Development and associated procurement approaches

Part of: Housing Association Guide, Procurement Guide

This section details that Associations have a number of development approaches available for the provision of a new build, or existing properties for social housing for rent.

What is required

The Development and associated procurement approach selected by a PG / Association must take account of market conditions prevailing at the time, and how the approach delivers Best Value for Money.

Most development approaches require the procurement of construction works and services the procurement of which should be in accordance with, where applicable Procurement Law, NI Public Procurement Policy and Guidance and this Procurement Guide. Under the Off-the-Shelf approach minor construction works which are clearly ancillary to the acquisition of existing dwellings may be an integral part of the acquisition.

A Procurement Group/ Association proposing to award a contract without competition, or by either Negotiated Tendering or Competitive Dialogue, should first seek advice from the CoPE.

Procurement Groups/ Associations have a number of development approaches available for the provision of a new build, or existing properties for social housing for rent.  Associations may provide dwellings by a number of means.  

New Build

Acquisition and Works

‘Acquisition and Works’ is where an Association contracts, via a building contract, for the construction of new dwellings on land purchased or acquired for the purpose. For an acquisition and works scheme, the Association must own the land and have satisfactory title before the works start on site.

New build dwellings generally must meet the design requirements contained in the Department’s Design Standards and, on completion, must have a ‘structural’ life expectancy of at least 60 years and comply with all Statutory Requirements on completion of the construction works. The Department’s Design Standards can be found in the Design standards section of the HAG Development Guide.

[Note: Building Licence Agreement - Procurement Groups/ Associations should note that a ‘Building Licence Agreement’ does not meet the DfC’s acquisition requirements and Procurement Groups/ Associations having this type of agreement cannot claim any Grant from NIHE (DPG) until the Association is in a position to acquire the ownership of the site.]

Works Only

‘Works Only’ involves the development of land already in the Association’s ownership and for which no acquisition costs (other than legal charges) apply. Development costs are assessed against the TCI particular to works only (new build) scheme.

Existing Properties

Acquisition and Works (Rehabilitation)

‘Acquisition and Works (Rehabilitation)’ is where existing dwellings are purchased and require substantial repair and improvement, conversion or extension for social housing for rent use. The total works cost of each unit should exceed £10,000 (excluding VAT).
Existing dwellings generally must meet the design requirements contained in the Department’s Design Standards and, on completion, have a ‘structural’ life expectancy of at least 30 years and comply with all Statutory Requirements on completion of the construction works.

Works Only (Rehabilitation)

‘Works Only (Rehabilitation)’ is similar to ‘Acquisition and Works (Rehab)’, but where the Procurement Group/ Association contracts for the construction works only, and involves the development of property already in the Association’s ownership which has hitherto been unimproved.

Re-Improvement

‘Re-Improvement’ is a category of ‘Works Only’ rehabilitation to Association owned property. In order to be considered for grant-aid, the property must:

  • be in the ownership of the Association
  • have been, at some time in the past, the subject of some form of grant or subsidy (grant or otherwise) for construction, rehabilitation or conversion
  • require substantial improvement & repair (ie, is no longer suitable for the purpose intended)

Off-the-Shelf Purchases

An 'Off-the Shelf' purchase is where newly constructed dwellings are purchased for first-time occupation by Housing Associations or have been occupied privately for period(s) not exceeding 12 months from completion, following inspection and independent valuation.

Purchase will be on the basis of a standard Purchase Contract.  This contract may have Special Conditions annexed thereto requiring the vendor to provide legal and/or technical documentation to the Association which may facilitate, amongst other things, future property management, for example, documentation relating to Title, statutory approvals, drawings, specifications, health and safety files or the like. Special Conditions to the Purchase Contract may also require the vendor to carry out minor ancillary works to the dwellings. No additional allowances will be available to the Association in relation to the cost of any minor ancillary works; consequently such costs should be set against the 'on-cost' allowance due to the association.

Early engagement by an Association, whereby it may seek to negotiate an OTS purchase contract for dwellings prior to completion, is likely to be construed as a construction works contract which should have been procured. Likewise, specifying construction works, other than minor ancillary works, within a purchase contract may have the same effect.  Such an arrangement would be a contravention of the Public Contracts Regulations 2015 and could be subject to legal challenge.

An Association's Board of Management is responsible for the effective management of all procurement risks including those associated with OTS purchases. It is therefore recommended that Associations seek legal advice in constructing its contracts for OTS purchases.

Competitive Design and Build

Competitive Design and Build (CD&B) is where, following a procurement compliant procedure, an association enters into a single contract or agreement with a developer/contractor to acquire land and the design and construction of dwellings. 

Under the CD&B approach, the Association must have satisfactory title to the land before the construction of the works start on site. 

New build dwellings delivered under CD&B must, on completion, meet the design requirements contained in the Department’s Design Standards, the requirements of all statutory approvals and have a ‘structural’ life expectancy of at least 60 years.  The Departments Design Standards can be found in the Design standards section of the HAG Development Guide.

A Housing Association’s Board of Management is ultimately responsible for the effective management of all contractual and procurement risks including those associated with the CD&B approach.  Since associations’ approaches to implementation of this innovative procurement route may differ and include the use of non-standard conditions of contract it is recommended that associations seek specialist procurement and legal advice in undertaking CD&B procurements and constructing its contracts. 

Joint Ventures

Joint Venture is being explored as an option for delivering new build social housing through the Social Housing Development Programme (SHDP).  This would be completed through contractual or corporate arrangement which has been known as joint venture with developer/contractors, land owners, funders or the like. Under a joint venture the parties contribute capital, property, resources and skills. Ultimately everyone shares the risks and rewards associated with the development of wholly residential (may include social, affordable, shared equity and private) or mixed use projects (may include commercial, community or other elements).

Joint ventures can be highly complex, both in their structure, funding and ‘management’.  Similar to Off the Shelf and Competitive Design and Build Schemes, an associations’ Board of Management is ultimately responsible for the effective management of all contractual and procurement risks including those associated with the joint venture approach. 

Since associations’ approaches to implementation of this innovative procurement route may differ and include the use of non-standard conditions of contract it is recommended that associations seek specialist procurement and legal advice in undertaking joint venture procurements and constructing its associated structures and agreements.

Associations considering joint venture arrangements should advise NIHE(DPG) of their proposal at the earliest opportunity.  

Existing Satisfactory Purchases (ESPs)

Existing Satisfactory Purchases (ESPs) are where existing dwellings occupied as a residence for at least 12 months are purchased, following inspection and independent valuation, from the property market.  This is a normal legal ‘Purchase Contract’ i.e., without the Association having commissioned works via a building contract.  The condition of the dwellings should be such that they do not require full rehabilitation, but may require a degree of repair/checks/upgrading to bring them up to an acceptable standard for letting.  The estimated repair/checks/upgrading cost of each dwelling should normally not exceed £10,000 (excluding VAT) per dwelling. 

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