Modern methods of construction

26th March 2021

Last week (17 March) saw the latest instalment in Blake Morgan’s Public Sector Network series, chaired by Construction team Partner Joanna Rees. The focus of the webinar was the use of modern methods of construction, considering both the legal and practical issues surrounding its use.

We were pleased to be joined in our discussions by Blake Morgan’s Construction team Senior Associate Kate Howell, Welsh Government’s Darren Hatton, and Linc-Cymru Housing Association’s Richard Hallett and Keri Harding-Jones.  

What are modern methods of construction?

Over recent years, there has been a need to address housing supply shortages which, combined with a desire to drive costs down, has resulted in the construction industry seeking to innovate and develop alternative methods of construction. The term modern methods of construction is used to include a range of non-traditional construction methods, including off-site and volumetric modular builds. The enactment of the Well-being of Future Generations (Wales) Act 2015 has provided a further impetus towards modern methods of construction in Wales.

The Welsh Government‘s Innovative Housing Programme (IHP) supports innovation in housing delivery in Wales, providing grants where some or all of the construction is modular build. It is anticipated that the use of modern methods of construction (MCC) will reduce build costs and time, whilst also enhancing sustainability of developments. The Welsh Government’s MMC strategy was published a few weeks ago, and is available to read here.

Practical use

Some of the key practical advantages in incorporating MMC into development projects include:

  • taking the construction processes away from the building site and into factories, providing Welsh communities with opportunities for employment;
  • using controlled factory conditions to prevent delays to the build that may otherwise be caused by the unpredictability of site conditions, e.g. weather;
  • workers will not be exposed to the same level of health and safety risks within the factory as on-site, such as reduced requirement to work at height;
  • designs will be agreed at the outset of the project, reducing time spent on finalising design details throughout the life of the project;
  • where building parts are of a repetitive nature, off-site manufacturing can speed up bulk production;
  • being able to switch to more sustainable materials, such as cross-laminated timber, helping to achieve a net carbon zero building; and
  • may help to address the perceived skills gap in the construction industry.

There are a number practical issues that need to be properly considered to ensure that MMC can be adopted into construction projects. One issue is the availability and cost of structural insurance. However, it is anticipated that as MMC becomes more commonplace in developments, insurers will more be ready to adapt and provide the required insurance products to support a move towards MMC.

Legal issues

Employers should also be aware of the key legal issues associated with the use MMC, in particular, the contractual provisions that should be in place to protect them at each stage of the project. It is likely that amendments to the standard forms of contract (e.g. JCT, NEC4) will be required to ensure that they are fit for purpose, and provide the employer with adequate protection in respect of a development incorporating MMC.

Employers should also consider how the project is to be funded. To cover cash flow, modular build contractors typically demand 50% of the cost up-front, with 30% on commencement of the build and the remaining 20% before delivery to the site. Employers should therefore assess their options for security in respect of up-front payments, such as Advanced Payment Bonds, Vesting Agreements or Parent Company Guarantees.

Employers and contractors take note

With growing concerns over the supply and demand for housing, as well as an increasing focus on issues of sustainability and climate change, a move towards MMC is more important than ever. Employers and contractors should make sure that are ready for this change, and lead the way in supporting the future of the construction industry.

If you require any Construction law advice or more information about the use of MMC, please get in touch with one of our construction experts.

A full recording of the Modern Methods of Construction webinar is available here.

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