Industry 4.0 – from procurement challenge to opportunity

David Weare, Partner, Fladgate LLP (dweare@fladgate.com)

For decades, modern methods of construction, including off-site, have been seen as the future of the industry. Yet, perhaps because of the stigma of low quality construction from the 1940s and 1950s when the focus was on quantity rather than quality, that vision was never really embraced. Now there are signs that industry is making the leap towards use of advanced technology in construction in what has been named the ‘fourth industrial revolution’.

The benefits of off-site construction are well reported: improving speed and quality, overcoming shortages of skilled labour, improving energy performance and productivity whilst reducing waste generated by traditional construction.

It is no surprise that Government is endorsing off-site as part of the solution to the UK housing shortage but for the first time the influence industry-wide cannot be ignored. Technology is not only improving how we can build but also becoming integrated within “smart” buildings themselves.

As construction methods change, so must the way in which we engage with the construction industry whether that be the contracts we use, procurement approaches we take or the risks to be managed. Some key points to consider include the following:

• Design Freeze
  Construction “off-site” isn’t just construction within a warehouse. Many modern construction methods involve processes more akin to manufacturing and the same disciplines need to be adopted as changes are significantly harder to implement half way through a production line.
• Payment
  For centuries payments in the construction industry have been for work done on site. With “offsite” methods, substantial payments often need to be made when materials are still under construction potentially in another part of the world.  Protecting the value of those payments is essential.
• Ownership
  Under English law, title to goods usually passes on delivery unless otherwise agreed and once fixed to the land title passes whether it is paid for or not. Carefully allocating passing of title and risk is key – they may not happen at the same time.
• Transit and Storage
  Replacing or repairing manufactured components damaged in transit can have a significant impact. Aside from the cost of replacement, which is commonly insured, the effect on the programme of having to go back into manufacture could be significant.
• IP and future usage
  Modern methods of construction are often rich in intellectual property. A balance is needed between protecting IP rights to protect those who own them whilst giving the end user the ability to operate, maintain and modify the works.

The answer to many of these issues can be found in adapting existing solutions to the new challenges associated with modern construction. Managed correctly, the obstacles can be overcome and we can embrace these opportunities to ‘build better’.