What are the contractual considerations when embarking on a mass timber project? Adriano Amorese, Partner at Mishcon de Reya LLP, provides some thoughts on best practice.
You have only to look at the volume and scale of mass timber projects coming through planning to see that things are changing. The industry is charting a course through the obstacles and the more widespread adoption of mass timber solutions is on the horizon. So what are the key contractual considerations for parties embarking on mass timber projects? What might they need to do differently?
Early contractor and supply chain involvement
Timber is a natural product; it behaves over time in a way that other building materials do not. It therefore requires a different approach to design and fabrication, and this cannot be ignored. To secure the full benefits of mass timber construction, clients will need an experienced team that understands the product and can get the detailing right.
Early supply chain involvement (ideally at RIBA Stage 2 or 3) will be critical to optimising the following eight considerations.
Eight aspects that should be discussed and considered as early as possible
This includes defining the extent of the mass timber element and any associated constraints, developing a robust fire strategy, coordinating the mass timber element with other packages – notably facades, fire stopping, MEP and lifts – and any existing structures, and driving efficiency to avoid waste.
2. The BIM/AIM strategy
3. Off-site testing and mock-ups to enable planning conditions to be discharged early.
4. Approval of statutory bodies
These include building control and the fire brigade, who really need to be taken on the journey by the design team.
5. Construction insurance
Availability and cost of cover is dependent upon insurers being able to understand and quantify risk, which they can do only if they are given early access to the relevant information.
6. Logistics strategy
Component sizes tend to be bigger with mass timber, so vehicle size, pit lane capacity, storage and lay down all need to be considered and factored into the design.
7. Construction methodology
This includes lifting/craneage and protection, which requires consideration of seasonal weather conditions.
8. Long-term maintenance strategy
This includes the moisture control plan and leak monitoring.
A pre-construction services agreement
Where the extent of mass timber is sufficient to justify it, clients might look to engage the specialist timber contractor under a pre-construction services agreement, in much the same way as they would a specialist lift or façade contractor.
This will help clients secure capacity with their preferred contractor in a market where demand could well end up outstripping supply. It will usually require the payment of a pre-construction fee and, potentially, the loss of competitive tension in relation to the timber package. But this is likely to be viewed as a sensible trade off.
Cost benefits of confirming mass timber early
Mass timber has the potential to deliver cost savings – timber structures tend to be lighter so require less engineered foundations. Interior finishes and ceilings are often omitted as a design choice and less on-site labour is typically required resulting in lower prelims. It also has the potential to reduce the on-site construction phase due to the size of the off-site fabricated components.
But these benefits are realisable only if the decision to adopt mass timber is made at a sufficiently early stage and the key supply chain members are given an opportunity to influence the design.
Warranties for design and long-term performance
A typical design and build contract will require the contractor to do some or all of the following:
- Use materials and goods which are of sound and satisfactory quality and reasonably fit for their intended purpose (as per the Supply of Goods and Services Act)
- Refrain from using materials which are deleterious or harmful to health or to the durability of the works
- Exercise professional skill and care in the design of the works and assume responsibility for matters of design coordination (including designs carried out by or on behalf of the client)
- Warrant that the completed works will comply with any performance specification or requirement included in the contract documents
Clients will naturally wish to avoid any dilution of these requirements or the need to pay an inflated premium to retain them, but they will require careful consideration in the context of mass timber projects. Again, if the contractor and supply chain can be brought on board early and given an opportunity to influence the design and other matters referred to above, this should give them the confidence to sign up to such requirements. Arguably this is not something that can sensibly be left to the final tender stage.
Establish a maintenance plan
Given timber’s particular susceptibility to environmental conditions, it will be in all parties’ interests to establish a robust maintenance plan for the building, a critical component of which will be moisture monitoring and leak detection. Not only will this help to avoid issues with durability and life expectancy, but it will also help in distinguishing between genuine inherent defects and issues that are attributable to lack of proper care and maintenance.
It is difficult to see anything inherent in mass timber construction that would necessitate a wholly bespoke approach to valuation and pricing. The spectre of inflation is still looming, but this is not specific to timber and, without wishing to tempt fate, prices do look to be stabilising (albeit at inflated levels). So there should be less pressure on clients to agree fluctuations provisions and the like.
Most of the forestry for mass timber is located in Europe (Sweden, Finland and Austria), so currency exchange risk is a consideration. But this is true of most construction products these days, and exchange rates can always be agreed and locked-in at tender stage.
A significant proportion of the cost of mass timber is in the timber itself (around 50-70%). As such, whilst lead-in times (from forest to flatbed) are comparatively short, clients will be expected to spend quicker. So there is likely to be a requirement for substantial advance payments to facilitate the placing of early orders and alleviate pressure on contractor cash-flows. Parties to construction contracts will therefore need to consider the amount and timing of such payments and, most crucially, how they will be secured.
Vesting certificates and bonds
Vesting certificates rarely offer adequate protection, as they are not enforceable against third party creditors. Clients who are required to make substantial advance payments would be well-advised to explore the availability of on-demand bonds as security for such payments. The JCT Design and Build Contract includes appropriate forms for this purpose. If contractors don’t have sufficient bonding capacity to procure such bonds, then clients might consider direct procurement as part of an owner-furnished and contractor-installed arrangement.
At the time of writing, demand in the UK is understood to be at a fraction of total European capacity, so availability of supply is not a concern. As noted above, most mass timber products are produced in Europe, so importation will be more labour-intensive in the post-Brexit environment. However, it should be possible to mitigate any adverse programme impacts through diligent forward planning, and appropriate allowances can be made to avoid the need for bespoke extension of time entitlements.
It is common practice in the UK market for contractors to be given a right to additional time where works are delayed due to the occurrence of a “Specified Peril” (fire, flood and the like), notwithstanding any negligence or default on their part.
The justification for this is that clients are typically best placed to insure against such risks (through delay in start-up insurance). However, given the challenges of obtaining construction and property insurance for mass timber projects, the availability of such cover cannot be assumed, and the position will need to be checked on a project-by-project basis.
Sharing experiences and advice
We are all learning as we go. It is vitally important that we go “open source” with our thinking on topics such as this, so that we can work together as an industry to identify and overcome the challenges.
Mass timber has enormous decarbonising potential, and it would be unforgivable if we were to allow complacency or ignorance to further impede its wider use.
This article is from issue 03 of Designing Timber. Read more articles from the magazine here.