MMC Framework Agreements and commercial reality

Modern Methods of Construction (MMC) are continuing to nudge the construction industry towards projects that have tremendous potential in terms of environmental, economic and social benefits. Such benefits include, achieving net zero, improving the quality of construction through specific manufacturing techniques and addressing the ongoing housing crisis.

The increasing rise in popularity of MMC in recent years, especially in the public sector, has also catalysed the emergence of various MMC frameworks in the UK.

Generally, MMC frameworks consist of a collection of agreements that provide for building contract requirements such as price, quantity, quality and specification. Following a public procurement process, manufacturers/suppliers are appointed to a framework. That framework is then offered as a product to an external body such as a housing association.

Frameworks aim to, amongst other things, support early engagement between manufacturers/suppliers and development teams and offer fully Official Journal of the European Union (OJEU) compliant routes to market for members.

Currently, within the social housing sector, we have observed an interesting trend of large-scale MMC frameworks being launched by alliances such as 'Building Better', the South West Procurement Alliance (SWPA) and the Off-Site Homes Alliance (OSHA).

In July 2021, the 25 housing associations in the Building Better alliance launched the first MMC framework, alongside Procurement for Housing and with backing from the National Housing Federation. The £600 million framework focuses on 3D volumetric manufacturers with a 'fabric first' approach to meet net zero targets. It is also said to offer members robust price certainty.

Further, OSHA, with its 23 housing associations and support from Homes England, is looking to launch a £4 billion framework early next year. In the meantime, it has published a prior information notice as it is looking to carry out soft market testing with manufacturers/suppliers.

SWPA, on the other hand, has presented a framework for the Off-Site Construction of New Homes (NH2) that is split into four workstreams for different MMC services. This framework is available not only to bodies such as Registered Social Landlords, but also to health authorities, registered charities and other organisations receiving public funding.

Importantly, MMC frameworks like these pave the way for the delivery of high-quality, sustainable and safe homes for individuals and families who would otherwise struggle to access decent housing. We therefore look forward to the steps being made through these frameworks to strengthen our communities, tackle our housing crisis, reach our net zero and other environmental goals.

Of course, there is a commercial side to it. Framework participants benefit from the due diligence checks already undertaken by the purchasing body, for example, these can relate to financial, MMC product / process related, availability of latent defects warranties etc.

Often such frameworks also offer a turnkey solution (which wraps design, manufacture, supply, installation and construction services), which assists a client who is new to off-site construction. Housing associations can also benefit from the information sharing aspects available within such frameworks, enabling businesses to see what's worked, and what has not.  

MMC manufacturers in turn benefit from the "aggregation" provided by these frameworks for example, orders placed by multiple housing associations which allow for economies of scale in production. There is therefore a clear benefit to this approach proving that the "framework agreement" business model has a definite place in the UK market.

Not widely publicised though are the contracts that sit behind such frameworks. So, whilst a framework agreement can include a Framework Alliance Contract (or similar) which governs the "big picture" relationship between the purchasing body, the suppliers and the contracting authorities. Sitting under this are the project contracts, which are the tier-2 contracts including Joint Contracts Tribunal, New Engineering Contracts or other industry forms, which need to be entered between the relevant contracting entity and the MMC manufacturer/supplier.  It is rarely the case that a one-size fits all approach can be used across the board at this tier-2 stage, as commercial reality and internal ESG / business strategy drivers will necessarily vary across the board.  It is in the context of these tier-2 contracts that further consideration is needed, as contracts are key to how risk and liability are apportioned between parties, and they become all the more important in the event of a dispute.  

Contact us today if you would like to know more about how to approach MMC projects and their associated contracts.  

Key Contacts