Major housing association L&Q has launched an in-house construction division to become lead contractor on a large part of its £120 million annual housebuilding programme, Construction News can reveal.
Quadrant Construction will develop affordable housing projects across L&Q’s future portfolio. The housing association said it wants to reduce build costs, improve quality and cut out the risk of contractors going bust.
The wholly-owned subsidiary will be run by L&Q director of direct procurement Stuart Miller, who told CN he aims to build a turnover of £40-50 million over the next few years.
“Quality can be variable - we have some excellent contractors who have been working with us for years but in some areas it has not been as we would like.”
L&Q director of direct procurement Stuart Miller
He said: “We are in a position where we retain our product, so quality is key - this is not just about focusing on reducing costs.
“Quality can be variable – we have some excellent contractors who have been working with us for years but in some areas it has not been as we would like. The more we can standardize the more we can manage quality.”
L&Q has a pipeline of 10,000 homes. Mr Miller said L&Q build around 1,500 homes a year, spending roughly £120-£140 million.
“We would reckon that within five years or less (Quadrant Construction) would have a turnover of £40-50m.”
Mr Miller denied the move would put a strain on relationships with other contractors.
He said: “I hope they will see it as a positive challenge to maintaining the standards of the industry that are already high.
“We have to prove our standards are at the top end of the sector and I hope others take it as a positive challenge.
“We are just looking to get the best value from the market place.”
L&Q will continue to outsource a large volume of work – its four-year £400m construction and regeneration framework will be awarded in the next two months - and Quadrant will not be taking on the group’s extensive refurbishment programme covering 62,100 homes.
“What we are conscious of doing is getting safe and constant growth, to get prices right and maintain a high standard of quality in the business.
“The ambition is to grow to take on board the majority of works into Quadrant.”
He acknowledged the post-recession marketplace would make it difficult for Quadrant to find “significant improvements in the bottom line”.
But he said setting up its own construction arm would generate improvements in the long term including uniform high standards not currently delivered.
Mr Miller, who has had a long career at John Laing Partnerships, joined L&Q in March with the specific task of developing Quadrant Construction.
L&Q director of development Jerome Geoghegan said the difficult market made the possibility of more firms going bust an ever-present risk.
“At the same time, in boom times investing in a subsidiary business can help ensure we can generate adequate surpluses to reinvest in future developments,” he said.
Quadrant Construction has been funded via a £50m on-lending facility from L&Q. Its first project will be a 146-home redevelopment in Lewisham – the final phase of the Silwood regeneration project.
Construction will begin on 17 January, with completion planned within two years.
Initially Quadrant Construction will focus solely on the delivery of L&Q projects such as Silwood scheme, but the offering may be expanded into the wider market in the future.