Within the Housing, Communities and Local Government Committee’s report on Modern Methods of Construction (MMC), there is undoubted Government support to embrace MMC to build new homes at pace whilst maintaining the highest levels of quality assurance. This is set against the backdrop of the UK needing to build up to 300,000 new homes per year, a target which has been frequently missed.
There is growing cross party support and the Government has invested significantly in the emergence of MMC. Homes England has been delegated to oversee delivery of the Government’s funding programmes and we now have an MMC Champion advising Ministers. However, even though there is a growing interest in MMC the initial take up has been slower than had been hoped. This approach has stalled, often due to misunderstanding over the following risks / barriers to entry in the industry:
- There are some concerns around design and how creative an MMC scheme can be (e.g. Is the need for standardisation an opportunity or a barrier?);
- Greater knowledge of the off-site manufacturers approach, their capabilities and the ability to obtain funding, warranties and insurance;
- Cost – It is thought that the upfront capital cost of a MMC scheme can exceed the comparable cost of a traditional scheme. And that the cashflow / funding / finance for these projects can be difficult to obtain;
- Risk – There seems to be a reluctance to change or modernise, the industry reverts to what it knows and has always done, private sector developers are watching and monitoring the market whilst public sector, supported by the Government has been more accepting.
For many clients there are rightly concerns and questions (we must remember that incumbent teams will often have little experience or exposure to MMC) so whilst the appetite to change is apparent it is not always clear how, when and why you should begin to implement MMC into the delivery of residential projects. Drawing on our Group experience of delivering MMC projects for a range of clients cross sector in the UK, we have below summarised some of the key points of how best to manage and minimise the risks and barriers to entry and maximise the benefits of MMC.
Design and flexibility
Increasingly the use of MMC buildings are being utilised for more complex and higher quality designs. Products and approaches are innovative but with this comes new design challenges which many will not have experienced if solely working on traditional projects. Considerations should include:
- It is critical that the correct design team are selected early. The Client’s Project Manager should be able to advise and offer insight into which Architects, structural engineers, acousticians, fire consultants et al have significant experience of delivering MMC schemes and are aware of the inherent challenges and opportunities associated with this form of construction.
- The earlier that a MMC scheme is considered, the more flexibility there will be for the manufacturers to add value and maximise the Client returns. With the need for design to be fixed earlier than a traditional scheme, it is crucial that the scheme is designed well from the beginning and that there is full co-ordination ensuring design and manufacturing approaches are aligned to create efficiency and drive productivity. MMC does not lend itself to late design changes which can be expensive to clients.
- To take advantage of the efficiencies of MMC it is essential that there is as much repetition and standardisation of design components and details as possible. This will not hinder creativity and vision if the correct design team have been appointed.
- MMC provides the ability to produce visual mock-ups and prototypes at an early stage. When using volumetric modular solutions, we have delivered “first off last on” modules (first out of the factory and last to be installed onto the building) which allows the client to sign off the interior design, quality and workmanship way in advance of a traditional build programme.
There are many reputable suppliers within the UK market (with a good mix of large and SME manufacturers) who have the experience of delivering high quality MMC buildings. Careful choice of supplier needs to be made as is it difficult to move between suppliers once a system is selected and there will naturally be design costs associated with this engagement.
- Engagement with MMC suppliers needs to be carried out to understand their; product; capability; pipeline of work, all to ensure that a “good fit” is achieved and that factory production slots are available that match with the construction programme.
- Obtaining budget costs from the suppliers is necessary to test against the budget and appraisal before considering the next steps for procurement.
- Procurement of MMC suppliers can vary depending on whether the building is to be procured as a ‘turnkey’ contract or as a package under a main contractor. Whilst supplier engagement at an early RIBA stage is important, it is still possible to maintain competitive tension in the procurement process.
- Other considerations when selecting suppliers are:
- What warranties are available to cover that supplier (E.g. LABC, NHBC, Premier, Checkmate), no less than 60 year durability (two mortgage terms).
- How the works will be checked, approved and signed off by building control / funds and insurance providers and whether this is off site or on site.
- The supplier should be accredited by BOPAS (Buildoffsite Property Assurance Scheme) and have ISO9001 certification which covers quality management.
Within Faithful+Gould we have an in-depth knowledge of these key suppliers and can advise on how to identify and procure the right team for your development.
Commercial viability of any schemes is paramount, and there is a perception that MMC projects attract a capital cost premium which is difficult for the appraisal to support. From our experience we have found that capital build costs can be very competitive when compared to a traditional build, if the following are taken into consideration.
- Cost certainty of the offsite elements of the Contract can be achieved much sooner in the design process, therefore, careful monitoring of this design package can provide a greater degree of cost certainty at a much earlier stage.
- With the design programme being brought forward this will impact the client’s cashflow profile. This will include front end design costs, potentially any Pre-Contract Services Agreement (PCSA) fees associated with this, advanced payment for the design and production of goods off site by the supplier as well as payment for the modules off site.
- The payback being that the programme benefits of this method of construction should result in the client realising their revenue from the project much sooner than when compared to a traditional project.
- Careful consideration of payment protection, in the form of bonds or guarantees need to be considered during the procurement process. Performance bonds or parent company guarantees are advisable to provide surety of the modular supplier’s performance.
- With design being fixed earlier to allow manufacture, changes post-contract should be avoided where possible, or limited as far as possible to those which don’t disrupt productivity. The production of early visual mock-ups will help to minimise post-contract change.
- We would expect the quality assured approach to manufacturing in a controlled factory environment will result in reduced Revex and Opex costs over the life of the asset.
Opportunities and Risks
There is naturally a balance of opportunity and risk which needs to be recognised and managed. With using an alternative form of construction other than traditional it is important that all stakeholders have a clear vision and aligned strategy. Initial advice should be impartial, whilst we truly believe MMC will play a significant part in delivering the homes of today and the future we must also recognise that it is not a silver bullet and should be used in complementing traditional works. Our recent experience has informed us that MMC can;
- Deliver despite the most challenging circumstances. - It is worth acknowledging that even in the current climate and the challenging circumstances surrounding Covid-19, output within off site manufacturing facilities is continuing and the impacts of social distancing in the workplace have been significantly less than traditional contractors have experienced. This method of construction can reduce the risk of large numbers of labourers on site and can ensure productive work offsite can continue.
- Cause programme delays & increase costs if not all elements are aligned to the factory programme. - The programme benefits of MMC are often discussed and stress tested. To ensure that this benefit can be realised, make sure that design development approvals and stage gates are aligned to factory production slots. Manufacturers can produce homes at pace (typically on a 40-60 day cycle with homes running concurrently), this production period will overlap with in-situ works on site required for the project, such as the substructure and the frame up to the transfer slab. Suppliers aim to keep their factories at full capacity and design or logistics delays can result in missing a production slot or storage costs which could result in contractual penalties.
- Reduce the number of people on site. - A key consideration in any construction project surrounds on-site logistics regarding materials, deliveries, storage, as well as accommodation for on-site workers. MMC will reduce the number of operatives on site, deliveries, storage and accommodation and the use of “just in time” approaches can potentially reduce the challenges on constrained sites and can offer a viable method of construction.
Over the past few years there has been a large uptake in MMC (mainly volumetric modules and panelised systems). Using the right design team that understands the challenges and opportunities associated with this form of construction can help to ensure that the perceived barriers to entry that this form of construction carries can be overcome and MMC is quickly becoming a credible option for a greater number of building types / construction projects.
Faithful+Gould is at the forefront on MMC both in the public and private sector, our understanding of the pre-construction challenges associated with MMC means we are well placed in supporting clients and achieving the best possible outcomes.
 Government response to the Housing, Communities and Local Government Select Committee report on modern methods of construction, Presented to Parliament by the Minister of State for Housing by Command of Her Majesty, September 2019, ISBN 978-1-5286-1596-9