Experienced owner’s representatives explain where first-time projects typically go wrong — and how to keep them on the right track.
• Treat offsite as a fundamentally different delivery method requiring new estimating, planning and decision-making processes from day one.
• Integrate designers, contractors, manufacturers and owners early to optimize constructability, repeatability and overall project value.
• Reduce costly surprises through disciplined coordination, clear contractual responsibilities, proactive logistics and experienced project leadership throughout.
Since the offsite construction process is sufficiently different from conventional construction, many first-time offsite projects run into serious trouble. Where are issues most likely to occur? And how can major problems be avoided on that very first project, if a developer or owner has never used offsite construction before? We asked owner’s reps for their opinions.
Feasibility and Pricing
Emily Mills Marineau is the Co-Founder and CEO of Juno, a San Francisco, California-based development advisory firm specializing in mass timber, prefabrication and kit-of-parts construction. However, Mills Marineau says, “We are ultimately method agnostic. Our job is to determine what’s right for a given project and help ensure it gets built.”
She says prefab projects often go wrong right at the beginning with initial pricing received from contractors new to prefab. “The cost is almost always too high because it’s conventional estimating with a risk factor applied,” she says. That first number scares developers and owners off, and the project “flips back to conventional.”
She explains that “Part of our job is to help the contractor — who’s providing the pricing to the developer — understand what it is they’re pricing, what’s included and what’s not.” Getting that initial number right requires walking them through what’s actually in their scope. “For example,” she explains, “in a panelized system, some things come pre-bored or pre-wired. And there are other items that would typically be in a plumber’s scope. We go through line item by line item: ‘You’re paying for something here, so you need to take it out over here.’”
Jen Canchola, Co-Founder and Chief Operating Officer of Juno adds, “In a prefabricated building, you actually need to estimate by piece — whether it’s the structure or just a bath pod.” Then, part of helping developers evaluate the feasibility of a project is making sure they understand the estimates they get. They can’t rely on historical cost-per-square-foot data — the standard approach in multifamily development.
To make the pricing work out, the decision to use offsite construction has to be made at the beginning of a project. “You can’t just turn a project modular after the fact,” says Canchola. “You have to go into the project knowing you’re going to use prefabricated elements, especially if they’re structural elements.”
Brian Caruso, an owner’s rep based in Boise, Idaho, sees the consequences of late decisions regularly.
“A lot of owners call me after they’re 10, 12, or 20 million dollars in. They own the land, they’ve got their entitlements, they’ve paid a ton of money for design and they have pricing that doesn’t work.”
Retroactively applying modular is sometimes possible, sometimes not. But, even when it’s possible, “let’s not have the misconception that modular is a silver bullet that will save all this money,” Caruso says. “I’m doing a retroactive project right now, and the only reason we’re able to make it work is that the owner’s given me carte blanche to do whatever design work is necessary. And the only reason he can afford to do that is because the designers are on his staff.”
Design Management
Once a project moves past feasibility, the design process itself has to run differently. Decisions that would normally be deferred need to get made earlier. It’s also important that the design team is informed by budget, and that the contractor is involved from the beginning.
Caruso applies what he calls the 1-10-100 rule: “It costs you $1 to fix a problem in design. It costs you $10 to fix that problem in the factory if the design is already baked. And it costs you $100 to fix it in the field if the module’s already built.”
Mills Marineau advises bringing your contractor in from the very beginning, “so that the feedback loop from design to budget starts happening way sooner than it would on a conventional project.” This is partly about avoiding the classic problem of a design set going out for pricing only to come back over budget — but it’s also specific to offsite. Fabricators have fixed manufacturing constraints: panel widths, module dimensions, weight limits, how piping and electrical run, etc. A designer who doesn’t understand those constraints ahead of time will create problems that are expensive to fix later.
Canchola describes what she calls target value design: “Everybody upfront needs to know what that target value is, instead of waiting for the feedback loops that come during deliverables.” She maintains that “Hands-on experience is where you learn what’s actually constructible: where tolerances get tight, what sequencing works, which details create problems when someone’s holding a tool, and so on.” As a contractor, you learn about little things that “will make a project cheaper, or more constructible, or easier for your guys in the field. Things that typically don’t get communicated back to the architects.”
Also, small architectural decisions add up. For example, Canchola says that specifying a wall thickness of nine inches instead of 11 inches means every precast concrete exterior wall company can produce it without a custom mold. For mass timber, “specifying CLT panel widths that align with standard mill production sizes, such as 3-ply versus 5-ply configurations, or keeping spans within a manufacturer’s standard press width” means a design won’t trigger a custom lamination run.
Similarly, for modular construction, keeping module widths at or under about 14 to 15 feet so they’re road-legal without a wide-load permit or designing room layouts that fit standard chassis dimensions instead of requiring custom framing can help lower costs and increase efficiency, she explains.
Designing for repeatability is another discipline that’s essential for offsite. “What can we repeat the most times in order to get the cost down on the construction side?” Canchola says.
Caruso emphasizes that the design-to-construction handoff has a hard stopping point that developers must internalize. “There’s a point at which we all understand: Pencils down,” he says. “After that point, if we make a change, we are going to be hurting ourselves.” Developers accustomed to making unit adjustments well into construction will find this discipline of “design lock” difficult — but it’s non-negotiable. “If I’m doing my job right, I’ve gotten them to understand that they need to stop designing before the building has started construction. But that’s very unconventional for commercial construction, so we have to say it over and over and over again,” he explains.
Financing and Contracts
Offsite projects also require developers to overcome deeply ingrained assumptions regarding cash flow and contracts.
Deposits for fabricated components are required early. Caruso often hears the question, “You mean I have to pay 25, 30, or 35% of this before construction even starts?” The answer is “Yes.” He says that getting banks and lenders to wrap their heads around “the very different cash flow needs of a modular project, compared to a conventional one, is a challenge. Large deposits are needed up front, money is placed into escrow and draws are done on a weekly rather than monthly basis.”
Mills Marineau advises developers to plan this into their pro forma from the start, communicate it clearly to equity partners and lenders and have contingency strategies in place. “Bring your insurers, lenders and capital partners in early, and talk to them about what’s happening and why it’s going to be different, why it’s worth doing and write down that risk management plan,” she says.
The risk management plan is specific to each individual project. But for prefab and mass timber specifically, it “includes procurement, schedule, transportation and logistics, moisture and fire risk management,” Mills Marineau explains. “For insurance, specifically, it often requires providing data about how mass timber behaves differently than traditional stick-frame wood construction. Char rate, water damage and mitigation, and seismic are the key differences when comparing mass timber to conventional construction, either stick-frame or concrete.”
On contracts, Caruso says, “Make sure your contract lines up with your expectations, your needs and the abilities of the factory and field teams. So, when things go wrong, you have clear understanding of who’s responsible, at what stage, and what the recourse is.”
Modular contracts are not standard subcontractor arrangements. The scope matrix — a document delineating who is responsible for every interface between site work and factory-built work — is a critical tool. “As mundane as it sounds, an Excel spreadsheet listing items and responsibilities, is very effective,” Caruso says. “It forces people to think about coordination and who’s responsible for all the details. When I drop a module on top of the podium, what is it connecting to? Where are those pieces coming from? Who is installing them? Who’s responsible for the tolerances and who’s responsible for the final connections?”
Mills Marineau says, “In recent years, contracting structures like design-build and IPD [integrated project delivery] have come up that fit prefab better than the conventional linear progression of design, bid, build.”
Logistics, Coordination and Communication
Caruso says preparation for transportation and weatherization is frequently inadequate. Modules arrive with interior finishes already installed, which means they’re vulnerable in ways that site-built structures aren’t. “If the team hasn’t adequately considered transportation and weatherization measures, a project can be derailed completely at a very late stage,” he says.
Problems often occur at the integration between what’s built offsite and what’s built on-site, so this detail requires active, daily management. In particular, the different tolerances between site-built and prefab components are a frequently underestimated challenge. “Concrete can be up to an inch and a half off as it goes vertically on a core. The subcontractor follows their code, they meet the tolerance, they’re done,” Canchola says. But mass timber doesn’t have that level of tolerance. She explains that on an eight-story building with a concrete core, a cumulative deviation of an inch and a half can mean that the last panel barely sits on its plate — triggering either a fabricated replacement panel or a specially engineered connection detail.
“These things cost time and money and put your project at risk, especially when you’re trying to dry in,” she says. Tighter tolerances need to be written into plans, specifications and contracts.
About communication, Canchola says, “Good communication is communication that’s frequent. I don’t assume that because I told you something once, you’re going to do it.” Someone needs to be checking, verifying and tracking every day. “On large $100 million jobs there should always be a full-time representative of the owner there. And on any project, you should have somebody visiting, virtually or in person, every day.” This is in contrast with the typical weekly meetings between the owner, architect and contractor, “which most people are used to. At these meetings, issues are raised and planned to be fixed by the next meeting. But, with offsite, that [communication and problem-solving] should be happening all the time.”
Hire Experienced People
Team composition is critical. On your first prefab project, if you’re not going to hire an owner’s rep, “at the very least, definitely make sure you have a contractor and an architect, and some of your key partners, who have been down this path before and can bring their lessons learned to the table,” Mills Marineau says.
Without experience on the team, Caruso says, “It’s not unusual for an owner’s first prefab project to not go well. Then they say, ‘Screw modular, I don’t like it.’” But there are reasons the project didn’t go well and those could’ve been addressed and avoided by taking the advice of experienced people in the industry. He also recommends that owners and developers “go to the prefabconferences and immerse yourself in the Kool-Aid drinking. Get excited about it so that you know the sort of questions to ask.”
When asked for her top three pieces of advice for owners and developers working with prefab for the first time, Mills Marineau cheekily sums up her view: “Hire an owner’s rep, hire an owner’s rep, hire an owner’s rep.”
Zena Ryder is a copywriter and content strategist. She writes for magazines and companies, and also helps B2B service business owners and consultants turn their expertise into content that converts traffic and followers into clients. Find her at zenafreelancewriter.com.
