It is disappointing to learn that Legal & General (L&G) Modular Homes have this month ceased production [1], following 6 years of losses. This comes close on the back of Urban Splash's modular unit entering administration [2], and has brought the future of modern methods of construction (MMC) under close scrutiny. 

Our thoughts go out to all of the staff employed by both businesses who have been made redundant. We urge them not to become disheartened and to continue to seek opportunities within the MMC market as their range of skills are highly transferable and will be very desirable to other businesses who have healthy order books and a variety of planned projects on the horizon.

What this means for the industry

You would be forgiven for thinking that the collapse of two MMC organisations in close succession could signal a reduction in confidence in MMC techniques, but this is certainly not the case. There are definitely lessons to be learned, and these will surely be considered as part of the Department for Levelling Up, Housing and Communities (DLUHC)'s project, which is investigating MMC Standardisation Research and Kit of Parts [3].

The most prominent element of MMC construction projects that is believed to be lacking is the inability to benchmark projects against each other and against traditional construction methods. Without the ability to garner reliable data from every construction project, it becomes more challenging to develop best practices and consistent methods of planning, costing and implementing the builds.

Quantifiable benefits need to be realised

Evidence has demonstrated on many occasions that MMC, including off site modular construction, offer a number of benefits over traditional construction. These include reduced waste, improved worker safety, shorter timescales to completion and reduced carbon emissions. Long touted as the future of construction, the MMC industry is now being challenged to quantify its cost benefits in terms of the premanufactured value (PMV) of its projects.

PMV is a value that is important, as Crown Commercial Service's new off site construction framework lists PMV as the core metric by which bids will be assessed. To comply with this new framework, contractors must demonstrate that their pre-manufacturing phase will account for 70% of their total construction cost. Yet, despite mandating this calculation, there is no set method by which it is to be derived, leaving each individual contractor to draw their own conclusions.

There is widespread speculation that the PMV supplied in bids can only be an estimate of the financial proportion of the pre-manufacturing phase as compared to the total expected cost of a construction project, and it is up to each individual contractor to determine the extent to which they include "hidden" costs, such as the cost of road closures and specialist labour and machinery. 

In order to refute suggestions that MMC costs and benefits cannot be adequately quantified, this value needs to be standardised and endorsed by a professional body such as RICS, CLC or ICE. This will ensure that all contractors embarking on MMC projects can make an accurate assessment of their project costs against which other projects and methods of construction can be benchmarked to reach a true conclusion as to the benefits of modular construction. 

Early engagement is key to success

A large benefit of modern methods of construction is that project decisions, including design and integration, happen far earlier than in more traditional methods of construction. Not only is the finished product designed at an early stage, but so too are the designs for the sub-assemblies and systems that will allow that design to reach fruition. 

Early engagement across the entirety of the supply chain and third parties, including the electricity board, water board and highways, ensures that early designs can be challenged and developed ahead of beginning construction or breaking ground, resulting in a higher quality end product, lower costs and less disruption to local residents. 

If this engagement produces true facts and figures to substantiate the likely cost of the build, it becomes easier to determine what proportion of costs will be attributed to the pre-manufacturing phase. Should a standard PMV calculator become available in the near future, with a defined set of costs input for every construction project that is planned, it will become much easier to benchmark these costs and create data-driven best practice for use by the whole of the industry.

Summary

We have huge confidence in the MMC industry and believe that these construction techniques are vital to achieving the government's home-building and carbon reduction targets. We agree that standardisation would be beneficial to allow the industry to demonstrate its cost, quality and timescale benefits based on a defined set of input data and would be very happy to contribute to industry-wide discussions about the topic. 

Resources:

[1] https://www.constructionnews.co.uk/financial/lg-to-stop-making-modular-homes-05-05-2023/ 
[2] https://www.constructionnews.co.uk/financial/administrations/urban-splashs-modular-spin-off-falls-into-administration-13-05-2022/ 
[3] https://www.constructionnews.co.uk/tech/offsite-mmc/govt-appoints-firms-to-standardise-mmc-for-housebuilding-12-05-2023/