Do the risks outweigh the benefits of using prefabricated construction on your next project? ConsensusDocs recently held a webinar and emphatically concluded that, yes, the benefits far outweigh the risk so long as you have the right contractual tools to address the many small and large issues that arise when using prefabrication. In addition, new proposed federal rules may change how off-site work is treated under Davis-Bacon and the application of prevailing wages. However, the trend toward prefabrication, especially in a post-Covid-19 outbreak construction world, will undoubtedly continue.
It was also announced that ConsensusDocs is preparing for publication a prime-level agreement between an owner and prefabricator. This will be another industry-first standard contract document.
The webinar provided an overview of why so many projects incorporate off-site prefabricated components into their construction projects. These advantages include:
- More robust QA/QC
- Faster and more reliable construction scheduling
- Improved labor productivity (happier, more stable workforce)
- Safety advantages
- Sustainability
- Efficiency, less waste, leaner
- Possible cost savings or same cost with better quality
Many Modular Building Institute (MBI) members are past their capacity, and future deliveries, in some instances, are now more than a year out for current orders. Amidst this boom in prefabricated construction, the U.S. Department of Labor Wage and Hour Division has announced proposed rules that would disrupt the currently well-settled case law that Davis-Bacon Act and Related Acts requiring prevailing wage labor rates do not apply to off-site construction. The proposed rules would significantly expand Davis-Bacon to “off-site of work.” Both AGC and MBI strongly oppose the proposed rules and indicated that they would consider challenging the rules should they be finalized. AGC has prepared a letter detailing its opposition that can be found here. This letter thoroughly details how decades of litigation have made the current application of Davis-Bacon to “site of the work” and “adjacent or virtually adjacent” consistent and predictable.
ConsensusDocs publishes the only standard contract document that addresses prefabricated construction – the ConsensusDocs 753 Standard Prefabricated Construction Agreement Between Constructor and Prefabricator. Significantly, the document allows users to express their intention of having common law apply to the scope of services rather than the uniform commercial code (UCC). The UCC typically applies to manufacturing. Prefabricated construction is a hybrid of both manufacturing and more traditional construction, which is labor-intensive and customized. The webinar detailed the many ramifications of applying the UCC as opposed to common law to prefabricated construction. One example was the UCC’s perfect tender rule instead of reaching substantial completion on a construction project. v typical for construction projects. The ConsensusDocs 753 does a thorough job of addressing the many nuances of applicable legal standards that might apply to a project that utilizes prefabrication.
The webinar was presented by Ron Ciotti of Hinkley Allen, Tom Hardiman, the Executive Director of the Modular Building Institute (MBI), and Seth Pasakarnis, also of Hinkley Allen. Brian Perlberg, executive director and senior counsel of the ConsensusDocs Coalition, moderated this 90-minute webinar.
Additional Resources:
AGC WebEd: Assessing your company’s Prefab Readiness here.
AGC WedEd: Prefab Construction: Improving Visibility and Control here.
“New Prefabricated Contract Document Eases Use to Contract for Prefab and Modular Buildings” here.