Developers should pass the risk of designing and manufacturing the modules to the Main Contractor to reduce the Developer’s exposure to variations, prolongation cost claims.


Offsite payments and security


As a general rule, the owner only makes payment for works incorporated to the building. However in modular construction there is considerable works carried out offsite. Developers need to ensure the contract allows for securing payment for off-site materials and for the ability to step in and take possession of the modules under fabrication in the event of insolvency. One way is to obtain a bank guarantee that will secure the payment but will not cover any delays caused to the project. In a similar way, if the Main Contractor becomes insolvent, the developer may want to have the modular fabrication contract novated to it.


The developer should carry out an independent due diligence on the Main Contractor’s choice of modular fabricator because the consequences of a fabricator’s failure to deliver is serious. Unlike conventional construction, if say the concrete supplier does not perform, the Main Contractor can substitute with another supplier. If the modules are not delivered, the entire project stops while the Main Contractor looks for a new manufacturer.


The Developer and their financier will want to take some interest in the modules under fabrication by way of registering its interest and have an agreement or deed with the builder and fabricator to allow it to enter and take possession of the units in appropriate circumstances


DISCLAIMER

This is not legal advice and the Developer should consult and obtain professional legal advice on this matter.

Volumetric Modular Construction is being considered with a view that it provides the following benefits:

Offsite :

  1. allows for higher accuracy, precision and control on finish quality in the factory

  2. safety can be monitored and controlled within a factory environment

  3. work carried out under cover so progress is not affected by inclement weather


Onsite:


  1. less time required - onsite work can commence while modules are being constructed offsite

  2. less labour required onsite

  3. safer process particularly for high-rise construction


Overall, the benefit to Developers is a reduction in time and the financial benefit associated with that. If the project is managed, designed and supervised well, then the developer should benefit from higher quality and lower cost than conventional construction.


contracts


Developers should avoid construct only contracts where the Main Contractor is entitled to ‘free issue’ of modules by the Developer.  The risk in taking responsibility for warranties, compliance to fire and building code, accuracy shifts to the Developer. If the modules do not have the right plumbing connections or do not fit accurately, the modules will need to be stored while some modification is done. This may lead to double handling and loss of time. If there is delay in delivery or shipment of the modules, there will be loss of time and impact on the builder’s programme.

Prefab Design Contracts

Volumetric Modular Construction is being proposed in Singapore as a method of construction to increase productivity on site and reduce the demand of labour.