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Prefabrication and modular construction are seeing a huge uptick in the commercial sector. According to a report from Dodge Data & Analytics, while only 25% of contractors have invested in prefabricated projects over the past three years and 17% have bid using modular techniques, that amount will increase to 33% and 21%, respectively, in the next three years. The growth in this area has been so strong that, although modular construction was valued at nearly $68 billion in 2019, it is estimated to reach over $106 billion by 2027—and with good reason. 

Improved productivity, improved quality, increased schedule certainty and reduced waste are just a few benefits to these modern methods. 

But how “modern” are they really? Considered a “technology” by many, prefabricated homes were produced as early as the 1800s to allow Gold Rush-era prospectors access to quickly erected homes. From Colonial “kit” houses to Sears Catalog Homes in the early 1900s, the American construction industry has had a long relationship with factory-made buildings. 


“Everyone, whether you own a small business or a larger business, has done some type of prefab and may not even have realized that,” says Luiza Mills, vice president of human resources and public relations at Interstate Electrical Services Corporation, headquartered in Massachusetts with offices in Connecticut, Maine, New Hampshire, Rhode Island and Vermont. “The novelty of prefab is not new, and what’s interesting is how many different levels of prefabrication are available. Prefab still has a connotation that it’s set on a dusty table in the back of someone’s warehouse, and that is not true.”

That is the distinction prefabricated buildings hold over other methods: the parts are prefabricated off-site, usually at a factory or offshoot building owned by a contractor, and then assembled on-site. Modular buildings are a specific type of prefabricated construction—but they are also assembled off-site as volumetric models (like large dioramas) and dropped (like LEGOs) into the site, reducing the need for on-site construction to almost zero.

“Prefab really is bringing everything together and starting from the inception of an order all the way through completion,” Mills says.

PROS AND CONS

Jake Snyder, director of preconstruction at Birmingham, Alabama-based Hoar Construction, says that making the switch to prefabrication—or adding it to your repertoire—seems more complicated in theory. After seven years working with prefabricated and modular construction, the company has installed both overhead mechanical, electrical and plumbing systems, as well as prefabricated headwalls, for various project owners.

“We chose to prefab the exterior wall panels to provide a faster, safer installation,” Snyder says of a 17-story high-rise commercial building—and Hoar’s use of this method is on the rise. “The price point is becoming less of an issue, so I expect to see a climb in the percentage of projects that use modular solutions,” Snyder says.

A lowered price is just one benefit of prefabrication. A bonus that contractors have realized in a practical sense is adaptability, like the flexibility that was offered when the COVID-19 pandemic presented contractors with an onslaught of problems such as supply issues, a skilled-worker shortage, competition with other contractors, an inability to work on-site due to safety regulations and schedule delays. Many contractors may still face ripples from these concerns in 2022 and beyond. 

Preconstruction presented contractors with the ability to accept bids and perform work—while still remaining off-site. The presence of overseas factories offsets the worker shortage and can assist conflicts with competing projects. 

In an industry heavily concerned with risk, the next question must be: What, then, are the arguments against using prefabrication? 
Gary Clevenger, vice president – risk control at CNA, believes these are the potential risks:

Building codes: In building codes, there is typically no mention of special treatment, exceptions or exemptions for projects built using modular construction. Therefore, these projects must meet all applicable sections of the building code.

Labor laws: Trade licensing requirements and labor agreements applicable to the project site may or may not be applicable to the off-site location at which the modules are constructed. 

Contract language: Traditional construction contracting is typically not reflective of the unique circumstances found in modular construction, such as the impact of state laws and OSHA.

Quality control: Many protocols are put in place within a manufacturing facility and separately on a construction site to ensure the safety of employees as well as to uphold the quality of the construction materials. It is crucial that the same level of consideration is upheld on both sides of the modular construction process.

Supply chain: Several challenges exist in relation to supply chain, including availability of warehouses to host the materials and meeting tight deadlines to ensure on-time delivery at the construction site. 

Transportation: Transporting modularized units presents a new set of risks, as many factors need to be considered, such as where the transport occurs, whether there are there limits to the size of the transport, and what happens when you cross state boundaries regarding permits and fees.

Regardless, modular buildings are versatile and can be designed and built to serve virtually any function, and because modular units are easily replicable, the quality of construction often rises.  

“The benefits outweigh the detractions for most prefabrication and modular construction, but there is a balance point depending on the scope and schedule needs of individual projects,” Snyder says. He recommends using this method when the same entity is repeated multiple times. 

“For instance, you want to have over 50 bathrooms that are the same before bathroom pods makes sense. This scale is why you see modular construction more in health care, high-rise residential or hospitality, where you’re building the same room over and over,” Snyder says. “Overall, modular/prefab construction still has a slight premium over traditional construction, so not every job may be a fit. The choice has to make sense from either a cost or timing standpoint—or both.”

AN INFORMATION AGE

Interstate Electrical Services was coming up on its 50-year anniversary in 2016 when the Tewksbury, Massachusetts-based contractor made a pivot: a 100,000-square-foot prefabrication facility and an investment in software to manage that process. For the latter part of this development, Interstate chose Manufacton, a SaaS platform for planning, tracking and managing both prefabrication and regular material handling. 

“We realized that the industry was moving toward more and more off-site construction, prefabrication, modular, single-trade, multi-trade, etc. The whole idea behind the transition was to look at it from a life cycle perspective,” Raghi Iyengar, president of ViZZ and Manufacton, says. “Because there’s no such thing as managing from the top down anymore—it’s a value stream.”

This management software has the potential to mitigate some of the detractions of prefabrication, such as quality control and supply chain issues, as well as to emphasize the benefits. While Interstate works in the field and possesses the knowledge to run each project independently, Manufacton is utilized to orchestrate the workflow and tie in the loose ends “from A to Z,” Mills says. This gives project managers on Interstate’s side the ability to see a project in its entirety and to review individual stages or components. 

“We talk about technology often, and you can’t use technology without an electrician; but an ironic thing is that electricians don’t use a lot of technology in the field. We use a lot of our strengths, which include brainpower, on a project, but now we can bring in technology and make the job more efficient,” she says.

Hoar Construction has gone for a more localized approach, partnering with prefabricators in close proximity to the office working on a specific project—which suits a contractor that has seven offices across the country. The team in Birmingham has partnered with Blox. the Austin, Texas, office works with Neopod. the Austin branch has collaborated with Baker Prefab on at least one project—a bed tower expansion. 

“There’s a comfort to being able to drive to a facility to coordinate and review the solutions before they get sent to the jobsite,” Snyder says. Of the variety of technology providers chosen by Hoar, he explains that each player in the space offers “very similar” solutions. A catalog of products would change that dramatically. 

“Once you get a solution that an architect or engineer can pick out of a catalog, you’ll see the adoption of prefabrication skyrocket. Until that happens, the push to do prefab falls mainly on the general contractor, trade partners and construction manager,” he says.
That’s where Manufacton comes in for Interstate. Iyengar describes the ability of technology platforms to take part of the load from contractors. “All the work and all the thinking behind the tools is Interstate as a customer. Manufacton provides a platform that enables them to succeed and make the concept of prefabrication come to fruition.”

To Iyengar, companies that are willing to take risks—technologically or in terms of reassessing its production process—are the key to the future of the industry. “All of these different things in manufacturing don’t happen overnight. It took a long time, improving on all fronts—whether it is materials control, quality control, principles, assembly, etc.,” he says. “The drive for continuous improvement should not be taken for granted.”

As one of the prime motivators for continuous improvement at Interstate, Mills is convinced that prefabrication and technology are irrevocably intertwined. “To achieve true fabrication, which is innovative, forward-thinking and will take Interstate to the next level—that would not be possible without technology,” she says. 

READY OR NOT

To grapple with prefabrication technology, a contractor must first be ready to add that vertical to its proffered services. The industry needs to be ready. 

“Construction is near a point where prefabrication and modular have become a lot more ‘normal.’ We’re all facing shortages in skilled labor that continue to worsen. Owners want schedule and budget certainty earlier in the process, and projects are continuing to be completed at a faster pace. Prefabrication solves these problems,” Snyder says. 

While there may always have been a point of no return (like cellphones or laptops), the plod toward embracing prefabrication has certainly sped toward a climax during 2020 and 2021—ready or not. 

“I think now it’s not a question of, ‘Should we be moving from the field to the factory?’ But, really, everybody that we’ve talked to wondering how best to go about that,” says Iyengar.

Being a level-four company doesn’t just entail investment—there is a wide future of dividends. 

As Mills explains, prefab means Interstate Electric is able to create any part, enabling the company to better serve and adapt to its clients. “We can do everything from pipe bending to circuit boxes and fire alarms; and keep in mind that electricians design the project, so it’s not just someone putting a LEGO set together. There are always exceptions, but there’s nothing we can’t do.”

Snyder sees bright possibilities in store for Hoar Construction as well. “The future for prefabrication is the productization of solutions. Consider a time when we can pick an electrical room out of a catalog that is the right voltage, amperage, and has the appropriate number of circuits available. Why wouldn’t we order that and place it as a unit? If we reduce the time it takes to install the exterior skin of the building by 75-80%, why wouldn’t we want to install the main electrical rooms so we could have permanent power in place sooner?” he says, noting that the same could be done for bathrooms, hotel rooms or hospitals. 

Mills is fully onboard with pushing for the present day to be positively futuristic. “We didn’t do away with transportation. We just made it more efficient. We didn’t do away with watching movies. We can stream them now. The same is true with music, and we didn’t stop making phone calls. We continue to change and move ahead,” she says. “I’d like to assume that the world is ready.”

The motives for change are not insignificant, says Snyder. “If building construction evolves to more of a ‘kit of parts,’ then the value we bring will be offering our own prefabrication and modular solutions. To stay relevant, we have to evolve to provide value through productization.”

If the choice is between profitable relevance or eventual obscurity—is there a choice?

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