Blog: Exploding MMC Myths - Public Procurement28 October 2019
Exploding the myths: public procurement, structures and MMC – part one
Since the promotion of Modern Methods of Construction (MMC) as a way of meeting housing demand, many myths have arisen. Fears over a lack of quality, difficulty in securing finance, and confusion over contracts, have all been cited as problems.
Myth: All MMC products are bespoke so cannot be compared
Many public sector client groups, including the GLA, are working on models to standardise design so that manufacturers can work to agreed design standards. This approach simplifies the route-to-market competitive comparison through a faster public procurement exercise via the Open or Restricted Procedures.
Alternatively, more flexible procedures under the Public Contracts Regulations 2015, such as the Competitive Dialogue and Innovation Partnership procedures, as well as design competitions, will allow clients to work with a number of tenderers bidding on an output specification. This flexibility allows the collaborative development of a bespoke product.
Framework and alliancing agreements can also be used for early engagement with framework members (contractors and/or suppliers and/or manufacturers) in order to develop an outline design for the project, which can then be market-tested through mini-competitions run in accordance with that framework or alliance
Myth: Public procurement is all about lowest price selection so if MMC is the more expensive option this is a barrier
There is evidence to suggest that in some instances the cost of an off-site method of construction (modular or panelised) will initially be higher than with traditional build methods. Nevertheless, overall feasibility studies carried out on schemes to ascertain viability have highlighted MMC benefits over traditional build such as:
- Lower lifecycle costs
- Earlier revenue from rents and sales
- The financial benefits of a higher-quality product and digital record
- Reduced maintenance costs over the life of the asset
It’s clear from the Public Contracts Regulations 2015 that these benefits can be evaluated as part of a procurement process, which requires clients to select a quality/price evaluation that anticipates these non-price elements (e.g. ongoing maintenance costs).
Myth: The constraints of the public procurement regime mean you cannot create sustainable long-term relationships which are needed to provide a consistent pipeline for the manufacturing industry
It is accepted best practice in the construction sector that creating collaborative relationships helps capture lessons learned on one project that are then taken forward by the team to the benefit of the next project. The same is true for those clients establishing their own manufacturing base so that it can deliver off-site manufactured products with a consistent supply-chain and make efficiencies and improvements through iterative design development and manufacturing practice.
Public procurement is not a barrier to the creation and development of long-term relationships. Framework agreements and longer-term contracts set up by clients enable relationships to be developed over a longer-term period, thereby streamlining the requirements for full procurement exercises undertaken on individual projects.
One way to enable better collaborative working between the different parts of the project team is to use the Framework Alliance Contract (FAC 1). This creates relationships between clients and a series of manufacturers and suppliers and provides for an integrated supply chain. FAC 1 is recommended by the Construction Leadership Council as a model form for long-term strategic relationships for MMC and has been adopted by the Crown Commercial Services as its form of contract for its MMC framework.
A number of housing providers have also set up contractual and corporate joint venture arrangements with manufacturers to guarantee a sustainable pipeline and achieve the benefits of a collaborative approach to design and product development.
MMC for Affordable Housing Providers - A Housing Forum guide to overcoming the challenges and barriers
Our new guide argues that modern methods of construction (MMC) are key to increasing the supply of affordable homes in the UK and aims to help public sector organisations navigate the procurement, planning, design and post-build stages of MMC projects.
It includes a detailed section on myth-busting, highlighting common assumptions people make about MMC, such as a lack of quality, difficulty in securing finance, and confusion over contracts.