MODERNISING THE MALAYSIAN CONSTRUCTION INDUSTRY THROUGH THE ADOPTION OF INDUSTRIALISED BUILDING SYSTEM (IBS)

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1 THE SIXTH INTERNATIONAL CONFERENCE ON MULTI-NATIONAL JOINT VENTURES FOR CONSTRUCTION WORKS KYOTO, JAPAN September 22-23, 2010 MODERNISING THE MALAYSIAN CONSTRUCTION INDUSTRY THROUGH THE ADOPTION OF INDUSTRIALISED BUILDING SYSTEM (IBS) Kamarul Anuar Mohamad Kamar 1, Zuhairi Abd Hamid 2 & Zulkefli Ismail 3 Construction Research Institute of Malaysia (CREAM) Construction Industry Development Board (CIDB) of Malaysia IBS Centre, 1 st Floor Block E, Lot 8, Jalan Chan Sow Lin Kuala Lumpur MALAYSIA kamarul@cidb.gov.my ABSTRACT The Malaysian construction industry plays an important role in generating wealth to the country and development of social and economic infrastructures and buildings. The industry creates a multiplier effect to other industries, including manufacturing sector, financial and banking, agriculture, mining and professional services. Nonetheless, the industry is under a constant pressure to improve its performance. It needs to illustrate better image and reduces its dependency on cheap foreign workers. The current construction methods are also not in line with the government s housebuilding target. The industry needs to react quickly to these issues and modernise its processes within the capacity and knowledge acquired. The aim of this paper is to highlight construction modernisation efforts in Malaysia through the adoption of Industrialised Building System (IBS). IBS is defined as a construction technique in which components are manufactured in a controlled environment (on or off site), transported, positioned and assembled into a structure with minimal additional site work. The paper presents the definition, advantages, business cases, government s policies and challenges of adopting IBS in Malaysia. The paper also discusses findings obtained from the workshops conducted by the Construction Industry Development Board (CIDB) of Malaysia. The workshops have attracted participants from the industry stakeholders, professional bodies, government agencies and universities to discuss the challenges in implementing IBS and find the way forward. The workshops highlight the need to create more incentive for change, to establish IBS economic clusters, to improve in construction integration and supply chain, to improve IBS business strategy and to reform policy on foreign workers. Keywords: Industrialised Building System (IBS), Malaysia, construction industry 1 Manager, Construction Research Institute of Malaysia (CREAM), CIDB Malaysia 2 Professor and Executive Director, Construction Research Institute of Malaysia (CREAM), CIDB Malaysia 3 PhD Candidate, International Islamic University of Malaysia, Malaysia 1

2 1.0 INTRODUCTION The aim of this paper is to highlight some of the construction industry modernisation efforts in Malaysian through the adoption of Industrialised Building System (IBS). The paper also discusses findings from the workshops conducted by the Construction Industry Development Board (CIDB) of Malaysia on IBS. The workshops have attracted over 60 participants from the industry stakeholders, professional bodies, government agencies and universities to discuss the challenges in implementing IBS and find the way forward. The paper is not aim to present any rigor data collection and analysis but rather to put forward and discuss literature reviews and report on the workshop s findings. A literature review is a body of text that aims to review the critical points of current knowledge. A literature review uses as its database reports of primary or original research, and does not report new primary research itself. A literature review seeks to describe, summarise, evaluate, clarify or integrate the content of information. Completing a literature review is usually a significant intellectual achievement in its own right, requiring the analysis and synthesis of previous work in such a manner that new understandings of that work are uncovered, and the way is opened for new research. The authors believe this paper has an interesting and valuable findings and worth to be published. The findings could be a useful reference for practitioners and platform for future research in this area. 2.0 THE MALAYSIAN CONSTRUCTION INDUSTRY The Malaysian construction industry plays an important role in generating wealth to the country and development of social and economic infrastructures and buildings. The industry provides job opportunities for 800,000 people which represented 8% of total workforce (CIDB, 2006). The construction industry is one of the productive sectors that constantly contribute to the economy. Its growth rates fluctuates between extremities that varies from as high as 21.1 percent in 1995 to as low as 24 percent in Since the 1990 s, the contribution of the construction sector to the GDP also fluctuated albeit at a more stable rate varying from a high of 4.8 percent in 1997 to an estimated low of 2.7 percent in 2005 (CIDB, 2008). Recent data showed that the construction sector growth at 5.3% in 2007 and contributed 2.1% total Gross Domestic Product (GDP) of Malaysia (CIDB, 2008). The contribution to GDP would be much higher if one considers input from the whole supply chain activities of construction from design to maintenance. The total number of contractor registered with the Construction Industry Development Board (CIDB) as in June 2008 is 63,610 (CIDB, 2008). Construction work volume for public and private projects is predicted in the region of RM 70 billion per year. The industry creates a multiplier effect to other industries, including manufacturing sector, financial and banking, agriculture, mining and professional services. The industry is also predicted by many as catalyst of economic recovery and as a driver for the modernisation of Malaysia. In the 10 th Malaysian Plan within the time frame from , RM 130 billion public fund will be spend on building the physical infrastructure for Malaysian population, including schools, hospitals, road, dams, highways and railways. It is a huge amount of money spends by the government which will creates industry that is vibrant and healthy. Nonetheless, the industry is under a constant pressure to improve its performance. As in the conventional construction which is a common practice in Malaysia, reinforced concrete frame and brick, beam, column, wall and roof are cast in situ using timber framework while steel reinforcement is fabricated offsite. This method is labour intensive involving formwork fabrication, steel bending and concreting. It requires many wet trades on site such as skill 2

3 carpenters, plasterers and brick workers. The process can hamper by quality issue, unfavorable site condition, skilled labour shortage and bad weather conditions. Malaysian construction industry is also struggle to cope with the influx of foreign labour doing manual jobs in construction. Local people since reluctant to work in this sector due to minimum wage structure, bad image and 3D syndrome (Dirty, Difficult and Dangerous) In general, the number of foreign workers in Malaysia has increased from an estimated 0.5 million in 1984 to 0.63 million in 1997, 2.4 million in 1998, 1.9 million in 2006, and an estimated 2.2 million in 2008 out of 28 million total population and 8 million total workforce. CIDB had reported that 69% (552,000) out of total 800,000 of registered workers as in June 2007 are foreign workers (CIDB, 2007). It was a huge number which distress the stability and growth of domestic economy and created social problems. The current state of the construction industry using conventional method and wet trades is also not in line with the government agenda to construct 4,964,560 unit houses built between the periods of 1995 to 2020 with 709,400 units to be constructed in the period of (CIDB, 2006). The industry need to react quickly to these issues and to modernise within the capacity and knowledge acquired. 3.0 INDUSTRIALISED BUILDING SYSTEM (IBS) One of the options to solve construction problems as discussed above and modernise the industry is to move towards industrialisation and that is by adopting the Industrialised Building System (IBS) method in construction. The main aim of IBS adoption in Malaysia is to gradually reduce the dependency on foreign labour and saving country s loss in foreign exchange. Besides, IBS also provides the opportunity for the players in the construction industry to project a new image of the industry to be at par with other manufacturing-based industry (CIDB, 2007). The adoption of IBS promises to elevate every level of the construction industry to a new height and image of professionalism (CIDB, 2007). If IBS is adopted, efficient, clean, safe and innovative are some of the new attributes that will be associated with the Malaysian construction industry. In the Malaysian context, IBS is defined as a construction technique in which components are manufactured in a controlled environment (on or off site), transported, positioned and assembled into a structure with minimal additional site work (CIDB, 2003). IBS is also known in other countries as off site construction, offsite manufacturing, Modern Method of Construction (MMC) and pre fabrication. Those parts of building that are repetitive but difficult, time consuming, labour intense to cost at site are design and detailed as standardised components at factory. IBS also involves onsite casting using innovative and clean mould technologies (steel, aluminum and plastic). IBS offers benefits in term of cost and time certainty, attaining better construction quality and productivity, reducing risks related to occupational safety and health, alleviating issue on skilled workers and dependency on manual foreign labour and achieving ultimate goal of reducing overall cost of construction. In Malaysia, CIDB has classified the IBS system into 5 categories as follows (CIDB, 2003): Precast concrete framed buildings Precast concrete wall buildings Reinforced concrete buildings with precast concrete slab Steel formwork system Steel framed buildings and roof trusses 4.0 THE ADVANTAGES OF USING IBS 3

4 The following discussion will summarise some of the significant drivers and benefits of using IBS as being compiled by previous scholars in this field and relevant documentations: 4.1 Reduce Build time One of the obvious drivers to use IBS is a reduction of construction build time. IBS project has proven to complete faster compared to conventional construction project due to the usage of standardised components and simplified construction process. It proved to build faster since on-site and manufacturing activities are usually undertaken in parallel. It cut down the duration of work and simplifies the processes by reducing onsite activities and number of trades. 4.2 Labour reduction IBS offers significant save in labour and material cost, as the number of labour forces required in IBS is far lower than those required in traditional method (Na and Liska, 2008). It is however, necessary to emphasises that the relatively far fewer workers still need to be imparted training and skill appropriate to IBS. It is expected such trained skilled worker in IBS would much more quality conscious then the unskilled labour doing manual jobs in conventional construction. 4.3 Solving skill shortage IBS alleviates the issue of skills shortage in construction since all the construction elements are fabricated at factory. IBS eliminate extensive use of carpentry work, bricklaying, bar bending and manual job at site (Na and Liska, 2008; Hamid et al. 2007; and Haas and Fangerlund, 2002). 4.4 Fewer disturbances to community Fewer tradesmen visiting construction site in IBS projects has reduced local disturbance (BRE, 2002). This benefit is critical for hospital, school and hotel refurbishment projects, particularly in the city centre area. 4.5 Improvement in construction quality IBS offers improvement in quality, productivity and efficiency from the use of factory made products, thus reducing the possibilities of poor workmanship and lack of quality control. The quality of the final IBS products are normally much superior to the conventional work as the former are produced under rigorously controlled condition (Haas and Fangerlund, 2002). Complex shapes and finishes can be inspected and any substandard component rejected before it gets erected into the structure. IBS also as observed provide high quality surface finishes where joints section is the only part to be grouted, eliminating the requirement of plastering (CIDB, 2003). 4.6 Clean site condition and reduce safety and health risk IBS construction site have proven to look much tidy and organised compared to the wet and dirty conventional method sites. Wastage of temporary works such as timber formworks and props, which are normal in conventional construction are not there when one apply IBS. Thus it reduces the risk related to health and safety by promoting safer working condition (Blismas, 2007 and BSRIA, 1998). 4.7 Increase construction build rate In housebuilding sector, IBS improves the build rate of housing scheme dramatically by increasing the number of house completion over the period of time. This will help developers 4

5 to meet the demand in housing and contributes to government s aim to provide sufficient supply of affordable housing (Blismas, 2007 and BSRIA, 1998). 4.8 Waste reduction IBS also proved that wastage can be reduced greatly due to prefabrication of most of the building components. The system offers the potential to minimise the environmental impact of construction in many ways. Prefabrication in factory environment enables waste reduction through process orientation that entails controlled production and standardise process. IBS also promotes economic and environment sustainability as component moulds could be used repeatedly for different projects, allowing economic of scale and reduction in amortisation cost (CIDB, 2003). 4.9 Potential cost and financial advantage IBS in some ways could be a cheaper method of construction compared to conventional method. The saving could come from lesser number of workers. IBS can also be cheaper if one consider the whole life costing of the building. There are direct cost saving in material, construction over-head, while indirect cost saving occur due to faster delivery of building. This particular advantage in beneficial for the construction of small shops and offices. Further, construction of prefabricated elements in IBS results in considerable reduction in the use of scaffolding, shuttering and other temporary support as compared to onsite construction. 5.0 IBS ADOPTION IN MALAYSIA IBS has been introduced in Malaysia since early 1960s by the use of pre cast concrete beam column element and panelised system. The projects in Jalan Pekeliling, Kuala Lumpur and Rifle Range, Penang used Danish System and French Estoit System respectively. However, due to the leaking issue and high cost in producing panel components the technologies did not take off as planned. Another earliest IBS project was at Taman Tun Sardon in Penang (consists of 1,000 units five-storey walk up flat). IBS pre-cast component and system in the project was designed by British Research Establishment (BRE) for low cost housing (BRECAST system). A similar system was constructed almost at the same time at Edmonton, North London and about 20,000 BRECAST dwellings were constructed throughout UK from 1964 to 1974 (CIDB, 2006). Nonetheless, the building design was very basic and not considering the aspect of serviceability such as the local needs to have wet toilet and bathroom (Rahman and Omar, 2006). During the period of early 80s up to 90s the use of structural steel components took place particularly in high rise buildings in Kuala Lumpur. The usage of steel structure gained much attention with the construction of 36-storey Dayabumi complex that was completed in 1984 by Takenaka Corporation of Japan (CIDB, 2003 and CIDB, 2006). In the 90s, demand for the new township has seen the increase in the use of precast concrete system in residential buildings. Between 1981 and 1993, Perbadanan Kemajuan Negeri Selangor (PKNS) a state government development agency acquired pre-cast concrete technology from Praton Haus International based on Germany to build low cost houses and high cost bungalows for the new townships in Selangor (CIDB, 2003 and Hassim et al. 2009). It was recorded then, around 52,000 housing units was constructed using Praton Haus system. 5

6 However, in 1990s, the employment of foreign labour originally considered as a stop gap measure has become a national security issue. Recent influx of foreign labour has reignited the interest on IBS. During the booming period of construction , hybrid IBS application used in many national iconic landmarks such as Kuala Lumpur Convention Centre (steel beam and roof trusses and precast concrete slab: Victor Buyck Steel Construction), Lightweight Railway Train (LRT), KL Sentral Station (steel roof structure and precast hollow core: RSPA Bovis), KL Tower (steel beams and columns for tower head: Wayss and Freytag), Kuala Lumpur International Airport (steel roof structure: KLIAB Eversendai) and PETRONAS Twin Towers (steel beams and steel decking for the floor system Mayjus JV and SKJ JV) (CIDB, 2006). At present state, the use of IBS as a method of construction in Malaysia is evolving. Many private companies in Malaysia have teamed up with foreign expert to offer solutions to their IBS projects. The total registered IBS contractors in Malaysia stand for 895 in year 2007 with 334 are G7 contractor (Table 1 and 2) and registered IBS manufacture in Malaysia until 2010 is 118 producing approximately 347 IBS products available in the market shown in Table 3. The majority of the contractors involve in building and industry steal structure work and only 11 companies specialised in special formwork. There is also a good number of IBS precast concrete framing, panel and box system available in Malaysia and only 10 manufacture involved in producing block work system. Table 1: IBS contractor in Malaysia (Hamid et al. 2008) Grade Specialties Total Number B01 Building and industrial pre-casting work 28 B02 Building and industrial steel structure work 516 B12 Aluminum, glass and steel work 232 B15 Roofing and steel cladding work 108 B19 Special formwork 11 Grand Total 895 Table 2: IBS contractor in Malaysia (based on CIDB G1-G7 classification) (Hamid et al. 2008) Grade Number G7 334 G6 52 G5 83 G4 42 G3 237 G2 76 G1 71 Total 895 Table 3: IBS manufacturer in Malaysia (CIDB, 2008) IBS Type Total manufacturer Pre-cast concrete framing, panel and box system 36 Steel formwork system 16 Steel framing system 29 Prefabricated timber framing system 16 Block work system 10 Others (on-site) 11 Grand total GOVERNMENT S POLICIES ON IBS IBS Roadmap was developed and published to steer the direction of IBS implementation and promotion activities and guide the practitioners and policy makers on IBS 6

7 related issues (CIDB, 2003). IBS Roadmap aimed to facilitate the transformation of the construction sector was endorsed by the government during its parliamentary sitting in October The master plan is based on the 5-M Strategy (Manpower, Materials- Components-Machines, Management- Processes-Methods, Monetary and Marketing) with the target of having an industrialised construction industry as well as achieving target on developing open building industry by the year 2010 (CIDB, 2003). About 109 milestones were set to be achieved in year One of the important milestones in IBS Roadmap is the introduction of Modular Coordination (MC) concept. MC is a concept of coordination of dimensions and space where buildings and components are dimensioned and positioned in a basic unit or module known as 1M which is equivalent to 100 mm as stipulated in MS1064 developed in The concept allows standardisation in design and building components (CIDB, 2007). It encourages participation from manufactures and assemblers to enter the market, thus reducing the price of IBS components. In essence, MC will facilitate open industrialisation market. The IBS agenda was further boosted with the 2004, 2005 and 2006 budget announcements. In 2004, new government building projects had been strongly encouraged to have at least 50% of IBS content in their construction elements which had been calculated using IBS Score Manual developed by CIDB. Further in 2005, the government had pledged to construct 100,000 units of affordable houses using IBS (Hamid et al. 2008). Finally in 2006, tax incentive was offered through Acceleration Capital Allowance (ACA). IBS manufacturers would be given ACA for expenses incurred in the purchase of steel moulds used for production of precast concrete components to be claimed within three years (CIDB, 2005). The Construction Industry Master Plan (CIMP ) had been published in 2006 as means to chart the future direction of the Malaysian Construction Industry. The effort to promote IBS was highlighted under Strategic Thrust 5: Innovate through R&D to adopt a new construction method (CIDB, 2006). A number of programs have been undertaken under the recommendation of CIMP including the establishment of IBS Centre located at Jalan Chan Sow Lin, Cheras, Kuala Lumpur which is a one-stop centre of IBS related programmes initiated by CIDB, providing training and consultancy on IBS and showcasing IBS technologies through the demonstration projects. The centre has 5 elementary tasks: industry planning, promotion and marketing, verification and certification training and technology development. Currently, the centre offers 7 professional training courses; Module IBS01: Introduction to IBS and Modular Coordination, Module IBS02: IBS Score calculation and submission, Module IBS03: Precast concrete planning and execution, module IBS04: Analysis and design of precast concrete structure, module IBS05: Analysis and design of steel frame structures, module IBS06: Modular coordination design and module IBS07: procurement and contract administration. The CIDB also offers courses for contractor to become IBS component installer under National Occupational Skill Standard for Construction Industry (NOSS) conducted under the Personnel and Contractor Development Sector of CIDB. The CIMP through CIDB also supports the Research and Development (R&D) activities on IBS, conduct by Construction Research Institute of Malaysia (CREAM), a research arm of CIDB. The establishment a national laboratory for IBS testing and research has further enhanced R&D activities and become an important element under Verification, Validation, Certification and Testing (VVCT) quality assurance program for IBS manufacturers in order to be included in the Orange Book (Directory for IBS manufacturer). As to date, there are about 12 IBS researches have been conducted worth more than RM 6 million of capital investment. The government was also realised that it is important for private sector to participate in ensuring the successful implementation of the programme by creating sufficient demand for the players. Currently there is exemption to the Malaysian construction levy (CIDB levy % of total cost of the project according to Article 520) on contractors that have used IBS in 50% of the building components in residential buildings (Hamid et al. 2008). Some may argue that the incentive in the form of exemption of levy for projects with minimum IBS Score of 50% is too little to justified capital investment on IBS. The effectiveness of the offer is very unlikely due to the fact that the current levy imposed on building projects is already low. Initially the levy charged for construction projects was at 0.25%. However, after the enforcement of the Economic Stimulus Package in 2003, it was reduced to 0.125% and as for low, low medium and medium cost housing projects, no levy is imposed. Based on the 7

8 0.125% rates, say for a RM 20 million project, the levy to be paid to the Government is only RM 250,000. The offer will only be attractive if the increase of cost due to the usage of IBS components is less than that value. One of the most important milestones of IBS policy in Malaysian is the Ministry of Finance (MOF) s circular letter (7/2008) dated on October 2008 which emphasized on the full utilisation of IBS in the construction of new government building projects. The use of IBS components in government projects must not less than 70% (or IBS Score 70) and in that sense IBS must incorporated as part of the contract document for tender (Hamid et al. 2008). The decision was to create sufficient momentum for the demand for IBS components. As on February 2009, in approximate of 320 government s projects worth RM 9.43 billion had been identified to be carried out using the IBS. To monitor the implementation, the government has established National IBS Secretariat. It involves coordination between inter-ministries level to make sure the policy is successful implemented. The new IBS Roadmap to replace current roadmap will be published in The policy objective is to impose high level intended outcomes of implementing IBS. To remain focus, it has been narrowed down to four policy objectives which are quality, efficient, competent and sustainable. A sustainable IBS industry will contribute to the competitiveness of the construction industry. The pillars of the roadmap are as follows: Good quality designs, components and buildings are the desired outcome of IBS. Aesthetics should be promoted through innovation. To ensure that by using IBS, completion time of a building is speedier, more predictable and well-managed. To have a ready pool of competent IBS professionals and workers throughout the entire project life-cycle: from design, manufacture, build to maintain To create a financially sustainable IBS industry that balances user affordability and manufacturer viability In June 2010, the government had introduced the New Economic Model for Malaysia that will push the nation out from the middle income trap and create high income society towards obtaining developed nation status by the year The model aims to increase employee s productivity through efforts in innovation and creativity. By putting emphasis on this new economic model, the government hopes that employees will attain a higher level of competitiveness and eventually improve their standard of living. In this model, government will continue to introduce measures to reduce dependency on foreign workers in all sectors. Under the model, the industrialisation of the industry through mechanisation, prefabrication and automation in IBS will reduce the number of foreign labour and it eventually will be replaced by high skilled local workforce supporting national agenda as stipulated under the model. 7.0 SHORTCOMING OF IBS ADOPTION The initial take up for IBS nonetheless was not as high as first anticipated at this stage particularly from private sector. IBS Survey 2003 stated only 15 % of construction projects used IBS in Malaysia (CIDB, 2003). IBS Mid Term Review in 2007 indicated that approximately only 10% of the complete projects used IBS in the year 2006 as compared to forecasting IBS usage of 50 % in 2006 and 70% in year 2008 as projected in the roadmap (Hamid et al 2008). It was highlighted by many that the idealism, processes and management and skill sets behind IBS is differs from the traditional method. The potential barriers to successful IBS adoption as been documented by researchers and official reports in Malaysia are as follows: 7.1 Availability of cheap foreign labour The availability of cheap foreign labour which offset the cost benefit of using IBS is a root cause of the slow adoption. As long as it is easy for the industry to find foreign workers, labour rates will remain low and builders will find it unattractive to change into simplified solutions such as IBS. The cost of using IBS exceeds the conventional methods of construction, especially given the ease of securing relatively cheap foreign labour. In some 8

9 cases, irresponsible employers hired the illegal foreign workers, in the process, has further bring down the labour rates. The government spends millions of Ringgit each year to train construction workers but it is a waste if the graduates are not interested to find jobs in the construction industry due to the extremely low wages structure. In the end, the industry will always prefer the labour intensive methods, at the expense of IBS. 7.2 Sheer cost investment to set up IBS The limited take up was also relates to sheer cost of investment and the inadequacy of market size. Since the Asian financial crisis in 1997 and the global recession in 2008, it becomes apparent that large investments in central production plants are uneconomical. Relatively, high transport and overhead cost virtually eliminates the potential gain achieved through industrialisation. With the current low demand and low standardisation of IBS components, undoubtedly the initial usage of IBS will increase the total material costs of the projects even though ultimately it lowers the total construction costs in the longer term. As profit is the main motivation for private sector clients, an increase in take up rates will only materialise when overall prices of IBS components are reduced. There also observed that lack of investment on heavy equipments and mechanise construction system due to high capital investment could hampered a move to IBS (Rahman and Omar, 2006). Heavy capital cost involves in IBS resultant an insufficient capacity for contractors to secure projects (Hamid et al. 2008). Contractor hence demanded government intervention and assistance such as award and provision of large scale projects that would justify the capital investment required to adopt and deploy IBS. Some contractors seek large and design and build contract from the government. Large design and build contracts enable successful development of unique technical capabilities and present innovation opportunities like in IBS, which otherwise would be almost economically inappropriate choice instead. 7.3 Reluctant to change In IBS construction, there is a critical need to manage the design and manufacturing differently from the traditional way as IBS is different and needs a different mindset along with the right environment. Most construction stakeholders are already familiar with the conventional system and for them the technology suit well with their projects and therefore they are not willing to switch into mechanised based system. Changing their method or trade will require more investment to train the labour or to buy the machineries. Currently, there is lack of proper project management technique specifically for IBS and there is no specific cost control mechanism adopted by contractor in IBS. So, the risk of trying an unfamiliar technology is too high compared to current profit margin in construction. It also unfortunate that the local construction industry is reluctant to invest more in research which often a long drawn out affair without promise of immediate return. Further, Hamid et al. (2008) argued that there are mismatch between IBS target by the government and current industry readiness to adopt and change to IBS, therefore the industry need to be guided and helped to improve their readiness on IBS. 7.4 Low standardisation of building components Low standardisation of components is also hinder successful use of IBS (Hamid et al. 2008). The tailor made components which does not fit into another project will increase initial cost due to the cost of the mould and design. Lack of standardisation was due to a lack of certification and accreditation scheme on IBS and lukewarm respond on Modular Coordination (MC) promotion under MS 1064 (Hamid et al. 2008). As such, it is also vital for the industry to develop standard plan and standard component drawing for standard use particularly in public sector buildings. Nonetheless, in recent research indicated that IBS creates more value in the form of mass-customisation and less standardisation. Therefore, standardisation could possibly not be the barrier to IBS adoption when adopters apply masscustomisation when the level of industrialisation increased. 7.5 Poor human capital development on IBS 9

10 Lack of experience, lack of technical knowledge and lack of skilled labour is important barrier to successful IBS adoption (Hamid et al. 2008; CIDB, 2008; Rahman and Omar, 2006 and Thanoon et al. 2003). Based on IBS Survey 2005, the majority of designers agreed to have insufficient knowledge in IBS (CIDB, 2005). Furthermore, client and approving authorities cited to have poor knowledge of IBS thus resulting delays in building approval (CIDB, 2006). Familiarity with IBS concept and its benefits is vital to its success because IBS requires different approach in construction. 7.6 Lack of integration in design stage Nature characteristics of construction project which are fragmented, diverse and involve many parties. IBS manufacturers and contractors are currently involved only after the design stage. This lack of integration among relevant players in design stage has resultant in need for plan redesign and additional cost to be incurred if IBS is adopted (CIDB, 2006 and CIDB, 2008). IBS benefits can be optimised if the concept of standardisation, build ability, manufacturability are considered during the design stage. As in the current practice, it is not being taken into consideration at the onset of the project. This argument is supported by a book by Gibb (1999). He had underlined that IBS should not use as the afterthought that it will limit the benefit of adopting it. There is also chicken and egg dilemma between designers and manufacturers (designers will not design using components as they do not find the components in the market, whilst producers will not produce components as they do not see designs using components) due to lack of integration (Hamid et al. 2008). Perhaps, as pointed by Malik (2006), lack of exploitation to Information and Communication technology (ICT) had hindered successful integration in IBS particularly on the design stage. 7.7 People Perception on IBS Hamid et al. (2008) highlighted that a poor people perception could be another setback to IBS. As a result, IBS is not popular among design architects due to misconception that IBS will eventually limiting their creativity in building design (CIDB, 2005). Many in and out of the construction industry still have the perception that IBS is rigid and not flexible enough in both form and dimension to meet all variable demands of construction. This leads to the mistaken conclusion that IBS can only produce monotonous design. The term IBS is also often misinterpreted with negative meaning linked with 1960s industrial building. These buildings are normally associated with low quality and unpleasant architectural appearance (Rahman and Omar, 2006). Rahman and Omar (2006) also highlighted that lack of general awareness in IBS issue contribute to this misconception and a lukewarm responds to IBS. 7.8 Lack of sustainable volume and demand There is general consensus among practitioners that IBS needs mass production to achieve economic viability but currently in Malaysia, there is no assurance of continuity of production thus limiting interest on IBS. It requires volume and economy of production in scale to produce IBS component, but despite mandatory adoption in public sector, there is still lack of support and slow adoption from private sector clients thus creating unbalance and unsustainable demand (Hamid et al. 2008). This is because there is lack of assessment criteria set by the approving authorities, policies and incentives to urge the developers and private sector clients to use IBS. 8.0 INNITIAL OBSERVATION (EXTRACT FROM WORKSHOP S REPORT) The Construction Industry Development Board (CIDB) Malaysia has conducted two industry roundtable workshops in The 1 st IBS Roundtable Workshop was conducted in July 2009 at Grand Season Hotel, Kuala Lumpur and the 2 nd IBS Roundtable Workshop was conducted in November 2009 at The Legend Hotel Kuala Lumpur. Both events have attracted over 60 participants from various industry background, professional bodies, government agencies and universities. The workshop discussed the current challenges in implementing 10

11 IBS in Malaysia and proposed recommendations as the way forward. The summary of findings and recommendations derived from the workshops is as follows: A wider understanding on the characteristics and what is involved in IBS is needed. There is a critical need to manage the design and manufacturing differently from the traditional way as IBS is different and needs a different mindset along with the right environment. Rethinking the old processes is now critical if the industry is to move forward. The industry requires change management and business re engineering to encourage new mindset. What is needed is guidance on best practices and success factors which can be orchestrated the effort to adopt new construction mechanism. There are consensuses of opinions that IBS best handled as a holistic process rather than just a collection of technological solutions. The approach requires total synchronisation on construction, manufacturing and design processes. It needs emphasis on rationalisation, standardisation repetition, collaboration, supply chain partnering and more effective planning and project management. The incentives for IBS are not sufficient. IBS adoption requires more pull and push factors from the government. Due to the small profit margin, the change from conventional to IBS was not feasible, unless, more attractive incentive systems and benefits which can lure the conventionalist to IBS are in place. In current open and liberal market place, the decision to use IBS is commonly based on business judgment. Any promotions, incentives, development efforts should be focused on the demand side of IBS as well as develop capacity in the supply side. There is a good level of willingness among industry and government to take things forward. However, there is reluctance among companies to take risk which is mainly related to cost and unstable market and hence lack of investment. There is a critical need to manage the design and manufacturing differently from the traditional way as IBS is different and needs a different mindset along with the right environment. In this context, we might need to consider creating an IBS economic cluster to boost this industry by creating a partnership between government and private sector when and where it is needed. The payment mechanism for IBS should be reviewed. The adopters require safer and more reliable payment mechanism and contracts. The construction industry should benchmark with other industry particularly in manufacturing and automotive to understand the mechanism that works for IBS construction. IBS can be only benefit if decision to use it can be decided as early as possible not as afterthought during the project. This practice will allow manufactures, contractors and Mechanical and Electrical (M&E) specialists to get involve and share their knowledge early during design stage. The collaborative design team can be established by improving procurement and contract, establishing a clear statement of needs from clients or integrating the team starting from project briefing all by client s initiative. IBS should not be seen as a threat to traditional methods. The failure of IBS to penetrate the market is due to a misconception that it will eventually replace the traditional sector, while it actually should work closely in tandem to promote best practice in construction. The sharing of best practice between the two approaches is essential for the continued successful development of both construction sectors. IBS requires fresh thinking and blue ocean strategy to capture new demand, create new market space and offer customers a leap in value. The blue ocean is an 11

12 analogy to describe the wider, deeper potential of market space that is not yet explored. IBS is not well accepted by the construction companies because of the failure to adequately deal with risks in the IBS projects. In order to reduce risks, a careful risk strategy is very important. Sub contracting and establishment of IBS subsidiaries can reduce some risk based on contractual risk transfer solution. In addition, the contractor can attempt to own the prefabrication technology by devising a special relationship with one or more prefabrication subcontractor, such as project based joint venture, vertical integration or even internalization. Supply Chain Management (SCM) and partnering concept has not been fully understood by the industry. Currently, the cooperation between contractors, manufacturers and suppliers is weak in many cases. Improving the procurement system and supply chain is the key to achieving IBS success for contracting companies. Partnering with suppliers and sub contractors from the earliest project stages is vital to ensure efficient and timely delivery of components and services Availability of abundant cheap foreign labors doing manual job (at approximate RM 30 RM 40 per day) is probably a root cause hindering IBS to compete with conventional. In a nutshell, foreign labors usually unskilled and it is already affecting the quality and productivity of construction. Foreign labors were also contributed to the outflow of our currency and often associated with crimes and social ills. The government to find solution sooner rather than later to get rid at least half the number of foreign labors (particular in doing manual jobs) in Malaysia but to retain the skillful one. The government are suggested to introduce minimum wage for construction workforce through levy system, reform construction workforce training, attract graduates and school leavers to join the workforce, and to retrain and reskill our construction workforce to work as IBS assembler or at IBS component factory or simply stop issuing new permit for foreign labors. 9.0 CONCLUSION Industrialising construction by way of manufacture of building components and delivery on site exactly when needed is considered an effective way to achieve productivity gains and to make the industry more attractive for new entrance. To move towards industrialisation, Malaysia government has encouraged the use of Industrialised Building System (IBS) construction. IBS is a potential method to improve overall construction performance in term of quality, cost effectiveness, occupational safety and health, waste reduction, image and productivity. However, its current usage remains much lower than first anticipated. It was highlighted by many scholars, that the idealism, processes, management and skill sets behind IBS are different from the conventional method. This paper has highlighted modernisation efforts in Malaysian through the adoption of IBS. The paper presented definition, benefits, business cases, government s policies and challenges in adopting IBS. The paper also discusses findings obtained from workshops conducted by the Construction Industry Development Board (CIDB) Malaysia on IBS.. The workshops highlight the need to create more incentive for change, to establish IBS economic clusters, to improve in construction integration and supply chain, to improve IBS business strategy and to reform foreign workers policy. The derived outputs from this workshop will be proposed to be a guidance and reference for policy makers and IBS promoters to path the way forward in establishing new policies on IBS, guiding the promotion programs and identifying the potential themes and titles for future Research & Development (R&D) in IBS. ACKNOWLEDGEMENT The acknowledgement is due to the workshop attendees from various government agencies, professional bodies, universities and industry stakeholders, Ir. Elias Ismail (Senior General 12

13 Manager of CIDB Malaysia), CIDB Malaysia, IBS Centre Malaysia, Assoc. Prof. Dr. Sr. Fadzil Hassan (UiTM), UiTM lecturers and researchers, Professor Mustafa Alshawi, Professor Charles Egbu and Prof. Mohammad Arif (University of Salford). REFERENCES Blismas, N. (2007) Off site manufacture in Australia: Current state and future directions Cooperative Research Centre for Construction Innovation, Brisbane, Australia, pp BSRIA (1998) Prefabrication and Preassembly applying the technique to building engineering services In Advance Construction Technique ACT 1/99 (Ed. Wilson, D. G., Smith, M. H. and Deal, J.) Department of Environment Transport Region (DETR) and the Building Services Research and Information Association (BSRIA) CIDB (2003), IBS Roadmap , Construction Industry Development Board (CIDB) Malaysia, Kuala Lumpur CIDB (2005), IBS Survey 2005, Construction Industry Development Board (CIDB) Malaysia, Kuala Lumpur CIDB (2006) Construction Industry Master Plan (CIMP ), Construction Industry Development Board (CIDB) Malaysia, December 2006, Kuala Lumpur CIDB (2007), Malaysian Construction Outlook 2007, Presentation by Business Development Division, Construction Industry Development Board (CIDB), August CIDB (2008) Malaysian Construction Outlook 2008, Presentation by Business Development Division, Construction Industry Development Board (CIDB), August Gibb, A. G. F. (1999) Off site Fabrication prefabrication and pre assembly, Whittles Publisher, Glasgow, United Kingdom Haas, C. T. and Fangerlund, W. R. (2002) Preliminary Research on Prefabrication, Preassembly, Modularization and Off site Fabrication in Construction In A Report to The Construction Industry Institute, The University of Texas at Austin, Under the Guidance of The PPMOF Research Team PT 171 The Department of Civil Engineering, University of Texas at Austin, Austin, Texas 13

14 Hamid, Z. A., Kamar, K. A. M., Zain, M. Z. M., Ghani, M. K. and Rahim, A. H. A. (2008) Industrialised Building System (IBS) in Malaysia: The Current State and R&D Initiatives Malaysian Construction Research Journal (MCRJ), 2 (1), Hassim, S., Jaafar, M. S. and Sazali, S. A. A. H. (2009) The Contractor Perception Towers Industrialised Building System Risk in Construction Projects in Malaysia American Journal of Applied Sciences, 6 (5), Malik, N. A. F. (2006) Supply Chain Management in IBS Industry in Malaysian International IBS Exhibition (MIIE) 2006 Construction Industry Development Board (CIDB) Malaysia, Kuala Lumpur Na, L. and Liska, R., W. (2008) Designers and General Contractors Perceptions of Offsite Construction Techniques in the United State Construction Industry, International Journal of Construction Education and Research, 4 (3), Rahman, A. B. A, Omar, W. (2006) Issues and Challenges in the Implementation of IBS in Malaysia. Proceeding of the 6th Asia Pacific Structural Engineering and Construction Conference (ASPEC 2006) 5 6 September 2006 Kuala Lumpur, Malaysia Thanoon, W. A., Peng, L. W., Kadir, M. R. A., Jaafar, M. S. and Salit, M. S. (2003) The Essential Characteristics of Industrialised Building System In International Conference on Industrialised Building Systems Construction Industry Development Board (CIDB) Malaysia, Kuala Lumpur, Malaysia, September