Procurement might not be most housebuilders favourite topic - certainly not when you are tasked with writing a tender submission - but things might have been made a little easier for those housebuilders admitted to the Scotland Excel residential new build construction framework.

What’s the issue?

There is one procurement related question which we are asked by housebuilders more than any other:

“Can we make a deal with a local authority / housing association to sell our site and build out the site for them without the need for a procurement exercise?”

This question is usually asked after the housebuilder has already spent a considerable amount of time with the local authority / housing association, working up a scheme and proposal, which the authority’s property contact then takes to their in-house legal or procurement team.

It is at this point that the procurement barrier is often raised – which can range from a flat ‘no’ to the other typical answer: ‘it depends’.

Housebuilder clients faced with this apparent brick wall will then often turn to us for guidance.

What’s the legal position?

The sale or lease of land, on its own, is not subject to the procurement rules.

However, that only gets us so far. Where that sale or lease is combined with a development agreement for the construction of residential accommodation, the procurement rules will apply, subject to some exceptions.

Exceptions include:

  • where the combined value of the land and the works is less than £2M (albeit the local authority / housing association will still have some internal processes to navigate at this value); and
  • where the authority can demonstrate there is no reasonable alternative to meeting the authority’s need for housing, other than by entering into the development agreement with the housebuilder.

This last point can be difficult, but not impossible, for the authority to evidence. In essence, they will want to demonstrate that they had assessed what sites were available in the relevant locations which met their criteria for housing that no other suitable sites were available and the only option open to them to deliver the required housing is to enter into the development agreement with the housebuilder.

What has Scotland Excel done to overcome this issue?

Scotland Excel has established a framework agreement which entitles all Scottish local authorities, Scottish housing associations and others to award a contract for construction of residential accommodation.

Scotland Excel is a joint committee of Scottish local authorities established to act as a centre of procurement expertise for Scottish local authorities. While not itself a purchaser under the framework, it is a ‘central purchasing authority’ under the procurement regulations – entitling it to establish frameworks for use by Scottish local authorities and others.

The main purpose of the framework is to enable local authorities and housing associations to appoint a housebuilder to build residential accommodation on the authority or association’s land. However, the contract notice for the procurement makes it clear that the authorities and associations can use the framework to acquire land at the same time as entering into a construction contract with the housebuilder selling the land.

Purchasing authorities do not need to carry out a separate full procurement exercise to use contractors under the framework, but may, of course, conduct a mini-competition among the contractors on the framework.

Another use of the framework is to get over the procurement brick wall referred to above.

So, in answer to the question above,  yes you can make a deal with a local authority / housing association to sell your site and build out the site for them without the need for a separate procurement exercise - provided you are on the Scotland Excel framework.

Related Expertise
HousingProcurement