Nov 2022 Better Procurement for Better Homes Supplementary Guidance in a Hyperinflationary Environment

The Housing Forum has now published: ‘Better Procurement for Better Homes Supplementary Guidance’.

This supplementary guide offers advice on how to procure in a hyperinflationary environment 

Inflation is now at a 40 year high of 11.1%, fuelled by rising energy costs and global supply chain difficulties. This has created an extremely tough landscape for procuring construction work, threatening the prospects for new housing development. The Autumn statement offered little by way of help for the housing sector facing rising costs and an uncertain market.

Last year The Housing Forum published the Better Procurement for Better Homes Guide. We are now publishing 2022 Better Procurement for Better Homes Supplementary Guidance to help the sector to cope with these new inflationary challenges.

The key audience for the new supplementary guidance is local authorities and housing associations who are seeking to procure new homes in the current economic climate. The guide may also be of interest to developers, contractors and consultants looking to work in partnership to develop housing or tendering for work, and to policy makers and regulators who need to understand the challenges facing social housing developers bidding for funding.

Key messages in the guidance:

• It’s important to build trust – Working with contractors who share values of commitment to quality, are willing to work in an open book environment and demonstrate a collaborative approach reduces risk.
• Closely involve the finance and procurement teams – Whole-team decision making needs to be a dynamic process, with budget holders updated and alerted as soon as inflation looks to be adding cost pressures that threaten to breach contingencies.
• Manage risks equitably between commissioner and contractor – acknowledging that some sort of price fluctuation (both up and down) will have to be accommodated over long contracts.
• Engage early with the contractor’s supply chain – enabling quicker on decision making via an open book approach.
• Use flexible contracting – with an emphasis on how pre-contract agreements can be managed and that can start to lock in cost early, where possible. Single-stage, fixed-price design and build contracting in the current hyperinflationary market becomes even less workable.

Our solution via a three-stage process is set out in the new supplementary guidance