It’s a ballsy estimator who pulls out prelims against a hypothetical cost saving; Does modular save you ‘real’​ money?

When initially discussing offsite with customers they have a major misconception.

They assume offsite is cheaper than traditional construction.

They also assume that quality is higher and the time taken is shorter – both true – but what about the real costs.

Contractors always say they can build the bathrooms on site cheaper. That’s what their budgets say.

In Australia, compared to current domestic prefab producers products – they can.

However, most of the more intelligent contractors know that there are savings to be had on projects. That’s why more of them are starting to buy them.

So what are the savings they think they see?

Waste. Material waste and waste handling is one of the biggest costs and can be 5-10% of a bathroom budget. You’ve got so many trades and so many materials that the packaging, material offcuts and breakages is substantial. The cost of handling and removal cost of waste is high so it’s important and reasonably easy to measure.

Management. A prefabricated fully finished product doesn’t need anywhere near as much supervision on site. It’s lifted in, positioned, commissioned. Especially when the manufacturer completes the installation and commissioning as part of the package.

Think about this. An average bathroom on site build takes over 45 threshold crosses (when a person enters the bathroom).

That is pre defect checking, pre-reworking, pre-handover checks. We have seen clear evidence from contractors that the total number of crosses per complete and approved bathroom is over 100.

With a prefabricated option that is minimised – a sensible estimate would be just under 10. Quite a difference.

Site facilities. There is a view that the reduction of people on site achieved through using prefabricated units will reduce the amount of site huts, canteens and ablutions. This is theoretical and only a couple of contractors have bet on this to reduce estimated prelims. We have seen a correlation between this saving and the type and shape of the building so it’s not always applicable.

Time. The holy grail of prefabrication is that is saves you time and that saves you money. This isn’t the case in most deliveries. Quite often the additional cost of the prefabricated product absorbs any prelims and site savings.

Also, programme savings are not that clear for elements such as bathroom pods. Generally smarter contractors consider pods as a programme risk mitigation not a cost saving.

So how much do you ‘save’?

Well; that would be telling. It varies between contractors but it doesn’t save you the premium for Australian bathrooms.

That makes the calculation line ball for most projects and here is the real problem.

You don’t actually save that money – it’s just money you eventually didn’t spend.

They are soft savings.

When contractors look at bathroom pricing in comparison they are looking at tender package rates with some moderation on various factors. They don’t/can’t/won’t look at the end cost.

If you assess budget and tender supervision, waste and prelims and try to allocate the proportion attributed to bathrooms you’d get virtually nothing. And that is the problem.

The truth of competitive construction is that the traditional method, bathrooms in this instance, always take more time, more supervision, have the majority of defects, the majority of bulk materials and the majority of critical handover time issues. Contractors throw resources at them to finish the project but never really account for that additional cost accurately – it just comes off the project margin.

The cost based decision is made at the beginning of the job with theoretical data on insitu construction cost. The estimate does not account for the additional work fighting to finish the job on time.

BUT. With the introduction of hand held data tracking for defects and on site works there is information popping up.

The data mining of bathroom defects and the estimated costs resulting in that will underline what we already know – prefabrication and offsite products do save money.

However, this is not a fairy story – we are not unicorn chasers and construction is a very competitive marketplace.

Contractors compete on hard dollar pricing and soft savings are not real when you’re tendering.

It is a very difficult argument, and a balls on the line estimating decision, to pull out a chunk of budget against a hypothetical cost saving that might not happen. Contingency can be reduced but in competition that’s normally pretty thin anyway.

Conclusion? Don’t price traditional in the first place.

If clients and contractors are serious about prefabrication then they shouldn’t even compare the prices.

That should be a balls on the line company policy not a tendering decision.

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