Currently Reading

Contractors expect to spend more time on prefabrication, according to FMI study


Contractors expect to spend more time on prefabrication, according to FMI study

A new FMI study lays out the challenges, which include spurring demand among owners and specifiers. 

By John Caulfield, Senior Editor | June 4, 2024
Stantec illustrates the benefits of prefab multi-trade racking.
To illustrate the benefits of prefabrication, Stantec shows a multi-trade rack that features a modular frame with a custom assembly for standardized MEP components. Image credit: Stantec

Get ready for a surge in prefabrication activity by contractors.

FMI, the consulting and investment banking firm, recently polled contractors about how much time they were spending, in craft labor hours, on prefabrication for construction projects. More than 250 contractors participated in the survey, and the average response to that question was 18%. More revealing, however, was the participants’ anticipation that craft hours dedicated to prefab would essentially double, to 34%, within the next five years.

The studya sequel to FMI’s 2023 Labor Productivity Study—reiterates how the industry’s receptivity to prefab solutions corresponds with its ongoing labor shortages and compressed project schedules. (Contractors experienced approximately $30 billion to $40 billion in lost profits due to labor inefficiencies in 2022.) In its latest study, contractors told FMI that “improved quality” was prefab’s greatest perceived benefit. “Reducing the risk and variability” is how one contractor put it. Other benefits cited include reductions in construction schedules and improved worker safety.

(Nearly three fifths of the respondents to FMI’s study are MEP contractors, with another 15% being framing and drywall contractors.)

Contractors stated that improved quality is one of the main benefits of prefabrication. Charts credit: FMI

Contractors that consider prefabrication must determine how to do it at scale, profitably, and in a way that increases company earnings. Successful prefab practices, says FMI, require long-term strategic thinking and planning across an organization, along with the development of a comprehensive operational blueprint.

Which prefab model is right for pros?

It’s not like prefabrication is an alien concept for contractors. FMI’s study found that 86% of respondents currently offer single-trade prefab services. Three quarters of the concrete contractors surveyed said they are prefabricating on their jobsites; 57% of self-performing general contractors polled are prefabbing on-site, too.

What’s often lacking, however, is a clear vision of what they want their prefab capabilities to become. To make prefab work, says FMI, contractors need to shift their operating models, processes and systems. Contractors also need to decide which prefab models and combinations would work best for their companies; these include kitting services, multi-trade services, procurement, and modular services.

In making these determinations, contractors should be asking themselves:

•Why do we want to do more prefabrication? 
•What is the total addressable portion of our work mix (today) that could be prefabricated? 
•What investments would need to be made to scale our prefabrication capabilities to capture that opportunity? 
•When fully optimized, what does the earnings stream from prefabrication look like? 
•What does the return on investment look like for the enterprise? 
•Do we have alternative investment options for other initiatives in the business? How do those options stack up against our prefabrication ambitions? 
•Will prefab make the company better, more profitable, and resilient?

Prefabrication a different kind of business

For prefabrication to accelerate, contractors need to see more receptive owners and designers.

Prefabrication is a manufacturing endeavor that’s different from building construction. Contractors diving into prefab in a bigger way need to think about whether prefab will be a unique business or separate entity, and how autonomously construction and prefabrication operate? Will prefab services be proprietary or available to other contractors? Will prefab be a profit or cost center? How will manufacturing cost overruns, if there are any, be accounted for?

FMI says that contractors need to establish clear project management lines that encompass how prefabricated products are tracked, stored, and billed for. Tracking labor productivity across prefabrication and field installation is key.

Owners and designers need to buy in more

Contractors must decide what type of prefab service works best for their business and clients.

One of the contractors whom FMI polled mentioned a recent casino and hotel project that required 25% less labor in the field, and cut nearly two months off of its installation time, by using prefabrication methods.

Scheduling is driving prefab demand, says FMI. But expanding that demand depends on acceptance by owners and AEC firms, and right now, that acceptance is middling: only 18% of the contractors polled by FMI said that owner-specific requests drove prefab, and only 10% said that prefab was specified by architects or engineers.

“For the industry to realize substantial gains in prefabrication and productivity, owners and designers need to be a bigger part of the demand equation,” says FMI.

FMI’s study found that the industry still struggles with broad adoption. The biggest challenges to adopting prefab are a project’s design and coordination, stakeholder awareness and education, the mindset and culture of a project’s active players, and the investment in facilities and equipment.

But given current and projected labor force limitations, “it’s clear that prefabrication will need to become part of the solution.” For that to happen, building teams need to demonstrate a bolder vision, strategic planning, commitment to investing, consistent communication, and a proactive engagement by external stakeholders. 

Related Stories

Affordable Housing | Jun 12, 2024

Studio Libeskind designs 190 affordable housing apartments for seniors

In Brooklyn, New York, the recently opened Atrium at Sumner offers 132,418 sf of affordable housing for seniors. The $132 million project includes 190 apartments—132 of them available to senior households earning below or at 50% of the area median income and 57 units available to formerly homeless seniors. 

Contractors | Jun 12, 2024

New hire strengthens Kraus Anderson's relationships with design-architects

Nate Enger, the firm’s second design phase services manager, has worked on both sides of the designer-contractor fence.

Contractors | Jun 12, 2024

The average U.S. contractor has 8.3 months worth of construction work in the pipeline, as of May 2024

Associated Builders and Contractors reported that its Construction Backlog Indicator fell to 8.3 months in May, according to an ABC member survey conducted May 20 to June 4. The reading is down 0.6 months from May 2023.

Lighting | Jun 10, 2024

LEDs were nearly half of the installed base of lighting products in the U.S. in 2020

Federal government research shows a huge leap in the penetration of LEDs in the lighting market from 2010 to 2020. In 2010 and 2015, LED installations represented 1% and 8% of overall lighting inventory, respectively. 

Contractors | Jun 7, 2024

First-in-nation law requires contractors to pay prevailing wage for subsidized housing projects in Minnesota

Minnesota recently adopted a first-in-nation law that requires contractors to pay prevailing wage for subsidized housing projects in the state. This action makes Minnesota the first state in the nation to mandate prevailing wages on projects funded by federal Low-Income Housing Tax Credits (LIHTC).

Education Facilities | Jun 6, 2024

Studio Gang designs agricultural education center for the New York City Housing Authority

Earlier this month, the City of New York broke ground on the new $18.2 million Marlboro Agricultural Education Center (MAEC) at the New York City Housing Authority’s Marlboro Houses in Brooklyn. In line with the mission of its nonprofit operator, The Campaign Against Hunger, MAEC aims to strengthen food autonomy and security in underserved neighborhoods. MAEC will provide Marlboro Houses with diverse, community-oriented programs.

Airports | Jun 3, 2024

SOM unveils ‘branching’ structural design for new Satellite Concourse 1 at O’Hare Airport

The Chicago Department of Aviation has revealed the design for Satellite Concourse 1 at O’Hare International Airport, one of the nation’s business airports. Designed by Skidmore, Owings & Merrill (SOM), with Ross Barney Architects, Juan Gabriel Moreno Architects (JGMA), and Arup, the concourse will be the first new building in the Terminal Area Program, the largest concourse area expansion and revitalization in the airport’s almost seven-decade history. 

Construction Costs | Jun 3, 2024

Escalation: Predicting project costs in a volatile market

Thad Berkes, Chief Cost Estimator, Design Collaborative, shares that one of the major hurdles that Design Collaborative attempts to forecast for its commercial construction projects is escalation.

Multifamily Housing | Jun 3, 2024

Grassroots groups becoming a force in housing advocacy

A growing movement of grassroots organizing to support new housing construction is having an impact in city halls across the country. Fed up with high housing costs and the commonly hostile reception to new housing proposals, advocacy groups have sprung up in many communities to attend public meetings to speak in support of developments.

MFPRO+ News | Jun 3, 2024

New York’s office to residential conversion program draws interest from 64 owners

New York City’s Office Conversion Accelerator Program has been contacted by the owners of 64 commercial buildings interested in converting their properties to residential use.


More In Category


Most Popular Content

  1. 2021 Giants 400 Report
  2. Top 150 Architecture Firms for 2019
  3. 13 projects that represent the future of affordable housing
  4. Sagrada Familia completion date pushed back due to coronavirus
  5. Top 160 Architecture Firms 2021