Five key considerations to accelerate MMC housing delivery in Ireland using modern methods

Recent government initiatives offer significant advantages for Local Authorities to develop social housing using modern methods of construction (MMC). Understanding key requirements for successful MMC delivery can allow them to maximise the value.

In brief

• Think MMC early: There are huge time and cost advantages to early consideration of MMC designs
• Think scale: Cost effective use needs sizeable orders: there is much to be gained by aggregating orders and providing manufacturers with visibility of pipeline 
• Think variety: High pre-manufactured value MMC (with most of the structure constructed offsite as either panels or modules) offers the greatest delivery speed and can be used across housing types, not just high-rise apartments or small units.

Matching production advances with procurement progress

MMC has gained momentum in Ireland, driven by the Construction Sector Group and the Construction Sector Innovation and Digital Adoption Team established by Government. With several Irish firms already investing in off-site and modular construction, facilitating the efficient procurement of MMC housing is the next critical step.

Creating a bespoke framework of approved MMC providers, available to local authorities and potentially other government, semi-state and third sector landowners, should both ease the commissioning of MMC housing and permit orders at a volume and frequency that drives down unit cost. Offsite manufacturing can progress multiple stages of house-building in tandem, and concurrently with foundation and enabling works on-site. With time-bound incentives in place for local authorities to deliver social housing on their land, a bespoke MMC procurement framework for MMC housing and attendant works will allow authorities to make the most of this opportunity and deliver quality, sustainable social homes at pace.

Comparison of Modern Methods of Construction with Traditional Build

The five key factors

1) Early consideration of MMC for a site

MMC benefits from settling on a design early to maximise price efficiency, as future changes involve potentially costly amendments to the manufacturing process. Local authorities can collaborate with manufacturers to select designs that work with their preferred house types. 

Manufacturers should be able to adapt designs to local vernacular provided this is determined and costed early in the process. Several manufacturers have worked with housing providers to understand requirements and offer products to suit.

This may, however, require adjustment to standard procurement processes. Local authorities may typically run their procurement based on a traditional build, i.e., an architect-led, pre-determined design tendered on a turnkey basis with little need for coordination with manufacturers. They may have established supply chains using local and/or regional subcontractors. This is where a bespoke procurement framework will be valuable to allow authorities to consider the available MMC housing designs that may be suitable for a site. The framework could also include suppliers of all required contracted services. 

2) Understanding MMC suppliers’ offering – design and planning

Some local authorities may have concerns that use of MMC may complicate the planning process.  This may be alleviated by the expected reforms in the Draft Planning and Development Bill 2022 that limit the scope for objections to social housing built on local authority-owned land. It is also helpful for planning teams to be aware of the cost of MMC design change – namely amendments to production machinery calibration and materials orders – and provide input at outline design stage.  

Each local authority may have preferred house types and designs, and to date many have not standardised for social and affordable housing. However manufacturers are very willing to engage in explaining product offerings and may make adaptations to preferred designs if engaged early.  Upfront spend - irrespective of order size – is needed to adapt product offerings and calibrate production processes, so the larger the order, the lower the unit cost. 

Local authorities can achieve significant cost savings by including selected MMC designs in their list of standard housing types, conducive to placing orders at scale.  This can include standardised housing modules that may be configured in different ways to provide a variety of housing types.  The Government-published Design Manual for Quality Housing (January 2022) includes sample site layouts and design principles which are extremely helpful to MMC manufacturers to target offerings towards the required housing typologies, urban design and place-making priorities of local authorities, as well as the sustainability standards. Collaboration between local authorities to aggregate orders for identified development sites can capture further economies of scale. 

The framework route also facilitates volume orders. Procuring authorities can provide valuable input on preferred designs when the framework is created to ensure selected providers offer housing that meets their needs. Significant savings have been achieved by Housing Associations in the UK (equivalent to Approved Housing Bodies) through collaborations and procurement alliances to place orders totalling 500+ units per annum.  Alliances such as Build Better and Advantage South West have set up procurement frameworks from which all members can commission orders.

3) Contracting considerations and direct relationships with the MMC supplier

The Capital Works Management Framework (CWMF) or standard JCT Design and Build contracts, aligned to a main contractor structure, may not facilitate a procuring authority engaging directly with the manufacturer.  The “main contractor” structure is less prevalent for MMC build, leading to a potential need for authorities to separately procure groundworks and other aspects of a build. Some manufacturers offer to act as a main contractor to ease the process for clients while understanding matures. 

A helpful step in creating a specific MMC procurement framework for MMC housing providers and attendant categories of works would be to include the form of collaborative/partnering contract that better suits a manufactured rather than turnkey solution. This may be similar to the ACA Framework Alliance Contract used in the UK by the London Housing Consortium and Crown Commercial Services on modular frameworks. These contracts include appropriate scheduling, risk sharing and compensation arrangements between the parties in an MMC build.  

The local authority may need to consider supplier payment, integration and programming to a greater extent than with traditional build. There may be a learning curve for the rest of the supply chain, though early engagement with all parties can minimise teething issues and potential cost overruns. A coordinating official or central team for local authority MMC builds (similar to that used on the Government’s rapid build of Ukrainian refugee homes, its first scale procurement of MMC) could be a valuable facilitating resource to provide the additional contractor oversight until the process becomes established.

4) MMC Working Capital Profiles and supplier financial resilience

Once mandated, MMC suppliers will need to set up their factory systems to manufacture the selected housing types. They will also need to secure materials upfront for the entirety of the order so that several components can be produced in parallel. This requires a greater proportion of the development costs to be funded in the early stages prior to delivery on site.

It is helpful for procuring authorities to understand and accommodate to the different cost profile.  While the industry is still maturing, some manufacturers in the UK have absorbed more risk by permitting payments more in line with traditional build (staged payments in line with construction milestones), but this puts pressure on working capital and could undermine financial resilience at a critical juncture for the industry. The benefit of accommodating a realistic spend profile will be reduced construction times overall, more resilient suppliers and faster housing delivery.

Provided that the manufacturers are sufficiently funded for the order book, it is worth noting that delay risk for MMC is significantly reduced as multiple stages of the housing manufacture are progressed in parallel with ground and enabling works. Even during the height of Covid restrictions, many factories were able to implement socially distanced working, task “bubbles” and compliant working practices early on and continued to deliver during the crisis. Along with minimising site-related delays, this was positively received by clients such that the industry reached a tipping point of financial resilience in previously slowly adopting jurisdictions such as the UK.  Supplier financial standing has continued to grow with regular order flow and pipeline visibility. 

5) Long term maintenance, repair and safety

Many MMC manufacturers have invested time with the maintenance teams of their customers to explain procedures and costs and will be very willing to do so with local and other procuring authorities.  

In reality, MMC manufacturers are able to provide significantly more information on their buildings than typically provided with a traditional build, as well as being better placed to enforce quality control and standards through factory build:

• Manufacturers can produce a manual that contains the location of first fix utility installations such as pipes and wires, instructions for secondary trades to maintain building safety and longevity and instructions for future adaptations to tenants’ needs.
• Digital twins may be provided for each building containing all information for future maintenance or adjustment works.

MMC buildings for social housing in European jurisdictions are typically given warranties for the same 60-year duration as new traditional build homes. MMC delivers a more sustainable construction product, and in terms of durability, quality has been found to be easier to verify and monitor in an off-site environment using digital measurement. Certifications are carried out by warranty providers both in the factory, and following assembly onsite to ensure quality and safety is maintained.

Industry stakeholders’ lack of familiarity with the durability, safety and long-term maintenance requirements of MMC buildings can be addressed through detailed engagement sessions with local authorities and with any procuring authority on their behalf, as well through provision of warranties. 

To conclude

With an appropriate procurement process, MMC can be used efficiently and cost effectively for rapid social housing delivery at scale.  With sufficiently predictable order volumes, it can eventually become cost advantageous both on an upfront and whole-life cost basis. Volume orders through demand aggregation and/or a bespoke procurement framework would facilitate this competitivness. There is compelling precedent for this in the limited number of vertically integrated housing associations in the UK who set up their own manufacturing capability to produce their own social and affordable housing. Their experience in the early years following factory set up was that order certainty allowed them to recoup their investment and achieve a cheaper unit cost within three to four years.  

Such benefits would be undoubtedly valuable for the provision of social housing in Ireland, and may be achieved significantly faster with targeted procurement from existing warranted suppliers - via order aggregation or a framework - providing units to multiple local authorities.  Such a framework could be extended to providers of student accommodation or keyworker housing, particularly near to critical facilities such as hospitals. Collaboration between authorities to agree a suite of preferred, pre-approved and planning-compliant designs across typologies (as per the Design Manual for Quality Housing) would yield further time and cost savings.

The public sector lead on exemplar developments has the potential to encourage the private sector to ramp up adoption and bring about a much-needed step change in housing output. With a clearly visible pipeline of social and affordable orders, procuring authorities and MMC manufacturers can collaborate to meet and future-proof the housing needs of a growing and resilient Ireland.