There’s a clear trend towards greater adoption of prefabrication in construction, but contractors moving that way should be mindful of the obstacles to marrying manufacturing and construction.
That’s engineering and construction consultant FMI’s determination in a recent report probing the current state of construction prefab and its future. Part two of its 2023 analysis of construction labor productivity, the study identifies prefab as a noteworthy part of the industry’s response to mounting productivity challenges. But committing to manufacturing elements of construction projects off-site carries risks, especially for those who don’t approach it strategically.
In “Growing Prefabrication: What’s in the Way?” FMI says its research and survey of construction contractors finds that approaching prefab as a simple bolt-on to the business is commonplace but risky. To increase the odds of a successful integration, contractors must do a top-to-bottom analysis that looks at the full business-specific case for prefab, identifying the goals, obstacles, organizational impact, and executional requirements.
“We often hear from contractors who feel they must grow their prefabrication capabilities to improve their productivity, meet client demands and remain competitive, but many don’t have substantive plans or strategies for getting started,” the authors write. “Putting in place successful prefabrication practices requires long-term strategic thinking and planning across the organization, from the development of a comprehensive operational strategy to deliberate implementation.”
Nevertheless, interest in prefab in the construction world is growing. In its survey of contractors as part of its labor productivity study, FMI found across all types of contractors 16% of craft labor hours are spent in prefab. MEP contractors, who accounted for 59% of the sample, reported that same percentage. Other non-MEP specialty trade contractors reported the highest percentage, 22%. Civil contractors reported the smallest share, 6%. They cite a range of potential benefits from utilizing prefab (see Figure).
Asked to look a half-decade ahead, contractors see those prefab hours basically doubling, from the average 16% today to 34% in five years. The MEP contractor sample sees that same 34% share. Non-MEP specialty trade contractors expect the largest allotment of hours to prefab in five years: 40%.
Widespread labor inefficiencies in construction will be the main driver of the move to explore greater prefab adoption, FMI says. Based on its labor productivity study that polled contractors, FMI put lost profits due to labor inefficiencies at $30 billion to $40 billion in 2022. It also revealed that almost two-thirds of contractors polled believe a lack of qualified craft labor is a top factor negatively impacting productivity in their companies. Consequently, it said, contractors are increasingly drawn to the concept of moving more work to controlled environments where quality, productivity and on-time and on-budget demands can likely be better managed.
Getting anywhere close to attaining that goal, however, depends on contractors sweating the details of integrating a prefab operation. Fully appreciating the unique challenges of setting up a manufacturing operation, accounting for the capital investment needed, factoring in utilization scenarios, bringing clients and other stakeholders into the deliberations and getting full organizational buy-in are a few critical elements. While the challenges have hardly given many contractors pause, the track record, FMI says, is not good.
“Many contractors have attempted to launch new or augment existing prefabrication capabilities because of the real or perceived benefits and advantages — but few have figured out how to do it well and make money at it consistently,” FMI maintains. Too many contractors, it says, “lack a clear vision of what they want their prefabrication capabilities to become and a strategy for how to get there. To make it work, contractors need “intentionality in change management for shifting the organization’s operating model, processes and systems, mindsets and behaviors, and culture to facilitate their company’s adoption of prefabrication.”
The core challenge was summed up by survey participant, Tom Whicker, president of Electric Plus, Inc., Indianapolis, who was quoted in the report. “Running a prefabrication shop is different from running a construction company. Having the right people with the right mindset who know how to manage efficiency, capacity and throughput is key.”
