In 2006 the Housing Corporation allowed private firms to apply for its grants – and spared them much of the red tape that housing associations have to deal with

An increasing number of private developers have started to tackle affordable housing since the Housing Corporation extended its grant funding to the private sector in 2006. From next year there will be 31 firms that are not Registered Social Landlords (RSLs) receiving grants to build or refurbish housing.

Although some RSLs were concerned at the appearance of private sector competition, others believed the red tape wrapped around public sector contracts would deter many developers. One example of this is European Union procurement.

The corporation and the RSLs are considered “contracting authorities” for the purposes of The Public Contracts Regulations 2006. As such they must follow a prescriptive process before granting contracts for contracts that are worth more than a threshold amount. This is presently £3,611,319 for work and £144,371 for services and supplies.

The contracts must be advertised in the Official Journal of the European Union and must follow one of the four tender processes in the procurement regulations (open, restricted, negotiated, competitive dialogue).

Historically, RSLs have formed close partnering arrangements with preferred suppliers, resulting in savings in cost and time, and fewer disputes.

Compliance with the regulations can result in an RSL being forced to work with suppliers it does not know and, for example in the case of architects, firms that have no experience of the planning authority of the relevant borough.

In addition, a common complaint now is the time it takes to get from conception to the selection of the supply chain.

Often the RSL will follow the “restricted” procedure. Following prequalification an invitation to tender is issued to the short listed tenderers.

Finally a contract is awarded by using the selection criteria in the invitation to tender to find the “most economically advantageous tender”. This may not seem too much of a departure from the tender procedure in the private sector but the difference is that there are set, lengthy time limits, restrictions on questions that may be asked and rules about how the information is assessed.

It seems reasonable to suppose that developers that receive Housing Corporation grant would also need to comply with the regulations . . .

To limit the red tape on individual schemes many RSLs enter into framework agreements with suppliers, under which individual projects are “called off”. However, how the call-off is made is also strictly regulated.

The Housing Corporation envisages that private developers will build the social housing units and transfer them to an RSL or retain them and put long-term management arrangements in place.

It would seem reasonable to suppose that developers receiving a corporation grant would also need to comply with the regulations. However, they are not necessarily a contracting authority under the regulations.

Only if a developer retains the units and makes arrangements for their management is there likely to be a public works concession contract. There, if the developer subcontracts works over the threshold it must comply with regulation 37 but does not have to comply with all the regulations.

The developer must publicise its intention to seek tenders for the works, and publish a notice in the OJ. The developer can then advertise the contract as it wants.

The developer also must comply with the time limits (for expressions of interest and receipt of tenders) specified in the regulation. This does not apply to services or supplies.

If the developer disposes of the units after completion, the regulations will not apply.

Interestingly, the corporation has chosen not to create a level playing field by imposing a contractual obligation on developers to comply with the regulations. It remains to be seen whether, as more grant is paid to developers RSLs seek a contractual obligation on developers requiring fuller compliance with the regulations.