Blog Author: Su Sharma – Skanska UK
Last year, the JCT Young Professionals Group (YPG) kindly invited me to speak on three of their chosen topics, Modular Construction – The Future of Construction, Draft Building Safety Bill (as it then was at the time), and PI Insurance: Current Position.
This article for JCT News includes those topic areas I covered with the YPG, as a summary for JCT News readers, and to provide an update where applicable on the current situation.
- Modular Construction – the future of construction?
What is Modular Construction?
Put simply, prefabricated components are manufactured off-site in a factory. These are then assembled on site. Most commonly, modular construction is used in the housing market.
Modular construction is a speedy way to build houses. Given the housing shortage in the UK and the government’s keen initiative to build approximately 300,000 homes per annum, modular construction in the house building market is an attractive mode of construction. To support this initiative, local and central financial support (open to modular construction) is available.
Skanska’s Involvement in Modern Methods of Construction (MMC)
The BoKlok housing project, an IKEA/Skanska joint venture, finally arrived in the UK after 20 years of building over 14,000 sustainable homes in Sweden, Finland, Denmark and Norway.
Under the BoKlok brand, IKEA/ Skanska announced its entrance into the UK housing market in mid-2019. Since then, it has garnered attention as one of the few homebuilders to introduce the concept of modular homes to the UK.
Homes are competitively priced enabling more home ownership. BoKlok is approved for the government’s Help to Buy scheme. All homes carry the Building Offsite Property Assurance Scheme (BOPAS) and NHBC Accepts scheme.
Sustainability, a key IKEA/Skanska business strategy, is reflected in its net-zero carbon reduction targets. Boklok has the following key sustainability features: –
- Standardised solutions are applied which means the same home design can be produced with precision each time, limiting the number of errors made. The standardised solution further reduces waste by approximately 70%; fewer mistakes mean less wastage.
- Timber, a key sustainable material, contributes to BoKlok homes being 50% more carbon efficient than traditionally built homes.
- The use of air source heat pumps for space and water saving ensures energy efficiency in BoKlok homes.
As with all construction projects, modular construction is not without its challenges. For instance:-
- Homes constructed in a factory setting require precision and repeatable designs. An approach like this prevents designs being tailored to customer taste. This contributes to a homogenous geographical landscape.
- Transporting modular blocks to site often requires an escort. Should damage occur during transportation, this could delay the completion date.
- Modular design requires architects and design engineers to understand Design for Manufacturing and Assembly processes (DfMA), which is specific to modular construction. This requires engineering and design decisions to be made upfront so they can be replicated in the factory.
Modular Construction: Is it the Future?
Modular construction certainly is part of the future in building homes. It is an efficient, low cost, high quality, sustainable mode of construction which is quicker to construct.
As modular homes are built in factories, local authorities, who own housing stock, are able to make modifications on existing stock quickly and efficiently. This adaptability is a key component of MMC.
BoKlok UK is currently developing sustainable homes in Bristol, Worthing and Littlehampton.
- Building Safety Act 2022
On 14 June 2017, the construction industry had a wakeup call; the unthinkable happened. The Grenfell Tower fire tragically claimed 72 lives. Serious failings were exposed, not just across the system of building and managing high rise homes, but across the whole of the construction industry. Dame Judith Hackitt led an independent review of the building regulations and fire safety to understand the cause of the fire. She concluded that the whole system needed major reform and stating the obvious, residents’ safety needed greater priority through the entire life cycle of a building.
One consequence of the review was the enactment of the Building Safety Act 2022 (“BSA”), comprising 262 pages. This received Royal Assent on 28 April 2022. It has brought about some of the biggest reforms in almost 40 years. The aim of the BSA is to dramatically improve building safety during design, construction and occupation. It has a particular emphasis on higher risk (residential) buildings i.e. those that are at least 18 metres in height or have at least 7 storeys and in each case, have at least two residential units. It also applies to care homes and hospitals meeting the same height threshold during design and construction. The Act makes changes to the Fire Safety Order, applicable to workplaces and the non-residential parts of blocks of flats.
The BSA makes far reaching changes to dramatically improve building safety during design, construction and occupation, relating to competence, selection of products and sound management. The BSA does not, however, amend the Building Regulations.
Although Royal Assent has been received, most of the provisions will not come into force for at least 12-18 months, through secondary legislation.
Providing a detailed analysis here of this complex legislation is not feasible. 3 significant features are, however, key:-
- Extension to Limitation Periods: The current period of time of 6 years from practical completion for bringing a claim has been extended to 15 years for claims in two areas:
- Dwellings unfit for habitation under Section 1, Defective Premises Act 1972; and
- Breaches of the Building Regulations under Section 38, Building Act 1984.
This extension applies prospectively i.e. to claims which arise after the BSA takes effect.
In relation to claims brought under Section 1, DPA, however, claims can be brought up to 30 years after completion of the dwelling retrospectively i.e. to claims arising before the BSA takes effect, potentially giving rise to claims on historic projects.
- New Building Safety Regulator and New Home Ombudsman: Two new roles have been created by the BSA; the Building Safety Regulator, responsible for overseeing and driving improvements in the safety and performance of all buildings. The Building Safety Regulator will form part of the HSE. A Home Ombudsman is also created by the BSA, whose role is to determine complaints by buyers of new homes against developers.
- Construction Products: There is now a requirement on manufacturers to ensure all construction products are safe. A new cause of action against manufacturers and suppliers of products may be raised if the product:
- Has been mis-sold; or
- Is found to be defective; or
- Breaches existing construction product regulations.
If a product falling within one of the 3 categories above causes or contributes to a dwelling becoming unfit for habitation, a civil claim may be brought. For cladding products only, there is a retrospective 30-year limitation period. For all construction products, there is a 15-year prospective period.
- Professional Indemnity (“PI”) Insurance market- Current Position
Since mid-2018, the availability of insurance capacity for PI in the construction market has significantly reduced with many insurers withdrawing from the class and those remaining reducing the capacity they are willing to offer.
This has led to the transition into a ‘hard market’.
This transition has led to a dramatic increase in the cost of purchasing construction PI policies, increased self-insured excesses being applied and reductions in the scope of policy coverage.
The availability of unlimited reinstatements has been considerably reduced with a finite number of reinstatements being offered instead.
Coverage for claims arising from cladding and fire safety matters is now extremely limited.
In 2019, Lloyds of London issued a report called Decile 10 which highlighted the poor claims performance of construction PI insurance and led to Lloyd’s requiring all syndicates to identify their poorest performing portfolios of business and demonstrate plans to return their portfolios to profit.
One of the worst incidents was of course the Grenfell Tower tragedy, which resulted in an increase in the number of claims on buildings with dangerous cladding.
The PI market has seen some stabilising in the last 12 months. Construction companies with well performing loss histories and quality risk management are faring considerably better than companies with distressed loss histories who can expect to have challenging renewals.
The recent government comments regarding cladding and fire safety may raise further concerns to insurers regarding the current level of cover provided.
Construction companies can help themselves considerably when procuring PI by engaging with their brokers as early as possible in the renewal process.
Acknowledgements: With thanks to William Frost and Martin Stubbs (Construction, Infrastructure and Surety Practice, Marsh), Dianne Lowther ( Corporate Communications Business Partner, BoKlok UK Media Relations, Skanska) and Gary Neal, Head of Fire, Skanska Technology Limited for their input in writing this article.