Modular construction gains traction as an alternative to traditional construction techniques

Over the past few years, the construction market has talked more and more about the use of modular construction to build new houses, offices and even factories. According to many, the use of modular housing is the answer to the existing housing shortage. The UK needs to build about 250,000 homes a year, but on average we only manage 100,000 and the construction sector is struggling to keep up.

In fact, in 2016, to specifically tackle the UKs chronic housing shortage, Legal & General opened the world’s biggest modular working factory with an aim of building thousands of modular houses.

Modular housing or “pre-fab” construction is not new and has been around since the 1960’s and 70’s. However, the evolution of manufacturing techniques and reduced cost of production has meant that it is now starting to re-emerge as a very realistic alternative to traditional construction techniques, especially for large-scale construction projects. Funding institutions are also increasingly getting comfortable with this method of construction.

The upside of modular construction is obvious. It reduces the construction period and therefore the costs of man hours and time on site. This can save developers a fortune. In addition, it reduces the need for highly skilled workers as the UK continues to face a shortage in the construction sector.

But the use of modular construction is not just appealing to the housing sector – it is also starting to gain a foothold in the commercial space. For example, GSK has recently commissioned a “Factory in Box” designed by modular and BIM construction studio Bryden Wood. This is an easy to assemble pharma factory that can be shipped and put together anywhere in the world.

These are all exciting uses of modular construction technology and certainly serve to start addressing the demand in the market. But there are a number of challenges developers and the industry as a whole face as modular continues to evolve:

• Significant insolvency risk – a substantial part of the developer’s project lies with one sub-contractor providing the modular parts. Developers need to protect themselves from this risk in case those sub-contractors go out of business.
• Bespoke design increases risk and cost – if there is a fault with any of the modules it can lead to substantial redesign costs, additional costs on site and delay – all contractual agreements need to be water-tight and address the liability for these issues.
• Off-site fabrication – there is often the need for payment prior to goods being brought to site. This raises issues around ownership, quality and service level agreements.
• Potential that suppliers are not UK based – If so, there will be issues around shipping risk, insurance and apportionment of the risk in case of delay and associated costs.

With all these issues, developers need to minimise their risk and ensure that their contractual agreements address all the potential issues that could arise. Whilst the use of modular construction will certainly speed up the rate of construction and therefore reduce the associated costs, it also increases the risks for those who have not thoroughly considered all the potential contractual pitfalls.

For more details on how the construction team at Memery Crystal can help you address your risk and protect your business, please contact Joanne Kelly using the details below.