NIFHA calls for action on Social Housing Development Programme
We are working closely with the Department for Communities on this. Housing associations are here to ensure that new homes continue to be built and that the increased need for housing, which is likely to result from the economic fallout from this outbreak, can also be met.
Outlined below are a series of actions which NIFHA thinks are necessary to maintain the new build programme as we deal with the Covid-19 pandemic and the related impact on the construction industry and wider economy.
As a sector, we are here to ensure that new homes continue to be built and that the increased need for housing, which is likely to result from the economic fallout from this outbreak, can also be met.
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Front line staff should be confirmed as key workers. Government departments should be assisting in the availability of PPE to these workers.
To ensure we get priority access to testing staff for Covid-19, to child minding and PPE (personal protection equipment).
Housing associations should be central to any fiscal stimulus.
Our sector delivers an economic multiplier effect of circa £1 billion per year for the wider regional economy when we include the impact on the supply chain, through the development programme.
This will be crucial to rebuilding the economy, as well as providing much needed new homes, after this immediate crisis has ended.
Given the unprecedented circumstances we find ourselves in, NIFHA calls for year-end flexibility. Specifically, we call for the year end to be extended by six months.
This will help to ensure that capital money for the SHDP allocated to the 2019/20 financial year is not lost and can be used to build much needed new homes, over the coming months.
It will also help to address the unquantifiable and uncontrolled risk that housing associations are currently facing by potentially entering into contracts at this time and when their legal advice is that they should not be.
We feel that six months is an appropriate length of time by which stage we hope there is wider clarity externally and the flow of contracts at the end of this uncertain period will bring much needed relief to get contractors back up and running again. Amending contract clauses now that are at variance to what was tendered also brings potentially significant procurement issues for associations.
All public procurement rules which inhibit/delay us from placing work with partners, be temporarily suspended.
We can still ensure VfM (Value for Money) through application of TCIs (Total Cost Indicators), although flexibility on some rates will be needed.
Housing associations given flexibility to seek their own legal advice in relation to current procurements and on-site commencement targets.
This represents a good option and could expedite matters, but this will depend on whether contractors are prepared to enter into contracts and therefore the best solution is year-end flexibility as outlined above.
Practical Completions will also be impacted and we are aware that DPG and the Department are accepting of this providing we give an adequate explanation.
We strongly urge caution on the use of force majeure.
If housing associations are required to put force majeure into construction contracts, contractors who enter into contracts now with housing associations are highly likely to claim for additional time and money to complete these projects.
The amount of additional costs to housing associations in these circumstances is unquantifiable and there is currently no way for housing associations to control that situation and remain compliant with Departmental and Public Procurement Regulations.
There would be no cap on the amount a contractor could claim, and it is highly likely that there would be disputes as to the extent of the contractor’s entitlement.
If this happened, this would essentially mean housing associations will be paying contractors claims which they cannot quantify at this stage in terms of their financial exposure, be engaging lawyers to deal with contract disputes etc.
In these circumstances, all these factors would most likely have to be funded from associations’ own private funding, which are stand-alone charities. This would reduce our sector’s funds and the ability to deliver the much-needed new homes.
Given the uncertainty at this time, neither contractors or housing associations should be having to mitigate the onsite risks. This represents a global issue and government intervention through financial means is, we believe, the appropriate mechanism.
It should not be for housing associations to mitigate these risks. Our primary role is to provide homes and services for those that need them.
It is imperative that, when we have passed this current uncertainty, there will be construction works ready to award and the year-end extension would enable us to be in that position.
It is important we can play our part in helping society get back to normal.
We request consideration of additional financial assistance to:
- cover economic uncertainty and;
- additional risks we are being exposed to.
It is inevitable, with COVID-19 impacting on manufacturing processes, the supply chain and workforces, that we will receive Early Warnings seeking reimbursement for increased material costs and an elongated works programme. Design teams will assess these costs to ensure they are fair & reasonable, in line with current market rates and align with actual costs incurred on site.
Additional Design Team fees are also likely if re-tendering is necessary and there will be legal costs in seeking procurement advice on suitable contract clauses.
There is potential of additional costs in relation to re-instructing surveys such as valuations if DPG require these to be valid within 6 months of seeking scheme approval.
Solicitors may have to seek updated property searches, etc, as part of the conveyancing process. Housing associations are already having to hold off on completing on site acquisitions, given the uncertainty and risk around proceeding to sign construction contracts.
Continued interim payments by housing associations in line with actual costs incurred by contractors in relation to delays will be a key part of them remaining financially stable.
One solution might be to present these additional Compensation Event costs as they occur and seek additional grant funding to address these.
If contractors are unwilling or unable to go onsite within four weeks of the signing of a contract, housing associations should not be penalised by, for example, having Housing Association Grant (HAG) clawed back.
We request DfC introduce a temporary derogation to address this issue.
Within our sector, there has already been an early warning of cost relating to cessation of work on sites and the costs of prelims on site during this period and delay in completion in contracts.
The most expedient way to address the unknown and unquantifiable risks are to provide the year end flexibility.
We ask for consideration of a package that sustains maintenance contractors.
Recognising the link between development and maintenance, we must retain capacity and manage labour and materials costs across the construction industry.
If the latter go bust and all housing associations maintenance costs significantly increase, the pool of contractors for traditional development contracts may be reduced.
We know that there is only a small pool of contractors and, if they cease to operate, it will be incredibly difficult to deliver the SHDP.
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