Out-Law / Your Daily Need-To-Know

The industrialisation of construction processes has the potential to improve productivity and profit margins, attract the talent needed to innovate and achieve decarbonisation.

At the heart of industrialised construction is the greater use of data and digital technology to understand and measure the performance of infrastructure and other built assets, and to support greater standardisation of the way components are made and of design and construction processes.

However, while technologies such as building information modelling (BIM) systems, artificial intelligence (AI) and 3D printing are important, industrialised construction goes beyond just digitisation and harnessing data.

Industrialised construction encompasses everything from a shift towards the commoditisation of construction products through new manufacturing processes aimed at reducing defects and achieving efficiencies, to a fully integrated supply chain working collaboratively under contractual models that underpin that.

Industrialised construction also envisages seamless integration of health and safety processes, quality control procedures and digital payment systems into construction operations, and strong leadership to modernise the traditional approach to construction projects that does not deliver the best outcomes.

A fundamental change in culture and practices in the construction sector are necessary for industrialised construction to become reality.

What is driving the shift to industrialised construction?

A combination of political, economic, social and environmental factors is leading the construction sector to embrace industrialised construction.

The global construction sector is currently ill-equipped to meet the demands being placed on it. Business models are built on productivity levels that lag those of other industries – the construction industry has improved its labour productivity by an average of just 1% annually over the last two decades, compared to an average 3.6% annually in manufacturing.

At the same time, the traditional allocation of risk down the supply chain and tight profit margins combine to breed a culture where employers and contractors are more likely to seek to position themselves for winning disputes over delays or defects than to work together to resolve issues and deliver projects on time and on budget.

Our analysis of the largest, most innovative and highest risk UK projects, as identified by the government major projects portfolio (GMPP), shows that only one of the 34 infrastructure and construction projects in that group is highly likely to achieve its objectives.

Oxford University’s Saïd Business School has found that nine out of 10 mega infrastructure projects go over budget.

That assessment is provided by independent scrutiny body the Infrastructure and Projects Authority. It said that a further five projects will ‘probably’ meet their objectives but that they are in need of constant attention to ensure risks do not materialise into major issues threatening delivery.

HS2 is the largest project in the GMPP at £55.7 billion and has been ranked in 2020 as unachievable. The whole life cost of all the infrastructure and construction projects in the GMPP is £214bn.

Policymakers around the world are looking to major infrastructure projects to facilitate economic recovery from the coronavirus pandemic and also setting stretching new climate change targets and tying ambitious plans for new infrastructure to the decarbonisation agenda, requiring industry to play its part in reducing carbon emissions.

These fresh demands for speedier and greener ways of working require construction companies to innovate. Their capacity to do that is hampered by analogue rather than digital ways of working and a skills shortage in a number of markets around the world.

Industrialised construction offers the promise of improved productivity which in turn can improve the performance of infrastructure projects as well as provide the means for the construction industry to invest in new skills and in innovative materials, products and construction techniques.

Industrialised construction in practice

Greater standardisation of construction components is a core feature of industrialised construction.

Greater standardisation of components is achieved through manufacturing of those components in specialist factories. The combination of factory processes, skilled manufacturers and automation means building components can produced much faster, at greater scale and with fewer defects and reduced waste than is the case currently. The standardised components are transported to the construction site for on-site assembly, though some businesses such as Shimizu in Japan have practised smart build processes for decades, essentially developing a factory for producing components for the building on the site for the building itself.

Industrialised construction also provides an opportunity deal with some of the construction industry's longstanding challenges by increasing the diversity of people working in the sector. Industrialised construction can help attract a new generation of talent, increasing diversity across the industry.

Interoperable systems and common data standards are at the centre of improving design and construction processes too. This is because they allow all businesses across a supply chain to better integrated and to share and access information about the way infrastructure is being designed or is to be built so as to coordinate their work, highlight potential problems and collaborate on solutions.

The Construction Innovation Hub has taken this a step further, developing the idea of a ‘platform’ approach to construction, a system which involves a ‘kit of parts’ which can be used in many building types such as schools, hospitals, housing and other infrastructure to reduce complexity and increase interoperability.

For the construction sector, industrialised construction can be a means to achieving decarbonisation. The built environment accounts for over 40% of all emissions globally as well as 50% of the extraction of earth resources and is the biggest single contributor to waste globally. The construction industry has worked on improving its approach to circularity but has a long way to go. The use of data will help identify what types of materials have already been used across the built environment and how these might be recovered and reused in future infrastructure and the built environment.

Done right, industrialised construction can lead to the commoditisation of construction products and processes, enabling construction companies to scale up operations globally more easily. The construction sector will be able to transform into a products-based sector with much greater capital deployed in its business model. Management will start to think about how continuous improvement can play a part in the ongoing improvement of productivity and how a zero defects approach can be made to happen and become a core measure of success.

Industrialised construction is a concept in its relative infancy, but already those behind some major infrastructure projects – including HS2 in the UK – plan on adopting it.