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The chosen ones
Housebuilder – February 2010

The HCA's select list of housebuilders and contractors chosen to deliver the public land initiative has caused dismay and controversy, as well as delight for those that made the cut. Mark Smulian talks to the lucky and not so lucky

There was a late Christmas present for a select group of housebuilders and construction firms when the Homes and Communities Agency unveiled its delivery partner panel in early January. They alone will work with the HCA for three years on projects funded through the public land initiative, local authority new build and potentially some other mechanisms. Other public sector bodies - councils, central government, the NHS and regional agencies, for example - will also be encouraged, but not required, to use panel members for their housing projects. Membership is therefore important, yet some wellknown housebuilders are conspicuously absent.

Equally conspicuous, by their inclusion, are contractors not known for involvement in UK housebuilding. So what is going on? HCA deputy chief executive Eamonn Boylan says the panel is intended to speed up procurement because members will be pre-qualified and there will be expertise across the development process among the chosen few. He explained to Housebuilder: "There is a range there from housebuilders to contractors, so we are quite happy we have got a suitable list.

"We were particularly keen to broaden delivery from just housebuilders, because although the market has changed now, a few years ago housebuilders were not delivering the volume of homes that it was generally accepted were needed. "Companies like Bouygues and Skanska might not be involved in housebuilding here in the UK, but they bring a range of capacity and skills they have elsewhere." Builders who secured panel membership are naturally delighted, but those who failed are, understandably, not. Bellway, a builder much involved in regeneration, applied and "we need to find out why we were not selected," a spokesman said.

Redrow was also not chosen, but declined to comment. Another failed applicant, a housebuilder prominent in social housing, declined to be named but gave an outspoken view of where it thought the HCA had gone wrong. Its md says: "We are not very happy about the whole thing. We were a bit surprised not to be chosen, as we are a contractor/ developer you would recognise as experienced in this area. "I am bemused by it and have asked for a debrief to find out why we were scored low on some categories. "How come there are so few firms there with development experience? I can't build schools and hospitals like Laing O'Rourke and Skanska can, but can they build what I build?" Boylan says the HCA carried out "a robust selection process that clearly set out that it was open to all contractors, housebuilders and others to put themselves forward and the criteria were made clear. "We are more than happy to give feedback to unsuccessful bidders, but we are certain the process was fair, and conducted meticulously." Some indication of the complexity of the bidding process comes from John Laing Partnership Housing. Steve Doherty, its land and sales director, says: "We chose not to apply because the bid criteria and the timescale were not suitable for us, we have just not got lots of people to run round and do that sort of stuff, the process was too complex."

Those who were chosen admit the selection was tough. Steve Trusler, strategy director of Wates Living Space, says: "The process of application and selection was certainly incredibly robust and we decided to put in the resources needed because we felt this was something important. "It was like all public sector procurement, you either go in and do it properly or you don't do it at all." Trusler welcomes the wide range of companies chosen: "I think the HCA wanted to do something new that will help it get homes built, and if you look at who is on the list some of them are companies you'd not expect to see in speculative housebuilding. "A few years ago the cost of land meant there were about six big companies dominating the market and you had to be very big or very specialised to survive, with no chance in the middle, but this will bring new companies in."

820 million programme

There are two main programmes on which panel members will work, though others may be added. Local authority new build, the return of new council housing, will be an 820 million programme eventually, run by the HCA and funded both by its grants and borrowing by councils to provide new homes. That will be a useful source of work, but it is the public land initiative that has raised the most excitement. In this, the HCA, and other public bodies that so choose, will contribute land to projects but only charge developers for it when homes have been built and sold. Thus the land cost moves from the start to the end, reducing developers' risk. Peter Andrew, Taylor Wimpey's director of land and planning, says: "We applied because we could see the opportunity to access a supply of land from the HCA, and from local authorities if they choose to go that way, that would not be on the open market and for which competition is limited to panel members. "I see it as long-term and a very good way of delivering government land to the market place.

"At the moment you can end up with sites where development cannot generate the return needed for profitability and they get mothballed. But if the risk of the cost of land is taken out by a public body you start to see the sort of return that shareholders want." This privileged access to land also attracted Galliford Try to apply. Stephen Teagle, md for affordable housing and regeneration, says: "It offers access to considerable land holdings, some of the largest sites are held by public bodies and are very keen to work on those."

Similar projects

Teagle says he has already worked on projects with similar arrangements to the public land initiative, and believes it will succeed. "It's fairly straightforward, we agreed a potential return for the site and the payment to the landowner, and if we outperform on sales that goes to the public body," he says. "Effectively, it is based on a margin agreed for reduced risk." Galliford Try is a hybrid contractor and developer and Teagle says firms such as his, and the pure contractors, are on the panel "because the HCA wants the ability to pull down a range of services from the panel and was looking for partners who can offer contracting, developing and perhaps facilities management skills, and also wanted new entrants". Eugien Jaruga, director of partnerships at Keepmoat, which also made the list, thinks the HCA may perceive it can get better value from contractors.

"We are a mix of housebuilder, contractor and environmental works so we have wider experience than just housebuilding," he says. "If you look at the returns earned by housebuilders, even now, they are ahead of those of contractors, and I think the HCA sees something there that makes it think contractors can offer it better value." Perhaps surprisingly, only a handful of associations are on the panel. Dick Mortimer, development director at Family Mosaic, bid in a consortium with builders Mulalley, Rydon and Mount Anvil. He says: "The public land initiative is an experiment that I hope will succeed. "It can't be the only solution to building more homes, but it is another string to the bow." Well, it is a string to some people's bows. Will social housing construction soon now split into the "haves" on the panel and "have nots" outside?