JV North Chairman Wayne Gales explains in this exclusive with Construction News how a new approach to contractor relations is needed with greater risk sharing to ensure the housing sector keeps building given the IMF’s global recession warning and the impact this will have on construction.
The position the housebuilding sector faces today is a culmination of austerity, Brexit, Covid-19 and economic turmoil caused by poorly considered fiscal policy by Liz Truss’ government.
The UK financial market shifted seismically at pace last autumn; interest rate rises won’t help construction but felt necessary to curb inflationary pressure.
Despite this, the affordable housebuilding sector has a long history of adapting to such challenges and capitalising on opportunities.
So how it responds once again in 2023 will be key.
Continued financial support from government via its Affordable Homes Programme will help us continue building and play an important role supporting economic growth.
Equally important is the need for a new approach to social housing client-contractor relations.
Simply recognising that times have changed sends a strong message.
We need to evolve our offer to reflect the challenges all stakeholders – social housing providers who build, contractors and consultants – are facing.
Contractors want to work with organisations they feel valued by and who stand shoulder-to-shoulder with them not just when things are going well, but also during challenging times.
Clarity is therefore more important than ever so all parties have clear and reasonable risk and reward boundaries and understanding.
We need to look beyond narrow economics and consider broader long-term value.
It starts with a change of culture with affordable housing providers treating contractors more as valued, key partners or ‘part of the team’ instead of the traditional client-supplier relationship that invariably focuses on cost.
Driving prices too hard will only serve to consign contractors to financial breaking point; there’s no value in this.
We also need the courage to commit to collective, calculated risk taking at different stages of the construction process.
The days of fixed-price schemes at a time of high inflation will be few and far between if at all, so flexibility is going to be of paramount importance for both parties moving forward if we are to keep building much-needed affordable homes for rent, rent to buy and shared ownership.
Understandably there is collective nervousness due to rate rises; supply chain and demand driven prices; and, a weak pound.
As the financial squeeze tightens, the long-term pipeline that homebuilding registered providers have can also help retain capacity and talent.
At JV North – a consortium of 12 housing association and local authority members that has built c.10,000 homes by pooling grant bids, running a framework and sharing best practice – we are shaping our future around the premise that everything starts with providing high quality affordable homes through partnership working.
This is something we considered when designing our £560m contractors’ and consultants’ ‘Building Back Fairer’ framework in 2021 to ensure they felt valued and recognised as key, long-term delivery partners.
An example of this partnership was seen late last year when we held a framework engagement day to discuss opportunities, better understand the challenges, explore how to work together more effectively and share market intelligence.
Feedback from contractors was excellent and we are being flexible by separately running tenders for smaller schemes and MMC on our new Dynamic Purchasing System portal.
Put simply, without contractor partnerships we can’t build the quantity and quality of greener, cleaner, more efficient homes we want and need to.
And given the cost of living crisis, this is more important than ever.
Of course there’s no easy answer.
But if all stakeholders see the bigger picture, are willing to have open conversations, are prepared to listen and if you also have a long-standing relationship, then that is a better place to be.