From DLO to house builder

In a suburb of Salford, change is afoot. Nineteen houses are under construction - by a direct labour organisation (DLO) that used to carry out repairs for a housing association.

They are being built by ForWorks, a company that only a few years ago was the DLO that served residents of City West Housing Trust.

“Knowing that housing association grants were going to be reduced, it makes sense to have a commercial construction arm that can put profits back into the group.”

Steve Parrington, director, ForWorks

Inside Housing visited Salford to find out what has happened since the repairs business spun out from City West, what lessons there are for the sector and whether the organisation is likely to make a success of this new venture.

“Why not?” is the attitude of Steve Parrington, who joined ForWorks as director in November 2014, with a long career in both private and housing sector construction under his belt.

Mr Parrington says there had been a number of drivers for growing beyond delivering only responsive repairs and works to voids - but the operating environment certainly played its part.

“Knowing that housing association grants were going to be reduced, it makes sense to have a commercial construction arm that can put profits back into the group,” he states.

“If you’re an organisation that’s delivering in-house repairs [as part of a housing association] why shouldn’t you be a commercial organisation, why shouldn’t you look to attract more business?”

In the beginning

The journey began when the in-house responsive repairs team at City West Housing Trust (CWHT) became a limited company in 2013.

This June the rapidly diversifying responsive repairs company was re-named ForWorks, becoming part of the Salford-based ForViva Housing Group that launched at the same time. Its two other members are City West Housing Trust and Villages Housing Association. Altogether the group manages 18,000 homes across the North West.

“Going into a group structure made us think about what the future would hold. Would we be seen as an organisation that just delivers responsive repairs or do we need to be a sustainable, growing business in a wider geographical area?” The answer was unequivocally the latter, says Mr Parrington, who is in charge of running and growing the business.

ForWorks is projected to turnover £17m in the 2015/16 financial year, with a profit margin of 6.5%. Some of these profits will be returned to its parent group, ForViva - although this isn’t a fixed percentage.

ForWorks’ first foray into construction will deliver those 19 new build homes on four sites in Cadishead, Salford, for City West Housing Trust. Yes, it has been contracted by a member of its own housing group, but Mr Parrington is clear that the business was not afforded special treatment. “We won under competitive tender. We had to demonstrate to City West Housing Trust we had the skill sets and capabilities to deliver. If they didn’t believe that, they would not have let us tender and we wouldn’t have secured the job on a past history point of view.”

New neighbours

At the end of a quiet residential street of Victorian terraced houses is a plot of flattened dark earth where a commercial garage used to stand. On the other side of the site fence is a meadow, giving a privileged sense of space that will no doubt be the envy of the cheek-by-jowl residents further down the street.

This is where the first CWHT properties built by ForWorks will be erected. Dixon Street is the largest development and when finished in spring 2016, there will be six three-bed and six two-bed houses for affordable rent. It is not the easiest plot to build on, confides Mr Parrington, as the soil is peat which has to be removed for the foundations at great expense.

But he says the extra cost will be worth it, as these homes will be a flagship for both ForWorks and CWHT, which owns the majority of houses along the street, marked by having been recently re-rendered. 

The Cadishead new build project has received a total funding of £570,000 from the Homes and Communities Agency, and will be completed by spring 2016. The overall cost of the construction project is £2.3m.

Removing stigma

“The best houses I’ve ever seen were built by a DLO.”

Keith Simpson, Direct Works Forum

For Mr Parrington it is ForWorks’ chance to prove itself as a serious contractor.

He admits it would have been harder for the firm to secure its first new build contract had there been no pre-existing relationship with the client. “I think it would have been extremely difficult. To secure your first new build with an external organisation they would have had to take a massive leap of faith for a company who can’t demonstrate any case studies.”

The case studies are important for overcoming any negative perceptions that former DLOs are not up to the job. “The intention was to get away from the stigma of what can be classed as a DLO. A lot of people have a mentality that it’s ex-council and they aren’t proper contractors. We are not a DLO, we are a modern, private contractor,” he asserts.

As part of breaking away from that image, some of ForWorks’ existing staff have received training in construction skills through ForViva Group’s skills centre to deliver new build works. And new staff with construction skills have been recruited.

The first homes built by the business will give it the beginnings of a track record. The next step is finding external clients.

“We needed to think about how we are going to procure work. Nobody just gives you work, so we put a lot of effort into business development,” Mr Parrington says. To attract business, ForWorks has signed up to eight procurement frameworks.

He is keen to stress, however, that ForWorks still undertakes responsive repairs, as part of a long-term agreement with CWHT. “That will always be part of our core business.”

Building and repairing

Being able to add construction to the product stream is a canny move that should enable ForWorks to take advantage of the cyclical nature of social housing work.

“There will always be a responsive element to dealing with occupied properties. But, as a lot of the investment programme works for refurbs has been completed, the next stage will be new build which the region and country needs. So it’s a product stream with longevity… After the new builds phase we can go back to focusing on responsive repairs.”

It is not an entirely new idea for a DLO to start building homes, as Keith Simpson at the Direct Works Forum points out. Plus Dane tasked its apprentices to build four houses in Cheshire and Wakefield and District Housing Association is another that has used its DLO to build homes in the past. “The best houses I’ve ever seen were built by a DLO,” Mr Simpson says. “DLOs absolutely ought to build houses because of the emphasis they put on proper training.”

The firm is beginning to attain its goals. “We have secured work with external clients, including a new contract to provide responsive repairs for Pierhead Housing Association, and for Villages Housing Association in Knowsley,” says Mr Parrington. “So although [Villages Housing Association] is in the same group, it is beyond our Salford/Manchester geographical boundaries and, hopefully, that will sustain growth in the coming years.”

By 2017/18, ForWorks expects to generate £7m-£8m of work from external clients, of which £5m is estimated to be from housing construction. Mr Parrington says he expects other in-house responsive repairs teams to be thinking of similar ways to increase their product streams and offers some advice. “My advice would be get yourself set up - if you’re looking to grow, don’t go in with a scattergun approach, take time on business planning, look at the products you want to go into and be certain you can deliver them, then approach it in a professional manner.”