Insiders Take | 03 - Prefab Is a Manufacturing Business, Not Construction in a Warehouse

The first time I stood up a prefab operation, I didn’t have an appreciation for the difference between running it as a manufacturing business and running construction in a warehouse. Those are not the same job. I went back for the PhD partly to learn the manufacturing side, because the gap was bigger than I expected.

That gap is what I think about most when people ask why prefab adoption keeps stalling. The case isn’t hard to sell at the C-suite. It tends to fall apart somewhere between the executive nod and the bid package. And the reason is consistent. The industry keeps trying to run a manufacturing business with construction’s mental model.

We’re evaluating prefab the wrong way

When an owner and/or the prime contractor evaluates a prefab proposal as a line-item comparison against stick build, prefab will lose almost every time. That’s where most decisions stop, at the belief that two adjacent numbers reflect the same project Value. If you take a step back and look at it holistically, the picture changes. Schedule compression reduces time-based general conditions. Fewer people on the job site reduces exposure. A higher degree of planning upfront reduces on site conflicts. Earlier completion shifts the project from construction financing into permanent financing and revenue generation sooner. If you don’t account for any of that, you’re comparing the unequal numbers, in terms of value.

The market has segments where this is obvious. Healthcare systems that build repetitive prototypes are all in on prefab, because they can amortize the value across dozens of projects and see the holistic case clearly. I call those serial builders, or the heads and beds clients. Most owners can’t, or won’t, look at the math the same way. So the prefab value evaluation gets stuck at the line item, and the project gets stick built by default.

Certainty of outcome is the real value proposition

What prefab is actually selling is certainty. In design-bid-build, the likelihood you hit schedule is not high. The likelihood your bid number stays your final cost is not high. The quality level you’re buying is a question mark. That’s the baseline the industry has accepted as normal.

With a sophisticated prefab partner working under a design-assist arrangement, those probabilities change. The fabricator owns the design, so they can’t come back later with an errors and omissions claim asking for more money. The work happens offsite, so other trades aren’t in the way. The schedule is more predictable because the variables that wreck field schedules don’t apply in a controlled environment, such as weather delays.

This is also why the cash curve moves. If 75 percent of a building skin is fabricated before installation starts, the cost bell peaks in the first third of the project, not the middle. Owners have to be told that up front, and the procurement and billing structure has to account for it. Most of the friction comes from the fact that the traditional process wasn’t designed for it. Preconstruction can’t be three weeks. Procurement of the specialty contractor can’t wait, because between shop drawing, detailing, and assembly, you’re not talking days - you’re talking weeks if not months. Once a sophisticated owner has paid the tuition on a few of these jobs, the value is obvious. The hard part is everything before the first one. It requires a paradigm shift in thinking, a willingness to do the math differently, and an appreciation for purchasing certainly of outcome.

The tools haven’t fully caught up yet

The other piece that has to evolve is the tooling. When you’re framing in the field, you’re using a screw gun oriented one way, with one set of ergonomics. When you’re building a panel in the shop, the work is, generally, horizontal, the body mechanics are different, the priorities change, and the factors that contribute to worker fatigue are different. Where the battery sits on the tool starts to matter differently when you’re doing the same motion for an eight-hour shift on a fixed station.

To the credit of the construction technology space, there’s been real investment in this area over the past couple of years. Companies have moved from generic field tools toward setups better suited to manufacturing, and the iteration has accelerated. But the bar still needs to keep moving. Robotic arms get talked about a lot, but the cost remains a real barrier for any company that isn’t already at significant scale. Meanwhile a screw gun designed for shop ergonomics will pay for itself fast if it’s purpose-built for that environment. Both ends of that spectrum deserve more attention than they’ve gotten.

The reason I’m bullish is that the industry’s iteration rate is finally speeding up. Companies are failing, and failure is how the rest of us learn. Whether it’s Katerra or any number of construction tech failures, every one of them adds to the curriculum. I think we’ll see a sea change in this space over the next ten years, not because robots have replaced people, but because more data finally becomes actionable. Pockets of the industry are already proving it.

Andrew Rener, PhD, PE, DBIA, F.ASCE is an executive at Architectural Metals and previously cofounded Centerline Prefab while at Bouma Corporation. He holds a PhD in engineering with a focus on prefabrication.