Rethinking housing delivery means rethinking procurement models

Over the last 25 years, the adoption of modern methods of construction has popped up as a recurring theme in our industry. Yet, at this present moment, it feels like the debate has reached a different level of significance, driven by clear government support. Parts of the industry are also seeing the undeniable opportunity of technology-led delivery and the increasing danger of marginalisation through business as usual. 

Within the public and non-profit sectors, offsite construction lends itself to helping achieve many current aims, including to build high-quality homes fast and on sites once considered difficult to build on. There are early adopter housing associations that have decided to embrace modular, either setting up their own integrated offsite factories or partnering with existing manufacturers. Many local authorities are also looking at design rationalisation and standardisation to better enable design for manufacture and assembly (DfMA), from a range of providers.

With any disruption to existing delivery models, there are knock-on effects for both processes and organisational norms

But with any disruption to existing delivery models, there are knock-on effects for both processes and organisational norms. Offsite is no different, especially when it comes to procurement. 

The existing procurement model for delivering residential housing within the public sector tends to be a single point of ownership and risk transfer using a main contractor. The contractual framework will therefore generally tend towards a design and build (D&B) approach. Despite the question mark hanging over the public sector’s use of competitive D&B in the light of the Grenfell disaster, there seems no apparent move away from this approach. Familiarity and lack of alternatives that procurers and industry readily understand is preventing the wider reform of procurement that our industry desperately needs to reintegrate itself. 

This problem is magnified when the organisations that want to use full volumetric modular have 60%-70% of the entire budget in one premanufactured package. Where the manufacturer is not vertically integrated into the supply chain, procuring a traditional main contractor to deliver these developments is proving untenable. It is unaffordable because the factory overhead is duplicated by the contractor site overhead. 

To get offsite manufactured schemes stacking up in the public sector and beyond, there needs to be a shift in the procurement model. The most successful manufacture-led models will be ones where manufacturers are vertically integrated with a site assembly and completion capability. The contractual arrangement needs to be adjusted accordingly, allowing for earlier engagement between the client and a core manufacturer under a fee-based arrangement.

At the moment, the problem is that no two modular systems are the same. Even though they may have similarities, it can mean that if a design pushes ahead without a selected manufacturer’s involvement, then the principles of DfMA will not have been adopted. In some instances, generic DfMA led outline designs to allow tenders from multiple manufacturers, will invariably still be compromised due to a lack of design conformity between different systems.

In the public sector, early engagement or a negotiated and aligned DfMA strategy is often viewed as in the “too difficult box” on the basis of traditional means of demonstrating ‘best value’. Even in the private sector, integrated single point procurement is viewed with extreme suspicion. Without the ability to open-source standard components and systems from multiple providers, antiquated competitive tendering led procurement models will always stand in the way of progress.