Lord Moylan's report of recommendations has certainly stirred up some interesting conversations over the last week among industry leaders. The consensus agrees that ' The Government approach to Modern Methods of Construction has been left in Disarray' and that 'millions of pounds of public money have been invested, but the money has not been backed by a coherent strategy and set of measurable objectives’ to help us collectively support with delivering our demands for essential infrastructure.
There is a lot in the press around output reductions for 2024 across the housing sector. There is high financial stress across construction with large numbers of insolvencies and almost daily reports on House Builders, Associations and Manufacturers taking huge losses, or worse collapse, even those with years of healthy finances. This is not a challenge only faced by the offsite construction industry, but one that the entire construction industry is grappling with.
The UK Government promoted the use of MMC as a solution to addressing the 300,000 homes per year target, with significant attention brought to the volumetric solutions as the leader in addressing labor shortages, agreeably one of the biggest challenges we are facing.
And so the collapse of some of our top-tier suppliers of volumetric housing brought with it a lot of attention and left many questioning why, and I don't think we have all the answers. It isn't simple.
In the strategic plan, Homes England said that Offsite Construction ' has the potential to revolutionize the sector, but with the critical attention on the industry, it is important to review and consider all of the challenges that have seen organizations from across the industry struggle and recognize there are more solutions beyond the volumetric.
My comments on those are below:
Cost
There have been several oversimplified statements made around costs associated with the different methods of construction, and contrary to the sentiment expressed in the following:
''We have been told by housing associations, developers and the Royal Institute of Charted Surveyors that Category 1 housing is, or could be, more expensive than homes built using traditional construction methods, hence either needing public investment to offset the added cost or simply taking the decision to not use MMC. With the same level of certainty, we heard that MMC homes are cheaper. These two statements cannot both be true.''
I would argue that 'both can be true' and it is not baffling when you consider all the factors at play. Cost is not something that is simply compared on the bottom line, it can be measured and impacted in so many ways. Cost is determined by volume and scale, repeatability, specification, on-site labor costs, and ground conditions to name a few, and each of these factors will positively and negatively impact the cost depending on the project and the method of construction selected. The statement conflates Cat 1 costs and fails to acknowledge all other options including 2D systems. This is why optioneering and value-driven decisions are critical in deciding what the right solution is from project to project.
Last year DLUHC admitted it had to hand back £255m because it was unable to spend it. Simply throwing money at organizations is only going to continue to feed the problem, we need to first understand offsite construction and the many solutions out there. A better understanding of the methods, their characteristics, their strengths and weaknesses is enough to fairly measure and evaluate what is required to set out our objectives and how to measure and evaluate.
Several times in my career when under pressure to deliver in a tight timeframe, the request would come to simply employ more people to meet the deadline. I always found this very frustrating, because the resourcing wasn't the issue, nor the fix. The lack of defined process, objectives and efficiency was the issue, and to fix that would mean non-fee earning time and cost.
Planning
Many attributed the collapse of some manufacturers to 'insufficient order books and wider economic challenges'. A consistent pipeline is pivotal in meeting the significant benefits of manufacturing.
Our offsite suppliers have worked hard and invested millions in developing their systems, some have taken a rigid approach to their product books, whilst others have remained flexible. Each trying to find that balance between efficiency and flexibility to accommodate what is a laborious and slow planning process as well as create a pipeline of work across the country.
I agree that we need to prioritize an in-depth review of the planning system because the time to gain permissions is the slowest it has ever been. Simply introducing an optional extension of time is, again, accommodating the problem and not looking at it with a clean slate approach to reviewing, understanding and improving the process. We need to properly resource the planning system, and ensure local plans are put in place so that we can process applications effectively and efficiently.
When clients and planners demand that these businesses remain flexible in design, the result of that is a continuous state of R&D which involves lengthy testing and qualification periods for warranty and insurance providers.
Contracts
The commercial viability of delivering projects under fixed-price contracts presents a significant challenge for companies in a climate where material costs are unpredictable, negotiating these contracts becomes even more arduous, often resulting in companies being pressured to lower their prices. On top of that customers are cautious and will not place large orders with organizations that are not yet profitable, which means small orders of varying products across multiple clients are forcing these manufacturers to be in that perpetual state of R&D with new products on small batches lacking scale and opportunity to include learnings.
According to KOPE Market (UK & North America), there are over 500 Cat 1 & Cat 2 manufacturers registered, and 60% were founded in the last 10 years. It's important to recognize that many of these manufacturing businesses are still in their infancy, unlike established industries with a century-long legacy. Over the course of a decade, they have invested in refining their factories, optimizing processes, and delivering key projects to identify the most effective solutions. They have navigated the complexities of establishing their presence in the market, adapting to meet evolving customer demands, overcoming initial hurdles, and honing their craft.
We need to support projects by developing new procurement routes or lending opportunities to cover the upfront capital costs for materials for larger scale projects which neither the customer nor the manufacturer will take on, this can help with reducing the barriers to purchase.
Process Standardization
The report suggests that we look more closely at successful examples overseas with modular construction however, as the report states earlier, the method and the process of construction in isolation are not the issue, we need to resolve how we best integrate and incentivize offsite construction across our built environment and planning system first.
Design and Build contracts have long dominated the market, leaving the prescriptive specifications late on, putting risk and liability into the hands of those who did not design the asset the products are then applied to. With the new Building Safety Act, liabilities will
change, and so should how we integrate product solutions much earlier on to de-risk our projects. We should see a reduction in swapping like-for-like products late on with more onerous quality checks and potential delays.
I agree that instead of focusing on the types of offsite solutions, to increase the economies of scale and drive competition and standards across the market.
We should also invest more time and money in developing a pathway from descriptive to the prescriptive specification of solutions through the design process. To enable people to understand the impact and inform design decisions based on the most suitable product solutions.
Product Standardization
The entire supply chain of manufacturers needs to look at how best they can align with the platform approach.
The order books may look great but what is the level of standardization across demand to deliver all of it on time, budget and quality as promised? We need a sector-wide solution that can deliver across the spectrum of projects and their requirements. We need to reduce risk through standardization.
Following the work of DLUHC's Kit of Parts, currently focused on 2D solutions, the Volumetric suppliers need to respond and look ahead. All offsite product solutions should aim to define flexibility and constraints and enable rule based configurations and evaluations.
No single supplier can efficiently address all projects and their requirements. Visibility of the Market, what their services are and what their products can and cannot do is key. It allows us to create a suitable shortlist of products suited to each project, supporting the aggregation of demand whilst also enabling interoperability.
We need to continue the great work undertaken by our Government departments regarding our national programs NHO, DiO, MoJ, DLUHC, and DfE that are supporting the industry by standardizing and increasing the demands across sectors.
The Government MMC Taskforce was expected to undertake work on the required data standards but this never materialized. It is time for the Government to take stock of where we are, gather what we have, make sense of it and prepare a comprehensive plan of action to progress forward, including a strategy to consult the right industry professionals. If we can't measure it, how can we review it, validate and most importantly learn and improve from it?
