A gold medal must be on its way to the civil servant who came up with the name for Lord Rooker's new slug of money to help alleviate the housing crisis in the South.
"Challenge Fund" is the name, and a challenge to the sector it certainly is.

Many of the 60 housing associations that have been invited to apply for the cash will probably not make it off the starting blocks, let alone round the first lap. Winners will have to be Egan-compliant and have their schemes on site before March 2004, which means for the most part they already have planning permission. Our cover feature on the monstrous task of agreeing section 106 agreements is a timely reminder why this is a very sensible prerequisite (see linked story, below). The odds are again shortened for bidders who have built homes in factories before, and again for bidders who can build 11 homes for the price of 10. By giving £200m to procure 4000 houses, the cash is expected to go further than usual, but without reducing space standards, and while raising design ones.

The Housing Corporation seems pretty confident the sums add up – the National Housing Federation estimates that the sector will have to shave £32m off costs. It's all a bit of guesswork, given that the corporation is not stipulating the proportion of the fund that will be used for sub-market rented homes, which would be expected to be built with less grant anyway.

The government's commitment to off-site manufacture may make the delivery of more homes for less money feasible in the longer term. The release of cheaper land will also help, again in the longer term. But there remain questions over the short-term challenge to make cost savings. It's still a builder's market out there, and although partnering has brought with it benefits in terms of reduced litigation, better quality and all-round improved relationships, there's little evidence it has led to cost reductions. Egan's Rethinking Construction report, remember, was all about improving efficiency – but not by resorting to the lowest-cost tender.

In the commerical sector, clients have given their teams real incentives by sharing cost savings with partners and suppliers. This may be an idea housing associations would find worth considering – even if it means renegotiating with partners. So too might be some joint bidding for schemes – which could be a further incentive for suppliers. In the meantime, all those now seeing the Challenge Fund as a spectator sport while they limber up for the relatively genteel round of ADP bidding should make the most of it.

Without a doubt, the government's watchwords are value for money, bulk deals and off-site manufacture. Anyone keen to stay in the development game would do well to get in training now.

Source

Housing Today