Contracting for Offsite Construction

Blog Author: Peter Hibberd

Offsite construction of buildings is the future but then it has been for over 70 years. It has provided a solution to a problem ever since the first major offsite construction programme involving prefabricated public housing following the 1944 Housing Act. Thereafter, many different types of offsite production, especially for public housing, were developed. Offsite construction is not new or modern, it simply experiences continuous refinement and recurring times of high importance.

To manufacture, design, fabricate, and assemble building elements at a location other than where they are finally installed as a building is what is generally understood to mean offsite construction. Its earnest yet intermittent discussion is driven by the belief that its use will improve productivity and predictability, reduce time for delivery and provide better quality control. This long held belief is currently augmented by the availability of BIM and highly developed automation. Furthermore, that it overcomes certain current skills shortage and provides better working conditions for a larger part of a building’s construction.

So, if all such benefits are deliverable what is stopping the greater adoption of offsite manufacture. After all, the government’s Construction 2025 Strategy with its reference to Smart Construction and offsite manufacture is a driver. But even that publication was seven years ago and yet still there is a call for more offsite work. So, what is the problem?

The barriers to its adoption are disparate and frequently cited to include past experience, prejudice, unsuitability for particular types of work, vested interest in existing processes, being unconvinced on cost benefits because of a lack of compelling evidence, the nature of construction procurement restricts collaboration within the supply chain and the latter reorganisation involves significant funding, and contractual arrangements preclude its use.

Notwithstanding whether offsite construction delivers the benefits referred to, each of the barriers identified needs to be addressed if the objective of increasing the amount of offsite construction is to be achieved.

Offsite manufacture affects procurement, but how it does so is dependent upon the nature of that manufacture. At one extreme the whole of the building is manufactured and assembled offsite and transported for installation on the building site. At the other extreme it is little more than traditional construction with the removal of the wet trades: that is all materials are manufactured offsite, with some assembled before being taken to the building site for installation. However, as with many things the reality is often somewhere between e.g. forms of system building, standardised components. In any event, there are groundworks, service connections and drainage work etc. that need to be carried out regardless of the amount of offsite manufacture.

The nature of offsite manufacture chosen is determined by many factors, even just the need to try something different; but whatever one does the client’s designer should from the outset work in collaboration with component and system manufacturers. This is necessary to ensure feasibility of what is sought and the necessary coordination between the components and their installation on site.

The precise definition of offsite construction directly determines the nature and extent of barriers to its adoption. There is no denying that some of the barriers are problematic but those relating to procurement restricting collaboration within the supply chain and that existing contractual arrangements preclude its use are not.

That is because those two barriers are perceived rather than real, firstly, the nature of construction procurement does not restrict collaboration because procurement is already multifaceted – it is not just one approach and its many approaches involve significant degrees of collaboration. Secondly, the view that existing contractual arrangements preclude the use of offsite construction is far off the mark.

The industry has for many years had a range of offsite production solutions which procurement has accommodated and where standard form contracts such as JCT have been used accordingly. For example, the JCT Constructing Excellence Contract (CE) and the JCT Framework Agreement encourage and provide for extensive collaboration. Also, other JCT contracts contain collaborative working provisions which should not be overlooked in what is the wide spectrum of construction procurement for offsite production.

The view that existing contractual arrangements preclude the use of offsite manufacture is certainly misleading and, at worst, wrong. For as Robert Shaw of Lavan stated ‘The form of building contracts used for traditional construction will be suitable for modular construction subject to some modification.’. His suggestion that even traditional contracts can meet the needs of offsite manufacture is made because no doubt it is far better in such situations to use a known base rather than create a bespoke contract. However, JCT contracts go far beyond this approach.

Where building projects comprise of largely offsite manufacture the issues of quality control and payment for offsite materials are often purported to be specific problems. However, theoretically the problem is little different from that of small-scale offsite production. That is why JCT makes provision for these and other such issues in its standard form contracts. These contracts include, in addition to CE, the Design and Build Contract, Management Contract, Construction Management Contract and Prime Cost Contract and are all available for use in conjunction with all forms of offsite manufacture: with or without the use of the Framework Agreement.

None of this is to say that construction cannot improve, it can. BIM and automation provide great opportunities to enhance construction quality and improve productivity, but we should not be blinded into believing that any specific form of offsite manufacture, is the silver bullet. As Paulo Coelho said, “It’s one thing to feel that you are on the right path, but it’s another to think that yours is the only path”. JCT offers a range of paths to meet the various demands for offsite manufacture.