Standardise and streamline procurement processes to reduce build costs, says Housing Forum

The Housing Forum has published a report urging housing associations and councils to look at streamlining and standardising procurement processes to reduce build costs.

The report, titled Procurement: The price we pay, said local authorities and housing associations can face higher construction costs than private developers due to “differences in procurement, governance and specification requirements”.

The Housing Forum said lengthy procurement and decision-making are “significant and under-recognised drivers of housebuilding costs.” It said while delays happen, inflation adds to cost, interest adds up and there is the growing risk of supply chain price moments or legislative changes.

It said trying to recover lost money through the construction phase, such as pushing contractors to bid at lower margins, is risky. It said: “Streamlining procurement, by contrast, delivers real savings. It is the safest, most reliable, and most cost-effective lever available to councils and housing associations looking to commission new homes.”

The report said the sector could standardise aspects of design and procurement that need not vary from scheme to scheme. These include: specification levels; Employer’s Requirements; apartment typologies; balcony system’s lift strategies; MMC components and assumptions around what will be required to receive planning permission tender documents.

It also said the sector should shift mindsets from risk transfer to risk management as passing on risks to contractors can increase costs. It said a a risk-management approach to procurement involves: early client-funded surveys; jointly managed risk registers; clearer decision gates at each stage; early contractor involvement and appropriate use of provisional sums for unknowns.

It said: “These approaches reduce inflationary risk pricing and create better relationships with contractors. Risk registers shared between client and contractor support joint decision-making, while local technical forums can create a platform for sharing learning on recurring technical issues”

The Housing Forum also said costs can be reduced by improving the efficiency of procurement, through parallel approvals; standard tender packs; more predictable planning requirements; faster governance cycles and effective use of procurement frameworks.

The report also said policy and regulatory changes are required to reduce procurement costs. These include ensuring consistency in the planning system, reforming procurement through two-stage tendering and provide additional funding to close viability gaps or encourage the use of frameworks to help clients procure innovatively.

Alex Notay, chief executive of The Housing Forum, said: “There is growing concern about the rising cost of housebuilding and the sector’s ability to deliver the homes the UK urgently needs. What is less widely recognised is the role procurement plays in driving those costs.

“This new report identifies procurement as one of the most significant – and most controllable – drivers of development costs within the public sector.”