Commentary – Modular Construction – How the Industry Continues to Mix Delivery Models with Means and Methods and How it will Never Advance Because of It.

Construction News is an e-zine from the UK that recently featured an opinion piece from a gentlemen named Neil Brearley.  Mr. Brearley is a founder and director at Cast Construction Consultants (a real estate consultant group from the UK).  In July 2018, Mr. Brearley wrote an article for Construction News entitled “Contractors are Losing Control – DfMA is the Answer“.

Brearley’s article makes the point that DfMA or Design for Manufacturing and Assembly is a delivery model that could, “change the industry’s delivery model to build better quality housing on time and at speed.

Brearley goes on to promote, “the production of units in controlled factory conditions that are transported to sites”.

Now to be clear DfMA is simply modular construction.

You may recall in November of 2017 I wrote an article discussing how David Chandler was promoting the use of Off-Site Manufacture (OSM) at the Western Sydney Airport in Australia.  In that article I shared some of the benefits of modular construction and wrote a subsequent article on the many ways that modular construction methods can be implemented into a project.

Regardless of what it’s called, I’ve always been a great proponent of modular construction techniques.

I share this just to be clear that I am not opposed to the main idea behind Brearley’s article.  I am however troubled at how Brearley mixes delivery models with means and methods.  This is the point I want to clarify.

What are delivery models

The term delivery model refers to a contract structure that defines how the design and construction will be contracted.  I’ve written extensively on delivery models but offered the most thorough overview on the matter in this article written in June 2017.

In that article I mention that the three delivery models are; Design-Build (DB), Design-Bid-Build (DBB), and Integrated Project Delivery (IPD).  There are some newer forms of delivery models emerging which I mentioned in this article here.

I know that others create confusion with terms like CM at Risk, GMP, and Turnkey, calling these delivery models, but these are nothing more than variations on DB or DBB.  These variations preserve the same concept of the three delivery models with different pricing models added to address specific risks.  You can read this article on pricing models for more detail.

So Brearley goes on to write,

In many instances, housing delivery relies on a design-and-build model. However, this has increasingly become a ‘risk cascade’ rather than a method that places design responsibility with the right party to drive innovative solutions.

This model often leads to the main contractor losing control over the outcomes it desires, in terms of both time and quality.

The conventional approach to risk and margin often forces clients to pursue the cheapest offer. These competitive tendering-led procurement models also tend to ‘close the books’ and provide clients with less clarity over what they are procuring. Without the ability to open-source standard components and systems from multiple providers, procurement models can stand in the way of progress and wide-scale DfMA adoption.

There is a lot in that statement, so allow me to unravel this and point out where Brearley is correct and where he is confusing matters.

Design Build Leads to Loss of Control?

First, let me address the concept that a design and build (or design build) delivery somehow, “leads to the main contractor losing control over the outcomes.”

By definition if the project is a design build project, then the design and the construction is the responsibility of a single legal entity.  This means that design build grants the main contractor full control over every aspect of the project.  Therefore if design build was the delivery model selected, the use of modular construction is absolutely in the main contractor’s control.

A Risk Cascade

Now lets address this idea of a risk cascade.  There are a couple of ways that risk can be cascaded down on a project.  The first is a legal cascade of contract terms.  This is often referred to as “trickle-down” terms.

With “trickle-down” terms, legal concepts that are present in the prime contract between the Owner and the Main Contractor cascade down onto all sub-contracts.  Brearley references Carillion, who notoriously used this concept of trickle down terms to extend payment terms on sub-contractors.  This means that Carillion would accept 90 day or longer payment terms and all of their sub-contractors would also be obliged to wait 90 days or more to receive their payment.  Other concepts can also trickle down in this fashion transferring risks that belong with the prime contractor onto it’s subcontractors.

Another way that risk can cascade down is by using “basis of design” to define a project scope.  This is likely the form of risk cascade that Brearley is referring to.  By using a Basis of Design to define a scope of work, a prime contractor can pass along the responsibility for detailed design to a sub-contractor.  Basically the way this works is that the prime consultant will document a few high level concepts to describe a particular system or element of a project.  The description will be so high level that there will be many unknown details remaining to be worked out.  The subcontractor will be obligated to present a fixed price on the basis of this highly undefined scope.  This effectively transfers the risk completely onto the subcontractor because they must now put a price on something that is undefined.  They then must define the item fully (so they can buy the right parts) and install it for whatever sum they quoted at the outset.

While both of these forms of risk cascade are bad practices, I would not agree that either of these specifically preclude the use of modular construction.  Trickle down terms don’t ever dictate how something is built, they simply augment your legal terms to include the terms between the main contractor and the Owner.

Use of basis of design as a concept for defining scope is even less of an impediment to modular construction because the nature of an undefined scope gives the subcontractor freedom to decide how the system will be designed and ultimately how it will be built.

In neither case would I agree that modular construction is precluded.

Cheapest Offer

Another main point that Brearley is making is that, “The conventional approach to risk and margin often forces clients to pursue the cheapest offer”.

This statement assumes that use of modular construction techniques would somehow cost more, but in reality, the opposite is true.

Some experts in modular construction have estimated that using modular construction techniques actually saves 20% or more in construction costs.  These savings are the result of speedier construction (40% faster) and less waste of raw materials.  These estimates dispel the notion that modular construction cannot be adopted in a competitive environment.

Other terms

Brearley has thrown in several other terms in his statement which he believes bolsters his argument.

The term “Close the books” is meant to promote open book models like Integrated Project Delivery or Alliance Agreements, but just because a bid is closed book does not mean that modular concepts of construction cant be employed.

Brearley also mentions the need for specifications to allow “open source standard components and systems from multiple providers“, suggesting that scopes of work require specific products or specific brands.  This seems to be in opposition to earlier discussions about risk cascade, but even if a specific system was required, the opportunity to use modular concepts is still not precluded.

Closing

Brearley seems passionate about using modular construction techniques.  I believe his vision is a good one and I applaud anyone who promotes new concepts and technologies, but I think we need to be careful not to mix apples and oranges.

Delivery models should not be confused with means and methods.

Every person involved with a construction project has an opportunity to be creative.  Plumbers can be just as innovative as Architects if they chose to be.  Modular techniques can be employed by almost every trade, they simply need to think outside of the means and methods of the past.

It’s too easy to look at the “other guy” and say I can’t be good because you are not letting me.  As leaders in our industry, we need to look internally at the small piece of our pie and begin being the best we can.  Only then will the industry see the change it so desires.

Thanks for reading.  If you enjoyed this content, please feel free to browse my previous articles and please like, share, comment, and subscribe.  This helps promote my content and is greatly appreciated.

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