Housing associations have three years to become Egan-compliant if they want funding for their schemes. Does this herald a real change in culture – or just a bureaucratic obstacle course?
Housing associations have three years to comply: BY 2004, social housing schemes will not get government funding unless they can meet a preset list of criteria demonstrating Egan compliance.

Heavily involved as they already are with environmental and community issues, whole-life costing and long-term thinking, housing associations should, in theory, have fewer problems with Egan than more commercially oriented clients.

But in fact they are far from happy. It is not so much Egan they have a problem with as the Housing Corporation, the government's fund-giving body. Many housing associations feel that the corporation's whole system for demonstrating compliance is unfair, unworkable and does not in any case accord with the true spirit of Egan. It is too bureaucratic, they complain, too expensive, and it is forcing them to transform their reluctant supply chains within an unrealistic timescale.

Stung by the criticism, the Housing Corporation is looking at ways of reducing the obstacles to Egan compliance. Clive Clowes, the corporation's head of housing, procurement, practice and development, hinted that a wholesale rethinking of the compliance system may be in the pipeline. "We don't want to provide a bureaucratic burden," he says. "We only want to do things that will help RSLs [registered social landlords, or housing associations] on the road to continuous improvements."

Any changes can't come soon enough for RSLs, which are struggling to come to terms with a bafflingly complex system to check compliance. Essentially, associations have been given nine criteria, or "proxies", at least five of which must be fulfilled for any scheme to be considered compliant (see factfile below).

Liz Willis, policy officer with the RSL body, the National Housing Federation, says many RSLs are already in tune with much of what Egan recommends; the problem is that the compliance hurdles make it hard for some of them to prove this.

"Certain proxies are easier to fulfil on some housing association schemes than others," she says. "For example, a housing association involved in refurbishing inner-city properties may be able to access European funds which support employment opportunities – making it easier for them to score on proxy five which encourages training and diverse employment initiatives.

"New-build projects may not attract that kind of funding but, starting from scratch, they have more opportunity to influence design and encourage prefabrication and modularisation."

Jayne Forrester, development and property asset manager in the Midlands at Jephson Homes, offers another example: "Land prices for housing in many areas are high at the moment, and the only way we can access land on an affordable basis is through section 106 sites where a private developer has been obliged to reserve a proportion of units for social housing."

More than 50% of her programme is through 106 agreements, but the trouble is that "the developer is in the driving seat and we are limited in what we can do". By and large, she says, "volume housebuilders in the private sector consider us a blot on their landscape, and are not in the least bit interested in open-book accounting, shared savings or long-term relationships".

Forrester is also frustrated by the system's tendency to formalise procedures that already work perfectly well on an informal basis. "We have long-standing arrangements with contractors and consultants who understand the way we work. They save us considerable amounts of time and money, but they would not necessarily count towards fulfilling proxies," she explains.

If it ain't broke …
"We recently went through an Egan-recommended procedure where we pre-selected contractors on specific quality issues. One contractor was outstanding during this procedure and won the job, but turned out to be terrible in practice, and we wished we had stuck with our normal arrangements."

Problems with housing contractors' attitude to Egan are apparently commonplace. Richard Baines, environmental consultant with the Black Country Housing Association, is unreserved in his criticism of the volume builders. "The most serious stumbling block we have in pursuing Egan is that contractor organisations are not motivated at all," he says. "We still get unsafe sites and houses delivered late, over budget and full of defects. You name what Egan wants – and we are not getting it."

And there is little RSLs can do, says Baines, about the construction industry's lack of skill in applying innovative techniques. RSLs are expected to get "as much social housing for as little as possible". This makes them dependent on the contractor which will build traditionally with brick and block.

"They can do it differently," says Baines, "but it will cost more because of the learning curve. Where people have tried modular building, you hear of the shell arriving on site and then sitting there for six weeks because the builder is not used to that kind of approach. The premium paid for the frame has been wasted."

Baines accepts that RSLs are in a position to use their expertise to influence the construction they buy, but adds that with the private housing sector performing well, builders and designers are reluctant to become involved in innovation within social housing.

"Cost is a major factor," he concludes. "If it has been decided that the social housing sector should do housebuilding's research and development, someone needs to pay us to do it.

"Some of the smaller associations may disappear"
"We are being squeezed financially at the moment because of a separate requirement for rent convergence. But you can't take money out of the system while at the same time expecting the system to pay for innovation. It just doesn't stack up, and I can see some of the smaller associations disappearing because of this."

Paul Nicholls, project manager with the Housing Forum, agrees that Egan compliance can cost more – at least in the short term. He concedes: "It is probably fair to say that there is a cost associated with change and innovation which was not fully appreciated at the outset. So phase one probably costs you more – even if by phase 10 you are reaping substantial savings." Nicholls should know: the Housing Forum is the body that runs Egan demonstration projects in the construction sector; achieving "demonstration project" status is one of the nine proxies RSLs have been set.

So, the proxies apparently apply unevenly, make RSLs responsible for things they cannot control, do not work in the case of 106 agreements, and involve RSLs in costs for which they are insufficiently recompensed.

Bad enough, perhaps, but the list of complaints does not stop there: strategic partnering technically falls foul of public-procurement rules on competitive tendering; long-term relationships cannot be forged with suppliers when the Housing Corporation doles out money on an annual, project-by-project basis; new technology often involves innovative forms of

cladding which planners are reluctant to sanction; the proxy system encourages use of new technology with uncertain long-term reliability.

But there are things RSLs can do to help themselves, according to Hugh Raven of the Raven Partnership, a consultancy that advises RSLs on Egan compliance. He says: "There is plenty that can be done to make compliance easier. For example, a lot of the information RSLs need to extract various quality indicators already exists within their organisations. They just need to re-organise a little, and make better use of IT to make it more visible.

"And as far as partnering goes, the smaller organisations will find it easier to attract committed partners if they band together to form larger purchasing units."

But Raven concedes that there is a problem in that Egan is about a real change of culture, "whereas the Housing Corporation's proxy approach is about ticking boxes".

The Housing Corporation itself does not attempt to defend all these points, and Clowes accepts that there are concerns about costs: "We are undertaking a fundamental review of total cost indicators and grant rates, and are reasonably confident that the proposals we put forward to government will better reflect RSLs' costs and take some of the pain from having to invest in change."

Clowes also seems particularly receptive to the idea that ticking boxes is not really what Egan is all about. "In the future, we have got to look at the proxies again and try to explain things better."

And he adds: "There are many excellent organisations out there already doing a good job, and for the more progressive RSLs it is probably no longer appropriate to be scatter-bombing among the proxies. It may be more appropriate to have a

short-cut to full Egan compliance – perhaps a certification achieved through independent audit."

It looks as if these changes will happen sooner rather than later, with an audited compliance procedure available for those pursuing Egan in their own way, working in tandem with a revised set of proxies to ensure that less progressive RSLs do not get left behind.

Clowes even hints that the annual funding arrangements may also change, to be replaced by a system that would make longer-term planning easier. All in all, RSLs should be encouraged by what Clowes has said. Or, to use Egan-speak, it sounds like a good example of end-user feedback driving organisational change.

Nine ways housing associations can prove their Egan compliance

Box-ticking is set to become an increasing chore for housing associations as they try to keep up with the Eganising agenda. This year, 30% of Housing Corporation funding will go to Egan-compliant schemes, next year it will be 60%, and, for the year 2003-2004, 100% of the construction cost element of the Approved Development Programme will go to compliant projects. Although compliance is assessed on a project-by-project basis, registered social landlords must also demonstrate continuing organisational commitment to the Egan agenda. To gain “Egan compliance status” an RSL must demonstrate:
  • A commitment to use the headline key performance indicators as published by the Construction Best Practice Programme
PLUS two of the four following organisational proxies:
  • active participation in a benchmarking club
  • key personnel trained in use of housing quality indicators, KPIs and benchmarking
  • achievement of construction clients’ charter status
  • commitment to a range of employment initiatives covering health, safety and diversity
PLUS two of the four following project proxies:
  • a commitment to a project-specific or strategic partnering arrangement
  • the project benefits from greater standardisation, pre-assembly and modularisation of components
  • the project has housing forum demonstration project status or approved project status
  • feedback will be gleaned from the project’s end-users and benchmarking techniques will be applied throughout the supply chain to improve performance.
As a further incentive for registered social landlords to submit schemes involving off-site manufacturing techniques, a top slice of £80m of the approved development programme will go to schemes submitted under the special kick-start programme. To qualify, schemes must make use of a list of approved suppliers of timber and steel pre-assembly systems which has been compiled by the Housing Corporation.