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Easier said than done. The trust, which sees innovation as the key to cost effectiveness and better design, had used new construction techniques on some of its recent developments. At Murray Grove in north-east London, it pioneered volumetric modular construction, by bolting steel boxes together to form a block of affordable homes. The technique was then refined at Raines Dairy, north London, by reducing the number of modules needed to form each apartment. The challenge for architect Feilden Clegg Bradley was simply to continue this process of innovation at Lillie Road. But how?

At the outset, the architect kept its options open. "The scheme was designed on a 4.2 m grid that would suit any type of construction – traditional, volumetric modular and steel frame," explains Julian Gitsham, a partner in Feilden Clegg Bradley. This 4.2 m dimension was set because that is the widest a volumetric module can be before transportation requires a police escort.

The advantage of assembling a building from volumetric modules is that an entire room, or even a complete flat, can be delivered to site on the back of a truck, fully fitted-out, decorated, with the furniture in place, if so desired. However, one of the disadvantages is that along with the fully-fitted box comes the empty space within it. "One of the issues with modules is that you have to transport the air inside them when you get them from factory to site," says Gitsham.

What is innovative on this scheme is that rather than transport apartment-sized modules to the site, only the complicated bathroom assemblies have been modularised. The remainder of the scheme is being constructed using a light-gauge steel-panel system. "We're trying to be efficient in transporting, so the small, high-value bathroom is a module, and the rest is being transported as a flat pack," says Gitsham.

Nothing too innovative about that, you might think – after all, hotel contractors have been sliding in fully fitted bathroom modules for years. But at Lillie Road, the modules will be loadbearing. "Most bathroom pods have redundant walls, whereas the walls of the pods on this scheme form part of the building's structure. It stops structural duplication," says Robert Doe, project manager for the Forge Company, the steelwork specialist and contractor on the project.

Having decided on the pod option, the next task for Doe and his team was to actually build them. The bathroom pods were preassembled by the Forge Company in a factory in Milton Keynes – but the company had never made pods before. "Hotel pods are usually produced in glass-reinforced plastic in France or Germany," says Doe.

For this scheme, shells are constructed from steel-framed panels, made by Ayrshire Metal Products in Scotland and delivered to the factory as completed wall, floor and roof units. The bathroom pods span the full 4.2 m width of the dwellings, from party wall to party wall, and the floor cassette extends from the front of the unit to form the hall floor.

The main problem for the architect was that the site for Lillie Road was a cramped plot in west London. A hotel, a Victorian terrace and a 1930s medium-rise estate fenced in the development, which Hammersmith and Fulham's planners insisted should be high density.

The architect's solution was to arrange three blocks around a central courtyard, beneath which was an underground car park. The largest of the buildings on the £7.4m scheme was a six-storey block that fronts Lillie Road itself, containing maisonettes and flats. Behind this, and perpendicular to it, is a three-storey communal building – home of the tenants' meeting hall – with four flats perched on its top floor. Finally, facing the main block across the courtyard, is a terrace of 14 two-storey houses. "Everybody gets a view of the courtyard," says Gitsham.

With the exception of the ground-floor flats, where the concrete floor slab made the use of pods impractical, and a few of the top-floor flats, where the number of pipes in the service risers meant it would be difficult to preassemble the services, bathroom pods have been installed throughout the development. Even the two-storey houses have preassembled bathrooms, although Peabody's senior development manager Cy Powell admits that "for the houses, pods were not strictly necessary".

However, even though most dwellings incorporate a pod, there were significant differences in the construction of each unit so that the economies of scale were not fully realised. "There was not a high degree of repeatability with the pods," says Doe, somewhat regretfully. Gitsham admits: "It was quite a learning curve. Although the layout of the bathroom inside the pods is the same throughout the building, the pods are either left- or right-handed and the services risers vary in size depending on where in the building they are."

Light-gauge steel-frame panels were used to construct the blocks themselves. For the main six-storey block, the first parts of the structure to be assembled were the three access cores housing a staircase and lifts. These were assembled from hollow steel sections. "These gave a solid centre to the steel panels," says Doe.

The panels themselves were put up using what Doe calls "modified balloon-frame construction". He explains: "This is where the floor panels are attached to the side of the wall panels, as opposed to placing them on top of the wall."

In this way, the floor joists can be centred on the wall studs. "It's a more efficient way of loading the wall panels, and you don't crush the floors," he adds.

Starting at the cores, the walls are built out by joining panels using self-tapping screws, then the floors are added and finally the pods are slotted into position and bolted into place. "As long everything is plumb, you can work like this up to the sixth floor," Doe says. Hot-rolled steel columns running up the outside of the block to support the building's balconies helped Doe in his task. The columns were necessary to enable the six-storey block to comply with the progressive collapse regulations (designed to prevent tall buildings collapsing like a pack of cards, should one wall panel fail).

The pods were delivered as sealed units, fully fitted-out, tested and commissioned. Only the sealant around the bath and basin was not factory-applied, for fear that it could become damaged when the units were manoeuvred into position. Each pod weighs slightly more than a tonne and is made to tight tolerances, so there is little room for error slotting them into position into the building's structure.

The lack of flexibility in the system meant that tolerances were critical if the pods were to be slotted into place without a problem. "There is little forgiveness in the system," says Gitsham. "We knew the tolerances were tight – but if you know that, you can design around it." The hot rolled steel columns also helped contain the structure within tolerance.

There was one heartstopping moment when it looked as if the construction team might be beaten by the system's lack of forgiveness – but that was traced back to a stray sheet of plywood left on top of a pod, which threw the system out of true.

On site, the structure on all three blocks is now complete. A team is busy installing the terracotta rainscreen cladding and stack-bonded blocks on the six-storey block, and the terraced houses are being prepared to receive their window and door units. Inside, fit-out is under way and the services risers are installed.

The scheme looks likely to meet its July handover. However, this deadline was never really in doubt, given that main contractor Llewellyn allowed for possible problems in its extended programming. From fabricating the structure to handover, the project took the same amount of time as it would have taken using traditional construction. Meeting this deadline was undoubtedly helped by the PPC2000 partnering contract, which the architect said "meant there was no finger-pointing and no blame".

The trust appears to be impressed with the pod innovation: "Peabody will review the scheme with a view to taking this team forward," says the trust's Powell. "We're looking at using this scheme on the edge of Hackney." And Peabody is keen to use the same project team for the new development to capitalise on the experience that it has acquired. However, Powell is concerned that the project's 12 month lead-in will mean that by the time the project does kick off, the contractor's men will have been deployed onto another scheme. "One of the things the trust is keen to do is to have the same people back again," he says. And by insisting on the same design and construction team, Peabody will ensure that their construction innovators do not have to continually reinvent the pod.