US Energy Department  

By: Michael J. Crosbie, Ph D.  R.A.  Steven Winter Associates, Inc.

How do builders decide whether to use panelized house systems? What factors come into play when a builder is contemplating making a move to panelized construction? And for what reasons would builders who are inclined to try a new building technology choose not to use panelized construction?

These are some of the questions asked in a recent survey conducted for the U.S. Department of Housing and Urban Development’s PATH (Partnership for Advancing Technology in Housing) program in an effort to understand how builders decide to use panel systems. We interviewed 24 builders across the U.S. , mostly from the Southwest and Southeast part of the country, where the lion’s share new housing starts are taking place (according to the latest U.S. Census data). We selected builders in a wide range of sizes (from 2 employees to more than 100) and the number of houses produced annually (from 2 to more than 200). The builders surveyed serve all kinds of markets, from first-time homebuyers and affordable housing for lower-income buyers, to high-end custom homebuyers.

What was learned in the survey might surprise some builders, especially when in comes to the motivating factors that serve as “tipping points,” propelling builders to take the plunge in using panelized housing technology. Comparing one’s own experience to what was learned in the survey might help a builder to decide whether to use panelized construction. The matrix at the end of the article presents a variety of factors that builders identified as being crucial in making their decision, what the elements of success where in using panels, and what some of the drawbacks were.

Popular Panel Technologies

Builders using all kinds of panelized systems were represented in the survey: simple open-wall panel technology (where panels are delivered to the site with exterior sheathing and open stud walls inside, to receive utilities, insulation, and finishes); sophisticated structural insulated panels (SIPs, with two pieces of OSB sandwiching a core of rigid foam insulation); precast concrete panels (delivered to the site with exterior finishes already applied); and SIPs with cement board exterior surfaces. By far, the most popular panel systems used were open wall systems and SIPs—five of the builders surveyed used open wall panels, while 13 chose some form of SIP.

Builders who have never used a panel system were also surveyed to understand their reasons for choosing not to use panels. These builders were selected from PATH’s Technology Evaluation projects—which tracks builders’ experiences on-site with using innovative building technologies— so they were at least open to the idea of trying something new. These builders almost uniformly cited higher costs for panelized systems as the reason they have not used them. Also mentioned was the lack of a panelized dealer close by, and the fact that no other builders in their region were using panelized systems. Generally, they admitted to not knowing enough about the benefits of the technology or how panelized systems are used.

The Cost Factor

Ironically enough, the cost of panelized systems was not a negative factor for the builders who chose to use them. The reason for this is that panelized builders, at least in the survey, tended to view costs on a more long-term basis. For example, builders who used SIPs technology admitted to higher first-costs for materials when compared to stick framing. But there were cost advantages further along the construction timeline. By using SIPs, builders could use fewer on-site laborers, at a lower skill level, which cost less. The construction time was also shortened, which meant that labor costs could be kept lower. Builders also mentioned the cost of construction waste—hauling it away and paying to dispose of it. With panelized technology the builders surveyed reported that there was less construction site waste—which was ultimately a cost savings.

Builders surveyed in the Southeastern U.S. predominately used open-wall panel systems. Many of these builders cited less on-site labor as a way of reducing costs—and a reason to use panel systems. Avoiding costly material theft was also a factor in the decision to use panel systems for some builders.

Construction Quality and Efficiency

While higher costs for panelized systems did not appear to deter the builders surveyed, construction quality and efficiency were cited as the biggest factors in deciding to use panels by builders all over the U.S. , large and small. Construction quality appeared to be a bigger factor for smaller builders versus larger builders. Many of the builders surveyed who produced 15 or fewer houses a year noted that a drop in the number of callbacks was the result of better material quality and a higher quality finished product in using panel systems (particularly SIPs).

For larger builders in the survey (constructing between 50 to more than 200 houses a year) open-wall panel systems were the technology of choice. For these builders, construction efficiency (faster construction times with less on-site labor) was a bigger factor than construction quality (although many of the builders said that they believed that construction quality was better with panel systems versus stick or masonry building).

Many of the builders surveyed said that construction efficiency was enhanced with an experienced on-site crew, whether subcontractor labor well-versed in the panel system used, or the builder’s own employees who have used the panel system before. In fact, many of the builders surveyed said that the on-site crew experience was the biggest factor in determining construction efficiency. Builders noted that construction efficiency was greater with fewer subs (which means less management necessary by the builder) and that fully fabricated panel systems—pre-designed with window and door locations and cut-outs—further enhanced construction efficiency. House designs that were simple and repeatable on a variety of sites also added to construction efficiency in using panels. 

Energy Savings

The promise of better energy efficiency due to higher quality construction and boosted levels of insulation (particularly in SIPs) was a deciding factor for only certain builders surveyed. Builders who operated in parts of the country with extreme climates (either hot or cold) preferred the higher energy efficiency of SIPs technology. All of the builders surveyed in the Southwest cited energy efficiency as an important factor in deciding to use panelized construction, and all but one chose SIPs. By contrast, only one builder out of the six surveyed in the Southeast cited energy efficiency as a deciding factor (that one builder was in Florida ).  Most of the builders in the Southeast opted for open-wall panel systems.

The bigger the builder (in terms of the number of units produced) the less of a factor energy efficiency played in the choice of using panels. For builders serving the affordable housing market, and those building high-end custom homes, energy efficiency was a factor. For builders who produced spec or tract houses, energy efficiency was less of a factor in deciding to use panels.

Competing with Other Builders

The general consensus among the builders surveyed was that the choice of panels was not made in an effort to compete with other builders in a market or region. Several builders mentioned that homebuyers do not discern a visual difference in a stick-built or masonry home versus a panelized home—they essentially appear the same. However, several builders surveyed mentioned that better energy performance (particularly with SIPs) helped them to compete by being able to serve a niche market of homebuyers were interested in energy savings and lower utility bills.  Other builders mentioned that the savings in construction time and labor costs helped them to compete with builders who did not use panels. This was particularly true for the builders in the survey who constructed 100 or more houses a year.

The Code Factor

Some resistance (or at least begrudging acceptance) of panelized systems by local code officials and buildings inspectors was experience by about half the builders in the survey who use panels. Among these builders, the negative reaction from the local officials was not enough to change their minds about using the technology. In fact, a number of builders reported such resistance as a challenge they were happy to meet by educating building inspectors, either on their own or with the assistance of the panel manufacturer or trade groups.

Builders who use panels for the first time in a locale where the technology has not made a big impact on the market should expect to spend some time educating the building inspector about panelized systems. However, builders report that once familiar with the systems, building inspectors are not a barrier to the technology’s use. In fact, one builder noted that local building inspectors now prefer the panel systems because they are easier to inspect, and construction quality is higher. 

Common Problems and Success Factors

Fabrication errors, miscommunications with the panel manufacturer, late delivery, resistance from subs such as electricians and plumbers, and the training of installation crews were the most common problems mentioned by builder in using panel systems. Fabrication errors in open wall and SIPs can usually be corrected on-site, or the manufacturer will supply a new panel. Good communication with the fabricator—particularly changes in the house’s design—is essential in heading off problem on site, many panel builders reported. Resistance from other subs is common in those who have never worked with the technology. Several builders mentioned that once familiar with panelized technology (even one house) resistance on the part of the sub dissipates.

Many builders reported that having experienced crews, either on staff or as subbed labor, is a key factor in making a panelized project a success. This can usually be attained simply by experience (learning onsite in the process of building a panelized house for the first time) or through crew training by the panel manufacturer. Some suppliers will send a representative to the site to help a crew through the building process—several builders noted that this was a big factor in using panel successfully. Technical support by the supplier was cited by several builders as an important factor for continued use of a particular system. 

Other factors for success with panel systems mentioned by builders included close coordination and scheduling with the manufacturer/supplier and good shop drawings that are carefully checked. Some builders mentioned that repeatable home designs also helped in the success of projects (both from the standpoint of getting the bugs worked out in the factory and on-site).

Conclusions

Higher first costs and an inadequate understanding of panelized housing technology appear to be the most common barriers cited by builders who have not used the technology. Among those who have taken the plunge, cost savings in the long-term, shorter construction time, and better overall quality are the major deciding factors. Some builders have carved out niche markets in building energy-efficient homes, and the energy efficiency of SIPs construction in particularly has helped them to serve this market. Competition with other builders does not appear to be a major factor in choosing to use panels. Code officials continue to remain behind the curve of understanding how panel systems work, but appear to be accepting of the technology once educated on the technology (thanks to enlightenment from builders using panels). One of the major factors for the successful use of panels is trained crews experienced with the technology, along with good communication and coordination between the builder and panel supplier.