Jamie Olsen Ferreira is a knowledge lawyer and Stacey Cassidy is a construction partner at law firm TLT
The use of “Modern Methods of Construction” (MMC), or modular construction, has been encouraged by the UK government in recent years. Homes England’s five-year Affordable Homes Programme made £7.3bn available to developers in April 2021 with the government stating that it expected its strategic partners to adopt at least 25 per cent MMC on schemes. In January 2021, the government also published the Construction Playbook, which set out its procurement strategy, including an encouragement of MMC.
“While fixing the design at the pre-construction phase does have efficiency advantages, there are also associated risks”
In September 2022, when the playbook was updated, a separate MMC Guidance Note was published that set out considerations for assessing the use of MMC solutions and guidance on the different contracting models required. Comparing MMC with “traditional” methods of contracting, the guidance note commented that while traditional “design continues to evolve at relatively late stages of the project, including after construction has commenced […], MMC and platform approaches require product-led thinking, an increased fixity of design and earlier decision-making associated with manufactured elements”. The point about earlier decision-making with MMC aligns with the playbook’s emphasis on two-stage tendering/early supply chain involvement – on the basis that the more work done in planning and pre-construction, the more smoothly the construction phase is delivered.
In November 2022, a private sector construction playbook was also published by the Construction Productivity Taskforce, endorsed by the Construction Industry Council and the British Property Federation. This mirrored many of the principles in the government’s playbook. It said that the adoption of MMC should be coupled with an approach to design that allows for greater standardisation – namely design for manufacture and assembly (DfMA) – and considers materials and process efficiencies at an early stage.
The Building Safety Act 2022
The Building Safety Act (BSA) received Royal Assent on 28 April 2022. The Act introduced significant reforms to the law and regulation of building safety, including extended limitation periods for bringing claims under the Defective Premises Act 1972 where homes are not fit for habitation; strict competency requirements placed on consultants and professionals working on projects; and the establishment of a Building Safety Regulator (BSR) within the Health and Safety Executive to implement a stricter regulatory regime for higher-risk buildings (HRBs), and to oversee the safety and performance of all buildings.
Much of the specific detail on the BSA 2022, and in particular on the HRB regime, which will be overseen by the BSR, has at time of writing yet to be published – the details will be set out in a series of secondary legislation which is expected to be enacted at some point between April and October 2023. However, Parts 3 and 4 of the Building Safety Act set out a general framework of how the higher-risk residential building regime will operate, including a gateways system as follows:
- Gateway one: as part of the planning-permission application, the parties must provide information to show that fire-safety requirements have been considered and incorporated.
- Gateway two: once the building’s design has been completed, work cannot commence until confirmation has been received from the BSR that it is satisfied that the building’s design meets the requirements of the Building Regulations 2010.
- Gateway three: once the construction phase is complete, a further assessment is required to be carried out by the BSR to confirm whether the work complies with the Building Regulations, and that all relevant information has been produced and provided to the “accountable person”.
Crucially, during the construction phase, there are also strict change control requirements on HRBs, with any changes to the works classed as “major” or “notifiable” requiring further review and approval by the BSR. The specific detail will be included in the secondary legislation when published, but it is expected that “major” changes may include changes to certain fire-safety features of an HRB, or to its use, or structural design, while “notifiable” changes may include alterations of certain plans that had been previously approved by the BSR during gateway two, or the substitution of certain products to be used in the works. Since there are likely to be significant delays while approval of changes from the BSR are awaited (the applicant must allow 10 working days from notification to elapse before any changes can be made), parties are likely to want to make as few changes as possible to the design or materials used in the construction of a new housing building in order to complete the project as quickly and efficiently as possible.
How does the BSA HRB regime align with MMC?
The desire to make as few changes as possible during the construction phase is a common thread in both the BSA HRB regime and in how MMC is intended to be used. With MMC and the DfMA approach to design, the structural design and choice of materials used has to be fixed at an early stage for manufacturing to commence. If changes are continually made during the manufacturing process, as can be the case during a “traditional” construction project, the modular contractor may be forced to stop manufacturing some of the components and potentially start whole sections again. Thus, as with the change control regime under the BSA, changes are to a certain extent discouraged, as they would also likely result in higher costs and inefficiencies.
For this reason, the use of MMC (whether intentionally or not) seems to lend itself well to the BSA regime if the parties are able to obtain approval from the BSR prior to the manufacturing process commencing – on the basis that once the approval has been received and the manufacturing process has started, there should be very few changes made.
By contrast, even if “traditional” methods are being used, developers may need to give significant thought to whether using a design and build or traditional procurement method that anticipates changes being made throughout the construction phase and at late stages in the project will be suitable given that the developer may need to go back to the BSR for approval, incurring delays of up to 10 days each time.
Disadvantages of ‘fixing’ the design
While adopting the DfMA and MMC approaches to fix the design at the pre-construction phase does have advantages in terms of efficiency, there are also associated risks. Developers will generally be required to pay more upfront costs (roughly 60 per cent before the modules reach site) on projects using MMC and so adequate payment security is essential.
There is also less visibility for the developer’s professional team on the manufacturing process, with factory inspections required, which need to be frequent enough to gauge that the quality of manufactured products is up to scratch, while at the same time not being so frequent to cause disruption. If the works also involve the supply of materials by the client, which are to be attached or incorporated in the items being manufactured, there may also be issues arising if there are differences in the quality of the materials produced by the client and contractor, and the interfacing between them.
If the quality of materials or a batch is substandard, this will also incur significant delays and costs – although by that same rationale, by using standardised units and materials, the risk of defects on the end product should also be minimised in comparison to “traditional” projects where the work is constructed on site on a bespoke basis.
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