The UK Government’s Construction Playbook has 14 key policies for reforming and modernising aspects of public sector projects (and perhaps, with luck and trickle down, the private sector too). However, it will need some robust contract tools to bring those ideas to fruition.
In a series of posts, I consider how contracts will need to change to adequately respond to the Playbook’s policies or themes.
Modern Methods of Construction (MMC)
MMC is (as the Playbook states)
a wide term, covering a range of offsite manufacturing and onsite techniques
The government wants to drive innovation as well as standardisation… it wants collaboration and longer term relationships to encourage suppliers to invest in new technologies and MMC… it wants interoperable components so it can use different suppliers for its resilience, but doesn’t consider how that can apply to proprietary goods, or supplier investment, or intellectual property rights or a competitive market.
What does that mean for contracts?
The Playbook recognises that contract terms should not unintentionally limit innovation, sustainability or investment in MMC. However, it does not state how contracts should reflect the use of MMC.
For example, off-site manufacturing is more akin to the sale of a bespoke or off-the-shelf product for use within a project. Contracts may require a raft of different provisions including:
- advance payments (and security for those),
- tests and inspections offsite,
- licences, duties and taxes for manufacturing abroad,
- specific transport and delivery mechanisms,
- revised insurance, title and risk arrangements,
- specific licences for intellectual property and data-sharing related to innovative or proprietary items,
- zerod defects at completion (potentially) so no/shorter defects period,
- integration across suppliers and responsibility for pre-delivery site conditions (which may have changed since the contract was signed),
- changes to the right of a client to cancel or terminate that element of the contract once manufacture has started.
The current construction standard forms do not adequately reflect MMC – the engineering suites are better. We can try and squidge MMC into an unamended standard form (the Playbook likes standards), but that will leave serious issues unresolved and risks not properly allocated.
What should you do?
Although MMC provides significant advantages to construction and engineering projects, the contracts need to reflect this way of working.
At the very least, payment will need fundamental changes. Our understanding of the value exchange may also need to change to reflect the Playbooks’s requirement for a fair margin of profit for suppliers.