There is nothing more depressing than those beat-up, decrepit portable buildings that schools across the country use for classrooms or offices. Most of these trailers on blocks don't meet modern construction standards. That's because many are decades old, in use well beyond their accepted lifespan. Aside from being mold traps and sources of unhealthy air, portables are also, by and large, incredibly inefficient. They tend to be cooled by wall-mounted air-conditioning units in the summers, which suck up power to counter-balance the uninsulated roofs and poorly ventilated metal-box construction.

Which is why I went to visit Project FROG (Flexible Response to Ongoing Growth) in San Francisco. The company hopes to become the Apple (AAPL) of the pre-fabricated building industry, a purveyor of elegant design that translates into a better user experience. And Project FROG is one of the hottest venture-backed entities in the nascent green building sector.
Project FROG also claims it can build modular structures for 25% less than standard permanent structure costs and in a fraction of the time. It's not only costs that matter, either. Project FROG buildings, in many cases, use zero energy and can even export energy to the grid. They also incorporate healthy light (daylight has been shown to improve productivity versus fluorescent). And their first target market is schools, naturally, although any market that requires cheap and fast construction will suffice (think disaster relief, non-profits, retail).

I sat down and talked to company CEO Ann Hand and President Adam Tibbs. Here are edited excerpts of our conversation:

Daily Finance: How did Project FROG get started?
Ann Hand: It was an idea of a group of founders saying there has got to be a better way. Kids deserve better than what they had. Also, we were looking at national disaster relief and thinking there should be a faster solution to replacing lost structures. But we aren't just pigeonholed in those two areas. FROG stands for flexible response to ongoing growth.

How many FROG structures have you put up?
Adam Tibbs: A handful to date, but we are seeing tremendous interest and we have a solid pipeline. We put some initial structures and then we spent a lot of 2008 taking the time to learn from those initial prototypes and lock in a solution that we feel really delivers value. We feel we can make a building a better place to work or study, greener -- 50% more energy efficient than code, faster to build by orders of magnitude and 25% cheaper per square foot on average as compared to traditional permanent structures.

Pre-fabricated structures have been a tough go. A couple of companies doing residential pre-fab have failed in the last year. And pre-fab always seems to cost more than standard construction in homes.
AT: I don't think so. I went through this myself. The price you are quoted from quality pre-fab home companies up front is a little scary and definitely higher than an initial quote for standard construction. But everyone is always convinced they're smarter, they can cut a few corners and get that home for less than $250 per square foot. Ultimately, it doesn't happen that way. There are always consequences that arise. Your architect has to make modifications. There could be work done by a sub-contractor that needs to be redone. And it usually ends out being more expensive than pre-fab.

So break down for me how a FROG building can be both excellent and cheaper than standard construction?
AT: The bar of excellence is pretty low in the construction industry. Think of waste alone. More than one-fifth of all materials brought to the site are thrown away. If you can get to a near zero-waste fabrication facility, that's a huge cost savings you have achieved by using less material and by eliminating need for waste removal. We are just to applying the same rationale and logic that manufacturers have long done for things like computers, airplanes and furniture.

We focus on smart manufacturing techniques rather than merely shifting construction from on-site to off-site. By doing this, you can bring the same efficiencies as really smart, highly efficient industries. The bulk of our secret sauce is in smart design in terms of cleverly using materials. We have instituted some lean production methodologies within our factory, things you might see at General Electric of other big fans of Six Sigma practices. But in our case this is not about scale. We're a small company. This is about being smarter and building a process that can be replicated easily in order to both stay efficient and to maintain quality.

AH: The number one cost building buyers do not understand is soft costs -- services, consulting, labor and things that don't show up as a materials purchase. That's what Project FROG does. Our process and products automate a lot of that work for smaller scale building and customers that don't have a lot of dollars to invest to design for green buildings.

Could you explain that a bit more?
AT: We developed some proprietary software that automates the design and build process. We export from our files into whatever CAD system the architects are using. But we use a proprietary 3D design tool that is more robust than what architects use. Basically, it's complicated and time-consuming to develop a 3D model. But once you have that model, the effort can be spread across multiple partners and buyers.

So site connection kits, designs for soil types, seismic situations -- all of that you can pull from our existing catalog of design models. The catalog does not work for every single situation. But it works for almost all situations. The other interesting thing we do is build an interconnection between the hardware and the software. When you buy a Project FROG structure, you also get performance monitoring software and sensors embedded in the buildings that automatically monitor energy performance and maintenance in your building. So we build you a much smarter building that way, too.

AH: In some cases, we can even save 40% customers off project costs from through our improved process which eliminates soft costs. But we eliminate soft costs in other ways. When you buy a FROG set that is California pre-approved by a California architect, you don't to go through the time and energy to get that approval. That's a big benefit and its only one of the things we do to streamline process and make it cheaper.

Tell me about how you have used software to improve this process.

AT: Part of what we've done in the last year is create a machine-readable design format. What does that mean? Take the pieces of structural steel we need for each project. We've modeled those pieces of steel it into a software file and included algorithms to determine the most efficient way to cut as little steel as possible from a sheet and still get the component shapes we want. We use something called nesting. Nesting means we look at all the pieces of structural steel we need and the order in which we will need to assemble them. So there are two factors to consider in cutting the steel -- required components and order of assembly.

Using this, we figure out the most efficient way to cut this steel from sheets not only in terms of saving material but also in terms of saving time and making our product easier to use. By spending 2008 building this software, we've been able to drastically cut the cost of structural steel per project and also to speed up the amount of time it takes to build a Project FROG building.

Another thing we've done is build our design to require the minimal amount of extra work on cutting and sizing. The exterior siding we use comes in 4-foot-by-8-foot sheets. So we designed our building to have siding panels that were exactly 4-foot-by-8-foot. No waste.

Building for schools would seem to be a tough market. There's not a lot of money floating around there right now.
AH: In the school world, their only objective is to hit a cost number when there is no spec for quality or energy efficiency. We can't compete with portables on price. But the anecdotes we hear is people want so much to have a FROG for other reasons.

AT: Most portables, because they are not permanent structures, do not have to pass code. They are very energy inefficient and not made to last. They use lower grade materials that emit volatile organic chemicals (VOCs). The biggest problems with trailers is mold. The issue is that its more expensive to build structures where water that penetrates the portable runs down the building and out. In many trailers, there is not drainage at all. This turns into a nasty mold problem.

AH: Another big plus for schools is our construction time of four to eight weeks for a project. That allows a project to take place in the summer when school is not in session. We also think our costs will continue to come down. Every time we partner with a general contractor, they tell us that by the third or fourth time they have built a FROG structure they should be able to halve the time they spend o he process.

On quality of life issues, too, we are confident that our downstream value will become clear. We use daylighting primarily in our building. Daylighting can boost kids grades by 20% and can cause absenteeism drop. There are lots of other benefits to greener classrooms that will be more apparent as this all plays out.

Alex Salkever is Senior Writer at AOL Daily Finance covering technology and greentech. Follow him on twitter @alexsalkever, read his articles, or email him at alex@dailyfinance.com.

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