1. School of the Built Environment New Approaches to Developing Affordable Housing James Morgan Heriot-Watt University, School of the Built Environment HSA Spring Conference April 2010

2. School of the Built Environment Structure of Presentation 1.Focus on innovation in affordable housing development by RSLs to achieve efficiency 2.Set this in context of modernising procurement in construction industry 3.Show the particular challenges for housing associations 4.Illustrate these challenges and opportunities with the example of the Devanha Phase 2 procurement initiative 5.Raise key questions for the future

3. School of the Built Environment Introduction Housing associations have historically provided only a relatively small proportion of social housing in Britain. But HAs main providers of new social rented and affordable housing since the 1980s, therefore significance of practice. housing association and registered social landlord as ‘artificial’ and ‘diverse’ terms, (Malpass, 2001) Expect variation in Development Process

4. School of the Built Environment Performance of UK construction industry Seen to perform poorly in comparison to other industries and internationally Latham Report (1994), problems, partnering. Egan Report (1998) solutions, leadership, benchmarking etc. “the main...opportunities for improvements in housebuilding performance exist in the social sector for the simple reason that most social housing is commissioned by a few major clients.” (Egan, 1998, p35) Very positive ideas embraced, e.g. “Egan Compliance” But “a few major clients” is only representative of part of RSL movement.

5. School of the Built Environment Tensions in Direction of Travel Influential, many organisations promoted, Construction Best Practice Programme, Egan compliant since 2004. Egan compliance pushes towards larger, expert clients. Tensions in England and Scotland between economies of scale and localism. Contrasting approaches. Efficiency vs. community control. Distinctive Scottish experience: delivery by smaller HAs with limited opportunities for partnering etc. But...Need for greater no. affordable houses for the same investment: Building a Better Deal e.g. pilots, LA preferred partners, Investment Reform Project - opportunities and concerns. Devanha - innovation

6. School of the Built Environment Partnering “….organisations working together to improve performance through agreed mutual objectives, devising ways for resolving any disputes and committing themselves to continuous improvement, measuring progress and sharing gains.” (Egan, 1998) reduced disputes, better working, more effective use of personnel, promotion of innovation and organisational learning. Should benefit all parties, targets for improvement.

7. School of the Built Environment Egan Targets and KPIs

8. School of the Built Environment Demonstrating Improvement Housing Forum Demonstration projects used Performance measurement and benchmarking, Longterm partnering, Integrating supply chains, Sharing risks and rewards, Establishing a culture and providing incentives for the elimination of waste, Improving working conditions for employees. Generally modernising procurement: Selection based on quality, not just lowest tender Single project partnering not meaningful, therefore: Use of framework agreements e.g. Devanha

9. School of the Built Environment Partnering: Contractual Framework Aim to reduce reliance on contracts ensuring value for money, quality and efficiency partnering charter in reality, need contracts to identify risk and responsibility ACA Project Partnering Contracts PPC 2000, SPC 2000 and TCP2005 New Engineering Contract (NEC3), less adversarial, Core Group, risk register.

10. School of the Built Environment The Devanha Initiative Research Heriot-Watt University and DTZ commissioned by Scottish Government to carry out m&e study of procurement initiative 5 RSLs in Grampian to deliver 1563 new homes for rent and LCHO from 2007/08 to 2010/11. Demonstrating quality improvements and efficiency savings. 4 year evaluation period – recommendations for Devanha and for the Scottish Government which may inform Investment Reform Project.

11. School of the Built Environment Research Method and Progress Two Interim Reports Documentary analysis, Analysis of programme management data, Use of ‘data capture’ forms to minimise the administrative burden, Workshops, Interviews, Questionnaire surveys, Not just cost but quality and social gain.

12. School of the Built Environment Interim Findings: Governance Devanha limited company with board drawn from member RSLs. Independence of member RSLs and Devanha’s relationship to them is a defining aspect of the Devanha structure. Devanha can galvanise the group, but also cause conflicts of interest. Initially, there were deficiencies in the support and information. NEC3 contract was useful in facilitating this improvement. But struggled to try to deliver its programme. Lacked leadership of a Chief Executive – RSLs reluctant to give up power.

13. School of the Built Environment Interim Findings: Programme Delivery £7.9m expenditure almost 60% less than £17.7m in Programme Agreement. Difficulties over system of approving schemes. Inflation monitoring part of problem. Year 2 system worked but lack of flexibility in national budget led to ‘front funding’. Lessons for National system.

14. School of the Built Environment Interim Findings: Cost & Grant 1 Two main routes to efficiency 1.Bulk Procurement No evidence of economies of scale had emerged. Is programme big enough to influence market? Variation from common specification. To what extent is this needless duplication as identified by Egan and to what extent a reflection of local choice? Lessons from private sector standard layouts with variation in “jacketing”.

15. School of the Built Environment Interim Findings: Cost & Grant 2 2. Collaborative Working using NEC 3 Approach Currently only be based on projected costs at scheme approval stage. Collaborative approach may lead to efficiencies on site, reinforcing need for caution in drawing conclusions at this stage. Real progress in cultural change: trust, cooperation and openness within Core Group (involving all partners) and evidence of contractor engagement with open book costing

16. School of the Built Environment Interim Findings: Cost & Grant 3 Lack of progress in process implementation: Operation of NEC open book process remains problematic. Need to urgently address Final Target Cost setting, Cost Monitoring and Forecasting, Programming and Risk Management. Collaborative culture had been achieved but amount of innovation and novelty in procurement practice almost overwhelming.

17. School of the Built Environment Issues for Discussion and Development What benefits have been demonstrated to arise from the move to larger housing associations and development consortia? Specifically, has bulk procurement been shown to result in quantifiable cost savings? What has been lost in the process of growth? How can the best aspects of local control be maintained while seeking efficient development? Is there a place for small independent housing associations and co-operatives continuing to develop their own stock? What are the appropriate models for the future – lead developers, non-developing consortia members, development vehicles which develop but don’t own stock?