Calculating Success

What does Pre-Manufactured Value mean for affordable housing? Tony Woods, Group Technical Manager at LHC, explains more.

The new Affordable Homes Programme from Homes England requires all projects funded by them to have at least 25% of the units delivered through MMC and a calculated Pre-Manufactured Value (PMV) of 55%. This represents a significant push to get social housing providers to adopt offsite construction.

Earlier this year, Cast published its PMV Technical Manual explaining how the calculations are carried out. The manual also provides an online calculator tool, which gives us a simple and quick way to assess how choices from across the seven categories of MMC alter a build’s PMV, providing an opportunity to evaluate what impact the build combination has in achieving the required 55% PMV level.

The baseline for the calculator (if you want to build ‘traditional’ houses with a traditional substructure without any additional MMC elements) provides 1 a PMV of 39.74%. So straightaway we can see why Homes England set the bar at 55% to push us to innovate – as doing nothing different achieves almost 40% PMV. If we then select just a basic structural framing system such as timber frame (MMC Category 2a), the PMV is pushed up to 44.74%, still falling short of the required 55%.

For a 2D structural element to raise this even further, clients and contractors will have to look at the top end of the market for those manufacturers that can provide a Category 2c product with insulation, linings, windows, doors and external cladding. There are currently a few manufacturers in the UK that provide such systems (such as C-C-G in Scotland or Local Homes in England, both of which have been supplying these types of products for the past four years through an LHC framework), however this alone will still not get you to 55%.

To do this, you will need to look at alternative substructure solutions (Category 3b prefabricated piles caps/ ring beams) and Category 5l doorsets (pre-hung, finished with ironmongery), which brings you to a PMV of 55.38% and meets the Homes England target. Alternatively, you could also use Category 1b – 3D structural systems – with structural chassis and internal fit out, which will mean you can immediately hit 69.74% PMV. So from this set of calculations we can see the clear direction of travel is in favour of the MMC Category 1 approach to delivery and easily achieving the minimum PMV targets.

The Affordable Homes Programme will run from 2021 to 2026 with the aim of delivering 130,000 homes outside London, with a budget of £7.67billion. All sites must be started by 31 March 2026 and completed by 31 March 2028. The programme allows for 10% of units to be delivered through stock acquisition, which means a minimum 117,000 units delivered through newbuild, of which 25% must be built using MMC. This gives a minimum number of 29,250 units, needing a PMV of 55%, over a five-year period. Based on this, the estimate is around 5,850 MMC units per year, which is certainly within the capacity of current manufacturers in the UK market.

The question is: how many different organisations will be on the Homes England dynamic purchasing system (DPS) for delivery of housing, and thus how spread-out will the MMC units be across different organisations? How will manufacturers engage with enough housing providers in order that they can achieve aggregated demand at their factories to improve efficiencies? A DPS means the programme will be open throughout its life for the addition of new suppliers, so the potential for real engagement is further reduced for smaller MMC manufacturers over time.

For public sector procurement specialists like LHC, which puts a lot of emphasis on supporting the success of local SMEs into social housing frameworks, this is frustrating, as we know there are many MMC specialists out there who could deliver a genuinely impressive result for registered housing providers. For example, for many housing associations and local councils starting their MMC journey, or for those looking for solutions for existing projects, LHC and its regional teams offer the Offsite Construction of New Homes (NH2) framework, which provides volumetric and panelised solutions.

Our clients in the public sector are looking for a diverse supply chain and opportunities to work closely with local manufacturers and installation teams. We must continue to work closely with clients and suppliers to bring this to fruition – MMC for all.

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