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Housing targets are fine, but delivering them is another matter
SMEs and frameworks can open the door to increasing housing supply, writes Clive Feeney, group managing director at LHC Procurement Group
Clive Feeney is group managing director of LHC Procurement Group
SMEs and frameworks can open the door to increasing housing supply, writes Clive Feeney #UKhousingThe election dust has settled, and the hard work of governing the country has begun. And the new administration faces no greater challenge than delivering on its manifesto pledge to build thousands of new homes.
The new prime minister has promised to “hit the ground running”, and with a landslide victory under his belt, he will have momentum on his side.
Rachel Reeves, in her first major speech as chancellor, pledged sustained economic growth – our “national mission” – and declared that there is “no time to waste.”
Compulsory housebuilding targets and plans for 1.5 million new properties over the course of this parliament are to be applauded, certainly, but that is the aspiration. Construction deals with reality.
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For such a push, it will require major engagement on the part of both private and public sector, and with Labour promising to do more to open up opportunities for SMEs as part of its campaign, it will be interesting to see what that means in practice when it comes to housebuilding.
A report from the House of Lords Built Environment Committee in 2022, Meeting Housing Demand, noted that SMEs developed just 10% of new homes in 2020, down from 39% in 1988. The scale of the problem has also been highlighted in a British Chamber of Commerce report which revealed that while the value of published public sector procurement spending with SMEs has increased, the proportion of total government money awarded directly to SMEs has not grown over the past five years.
“For such a push, it will require major engagement on the part of both private and public sector”
Just £1 in every £5 spent by government on public sector procurement in 2021 was awarded to small and medium enterprises, the report revealed.
Why does this matter? Well, as of the start of 2023, there were approximately 5.5 million small and medium-sized enterprises in the UK. Nearly 7% of these are in construction.
And it is construction that matters when it comes to housing. For a sector that is 99% SME, according to the latest Office for National Statistics figures, you would expect it to be ahead of the curve when it comes to delivering work.
But, in reality, the way frameworks operate is not consistent when it comes to attracting and bringing on board appointed companies. It means that many SMEs feel that it’s a closed shop when it comes to public sector contracts – hard to bid for, and hard to secure.
It is something that we actively try to address through our procurement processes, starting with our early market engagement. We follow a number of guiding principles, among them working hard to attract under-represented groups during the tender engagement process and taking extra care in framework design to ensure no barriers that might dissuade smaller firms from applying.
On top of that, we ensure that we are specific on social value and technical outcomes desired, rather than just looking at what has gone before. Case studies are important, but there is more to it than that when appointing a company. Further, we discuss with clients and end users what their perception of ‘risk’ is when it comes to engaging with an SME: is it real or is it just a set of rules they have followed for a long time?
“Many SMEs feel that it’s a closed shop when it comes to public sector contracts – hard to bid for, and hard to secure”
While there is always more to be done, we feel that we are moving in the right direction. In the past decade, we have appointed 1,266 suppliers to our frameworks. Four out of five of these suppliers were SMEs (1,048).
Looking at last year (April 2023 to March 2024), 70% of the projects delivered through our frameworks were awarded to SMEs, at a project value of around £245m.
SME engagement is not the only factor at play, of course. Construction methods come into focus, too; modern methods of construction (MMC), for instance. The government remains committed to MMC despite well-documented issues, and several organisations and experts – including the British Insurance Brokers’ Association and a trio of Manchester academics – are campaigning for its increased use.
For public sector clients, there are positives to be had and frameworks can help to reduce risk by bringing together clients and a pre-qualified supply chain that is ready and able to deliver.
SMEs, frameworks, election target promises, MMC – spinning those and other plates will be key to easing Britain’s housing problems.
Clive Feeney, group managing director, LHC Procurement Group
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