Landlords should be fair to contractors amid this crisis, it will pay off in the long term

After the 2008 crash, a host of contractors went bust and the sector’s ageing workforce meant many never came back. The result was a skills shortage, which is still felt today.

That’s why social landlords now need to think about the long term. Their actions today will determine the relationships they have with their supply chain in the future.

As ‘anchor bodies’, housing providers are in a unique position to protect their residents as well as support local economies, SMEs and employment.

The short term is about pinpointing suppliers in difficulty, communicating regularly, and offering relief around targets. But landlords must also take a longer view, offering financial support and working in partnership now to keep contractors afloat, reduce spikes in demand, and maintain pricing stability.

Here are some practical steps on how to do this:

• Identifying at-risk suppliers: Cabinet Office guidance recommends that housing associations and councils “should act now to support suppliers at risk”. The problem is identifying those vulnerable businesses. Obvious signs include them furloughing staff or requesting advance payment. Some housing associations use financial risk reports or performance data, but in these fluid market conditions it’s important to see the softer signs. A reduced social media presence, slower response to requests and less enthusiasm are all indicators.
• Offering a performance holiday: Suppliers may flag up that current pressures could prevent them meeting contract targets. Housing associations can help here by including a contract variation to say that until the end of the pandemic, the supplier won’t be penalised if performance indicators dip within a certain range. This gives breathing space (and motivation) to the contractor and shows them that open and honest communication will be rewarded.
• Rethinking payment terms: Paying suppliers more promptly than normal is one step. Another is offering a recurring fee, not project-by-project income. This way, suppliers receive steady revenue and they can increase work when lockdown is relaxed and stop again when required. If they become more than three months behind, then payment halts and if they get ahead, payment accelerates and reduces for the rest of the contract. A different option is a labour-only payment model, where the supplier buys products on the landlord’s account and only covers workforce costs – limiting cashflow challenges. Some organisations are also considering support payments. Suppliers receiving this financial relief have to operate on an open book basis, showing they have spent payments in line with what they said they needed them for.
• Breaking down planned works: Over the next six months, restrictions may be lifted and replaced over and over, and housing providers must consider what work can be delivered in this changing environment. For example, it may be safe, when lockdown is loosened, to refurbish void properties or do external cladding removal – all under strict social distancing rules. The key is having strategies in place that can quickly adapt depending on the severity of government constraints.
• Collaborating with public bodies: When the lockdown finally ends, public sector organisations will scramble to begin planned maintenance. If joint strategies are not planned now, housing associations will find themselves fighting with hospitals, councils, colleges and universities over the contractors left standing. To avoid demand outstripping supply and prices going through the roof, landlords must collaborate with public bodies to forward plan building requirements across the region. This is about pooling resources to redeploy contractors, staggering start dates and synchronising manageable chunks of work to be delivered once restrictions are eased.

It is critical that housing providers adopt a partnership approach with contractors immediately.

The way landlords behave now will directly influence how well they and their supply chains come out of this crisis.

Those that are fair, understanding and supportive will be first in line with contractors once lockdown is lifted.

Neil Butters, head of procurement, Procurement for Housing