Daiwa House Modular Europe – Supplementary written evidence (MMC0028)

Committee Question = Based on your experiences working in Germany, the Netherlands, and other countries, could you tell us what factors have made MMC more successful abroad and any lessons learned for the UK?

Procurement Routes for MMC in Europe are simpler, local authorities procure the modular solution directly from the modular provider, whilst appointing the infrastructure works to a separate construction company. The local authority simply completes a PCSA period with Daiwa with their Building Permit issuers present. This practice speeds the whole pre-construction/ manufacture process up. Meaning what can take over twelve months in the UK, can be reduced to four to six months in Europe.

As explained orally, when the procurement and design elements are taking place, ground investigations on the selected site are being conducted simultaneously. Once the design is complete and the modular solution is procured, the ground investigation results are also generally complete, allowing foundation design.

(Our units are generally the same dimensions and weights and therefore foundation details are often generic, with only the holding down bolt locations needing to be configured to the foundation layout, dependant on units selected and their configuration)

Simplistically, when the contracts are signed for the modular (houses / apartments) this sets both elements of work into motion. The groundworks commence on site, along with the modules going into manufacture in the factory. When the first plot foundations are completed, the modules are deployed from the factory and are ready to be placed on the newly completed foundations.

Compared with traditional, where you must wait for foundation completion before the dwelling structure is started. MMC, (Cat l Volumetric) the dwelling "structure" commences simultaneously as foundations. Taking a standard system of six modules (boxes) making up one dwelling three boxes. Ground floor, three boxes upper floor we can install two dwellings per day.

We then require a further seven days to complete the connection details (where the modules join) test and commission the mechanical, electrical & plumbing (MEP services) of the dwelling. From the modules arriving on site (on the back of a truck) handing the completed dwelling over, we can achieve a seven day turn around, ready for occupation.

It's important to speed up the whole project's lifecycle, not just speed up the construction and delivery elements.

This can half the "on site" duration, meaning the overall cost of the project is dramatically reduced.

The Housing Association or Registered Provider {HA/RP) then also benefit from the reduced "on site" time by getting tenants into the properties sooner.

Meaning, they claim rental income from said properties quicker. Making a further saving on the projects overall cost.

Committee Question = Have you faced difficulties in obtaining warranties for your projects in the UK more than in other countries?

No, our modules are made up of hot rolled steel sections as a frame and incorporate reinforced concrete floors. We have received negative feedback from HA's and RP's regard the top warranty providers. Complaints about long, drawn-out processes sometimes taking 12-18 months, which in some cases is longer than the project construction duration. Complaints around the inability to ask and resolve very simplistic questions or queries. We are continually instructed to avoid the top few providers due to this issue.

In Europe, we offer a "manufactures warranty" for what we deem as our "product" which translates simplistically to the house/ apartment that's purchased from us.

This is typically for a duration of 50/60 years and would generally cover the build from defect. This warranty would NOT cover the foundations of the development unless we as Daiwa House were delivering the complete build as the Principal Contractor PC. (known as the general contractor in Europe and the USA).

We can cover that element when required and appointed however, currently in the UK we simply pass on the weights and dimensions of our units to the PC, to have their consultants design the foundations accordingly. Our warranty cover as such, then stops at the baseplate of our unit. We then pass on our warranty providers details to the PC and request they pick up the same warranty provider for the foundations. Giving one complete warranty at the end of the process.

In Japan, a very similar approach is adopted although termed slightly differently. In Japan, Australia, and SE Asia, we offer what's termed as Original Equipment Manufactures warranty (OEM Warranty) I understand they can offer warranties for up to 75Yrs. These again exclude foundations unless we are appointed otherwise through the contract. In some territories we also offer maintenance packages for the upkeep of whatever is purchased from us. This ensures the longevity of the asset by having the people who built it, maintain it.

The service is now being explored and requested in Europe as governments in Germany, Netherlands and Belgium can tie up the procurement of the asset along with its ongoing maintenance under one contract. The system is very simplistic in nature and is reflective of a new car purchase in the UK.

You buy a new car in the UK from any reputable manufacturer, you generally receive a three, five or even a seven-year warranty for defects. Should you choose the service plan from the same dealer, you will often receive an extended warranty period for the product.

It's often also cheaper for Daiwa House to repair any damages to any asset that sits outside of the warranty, due to Daiwa as the manufacturer and our buying power.

We obviously purchase the materials for our builds on a colossal scale, we can procure the materials for any repairs 15% to 30% cheaper than any maintenance contractor. Meaning the upkeep and maintenance of the asset also becomes cheaper for the asset owner.

Committee Question (part B) = What is your view on the concern that MMC introduces fire risks that are difficult to assess?

We are now being asked to look at completely Non-Combustible options for several UK clients to eliminate the risk. We believe Industry will be driven by insurers insisting on non-combustible options in the future and are investigating a fully designed Non-combustible option to bring to the UK market in early 2024.

Our basic units are made up of hot rolled steel sections with concrete floors and therefore present a hugely reduced fire risk. Fire risks can and are routinely designed out by early engagement with building control, warranty providers and fire consultants appointed to the scheme. With the increased use of Non-combustible materials, the risk is lowered further.

We have chosen a steel and concrete solution that reduces two major concerns around MMC in the UK and in some parts of Europe.

Carbon & Waste reduction. Globally, we cut down rainforest at a rate of one football field, every second. We don't deem this to be sustainable!

More importantly, understanding that trees take carbon out of the atmosphere and lock it in for the life of the tree. Simplistically, the more trees we have the more carbon gets absorbed from the atmosphere. Typically, wood can only be recycled four to five times before the fibres start to break down, then what's left can be burned & used as a biofuel.

Therefore, roughly speaking, you can only achieve four to five recycle, cycles before you have nothing left. In summary of the above points, we are cutting down the very thing we need most to reduce carbon. What we are cutting down, can only be recycled a few times before you have nothing left and raises concerns around fire risk.

The extended or increased use of timber framed buildings in our opinion is not sustainable and present concerns around fire risk and performance of said structures in a fire. The National Fire Chiefs Council (NFCC) MMC Policy Statement highlighted the fire risks around all wood structures that must be fully understood and recognised by industry.

The NFCC document states, Steel and reinforced concrete structures provide a resilience as a whole system that is understood through comprehensive large-scale testing. Modular and mass timber construction does not have the same body of knowledge supported by large-scale test data. It is therefore unclear how resilient the structure will be in the case of a serious fire in a high rise modular or mass timber building.

We have chosen to reduce our impact on the environment by choosing steel over timber. This benefits the environment by reducing deforestation, whilst also reducing the risk of fire in the buildings and structures we provide.

Steel can be recycled indefinitely. Globally, we work with Tata steel and understand how they are de­ carbonising steel production. We understand Tata steel plan to replace Port Talbot coal powered blast furnaces with new electric Arc furnaces. This is a proven method of green steelmaking and can reduce CO2 emissions by around 80%.

Understanding apart from the USA, the UK exports more steel scrap metal than every other country in the world.

The UK produces around ten million tonnes of scrap steel a year and we export eight million tonnes of it, yearly. Often to countries with lower environmental standards. That scrap metal is then re-cycled into new steel products, some of which is then re-Imported back into the UK as other steel products. We have a plentiful and reliable supply of steel scrap here in the UK.

Steel is a key driver of economic growth and supply chain resilience; steel is produced locally supporting UK jobs whereas timber is imported.

The UK steel industry makes a £2.9 billion direct contribution to UK GVA and supports a further £3.8 billion in its supply chains. It further contributes £2.4 billion to the UK's balance of trade. We believe steel is central to the UK's decarbonisation journey and the UK is in a prime position for scrap-based steelmaking as one of the largest scrap suppliers in the world.

The steel industry supports thousands of jobs and communities both directly and indirectly along the supply chain, particularly in Wales and the Northeast of England.

To build 300,000 homes per annum, which is a regular target for respective governments, it is vital we support resilient and local supply chains, on the island, to ensure we can deliver homes at scale and pace.

Logic dictates the UK recycle our own scrap metal into new steel products here in the UK, for UK manufactures to use and export to the rest of Europe & the world.

Committee Question = Are the existing training programmes and apprenticeships in the construction industry in the UK adequate to equip the workforce to use MMC effectively, and are there examples of better training systems abroad.

We believe education in schools about the construction industry could be better. CIOB, Contractors & Government can offer a wider understanding of the construction industry so that school leavers understand the industry better.

T-level courses are a good start. However, also think the providers of apprenticeships need to open their doors to lower-level abilities & entry requirements should be lowered for apprenticeships in the construction industry. Making apprenticeships more attractive to potential employers will also help.

Not all young men or women, are good in a classroom however, they may be fantastic at industry skills, bricklaying, carpentry, plumbing, anything else. I think the Youth Training Scheme (YTS) was fantastic and needs to be brought back upgraded for today's industry. Endeavour to map the GCSE's in maths and English to the apprenticeship, so the young person is learning the maths and English in an environment where they understand its need and relevance whilst also learning critical industry construction skills.

Committee Question= What do you see as the proper role of Government in addressing challenges and barriers to greater uptake of MMC

We have successfully delivered social housing projects in Wales as Housing is devolved to the Welsh Government. The social housing grant scheme not only has targets to deliver an MMC strategy but has increased grant provision for the uptake of MMC.

We don't believe this exists in England or Scotland?

Welsh Government's approach to increase the level of social affordable housing is to start with social housing which helps the poorest in society.

Our experience is that MMC is seen as a positive solution in Wales, these incentives that are available to LA's, HA's and RP's, help create a pipeline for MMC providers so that together, a scaled solution can be provided to supply needed houses in the volumes required in an effort to combat the housing shortage.

We participated in the Welsh, Innovation Housing Programme (IHP) in partnership with a housing association, the scheme compared Daiwa House Modular Europe's modular build against another modular built house (now in administration) along with a traditionally built house.

The HA comparing the two MMC homes, Daiwa House received positive feedback on our home from the end-user following two years of use, they have reported lower energy bills, a comfortable living standard and the HA confirmed there were very little defects or maintenance issues.

Committee Question = Have the Affordable Homes programme and MMC frameworks been useful in incentivising greater use of MMC

We have had a negative experience with frameworks. The questions that dictate access on certain frameworks vastly limits the uptake of MMC. Daiwa House carry over 60 years' experience delivering MMC projects all over Europe and the rest of the world, globally we have a turnover of over £40 Billion.

As an example, we tried to gain access to the Crown Commercial Services (CCS) Offsite Construction Framework. Reportedly worth £10 Billion, we completed the initial information but were declined access to the framework as our projects undertaken were outside the UK and could therefore not be accepted.

Despite a group turnover of over £40 Billion and over 60 years' experience in the MMC industry we were excluded from the framework due to not completing enough projects under JCT/ NEC or other widely accepted UK contracts.

By excluding the Daiwa House Group, on this type of framework and others like it due to the questioning structure, it excludes Daiwa Houses 60 years of experience working in all sectors of MMC. Predominately Cat 1 & Cat 2, and also excludes investment in the UK as a whole and knowledge from one of, if not the biggest modular provider in the world.

Committee Question= How could construction contracts and project models be improved to incorporate MMC more effectively in the UK?

It's important to speed up the whole project's lifecycle. This obviously starts at the beginning, with the client understanding what they are buying from the MMC provider. They are buying a factory produced home be it house or apartment that is delivered faster, generally with an increase quality that often exceeds current regulations and legislation.

Simply comparing a M2cost from a traditionally built house against a Cat-1, 3-D volumetric modular house doesn't consider all the commercial benefits of choosing a modular solution. This eliminates the overall contract sum being considered and presents the modular solution as being more expensive.

When the savings on site works, reduced abortive work on site, more energy efficient running costs, along with a faster achieved rental income for the HA/ RP are correctly quantified, the Cat-1, 3D volumetric solution can cheaper than a long drawn out traditionally built scheme.

The contracts we deploy in Europe also a lot simpler and more user friendly. The majority of construction projects delivered in the UK adopt the JCT or NEC suite of contracts.

The problem with these contracts is they are very technical in wording and understanding. It's been highlighted to Daiwa House they often cause a delay in project commencement due to legal wranglings between client & principal contractor legal teams agreeing on wording and terminology in the contract.

This in some cases can take months to resolve, with the opposing legal teams the only beneficiaries. Hence, in Europe generally the packages are split into two major elements.

Groundworks/ infrastructure and Modular solution. The ground works and infrastructure are placed via one contract with the housing solution placed under the other contract. The contracts are very simplistic in nature and utilise easily understood referencing and language. Often avoiding the need for the client, be it HA or RP having the need to employ a legal team which also benefits the project cost plan and speeds up the frontend project elements.

This practice also mitigates against less experienced MMC providers attempting to deliver whole project schemes where they don't have the knowledge or experience to deliver packages of work like infrastructure works, ground works, foundation designs, utility co-ordination and so on.

Further to oral evidence given, a faster uptake of MMC in the UK could be adopted by ensuring a level playing field for MMC providers as well as traditional builders.

Simplistically, government level the playing field by producing an "Affordable Homes Standard".

This standard incorporates all the requirements of England, Scotland, and Wales without the need of any changes to the building regulations. Simply design the housing types from one, through to four bedroom houses, with a ground floor apartment with level access for single or double occupancy disabled use.

Then go a step further and modularise the dwelling types.

Consult with the MMC Cat 1, 3D volumetric suppliers in the UK to agree the best "module" size, (that will most likely be dictated by what can be transported by truck without the need of escort = Width no more than 3.Smetres and length no more than 18metres)

All the UK suppliers of Cat 1, 3D volumetric MMC buildings can then compete with traditionally designed schemes due to the dwellings carrying a building footprint that's achievable via a volumetric MMC solution. This prevents MMC providers struggling to produce MMC solutions to traditionally designed schemes and further enhances any schemes build route being undertaken via a MMC solution.

Advice to Government, collaborate with the MMC providers directly via working/ steering groups.

Don't waste time or money on consultancy endeavours or appointments that often get it wrong and don't understand the systems and abilities first hand. The MMC providers in the UK will give advice, technical abilities, and anything else required when asked.

The information will be first hand and will detail each providers system in its entirety. This information will be free of charge and issued without delay.

Further speeding up understanding of the varying systems and solutions Daiwa House and other manufacturers have to offer in the UK.

December 2023