Philip Pamment Blog: New Methods for Registered Providers to Deliver Developments30 March 2015
A recent Housing Forum Working Group that I chaired sought to look at new ways Registered Providers (RP’s) could deliver their development programmes.
The difficulty RP’s have is that the external constraints they currently face are unlikely to change anytime soon – capital grant funding is unlikely to return; supply chain capacity constraints will continue and land prices are unlikely to fall in the foreseeable future. This suggests the need for RP’s to look inwards for the answer.
The workshop noted two factors that hinder the ability of RP’s to do things differently. The first was their regulated nature. The need to demonstrate probity, multiple internal stakeholders and social value objectives all constrain their capacity to be nimble and entrepreneurial and take on developers and housebuilders in the private sale market. Some questioned whether RP’s should even try and become something they are not. Some felt they should flex their core activities rather than completely change direction; with a focus on evolution rather than revolution.
The second challenge to doing things differently was the time it takes to change the culture of an organisation. One only has to look at the privatisation of British Rail to see it can take more than a decade to significantly alter the culture of a large bureaucracy. Although many development departments have been reorganised since 2010; internal processes, expected behaviours and organisational memories will not yet have caught up with these changes.
The workshop however felt that changing the way an RP looked at risk could create meaningful opportunities for an RP to do things differently
RP’s face a growing disinclination from contractors to tender for work. One way RP’s can respond to this risk is to spend more money up front in order to derisk a scheme for tenderers. This would reduce pricing unknowns when tendering and reduce the time between pricing and construction; both of which would help a contractor manage trade package pricing risks.
- Appointing a structural engineer to ensure that site investigation information is adequate to finalise the foundation design
- Appointing engineers to assess the capacity and location of existing services and utilities
- Using BIM to provide a warrantable model for quantities
- Discharging pre commencement conditions and obtaining technical approval before tendering
Two stage tendering is another way that better pricing information can be assembled before the scheme price is fixed. Price creep in this procurement route can be controlled by fixing preliminary costs and establishing an Agreed Maximum Price before starting any design development
A more radical idea for a RP to rethink risk would be for the contractor to build the frame, envelope and infrastructure as an enabling works package and allow the RP to use their supply chain and multi trade operatives to fit out the scheme. This would significantly reduce the number of packages let on a scheme and reduce the interfaces that need to be managed. It would also allow more self build and custom build.
Rethinking “value for money” and reducing the amount of market testing would allow an RP to move from managing individual project to managing a development programme. Demonstrating “value for money” does not require continuous market testing but moving away from this approach does mean rethinking value for money “risks”. By way of example housebuilders invest in long term relationships with their supply chain and reduce market testing to as little as 20%. A small focussed Framework of 2 or 3 combined contractor/ consultant delivery teams could be set a target of reducing market testing by 80% at every stage of procurement that would allow the entire supply chain to focus on adding value because they don’t have the abortive cost of tendering.
This approach has the potential to allow internal processes and sign off procedures to be reengineered so that development opportunities could be acted on more quickly.
All of these suggestions require a change in behaviour as much as a change in processes. Risk and behaviour are interrelated. Assessing risk impacts is often subjective and as much about perception. New ways of working for RP’s therefore probably means new ways of behaving.