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Procure Plus chief: Greater need for SME support in housing strategy

Laying the Foundations: A Housing Strategy for England goes some way in addressing the challenges faced by both the private and social housing markets, writes Procure Plus chief executive Mike Brogan.

But many of the announcements made are not new to the industry, and we look forward to the detail of the ‘radical’ approach as the report claims.

This is particularly the case when it comes the support for small and medium enterprises working within the housebuilding sector.

Although the new housing strategy outlines a sizeable £400m fund to ‘Get Britain Building’ and outline details of finance options for SMEs, the recent report doesn’t seem to offer the revolutionary rethink of the role of smaller organisations in England’s new build market that it really needs.

In the social housing sector, this revolutionary thinking is already starting to take place, and the government can learn some useful lessons from the successes that have been realised.

Organisations such as Procure Plus for example, operate an innovative approach to construction procurement frameworks which opens up the marketplace to SMEs.

By aggregating local demand for services, it is possible to ensure consistency and continuity, and availability of work for employees. As such, it’s more feasible for SMEs to secure direct contracts.

On top of this, the aggregated strategy generates significant cost savings which can then be reinvested back into local areas.  For larger schemes where a very large contractor is required, Project Bank Accounts should be a prerequisite.

Having successfully implemented this approach to planned maintenance, in fact, as a testament to the effectiveness of this approach, Procure Plus has been invited to share its learnings with a Cabinet Office task force group set up to make the construction industry fairer for SMEs, the same format is now being applied to the development of Procure Plus’ new build framework.

At present, the new build sector just isn’t a viable option for the smaller contractors. Typically, the major contractors are awarded the work, it’s then subbed off to smaller firms, which due to their distance down the supply chain often end up being owed money and unable to pay their suppliers or staff.

In fact, according to the latest Insolvency Service statistics, almost 1,000 SME construction companies went out of business between August and October this year.

By employing an aggregated approach however, it’s more feasible for SMEs to be employed directly, and by limiting the number of jobs the major players can bid for, the marketplace is opened up much more widely.

Currently, Procure Plus is establishing this model in the new build social housing sector, with the aim of engaging more SMEs in the process. What’s more, via volume procurement and collaborative purchasing strategies the model has realised an average 15 per cent reduction in unit price per home.

Aggregating demand and volume procurement aren’t alien concepts and arguably aren’t ‘radical’. But by really thinking practically, cleverly and reconsidering the basics, it’s possible to open up the marketplace to SMEs, creating hundreds of sustainable jobs, and stabilising the housing market for the future.

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