R&D / Innovation Priorities

With a framework in place to support the new tripartite covenant, it is necessary to build a coordinated programme of R&D and innovation that delivers productivity improvements throughout the construction sector, especially in housing. This should encompass utilisation of existing approaches such as Design for Manufacture & Assembly (DfMA), and product standardization and pre-manufacture from component level through to full volumetric level. It should also look to the future to understand the scalability and potential of newer technologies such as 3D printing, drones and on site robotics and the more holistic future impact of materials science advancements.

Any such initiatives should also be tied into an industrialised scaling up of benefit secured from the existing R&D Tax Credits Scheme. Construction should be securing its fair share of this tax benefit which it seems is currently passing it by. This point needs to link into the preceding leadership and implementation recommendations.

The CLC's Innovation workstream has set out a comprehensive plan for delivering many very relevant objectives and which this review has been party to and supports. It is recommended that the key issues that the working group must now champion are as set out below:

•  Centres of excellence and collaboration - Supporting and creating Centres of Excellence for skills and knowledge to share best practice, inspire collaboration and showcase new opportunities.

•  Promote the idea of innovation hubs where ideas can be shared and developed on a 'pay as you go' or free basis as currently being pioneered in parts of the higher education sector.

•  Promote the concept of 'factory sharing' (initially proposed by Buildoffsite) where SME businesses can coalesce and collaborate in a factory environment without fixed cost risk or by sharing that risk.

•  Promote the concept of on-site factories or consolidation centres that enable pre-assembly and de-risk construction operations and can be shared by multiple projects / clients. These could be demountable and have a modular approach themselves and so create an immediate opportunity.

•  Look to establish an industry-wide 'design for manufacture and assembly' (DfMA) protocol that enables a common platform to be created and supports possible interchangeability of components. This would create a more vibrant interactive trading market and be seen by clients as de-risking supply chain reliance, but needs to avoid concerns about retention of intellectual property and investments made.

•  Demonstrator projects and business case - Supporting and promoting demonstrator projects to raise awareness with consumers, aid industry learning and demonstrate the benefits of 'smart' construction and built assets. This should also prove the business case for 'smart', and the ability to demonstrate benefits through in-use performance data and leveraging the increasing power of the Internet of Things (IoT).

•  Work with the pre-manufactured construction industry to help it offer a much better quantifiable proposition to end clients. Predictability will be underpinned by BIM-enabled collaboration and greater pre-manufacturing adoption. Clients and their advisors also need to assess value in a different way and drive procurement away from project specific competitive tendering to more collaborative long-term approaches. Traditional cost plans need to move away from capex fixation and incorporate a new measurement of pre-manufactured value (PMV) which the CLC Innovation working party should look to formally define. This should be on a par with conventional Building Cost Information Service (BCIS) elemental definition protocols and should effectively inversely correlate to the level of on-site delivery risk (ie higher PMV = lower on site risk). Comparisons with traditional projects should focus on outturn positions in terms of time, cost and quality, not initial contracted positions. There also needs to be further development of more sophisticated cash flow and value chain mapping tools which can be deployed for pre-manufactured projects.

•  Specific priority should be considered for high PMV solutions that use lower-cost supply chains from UK regional locations (compared to higher cost, capacity constrained equivalents in London and the South East). The embedded build cost for such solutions in the residential sector could better enable low cost starter homes or discounted rental properties compared to traditional locally sourced approaches. This strategy will also free up more traditional skilled labour in areas such as London to be deployed on commercial and social / civil infrastructure construction.

•  Understand how pre-manufacturing might align to the custom build or bespoke developer housing market using 'off the shelf' solutions that provide flexibility on layout and fitting, better replicating the customer choice found in the automotive industry.

•  Liaise with central, regional and local government bodies to support direct investment into off-site solutions.

•  Address risk-averse culture, lending, valuation and insurance - Work with the finance sector and the RICS to improve high PMV property valuation understanding and work to widen the availability and affordability of asset investment finance and insurance / warranty products for homes built with high levels of PMV. Such measures should take account of concerns over product durability and long-term investment value and addressing the risk averse culture that exists not just in construction but in related financial, design and commercial advisory sectors.

•  Work with senior debt providers (and their advisors) to gain confidence in the development financing of higher PMV schemes and seek to promote the growth and mainstream acceptability of a quasi-Construction Management 'Integrator' professional delivery model for site based activities still required for a pre-manufactured solution. This avoids an inefficient and unaffordable lump sum 'wrapper' being forced onto developers or investors by historically led funder expectations. Also there is a need to ensure debt provider confidence in the greater need to drawdown higher levels of advanced off site payments subject to appropriate title security being obtained. This needs to be supported by appropriate contractual mechanisms to give comfort such as step in rights in the event of default.

•  Look to support a general education of the wider stakeholder community in making high PMV approaches 'mainstream' and acceptable based on clear benefits case analysis.

•  Look at more use of project bank accounts and new methods of project level insurance policy to re-aggregate the natural fragmentation that may exist around transactional and legal liability interfaces that often stand in the way of innovative procurement and product assembly models. This should also extend to digitisation of the payment process all the way down the supply chain and a move away from a culture of using other peoples' money to make money. These measures need to be supported by appropriate contractual mechanisms.

•  Look specifically at ways in which the rate at which initial fixed costs in manufacturing plant have to be written down against revenues can be supported through focused fiscal measures, subsidized loans or other policy measures. A factory overhead burden is an extremely sensitive cost and viability parameter for a pre-manufactured product, so an ability to help new businesses smooth this overhead allocation would support the comparative analysis against traditional construction and avoid a 'chicken and egg' barrier to investment and market entry.

•  Definition, targets and measures - There is a need for ongoing measurement and reporting of progress against the targets (work on the definitions and targets has already started) so as to check if more radical interventions are needed to drive transformational change (see recommendation 10).

•  Quantify and connect with the export opportunity - This workstream should seek to understand the potential for export markets to create an additional layer of demand for pre-manufactured housing solutions and inform support in relation to government trade missions and promotion.

•  Influencing Client Integration Agenda - In conjunction with the CLC's Business Models workstream, there is a critical need to disseminate outputs to provide the data and insights which can ultimately be shared with clients to help understand the business case for embracing innovation.

In connection with Recommendation 2, it will be necessary for a reformed CITB to link into the programme of activity detailed above. It will also need to design its grant system to reflect the relevant R&D and Innovation priorities. It is suggested a refreshed grant system should encompass:

•  Use of BIM level 2 and above.

•  Use of collaborative procurement and contract forms.

•  Use of DfMA / 'lean' principles as part of client brief setting.

•  Use of minimum levels of pre-manufactured value (PMV).

•  Funding / contribution to project or programme led R&D.

•  Delivery of customer choice as part of design & construction solutions.

•  Use of site based automation techniques - robotics, drones, etc.

•  General applications from parties for technology & innovation related initiatives underpinned by collaboration.

•  Strategic activities with wider industry impact attracting much higher levels of grant to be paid including direct or indirect investment in a pre-manufacturing capacity base that will serve the wider market.