Does Offsite Make Projects More Affordable?

Affordability is a key concern when we buy anything of significant value. Construction projects can run into hundreds of thousands or millions of pounds, and affordability has to be top on the list of priorities.

With large projects, it isn’t just the direct cost of the build that counts. There can be financing costs that depend on the project duration and opportunity costs from lost revenues for every day that a project is delayed.

In terms of build costs, it’s hard to make a direct comparison between traditional and offsite. You’d have to create two identical buildings with detailed cost accounting to do that. Direct modular building costs appear to be on a par with traditional methods on a like for like basis.

However, when KPMG modelled the potential cost benefits of offsite back in 2016 (and the technology has moved forward significantly since then), they found a more informative picture. They concluded that due to factors such as the reduced build time and elimination of late design changes, offsite techniques can be expected to produce 7% net financial project savings.

They equated this to £36m of savings on a 50-storey central London office block. They didn’t attempt to quantify what other financial benefits might come from, for example, reduced financing costs (from the shorter build time), opportunity costs of delayed revenues, or from greater guarantees over quality and building performance. But judging from their initial study, it can be inferred that there are a wealth of other benefits that offsite can offer – take a look at our ’10 benefits of offsite construction’ infographic for more details.

Standardisation and Affordability

The report also highlights additional potential savings from greater standardisation. They cited the fact that Anglian Water managed to achieve 30% cost savings by standardising the design of water treatment facilities and using modular building. With traditional builds, savings from standardisation are marginal as there is the same labour-intensive process needed for each iteration.

Maybe there’s a question over whether it’s not projected cost, but the uncertainty over cost that causes many projects to stall or never happen. The scenario is familiar – the spectre of unforeseen technical and buildability issues leading to late design changes, reworks, delays and additional costs. This could all add up to a level of risk that is too high.

Panelised offsite is all about certainty – over time, cost, quality and performance. And maybe that’s the most powerful affordability argument of all.