How are recent changes to procurement regulations helping landlords build more homes? Our Director, John Skivington, explains:
Main barriers to affordable housing supply
What do you believe to be the main barriers to affordable housing supply?
The first barrier is the capacity and the will of the major private house builders.
It is impractical to assume the government’s housing target can be delivered by the major private house builders, particularly in affordable housing supply.
That’s not a criticism of the private house builders, because they are a vital and valuable source of housebuilding, but their mentality is focused on building houses to maximise profit.
As soon as you start to increase demand, particularly for affordable housing on public sector land, the appetite tends to dwindle from the large private house builders.
But there are other factors at play - planning is still tricky and there’s not that much joined-up thinking within councils between their housing, planning and regeneration teams.
There’s also a capacity problem elsewhere in affordable housing. We need to generate more capacity and supply, and therefore look at different models of operation.
Do social landlords need to rethink their models of supply?
Absolutely, they’ve got to think past the mainstream model of private house builders or the Section 106 agreements from private house builders, which has previously been a main source of new stock.
There’s not just one model that works best, they’ve got to match the model to the need. There’s a range of models: there’s offsite construction, there’s more use of small builders for small sites, more use of joint ventures for large sites, self-build and custom build models.
I think there are lots of models that are emerging and a lot of social landlords are rethinking their options. Councils particularly are looking at a lot more innovations and a wider range of solutions.
You talk about models of supply, but there’s also innovation happening in organisational vehicles - council-owned companies and joint venture partnerships are interesting.
There’s a huge change from the major social landlords now. They’re merging and beginning to operate almost like private house builders. Councils are now moving into their space and are looking to contribute towards building more affordable housing.
Procurement's role in boosting the number affordable homes
What role can procurement play in boosting the number of affordable homes which are built?
Procurement is still often seen as a barrier to building homes.
There are lots of innovative models of supply, but social landlords are still concerned because they think they’re constrained by the Public Contracts Regulations (PCR) 2015.
A common mistake made by internal teams is tackling all types of procurement in-house. The majority of procurement exercises should be kept in-house, but where specialist construction and refurbishment procurement is required, external firms such as LHC have a vast wealth of knowledge and experience to deliver projects efficiently and effectively.
The PCR has historically been viewed as cumbersome, but the regulations have moved on and the 2015 revisions introduced some new and innovative sourcing features that social landlords can take advantage of.
Can you explain what opportunities are available to social landlords through the Public Contracts Regulations 2015?
There are a number of changes social landlords should be aware of. A key element is innovative partnerships. Social landlords that want to develop a new solution from a research and development perspective can now do so through innovative partnerships.
Essentially, if there’s something that doesn’t exist on the marketplace, you can use the innovative partnership model to have a partnership agreement with a supplier and develop a solution that meets your bespoke requirements.
There have also been some procedures in the old regulations which have been upgraded under PCR 2015. One such method is competitive dialogue. This is useful on complex projects when it is not possible to specify the outcome. You can have a competitive dialogue directly with contractors to develop a range of solutions to meet your needs. We’re not seeing it much yet in new housing, but there’s scope for that.
Another procurement route is through dynamic purchasing systems (DPS). The benefit of this is it’s easier for small builders to get onto the framework as they don’t have to go through tons of paperwork. It’s been around for a while, but there have been changes in the new regulations to allow more flexibility and we’ll start to see more examples of that.
Are you aware of any recent examples where landlords have used the new procurement regulations particularly effectively?
Yes - one of the most recent examples is Birmingham City Council’s use of DPS.
They’ve got something like 14,000 small sites but Birmingham had trouble getting the large house builders interested, so they used a DPS to seek more interested parties for new build on small sites. The council really opened up the whole programme to SMEs. They engaged with SMEs early in the process, they explained what the DPS was and how it worked and gave the SMEs the encouragement that they had a good chance of winning the work if they engaged.
There’s not a lot of effort to get involved from the supplier side - it’s much less onerous. The DPS can be set up very quickly, inside a month. We will see more of that, particularly with new entrants to the market.
An example of the competitive dialogue procedure in action is London Borough of Haringey’s procurement of a joint venture partner for its housing regeneration programme. It takes a lot of resources and a long time to get a solution but on such a complex £2bn project the effort invested in competitive dialogue ought to pay dividends in achieving the best outcome for the landlord.
Will there be a move away from conventional frameworks to these newer methods?
I don’t think it’ll result in a move away, it’ll just broaden the options. In terms of delivery there’s an opportunity to match the delivery model to housing need and then match the procurement procedure to that. The smart thing would be to have a procurement strategy for new housing which recognises the different tenures, different house types and different requirements of social landlords. These could be identified and matched up with different models of delivery.
Now, a whole range of procurement methods can be applied to those different methods of delivery that are going to help social landlords get the right solution for their needs.
It’s all about being clear about your needs, matching your requirements, matching your supply models and matching your procurement method to link in with your supply model. There’s a lot more scope and a lot more flexibility. It’s an optimistic outlook going forward.