This article was first published in Building Magazine.
In 2006 the Housing Corporation permitted private firms to apply for affordable housing grants. So far so good. But the rules governing these companies and Registered Social Landlords are significantly different. Wait for the explosion.
An increasing number of private developers have started to develop affordable housing since the Housing Corporation extended its grant funding to the private sector in 2006. From next year there will be 31 firms that are not Registered Social Landlords (RSLs) receiving grants to build or refurbish housing.
While some RSLs were concerned at this development, others believed the red tape they had to comply with would deter many developers. One such thorny issue for RSLs is European Union procurement.
RSLs Carrying Out Development Work
The Housing Corporation and RSLs are considered "contracting authorities" for the purposes of The Public Contracts Regulations 2006. As such they must follow a prescriptive process before granting contracts over a threshold value for works, services and/or supplies. This is currently £3,611,319 for works, and, for services and supplies, £144,371.The contracts must be advertised in the Official Journal of the European Union (OJEU) and must follow one of the four tender processes in the procurement regulations (open, restricted, negotiated, competitive dialogue).
Historically, RSLs have formed close partnering arrangements with preferred suppliers, resulting in savings of cost and time, and fewer disputes. Compliance with the regulations can result in an RSL being forced to work with suppliers it does not know and, for example in the case of architects, firms that have no experience with the planning authority of the relevant borough. In addition a common complaint now is the time it takes to get from conception to selection of the supply chain.
Often the RSL will follow the "restricted" procedure. Following pre-qualification an invitation to tender is issued to the short listed tenderers. Finally the contract is awarded by applying the selection criteria in the invitation to tender to find the "most economically advantageous tender".This many not seem too much of a departure from the tender procedure in the private sector but the difference is the set, lengthy time limits, the restrictions on questions that may be asked and how the information is assessed. To limit the red tape on individual schemes many RSLs enter into framework agreements with suppliers, under which individual projects are called off. However, how the call-off is made is also strictly regulated.
Private Firms Carrying Out Housing Corporation Developments
The Housing Corporation envisages a private developer building the units and transferring them on completion to an RSL or retaining them and putting long-term management arrangements in place.
It would seem reasonable to suppose that developers receiving Housing Corporation grant would also need to comply with the regulations. However, they are not a "contracting authority" under the regulations. Only where they are subcontracting work under a public works concession contract (regulation 37) do they have to comply, albeit only partially.
Only if a developer retains the units and makes arrangements for management is there likely to be a public works concession contract.There, if the developer subcontracts works over the threshold he must comply with regulation 37 but does not have to comply with all of the regulations.The developer must publicise his intention to seek tenders for the subcontract works, publishing in the OJEU a prescribed form of notice.The developer can then advertise the contract however he wants.The developer also must comply with the time limits (for expressions of interest and receipt of tenders) specified in the regulation.
If the developer disposes of the units post completion, the regulations will not apply.
Interestingly, the corporation has chosen not to create a level playing field by imposing a contractual obligation on developers to comply with the regulations. It remains to be seen whether, as more grant is paid to developers RSLs object.
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