The impact of Brexit on UK housing providers is still unclear and is very much dependent on how the UK’s relationship with the EU is redefined – whether or not UK makes budget contributions to the EU, agrees to either free or restricted trade and movement of people, or even refuses to give any element of preferential access to the EU single market.
However, what we can be sure of is that housing providers’ boards must be prepared to tackle challenges around the impact of Brexit on housing demand, funding, regulations, home building, and the availability of labour and talent.
Availability of funds
At the beginning of 2016, available capital was a relative rarity for privately-funded housing providers and, in unsure times, it seems natural for housing providers to tuck their wings in and sit tight rather than attempting to raise finance from the capital markets. With the additional challenges of numerous mergers and organisational restructures, it seems all the more tempting to hold onto anything that could be considered a constant.
When it comes to public funding for housing providers, significant challenges are also present. The EU funding currently available (EU Structural and Investment, including the ERDF and ESF, and funding from the European Investment Bank) may be reduced or simply no longer available post-Brexit.
So money will be tight and therefore smarter, more value-driven procurement will be key.
Availability of talent and materials
Quite simply, many construction materials are imported from countries within the EU. While the drop in the value of the pound will be having a fairly immediate impact on the cost of materials, the longer-term consideration is the impact on the free movement of goods between EU countries, and the potential increase of import costs (and therefore construction costs) post-Brexit.
It has been widely reported that the UK is suffering from a construction skills shortage which has an immediate and obvious impact on the planned increased output of new homes. There is no doubt that Brexit will have a further impact on the UK’s talent pool, and limits on EU migration may well increase the cost of construction.
Again, with raised construction costs and the importance of maintaining a healthy bottom line, housing providers will be under pressure to run a tight ship, and squeezing value from the procurement process will be essential.
Impact on procurement
Procurement has come under scrutiny recently, not least from the Housing Quality Network, whose view that housing providers’ maintenance costs have gone up significantly in recent years resulted in chief executive Alistair McIntosh questioning whether it was “just the market, materials or slack procurement?”
While it would be easy to assume that the EU public procurement procedure (OJEU) shouldn’t apply post-Brexit, in reality it (or something similar) is still likely to apply in many post-Brexit scenarios. While many housing providers might issue a collective groan at this news, it may not be all bad and there are other approaches to consider.
Planning for the post-Brexit procurement landscape seems a fantastic time to review procurement processes and tackle any of the opacity that remains around the adoption of a value-driven approach.
Are frameworks still the way forward?
Housing providers are under increasing pressure to take a more commercial approach to procurement and to demonstrate efficiency.
EU procedural restrictions when procuring goods and services for large deals have often been criticised, but have arguably raised the standard of procurement in the housing sector. Some say that transparency and competition have helped to give the wider marketplace, as well as tenants themselves, more faith that housing providers are taking a responsible attitude to ensuring value for money and efficiency.
Rather than undertaking an approach of procurement from organisations that were known, EU restrictions (augmented by Home & Communities Agency regulations and recommendations from the Housing Quality Network) have driven housing providers to procure with more of a value-driven head.
However, others believe that a persistent reliance on frameworks is outdated. It’s more critical than ever to buy the right solution to deliver the right results and it’s questionable whether existing frameworks can offer the flexibility required to ensure this happens.
It seems sensible to conclude that the answer to the question of whether or not frameworks are still the way forward is probably somewhere in between these viewpoints, recognising that an established framework is often a useful tool when considering the functional requirements of a solution within a more broad context, but that the detailed value may lie within a more dynamic procurement option.
Mini-competitions and procurement clubs
For a procurement process requiring more precision and/or detail, mini-competitions used within a framework agreement can enable housing providers to secure better terms – a proactive method of taking a more commercial approach to procurement and demonstrating efficiency.
In terms of resourcing the procurement process, many housing providers may not have the resources to assign a full procurement team. Whether it’s through collaborating, joining a procurement club or outsourcing much of the procurement to a procurement solution provider, embracing the options available for reducing the individual resource load for procurement can be a sensible option.
Looking at the benefits of procurement clubs in particular, there are benefits that can be delivered, particularly for less complex procurements:
- Common issues can be identified and best practice shared;
- Time can be saved and resources pooled;
- Compliance with UK and EU legislation is assured;
- Value for money can be demonstrated quite easily.
Of course, due diligence must be undertaken in the form of a procurement strategy review to ensure that the costs of using the framework are understood, the risk is minimised and the objectives for realising potential benefits are clearly defined.
With Brexit on the horizon and the housing industry already faced with rising costs and a skills shortage, extracting value from the procurement process has never been so crucial for housing providers.
The challenge ahead will be how they manage to balance a new sense of freedom with compliance and securing the best deal.
Juliet Hailstone is a senior product marketing manager at MHR.