Transcript
Speaker: Right. So here we go. A double yawn. That's how you know your topic. That's how you know you pick the right topic if it starts with a double yawn. Yeah. Triple yawn. Can we go before? Four, four, four. I'm out. I'm done. All right. Now my eyes are watering. This is a real struggle.
Speaker: Yeah. Right. You're listening to the offsite podcast with Jason and Carlos, where we talk all things construction and technology. Join us for discussions with industry leaders and insights into latest trends in construction. Welcome back to the pod. So today we're going to chat about modern methods of construction or MNC. And I guess a bit of context, if you're unfamiliar.
Speaker: It's kind of a set of methods or techniques to deliver construction projects, which differ from like traditional brick and mortar. It's kind of centered around things like factory production or offsite production, modular design, new materials. And I guess the goal is like improving speed, efficiency of construction, quality, safety onsite, reducing costs. So it all kind of sits in this bubble of we need to improve productivity with
Speaker: obviously construction, but that's kind of the classic chat GPT answer, which may or may not have been the source of that. But if we think about why it's on trend at the moment, the government are kind of pushing this MMC agenda. So they want contractors to be adopting these practices, the most prevalent, particularly in the UK. I don't know what it's, what it's like over in Australia at the moment.
Speaker: It's initially sort of centred around housing. A couple of stats, which I've openly stolen from another podcast I listened to in the UK. MMC chats podcast. It was a really good listen.
Speaker: So the UK are trying to build 350 ,000 houses a year. Currently we're doing 250, so like massive shortfall. Another stat, which is crazy, which is 50 % of babies that will be born today will never own a house. We can't keep up with the demands. The costs are going up. They're betting on the fact that it's going to be like this sort of renting economy.
Speaker: a bit like Germany and other European countries. MMC has seen as potential sort of avenue out of this so they can build more houses faster. And it's all really centered around modulizing as much as possible. So you're doing less on site. So there's everything from pre -publication, there's the ability to sort of do all of this in factory environments, which are environments you can control, you're not out in the field trying to do everything from scratch.
Speaker: and by doing things offsite and bringing things in at the last minute, it's safer. Can I ask you a question? Is it management consultants sticking a label on what is the offsite manufacturing, offsite prefabrication movement that's been going for a decently long period of time? So looking into it, there's no groundbreaking
Speaker: wild ideas that have been thrown in. It's all just sort of, let's take a bunch of good ideas that we've seen work, pull it together, give it a label and say, right, you've got to do this now. It seems like it's not going very well in housing. There's lots of like modular homes and those sorts of companies going bust. It's a difficult one because they sort of labeled it, they pushed it.
Speaker: It's not going to you well. You said something before of like they, you know, the government wants contractors adopting these, um, modern methods. And you mentioned that like, you know, they've put a label on it and then they said, you should do this now. What, I guess, uh, might be worth exploring. What is the, like, uh, the framework and how they're incentivizing it? Is it like a, you know, you have to do it or is there an incentive structure to do it? How are they incentivizing it? In terms of house building.
Speaker: I guess the incentivization is by standardizing and doing this offsite, you're going to turn a better margin because you're sort of, you've got these hubs producing X, distributing it to sites. So in theory, the model should work for the house builders, but there's one side of it, which is.
Speaker: If you go down this sort of, let's think of it as like almost manufacturing sort of side, there's really one aspect which is it takes seven years for manufacturers to turn a profit because all your cost is upfront and then you've got to churn through something that's happening over and over again. So that relies on these aspects of projects to be used for seven years plus to like turn a profit, which is quite a long time in a
Speaker: market the changes and people change their views on what they actually want and what they're purchasing. That's quite difficult. There's this sort of balancing view though. So the government are pushing modern methods of construction, but local authorities are arguing that it takes cash away from the local economy because we're doing less on site and it's all coming from centralized locations.
Speaker: not recruiting like the local labour force, you're not doing things on site, so you're taking money away from this area and pumping it to another. So it all seems a bit messy. I guess when you think about the the concept of prefabrication
Speaker: if we just stick on housing for a moment before we dive to what is our normal wheelhouse of infrastructure and commercial. But in housing, there's this, I think everyone would agree that if you could make houses cheaper by having them be more similar, repeatable, modulized, maybe off -site manufactured, more consistent design so you don't have to spend whatever it is, a percentage of the build and do a bespoke design every time, stick build on site.
Speaker: Most people would agree that's a tremendous idea. Yet the amount of people that then when it comes to their own house want a unique design. They don't want it to look like their neighbors. They want it to be totally unique to them when they're building it. So there's like this really like interesting and difficult dichotomy because you end up with this like a market dynamic where it might be cheaper to build the modular home
Speaker: but you can make a bigger margin having like a bespoke home. And that's been the case for a long time. So I don't understand what the government, I don't know how they break that model. And I don't know if that same dynamic doesn't apply when you move over to say infrastructure. Yeah. And yeah, as you say, people want bespoke, we don't want a bunch of Ikea show homes where everything looks the same in every spot. It's completely against what everyone actually wants.
Speaker: So yeah, it's an odd one. Margin's decreasing then. You're sort of narrowing the supply chain. So it's a bit of a strange one overall, where you would expect like then actually just a few key players to come. Make all the money. Yeah, because it's like anything. It's like karma. It's anything manufacturing. Like the way to make the business work is scale.
Speaker: you can get things cheaper if you make the same thing over and over and over again at massive scale. And so you end up with like, you know, two companies that make all of the modular housing in like UK or you know, you end up just with like this really weird like market dynamic. If this, I guess scenario plays out, how does that play? How does this translate to infrastructure? Like is the government pushing this in infrastructure? Is that why it's topical now?
Speaker: Yeah, so it seems slightly different. I was chatting to a friend of mine who works at Jacobs and they are doing a lot of work in this space. And he described it in a way that was much better than the, my opening gambit on this, where he's just sort of said, if we think about the principles of modern methods of construction and infrastructure, it's like a program, not a project approach. It's about contractual mechanisms for incentivization tied to productivity.
Speaker: It's about early contractor involvement and like strategic supply chain. And ultimately it just comes down to sort of productivity. Now he, he gave a couple of examples where he said like, for example, high -speed to massive scheme. They miss the boat almost by not standardizing components that are used throughout. So he gave an example of like parapets on a bridge. Like if that was a standardized thing across all of HS2, you can have a vendor producing them on mass.
Speaker: which makes them cheaper. You've got a design that's standard, whereas every contractor is doing their own design and you've got designers wanting to do their own thing. So that kind of goes against the model of something that's predictable, cheaper, and something that you can sort of replicate and repeat over and over again.
Speaker: The idea is just sort of have these repeatable components, but then you contract to the incentivized contractors that when they take and use these repeatable components and learn and install them or use them quicker and quicker, they're incentivized at the backend is kind of what the outcome that they're trying to sort of hit. Um, I think, cause I think everyone understands the idea that if you mass produce something, it becomes cheaper. I think the whole game here is like, what the hell the,
Speaker: what the hell the incentive structure is to make any of this work, because I guess the same thing would apply in infrastructure to a degree. By the time it gets to the contractor, there is very, very little scope for them to go and implement a strategy of modern methods of construction, because, you know, it's like the classic curve of like the earlier in the lifecycle, the project is the more impact you can have on all these things. So it's like,
Speaker: It's like given that the ultimate. It has to be done surely at scheme level. So you need the clients to say that. The ultimate client of all this infrastructure is usually more often than not the government. So it's like.
Speaker: Why the incentive structure should just be that they say that they're going to, in the design of the thing, require or build it into the design, which there is to a degree. I don't know what you would call them in the UK. But in Oz, there are standardized components for bridges within states, within the country here. There are standardized bridge component designs. So you'll call them a super T. There's pretty standard super T designs.
Speaker: allow manufacturers, or in that case, it would be a pre -castyard, to build moulds to the standard specification of that element. That's been around for a long, long time, and it's led by the government, the ultimate buyer of the infrastructure, enforcing standardized components across all of their assets. The idea that the contractor can really drive it is
Speaker: I just think it's, I think it's flawed to a degree. Yeah. The contract is not really incentivized in any way to run with it. Like you can have a scheme that says, right. This aspect of it is sort of owned and driven by us. So you could control certain aspects and free issue or manage that installation across contracts rather than each contract to doing it for themselves.
Speaker: It all kind of stems back to design, doesn't it? So if you're designing a scheme, you need the mandate that you're designing in line with modern methods of construction. So that you think about that. Schemes can be even too small. You should have standardized designs. A scheme will come along and then it will end.
Speaker: over some period. And if someone's going to stand up a business to make the, I don't know, bridge component, road component, barrier component that is standardized over and over and over again, which I'm presuming, again, these are some of these things that already do in many countries. But that business needs to be viable over the very long term. Yeah, no one's building a manufacturing facility to stand up a business to service this one scheme that they may or may not win a contract for.
Speaker: Cause otherwise you've got to let the contract to them when they have no manufacturing facility, no track record and no, you know, people. Um, it's like chicken and egg. And the, I think that the, I think the answer is chicken or egg and it's just whichever it is. I don't know, but it's designed and quiet. But I think some contractors, they, they are pushing into this. So like, uh, for example, Langaro cover explore, which does, it's like a massive pre -fabrication facility. So it can centralize that and distribute to projects.
Speaker: And then Crown, which is the sort of M &E arm of Lang, they produce these huge M &E modules. So you ship the entire pre -built services boxes to install them, which is way more effective in terms of programming costs. So there's obviously some buy -in. It is harder to think of it from an infrastructure point of view.
Speaker: earthworks, heavy concrete, things like that on site to really sort of standardize that and make it repeatable. It does make a lot more sense in a building project to keep the complexity in a manufacturing facility and just sort of minimize the time you're spending on site, especially if you can.
Speaker: Well, the other thing you're doing is kind of just leveraging union EBA wage rates. If you could substitute every onsite construction laborer with a warehouse worker in terms of hours of work done, I think like
Speaker: I'd be corrected, but I think for, there's like a, at least a, you know, 50 ish percent difference in hourly costs under most like union agreements for onsite versus factory. So at a minimum, it's an arbitrage of the, uh, rate that you end up paying the, the ad work. If you do it offsite, I guess an interesting question would be, is it greener? I guess that would come down to.
Speaker: where it's being distributed from, yeah, you're not going to ship for something 400 miles on an Arctic or however, if you could have done it on site for like a marginal gain. But yeah, I wouldn't like to say an answer then because I don't have any stats to back up my answer. But yeah, I'd probably say sometimes. Yeah, sometimes, sometimes not.
Speaker: Yeah. Do you think it makes it less interesting to be an architect or a designer? No, I think it's more interesting. It's like, um, it's kind of like, uh, it's like, what can you build with Lego? You know, it's like, how can you make, if you, if you constrain the design such that you have to use the standardized components, it's like a more challenging and interesting experiment where, or like a problem where
Speaker: you have more constraints and you have to think more carefully about it, as opposed to what it... But it's more interesting for a smaller group of people because in theory there's, if you're doing something that is being repeated at scale, then it's like a smaller group of people who have quite an exciting job and everyone else is just sort of...
Speaker: No, I'd say, well, I'd say, I'd say how it's probably going to play out. You know, the government says we're going to do a road upgrade from here to here or something. And, uh, they probably have to include in their scope for the project, the set of components that they are going to use from like the library of standardized MMC components. So like now in, you know, in Australia is the example of bridge decks, they'll specify that we'll use, you know, super T girders. But if you expand that idea.
Speaker: you could have standardized rail components and all sorts. Again, a lot of this is true. You have standardized on a road in a state. You've got standardized components for what the lights look like, the rail looks like, the barrier looks like. That is all pretty standardized already. But let's say there was other things and a type of project where there wasn't that standardization already. If we just say that that doesn't exist,
Speaker: I'd say that they would have to say, this is the project. We're going to use these standardized components from our library of things that we've specced. And then the designer of that project has to come up with the ultimate design for that project using the constraints of these components.
Speaker: So I don't think it like takes away, I don't think there's any like centralization of the design. There'll be a team that design the actual component themselves, but on each project there's still the same design team that has to come up with the solution. Just what I haven't seen is an infrastructure project with like a proven example of like these methods work. Like you can take single aspects of it and think, right, okay, that would work on this particular scheme. And each scheme is going to have its own little set of criteria of
Speaker: Like these methods are suitable. These methods aren't suitable. Yeah. It'll be interesting to see how it works. But it like that, but there are like, yeah, I think I take the counterpoint. They're like, if I take roads, uh, across, you know, a state of Australia, like a Queensland or Victoria, New South Wales, there are pretty heavily standardized components.
Speaker: Where it's not standardised is when you get like a mega project, like a crossrail, where every station is bespoke designed to meet some architectural theme that someone's dreamed up and invented and they have to all look different based on the area. And that, you know, there is a pretty good example of like where it probably wasn't used. And so, yeah, it has to be driven from the
Speaker: decline. I don't know how the contractor can't change at that point. You know, Tottenham Court Road Station is going to look like Bond Street. Yeah, to be fair, Crossrail as an example, they are very unique stations. They're entirely unique. They look awesome. The materials were a title. Yeah, and they were like three times over budget or something, right? And like 7000 years late. You get what you want. You know, if you want something, if you want something bespoke, it takes longer and it's expensive.
Speaker: And if you want it like reliable and faster and cheaper, you're best off doing it componentized. So yeah, I don't, I think like at that point you've got to, you've got to have like scheme level standardization. You've got to have like, like client or end user, whether it's like a TFL or a highways England or a network rail level standardization. Yeah, for sure. I go back to your point on a residential
Speaker: Everyone thinks it's a good idea until it's their house, and then they don't want the thing that's the exact same thing as everyone else. Yeah, and the market's totally different because the market dynamics in residential are totally different because you don't have one major buyer, you have a whole market of potential buyers. And so in that case, the onus is probably more on like a supply side or someone in the middle who can build a system of
Speaker: standardized components for houses that are cheaper and attractive but like on infrastructure I think it has the market dynamic is there is one big player in infrastructure that's usually the government and the only way this happens is they say this is the expectation yeah for sure right I think we've already hit time thanks Jason and thank you very much for listening
