The construction transformation reshaping the global construction industry is profound, and now it has its own momentum.
It points to a happier construction story for future construction customers who have often felt at the wrong end of the deal. The momentum to rectify the industry’s woes seems no longer reliant on the effectiveness of local regulatory and compliance systems. Banks and insurers are now stepping up with new solutions not previously imagined.
Recently in the UK, evidence of change was the centrepiece at an industry briefing on construction assurance. A briefing in Kent presented progress on a Property Assurance Scheme (BOPAS) developed by Lloyd’s Register EMEA, Building Life Plans (BLP), Buildoffsite, the Royal Institution of Chartered Surveyors and the Council of Mortgage Lenders. The scheme aimed to assure the lending community and valuers that non- traditional systems of construction can be used in new house building with total confidence and traceability. The assurance scheme is currently only available in the UK and Scotland.
Certification is now available to manufacturers and constructors which provides confirmation that new properties, built using non-traditional forms of construction, will be sufficiently durable to support loans over a period of not less than 60 years. The availability of this certification is a recognised means to manage financial and construction risk and is proving to be of interest to private purchasers requiring a mortgage, institutional investors in new public and private sector housing developments, and client groups.
Interestingly, the conversations were not about industry calling for reducing standards and getting rid of red-tape. On the contrary, the briefing spoke of the need to re-assure the industry’s customers that they could look forward to smarter, better, and less expensive buildings.
The presenters made two precursory comments that illuminate the reality and significance of the changes:
- Japanese prebuild is in an advanced stage and to the level where the manufacturers are prepared to sell “at cost” and make even greater returns due to the inclusion of ‘after-build services and their warranty covers.’ This is not lost on China or the UK.
- China has recently requested a Lloyds inspection facility for their own products.
Lloyds Registry has 9,000 employers worldwide with a wide range of skills. Lloyds and Allianz Insurance have secured the approval of a range of mortgage providers who will automatically accept BOPAS building assurance. Lloyds currently have 16 approved manufacturers. Most current major manufacturers are foreign and see UK as a major prospect for their growth. Construction and insurance are both large global industries.
The digitisation of construction and Big Data are just starting to unleash their potential. The assurance scheme comprises:
- a durability and maintenance assessment process
- a process accreditation
- an online database comprising details of assessed building methodologies, registered sites and registered/warranted properties.
This means in effect that every new building can have its own digital compliance certificate. With global construction turnover soon to exceed US$15 trillion per annum, one can see the urgency to lock in big slices of this pie. The potential for a line of sight to construction impairment risk mitigation in a globally sourced industry and the as-built resilience of new buildings in the face of changing extremes in global climate impact seems very compelling. These underwrites will be hard for lenders to ignore. They will affect insurance premiums.
The purpose of durability and maintenance assessment is to provide assurance on the probable service life of a building based on its component parts and assemblies in typical environmental and use conditions. The BLP durability assessment is accepted as a recognised technical assessment of innovative design and construction, and issues relating to reparability, maintainability and suitability for the intended environment are covered,
The assessment gives confidence regarding the performance over time of the system to potential users, purchasers, funders and insurers.
“Lenders can now consider the views of other professionals as part of their decision to lend on properties which are built with modern, innovative methods. The assurance scheme was developed with lender input. It will assist lenders by providing assurance to other professionals, about non-traditionally constructed properties which lenders may be asked to lend on,” said Paul Smee, director general, UK Council of Mortgage Lenders.
The process accreditation, which is carried out solely by Lloyd’s Register, evaluates and facilitates the adoption of best practice by manufacturers and constructors in key performance areas such as risk management, competency management, configuration management, procurement management and process control at each stage of project development, through concept, design, manufacture and construction.
A structured and systematic approach at each phase of the project life cycle will ensure consistency and repeatability. The accreditation scheme requires this discipline to be adopted by organisations and their suppliers/subcontractors seeking accreditation under the scheme. The assurance of repeatability, delivered through the accreditation process, will provide assurance to:
- Asset valuers, mortgage valuers and surveyors, providing for a more consistent through-life performance of the innovative systems/products and therefore reduced variability in asset value
- The provision of latent defect insurance, as any form of variability in the system or product warranted, introduces greater risk for the warrantor.
In London last September, at a similar industry briefing, guest speaker Paul Fletcher spoke of the ‘Fourth Industrial Revolution and the Built Environment' and described ‘The burning platform for construction.'
“The UK construction industry faces irreversible decline over the next decade unless industry leaders, market participants and the government take fundamental steps right now to change how the industry works. If Smart Buildings are dependent on the internet of things are those ‘things’ good enough and are the buildings we create any better? Indeed, how is combining them ‘smart’?” he said.
Fletcher’s presentation went on to note that "technology is fundamentally changing the very concept of what we consider a building to be. The interconnectivity of people and the way the environments in which we live and work enable that connectivity is increasingly blurring the lines between people, buildings and digital. Smart buildings, the internet of things and artificial intelligence are all gathering momentum as the fourth industrial revolution evolves, providing a context for change. The success of the built environment industries in their ability to respond to evolving consumers’ wants and needs and changing lifestyle choices, all lies in strategic innovation. Only smart thinking can provide the catalyst for change.
"Standing still is not an option. Disruption to the built environment is already taking place, driven by growing expectations and demand from the end consumer. Consumers are becoming increasingly astute about how good or bad their environment is, in terms of enabling them to live as they wish with all the latest mod cons. The result is that we are seeing the consumer becoming all powerful and driving change. Consider Airbnb, a company whose success lies in disrupting the rental markets, as just one of a myriad of examples. Innovation is clearly essential, yet it is being stifled by an industry that is inherently conservative," Fletcher said.
At the same time, disruption to the employment landscape is inevitable as changes to business models brought on by technological and socio-economic developments continue to take hold. The global workforce is expected to experience a significant shake-up between job categories and functions over the next five years according to the World Economic Forum’s 2016 The Future of Jobs report.
Job categories in decline between 2015 to 2020 include those in the installation and maintenance, construction, extraction, manufacturing and production fields. This is perhaps relatively unsurprising in the built environment industries, given the increasing prominence of offsite -build and other modern methods of construction.
On the other hand, architecture and engineering, business and financial operations, and sales related professions are all jobs anticipated to be on the rise, but not as we traditionally know them. This isn’t a continuation of business as normal, he said.
Kim Vernau, CEO, BLP Insurance (Consumer Code for Home Builders) highlighted the key points raised at an interactive discussion organised for industry peers on the role of sensors and data in informing sustainable design and management decisions within the built environment The role of sensors and data in the built environment (White Paper). Guest speaker Jennifer Schooling, director of the Centre for Smart infrastructure and Construction at the University Cambridge, provided an engaging insight into the world of engineering and advances being made to harness information more effectively in infrastructure projects.
Schooling told the gathering, "Modern infrastructure must be robust, resilient and adaptable to change, but it also needs to be optimised in terms of efficiency and cost. To do this we need to harness information more effectively in projects, and use this to help inform better decisions about the way in which we build. Emerging technologies in sensor and data management provide a compelling solution to transform infrastructure through smarter information. The potential for reduced costs and efficiencies are game changing.
"Smarter construction and the onset of the so-called fourth industrial revolution brings with it a huge opportunity for using sensor technology and digital information to better understand our assets at every stage of their life cycle. The way in which sensor technology can be deployed and integrated through the construction process, from design through to operation, will enable better and more informed decisions. Most importantly it will enable increased whole-life value; using the information around the condition of the build asset to deliver higher quality performance, at best value, over the lifetime of the asset," she said.
With these insights, it will be harder for construction financiers not to make construction modern construction risk assurance a standard condition for construction finance. For asset owners, it will be harder to avoid the potential to lower their future insurance premiums as insurers become able to price risk on an asset by asset basis. No longer one cross subsidised price fits all. For users of construction, the construction deal starts to look more assured.
The momentum of construction transformation globally is undeniable. Yes, there are pockets of resistance who still believe in the status quo, but the ‘first movers’ are already out there implementing construction’s future. What is becoming clearer is that the traditional institutions of construction who have had charge for regulation, compliance and certification have had their day. Global construction assurance and the traceability of construction inputs from source, through manufacture to assembly and into life cycle is now driven by new forces.
Australia’s current Senate Economics Committee Enquiry into Non-Conforming Building Materials has yet to set a date to reconvene following last year’s federal election. Hopefully, there will be a swift recalibration of the Honourable Senator’s focus and perhaps responsiveness.