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How prefabrication can tap into profit pool

Contractors want to use more off-site techniques on projects to boost efficiency and productivity and save costs. Prefabrication isn’t always the right fit, but the technique is rapidly being adopted across construction projects.

One of the critical challenges for preconstruction teams, design teams, and clients is identifying prefab opportunities for their construction projects. Prefab refers to building any project component off-site, such as pre-assembled wall panels, and later bringing that on-site for final assembly. Modular construction refers to fully assembled, box-like units which make up the entire structure after assembly on site.

While modular techniques still haven’t jumped into mainstream construction, prefab construction is making significant inroads in the industry—prefab techniques are becoming popular on most projects. This article discusses trends and which sectors are well-positioned to include prefabrication.

Early in project planning, identifying prefab opportunities for construction projects is essential for success. However, you can perform prefab during any stage of construction, such as requesting a single plumbing subcontractor to perform work in their warehouse if they have the experience.

One challenge is that you don’t want to recreate the wheel for every project. You have to evaluate all the factors.

  • What’s the size of the project?
  • Is it a renovation?
  • Where is it?
  • What’s the labor availability?
  • What’s the subcontractor coverage?
  • Is it a large hotel or building with many repeat possibilities for bathroom pods?
  • Does the structure have a repeatable exterior to skin the façade with a panelized, prefabricated exterior panel?

The choice is simple. Perform traditional stick building construction (the status quo) or decide to reap the benefits of prefab.


A few prefabrication trends in 2022


Technology is driving construction. Every large contractor now has a talented BIM and VDC staff. Some things they help with include digital twin world-building, productivity software for the shop, and digitizing Design to Fabrication and back.

The design team works to coordinate with the architects, subcontractors, and suppliers to bring the BIM model so that you can see everything digitally beforehand. This process helps contractors mature into heavy, multi-trade prefabrication.

For example, pre-facing the boiler and chiller systems of a large building, assuming a lab building for illustrative purposes, and breaking it down into a bunch of prefabricated skids that deliver the system into the prefabricated building.

The skids are then assembled at the jobsite to dramatically condense critical path construction of the building, which by default can’t be started until the penthouse structure is complete.

We are seeing many more projects trend on multi-trade prefabrication. You see more complex assemblies, but it’s only possible because of digitalization.


What does the future market look like for prefabrication and modular construction?

A report by McKinsey highlights a substantial $265 billion profit pool available to disruptors in the construction market.

The McKinsey report includes:

  1. New production technology enabling off-site manufacturing and industrialization
  2. New innovative materials (e.g., lightweight) that improve logistics
  3. Digitalization of products and processes: a shift toward data-driven decision making, including widespread adoption of BIM and Industry 4.0
  4. New entrants: Market-disrupting new players and investment in established approaches and systems

All of these disruptors link to prefabrication in construction.

A separate McKinsey report forecasts the modular market could reach $130 billion across the U.S. and Europe by 2030, delivering annual cost savings of $22 billion. Many contractors are focusing more on multi-trade collaboration, whether it’s the mechanical super skids or just encouraging MEP subcontractors to perform work in their shops instead of on the jobsite.


What sectors are best positioned to benefit from prefab?

Healthcare and life sciences markets are in an excellent position. They are doing heavy planning early in the schematic and planning phases and offer many innovative opportunities.

Products like pods and headwalls behind each patient bed in healthcare are perfectly fit for prefabrication and modular building. In life sciences, the labs are primed for repeatability. There’s substantial piping in units and partition walls needed in addition to mechanical pump stations and super skids on the roof.

Hospitality was highly impacted during COVID-19. As this sector rebounds, major companies are pushing contractors to save time and money on construction projects.


What are the benefits?

Improved safety and health: 

Work is undertaken off-site in a more controlled environment, limiting work at extreme heights. Hot works are also significantly mitigated, even eliminated in some cases.

Waste reduction: 

Prefabrication allows for much more efficient use of materials, resulting in reduced waste/surplus materials. Advanced manufacturing and cutting machine technology and BIM can optimize material usage and orders. Waste materials can be tracked to recycling and further optimized.

Improving schedules: 

Prefabrication offers great influence and schedule control since off-site construction in controlled environments is not subject to external impacts (e.g., different trade contractors, rework and delivery delays, and weather). Once at the jobsite, coordinating contractors for module installation is fast. External factors causing schedule impacts are mitigated. Quality control testing is performed off-site, and plant skids can be pre-commissioned, reducing time on site and much rework due to product failures.

Designing prefabricated systems may take longer than traditional design, but the increased upfront schedule time substantially rewards the jobsite team when rework is virtually eliminated.


A 2020 SmartMarket reports:

  • 88% of GC’s interviewed reported using modular construction had a net positive impact on project schedule
  • 60% reported a gain of 5% or better
  • Similarly, 65% of architects and engineers reported a positive effect on the project schedule

Installation quality increases:

Off-site manufacturers typically employ permanent staff across key trades, with some specialists operating on a contract basis. This means that installers are well-trained in the prefabrication process and are consistent in approach and quality.  Working in a highly controlled environment — like an advanced manufacturing facility — results in a much higher quality installation than on-site.

Labor force optimization: 

While this sits in both the advantages and challenges section, the reality is that in many states, labor shortages in the construction market are a significant limitation. By relying more on prefabrication manufacturer labor (permanent, not related to construction contracts), the demand for local, on-site skilled labor is reduced.

Increase control over project cost: 

Certainty over material requirements, improvements in schedule, and less rework mean improved cost controls and, overall reduced costs.


A 2020 SmartMarket report also reported:

  • 91% of GC’s interviewed report a positive impact of modular construction on project cost
  • 48% reporting a 10% or better cost reduction.
  • 47% of engineers and architects reported a positive impact on project cost

Jobsite traffic reduced:

Fewer deliveries to the jobsite, thanks to consolidated deliveries reduces labor movements, and helps increase safety and health both on the jobsite and in the local road network, along with reduced pollution. Outside of highly custom residential homes, there are substantial opportunities for MEP and Industrial contractors to prefabricate their projects to save time and money and increase safety.

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