In 2020 we produced a checklist of
points that developers need to factor in when considering MMC projects.
To further assist developers identify key themes in relation
to their projects incorporating off-site construction, here we set out some
contract specific considerations that can arise.
1. The MMC product, system, method:
The "product" is at the heart of off-site
construction. Why does this matter? Well, MHCLG identifies various categories of
MMC, so there is never going to be a one size fits all contract. For example,
where the product is a timber-frame CLT or Glulam solution, fire safety related
matters will be important. The supplier's accreditations and affiliations such
as with the Structural Timber Association will also be relevant. This of course
is timber frame specific and a separate set of considerations will exist where
the "product" is a module.
2. Risk in respect of the off-site element
Wrapping the risk and offering a turnkey solution is a key
selling point for some MMC operators, but where a client is undertaking a
project, it may not always be possible for the main contractor to wrap all of
the risk, i.e. to provide a single point responsibility/design and build
solution. Therefore, a crucial question to ask is who has the design risk for
the Works generally, and for the off-site element(s) in particular? Once
this is settled and the procurement structure established, the technical
documents will need to reflect this. Interface risk is another key element here
– it is important to clearly identify the party which takes this risk between
the MMC product and the rest of the Works.
3. Programme
A project's success can very much depend on good project management
(whether as an integrator or otherwise) and a comprehensive, live and
up-to-date programme. In the off-site context the programme can include
time-lines for the substructure, infrastructure and superstructure works, key
dates (such as the design freeze), the factory time-table, factory inspections,
time-table to check tolerances on site, delivery time-frames for the
kit/product, warranty provider checks, connection dates for the services,
details/dates for the transportation and on-site erection, craneage and
installation of the modules.
4. Factory visits
It is worth considering whether the client or third parties
wish to inspect / test the modules/MMC products in the factory. The contract
will also need to be checked to see that it allows for necessary access/testing
rights.
5. Energy efficiency
Off-site construction provides a great opportunity to
incorporate clean energy equipment and to improve energy efficiency. The Chancery Lane Project which we
as a firm support provides useful pro bono guidance and clause drafting on
energy efficiency, green construction, net zero construction etc., via its
Mary's, Luna's, Estelle's Edgar's, Tristan's and Francis' clauses (as
examples). If using this drafting, please speak to your legal advisor so as to
check that it is appropriate for the relevant circumstances.
6. Deleterious materials and use of products
Where a combination of MMC products or a hybrid are being
used, it is perhaps helpful to consider incorporating provisions in the
contract that warrant their safe use all-together, or when affixing to the
existing structure/works. A review of your deleterious materials clause to
include references to products/systems/kits may also be required.
7. Payment
A clear payment schedule in respect of the Works (generally)
and the MMC element (in particular) is needed. If the contract sum is said to
include transportation, storage, handling and site logistics related costs of
any prefabricated items, suggest making this clear. Consider specifics (i.e.
the latest in the law) - in 2020 the case Rochford Construction
Ltd v Kilhan Construction Ltd [2020] highlighted the importance of
clear and unambiguous payment provisions and the dangers of linking the final
date for payment to an invoice date.
8. Supply chain
The off-site manufacturing sector is far more reliant on
sophisticated supply chains. Understanding the project's supply chain and
undertaking requisite due diligence automatically reduces some amount of
project risk, and in addition aides with building a long-term trusting
relationship which is crucial to a resilient MMC supply chain. Contractually,
where a supplier / sub-contractor provides the MMC product/module suggest also
reviewing the sub-contract so that the chain of contracts "talk" to
each other.
9. Vesting provisions
Apart from vesting certificates, practically it is helpful
to consider where the MMC product is stored, how it is identified, and whether
one is able to access the factory/storage facility. If a sub-contract is yet to
be negotiated/completed but advance orders need to be placed, consider if you (as
a client) need to take assignment of the purchase orders. It is helpful to
identify and set out within the contract the responsibility in respect of
insurance or damage to the MMC product until delivery to the site.
10. Assurance
"Quality" of the build and the end product is
fundamental to its rental/sale and the fundability of the asset. It is
therefore important to consider in advance the assurances that can be procured
such as via BOPAS and latent defects insurance.
11. Extensions of time/cost
Consider if you wish to allow extensions of time or loss and
expense in relation to delays occasioned by the MMC supplier, issues with
transportation/site logistics and any interface related issues with the
remainder of the Works. How do these interact with other regulatory /
commercial / operational matters (including Covid-19)?
12. Practical completion
Consider if you require any specific requirements to
hand-over the modules or the off-site elements. Make sure that any energy
efficiency related requirements/certificates are provided at this stage.
13. O&M manuals
Check to see that you have the relevant O&M
documentation and that any relevant others such as tenants understand what to
do and what not to do when they move in.
Summary
This is by no means an exhaustive list of contract
considerations for construction contracts where MMC is involved, but all are
points that you should explore carefully when embarking on a project.
With trends pointing to an increased focus in modular and offsite construction through 2021 and beyond, contact us today to learn more or for advice on MMC projects.
Suriya Edwards- Foot Anstey
