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Controlling Construction Costs

It seems that there is always someone investigating ways to speed the process of construction. The main reason behind this effort is to save money. Considering a comment attributed to a building official in Virginia that the 2006 International Building Code increased the cost of construction by 15 percent, we do indeed need to look at ways to reduce costs in some fashion. There have been previous efforts to address this issue, and most, if not all, have failed for one reason or another. One that I remember from my early days in the industry was called “Operation Breakthrough.” This was a program initiated by the Department of Housing and Urban Development to improve the process of providing housing for lower income families by demonstrating the value of industrialized (factory built) housing construction methods and by eliminating or reducing barriers to industrialized housing construction. In a “lessons learned” report produced in 1976 by the General Accounting Office, the GAO stated that “Operation Breakthrough did not prove the marketability of most of its sponsored housing construction methods.”

One of the prime reasons for the failure of the program was that a significant reduction in the cost of construction was not realized. A group from a think tank in Washington, D.C., did look at the cost of construction, and they came up with some interesting results. They basically divided up a single dollar and assigned portions of it to the different segments involved. Those segments were separated into the costs of land, materials, labor and the cost of money to finance the construction. They determined that the cost of land would only increase due to availability. Any savings from material and labor costs were so insignificant percentage-wise that the savings in these two areas would have no impact on the overall savings.

That left them with the cost of money. Since the cost of money represented the biggest percentage of the construction dollar, they felt that there must be a way of reducing this percentage and realize a significant savings. The group presented its findings to an insurance company involved in the funding of construction loans. After the presentation, the insurance responded by saying that their idea had merit but did, in fact, have one flaw. That one flaw was that the insurance company would be losing money.

Is Prefab the Answer?

With the apparent failures, you would suspect than utilizing manufacturing methodologies in the construction industry would disappear altogether. That’s not entirely the case. The U.S. Bureau of Prisons has in recent history utilized offsite prefabrication to produce prison cells to build prison facilities nationwide with great success.

Many of you also utilize prefabrication to produce wall panel assemblies’ offsite. Some of our AWCI members who are involved in load-bearing steel stud construction use prefabrication methodology, and this magazine recently had an article about the offsite prefabrication of individual units installed for a hospital. So the premise of the demise of offsite prefabrication in the construction industry has not happened.

Of course we all know the benefits of offsite prefabrication. This methodology allows for better working conditions for the employees and also provides for better quality control, which means fewer callbacks on the work completed and also a reduction in construction time—and we all know time equals money.

You Have a Say

Now for the explanation of the background information just presented: The buildingSMART Alliance, a part of the National Institute of Building Sciences, in partnership with McGraw-Hill Construction, is undertaking an industry-wide survey of prefabrication and modularization in the construction industry. The survey, which involves 12 construction associations, will be one of the most comprehensive looks at prefabrication and modularization adoption and usage by architects, engineers, contractors, specialty contractors and other construction industry professionals. The survey will look at users and non-users of prefabrication and modularization concepts.

AWCI, as a member of the buildingSMART Alliance, strongly encourages you to take part in this survey. It is important that our voices be heard and opinions recorded. If your firm is not currently using prefabrication and modularization, you will be asked about your current attitude and potential future interest in prefabrication and modularization. If your firm is currently using prefabrication and modularization, you will be asked about your attitudes, past and current and future use, and how these processes can impact productivity on the construction site. The survey takes about 10 to 15 minutes to complete, and the results will be strictly confidential. The survey can be found at
If you have any questions contact John Gudgel of McGraw-Hill Construction, at [email protected] or (202) 383.7916.

Donald E. Smith, CCS, is AWCI’s director of technical services. Send your questions to [email protected], or call him directly at (703) 538.1611.

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