Industrialization of construction: Implications on standards, business models and project orientation

Digitalization is the single most significant change factor of the whole value chain of construction, with thorough implications on new technology as well as organization and processes (Eadie et al. 2015; Leviäkangas et al. 2017; Rizal 2013; Salman et al. 2012). A strong driver for digitalization in construction is the request for continuous and integrated information exchange between all actors of the construction process (Andersson et al. 2018; Thompson et al. 2017), which will ease communication and collaboration and will facilitate productivity improvements (Edirisinghe and London 2015). The potential of integrated and digital communication and information exchange in construction depends significantly on the establishment of common information standards (Koch 2017), file formats, and business models (Ekholm et al. 2013). Standards constitute a classification of information and rules for the building processes. Andersson et al. (2018) identify three main categories of standards:

concepts and classifications

There are numerous examples of national and international classification systems developed to support the increasing digitalization in construction. CoClass is one example of a new Swedish classification system designed to improve information management in the construction and asset management sector (Smart Built Environment 2017). The CoClass builds largely on the international ISO (ISO 12006-2 and ISO 81346-12) and IEC22 (IEC 81346-2) standard systems and relates to IFC, the global standard for data exchange in the building industries (BuildingSMART, 2020a). Similar classification systems are, for example, the Danish Cuneco Classification System (Cuneco 2013), the OmniClass (OmniClass 2017), created and used by the North American architectural, engineering and construction industry (AEC) and the Uniclass, that supports the construction sectors of the UK.

The civil infrastructure sector demonstrates an example of the need for open standards due to digitalization in the development project called “The Virtual Construction for Roads.” The National Road Authorities of the Netherlands and Sweden initiated this project in 2012 to improve the data exchange in the civil infrastructure sector by developing open standards for exchange and sharing of road information with commercial actors in the sector (Andersson et al. 2018). The background for this initiative was that the private civil infrastructure sector showed limited interest in investing in the standardization of data exchange formats, and therefore, software suppliers did not want to develop software for infrastructure clients as the market potential of their products was considered too uncertain (Koehorst 2017). In the real estate sector, five Swedish public construction client organizations have taken a similar initiative to develop open standards to facilitate the systematic use of BIM in building projects and real estate management (Andersson et al. 2018).

National authorities of Land Survey in Europe take important initiatives for integration between BIM and geographical information systems (GIS), for example, by supporting the EU Directive INSPIRE that will enable the sharing of environmental spatial information among public sector organizations, facilitate public access to spatial information across Europe and assist in policy-making (European Commission 2019). Another example within land surveying is the standard data model and exchange format of CityGML that enables common 3D urban objects of cities and landscapes, such as buildings, roads, rivers, bridges, and vegetation, to be shared and exchanged between applications. CityGML builds upon the Geography Markup Language 3 (GML3) and the international standard for spatial data exchange issued by the Open Geospatial Consortium (OGC) and the ISO TC211 (El-Mekawy et al. 2011). CityGML is also used as an inter-connector with IFC to bridge GIS and BIM (de Laat and van Berlo 2010) and enable unified applications in the areas of urban planning, property formation, building permissions as well as building construction analysis and coordination of construction supply chains (Deng et al. 2019; Chognard et al. 2018).

The establishment of Construction Operations Building Information Exchange (COBie) provides an example of a standard data spreadsheet format that facilitates information deliveries from BIM systems to Computer-Aided Facility Management systems for facility’s operation and maintenance (FM) (Lee et al. 2013). As such, COBie supports the handover of data from the design and construction phases to the facilities management by incrementally extracting and systematically store relevant FM-information as it emerges from design and construction documentation. The COBie specification rests upon open formats, such as Extensible Markup Language, SpreadsheetML or the IFC STEP format, designed for the exchange of data between systems (Schwabe et al. 2018).

BuildingSMART (2020b,c) has developed bsDD, the buildingSMART data dictionary, which constitutes an open and international standard library of construction concepts and their attributes. The bsDD allows architects, consultants, owners, and operators on one side and, product manufacturers and suppliers on the other side, to share and exchange product information at a global level (Beetz 2014).

Thus, there are several examples of local, national, and international standard classification systems that share the same fundamental idea of facilitating integrated information flow between systems and actors of the construction process. Such an integrated information infrastructure reaches beyond the AEC industry and includes urban planning, civil infrastructure, real estate management, building material manufacturing, industrialized construction, and other aspects of the construction sector.

This qualitative study operates in the business interface between industrialized and project-based construction. To understand, describe, and critically review the business relations and adoption of standards among precast suppliers, contractors, property developers, and trade organizations, semi-structured interviews were carried out with key representatives in this field. All interviews were recorded, transcribed, and were sent back to the respective respondents for proofreading and eventual corrections in the documentation. Additional data collected through the literature studies and product documentation, that is, the examination of model-generated drawings and technical documentation of precast products, supplemented the interviews. Altogether, the interview series included 11 interviews with key representatives from 10 different companies and organizations representing the industrialized as well as the project-based side of construction. See companies, lines of businesses, and roles of the interviewees in the list below.

Abetong AB (Abetong 2019), precast supplier, head of the division

One of the interviewed precast suppliers wanted to stay anonymous.

Fundamentally different production systems aggravate the establishment of common information standards and coherent information exchange in industrialized and project-based construction (Cox and Ireland 2002). Complex and unique products, temporary organizations, and onsite production methods (Gann and Salter 2000; Gosling and Naim 2009) characterize project-based construction, which offers limited incentives and possibilities for systematical repetition and improved production methods (Dubois and Gadde 2010). Industrialized construction represents a systematic, controlled, and standardized production process of well-defined elements and building systems, which facilitates the collection of experiences from the design, production, and assembly of the building system as a basis for continuous improvements (Lessing 2015). The understanding of industrialized construction has evolved over the years, from the mere off-site prefabrication of building elements to the design and manufacturing of more complex building systems, for example, complete structural frameworks composed by a specific set of slabs, walls, pillars, and beams (Lidelöw et al. 2015). The precast suppliers reviewed in this study operate as manufacturers of standard precast elements as well as suppliers of complete structural frameworks for buildings.

The review of business models and information standards among precast suppliers in this study has its starting point in the business model framework for industrial house-building companies presented by Brege et al. (2014). This business model consists of the operational platform, the market position and, the offering (Figure 1).

Fig. 1

The market position of the business model framework describes how precast suppliers relate to their customers on the market. The precast suppliers in this study operate in two principal lines of business. The offering of standard precast elements with minor customization represents the traditional line of business, in which general contractors constitute the typical client. In this line of business, the precast suppliers act in the role of a manufacturer of building elements with limited involvement in the onsite building production.

The other line of business represents the PSS-offerings of complete precast structural frameworks and additional services. In this line of business, the precast supplier operates as a contractor with full responsibility for the design and construction of the structural framework. Accordingly, the precast supplier acts on behalf of the building client, cooperates with the design team, and is directly involved in the onsite production side by side with the general contractor.

This study, operating in the business interface between industrialized and project-based construction, identifies driving forces for the adoption of standards from a market perspective that counteracts with the precast suppliers’ arguments for market protection. Incentives for the adoption of standards as well as renewed business models provide an example of a power balance between market and hierarchy (Williamson 1973).

The market approach promotes the adoption of open standards for the prefabrication industry, as in Finland. This approach will open up the market and making it possible for different actors using the same set of common standards to perform their respective parts of the value chain of precast elements. For example, one actor can do the structural design while another actor does the manufacturing of precast element and a third actor performs the logistical service as well as the assembly of the precast elements on site. Open standards, thus, promote increased competition, support information exchange, and prevent the identified problems design rework when shifting from in-situ to precast structural frameworks. The market approach, however, implies a product focus where the market position of the precast supplier is reduced to a mere manufacturer of precast concrete. Competition is based on the lowest price for standard elements of low complexity, and business relations are described by delimited and project-based contracts (Figure 2).

Fig. 2

With open standards, the precast suppliers cannot utilize and benefit from their existing operational platforms with qualified structural design competences, logistical services, and resources for onsite assembly. The reserved attitude to the adoption of standards among precast suppliers identified in this study concurs with Koch (2017), who found that actors on markets with no legal demands for the use of standards will only consider the adoption of standards if it generates immediate benefits for the business.

In the hierarchy approach, the precast suppliers try to align the whole value chain of precast structural frameworks to provide PSS-offerings and to secure the most efficient use of their operational platforms. As a supplier of PSS-offerings, precast suppliers act as turnkey contractors responsible for the design, manufacturing, deliverance, and assembly of the precast structural framework. This integrated work process provides opportunities for the precast supplier to gather experiences from the design, manufacturing, logistics, and assembly of the precast elements as a basis for continuous improvements. The hierarchy approach enables early involvement, shared risk and rewards, and close collaboration with the design team as well as other contractors. Besides, business relations rely on trust rather than strict contractual agreements, the product is unique and complex and competition is a matter of capabilities and qualities of the expected results. Accordingly, precast suppliers promote their PSS-offers as a way to climb the value chain and get more closely involved in the project-based construction.

The future scenario of the two counteracting forces toward an approach of standards and open market or toward integrated business models and hierarchies is, of course, impossible to forecast. In the long run, however, the adaption and integration of the two approaches are needed to enable the full potential of precast solutions as an integrated part of the construction process.