In recent years, offsite construction has emerged as a beacon of innovation in the industry, promising faster delivery times, improved quality and reduced waste, whilst also striving towards more sustainable and energy efficient facilities. With growing pressure from government initiatives to modernise construction practices the possibilities for offsite methods seem limitless. Yet, a series of embedded procurement barriers, hindering the full potential of offsite construction to make an abrupt and transformational change.
As we delve into the complexities of the procurement landscape, it becomes evident that cost benchmarking and a lack of standardisation stand as barriers that offsite construction must overcome.
The Call for Change
The construction industry is renowned for effectively fighting off change. If you combine this with the industry’s declining productivity levels, material inflation and a shortage of skilled labour, it is clear to see why construction business failures continue to increase.
Globally, governments have become increasingly vocal about the need for change within the construction industry. They recognise the potential for Modern Methods of Construction (MMC) to make a transformational impact, however the problem is they have asked an industry that is vested in maintaining the status quo and not invested in delivering it. This unfortunately has led to half-hearted attempts for many established players to incorporate modular construction without a genuine interest in adopting new technologies and processes.
The recent Procurement Bill – which came into law in October 2024 but remains to be implemented – seeks to reset how projects are assessed, creating an opportunity to incorporate innovative practices into the bidding process. However, the effectiveness of this legislation largely hinges on overcoming existing procurement mindsets that favour traditional construction methods over new solutions. Industrialised construction needs volume to grow, invest and deliver productivity growth and this can only be done by procuring preferentially, or at the very least, comparing platform designs alongside traditional tenders equally.
Cost Benchmarking: A Double-Edged Sword
One of the primary challenges faced by offsite construction providers is cost benchmarking. Traditional methods of construction provide estimates – which are firmed up post contract award. In contrast, offsite construction, is based on a pre-designed approach and is perceived as costly, as the method of manufacture – ‘the investment’ – needs to be recovered over a series of early projects. Nevertheless, offsite construction provides cost certainty – where only a very small handful of traditional projects maintain their original tender estimate.
Cost certainty is not ‘measured’ in the procurement process – all the statistics say that traditional build costs and programme increase after tender. For example MACE’s Olympic Park development exceeded its initial budget by more than £200m; originally £470m, with the final cost at £673m. Consultants working for the LLDC attributed more than £60m of the increase to the COVID-19 pandemic, with other stated factors including design changes and delays. Further examples include the Scottish Parliament, which escalated a spectacular £400m over its £40m budget and was delivered 20 months late, and the British Library, which by the time it finally opened in 1997 cost more than £ 500m; three times the original estimate.
Procurement bodies are set up to buy the same approach seeking tenderers with specific case studies that align with the project. This limits the bidding field to an exclusive few – blocking up and coming companies. This further emphasises that familiar, established contractors are the ones to compete and perpetuates the dominance of traditional practices.
The Lack of Standardisation: Creating Confusion
In a world where bespoke facility deigns reign supreme, the need for a platform-based approach becomes critically apparent. Currently, projects are treated as unique, leading to high levels of complexity and variability that hinders cost control and timely project schedule durations. To achieve significant productivity and efficiency advancements, the only way to overcome this challenge is to ‘standardise’ platform designs which are then applicable across a range of projects.
This would not only simplify the procurement process through fixed cost and high-quality product association but would also encourage clients to consider offsite construction more earnestly. By showcasing proven platforms built through repeatable processes, the industry can begin to address the cost and delivery challenges plaguing new build projects.
Path Forward
The potential for offsite construction to transform the construction industry is significant and is needed now. Yet it will require concerted efforts to shift existing procurement paradigms. The new Procurement Bill will focus more on delivering an outcome-based approach, allowing authorities the ability to engage with suppliers best placed to deliver innovative solutions tailored to specific needs. A fundamental shift in mindset regarding new innovation across the industry is essential. Clients and consultants must demand more from contractors, actively seeking out and valuing innovative methodologies rather than defaulting to traditional processes out of habit.
By breaking down procurement barriers, the construction industry can unlock the full potential of offsite construction, leading to improved efficiency, sustainability, and ultimately, better-built environments for society at large. The time for transformation is now, and as we embark on this journey, collaboration among all stakeholders will be key to fostering a more dynamic construction sector.