufacturing and engineering law.  If you would like more information or advice about off-site construction, please phone us on 0207 993 6960.