Modular construction – a panacea for the education sector?
Modular construction or, as it is commonly referred to, ‘off site manufacturing’, is the process whereby a property/building is designed and manufactured offsite. Such buildings can range from houses to components or pods (for example, whole bedrooms, bathrooms, teaching units etc). Once complete, they are transported and erected on site within the fraction of the time of a traditional construction method i.e. bricks and mortar.
Modular construction has tried, but failed, in the past to take off as a reasonable and suitable alternative to traditional construction methods. Despite this, over the past few years modular construction has slowly been on the rise, with it predominantly being used within the housing market. Modular has been touted as being the potential ‘fix’ to the housing crisis within the UK. Against this backdrop the appetite for modular construction within the housing market is definitely on the increase with a number of city councils planning ever larger schemes.
With the rise of modular construction within the housing market, and the support that it is getting from Parliament, it is inevitable that modular construction will become more predominant in other sectors. One sector that is already dipping its toes in the modular pond is the educator sector.
Education institutions often still have insufficient space for both teaching and accommodation, and modular construction can go a long way to plugging that need. As institutions increasingly look to modular construction solutions, it is worth understanding that, like everything, modular construction has pros and cons which should be considered and understood.
What are the pros?
• The bulk of construction can be done in one place under the same conditions, meaning that the big-ticket pros are saving time and money and improving efficiency. Institutions working with the ongoing pressure of meeting each new academic year may well find the reduced construction time an attractive proposition.
• The methods adopted for modular construction are now at the forefront of construction innovation and development, and in turn the quality and environmental impact of such builds has improved significantly.
• Improved methods of construction and streamlined processes have led to modular construction being a fraction of the cost of traditional build methods.
• There is the flexibility to either increase or decrease the size of a building without major changes having to be made.
• There are clear health and safety benefits, with reduced waste, dust and noise on site. There are also likely to be fewer accidents due to less construction work taking place on site.
What are the cons?
• Whilst it may be cheaper to build, there are still costs that must be incurred (e.g. land costs amongst others).
• Design flexibility is far more limited.
• The modern perspective of modular construction is fairly new and continues to evolve, so building regulations and planning regulations may differ or not be appropriate compared with traditional build methods.
• It often requires a significant investment with one primary contractor to design and manufacture, which can give the contractor strong bargaining power and increase the risk of default or insolvency.
• There may be associated problems relating to the financing and insuring of modular buildings.
• There appears to still be a stigma that modular builds are not of the same quality and lifespan of traditional builds, which is why modular construction has not proved to be as popular as traditional build methods.
• Whilst there are those who wax lyrical about modular construction (the uniformity and quality control achieved by off-site design), the reality is that we are seeing significant defect issues arise. In modular construction, often a defect which arises is repeated throughout, meaning that the remediation costs can be very significant indeed.
What legal issues should you be aware of?
There are a number of legal issues that also need to be considered:
• Risk – the allocation of risk under a modular construction project will be significantly different to a traditional project, for the main reason that the building is manufactured off site and the main contractor (if not itself the modular supplier) will have little or no control over the manufacture. Main contractors may not be prepared to accept full contractual responsibility for this reason.
• Advance payment – modular suppliers usually want to be paid up front, that is, before delivery to site (or title passes). Education institutions, on the other hand, will want to avoid a significant payment unless they have security, either because it is agreed that title passes on payment or with the benefit of an advance payment bond.
• Form of contract – the standard forms of construction contract are unlikely to be appropriate for modular construction without amendment. As the property is manufactured offsite, the manufacturer will require payments in advance of the manufacture and not towards the end when the manufacture is nearing completion. In turn, there are associated risks with adopting such an approach, such as insolvency on the part of the main contractor (or manufacturer of the modular building if different).
• Dispute resolution – An assessment will need to be made as to whether the Housing Grants, Construction and Regeneration Act 1996 (the Construction Act) applies to a modular construction project. The reality is that if a main contractor is engaged, there will be aspects of the works that are both within and outside the ambit of the Construction Act, meaning that adjudication will be available for some but not all issues that may arise.
It is worth being aware of the fact that NEC (one of the main providers of standard forms of construction contract) has recently issued a practice note in respect of modular construction. The note explains how the issues of title and payment can be addressed as between the employer and the contractor in the main contract.
There is no doubt that the popularity of modular construction is on the rise, and there are clear advantages to the education sector of using modular construction moving forward. Many education institutions do not currently have enough teaching space or student accommodation to facilitate the number of students that they would like. Using modular construction may well allow them to accelerate growth plans, by having the required space to offer more courses and accommodation.
The key to successful use of offsite modular construction is identifying and implementing the right procurement and contract strategy. It is important that legal issues are recognised upfront and resolved sensibly; including agreeing the forms of security to be provided plus the amendments needed to any standard form contracts so as to protect the education institution’s position as far as practicable.